SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
INFOCAST CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 84-1460887
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1 Richmond Street West, Suite 902, Toronto, Ontario M5H3W4
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (416) 867-1681
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
NONE NONE
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 par value
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(Title of class)
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Unless otherwise indicated, all information contained in this
Registration Statement gives effect to a 2 for 1 stock split effected on October
19, 1998.
ITEM 1. BUSINESS.
General
InfoCast Corporation (the "Company"), a development stage company, is
an Application Service Provider ("ASP") in the business of electronic content
delivery and information management on multiple communication platforms to meet
the growing global needs of high speed corporate information consumers. The
Company's content will be delivered through a North American network of
strategically placed information hubs ("i-Hubs"). These hubs will be implemented
on Sun Microsystems servers and based on Sun Solaris, Netscape and Java related
technologies, providing a high level of reliability, scalability and
performance. The Company's network and strategic alliances will provide the
essential communication link between information sources and information users
worldwide so that information can be delivered in real-time to anyone, anywhere,
in any format - data, voice or animation using the Internet or private networks.
An ASP provides services to implement, host and maintain packaged
applications and information technology (IT) services for customers on
commercial i-Hubs. The i-Hubs can be characterized as the core of an information
utility, being large servers that host a variety of content and applications,
and use the Internet as a primary distribution method. In general, the customer
enters into a multi-year contract with the ASP where the application license and
services are paid for on a monthly or per-transaction basis. Enterprises have
traditionally sourced solutions from multiple vendors, application vendors,
system integrators and hosting vendors or have created the components
internally. The Company will provide an alternative to this approach by being a
single source ASP with a highly scalable, reliable and secure information
utility. The Company will use distributed architecture technology to offer
device-to-device communication capability that is real-time, as well as
independent of underlying network architecture, operating system, database or
hardware. The Company has created software technology that will be applied to
the vertical markets of distributed learning, call centers and teleworking.
The Company has focused its technical expertise on taking legacy
software and training content and moving it, not only to the World Wide Web, but
to an ASP business model. The Company focuses on providing software which has
the ability to work in a mission critical environment, regardless of time zone,
network or geographical boundaries. The Company has considerable technical
knowledge in creating multi-vendor Virtual Private Network ("VPN") solutions,
multiple customer support from a single package of enterprise software and
creating three-tier software from traditional client-server models.
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History of the Company
The Company was incorporated on December 23, 1997 as Grant Reserve
Corporation, a junior mining company. During the year ended December 31, 1998,
the Company issued 5,000,000 shares of Common Stock to Sheridan Reserve
Incorporated for the acquisition of two mining interests and in April 1998
issued 1,000,000 units at a price of $0.50 per unit in a private placement
financing. Each unit consisted of one share of Common Stock and one Common Stock
purchase warrant with an exercise price of $0.50 per share before December 31,
1998. The $500,000 issue price of the units was satisfied through the receipt of
cash proceeds of $260,000 and the settlement of a non-interest bearing note of
$240,000 that was due from the Company.
On October 13, 1998, the shareholders of the Company voted to effect a
two-for-one stock split that increased the number of outstanding shares of
Common Stock from 6,000,000 to 12,000,000 and increased the number of
outstanding Common Stock purchase warrants from 1,000,000 to 2,000,000.
Accordingly, the exercise price of the Common Stock purchase warrants was
reduced to $0.25 per share. Subsequently, 1,580,000 of the Common Stock purchase
warrants were exercised at $0.25 each for cash proceeds of $395,000. The
remaining 420,000 Common Stock purchase warrants expired.
Prior to 1999, the Company's sole business was in the natural resource
sector and the Company held certain mineral interests in the United States. Due
to changes in the United States regulatory environment, management determined
that it would be appropriate for the Company to sell all of its mining assets,
which represented substantially all of the Company's assets. The Company
completed the sale of its mining assets in the fourth quarter of 1998. During
1998, the Company changed its name from Grant Reserve Corporation to InfoCast
Corporation. Prior to changing its name and subsequent to the sale of its mining
assets, the Company was a publicly-traded company whose common stock was quoted
on the OTC Bulletin Board under the symbol ("GNRS") without any ongoing business
operations.
On January 29, 1999, the Company consummated the acquisition of all of
the voting capital stock of Virtual Performance Systems, Inc., a Canadian
corporation ("VPS"), for 1,500,000 shares of Common Stock of the Company.
Pursuant to a letter of intent, dated February 10, 1999, as amended,
between the Company and Applied Courseware Technology (ACT) Inc. ("ACT"), the
Company intends to purchase a 100% interest in ACT in consideration of (i)
750,000 shares of Common Stock of the Company and (ii) the assumption of debt of
ACT of approximately $670,000. The transaction is subject to satisfactory due
diligence. From February to June 1999, the Company paid Cdn $140,000 of the ACT
debt and made cash advances to ACT totaling Cdn $498,000 to fund certain
development expenditures incurred on behalf of the Company. ACT develops
enterprise-wide training and job task analysis application software. Such
training and software enables ACT's customers to reduce costs associated with
the analysis, design and maintenance of their training and performance
management systems.
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In March 1999, the Company consummated a private placement financing
pursuant to which it issued 2,767,334 shares of Common Stock for an aggregate
offering price of $4,151,001 pursuant to Regulation S of the Securities Act of
1933, as amended.
In March 1999, the Company consummated a private placement financing
pursuant to which it issued 265,002 shares of Common Stock for an aggregate
offering price of $397,503 pursuant to Regulation D of the Securities Act of
1933, as amended.
Pursuant to an agreement dated December 15, 1998, as amended by a
letter agreement dated March 12, 1999, between the Company and ITC Learning
Corporation ("ITC"), the Company purchased from ITC the distribution rights for
certain education and training products in consideration for $975,000 in respect
of the first 150,000 user licenses and based on a shared revenue formula for
user licenses in excess of 150,000. The first $500,000 of the initial $975,000
purchase price was paid in March 1999 and the final $475,000 of the initial
$975,000 purchase price was paid in April 1999.
Pursuant to an agreement dated March 22, 1999, the Company issued
60,000 shares of Common Stock to a financial investment consulting firm for
assistance in securing additional financing over the following year.
In May 1999, the Company and Call Center Learning Solutions ("CCLS")
formed a new company, Call Center Learning Solutions On-Line, Inc. ("CCLS
OnLine"), which is owned 50/50 by both parties. CCLS Online will initially
convert and market 11 browser-based interactive multimedia courses over a
12-month period. CCLS has developed 29 instructor-led courses that cover every
aspect of call center operation. CCLS owns one of the most comprehensive call
center training curriculums in the world. Their training programs have been
delivered to over 5,000 businesses worldwide. The agreement between CCLS and the
Company provides for courseware conversion, hosting on the InfoCast Digital
Exchange Library ("DXL") and deployment of the courseware to the global market
over a high speed and secure virtual private network ("VPN").
On May 13, 1999, the Company acquired all of the outstanding common
shares of Homebase Work Solutions Ltd. ("Homebase"), a telework solution
provider headquartered in Calgary, Alberta, Canada. The purchase price was
satisfied by the issuance of 3,400,000 shares of Common Stock of the Company.
The addition of Homebase gives the Company a unique ability to provide secure,
reliable and high-quality information flow between either the nomadic or
home-based employee and its corporate data resources. Homebase will work in
conjunction with the Company's Distance Learning and Call Center divisions to
assist companies seeking to use the Internet to grow their business while
effectively managing their information technology expenditures.
In June 1999, the Company issued warrants to purchase 25,000 shares of
Common Stock at an exercise price of $7.00 per share to a consulting firm.
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In June 1999, in return for services, the Company issued warrants to
purchase an aggregate of 200,000 shares of Common Stock at an exercise price of
$7.00 per share to four individuals.
In June 1999, the Company entered into a memorandum of understanding
with Willow CSN (Canada) Inc. ("Willow") to launch Canada's first commercial
virtual call center ("VCC").
In June 1999, the Company entered into an agreement with ITC Learning
Corporation ("ITC") pursuant to which the Company will become ITC's exclusive
distance learning technology partner for the delivery of educational material
for the state of California for consideration of $2,000,000, payable in three
installments, the first of which was paid in August 1999 and the remaining of
which will be paid in September and October 1999.
On June 24, 1999, the Company consummated a private placement financing
pursuant to which it issued 420,000 shares of Common Stock and warrants to
purchase 70,000 shares of Common Stock at an exercise price of $7.00 per share
for an aggregate offering price of $2,100,000 pursuant to Regulation D of the
Securities Act of 1933, as amended.
In July and August 1999, the Company issued 1,100,000 shares of Common
Stock in a private placement financing for an aggregate offering price of
$6,050,000 pursuant to Regulation S of the Securities Act of 1933, as amended.
The Company may issue up to an additional 1,400,000 shares of Common Stock for
an aggregate offering price of $7,700,000 pursuant to such offering.
Background
The ability to deliver information to anyone, at any time, at any
place, remains the cornerstone objective of today's communications systems. This
is the case whether that information is transmitted over a private or public
network (including the Internet), via computers, telephone and/or satellite.
The 48% combined annual growth rate (source: Gartner Group, 1998) of
the Internet, electronic commerce and corporate intranets, means that companies
and individuals are continuing to increase their use of corporate and home-based
systems to send and receive ever more complex information.
The dilemma facing suppliers of information, and those wanting to
receive it, is the inability of the various networks, operating systems,
communication protocols and communications systems to interface seamlessly. This
situation is analogous to people from different countries with different
languages all trying to communicate.
The business opportunity in the near term is for the deployment of
technology that links different network infrastructures so that information can
be deployed and used from a remote central server or i-Hub which is at the core
of the ASP business model. Information can then be accessed
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in near real-time across dedicated networks or reduced with regard to the
fidelity and resolution of its content and then accessed through the Internet.
The Company seeks to position itself to take advantage of this opportunity.
The Company's Initial Delivery Services
Distance Learning. The Company's Distance Learning application is an
end-to-end, highly interactive learning environment that enables corporate,
academic and retail learners to access digital content through a standard
browser interface. Learners interact with subject matter to enhance and support
their learning endeavors. By having the tools to interact with career and
instructional experts seven days a week, 24 hours a day, through e-mail, chat
rooms and other real-time collaborative tools across the Internet or a dedicated
network, the Company believes it can offer a higher level of service than any of
its competitors. The Company's core software supports distance learning
initiatives such as the "AT&T Canada Learning Partner Program(TM)" ("AT&T LLP"),
a program designed for AT&T Canada to offer additional value to its existing and
potential clients. The objective of the AT&T LPP is to be a leader for real-time
interactive electronic delivery of distance learning to corporate and academic
organizations and their respective end-users. The Company's technology will act
as the enabling technology of the AT&T LPP to permit distance education over any
electronic medium. The Company is currently in the progress of launching its
distance learning beta testing program.
An important component of the Company's learning environment is the
Learning Management System ("LMS"). The LMS consists of proprietary software
created by the Company to support multiple corporations and learning
organizations that offer content in an ASP environment. The software was
designed from the ground up with role-based security, multiple language support
and multi-enterprise billing and tracking facilities. Acting as a "security
blanket" around the content, the LMS permits other organizations to embed their
web-based training content without fear of losing intellectual property over the
Internet and still permits that organization's employees to telework for
training.
The Company has secured an agreement with College Boreal of Sudbury
(Ontario) Canada to convert and make available current courses for distribution
using the Company's real-time broadcast technology. The Company, AT&T Canada and
College Boreal are working together to deliver a national distance learning
program using AT&T Canada's coast-to-coast network. College Boreal, which
currently services the needs of the francophone community in Northern Ontario,
will provide access to interactive learning anywhere, anytime for both corporate
and academic studies. This program will be delivered by blending real-time
electronic learning and facilitated learning utilizing the Company's
browser-enabled solutions and applications distributed over AT&T Canada's
advanced fiber optic and digital microwave network. College Boreal,
headquartered in Sudbury, Ontario, has seven campuses in Northern Ontario, each
connected to the largest telecommunications network among academic institutions
in Canada.
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The AT&T LPP includes:
o Learning COACH, a group of subject matter experts that give
guidance to learners in real time.
o Career COACH, a team that gives learners guidance with career
development.
o Digital Exchange Library lets learners access "best of class"
content in single units or as part of a curriculum regardless
of method of delivery.
o Learning Activity Templates to help busy faculty members
develop courses rapidly.
The Company's objective as a participant in the AT&T LPP is to
establish the AT&T LPP as the leader in distributed learning. By combining
training and curriculum expertise of premier corporations and academic
institutions with the Company's technology, the AT&T LPP is expected to deliver
real-time distance learning over any electronic medium.
o The Company's delivery software is expected to deliver
skills-based interactive multimedia content to corporate,
academic and retail learners.
o The AT&T LPP will differentiate itself from other training
methodologies by delivering an end-to-end interactive learning
solution over any network together with the most comprehensive
distance learning support.
o The use of the Company's technology will also provide content
vendors with confidence that their intellectual property will
not be compromised.
o The AT&T LPP will allow self-paced learning to maximize
personal and career success of learners over their lifetime.
o The AT&T LPP will support the learner with live on-line
telephone coaching within a standard Internet browser (i.e.,
Netscape or Explorer). The learner will access a browser for
interactive learning producing a more collaborative learning
experience.
o The AT&T LPP will enhance conventional classroom-based and
current distance learning delivery methods.
o The agreement with AT&T Canada's academic clients will provide
the Company with premier academic partners to launch its
distance learning program beginning in Canada.
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o The Company believes that the experience and relationships
acquired by the Company's management team in the
telecommunications call center industry provide the necessary
experience and resources to successfully launch and expand the
LPP.
Virtual Call Centers ("VCCs"). The Company's VCC solution will
potentially allow any caller or customer to reach a trained agent at any time,
from almost any place. The agent can, if necessary, also have secure access to a
merchant's in-house databases. Customer data is protected by a multi-level
secured dedicated network, yet is fully accessible via the AT&T Canada Digital
Network or via the Company's Private Access System ("PAS"). The PAS is a dial-up
solution that allows a VCC Customer Service Representative to process calls from
remote locations via a toll-free service. It seeks to do away with the need for
dedicated lines to the house or long-term relationships with internet service
providers. The Company's VCC solution's reduced cost structure will potentially
enable firms to enhance the quality of any customer contact and improve
profitability without incurring large capital costs.
The Company's VCC solution will permit any customer or prospect, any
time, anywhere, in its language of choice, to connect to an electronic or live
agent without unwarranted delay. The VCCs let call center agents work from home.
Using the Company's technology, VCCs enjoy all the features of a traditional
call center while reducing capital and human resource overhead. Call center
agents are recruited, hired and trained using the Company's network. The
Company's VCC application allows firms to service existing and new clients with
better cost structures while both enhancing levels of service and reducing
costly employee turnover.
Unlike traditional call centers, with the Company's VCC solution:
o Merchants can offer products to a worldwide audience.
o Consumer sales and service inquiries can be routed to the
advertiser, retailer or their agent.
o Any caller or customer can reach any participating merchant
at any time from any place.
o Any customer can connect to a trained agent who understands
the product, speaks the customer's language and has secure,
real-time access to the merchant's customer database.
The concept of the VCC is predicated on the Company's ability to
provide the communication software that allows the VCC agent, the buyer and the
vendor to be linked together in real-time. VCC is based upon a high volume of
inbound customer calls that are routed transparently to a VCC representative who
answers and services the call. The VCC operator is able to accept a buyer's call
and immediately access the merchant's database, locate the appropriate
product/service and process the buyer's request immediately. The Company's
software programs
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provide the necessary communications linkage and speed to allow all three
parties to interact in real-time to the buyer's transaction.
Customers will have the freedom to interact with merchants over any
network. Accordingly, the buyer-seller can interface more often at the point in
time when the buyer wants to complete the transaction, therefore, large
companies can reduce marketing costs, while small companies can access channels
of distribution that were not open to them before. The end result is that
merchants' overall profit margins increase, while users get what they want, when
they want it.
Teleworking. Working through the use of remote access is no longer
merely an option in many types of work. Instead, remote access has become a
necessary feature in competitive sales, customer relationship management and
flexible work programs. The Company and Homebase are creating a network
infrastructure to connect individuals working from their homes with the
corporate office. HomeBase's niche in the remote access market lies in its
ability to deliver services that facilitate the implementation of teleworking
solutions. The Company and Homebase will seek to make this system reliable,
secure and highly accessible so that it can provide complete management and
administration to individuals who need to connect to corporate data resources.
The Company's teleworking application will involve:
o The Company's high-speed and secure data and voice network to
connect telecommuters with their offices.
o Psychological assessment technology to access an individual's
ability to work well from home.
o A turnkey solution that supplies the hardware, software,
ergonomic counseling and telecommuting training.
o Ongoing monitoring and mentoring, evaluation, coaching and
certification.
The Company will offer a customized bundled solution that will provide
all the components to implement a successful telework program.
Strategic Alliances and Associations
The Company has entered into, and is developing, a number of key
strategic alliances in order to further its operations. Some of these
relationships and the strengths of each partnership (with specific reference to
the Company) are noted below:
AT&T Canada ("AT&T"). The Company has entered into a letter of
understanding with AT&T with respect to its distance learning and VCC services.
AT&T will provide the Company with a Virtual Private Network for secure and
global information delivery. AT&T is considered by
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many industry analysts as the international call center telecommunications
leader and hence will provide the Company with:
o state-of-the-art call center technology;
o an extensive call center Marketing & Alliance Program;
o access to the Canadian toll-free (that is, call center)
marketplace;
o access to the United States call center market;
o access to the international call centers.
Sun Microsystems, Inc. ("Sun"). The Company has an oral arrangement
with Sun whereby Sun will provide computer equipment, operating systems,
applications software and servers in order to initiate the Company's distance
learning program and the VCC. Sun servers and related operating systems
(including Java tools) provide the Company with critical communication functions
to link both private and public networks together. The Company has already
ordered the first i-Hub server that will host the Company's applications. Sun
provides the Company with:
o A recognized network and Internet computer partner with
worldwide service and support;
o A stable operating system environment further enabled by the
networking capability of its Java programming language and
environment;
o A clear and distinctive processing performance that will meet
the challenges of network computing;
o Solid communication tools and programs to support global
network connectivity;
o Internet firewall technology providing support users with
transparent access; and
o Professionals worldwide who can support complex network
designs and problems.
The Company's Technology
As an Application Service Provider, the Company's focus is to enable
customers to access the best software packages via a standard web browser and
Internet access without regard to geographical point of origin, underlying
network architecture or personal computer make or model.
The Company's technological expertise lies in five key areas:
o building fully-clustered server architecture for mission
critical applications;
o converting conventional client-server software to an N-Tier
architecture that supports load-balancing and fail-over;
o integrating VPN solutions from multiple vendors within a
single client installation;
o converting bandwidth intensive CD-ROM-based multimedia content
into a streamable, variable speed-of-delivery format that is
suitable to an Internet environment; and
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o using Voice Over-IP ("VoIP") technology to reduce call center
infrastructure costs while maintaining carrier-grade voice
quality and service.
As an example of its efforts to date, the Company has been using its
expertise to turn up a four processor Sun Enterprise 10000 super computer
installation, as well as a four machine clustered Intel solution. At the same
time, the Company has been experimenting with various distributed technologies
for pipelining web requests to increase handling capacity. These efforts will
form the basis of InfoCast i-Hub technology, which the Company envisions as
having a robust server architecture that can be repeatedly deployed in various
geographic locations with a minimum of effort and a maximum of processing
capacity.
To further the growth of the ASP industry, the Company is focused on
taking best-of-breed software from specific vertical markets and converting it
to support e-commerce. One example of this is the Company's work with a leading
oil and gas financial software vendor. The Company is in the process of taking
this vendor's conventional client-server architecture and converting it to work
in an N-Tier server-based environment, which is well suited to the ASP business
model. The Company believes that this will result in a software system that is
more robust and scalable than the vendor's existing architecture.
The Company's VCC business model is based on supporting multiple
customers with a single Customer Service Representative ("CSR") from any
geographical location. Thus, the CSR would not be limited to a traditional
brick-and-mortar call center building. To this end, the Company has developed
considerable experience in enabling multiple vendor VPN solutions to work in a
single client installation. This permits a single CSR to access corporate data
from multiple clients, regardless of the firewall or VPN solution the client may
have selected as its corporate standard.
During the multimedia training boom of the early 1990's, CD-ROM was the
de-facto standard for content delivery. The problem with CD-ROMs was that they
did not permit the customization required by large, technologically
sophisticated and globally oriented companies. CD-ROM was very much a
"one-size-fits-all" solution. Additionally, CD-ROMs did not provide the sense of
community and shared learning offered by the conventional classroom environment.
The Company believes that these problems can be solved by the use of the World
Wide Web. The Company intends to purchase ACT, which has considerable
technological experience not only in translating CD-ROM based content to a
format suitable for deployment over the World Wide Web, but also in creating the
tools for customization and group learning that were missing from the CD-ROM
format. ACT has developed a form of browser-based interaction format that
contains full Java-based audio- recording capabilities but does not require the
use of a browser "plug-in." Additionally, the use of training templates allows
ACT to migrate content much more quickly to a World Wide Web environment. The
Company believes that this will give it a competitive advantage over many
existing "learning over-the-web" companies that ask their clients to completely
redo their content to conform to the demands of the World Wide Web's format.
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Finally, the Company has spent considerable effort in taking VoIP
technology out of the hands of the hobbyist and into mainstream markets. The
cost justification of using the Internet's network architecture for
carrier-grade voice transmission has long been understood, but rarely achieved
due to a lack of quality of service on the Internet. The Company's work with
AT&T Canada, combined with an innovative business model and leading edge VoIP
technology, makes it possible for the Company to offer a competitive voice
network to any call center agents located near an i-Hub Point-of-Presence
("POP"). The Company's first POP is located in Markham, Ontario Canada and will
service the Greater Toronto Area. Additional i-Hub installations will service
this geographical area as well. All features of a regular call center, such as
Automated Call Distribution, and Interactive Voice Response, as well as
forward-looking call center technologies such as Unified Messaging and web-based
help desks, are also supported by the Company's installation. While the Company
does not develop the VoIP software itself, it has developed considerable
experience in the technical issues surrounding VoIP's successful implementation
and now believes it can successfully select best-of-breed vendors to meet the
demand it anticipates in this market.
Market Overview
Education/Training Delivery
The North American training market is approximately $74 billion in
size, with $6 billion being spent in Canada and $68 billion being spent in the
United States. The North American post-secondary education market spends
approximately $225 billion annually on training and the K-12 market spends
approximately $410 billion annually on training (AAHE Bulletin, 1998). The
factors driving people and businesses to seek training include: (i) business
requirements of staff to be certified in certain technologies in order to assure
performance and productivity; (ii) corporate downsizing, resulting in increased
training requirements for ex-staff as well as for employees who perform multiple
job tasks that require knowledge of various jobs; (iii) the proliferation of
computers and networks throughout all levels of organizations, increasing the
number of employees who need training; and (iv) the continuous introduction and
evolution of new technologies, contributing to the need for continuing
education.
Call Center Marketplace
The Call Center marketplace is a collection of vertical industries that
conduct inbound or outbound telemarketing practices. In total, there are some
95,000 Call Centers in North America.
Outsourcing of call centers is gaining popularity in North America and
Europe. There is an emerging number of large firms offering Call Center
outsourcing and management. One of the best examples is MCI. MCI estimates that
the market for Call Center outsourcing is more than $12 billion today and is
growing at 25% annually, while the number of companies taking advantage of Call
Center outsourcing is expected to double in the next five years.
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Marketing and Sales Strategy
The marketing and sales strategy for the Company will utilize the
established businesses and proven products and services of the Company's
strategic partners to allow the Company to generate revenues immediately through
its Distance Learning and Virtual Call Center applications.
Utilizing this strategy, the Company is positioning itself into a
marketplace where the only constant is change; both industries and technologies
are converging in order to maximize profits and reduce overhead. Customers in
today's business environment are demanding integrated solutions that are
transaction oriented and businesses perceive current technologies as a threat
rather than an opportunity for enhancement. The success in this market for the
Company will depend on its ability to generate competent, simple and flexible
solutions for customers.
The Company believes that it has positioned itself as a "single source"
for on-line media delivery in the distance learning market and can offer an
unbiased service to all major institutional and non-institutional educators
through its multi-level alliance strategy. The VCC solution provides the
environment to undertake any type of commercial transaction between seller and
buyer.
The Company's alliance partners will be provided with:
o A new medium on which to promote products, advertise, recover
data and interact with customers instantaneously.
o An on-line media delivery system that will facilitate
distribution of content to an unlimited number of users using
the convenience of the Internet, cable, satellite or intranet
networks.
o A cost-effective VCC that offers buyers and sellers with a
seamless network that is based on an architecture that is
platform, database and operating system independent. This
means that more people can use and access the system because
it does not change the way they learn about a product today -
the Company's solution simply makes buying the
products/services simpler and faster.
Through the new age of communications and technology, there are no
geographical limitations to doing business in the next century. Therefore, the
Company will have global reach for customers, leveraging the strengths of
alliance partner services and their clients in a "sell with, sell to" strategy
for both business to business and business to consumer applications. The
Company's product and service offerings will be marketed with both "off the
shelf" and customized applications.
The Company will provide customers with a compelling strategy to do
business by providing bundled offers including proven technology, content
delivery, management, hosting and transaction based revenue.
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Competition
The market for the Company's products and services is highly
competitive and subject to rapid technological change. The Company is using
certain third-party technologies and products that, in different forms, have
already been introduced and are being used in the marketplace. Competitors may
quickly deploy products and e-commerce technology that could limit the Company's
expansion. The Company expects competition to increase in the future. Many of
the Company's potential competitors have substantially greater financial,
technical and marketing resources than the Company. Increased competition could
materially and adversely affect the Company's business, financial condition and
results of operations. There can be no assurance that the Company will be able
to compete successfully.
Intellectual Property and Other Proprietary Rights
The Company's success is dependent in part on intellectual property
rights, including information technology, some of which is proprietary to the
Company. The Company relies on a combination of nondisclosure and other
contractual arrangements, technical measures, trade secret and trademark laws to
protect its proprietary rights. The Company does not presently hold any patents
for its existing products or services and presently has no patent applications
pending. The Company generally enters into confidentiality agreements with its
employees and attempts to limit access to and distribution of proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use or take
appropriate steps to enforce intellectual property rights. In addition, there
can be no assurance that the Company's competitors will not independently
develop technologies that are substantially equivalent or superior to the
Company's technology. Further, the laws of many foreign countries do not protect
the Company's intellectual property rights to the same extent as the laws of the
United States. The failure of the Company to protect its proprietary information
could have a material adverse effect on the Company's business, financial
condition and results of operations.
From time to time, third parties may assert exclusive patent,
copyright, trademark and other intellectual property rights to technologies that
are used by the Company. Litigation may be necessary to defend against claimed
infringements of the rights of others or to determine the scope and validity of
the proprietary rights of others. Future litigation may also be necessary to
enforce and protect trade secrets and other intellectual property rights owned
by the Company. Any such litigation could be costly and cause diversion of
management's attention, either of which could have a material adverse effect on
the Company's business, financial condition and results of operations. Adverse
determinations in such litigation could result in the loss of the Company's
proprietary rights, subject the Company to significant liabilities (including
possible indemnification of its customers), require the Company to secure
licenses from third parties or prevent the Company from the manufacturing or
selling its products or services, any one of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company has
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not conducted a formal patent search relating generally to the technology used
in its products or services. In addition, since patent applications in the
United States are not publicly disclosed until the patent issues and foreign
patent applications generally are not publicly disclosed for at least a portion
of the time that they are pending, applications may have been filed which, if
issued as patents, would relate to the Company's products or services. Software
comprises a substantial portion of the technology in the Company's products. The
scope of protection accorded to patents covering software-related inventions is
evolving and is subject to a degree of uncertainty that may increase the risk
and cost to the Company if the Company discovers the existence of third party
patents related to its software products or if such patents are asserted against
the Company in the future. Patents have been granted recently on fundamental
technologies in software, and patents may issue which relate to fundamental
technologies incorporated into the Company's products or services.
While the Company employs proprietary software technology and
algorithms and conducts ongoing research and development, the future success of
the Company will depend in part upon its ability to keep pace with advancing
technology, evolving industry and changing customer requirements in a
cost-effective manner. There can be no assurance that the Company's proprietary
software technology and algorithms will not be rendered obsolete by other
technology incorporating technological advances designed by competitors that the
Company is unable to incorporate into its products or services in a timely
manner.
The market for the Company's products and services is characterized by
rapidly changing technologies. The rapid development of new technologies
increases the risk that current or new competitors could develop products or
services that would reduce the competitiveness of the Company's products or
services. The Company's success will depend to a substantial degree upon its
ability to respond to changes in technology and customer requirements. This will
require the timely selection, development and marketing of new products or
services and enhancements on a cost-effective basis. The development of new,
technologically advanced products or services is a complex and uncertain
process, requiring high levels of innovation. The introduction of new and
enhanced products or services also requires that the Company manage transitions
from older products or services in order to minimize disruptions. There can be
no assurance that the Company will be successful in developing, introducing or
managing the transition to new or enhanced products or services or that any such
products or services will be responsive to technological changes or will gain
market acceptance. The Company's business, financial condition and results of
operations would be materially adversely affected if the Company were to be
unsuccessful, or to incur significant delays, in developing and introducing such
new products, services or enhancements.
Employees
At August 31, 1999, the Company had 32 full-time employees. None of the
Company's employees is represented by a collective bargaining agreement nor has
the Company experienced any work stoppage. The Company considers its relations
with its employees to be good.
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Risk Factors
An investment in the Common Stock of the Company is highly speculative,
involves a high degree of risk and should be considered only by those persons
who are able to afford a loss of their entire investment. In evaluating the
Company and its business, prospective investors should carefully consider the
following risk factors in addition to the other information included in this
Registration Statement.
Risks Relating to the Financial Condition of the Company
Environmental Liabilities. Prior to 1999, the Company's sole business
was mining exploration and development. The mining and mineral processing
industries are subject to extensive governmental regulations for the protection
of the environment, including regulations relating to air and water quality,
mine reclamation, solid and hazardous waste handling and disposal and the
promotion of occupational safety. The Company could be held responsible for any
environmental liabilities relating to the mining businesses that were sold by
the Company which liabilities could have a material adverse effect on financial
condition of the Company.
Development Stage Company; Limited Operating History and Revenues;
Historical and Anticipated Losses and Working Capital Deficits. The Company was
organized in December 1997 and has a very limited operating history upon which
an evaluation of the Company's future performance and prospects can be made. The
Company is a development stage company and has not yet sold any products or
services on a commercial basis. The Company's prospects must be considered in
light of the risks, expenses, delays, problems and difficulties frequently
encountered in the establishment of a new business in an emerging and evolving
industry. Since inception, the Company has generated no revenues and has
incurred significant losses resulting in a working capital deficit. Losses are
continuing through the date of this Registration Statement. Inasmuch as the
Company will continue to have a high level of operating expenses and will be
required to make significant up-front expenditures in connection with the
proposed development of its business, the Company may continue to incur losses
for the next 12 months and until such time, if ever, as the Company is able to
generate sufficient revenues to finance its operations and the costs of
continuing expansion. There can be no assurance that the Company will be able to
generate significant revenues or achieve profitable operations. See the
financial statements and the notes thereto included elsewhere in this
Registration Statement.
Need for Additional Financing. The Company may determine, depending
upon the opportunities available to it, to seek additional debt or equity
financing to fund the cost of continuing expansion. To the extent that the
Company incurs indebtedness or issues debt securities, the Company will be
subject to risks associated with incurring substantial indebtedness, including
the risks that interest rates may fluctuate and cash flow may be insufficient to
pay principal and interest on any such indebtedness. There can be no assurance
that additional financing will be available to the Company on commercially
reasonable terms or at all. If the Company is unable to obtain
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additional financing, its ability to meet its current plans for expansion could
be materially adversely affected.
Risks Relating to the Company's Business
New Industry; Uncertainty of Market Acceptance. As is typically the
case in an emerging industry, demand and market acceptance for newly introduced
services and products are subject to a high level of uncertainty.
Risks Associated with Growth Strategy and Rapid Expansion. The Company
is a development stage company and has not yet sold any products or services on
a commercial basis. Implementation of the Company's business plan will be
substantially dependent on, among other things, the Company's ability to hire
and retain skilled management, financial, marketing and other personnel and
successfully manage growth (including monitoring operations, controlling costs
and maintaining effective quality controls). The Company's plans are subject to
change as a result of a number of factors, including progress or delays in the
development of its technologies, changes in market conditions and competitive
factors. There can be no assurance that the Company will be able to successfully
implement its business strategy or otherwise expand its operations.
Competition. The market for the Company's products and services is
highly competitive and subject to rapid technological change. The Company is
using third-party technologies and products that, in different forms, have
already been introduced and are being used in the marketplace. Competitors may
quickly deploy products and e-commerce technology that could limit the Company's
expansion. The Company expects competition to increase in the future. Many of
the Company's potential competitors have substantially greater financial,
technical and marketing resources than the Company. Increased competition could
materially and adversely affect the Company's business, financial condition and
results of operations. There can be no assurance that the Company will be able
to compete successfully.
Attraction and Retention of Key Personnel. The Company's ability to
continue to develop and market its services and products depends, in large part,
on its ability to attract and retain qualified personnel. Competition for such
personnel is intense and no assurance can be given that the Company will be able
to retain and attract such personnel.
Limited Intellectual Property Protection; Risk of Third Party Claims of
Infringement. The Company's success is dependent in part on intellectual
property rights, including information technology, some of which is proprietary
to the Company. The Company relies on a combination of nondisclosure and other
contractual arrangements, technical measures, trade secret and trademark laws to
protect its proprietary rights. The Company does not presently hold any patents
for its existing products or services and presently has no patent applications
pending. The Company generally enters into confidentiality agreements with its
employees and attempts to limit access to and distribution of proprietary
information. There can be no assurance that the steps taken by the
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Company in this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use or take
appropriate steps to enforce intellectual property rights. In addition, there
can be no assurance that the Company's competitors will not independently
develop technologies that are substantially equivalent or superior to the
Company's technology. Further, the laws of many foreign countries do not protect
the Company's intellectual property rights to the same extent as the laws of the
United States. The failure of the Company to protect its proprietary information
could have a material adverse effect on the Company's business, financial
condition and results of operations.
From time to time, third parties may assert exclusive patent,
copyright, trademark and other intellectual property rights to technologies that
are used by the Company. Litigation may be necessary to defend against claimed
infringements of the rights of others or to determine the scope and validity of
the proprietary rights of others. Future litigation may also be necessary to
enforce and protect trade secrets and other intellectual property rights owned
by the Company. Any such litigation could be costly and cause diversion of
management's attention, either of which could have a material adverse effect on
the Company's business, financial condition and results of operations. Adverse
determinations in such litigation could result in the loss of the Company's
proprietary rights, subject the Company to significant liabilities (including
possible indemnification of its customers), require the Company to secure
licenses from third parties or prevent the Company from the manufacturing or
selling its products or services, any one of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company has not conducted a formal patent search relating generally to the
technology used in its products or services. In addition, since patent
applications in the United States are not publicly disclosed until the patent
issues and foreign patent applications generally are not publicly disclosed for
at least a portion of the time that they are pending, applications may have been
filed which, if issued as patents, would relate to the Company's products or
services. Software comprises a substantial portion of the technology in the
Company's products. The scope of protection accorded to patents covering
software-related inventions is evolving and is subject to a degree of
uncertainty that may increase the risk and cost to the Company if the Company
discovers the existence of third party patents related to its software products
or if such patents are asserted against the Company in the future. Patents have
been granted recently on fundamental technologies in software, and patents may
issue which relate to fundamental technologies incorporated into the Company's
products or services.
Impact of Technological Change. While the Company employs proprietary
software technology and algorithms and conducts ongoing research and
development, the future success of the Company will depend in part upon its
ability to keep pace with advancing technology, evolving industry and changing
customer requirements in a cost-effective manner. There can be no assurance that
the Company's proprietary software technology and algorithms will not be
rendered obsolete by other technology incorporating technological advances
designed by competitors that the Company is unable to incorporate into its
products or services in a timely manner.
The market for the Company's products and services is characterized by
rapidly changing technologies. The rapid development of new technologies
increases the risk that current or new
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competitors could develop products or services that would reduce the
competitiveness of the Company's products or services. The Company's success
will depend to a substantial degree upon its ability to respond to changes in
technology and customer requirements. This will require the timely selection,
development and marketing of new products or services and enhancements on a
cost-effective basis. The development of new, technologically advanced products
or services is a complex and uncertain process, requiring high levels of
innovation. The introduction of new and enhanced products or services also
requires that the Company manage transitions from older products or services in
order to minimize disruptions. There can be no assurance that the Company will
be successful in developing, introducing or managing the transition to new or
enhanced products or services or that any such products or services will be
responsive to technological changes or will gain market acceptance. The
Company's business, financial condition and results of operations would be
materially adversely affected if the Company were to be unsuccessful, or to
incur significant delays, in developing and introducing such new products,
services or enhancements.
Other Risks
Dividends Unlikely. The Company has not paid cash dividends on its
Common Stock since its inception. The Company does not intend to pay cash
dividend on its Common Stock in the foreseeable future so that it may reinvest
earnings, if any, in the development of its business.
No Assurance of Public Market; Possible Volatility of Market. There has
been only a limited public trading market for the Common Stock on the OTC
Bulletin Board. There can be no assurance that a regular trading market for the
Common Stock will ever develop or that, if developed, it will be sustained. The
market price of the Common Stock may be highly volatile as has been the case
with the securities of many emerging companies. Factors such as the Company's
operating results and announcements by the Company or its competitors of new
products or services may significantly impact the market price of the Company's
securities. In addition, in recent years, the stock market has experienced a
high level of price and volume volatility and market prices for the securities
of many companies have experienced wide fluctuations not necessarily related to
the operating performance of such companies.
Foreign Exchange. The Company receives the proceeds from its private
placements in U.S. dollars. It is the Company's practice to maintain all excess
cash in U.S. dollars and to invest these funds in short term, interest bearing,
U.S. dollar deposits. The Company converts U.S. dollars to Canadian dollars on
an as needed basis to meet Canadian dollar expenses. The Company incurs a
significant portion of its expenses in Canadian dollars and therefore is exposed
to fluctuations in the foreign exchange rate between the Canadian and U.S.
dollar.
Year 2000. 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
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something other than a date. The effects of the Year 2000 issue may be
experienced before, on, or after January 1, 2000, and, if not addressed, their
impact on the Company's operations and financial reporting may range from minor
errors to significant systems failure that could materially affect the Company's
ability to conduct normal business operations. It is currently not possible to
be certain that all aspects of the Year 2000 issue affecting the Company,
including those related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.
Corporate Governance Risks
Substantial Shares of Common Stock Reserved for Issuance. The Company
has reserved 2,250,000 shares of Common Stock for issuance pursuant to the
Company's 1998 Stock Option Plan, pursuant to which options to purchase
2,075,000 shares of Common Stock at an exercise price of $1.00 per share are
outstanding. The Company has also reserved 2,000,000 shares of Common Stock for
issuance pursuant to the Company's 1999 Stock Option Plan pursuant to which
options to purchase 1,180,500 shares of Common Stock at an exercise price of
$7.00 per share have been granted. The Company has also issued options outside
such plans to purchase 750,000 shares of Common Stock at an exercise price of
$7.00 per share and warrants to purchase an additional 295,000 shares of Common
Stock at an exercise price of $7.00 per share. The existence of the outstanding
options and warrants may hinder future financings by the Company. In addition,
the exercise of any such options or warrants in the future could dilute the net
tangible book value of the Company's Common Stock. Further, the holders of such
options and warrants may exercise them at a time when the Company would
otherwise be able to obtain additional equity capital on terms more favorable to
the Company.
Authorization and Discretionary Issuance of Preferred Stock. The
Company is authorized to issue up to 100,000,000 shares of preferred stock,
$.001 par value per share (the "Preferred Stock"). The Preferred Stock may be
issued in one or more series, on such terms and with such rights, preferences
and designations as the Board of Directors of the Company may determine, without
action by stockholders. No shares of Preferred Stock are currently outstanding.
However, the issuance of any Preferred Stock could adversely affect the rights
of the holders of Common Stock, and therefore reduce the value of the Common
Stock. In particular, specific rights granted to future holders of Preferred
Stock could be used to restrict the Company's ability to merge with or sell its
assets to a third party, thereby preserving control of the Company by present
owners.
Forward Looking Statements. This Registration Statement contains
forward-looking statements. Investors are cautioned that all forward-looking
statements involve risks and uncertainty. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this
Registration Statement will prove to be accurate. In light of the significant
uncertainties inherent in the forward- looking statements included herein, the
inclusion of such information should not be regarded as a
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representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
ITEM 2 FINANCIAL INFORMATION.
The selected financial data set forth below are derived from the
financial statements of the Company included elsewhere in this Registration
Statement and are qualified by reference to and should be read in conjunction
with such financial statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Registration Statement. The financial statements of
the Company as of and for the three months ended March 31, 1999 and March 31,
1998, the year ended December 31, 1998 and the period from July 29, 1997
(inception) to December 31, 1997 have been audited by Ernst & Young LLP,
independent certified public accountants. The information as of and for the
three months ended June 30, 1999 and 1998 is unaudited and, in the opinion of
management contains all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
position and results of operations at such dates and for such periods. The
results for the three months ended June 30, 1999 are not necessarily indicative
of the results for the full year. The historical results for the periods ended
December 31, 1997 and 1998, March 31, 1998 and June 30, 1998 are those of VPS.
The historical results are not necessarily indicative of the results of
operations to be expected in the future.
Selected Financial Data
<TABLE>
<CAPTION>
Period
from July
Year 29, 1997
ended (inception)
December to
Three months ended Three months ended 31, December
June 30, 1999 June 30, 1998 March 31, 1999 March 31, 1998 1998 31, 1997
------------- ------------- -------------- -------------- ---- --------
Statement of Operations
Data:
<S> <C> <C> <C> <C> <C> <C>
Revenues............. $ 23,157 $ 4,478 $ 102 $ 43,446 $ 43,446 $ 3,508
Expenses............. 9,151,954 3,088,399 47,672 63,067 467,318 99,669
Net loss for the 8,930,192 3,083,921 47,570 19,621 423,872 96,161
period...............
Net loss per share... $0.45 $0.27 $0.16 $478.56 $0.55 $2,345
Dividends paid....... - - - - - -
Balance Sheet Data:
Total assets......... 28,936,817 4,025,076 15,708 47,510 143,467 28,604
</TABLE>
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Management's Discussion and Analysis of Results of Operations and Financial
Condition
The consolidated financial statements of the Company are the continuing
financial statements of VPS, a development stage company and an Ontario
corporation incorporated on July 29, 1997. VPS had a 100% interest in, and
subsequently merged with, Cheltenham Technologies Corporation ("Cheltenham
Technologies"), an Ontario corporation. VPS has a 100% interest in Cheltenham
Interactive Corporation ("Cheltenham Interactive"), an Ontario corporation, and
Cheltenham Technologies (Bermuda) Corporation ("Cheltenham Bermuda"), a Barbados
corporation. On January 29, 1999, VPS acquired the net assets of the Company
(formerly known as Grant Reserve Corporation), a United States non-operating
company traded on the Nasdaq OTC Bulletin Board, which had a 100% interest in
InfoCast Canada Corporation ("InfoCast Canada"). After the acquisition, the
accounting entity continued under the name of InfoCast Corporation. InfoCast
Corporation, InfoCast Canada, VPS, Cheltenham Technologies, Cheltenham
Interactive and Cheltenham Bermuda are collectively referred to in this section
as the "Company."
The following discussion should be read in conjunction with the
Company's historical financial statements and notes thereto included elsewhere
in this Registration Statement. All figures included in this Management's
Discussion and Analysis of Results of Operations and Financial Condition are
expressed in U.S. dollars unless otherwise noted.
The following discussion includes forward looking statements. Such
forward looking statements involve risks and uncertainties, including among
other things, statements regarding the Company's anticipated costs and expenses.
Such forward looking statements contain, but are not limited to, the words
"expects," "anticipates," "intends," "predicts" and similar language. The
Company's actual results may differ significantly from those projected in the
forward looking statements. Factors that might cause future results to differ
materially from those described in the forward looking statements include, but
are not limited to, those discussed in the section entitled "Risk Factors."
Overview
The Company has incurred operating losses since its inception in July
1997. The Company has sustained itself through the sale of its Common Stock and
warrants to purchase Common Stock in a series of private placements. There can
be no assurance that such funds will be available in the future if additional
capital is required.
The Company is a development stage company engaged in the research and
development of information delivery technologies. The Company, an application
service provider ("ASP"), is in the business of electronic content delivery and
information management to meet the high-speed information needs of global
corporate consumers. The Company uses a sophisticated architecture technology
that brings reliability and scalability to applications distributed across a
network. The Company's network and strategic alliances will provide the
essential communication link between
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information sources and information users worldwide. The Company will link
networks and infrastructures so that information can be delivered in real-time
to anyone, anywhere, in any format - data, voice or video. This technology will
provide the infrastructure that enables and enhances applications such as the
Company's initiatives in Distributed Learning, Telework, VCC Solutions and
Application Hosting. The Company has not yet sold any of these products or
services on a commercial basis and thus has not generated any revenue to date
from these products and services.
The Company acquired HomeBase in May 1999 in exchange for 3,400,000
shares of InfoCast Canada, which shares are exchangeable into Common Stock of
the Company. The Homebase acquisition provided the Company with the core
technology for its network, the Information Hub, or i-Hub. The acquisition also
provided the Telework and Application Hosting initiatives to the Company, both
of which will be hosted on the i-Hub. The Company's VCC solution and Distance
Learning library will also be hosted on the i-Hub platform
The Company is in the process of completing the acquisition of ACT.
This transaction is subject to satisfactory due diligence and is expected to
close in second quarter of the Company's current fiscal year ending March 31,
2000. Consideration for this acquisition will be 750,000 shares of InfoCast
Canada, which shares will be exchangeable into shares of Common Stock of the
Company, and the assumption of approximately $670,000 of debt. The ACT
acquisition will provide the Company with in-house technical expertise used in
the conversion of traditional learning materials into an electronic format and
Integrator-Pro, a software tool that manages performance improvement data and
delivers analysis, design, decision support and resource management
functionalities. ACT's operations are located in New Brunswick, Canada, which
will allow the Company to benefit from various government research and
development and employment grants and loans.
The Company changed its fiscal year end from December 31 to March 31.
Therefore financial statements have been prepared for the three month transition
period ended March 31, 1999.
Results of Operations
Three months ended June 30, 1999 vs. three months ended June 30, 1998
Consulting income decreased from $102 for the three months ended June
30, 1998 to zero for the three months ended June 30, 1999. This decrease is due
to the Company's decision to no longer provide computer programming services.
Interest income increased from zero for the three months ended June 30,
1998 to $23,157 for the three months ended June 30, 1999. The proceeds received
from the private placements in 1999 were invested in short term deposits, which
generated interest income for the Company during the period ended June 30, 1999,
consistent with the Company's investment policy discussed under "Risk Factors -
Foreign Exchange" elsewhere in this Registration Statement.
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General, administrative and selling expenses increased from $17,767 for
the three months ended June 30, 1998 to $1,936,815 for the three months ended
June 30, 1999. The consolidation of the operations of Homebase for the period
May 13, 1999 to June 30, 1999 accounted for $233,000 of the increase. The
Company incurred expenses of $286,000 related to the Homebase acquisition in the
form of incentive compensation paid to three key officers of Homebase. The
Company had approximately six more employees and 10 additional consultants in
the three month period ended June 30, 1999 than for the same period ended June
30, 1998, contributing approximately $215,000 to the increase in expenses.
Investor relations costs of $325,000 were incurred for the three month period
ended June 30, 1999, $250,000 of which was spent on national media consulting
services and financial community investor relations consulting services.
Additional rent expenses of $36,000 were incurred for the two U.S. offices that
were not open in June 1998 and the expanded Toronto office space. The Company
expensed $449,998 for warrants issued for services during the three month period
ended June 30, 1999 and expensed an additional $157,923 related to Common Stock
issued for services during the three month period ended June 30, 1999.
Stock option compensation expense increased from zero for the three
months ended June 30, 1998 to $5,829,647 for the three months ended June 30,
1999. This increase is due to the amortization of the deferred compensation
amount resulting from the grant of stock options to various individuals involved
in the management of the Company. Options to purchase 2,250,000 shares of Common
Stock were granted on February 8, 1999 at a price of $1.00 per share. These
options expire three years from the date of grant and are subject to a vesting
period of at least six months. At June 30, 1999, 2,075,000 of the options
granted on February 8, 1999 were outstanding. On June 1, 1999, the Company
granted options to purchase 1,180,500 shares of Common Stock at an exercise
price of $7.00. These options are subject to vesting periods ranging from
immediate vesting to six months and expire five years from the date of grant.
Research and development expenses increased from $28,964 for the three
months ended June 30, 1998 to $730,657 for the three months ended June 30, 1999.
The majority of this increase is due to continued efforts to develop and expand
the Company's product offerings. The Company incurred expenses of approximately
$339,000 for services rendered by ACT for the distance learning project and the
CCLS On-Line joint venture during the three months ended June 30, 1999.
Amortization expenses increased from zero for the three months ended
June 30, 1998 to $645,873 for the three months ended June 30, 1999. Amortization
of the acquired intellectual property and goodwill resulting from the
acquisition of Homebase accounted for the majority of the increase in the
amortization expense for the period.
Depreciation expenses increased from $941 for the three months ended
June 30, 1998 to $8,962 for the three months ended June 30, 1999. This increase
is a result of the acquisition of additional capital assets between July 1, 1998
and June 30, 1999.
Deferred income taxes increased from zero for the three months ended
June 30, 1998 to $198,605 for the three months ended June 30, 1999 as a result
of the drawdown of the
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deferred income tax liability created by the purchase of Homebase by the Company
in respect of the difference in the tax and accounting basis of various
intellectual property assets.
Three months ended March 31, 1999 compared to three months ended March 31, 1998
The three month period ended March 31, 1999 is a transition period in
respect of the change in the Company's fiscal year end from December 31 to March
31.
Consulting income decreased from $43,446 for the three months ended
March 31, 1998 to zero for the three months ended March 31, 1999. This decrease
is due to the Company's decision to no longer provide computer programming
services.
Interest income increased from zero for the three months ended March
31, 1998 to $4,478 for the three months ended March 31, 1999. The proceeds
received from the March 1999 private placement were invested in short term
deposits, which generated interest income for the Company during the period
ended March 31, 1999. It is the Company's policy to invest all excess cash in
U.S. dollar short term interest bearing term deposits.
General, administrative and selling expenses increased from $42,494 for
the three months ended March 31, 1998 to $635,334 for the three months ended
March 31, 1999. The majority of this increase is due to the expansion of the
Company, including an increase in the number of employees and consultants
providing services to the Company, additional rent expenses of approximately
$40,000 for the two offices in the United States, opened in late 1998 and early
1999, and the additional space required in the Toronto office and additional
travel expenses of approximately $85,000. As a result of the January 1999
reverse merger, the Company incurred investor relations costs of $151,000 during
the three month period ended March 31, 1999.
Stock option compensation expense increased from zero for the three
months ended March 31, 1998 to $2,256,938 for the three months ended March 31,
1999. This increase is due to the amortization of the deferred compensation
amount resulting from the grant of 2,250,000 stock options under the Company's
1998 Stock Option Plan to various individuals involved in the management of the
Company. These stock options were granted on February 8, 1999 at a price of
$1.00 per share, expire three years from the date of grant and are subject to a
vesting period of at least six months. As of April 19, 1999, 175,000 of these
stock options were canceled due to the termination of certain individuals and
the renegotiation of employment terms, leaving a balance outstanding of
2,075,000 options.
Research and development expenses increased from $19,703 for the three
months ended March 31, 1998 to $162,914 for the three months ended March 31,
1999. The majority of this increase is due to the continued development of the
Company's technology.
Interest and loan fees expenses increased from zero for the three
months ended March 31, 1998 to $23,562 for the three months ended March 31,
1999. The interest and loan fees resulted
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from a short term loan received by the Company and repaid within the three month
period ended March 31, 1999.
Amortization expenses increased from zero for the three months ended
March 31, 1998 to $4,144 for the three months ended March 31, 1999. This
increase is due to the amortization of certain intellectual property rights
related to remote banking software acquired from a company owned by a
shareholder and former officer of the Company.
Depreciation expenses increased from $870 for the three months ended
March 31, 1998 to $5,507 for the three months ended March 31, 1999. This
increase is a result of the acquisition of additional capital assets from April
1, 1998 to March 31, 1999.
Year ended December 31, 1998 compared to the 156 day period ended December 31,
1997
Consulting income increased from $3,508 for the 156 day period ended
December 31, 1997 to $43,446 for the year ended December 31, 1998. This increase
is due to the timing of the provision of one-time computer programming services,
as the Company began providing these services at the end of 1997 and continued
to provided these services in the first calendar quarter of 1998. In early 1998
the Company discontinued providing these consulting services.
General, administrative and selling expenses increased from $47,954 for
the 156 day period ended December 31, 1997 to $375,302 for the year ended
December 31, 1998. This increase is due to the expenses being incurred for the
full year ended December 31, 1998 compared to a 156 day period ended December
31, 1997 and the continuing expansion of business operations. Consulting fees
were higher in 1998 as the Company engaged additional consultants to assist in
building the management team and enhancing the business model and infrastructure
of the Company. The Company incurred higher legal costs in 1998 as a result of
legal services rendered during 1998 for the reverse takeover transaction, as
well as for the Homebase acquisition, both of which were completed in 1999.
Research and development expenses increased from $51,257 for the 156
day period ended December 31, 1997 to $88,180 for the year ended December 31,
1998. This increase is due to the expenses being incurred for the full year
ended December 31, 1998 compared to a 156 day period ended December 31, 1997 and
the continuing expansion of the Company's research and development efforts.
Depreciation expenses increased from $458 for the 156 day period ended
December 31, 1997 to $3,836 for the year ended December 31, 1998. This increase
is a result of depreciation being incurred for the full year ended December 31,
1998 compared to a 156 day period ended December 31, 1997 and the acquisition of
additional capital assets during the year ended December 31, 1998.
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Liquidity and Capital Resources
Inception to June 30, 1999
As at June 30, 1999, the Company had cash and cash equivalents of
$1,493,205 and had a working capital deficit of $84,352. The Company's cash and
cash equivalent position has been generated through a series of equity offerings
net of development stage expenditures. The Company has not yet generated any
significant revenues.
From its inception on July 29, 1997 to January 29, 1999, VPS issued
3,624,100 shares of Common Stock for cash proceeds of Cdn $3,732. Pursuant to
the reverse takeover transaction on January 29, 1999, the shareholders of VPS
sold their 100% interest in VPS to the Company in consideration for 1,500,000
shares of InfoCast Canada, which shares are exchangeable into Common Stock of
the Company for no additional consideration. Such exchangeable shares have been
deemed as shares of Common Stock of the Company because they are the economic
equivalent of the Company's Common Stock. At the time of the reverse takeover,
the Company (formerly Grant Reserve Corporation) had 13,580,000 shares of Common
Stock outstanding which continued as shares of Common Stock of the continuing
entity. Subsequent to the reverse takeover and up to June 30, 1999, the Company
issued 3,023,333 shares of Common Stock at $1.50 per share in a private
placement in March 1999, 60,000 shares of Common Stock in consideration for
consulting services March 1999 and 420,000 shares of Common Stock at $5.00 per
share in a private placement in June 1999. The Company has raised $6,398,000
from these private placements, net of share issuance costs.
From its inception, the Company has used $3,328,000 for operating
activities before changes in non-cash working capital balances mainly as a
result of general and administrative and research and development expenditures,
net of incidental revenues. The Company used a further $298,000 for the purchase
of capital assets and software licenses, $975,000 on the purchase of
distribution rights and $586,000 on the placement of deposits.
The Company relied on term loans from shareholders, directors and
officers during the period from its inception to the completion of the March
1999 private placement to fund its operations. These loans were repaid as at
June 30, 1999 from the proceeds of the private placements.
The Company is currently raising funds through a private placement of
its shares of Common Stock. Gross proceeds from this private placement are
expected to be approximately $13,750,000. Through August 31, 1999, the Company
received $6,050,000 in consideration for 1,100,000 shares of Common Stock. The
Company may issue up to an additional 1,400,000 shares of Common Stock for an
aggregate offering price of $7,700,000 in such offering. The Company expects to
use these proceeds for the following:
o The Company plans to continue to invest in the research and
development of its products and services related to the
acquisition of Homebase and the pending
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completion of the acquisition of ACT and anticipates spending
approximately $4,800,000 and $2,400,000 respectively on these
efforts over the next 12 months. The Company anticipates that
it will begin earning revenue and collecting cash from sales
of the Homebase and ACT products and services, namely
application outsourcing, Telework and Distance Learning, in
the third quarter of the current fiscal year which will help
fund the cash requirements of these two divisions but there
can be no assurance that it will do so.
o Upon completion of the pending acquisition of ACT, the Company
has agreed to service the outstanding debt of ACT, which will
require approximately $670,000 over the next 12 months.
o The Company entered into an agreement with ITC in June 1999
whereby the Company will become ITC's exclusive distance
learning technology partner for the delivery of educational
material for the state of California for consideration of
$2,000,000, payable in three installments, the first of which
was paid in August and the remaining of which will be paid in
September and October 1999.
o The Company will contribute approximately $300,000 over the
next six months to fund the marketing and technical support
efforts of the CCLS On-Line joint venture, of which it is a
50% owner. The Company has entered into an agreement with Call
Center Learning Solutions Inc. to form a new corporation, CCLS
On-Line. This new corporation will develop, own and exploit
courseware in an electronic format capable of electronic
distribution.
o The Company will use approximately $1,000,000 over the next 12
months to enhance and complete its existing VCC technologies.
o The Company will use the remaining capital resources to fund
possible complementary acquisitions, develop new technologies,
and other corporate and working capital needs.
The Company believes that its existing cash resources, as well as the
cash received and expected from the current private placement and the cash
anticipated to be generated from sales of the Company's products and services
will be sufficient to meet its short term working capital requirements for at
least the next 12 months.
On a long term basis, the Company may need to raise additional funds
via private or public financings, strategic or other relationships because of
additional undertakings of the Company or because revenues generated from the
sale of the Company's products and services may be insufficient to satisfy the
Company's cash requirements.
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<PAGE>
Outlook
The Company's strategy is to be a leader in the ASP marketplace by
providing strategic IT enterprise services and applications to mid and large
sized organizations on its i-Hub platform via strategic relationships with Sun
Microsystems, network carriers, software vendors and clients. The Company
believes it will capture market share by initially focusing on three markets,
Distance Learning, VCC and Telework. The Company feels it is strategically
positioned to gain business velocity through its dominance in the selected
vertical markets, with a view to providing an expanding suite of industry
leading applications. The Company is anticipating that it will begin to generate
revenue in the third quarter of the current fiscal year, but there can be no
assurance that it will do so. This expected revenue stream will contribute to
the existing cash resources.
Year 2000 Compliance
The Company's business depends on the operation of numerous systems
that could potentially be impacted by Year 2000 related problems. Due to the
Company's early stage of development, all critical hardware and software has
been recently acquired or developed and is likely to be Year 2000 ready. The
Company made the appropriate enquiries prior to acquiring its hardware and
software and developed its products on platforms that are Year 2000 ready.
There has been no expenditure to date by the Company related to
becoming Year 2000 ready. The Company expects that any costs it incurs to test
for Year 2000 readiness will consist primarily of the salaries of those
employees who are assigned the tasks of testing for Year 2000 readiness and does
not anticipate those salary costs to be material. See also "Risk Factors - Year
2000 Issues."
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ITEM 3 PROPERTIES.
The Company's operational headquarters is located in 2,190 square feet
of leased office space in Chicago, Illinois and it has additional offices
located in 5,404 square feet of leased office space in Toronto, Ontario. The
Company's lease in Toronto, Ontario expires in November 2000 and its lease in
Chicago, Illinois expires in March 2002. The Company and its subsidiaries also
lease other facilities that are not material to the Company's business. The
Company believes that its existing facilities are adequate for its needs for the
foreseeable future and that if additional space is needed, it would be available
on favorable terms.
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information as of August 31,
1999 with respect to the beneficial ownership of Common Stock by (i) each person
known by the Company to own beneficially more than 5% of the Common Stock, (ii)
each executive officer of the Company, (iii) each Director of the Company and
(iv) all Directors and executive officers as a group.
Name and Address of Number of Shares Percentage
Beneficial Owner(1) Beneficially Owned Class(2)
------------------- ------------------ --------
Darcy Galvon 617,000(3) 3.28%
A. Thomas Griffis 1,244,997(4) 6.76%
James Leech 550,000(5) 2.98%
Michael Sheehan 300,000(6) 1.64%
James Hines 730,000(7) 3.99%
Edward Turner 263,607(8) 1.44%
Michael Gruber 270,000(9) 1.48%
George Shafran 350,000(10) 1.91%
Alex Walsh 500,000(11) 2.72%
Jennifer Scoffield 25,000(12) *
Treetop Capital Inc. 9,000,000(13) 49.47%
Don Jeffrey 2,404,749(14) 12.58%
Sheridan Reserve
Incorporated 1,000,000 5.50 %
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Name and Address of Number of Shares Percentage
Beneficial Owner(1) Beneficially Owned Class(2)
------------------- ------------------ --------
All officers and 4,850,604 24.38%
directors as a group
(10 persons)
- -----------------------
* Less than one percent (1%) of outstanding Common Stock.
(1) Except as otherwise indicated, the address for each of the named
individuals is c/o InfoCast Corporation, 1 Richmond Street West, Suite
902, Toronto, Ontario, Canada M5H 3W4.
(2) Except as otherwise indicated, the stockholders listed in the table
have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. Pursuant to the rules and
regulations of the Securities and Exchange Commission, shares of Common
Stock that an individual or group has a right to acquire within sixty
(60) days pursuant to the exercise of warrants or options are deemed to
be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person
shown in the table.
(3) Represents (i) 517,000 shares to be issued in exchange for outstanding
exchangeable shares of VPS and (ii) 100,000 shares issuable upon
exercise of options granted to Mr. Galvon under the 1998 Stock Option
Plan.
(4) Represents (i) 124,997 shares to be issued in exchange for outstanding
exchangeable shares of VPS by Griffis International Limited, of which
Mr. Griffis, the Chairman of the Board of the Company, owns 100%, (ii)
100,000 shares issuable upon exercise of options granted to Mr. Griffis
under the 1998 Stock Option Plan and (iii) 1,020,000 shares held by
Treetop Capital Inc. ("Treetop"), of which Griffis International
Limited is a shareholder. Treetop expects to distribute in the near
future the shares it holds in the Company on a pro rata basis to
Treetop's shareholders. VPS was acquired by the Company on January 29,
1999. Such exchangeable shares are exchangeable at any time for the
shares of Common Stock of the Company on a share for share basis.
(5) Represents (i) 250,000 shares issuable upon exercise of options granted
to Mr. Leech in June 1999 and (ii) 300,000 shares held by Treetop of
which Mr. Leech is an optionholder. Treetop expects to distribute in
the near future the shares it holds in the Company on a pro rata basis
to Treetop's shareholders.
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<PAGE>
(6) Represents (i) 100,000 shares issuable upon exercise of options granted
to Mr. Sheehan under the 1998 Stock Option Plan and (ii) 200,000 shares
held by Treetop, of which Mr. Sheehan is a shareholder. Treetop expects
to distribute in the near future the shares it holds in the Company on
a pro rata basis to Treetop's shareholders.
(7) Represents (i) 100,000 shares issuable upon exercise of options granted
to Mr. Hines under the 1998 Stock Option Plan and (ii) 630,000 shares
held by Treetop, of which Mr. Hines is a shareholder. Treetop expects
to distribute in the near future the shares it holds in the Company on
a pro rata basis to Treetop's shareholders.
(8) Represents (i) 83,607 shares to be issued in exchange for outstanding
exchangeable shares of VPS by Mr. Turner and (ii) 180,000 shares held
by Treetop, of which Mr. Turner is a shareholder. Treetop expects to
distribute in the near future the shares it holds in the Company on a
pro rata basis to Treetop's shareholders. VPS was acquired by the
Company on January 29, 1999. Such exchangeable shares are exchangeable,
at any time for the shares of Common Stock of the Company on a share
for share basis.
(9) Represents 270,000 shares held by Treetop, of which Mr. Gruber is a
shareholder. Treetop expects to distribute in the near future the
shares it holds in the Company on a pro rata basis to Treetop's
shareholders.
(10) Represents (i) 100,000 shares issuable upon exercise of options granted
to Mr. Shafran under the 1998 Stock Option Plan and (ii) 250,000 shares
held by Treetop, of which Mr. Shafran is a shareholder. Treetop expects
to distribute in the near future the shares it holds in the Company on
a pro rata basis to Treetop's shareholders.
(11) Represents (i) 200,000 shares issuable upon exercise of options granted
to Mr. Walsh under the 1999 Stock Option Plan and (ii) 300,000 shares
held by Treetop, of which Mr. Walsh is a shareholder. Treetop expects
to distribute in the near future the shares it holds in the Company on
a pro rata basis to Treetop's shareholders.
(12) Represents 25,000 shares issuable upon exercise of options granted to
Ms. Scoffield under the 1999 Stock Option Plan.
(13) Represents shares to be distributed to its shareholders on a pro rata
basis in the near future.
(14) Represents (i) 825,749 shares to be issued in exchange for outstanding
exchangeable shares of VPS by Mr. Jeffrey, (ii) 100,000 shares issuable
upon exercise of options granted to Mr. Jeffrey under the 1998 Stock
Option Plan, and (iii) 1,479,000 shares held by Treetop, of which Mr.
Jeffrey or his wholly-owned company is a shareholder. VPS was acquired
by the Company on January 29, 1999. Such shares are exchangeable, at
any time for the shares of Common Stock of the Company on a share for
share basis. Treetop expects to distribute in
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the near future the shares it holds in the Company on a pro rata basis
to Treetop's shareholders.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The directors and executive officers of the Company, and their ages and
positions with the Company will be as follows:
Name Age Position
---- --- --------
Darcy Galvon 43 Co-Chairman of the Board, Director
A. Thomas Griffis 58 Co-Chairman of the Board, Director
James Leech 52 President, CEO and Director
Jennifer Scoffield 29 Vice President, Finance & Administration
Michael Sheehan 58 Vice President, Virtual Call Center, Director
James Hines 34 Executive Vice President, Director
Alex "Sandy" Walsh 33 Chief Technology Officer
Edward Turner 57 Vice President - Business Development
Michael Gruber 32 Vice President - Marketing
George Shafran 73 Director
The officers of the Company are elected by the Board of Directors at
the first meeting after each annual meeting of the Company's stockholders, and
hold office until their death, until they resign or until they have been removed
from office. No committees of the Board of Directors have been established to
date.
The following is a brief summary of the background of each director and
executive officer of the Company:
Mr. Galvon has been Co-Chairman and a director of the Company since May
13, 1999. From 1995 to the present, Mr. Galvon served as a director of Sun
Computer Systems Inc. Alberta Ltd. and HomeBase Work Solutions Ltd., which was
acquired by the Company in May 1999, and is currently a subsidiary of the
Company. Mr. Galvon is also a director of Facet Petroleum Solutions, Inc., with
which HomeBase Work Solutions, Inc. has entered into a licensing and
distribution agreement. He is also Chairman of the Board of HomeBase.
Mr. Griffis has been the Chairman of the Board and a director of the
Company since January 12, 1999 and a Co-Chairman since May 13, 1999. In 1986,
Mr. Griffis founded and is the sole owner of Griffis International Limited
("GIL"), a management consulting and business development firm.
Mr. Leech has been President, Chief Executive Officer and a director of
the Company since September 4, 1999. From 1996 until September 1999, Mr. Leech
was Vice Chairman and Director
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at Kasten Chase Applied Research Limited, where he was responsible for corporate
strategy, finance, administration and production. From 1993 to 1996, Mr. Leech
was President, Chief Executive Officer and Director of Disys Corporation, which
was later merged into Kasten Chase Applied Research Limited.
Ms. Scoffield has been the Vice President, Finance and Administration
of the Company since July 7, 1999. From February 1997 to June 1999, Ms.
Scoffield held various positions at PRI Automation Inc. (formerly Promis Systems
Corporation Ltd.), most recently as Director, Financial Projects. From August
1996 to January 1997, Ms. Scoffield was Manager of Finance for Pet Valu Canada,
Inc. From August 1993 to August 1996, Ms. Scoffield was an accountant with Ernst
& Young in the Entrepreneurial Services group where she obtained her Chartered
Accountant designation.
Mr. Sheehan has been Vice President of Virtual Call Center since July
6, 1999 and a director of the Company since January 12, 1999. He served as the
Chief Executive Officer of the Company from January 12, 1999 to July 6, 1999.
From 1960 to 1998, Mr. Sheehan held a number of positions at AT&T, most recently
as Director of Call Center Solutions for AT&T Labs.
Mr. Hines has been the Executive Vice President of the Company since
September 4, 1999 and a director of the Company since January 12, 1999. He was
the President of the Company from January 12, 1999 to September 3, 1999. From
1996 to November 1998, Mr. Hines was President of Lasso Communications Inc., an
international affiliate of the Grey Worldwide Network of companies. From 1994 to
1996, Mr. Hines was Vice President of TransActive Communications Inc.
Mr. Walsh has been the Chief Technology Officer of the Company since
May 1999. From March 1998 to April 1999, Mr. Walsh was Director of Research and
Development - Business Intelligence Group for Hummingbird Communications Ltd.
From March 1994 to February 1998, Mr. Walsh was Project Lead for Andyne
Computing Limited of Kingston, Ontario. Prior to joining Andyne Computing
Limited, Mr. Walsh held various positions in the software design field.
Dr. Turner has been the Vice President - Business Development of the
Company since January 12, 1999. From 1996 to 1998, Dr. Turner held the position
of President of High Performance Group (USA), Inc. and from 1989 to 1996, Dr.
Turner was President of High Performance Group, Inc.
Mr. Gruber has been the Vice President - Marketing of the Company since
January 12, 1999. From July 1996 to November 1998, Mr. Gruber held the position
of Director of Sales at Lasso Communications Inc. Prior to July 1996, Mr. Gruber
was President of MG Pursuit Enterprises Inc.
Mr. Shafran has been a director of the Company since February 8, 1999.
Mr. Shafran has been the President of Geo. P. Shafran & Associates, Inc., a
management, marketing and investment consulting firm, for at least the last five
years. Mr. Shafran serves as Senior Consultant for The High Performance Group
and as an associate with the Technical Analysis Corporation. Mr. Shafran is
vice-chairman of The Heritage Bank and a director of NVR Mortgage, Missing Kids,
International and is chairman of the Advisory Board of the AAA Potomac. Mr.
Shafran also serves as a consultant to various other companies. He currently
serves on President Clinton's Legislative
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Council of the U.S. Chamber of Commerce and on the Board of the National Capital
Chapter of the American Red Cross.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth certain information concerning
compensation for the year ended December 31, 1998 of the Company's Chief
Executive Officer. No executive officer received compensation of a least
$100,000 during the year ended December 31, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
Securities Long-Term
Name and Other Annual Underlying Incentive Plan All Other
Principal Position Salary($) Bonus($) Compensation($) Options($) Payouts($) Compensation($)
<S> <C> <C> <C> <C> <C> <C>
Michael Sheehan - - - - - -
</TABLE>
- -------------------------
*Mr. Sheehan was the Company's Chief Executive Officer from January 12,
1999 to July 6, 1999. At the same time, Mr. William Wilson was the Company's
President. Prior to Mr. Sheehan's tenure as Chief Executive Officer, the Company
had no one serving in such position. Mr. Sheehan was paid $25,000 from January
12, 1999 to March 31, 1999 for his service as Chief Executive Officer. Mr.
Wilson received no compensation for his service as the Company's President. Mr.
Leech became the Company's new Chief Executive Officer on September 4, 1999. See
"Item 6 - Executive Compensation - Employment Agreements."
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Stock Option Plans
In 1998, the Company adopted a stock option plan (the "1998 Stock
Option Plan") pursuant to which 2,250,000 shares of Common Stock have been
reserved for issuance upon the exercise of options designated as either (i)
options intended to constitute incentive stock options ("ISOs") under the U.S.
Internal Revenue Code of 1986, as amended (the "Code"), or (ii) nonqualified
stock options ("NQSOs"). ISOs and NQSOs may be granted to employees of the
Company.
The purpose of the 1998 Stock Option Plan is to encourage stock
ownership by officers and other key employees and consultants and advisors of
the Company. The 1998 Stock Option Plan is administered by the Board of
Directors of the Company. The Board, within the limitations of the 1998 Stock
Option Plan, determines the persons to whom options will be granted, the number
of shares to be covered by each option, the option purchase price per share and
the manner of exercise, and the time, manner and form of payment upon exercise
of an option.
The Company granted no stock options in the year ended December 31,
1998 and there were no option exercises in the year ended December 31, 1998. No
stock options were outstanding at December 31, 1998. As of August 31, 1999,
2,075,000 options were outstanding under the 1998 Stock Option Plan at an
exercise price of $1.00 per share.
The Company's 1999 Stock Option Plan (the "1999 Stock Option Plan") was
approved by the Board of Directors of the Company on April 1, 1999 and by the
stockholders of the Company on July 29, 1999. The purpose of the 1999 Stock
Option Plan is to create additional incentives for the Company's employees,
directors and others who perform substantial services to the Company by
providing an opportunity to purchase shares of the Common Stock pursuant to the
exercise of options granted under the 1999 Stock Option Plan. The Company may
grant options that qualify as incentive stock options under Section 422 of the
Code, and non-qualified stock options. Incentive stock options may be granted to
employees (including officers and directors who are employees). Non-qualified
stock options may be granted to employees, officers, directors, independent
contractors and consultants of the Company. As of August 31, 1999, 2,000,000
shares were reserved for issuance under the 1999 Stock Option Plan and 1,180,500
options had been granted at an exercise price of $7.00 per share.
The maximum number of shares that may be subject to options granted
under the 1999 Stock Option Plan to any individual in any calendar year may not
exceed 800,000 and the method of counting such shares shall conform to any
requirements applicable to "performance-based" compensation under Section 162(m)
of the Code. It is intended that compensation realized upon the exercise of an
option granted under the 1999 Stock Option Plan will thereupon be regarded as
"performance-based" under Section 162(m) of the Code and that such compensation
may be deductible without regard to the limits of Section 162(m) of the Code.
The Board of Directors or the Compensation Committee thereof (the
"Compensation Committee") composed of two or more non-management directors that
are "non-employee directors"
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<PAGE>
within the meaning of Rule 16b-3 promulgated under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Code, is authorized to
administer the 1999 Stock Option Plan in a manner that complies with Rule 16b-3
under the Exchange Act. The Board of Directors or Compensation Committee
determines which eligible individuals are granted options and the terms of such
options including the exercise price, number of shares subject to the option and
the vesting and exercisability thereof; provided, the maximum term of an
incentive stock option granted under the 1999 Stock Option Plan may not exceed
five years.
The exercise price of an incentive stock option granted under the 1999
Stock Option plan must equal at least 100% of the fair market value of the
subject stock on the date of grant and the exercise price of all non-qualified
stock options must equal at least 80% of the fair market value of the subject
stock on the date of grant; provided, however, that if an option granted to the
Company's Chief Executive Officer or to any of the Company's other four most
highly compensated officers is intended to qualify as "performance-based"
compensation under Section 162(m) of the Code, the exercise price must equal at
least 100% of the fair market value of the subject stock on the date of grant.
With respect to any participant who owns more than 10% of the voting power of
the Common Stock of the Company, the exercise price of any option granted must
equal at least 110% of the fair market value on the date of grant. The aggregate
fair market value on the date of grant of the stock for which incentive stock
options are exercisable for the first time by an employee of the Company during
any calendar year may not exceed $100,000.
Options shall become exercisable at such times and in such installments
as the Board of Directors or Compensation Committee shall provide. Non-qualified
and incentive stock options granted under the 1999 Stock Option Plan are not
transferable other than by will or the laws of descent or distribution, and each
option that has not yet expired is exercisable only by the recipient during such
person's lifetime, or for 12 months thereafter by the person or persons to whom
the option passes by will or the laws of descent or distribution. The 1999 Stock
Option Plan may be amended at any time by the Board of Directors, although
certain amendments require stockholder approval. The 1999 Stock Option Plan will
terminate on April 8, 2009, unless earlier terminated by the Board of Directors.
Employment Agreement
James Leech is employed by the Company pursuant to an employment
agreement dated as of August 5, 1999. The agreement provides that Mr. Leech's
employment with the Company shall continue unless it is terminated by either
party in accordance with the terms of the agreement. The agreement provides for
an initial base salary of Cdn $330,000 per annum, a minimum bonus of Cdn $30,000
for the period ending March 31, 2000 and a minimum bonus of Cdn $50,000 for each
twelve-month period thereafter during the term of the agreement. Mr. Leech's
salary shall be annually reviewed and may be increased at the discretion of the
Board of Directors.
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The agreement also provides that if Mr. Leech is terminated other than
for "cause" (as defined in the agreement), he shall receive the base salary
provided for under the agreement through the date of termination, plus a lump
sum payment equal to twice his annual base salary and bonus. He will also
receive his accrued bonus, continue to participate in certain benefit plans for
the 24 months following such termination and any options issued to Mr. Leech
will immediately vest. If Mr. Leech's employment is terminated due to death or
"disability" (as defined therein), he shall be paid the base salary under the
agreement until the date of termination and receive certain pro-rata bonus and
incentive payments, as well as any benefits accrued until the date of
termination and any options issued to Mr. Leech will immediately vest.
In the event Mr. Leech is terminated within 24 months of a "change of
control" of the Company (as defined in the employment agreement), Mr. Leech
shall receive a payment equal to three times his annual base salary and bonus.
He will also receive his accrued bonus, continue to participate in certain
benefit plans for 36 months following such termination and any options issued to
Mr. Leech will immediately vest.
In addition, on June 1, 1999, Mr. Leech was granted options to purchase
750,000 shares of Common Stock at an exercise price of $7.00. Such options are
currently exercisable as to 250,000 shares and become exercisable as to an
additional 250,000 shares on September 4, 2000 and as to the remaining 250,000
shares on September 4, 2001.
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ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the three months ended June 30, 1999, the Company paid
consulting fees to A. Thomas Griffis, the Co-Chairman of the Board of the
Company, who is the sole owner of Griffis International Limited, a shareholder
beneficially owning approximately 6.8% of the outstanding shares of the Company,
in the amount of Cdn $105,000 for services rendered. The Company will continue
to pay a monthly consulting fee of Cdn $15,000 while services are being
rendered.
During the three months ended June 30, 1999, the Company paid
consulting fees to Don Jeffrey, a shareholder beneficially owning approximately
12.6% of the outstanding shares of the Company, in the amount of Cdn $105,000.
The Company will continue to pay a monthly consulting fee of Cdn$15,000 while
services are being rendered.
During the three months ended June 30, 1999, the Company paid
consulting fees totaling $70,000 to George Shafran, a director of the Company,
during the three month period ended June 30, 1999. The Company will continue to
pay a monthly consulting fee of $10,000 while services are being rendered.
As at August 31, 1999, the Company paid incentive compensation fees to
Darcy Galvon, its Co-Chairman of the Board, of Cdn $140,000 in connection with
the Company's acquisition of Homebase.
From July 29, 1997 to March 31, 1999, the Company received cash
advances from View Media, a company controlled by Don Jeffrey, a shareholder
beneficially owning approximately 12.6% of the outstanding shares of the
Company, totaling approximately $109,000. The Company repaid such advances prior
to June 30, 1999.
Darcy Galvon, Co-Chairman of the Board of the Company, is a Director of
Facet Petroleum Solutions, Inc. Pursuant to a licensing and distribution
agreement dated March 30, 1999 between HomeBase and Facet Petroleum Solutions
Inc., Homebase acquired the exclusive right in the telework market to distribute
Facet Petroleum's Telework Operational Data Store software for a period of two
years in consideration for 6,910 common shares of HomeBase valued at $200,678.
Facet Petroleum received 25,000 shares of Common Stock of the Company in
exchange for the 6,910 Homebase shares as a result of the acquisition of
Homebase by the Company on May 13, 1998.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not currently involved in any material legal
proceedings. From time to time, however, the Company may be subject to claims
and lawsuits arising in the normal course of business.
-39-
<PAGE>
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is currently traded on the OTC Bulletin
Board under the symbol "IFCC". Prior to changing its name to InfoCast
Corporation on December 31, 1998, the Company's Common Stock traded on the OTC
Bulletin Board under the symbol "GNRS." The following table sets forth the high
and low closing prices on the OTC Bulletin Board for the periods indicated, as
reported by the OTC Bulletin Board (as adjusted to reflect a 2 for 1 stock split
effected on October 20, 1998). The quotations are interdealer prices without
adjustment for retail markups, markdowns or commissions and do not necessarily
represent actual transactions. These prices may not necessarily be indicative of
any reliable market value.
High Low
1998
Third Quarter.............................. $0.50 $0.25
Fourth Quarter............................. $5.00 $0.19
1999
First Quarter.............................. $7.00 $4.25
Second Quarter............................. $10.00 $4.50
Third Quarter (through August 31, 1999).... $13.00 $9.33
On August 31, 1999, the last reported sale price of the Common Stock on
the OTC Bulletin Board was $11.19 per share.
Dividend Policy
The Company has not paid cash dividends on its Common Stock since its
inception. The Company does not intend to pay cash dividends on its Common Stock
in the foreseeable future. The Company currently intends to reinvest earnings,
if any, in the development and expansion of its business. The declaration of
dividends in the future will be at the election of the Board of Directors and
will depend upon the earnings, capital requirements and financial position of
the Company, general economic conditions and other relevant factors.
-40-
<PAGE>
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On October 13, 1998, the shareholders of the Company voted to effect a
two-for-one stock split that increased the number of outstanding shares of
Common Stock from 6,000,000 to 12,000,000 and increased the number of
outstanding Common Stock purchase warrants from 1,000,000 to 2,000,000.
Accordingly, the exercise price of the Common Stock purchase warrants was
reduced to $0.25 per share. Subsequently, 1,580,000 of the Common Stock purchase
warrants were exercised at $0.25 each for cash proceeds of $395,000. The
remaining 420,000 Common Stock purchase warrants expired.
In April 1998, the Company consummated a private placement of 1,000,000
units at a price of $0.50 per unit pursuant to Rule 504 of Regulation D of the
Securities Act of 1933, as amended. Each unit consisted of two shares of Common
Stock and two Common Stock purchase warrants. Each Common Stock purchase warrant
was exercisable for one share of Common Stock at an exercise price of $0.25 per
share. The $500,000 aggregate issue price of the units was satisfied through the
receipt by the Company of cash proceeds of $260,000 and the settlement of a
non-interest bearing note of $240,000 that was due from the Company.
On January 29, 1999, the Company consummated the acquisition of VPS for
1,500,000 shares of Common Stock of the Company pursuant to an exemption under
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder.
On February 8, 1999, the Company issued options to purchase 2,250,000
shares of Common Stock at an exercise price of $1.00 per share pursuant to the
Company's 1998 Stock Option Plan.
In March 1999, the Company consummated a private placement financing
pursuant to which it issued 2,767,334 shares of Common Stock for an aggregate
offering price of $4,151,001 pursuant to Regulation S of the Securities Act of
1933, as amended.
In March 1999, the Company consummated a private placement financing
pursuant to which it issued 265,002 shares of Common Stock for an aggregate
offering price of $397,503 pursuant to Regulation D of the Securities Act of
1933, as amended.
Pursuant to an agreement dated March 22, 1999, the Company issued
60,000 shares of Common Stock to a financial investment consulting firm for
assistance in securing additional financing over the following year.
On May 13, 1999, the Company consummated the acquisition of Homebase
for 3,400,000 shares of Common Stock of the Company pursuant to an exemption
under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder.
-41-
<PAGE>
In June 1999, the Company issued warrants to purchase 25,000 shares of
Common Stock at an exercise price of $7.00 per share to a consulting firm. The
Company may issue warrants to purchase an additional 75,000 shares of Common
Stock to such firm.
In June 1999, in return for services, the Company issued warrants to
purchase an aggregate of 200,000 shares of Common Stock at an exercise price of
$7.00 per share to four individuals.
On June 1, 1999, the Company issued options to purchase 1,180,500
shares of Common Stock to officers, employees and consultants under the 1999
Stock Option Plan and options to purchase 750,000 shares of Common Stock to an
officer and director.
On June 24, 1999, the Company consummated a private placement financing
pursuant to which it issued 420,000 shares of Common Stock and warrants to
purchase 70,000 shares of Common Stock at an exercise price of $7.00 per share
for an aggregate offering price of $2,100,000 pursuant to Regulation D of the
Securities Act of 1933, as amended.
In July and August 1999, the Company issued 1,100,000 shares of Common
Stock in a private placement financing for an aggregate offering price of
$6,050,000 pursuant to Regulation S of the Securities Act of 1933, as amended.
The Company may issue up to an additional 1,400,000 shares of Common Stock for
an aggregate offering price of $7,700,000 in such offering.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The Company is presently authorized to issue up to 100,000,000 shares
of Common Stock, $.001 par value per share. The following summary of certain
provisions of the Common Stock does not purport to be complete and is subject
to, and qualified in its entirety by, the provisions of the Company's
Certificate of Incorporation and Bylaws that are included as exhibits to this
Registration Statement and by provisions of applicable law. As of September 1,
1999, there were 18,192,336 shares of Common Stock outstanding and options and
warrants to purchase an additional 2,075,000 shares of Common Stock at an
exercise price of $1.00 per share and 2,225,500 shares of Common Stock at an
exercise price of $7.00 per share. The holders of Common Stock are entitled to
one vote for each share held of record on each matter submitted to a vote of
stockholders. There is no cumulative voting for election of directors. Subject
to the prior rights of any series of Preferred Stock which may from time to time
be outstanding, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor, and, upon the liquidation, dissolution or winding up of the
Company, are entitled to share ratably in all assets remaining after payment of
liabilities and payment of accrued dividends and liquidation preference on the
Preferred Stock, if any. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities.
-42-
<PAGE>
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Corporate
Stock Transfer in Denver, Colorado.
-43-
<PAGE>
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Neither the Company's Certificate of Incorporation, as amended, nor its
Amended and Restated Bylaws provide for the indemnification of its officers and
directors. Under Nevada's General Corporation Law, the Company may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the Company (such as a shareholder derivative suit), by reason of the fact
that such person is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise. Such indemnification may extend to expenses,
including attorneys' fees, judgments, fines and amount paid in settlement
actually and reasonable incurred by such person in connection with the action,
suit or proceeding if he acted in good faith and in a manner which he reasonable
believed to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. Indemnification may not be made for any claim, issue
or matter as to which such a person has been adjudged by a court to be liable to
the Company or for amounts paid in settlement to the Company, unless the court
in which the action or suit was brought, or another court of competent
jurisdiction, determines that in view of all the circumstances, the person is
fairly and reasonably entitled to be indemnified for such expenses.
There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification is
being sought, and the Company is not aware of any pending or threatened
litigation that may result in claims for indemnification by any officer,
director, employee or other agent.
The Company is in the process of purchasing Directors and Officers
liability insurance to defend and indemnify directors and officers who are
subject to claims made against them for their actions and omissions as directors
and officers of the Company.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The required financial statements are included under the section
"Financial Statements" in this Registration Statement.
-44-
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Ernst & Young LLP were appointed auditors of Virtual Performance
Systems Inc. ("VPS") on December 1, 1998 and have audited the consolidated
financial statements of VPS since its inception on July 29, 1997 to March 31,
1999. Prior to January 29, 1999, Jackson & Rhodes P.C. were the auditors for
InfoCast Corporation , formerly Grant Reserve Corporation ("InfoCast" or the
"Company"). Pursuant to a share purchase agreement dated January 29, 1999, the
shareholders of VPS sold their 100% interest in VPS to InfoCast in consideration
for 1,500,000 exchangeable shares of InfoCast Canada, a wholly-owned subsidiary
of InfoCast. The InfoCast Canada shares are exchangeable into shares of Common
Stock of InfoCast for no additional consideration. In addition, the shareholders
of VPS also purchased a further 9,000,000 shares of Common Stock InfoCast from
InfoCast's former controlling shareholder, Sheridan Reserve Incorporated, in
consideration for a nominal cash amount. As a result of these two transactions,
the shareholders of VPS effectively acquired 10,500,000 shares of Common Stock
of InfoCast, which represents a controlling interest of approximately 70% (60%
excluding the exchangeable shares). This transaction was considered an
acquisition of InfoCast (the accounting subsidiary/legal parent) by VPS (the
accounting parent/legal subsidiary) and was accounted for as a purchase of the
net assets of InfoCast by VPS because InfoCast had no business operations or
operating assets at the time of acquisition. The consolidated financial
statements of the Company are issued under the name of InfoCast, but are a
continuation of the financial statements of the accounting acquirer, VPS. Ernst
& Young LLP, therefore, continue as auditors for the Company.
The Company believes, and has been advised by Jackson & Rhodes P.C.
that it concurs in such belief, that, during the year ended December 31, 1997
and subsequent thereto, InfoCast and Jackson & Rhodes P.C. did not have any
disagreement on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of Jackson & Rhodes P.C., would have caused it to
make reference in connection with its report on InfoCast's financial statements
to the subject matter of the disagreement.
No report of Jackson & Rhodes P.C. on InfoCast's financial statements
for either of the past two fiscal years contained an adverse opinion, a
disclaimer or opinion or a qualification or was modified as to uncertainty,
audit scope or accounting principles. During such fiscal periods, there were no
"reportable events" within the meaning of Item 304(a)(1) of Regulation S-K
promulgated under the Securities Act of 1933, as amended.
-45-
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
InfoCast Corporation Consolidated Financial Statements as of
and for the three months ended March 31, 1999, the
year ended December 31, 1998 and the period from July
29, 19997 (inception) to December 31, 1997.
InfoCast Corporation Consolidated Financial Statements as of
and for the three months ended June 30, 1999
(unaudited).
Homebase Work Solutions Ltd. Financial Statements as of and
for the three months ended March 31, 1999 and the
year ended December 31, 1998.
Applied Courseware Technology Inc. Financial Statements as of
and for the year ended August 31, 1998 and 1997.
Applied Courseware Technology Inc. Interim Financial
Statements as of and for the ten months ended June
30, 1999 (unaudited).
InfoCast Corporation Pro-Forma Consolidated Financial
Statements as of and for the three months ended June
30,1 999.
(b) Exhibits
3.1 Articles of Incorporation, as amended, of the
Company.
3.2 Amended and Restated By-laws of the Company.
4.1 Specimen Certificate of the Company's Common Stock.
4.2 Form of 1998 Stock Option Plan ("1998 Plan").
4.3 Form of Option Grant Letter under 1998 Plan.
4.4 Form of 1999 Stock Option Plan ("1999 Plan").
4.5 Form of Option Grant Letter under 1999 Plan.
4.6 Option Agreement dated June 1, 1999, by and between
the Company and James William Leech.
-46-
<PAGE>
4.7 Warrant to Purchase 50,000 shares of Common Stock
dated June 24, 1999, issued to Thomson Kernaghan and
Co. Ltd.
4.8 Warrant to Purchase 20,000 shares of Common Stock
dated June 24, 1999, issued to Thomson Kernaghan and
Co. Ltd.
4.9 Warrant to Purchase 25,000 shares of Common Stock
dated May 31, 1999 issued to the Poretz Group.
4.10 Provisions Attaching to Common Shares of InfoCast
Canada Corporation.
4.11 Exchange Agreement dated as of May 13, 1999 by and
among the Company, InfoCast Canada Corporation,
HomeBase Work Solutions Ltd. and the Shareholders.
4.12 Support Agreement dated as of May 13, 1999 by and
among the Company, InfoCast Canada Corporation,
HomeBase Work Solutions Ltd., and the
Shareholders.
10.1 Letter Agreement dated March 17, 1999, from the
Company to Sandy Walsh.
10.2 Employment to Agreement dated August 5, 1999, by and
between the Company and James William Leech.
10.3 Consulting Agreement dated December 1, 1998, by and
between the Company and Three Hundred & Sixty
Degrees, Inc.
10.4 Consulting Agreement dated March 22, 1999, by and
between the Company and Thomson Kernaghan & Co. Ltd.
10.5 Consulting Agreement dated April 15, 1999, by and
between the Company and Michael Baybak and Company,
Inc.
10.6 Letter Agreement dated June 15, 1999, by and between
the Company and Lasso Communications Inc.
-47-
<PAGE>
10.7 Advertising Services Agreement dated July 1, 1999, by
and between the Company and Lasso Communications Inc.
10.8 Release dated July 14, 1999, by and among the
Company, Lasso Communications Inc., James Hines and
Michael Gruber.
10.9 Memorandum of Understanding dated June 7, 1999, by
and between the Company and Willow CSN.
10.10 Summary of Terms and Conditions dated April 21, 1999,
by and between the Company and CosmoCom, Inc.
10.11 Agreement of Purchase and Sale dated as of November
17, 1998, by and between Advanced Systems Computer
Consultants, Inc. and Cheltenham Technologies
(Bermuda) Corporation.
10.12 Asset Sale Agreement dated as of November 23, 1998,
by and between Grant Reserve Corporation and Cherokee
Mining Company.
10.13 Pledge Agreement dated as of November 25, 1998, by
and between Grant Reserve Corporation and Cherokee
Mining Company.
10.14 Agreement dated as of May 18, 1999, by and between
the Company and Call Center Learning Solutions, Inc.
10.15 Distribution Agreement dated as of March 12, 1999, by
and between the Company and ITC Learning Corporation.
10.16 License Agreement dated June 29, 1999, by and between
the Company and ITC Learning Corporation.
10.17 Letter Agreement dated March 24, 1999, by and between
the Company and Applied Courseware Technology, Inc.
10.18 General Security Agreement dated March 25, 1999, by
and between InfoCast Canada Corporation and Applied
Courseware Technology, Inc.
10.19 Memorandum of Understanding dated August 28, 1998, by
and between Home Base Work Solutions Ltd. and Shaw
Fiberlink Ltd.
-48-
<PAGE>
10.20 Licensing and Distribution Agreement dated March 7,
1999, by and between Homebase Work Solutions Ltd. and
Facet Decision Systems, Inc.
10.21 Licensing and Distribution Agreement dated March 30,
1999, by and between Homebase Work Solutions Ltd. and
Facet Petroleum Solutions, Inc.
10.22 Share Purchase Agreement dated as of May 13, 1999, by
and among the Company, InfoCast Canada Corporation,
HomeBase Work Solutions Ltd. and the Shareholders
named therein.
10.23 General Security Agreement dated March 25, 1999, by
and between InfoCast Canada Corporation and HomeBase
Work Solutions, Ltd.
10.24 Letter Agreement dated May 1999 (date unspecified),
by and among the Company and Darcy Galvon, Ken
MacLean and Sean Fleming.
10.25 Master Lease Agreement dated June 25, 1998, by and
between HomeBase Work Solutions, Ltd. and Sun
Microsystems.
10.26 Memorandum of Agreement dated July 31, 1997, by and
between Virtual Performance Systems Inc.
10.27 Letter Agreement dated November 27, 1998, by and
among Grant Reserve Corporation, Sheridan Reserve
Corporation and Virtual Performance Systems Inc.
10.28 Share Purchase Agreement dated as of January 29,
1999, by and among InfoCast Canada Limited, Virtual
Performance Systems Inc. and the Selling Shareholders
named therein.
10.29 Letter Agreement dated May 18, 1999, by and between
the Company and Satish Kumeta.
16.1 Letter from Jackson & Rhodes, P.C. relating to change
of accountants, dated September 3, 1999.
21.1 List of Subsidiaries.
23.1 Consents of Ernst & Young LLP, independent public
accountants.
23.2 Consents of Boudreau Porter Hetu, independent public
accountants
27.1 Financial Data Schedule.
27.2 Financial Data Schedule.
27.3 Financial Data Schedule.
27.4 Financial Data Schedule.
-49-
<PAGE>
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
INFOCAST CORPORATION, formerly Virtual Performance Systems Inc., a development
stage company
<S> <C>
Report of Independent Certified Public Accountants............................................................F-4
Consolidated Balance Sheets as of March 31, 1999, December 31, 1998 and 1997..................................F-5
Consolidated Statements of Operations and Comprehensive Loss for the three
months ended March 31, 1999 and 1998, the year ended December 31, 1998, the
period from July 29, 1997 (inception) to December 31, 1997 and the period
from July 29, 1997 (inception) to March 31, 1999.........................................................F-6
Consolidated Statements of Cash Flows for the three months ended March 31, 1999
and 1998, the year ended December 31, 1998, the period from July 29, 1997
(inception) to December 31, 1997 and the period from July 29, 1997
(inception)
to March 31, 1999........................................................................................F-7
Consolidated Statements of Changes in Stockholders' Equity as of December 31,
1997 and 1998 and March 31, 1999.........................................................................F-8
Notes to Consolidated Financial Statements....................................................................F-9
Consolidated Balance Sheet as of June 30, 1999 (unaudited)....................................................F-24
Consolidated Statements of Operations and Comprehensive Loss for the three
months ended June 30,1999 and 1998 and for the period from July 27, 1997
(inception) to June 30, 1999 (unaudited).................................................................F-25
Consolidated Statements of Cash Flows for the three months ended June 30, 1999
and 1998 and for the period from July 27, 1997 (inception) to June 30,
1999 (unaudited).........................................................................................F-26
Consolidated Statements of Changes in Stockholders' Equity as of March 31, 1998
and June 30, 1999 (unaudited)............................................................................F-27
Notes to Consolidated Financial Statements....................................................................F-28
</TABLE>
F-1
<PAGE>
HOMEBASE WORK SOLUTIONS LTD.
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Certified Accountants....................................................................F-37
Balance Sheets as at March 31, 1999 and December 31, 1998......................................................F-38
Statements of Loss and Accumulated Development Stage Deficits for the three
months ended March 31, 1999, the 101 day period ended December 31, 1998
and the period from September 22, 1998 (inception) to March 31, 1999......................................F-39
Statements of Cash Flows for the three months ended March 31, 1999, the 101 day
period ended December 31, 1998 and the period from September 22,
1998 (inception) to March 31, 1999........................................................................F-40
Notes to Financial Statements..................................................................................F-41
APPLIED COURSEWARE TECHNOLOGY INC.
Report of Independent Certified Public Accountants.............................................................F-49
Statement of Income and Retained Earnings for the years ended August 31, 1998
and 1997.................................................................................................F-50
Balance sheet at August 31, 1998 and 1997......................................................................F-51
Statement of Changes in Financial Position for the years ended August 31, 1998
and 1997..................................................................................................F-52
Notes to the Financial Statements..............................................................................F-53
Notice to Reader...............................................................................................F-61
Interim Statement of Income and Retained Earnings for the ten months ended
June 30, 1999 and 1998 (unaudited)........................................................................F-62
Interim Balance Sheet as at June 30, 1999 and 1998 (unaudited).................................................F-63
Interim Statement of Cash Flows fro the ten months ended June 30, 1999
and 1998 (unaudited)......................................................................................F-64
Notes to the Interim Financial Statements......................................................................F-65
</TABLE>
F-2
<PAGE>
INFOCAST CORPORATION PRO-FORMA CONSOLIDATED FINANCIAL
STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Basis of Presentation..........................................................................................F-72
Pro-Forma Consolidated Balance Sheet as of June 30, 1999.......................................................F-74
Pro-Forma Consolidated Statement of Operations for the three months
ended June 30, 1999.......................................................................................F-76
Pro-Forma Adjustments..........................................................................................F-79
</TABLE>
F-3
<PAGE>
AUDITORS' REPORT
To the Directors of
InfoCast Corporation
We have audited the consolidated balance sheets of InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company] as of
March 31, 1999, December 31, 1998 and December 31, 1997 and the related
consolidated statements of operations and comprehensive loss, cash flows and
changes in stockholders' equity for the three month period ended March 31, 1999,
the year ended December 31, 1998, the 156 day period ended December 31, 1997 and
the period from July 29, 1997 to March 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of InfoCast Corporation as of March 31, 1999, December 31,
1998 and December 31, 1997 and the consolidated results of its operations and
its cash flows for the periods then ended in conformity with accounting
principles generally accepted in the United States.
Toronto, Canada,
April 21, 1999 [except for Note 9[b] which is as of /s/ Ernst & Young LLP
May 13, 1999 and Note 9[d] which is as of Chartered Accountants
June 25, 1999].
F-4
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED BALANCE SHEETS
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
As of As of As of
March 31, December 31, December 31,
1999 1998 1997
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current
<S> <C> <C> <C>
Cash and cash equivalents 3,092,445 25,595 301
Accounts receivable 19,416 9,693 16,286
Due from InfoCast Corporation [the acquired
entity] [note 5] -- 25,020 --
Due from Applied Courseware Technology
(A.C.T.) Inc. [note 9[d]] 139,299 -- --
Due from Homebase Work Solutions Ltd.
[note 9[b]] 99,529 -- --
Prepaid expenses and refundable deposits 21,404 15,225 38
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 3,372,093 75,533 16,625
- ------------------------------------------------------------------------------------------------------------------------------------
Capital assets, net [note 4] 107,392 18,908 11,954
Distribution rights deposit [note 9[c]] 500,000 -- --
Intellectual property, net [note 3] 45,591 49,026 25
- ------------------------------------------------------------------------------------------------------------------------------------
4,025,076 143,467 28,604
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities 354,694 117,109 13,518
Note payable to InfoCast Corporation [the acquired
entity] [note 5] -- 250,000 --
Due to directors, officers and stockholders [note 6] 177,270 273,025 109,545
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 531,964 640,134 123,063
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies [notes 9 and 11]
Stockholders' equity (deficiency)
Common stock [note 7] 16,672 -- --
Additional paid-in-capital [note 7] 16,925,017 2,443 70
Deferred compensation [note 7] (9,858,932) -- --
Accumulated other comprehensive loss 14,309 20,923 1,632
Accumulated development stage deficit (3,603,954) (520,033) (96,161)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficiency) 3,493,112 (496,667) (94,459)
- ------------------------------------------------------------------------------------------------------------------------------------
4,025,076 143,467 28,604
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-5
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Period from Cumulative
Three months Three months July 29, 1997 from
ended ended Year ended [inception] to inception to
March 31, March 31, December 31, December 31, March 31,
1999 1998 1998 1997 1999
$ $ $ $ $
[unaudited]
REVENUE
<S> <C> <C> <C> <C> <C>
Consulting income [note 8] -- 43,446 43,446 3,508 46,954
Interest income 4,478 -- -- -- 4,478
- --------------------------------------------------------------------------------------------------------------------------------
4,478 43,446 43,446 3,508 51,432
- --------------------------------------------------------------------------------------------------------------------------------
EXPENSES
General, administrative and selling 635,334 42,494 375,302 47,954 1,058,590
Stock option compensation [note 7] 2,256,938 -- -- -- 2,256,938
Research and development 162,914 19,703 88,180 51,257 302,351
Interest and loan fees 23,562 -- -- -- 23,562
Amortization 4,144 -- -- -- 4,144
Depreciation 5,507 870 3,836 458 9,801
- --------------------------------------------------------------------------------------------------------------------------------
3,088,399 63,067 467,318 99,669 3,655,386
- --------------------------------------------------------------------------------------------------------------------------------
Net loss for the period (3,083,921) (19,621) (423,872) (96,161) (3,603,954)
Translation adjustment (6,614) (1,227) 19,291 1,632 14,309
- --------------------------------------------------------------------------------------------------------------------------------
Comprehensive loss for the period (3,090,535) (20,848) (404,581) (94,529) (3,589,645)
- --------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 11,583,995 41 768,301 41 2,198,607
- --------------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per share $ (0.27) $(478.56) $(0.55) $(2,345.40) $(1.64)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-6
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF CASH FLOWS
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Period from
Three months Three months July 29, Cumulative
ended ended Year ended [inception] to inception to
March 31, March 31, December 31, December 31, March 31,
1999 1998 1998 1997 1999
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
[unaudited]
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net loss for the period (3,083,921) (19,621) (423,872) (96,161) (3,603,954)
Add items not affecting cash
Stock option compensation 2,256,938 -- -- -- 2,256,938
Common stock issued for services 10,180 -- -- -- 10,180
Amortization 4,144 -- -- -- 4,144
Depreciation 5,507 870 3,836 458 9,801
- ------------------------------------------------------------------------------------------------------------------------------------
(807,152) (18,751) (420,036) (95,703) (1,322,891)
Changes in non-cash working capital balances
Accounts receivable (9,723) (19,501) 6,593 (16,286) (19,416)
Prepaid expenses and refundable deposits (6,179) (61) (15,187) (38) (21,404)
Accounts payable and accrued liabilities 173,306 10,999 103,591 13,518 290,415
Bank overdraft -- 9,263 -- -- --
Due from InfoCast Corporation [the acquired
entity] prior to acquisition -- -- (25,020) -- (25,020)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities (649,748) (18,051) (350,059) (98,509) (1,098,316)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (93,659) (325) (11,644) (12,412) (117,715)
Distribution rights deposit (500,000) -- -- -- (500,000)
Due from Homebase Work Solutions Ltd. (99,529) -- -- -- (99,529)
Due from Applied Courseware Technology (A.C.T.) Inc. (139,299) -- -- -- (139,299)
Acquisition of InfoCast Corporation 87 -- -- -- 87
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (832,400) (325) (11,644) (12,412) (856,456)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in note payable to InfoCast Corporation
[the acquired entity] -- -- 250,000 -- 250,000
Increase (decrease) in due to directors, officers
and stockholders (95,755) 19,346 114,476 109,545 128,266
Receipt of short-term unsecured loan 400,000 -- 70,000 -- 470,000
Payment of short-term unsecured loan (400,000) -- (70,000) -- (470,000)
Cash advance from InfoCast Corporation
[the acquired entity] prior to acquisition 146,900 -- -- -- 146,900
Cash proceeds from issuance of share capital, net 4,505,508 -- 2,373 45 4,507,926
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 4,556,653 19,346 366,849 109,590 5,033,092
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash during the period 3,074,505 970 5,146 (1,331) 3,078,320
Effect of foreign exchange rate changes on cash balances (7,655) (1,271) 20,148 1,632 14,125
Cash and cash equivalents, beginning of period 25,595 301 301 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 3,092,445 -- 25,595 301 3,092,445
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information
Interest and lending fees paid during the period 23,562 -- -- -- 23,562
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-7
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
[U.S. dollars, U.S. GAAP]
Accumulated
Accumulated other Additional
Common development comprehensive paid-in
shares stage deficit loss capital
# $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deemed common shares issued for intellectual properties
[note 1[b]] 14 -- -- 25
Deemed common shares issued for cash [note 1[b]] 27 -- -- 45
Net loss for the period -- (96,161) -- --
Translation adjustment -- -- 1,632 --
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of December 31, 1997 41 (96,161) 1,632 70
Deemed common shares issued for cash [note 1[b]] 1,499,959 -- -- 2,373
Net loss for the period -- (423,872) -- --
Translation adjustment -- -- 19,291 --
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of December 31, 1998 1,500,000 (520,033) 20,923 2,443
Acquisition of InfoCast by VPS [note 1[b]] 13,580,000 -- -- 294,108
Common shares issued for cash 3,032,333 -- -- 4,545,468
Share issuance costs -- -- -- (42,992)
Common shares issued for consulting services 60,000 -- -- 337,740
Granting of stock options -- -- -- 11,788,250
Amortization of deferred compensation -- -- -- --
Net loss for the period -- (3,083,921) -- --
Translation adjustment -- -- (6,614) --
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as of March 31, 1999 18,172,333 (3,603,954) 14,309 16,925,017
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Common stock Total
Deferred issued and stockholders'
compensation outstanding equity
$ $ $
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deemed common shares issued for intellectual properties
[note 1[b]] -- -- 25
Deemed common shares issued for cash [note 1[b]] -- -- 45
Net loss for the period -- -- (96,161)
Translation adjustment -- -- 1,632
- ---------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of December 31, 1997 -- -- (94,459)
Deemed common shares issued for cash [note 1[b]] -- -- 2,373
Net loss for the period -- -- (423,872)
Translation adjustment -- -- 19,291
- ---------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of December 31, 1998 -- -- (496,667)
Acquisition of InfoCast by VPS [note 1[b]] -- 13,580 307,688
Common shares issued for cash -- 3,032 4,548,500
Share issuance costs -- -- (42,992)
Common shares issued for consulting services (337,800) 60 --
Granting of stock options (11,788,250) -- --
Amortization of deferred compensation 2,267,118 -- 2,267,118
Net loss for the period -- -- (3,083,921)
Translation adjustment -- -- (6,614)
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding as of March 31, 1999 (9,858,932) 16,672 3,493,112
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-8
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
1. BASIS OF ACCOUNTING
[a] Nature of operations and continuing entity
These consolidated financial statements are the continuing financial statements
of Virtual Performance Systems Inc. ["VPS"] [a development stage company], an
Ontario corporation which was incorporated on July 29, 1997. VPS has a 100%
interest in Cheltenham Technologies Corporation ["Cheltenham Technologies"], an
Ontario corporation, and Cheltenham Interactive Corporation ["Cheltenham
Interactive"], an Ontario corporation. Cheltenham Technologies has a 100%
interest in Cheltenham Technologies (Bermuda) Corporation ["Cheltenham
Bermuda"], a Barbados corporation. On January 29, 1999, VPS acquired the net
assets of InfoCast Corporation [formerly Grant Reserve Corporation]
["InfoCast"], a United States non-operating company traded on the NASDAQ OTC
Bulletin Board which had a 100% interest in InfoCast Canada Corporation
["InfoCast Canada"]. After the acquisition, the accounting entity continued
under the name of InfoCast Corporation [note 1[b]].
InfoCast, InfoCast Canada, VPS, Cheltenham Technologies, Cheltenham Interactive
and Cheltenham Bermuda are collectively referred to as the "Company". The
Company is a development stage technology company engaged in the research and
development of information delivery technologies.
The functional currency of VPS, Cheltenham Technologies, Cheltenham Interactive,
Cheltenham Bermuda and InfoCast Canada is the Canadian dollar. However, for
reporting purposes, the Company has adopted the United States dollar as its
reporting currency. Accordingly, the Canadian dollar balance sheets of these
companies have been translated into United States dollars at the rates of
exchange at the respective period ends, while transactions during the periods
and share capital amounts have been translated at the weighted average rates of
exchange for the respective periods and the exchange rate at the date of the
transaction, respectively. Gains and losses arising from these translation
adjustments are included in comprehensive loss.
[b] Reverse acquisition of InfoCast Corporation
Pursuant to a share purchase agreement dated January 29, 1999, the shareholders
of VPS sold their 100% interest in VPS to InfoCast in consideration for
1,500,000 exchangeable shares of InfoCast Canada, a wholly-owned subsidiary of
InfoCast. The InfoCast Canada exchangeable shares are convertible into common
shares of InfoCast at no additional consideration. In addition, the shareholders
of VPS also purchased a further 9 million common shares of InfoCast from
InfoCast's former controlling shareholder, Sheridan Reserve Incorporated, in
consideration for a nominal cash amount. As a result of these two transactions,
the shareholders of VPS effectively acquired 10,500,000 common shares of
InfoCast which represents a controlling interest of approximately
F-9
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
70% [60% excluding the exchangeable shares]. This transaction is considered an
acquisition of InfoCast [the accounting subsidiary/legal parent] by VPS [the
accounting parent/legal subsidiary] and has been accounted for as a purchase of
the net assets of InfoCast by VPS in these consolidated financial statements
because InfoCast had no business operations or operating assets at the time of
the acquisition.
These consolidated financial statements are issued under the name of InfoCast,
but are a continuation of the financial statements of the accounting acquirer,
VPS. VPS's assets and liabilities are included in the consolidated financial
statements at their historical carrying amounts. Figures presented to January
29, 1999 are those of VPS. For purposes of the acquisition, the fair value of
the net assets of InfoCast of $307,688 is ascribed to the 13,580,000 previously
outstanding common shares of InfoCast deemed to be issued in the acquisition as
follows:
$
- --------------------------------------------------------------------------------
Cash 87
Note receivable from VPS 396,900
Payable to VPS (25,020)
Accounts payable (64,279)
- --------------------------------------------------------------------------------
Purchase price 307,688
- --------------------------------------------------------------------------------
Prior to the acquisition on January 29, 1999, the deemed number of outstanding
shares of InfoCast is equal to the 1,500,000 exchangeable shares of InfoCast
Canada that were issued to the shareholders of VPS in the acquisition. These
shares have been allocated to the changes in the combined issued and outstanding
and additional paid-in-capital common stock of VPS to January 29, 1999 as
follows:
<TABLE>
<CAPTION>
Deemed
InfoCast shares VPS shares Amount
# # $
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Issued for intellectual properties [note 3] 14 35 25
Issued for cash 27 65 45
- ----------------------------------------------------------------------------------------------------------
Outstanding as of December 31, 1997 41 100 70
Issued for cash 1,499,959 3,624,000 2,373
- ----------------------------------------------------------------------------------------------------------
Outstanding as of December 31, 1998
and January 29, 1999 prior to acquisition 1,500,000 3,624,100 2,443
- ----------------------------------------------------------------------------------------------------------
</TABLE>
F-10
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
The combined issued and outstanding and additional paid-in-capital common stock
of the continuing consolidated entity as of January 29, 1999 is computed as
follows:
<TABLE>
<CAPTION>
$
- ---------------------------------------------------------------------------------------
<S> <C>
Existing share capital of VPS as of January 29, 1999 prior to acquisition 2,443
Ascribed value of the acquired common shares of InfoCast 307,688
- ---------------------------------------------------------------------------------------
Share capital of InfoCast [formerly VPS] as of January 29, 1999 310,131
- ---------------------------------------------------------------------------------------
</TABLE>
The number of outstanding shares of InfoCast [formerly VPS] as of January 29,
1999 is computed as follows:
Number
of shares
- --------------------------------------------------------------------------------
Deemed share capital of InfoCast [formerly VPS] as of
January 29, 1999 prior to acquisition 1,500,000
Shares of InfoCast deemed issued by VPS 13,580,000
- --------------------------------------------------------------------------------
Shares of InfoCast [formerly VPS] as of January 29, 1999 15,080,000
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are summarized as follows:
Principles of consolidation
These consolidated financial statements include the accounts of InfoCast and its
subsidiaries, all of which are wholly-owned. Intercompany accounts and
transactions have been eliminated upon consolidation.
Cash and cash equivalents
Cash and cash equivalents represent cash and short-term investments with a
maturity date of less than three months when acquired.
Change in year end
The Company changed its year end to March 31 from December 31.
F-11
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Capital assets
Capital assets are recorded at cost less accumulated depreciation. If it is
determined that a capital asset is not recoverable over its estimated useful
life, the capital asset will be written down to its net recoverable value.
Maintenance and repairs are charged to expenses as incurred. Gains and losses on
the disposition of capital assets are included in income. Depreciation is
provided on a declining balance basis using the following annual rates:
Computer equipment 30%
Office equipment 20%
Leasehold improvements 20%
Intellectual property
Acquired intellectual property is recorded at cost and represents proprietary
rights to certain information delivery technologies. The capitalized costs of
the intellectual property is amortized on a straight-line basis over its
estimated useful life of 3 years. If it is determined that an investment in
intellectual property is not recoverable over its estimated useful life, the
intellectual property will be written down to its net recoverable value.
Distribution rights
Acquired distribution rights are recorded at cost and represent rights to the
distribution of certain call centre products. The capitalized costs of the
distribution rights will be amortized on a per user basis [note 9[c]]. If it is
determined that an investment in distribution rights is not recoverable from
estimated sales, the distribution rights will be written down to its net
recoverable value.
Revenue recognition
Revenue from consulting and programming services is recognized at the time such
services are rendered.
Research and development
Software development costs incurred prior to the establishment of technological
feasibility are expensed as incurred. Research costs are expensed as incurred.
F-12
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Foreign currency measurement
United States dollar monetary assets and liabilities of the Company's
subsidiaries utilizing the Canadian dollar as its functional currency are
remeasured into the subsidiaries' functional currency at the period end rate of
exchange. Transactions in foreign currency are remeasured at the actual rates of
exchange. Foreign currency remeasurement differences are included in general and
administrative expenses.
Stock options
As permitted by FASB Statement No. 123 ["FASB 123"], "Accounting for Stock-Based
Compensation," the Company has adopted the intrinsic value method of APB 25,
"Accounting for Stock Issued to Employees" in respect of stock options granted
to its employees and directors and FASB 123 in respect of stock options granted
to its consultants. The measurement date of options granted to consultants will
be the date the services are completed. For purposes of recognition of the cost
of the options prior to the measurement date such options are measured at their
then current fair value at each interim financial reporting date.
Income taxes
The Company follows the liability method of providing for income taxes in
accordance with FASB Statement No. 109, "Accounting for Income Taxes."
Basic and diluted loss per common share
Per share amounts have been computed based on the weighted average number of
common shares outstanding each period. The weighted average number of common
shares outstanding prior to the acquisition on January 29, 1999 are based on the
number of VPS common shares outstanding during that period.
InfoCast Canada's 1,500,000 exchangeable shares outstanding are deemed to be
outstanding common shares of InfoCast for the purposes of the loss per share
calculations and share continuity disclosures because the exchangeable shares
are the economic equivalent of common shares of the Company.
F-13
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Use of estimates
Management uses estimates and assumptions in preparing consolidated financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported amounts of
revenue and expenses. Actual results could vary from the estimates that are
used.
3. INTELLECTUAL PROPERTY
The Company executed a Memorandum of Agreement dated July 31, 1997, whereby the
Company acquired certain intellectual property owned by an officer of the
Company, in consideration for 35 VPS common shares issued at Cdn.$1 per share.
This value per share is consistent with the value ascribed to the other 65 VPS
common shares issued during 1997 for cash consideration. The intellectual
property purchased pursuant to this agreement relates to electronic information
delivery algorithms.
On November 17, 1998, the Company entered into a Purchase and Sale Agreement
with Advanced Systems Computer Consultants Inc., a company owned by the officer
of the Company noted above, pursuant to which the Company acquired certain
additional intellectual property rights related to remote banking software. The
Company purchased the intellectual property rights for consideration as follows:
[i] Cdn.$75,000 if the Company becomes a public corporation and has completed a
minimum financing of $2,000,000; and
[ii] Cdn.$325,000 if the purchased remote banking software generates revenue.
The Company has accrued the first Cdn.$75,000 [March 31, 1999 - $49,735]
installment in its accounts and has recorded amortization of $4,144 in respect
of the three-month period ended March 31, 1999 resulting in a net book value of
$45,591.
F-14
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
4. CAPITAL ASSETS
Capital assets consist of the following:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
---------------------------------------- ----------------------------------------
Net Net
Accumulated book Accumulated book
Cost depreciation value Cost depreciation value
$ $ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computer equipment 64,899 7,684 57,215 15,865 4,077 11,788
Office equipment 49,220 1,887 47,333 7,180 60 7,120
Leasehold improvements 2,979 135 2,844 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
117,098 9,706 107,392 23,045 4,137 18,908
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------
Net
Accumulated book
Cost depreciation value
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment 12,405 451 11,954
- ------------------------------------------------------------------------------------------------------------------------------------
12,405 451 11,954
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5. NOTE PAYABLE TO INFOCAST CORPORATION AND AMOUNT DUE FROM INFOCAST
CORPORATION
InfoCast advanced $250,000 to VPS in December 1998 in contemplation of the
acquisition [note 1[b]]. The advance was evidenced by a promissory note that is
payable on demand and bears interest at 7%. Subsequent to December 31, 1998 and
prior to the completion of the acquisition on January 29, 1999, InfoCast
advanced an additional $146,900 to VPS on the same terms.
During December 1998, VPS incurred expenses of $25,020 on behalf of InfoCast.
The amount was outstanding as of December 31, 1998, was non-interest bearing and
was payable on demand.
These amounts were eliminated upon the acquisition of InfoCast by VPS on January
29, 1999 [note 1[b]].
F-15
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
6. DUE TO DIRECTORS, OFFICERS AND STOCKHOLDERS
The amounts due to directors, officers and shareholders consist of the
following:
<TABLE>
<CAPTION>
March 31, December 31, December 31,
1999 1998 1997
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
View Media 383 109,269 105,965
Advanced Systems Computer Consultants Inc. 65,420 64,125 3,580
Griffis International Limited 28,348 26,714 --
Past officer of the Company 44,001 43,280 --
Current officers and directors of the Company 39,118 29,637 --
- ------------------------------------------------------------------------------------------------------------------------------------
177,270 273,025 109,545
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The amounts are non-interest bearing and payable on demand. All of the amounts
due to View Media and Cdn.$25,000 of the amount due to Griffis International
Limited as of March 31, 1999 and December 31, 1998 relate to cash advances
provided to the Company, while $49,710 [Cdn.$75,000] of the amount due to
Advanced Systems Computer Consultants Inc. as of March 31, 1999 and December 31,
1998 relates to the intellectual property described in note 3. The balance
relates to expenditures incurred and services performed on behalf of the
Company.
During the three months ended March 31, 1999, the Company incurred expenses of
nil [March 31, 1998 - $16,178; December 31, 1998 - $59,319; December 31, 1997 -
$42,119] for managerial and consulting services from Advanced Systems Computer
Consultants Inc., nil [March 31, 1998 - nil; December 31, 1998 - $30,526; 1997 -
nil] for consulting services provided by View Media and $26,981 [March 31, 1998
- - nil; December 31, 1998 - $16,178; 1997 - nil] for consulting services provided
by Griffis International Limited.
View Media is a company controlled by a stockholder and former director of the
Company. Griffis International Limited is a company owned by a stockholder and
the Chairman of the Company.
7. SHARE CAPITAL
Authorized
The Company has 100,000,000 preferred shares authorized at a par value of $0.001
per share and has 100,000,000 common shares authorized at a par value of $0.001
per share.
F-16
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Issued and outstanding common shares
The issued share capital subsequent to January 29, 1999 consists of the
following:
<TABLE>
<CAPTION>
Common stock issued and
outstanding and
additional paid-in-capital
------------------------------------
Shares Amount
# $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding as of January 29, 1999 [note 1[b]] 15,080,000 310,131
Private placement at $1.50 per share 3,032,333 4,548,500
Issuance of shares in consideration for consulting services 60,000 337,800
Share issuance costs -- (42,992)
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as of March 31, 1999 18,172,333 5,153,439
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Private placement
During March 1999, InfoCast completed the placement of 3,032,333 common shares
at $1.50 per share. The gross proceeds of the issue were $4,548,500.
Issuance of shares in consideration for consulting services
Pursuant to an agreement dated March 22, 1999, the Company issued 60,000 common
shares to a financial investment consulting firm in consideration for assistance
in securing additional financing over the following year. The measurement date
for these common shares will be March 22, 2000. For purposes of recognition of
the cost of the common shares prior to the measurement date such common shares
are measured at their then current fair value at each interim financial
reporting date. As of March 31, 1999, the common shares have been valued at the
$5.63 per share closing price on the agreement date of which $10,180 was charged
to general and administrative expenses during the three month period ended March
31, 1999.
Stock options
As a condition of the acquisition [note 1], InfoCast adopted the 1998 Stock
Option Plan as amended on January 29, 1999 pursuant to which 2,250,000 stock
options were set aside to be granted to various individuals involved in the
management of VPS. The options were granted on February 8, 1999, are exercisable
at a price of $1.00 per share, expire three years from the date of grant and are
subject to a vesting period of at least six months.
F-17
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
As of April 19, 1999, 175,000 of the stock options had been cancelled due to the
termination of certain individuals and the renegotiation of employment terms. Of
the 2,075,000 remaining stock options, 775,000 will vest on August 8, 1999 and
1,300,000 will vest on February 8, 2000. These outstanding stock options have
been valued at $11,788,250 of which $2,256,938 has been recognized as a stock
option compensation expense, and of which the balance of $9,531,312 has been
recorded as deferred compensation in stockholders' equity. The deferred
compensation will be adjusted for the then current fair market value at each
interim financial reporting date for the 375,000 stock options granted to
consultants and will be amortized to income over the vesting periods of the
stock options.
If the Company had been following FASB 123 in respect of stock options granted
to its employees and directors, the Company would have recorded a higher stock
option compensation expense for the three month period ended March 31, 1999 of
$69,556 and a higher deferred compensation as of March 31, 1999 of $322,434.
This higher stock option compensation expense would result in a pro-forma net
loss of $3,153,487 and a pro-forma basic and diluted loss per share of $0.27 in
respect of the three month period ended March 31, 1999. The Company assumed an
expected dividend rate of 0%, a risk free interest rate of 5.08% and an expected
volatility factor of 0.838 in respect of the valuation of the stock options in
accordance with FASB 123.
The directors of the Company have approved a 1999 stock option plan under which
an additional 2,000,000 stock options will be eligible for grant. The 1999 stock
option plan is subject to stockholder approval.
8. DISCONTINUED REVENUE SOURCES
The Company recorded revenue of $43,446 during the year ended December 31, 1998
[March 31, 1998 - $43,446; December 31, 1997 - $3,508] mainly resulting from the
provision of computer programming services to one customer. These services are
no longer being provided by the Company to this customer.
As of March 31, 1999, nil [March 31, 1998 - nil; December 31, 1997 - $3,448] was
recorded as accounts receivable from this customer.
F-18
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
9. COMMITMENTS
[a] Lease commitments
The Company leased premises under non-cancellable operating leases which require
future annual minimum lease payments as follows:
$
- -------------------------------------------------------------------
1999 60,428
2000 52,238
2001 35,072
2002 5,874
2003 --
- -------------------------------------------------------------------
153,612
- -------------------------------------------------------------------
The rental payments for the premises are exclusive of taxes and operating costs.
During the three month period ended March 31, 1999, the Company incurred rent
expense of $38,682 [March 31, 1998 - $4,044; December 31, 1998 - $16,701;
December 31, 1997 - $5,711].
[b] Acquisition of Homebase Work Solutions Ltd.
Pursuant to a Letter of Intent dated December 14, 1998, between the Company and
Homebase Work Solutions Ltd. ["Homebase"], the Company intended to purchase a
100% interest in Homebase in consideration for 2,100,000 common shares of the
Company. The agreement was conditional upon regulatory approval and satisfactory
due diligence. Homebase is a telework solution provider headquartered in
Calgary, Alberta.
Pursuant to a share purchase agreement dated May 13, 1999, all of Homebase's
outstanding common shares, first preferred series A shares, common share
purchase warrants and penalty common share purchase warrants were acquired by
the Company in consideration for 3,400,000 exchangeable shares of InfoCast
Canada. The InfoCast Canada exchangeable shares are convertible into InfoCast
common shares on a one-for-one basis at no additional consideration. The
acquisition will be accounted for by the purchase method. The allocation of the
purchase price has not yet been finalized.
As a condition of the closing of the share purchase agreement, the Company will
pay Cdn. $210,000 to officers of Homebase and must pay an additional Cdn.
$210,000 to the officers of Homebase if the Company completes a private
placement financing for gross proceeds of at least
F-19
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
$1,000,000 or completes a letter of credit financing of at least $500,000. These
amounts will be expensed after the closing.
On March 25, 1999, the Company advanced Cdn. $150,000 to Homebase in
consideration for a promissory note bearing interest at prime plus 1%. The
promissory note is payable on demand and is collateralized by a general security
agreement. As of March 31, 1999, $99,529 has been recorded as an amount due from
Homebase, including interest receivable of $105.
[c] Purchase of call centre distribution rights
Pursuant to an agreement dated December 15, 1998, as amended by a letter
agreement dated February 16, 1999, and an agreement dated March 12, 1999,
between the Company and ITC Learning Corporation ["ITC"], the Company will
purchase from ITC the distribution rights for certain call centre products in
consideration for $1,000,000 in respect of the first 150,000 user licenses and
based on a shared revenue formula for user licenses in excess of 150,000. The
first $500,000 of the initial $1,000,000 purchase price was paid during March
1999 and has been recorded as distribution rights deposit in the accounts of the
Company, while the final $500,000 of the initial $1,000,000 purchase price is
payable on May 31, 1999.
[d] Purchase of Applied Courseware Technology (A.C.T.) Inc.
Pursuant to a Letter of Intent dated February 10, 1999 between the Company and
Applied Courseware Technology (A.C.T.) Inc. ["ACT"], the Company intends to
purchase a 100% interest in ACT in consideration for [i] Cdn. $280,000 cash,
[ii] 750,000 common shares of the Company, [iii] the assumption of long-term
debt of ACT of approximately Cdn. $700,000 which the Company intends to
renegotiate and [iv] the settlement by the Company of approximately Cdn.
$350,000 of additional ACT debt. The transaction is subject to satisfactory due
diligence. During February and March 1999, the Company paid Cdn. $140,000 of the
ACT debt in consideration for a note secured by a general security agreement
subject to prior charges and made cash advances to ACT totalling Cdn. $70,000 to
fund certain development expenditures incurred on behalf of the Company. As of
March 31, 1999, $139,299 has been recorded as an amount due from ACT, including
interest receivable of $107. The realization of these loans are dependent on the
successful acquisition of ACT.
Pursuant to subsequent negotiations, the Cdn. $280,000 cash component of the
purchase price was revised to nil. The amount and terms of ACT's debt that will
be assumed by the Company upon its acquisition has not yet been determined.
F-20
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
[e] Marketing agreement
Pursuant to a consulting agreement and a news letter publicity agreement dated
April 15, 1999, the Company will pay $6,000 per month plus expenses to a
marketing consultant in consideration for national media consulting services
over the one year term of the agreement and will pay $250,000 for the costs of
the production and distribution of an investor newsletter featuring the Company.
10. INCOME TAXES
As of March 31, 1999, the Company has accumulated non-capital losses of
approximately Cdn.$1,000,000 for Canadian income tax purposes which are
available to reduce future years' taxable income. The future income tax benefits
associated with these non-capital losses have not yet been recognized in the
accounts.
These non-capital losses will expire as follows:
Cdn. $
- --------------------------------------------------------------------------
2003 125,000
2004 625,000
2005 250,000
- --------------------------------------------------------------------------
1,000,000
- --------------------------------------------------------------------------
The Company has recorded no United States current federal income tax expense or
benefit. As of March 31, 1999, the Company has accumulated non-capital losses of
approximately $600,000 for United States income tax purposes which are available
to reduce future years' taxable income. The future income tax benefits
associated with these non-capital losses have not yet been recognized in the
accounts. These non-capital losses will expire as follows:
$
- ------------------------------------------------------------------------
2018 200,000
2019 400,000
- ------------------------------------------------------------------------
600,000
- ------------------------------------------------------------------------
The Company has a United States capital loss carryforward of approximately
$65,000. This capital loss carryforward will expire, if not utilized, in 2003. A
capital loss carryforward may only be used to reduce capital gains and cannot be
applied against taxable ordinary income that might be earned by the Company.
A deferred tax asset has been established relating to the operating and capital
loss carryforwards and the timing differences between the Company's tax and
financial reporting basis. A valuation
F-21
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
allowance equal to the entire amount of the deferred tax asset has been
established due to the uncertainty of the future utilization of the operating
and capital loss carryforwards. Following are the components of the Company's
deferred tax asset balances:
March 31, December 31, December 31,
1999 1998 1997
$ $ $
- ----------------------------------------------------------------------------
Deferred tax asset 559,887 231,189 40,517
Valuation allowance (559,887) (231,189) (40,517)
- ----------------------------------------------------------------------------
-- -- --
- ----------------------------------------------------------------------------
11. 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 values of financial instruments classified as current assets or
liabilities including cash and cash equivalents, accounts receivable, due from
InfoCast [the acquired entity], due from ACT, due from Homebase, accounts
payable and accrued liabilities, notes payable and due to directors, officers
and stockholders as of March 31, 1999, March 31, 1998, December 31, 1998 and
December 31, 1997 approximate the carrying values due to the short-term maturity
of the instruments.
Concentration of credit risk
The Company invests its cash and cash equivalents primarily with a major
Canadian chartered bank. Certain deposits, at times, are in excess of limits
insured by the Canadian government.
F-22
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS [Information for
the three month period ended March 31,
1998 is unaudited]
[U.S. dollars except where otherwise noted, U.S. GAAP]
March 31, 1999
Note receivable from Cherokee Mining Company Inc.
Pursuant to an agreement dated November 23, 1998 as amended April 20, 1999, and
effective December 18, 1998, InfoCast [the acquired entity] sold its equity
interest in its two subsidiaries, Gold King Mines Corporation ["Gold King"] and
Madison Mining Corporation ["Madison Mining"] to Cherokee Mining Company Inc.
["Cherokee"], a company controlled by a former director of InfoCast, for [i] a
non-interest bearing note of $600,000 due November 25, 1999 and [ii] the
entitlement to 80% of the net proceeds received by Madison Mining and Gold King
in excess of $681,175 from the sale of their mining properties and assets.
InfoCast did not record a value on the $600,000 note receivable because of the
uncertainty of whether the management of Cherokee, Gold King and Madison Mining
will be able to sell the capital assets of Gold King and Madison Mining for
sufficient proceeds to enable the note to be repaid to InfoCast. As a result,
VPS did not reflect the note in the purchase equation upon the acquisition of
InfoCast [note 1[b]]. In the event that the note is repaid, the amount received
will be credited to stockholders' equity.
F-23
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED BALANCE SHEET
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Unaudited
As of
June 30,
1999
$
- ---------------------------------------------------------------------------------
ASSETS
Current
<S> <C>
Cash and cash equivalents 1,493,205
Accounts receivable 114,253
Due from Applied Courseware Technology (A.C.T.) Inc. [note 3[a]] 97,120
Prepaid expenses and refundable deposits 586,968
- ---------------------------------------------------------------------------------
Total current assets 2,291,546
- ---------------------------------------------------------------------------------
Capital assets, net 239,197
Goodwill, net 5,695,731
Distribution rights, net 2,975,000
Intellectual property, net 17,672,518
Software license 62,825
- ---------------------------------------------------------------------------------
28,936,817
- ---------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 2,375,898
- ---------------------------------------------------------------------------------
Total current liabilities 2,375,898
- ---------------------------------------------------------------------------------
Deferred income taxes 6,699,395
- ---------------------------------------------------------------------------------
Total liabilities 9,075,293
- ---------------------------------------------------------------------------------
Commitments and contingencies [notes 3 and 4]
Stockholders' equity
Common stock 20,492
Additional paid-in-capital 38,125,727
Deferred compensation (6,448,694)
Warrants 712,800
Accumulated other comprehensive loss (14,655)
Accumulated development stage deficit (12,534,146)
- ---------------------------------------------------------------------------------
Total stockholders' equity 19,861,524
- ---------------------------------------------------------------------------------
28,936,817
- ---------------------------------------------------------------------------------
</TABLE>
See accompanying notes
On behalf of the Board:
Director Director
F-24
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Unaudited
Cumulative
Three months Three months from
ended ended inception to
June 30, June 30, June 30,
1999 1998 1999
$ $ $
REVENUE
<S> <C> <C> <C>
Consulting income -- 102 46,954
Interest income 23,157 -- 27,635
- ----------------------------------------------------------------------------------------------------
23,157 102 74,589
- ----------------------------------------------------------------------------------------------------
EXPENSES
General, administrative and selling 1,936,815 17,767 2,995,405
Stock option compensation 5,829,647 -- 8,086,585
Research and development 730,657 28,964 1,033,008
Interest and loan fees -- -- 23,562
Amortization 645,873 -- 650,017
Depreciation 8,962 941 18,763
- ----------------------------------------------------------------------------------------------------
9,151,954 47,672 12,807,340
- ----------------------------------------------------------------------------------------------------
Loss before income taxes (9,128,797) (47,570) (12,732,751)
Deferred income taxes (198,605) -- (198,605)
- ----------------------------------------------------------------------------------------------------
Net loss for the period (8,930,192) (47,570) (12,534,146)
Translation adjustment (28,964) 4,344 (14,655)
- ----------------------------------------------------------------------------------------------------
Comprehensive loss for the period (8,959,156) (43,226) (12,548,801)
- ----------------------------------------------------------------------------------------------------
Weighted average number of
shares outstanding 20,035,410 298,324 4,596,050
- ----------------------------------------------------------------------------------------------------
Basic and diluted loss per share $(0.45) $(0.16) $(2.73)
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-25
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF CASH FLOWS
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Unaudited
Cumulative
Three months Three months from
ended ended inception to
June 30, June 30, June 30,
1999 1998 1999
$ $ $
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss for the period (8,930,192) (47,570) (12,534,146)
Add (deduct) items not affecting cash
Stock option compensation 5,829,647 -- 8,086,585
Common stock issued for services 157,923 -- 168,103
Warrants issued for services 449,998 -- 449,998
Write-off of in-process research and development 31,000 -- 31,000
Deferred income taxes (198,605) -- (198,605)
Amortization 645,873 -- 650,017
Depreciation 8,962 941 18,763
- ------------------------------------------------------------------------------------------------------------------------------------
(2,005,394) (46,629) (3,328,285)
Changes in non-cash working capital balances
Accounts receivable (36,340) 35,467 (102,154)
Prepaid expenses and refundable deposits (564,096) 62 (585,500)
Accounts payable and accrued liabilities (60,982) (7,225) 229,433
Bank overdraft -- (7,662) --
Due from InfoCast [the acquired entity] prior to acquisition -- -- (25,020)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities (2,666,812) (25,987) (3,811,526)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (117,151) (1,828) (234,866)
Purchase of intellectual property (49,004) -- (49,004)
Distribution rights (475,000) -- (975,000)
Purchase of software license (62,825) -- (62,825)
Due from Homebase Work Solutions Ltd. -- -- (99,529)
Acquisition of Homebase Work Solutions Ltd. 50,667 -- 50,667
Due from Applied Courseware Technology (A.C.T.) Inc. -- -- (92,901)
Acquisition of InfoCast Corporation -- -- 87
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (653,313) (1,828) (1,463,371)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in note payable to InfoCast [the acquired entity] -- -- 250,000
Increase (decrease) in due to directors, officers and stockholders (128,266) 23,037 --
Receipt of short-term unsecured loan -- -- 470,000
Payment of short-term unsecured loan -- -- (470,000)
Cash advance from InfoCast [the acquired entity] prior to acquisition -- -- 146,900
Cash proceeds from issuance of share capital, net 1,890,000 -- 6,397,926
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 1,761,734 23,037 6,794,826
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash during the period (1,558,391) (4,778) 1,519,929
Effect of foreign exchange rate changes on cash balances (40,849) 4,778 (26,724)
Cash and cash equivalents, beginning of period 3,092,445 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 1,493,205 -- 1,493,205
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information
Interest and lending fees paid during the period -- -- 23,562
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-26
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Unaudited
Common stock Additional
Common issued and paid-in Deferred
shares outstanding capital compensation
# $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding as of March 31, 1999 18,172,333 16,672 16,925,017 (9,858,932)
Deemed common shares issued for the acquisition
of Homebase Work Solutions Ltd. 3,400,000 3,400 16,996,600 --
Common shares issued for cash 420,000 420 2,099,580 --
Share issuance costs - cash -- -- (210,000) --
Share issuance costs - warrants -- -- (226,800) --
Warrants issued for consulting services -- -- -- (36,002)
Adjustments resulting from revaluation of stock options
granted to consultants in previous period -- -- 1,233,750 830,579
Adjustments resulting from revaluation of common shares
granted to consultants in previous period -- -- 269,700 (111,777)
Granting of stock options -- -- 1,037,880 (1,037,880)
Amortization of deferred compensation -- -- -- 3,765,318
Net loss for the period -- -- -- --
Translation adjustment -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding as of June 30, 1999 21,992,333 20,492 38,125,727 (6,448,694)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated
other Accumulated Total
comprehensive development stockholders'
Warrants income (loss) stage deficit equity
$ $ $ $
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding as of March 31, 1999 -- 14,309 (3,603,954) 3,493,112
Deemed common shares issued for the acquisition
of Homebase Work Solutions Ltd. -- -- -- 17,000,000
Common shares issued for cash -- -- -- 2,100,000
Share issuance costs - cash -- -- -- (210,000)
Share issuance costs - warrants 226,800 -- -- --
Warrants issued for consulting services 486,000 -- -- 449,998
Adjustments resulting from revaluation of stock options
granted to consultants in previous period -- -- -- 2,064,329
Adjustments resulting from revaluation of common shares
granted to consultants in previous period -- -- -- 157,923
Granting of stock options -- -- -- --
Amortization of deferred compensation -- -- -- 3,765,318
Net loss for the period -- -- (8,930,192) (8,930,192)
Translation adjustment -- (28,964) -- (28,964)
- --------------------------------------------------------------------------------------------------------------------------------
Outstanding as of June 30, 1999 712,800 (14,655) (12,534,146) 19,861,524
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-27
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
June 30, 1999 Unaudited
1. BASIS OF ACCOUNTING
Nature of operations and continuing entity
These consolidated financial statements are the continuing financial statements
of Virtual Performance Systems Inc. ["VPS"] [a development stage company], an
Ontario corporation which was incorporated on July 29, 1997. VPS had a 100%
interest in, and subsequently amalgamated with, Cheltenham Technologies
Corporation, an Ontario corporation. VPS has a 100% interest in Cheltenham
Interactive Corporation ["Cheltenham Interactive"], an Ontario corporation, and
Cheltenham Technologies (Bermuda) Corporation ["Cheltenham Bermuda"], a Barbados
corporation. On January 29, 1999, VPS acquired the net assets of InfoCast
Corporation [formerly Grant Reserve Corporation] ["InfoCast"], a United States
non-operating company traded on the NASDAQ OTC Bulletin Board which had a 100%
interest in InfoCast Canada Corporation ["InfoCast Canada"]. After the
acquisition, the accounting entity continued under the name of InfoCast
Corporation.
InfoCast, InfoCast Canada, VPS, Cheltenham Interactive and Cheltenham Bermuda
are collectively referred to as the "Company". The Company is a development
stage technology company engaged in the research and development of information
delivery technologies.
The functional currency of VPS, Cheltenham Interactive, Cheltenham Bermuda and
InfoCast Canada is the Canadian dollar. However, for reporting purposes, the
Company has adopted the United States dollar as its reporting currency.
Accordingly, the Canadian dollar balance sheets of these companies have been
translated into United States dollars at the rates of exchange at the respective
period ends, while transactions during the periods and share capital amounts
have been translated at the weighted average rates of exchange for the
respective periods and the exchange rate at the date of the transaction,
respectively. Gains and losses arising from these translation adjustments are
included in comprehensive loss.
Acquisition of Homebase Work Solutions Ltd.
Pursuant to a share purchase agreement dated May 13, 1999, Homebase Work
Solutions Ltd. ["Homebase"] was acquired by the Company in consideration for
3,400,000 exchangeable shares of InfoCast Canada. The InfoCast Canada
exchangeable shares are convertible into InfoCast common shares on a one-for-one
basis at no additional consideration.
As a condition of the closing of the share purchase agreement, the Company paid
Cdn.$210,000 [$141,561] to officers of Homebase in May 1999 and must pay an
additional Cdn.$210,000 [$141,561] to the officers of Homebase if the Company
completes a private placement financing for gross proceeds of at least
$1,000,000 or completes a letter of credit financing of at least $500,000. A
private placement of 420,000 common shares was completed in June 1999 at $5.00
F-28
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
June 30, 1999 Unaudited
per share for gross proceeds of $2,100,000 and, as a result, the remaining
Cdn.$210,000 [$141,561] is included as an accrued liability at June 30, 1999.
The acquisition has been accounted for using the purchase method. The value of
the acquisition was $17,077,000, which included $77,000 of expenses directly
attributable to the acquisition. For accounting purposes the exchangeable shares
of InfoCast Canada have been valued at $5.00 which is equal to the price per
share received from the June 1999 private placement of the Company's common
shares. The total purchase price of $17,077,000 has been allocated as follows:
$
- --------------------------------------------------------------------------------
Cash 127,667
Other current assets 13,565
Capital assets 20,465
Completed technology 17,015,000
In-process research and development 31,000
Trademarks 853,000
Workforce-in-place 253,000
Goodwill 5,846,293
Deferred income taxes (6,898,000)
Accounts payable and accrued liabilities (82,145)
Due to the Company (102,845)
- --------------------------------------------------------------------------------
Purchase price 17,077,000
- --------------------------------------------------------------------------------
The completed technology, trademarks, workforce in-place and goodwill will be
amortized over their respective useful lives of 5 years, 5 years, 3 years and 5
years. The in-process research and development was charged to income immediately
subsequent to the acquisition. The completed technology, trademarks and
workforce-in-place have been classified as intellectual property on the
consolidated balance sheet. The deferred income tax liability was created in
respect of the difference between the accounting and tax basis of the completed
technology, trademarks and workforce-in-place.
The results of operations of Homebase during the post-acquisition 49-day period
ended June 30, 1999 have been consolidated with those of the Company.
Change in year end
The Company changed its year end from December 31 to March 31.
F-29
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
June 30, 1999 Unaudited
Basis of presentation
These unaudited interim consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information. Accordingly, these unaudited interim
consolidated financial statements do not include all the financial information
required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all adjustments
[consisting of normal recurring accruals] considered necessary for fair
presentation have been included. The operating results for the three-month
period ended June 30, 1999 may not be indicative of the operating results that
will occur for the year ended March 31, 2000.
For further information, please refer to the consolidated financial statements
and footnotes thereto of the Company as of and for the three-month period ended
March 31, 1999, as of and for the year ended December 31, 1998 and as of and for
the 156-day period ended December 31, 1997, included elsewhere in this document.
2. SHARE CAPITAL
Authorized
The Company has 100,000,000 preferred shares authorized at a par value of $0.001
per share and has 100,000,000 common shares authorized at a par value of $0.001
per share.
Issued and outstanding common shares
<TABLE>
<CAPTION>
Common stock issued and
outstanding and
additional paid-in-capital
Shares Amount
# $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding as of March 31, 1999 18,172,333 5,153,739
Acquisition of Homebase Work Solutions Ltd. 3,400,000 17,000,000
Private placement at $5.00 per share 420,000 2,100,000
Share issuance costs -- (436,800)
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as of June 30, 1999 21,992,333 23,816,939
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-30
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
June 30, 1999 Unaudited
Exchangeable shares
The number of common shares outstanding as of June 30, 1999 includes 4,900,000
exchangeable shares of InfoCast Canada which have been deemed as common shares
of the Company for accounting purposes because the exchangeable shares are the
economic equivalent of common shares of the Company.
Securities Purchase Agreement
Pursuant to a Securities Purchase Agreement dated June 24, 1999, the Company
issued, by way of a private placement, 420,000 common shares to the agent at
$5.00 per share for gross proceeds of $2,100,000, net of commissions of
$210,000.
Also pursuant to the Securities Purchase Agreement, the Company issued 70,000
warrants on June 24, 1999 to the agent. Each warrant has an exercise price of
$7.00, expires June 23, 2001 and has been valued at $3.24 in the accounts based
on an expected volatility factor of 0.715 and a risk free interest rate of 5.1%.
As a result, $226,800 was charged to share issuance costs during the three-month
period ended June 30, 1999.
Stock options
As of June 30, 1999, 2,075,000 common shares were reserved for the exercise of
stock options granted to various individuals involved in the management of VPS
pursuant to the Company's 1998 Stock Option Plan as amended on January 29, 1999.
The options were granted on February 8, 1999, are exercisable at a price of
$1.00 per share, expire three years from the date of grant and are subject to a
vesting period of at least six months. Of the 2,075,000 stock options that were
originally valued at $11,788,250, the 375,000 that were granted to consultants
were revalued as of June 30, 1999 to $9.16 each based on a revised volatility
factor of 0.718 and the June 30, 1999 common share closing market price of
$10.25, which resulted in a charge to stock option compensation expense of
$2,064,329 and an increase in deferred compensation of $830,579 during the
three-month period ended June 30, 1999. Stock option compensation expense of
$2,998,178 was charged to income in respect of the remaining 1,700,000 stock
options during the three-month period ended June 30, 1999.
The directors and stockholders of the Company approved the 1999 Stock Option
Plan under which an additional 2,000,000 stock options are eligible for grant.
As of June 30, 1999, 1,180,500 stock options were granted to various employees,
officers, directors, consultants and advisors pursuant to the 1999 Stock Option
Plan. The options were granted on June 1, 1999, are exercisable at a price of
$7.00 per share, expire five years from the date of grant and are subject to a
vesting period ranging from immediate vesting to six months. Of the 1,180,500
stock options, 905,500 vest immediately and 275,000 will vest on June 1, 2000.
These outstanding stock options
F-31
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
June 30, 1999 Unaudited
have been valued at $1,037,880 of which $767,140 has been recognized as a stock
option compensation expense during the three-month period ended June 30, 1999,
and of which the balance of $270,740 has been recorded as deferred compensation
in stockholders' equity. The deferred compensation will be adjusted for the then
current fair market value at each interim financial reporting date for the
480,500 stock options granted to consultants and advisors, and will be amortized
to income over the vesting periods of the stock options.
On June 1, 1999, the directors of the Company approved the grant of 750,000
stock options outside of the 1999 Stock Option Plan to an individual who became
an officer of the Company. The stock options are exercisable at a price of $7.00
per share, expire 5 years from the date of grant and vest as follows: 250,000 on
September 4, 1999 upon the acceptance by the individual of formal employment
with the Company, 250,000 on September 4, 2000 and 250,000 on September 4, 2001.
The measurement date in respect of these stock options will be September 4,
1999.
If the Company had been following FASB Statement No. 123 ["FASB 123"] in respect
of stock options granted to its employees and directors, the Company would have
recorded a higher stock option compensation expense for the three-month period
ended June 30, 1999 of $1,414,656 which results in a pro-forma net loss of
$10,323,880 and a pro-forma basic and diluted loss per share of $0.52 in respect
of the three-month period ended June 30, 1999. The Company assumed an expected
dividend rate of 0%, a risk-free interest rate of 5.08% and an expected
volatility factor of 0.838 in respect of the valuation of the stock options
granted under the 1998 Stock Option Plan in accordance with FASB 123. The
Company assumed an expected dividend rate of 0%, a risk-free interest rate of
5.1% and an expected volatility factor of 0.744 in respect of the valuation of
the stock options granted under the 1999 Stock Option Plan in accordance with
FASB 123.
Issuance of shares in consideration for consulting services
Pursuant to an agreement dated March 22, 1999, the Company issued 60,000 common
shares to a financial investment consulting firm on March 22, 1999 in
consideration for assistance in securing additional financing over the following
year. The measurement date for these common shares will be March 22, 2000. For
purposes of recognition of the cost of the common shares prior to the
measurement date such common shares are measured at their then current fair
value at each interim financial reporting date. These common shares were
revalued as of June 30, 1999 to $10.13 each which resulted in a charge to
general and administrative expenses of $157,923 and a charge to deferred
compensation of $111,777 during the three-month period ended June 30, 1999.
F-32
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
June 30, 1999 Unaudited
Other warrants
Pursuant to a letter agreement dated May 20, 1999 with an investor relations
company, the Company will pay $25,000 and issue 25,000 warrants each quarter in
advance commencing June 1, 1999 in consideration for consulting services over
the period from June 1, 1999 to May 31, 2000. Based on a volatility factor of
0.744 and a risk-free interest rate of 5.10%, the Company valued the 25,000
warrants issued on June 1, 1999 at $54,000, which will be adjusted on the August
31, 1999 measurement date to their then fair market value. Each of the existing
and future warrants issued under this letter agreement has an exercise price of
$7.00, is exercisable on or after June 1, 2000 and expires May 31, 2001. The
Company charged $17,998 to general and administrative expenses in respect of
these warrants during the three-month period ended June 30, 1999.
On June 1, 1999, the Company issued 200,000 warrants to parties in consideration
for past consulting services to the Company. These warrants have a purchase
price of $7.00, are exercisable on or after June 1, 2000 and expire May 31,
2001. These warrants have been valued at $432,000 in the accounts based on a
volatility factor of 0.744 and a risk-free interest rate of 5.10% and have been
charged to general and administrative expenses.
3. COMMITMENTS
[a] Purchase of Applied Courseware Technology (A.C.T.) Inc.
Pursuant to a Letter of Intent dated February 10, 1999 between the Company
and Applied Courseware Technology (A.C.T.) Inc. ["ACT"], the Company
intended to purchase a 100% interest in ACT in consideration for [i]
Cdn.$280,000 cash, [ii] 750,000 common shares of the Company and [iii] the
assumption of ACT's liabilities. Pursuant to subsequent negotiations, the
Cdn.$280,000 cash component of the purchase price was revised to nil. The
transaction is subject to satisfactory due diligence. The amount and terms
of ACT's debt that will be assumed by the Company upon its acquisition has
not yet been determined.
During the three-month period ended June 30, 1999, the Company made cash
advances to ACT totalling Cdn.$428,000 to fund certain development
expenditures incurred on behalf of the Company. These advances in addition
to Cdn.$70,000 that was outstanding as of March 31, 1999 have been charged
to research and development during the three-month period ended June 30,
1999. As of June 30, 1999, $97,120 [1998 - nil], including interest
receivable of $2,611, has been recorded as an amount due from ACT in
respect of Cdn.$140,000 of ACT's debt that the Company paid in March 1999
in consideration for a note secured by a general security agreement
subject to prior charges. The realization of this loan is dependent on the
successful acquisition of ACT.
[b] Marketing agreement
F-33
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
June 30, 1999 Unaudited
Pursuant to an advertising services agreement dated July 14, 1999, the
Company will pay Cdn.$20,833 per month to an advertising agency in
consideration for the creation, production and placement of various
marketing and advertising initiatives. This agreement commences July 1,
1999 and continues for a fixed term until May 1, 2000.
[c] License agreement
Pursuant to a license agreement dated June 29, 1999, between the Company
and ITC Learning Corporation ["ITC"], and for total consideration of
$2,000,000 payable in three installments, the Company will become ITC's
exclusive distance learning technology partner for the delivery of
educational material for the State of California. This amount has been
provided for in the accounts.
[d] Call Center Learning Solutions On-Line Inc. joint venture
Pursuant to an agreement dated May 18, 1999, between the Company and Call
Center Learning Solutions Inc. ["CCLS"], the two parties have agreed to
form a new corporation, Call Center Learning Solutions On-Line Inc. ["CCLS
On-Line"] to be owned equally by the Company and CCLS. The new corporation
will develop, own and exploit courseware in an electronic format capable
of electronic distribution. The Company will contribute the resources
necessary to convert the first five courses into the electronic format,
will fund the incorporation and organization of the new corporation and
will fund all marketing and technical support efforts of the new
corporation for the initial six-month period. At the end of the initial
six-month period, the two parties will share all revenues and bear all
costs on a 50/50 basis.
[e] Lease agreement
Homebase entered into a lease agreement with Sun Microsystems on June 25,
1999 for the lease of a Sun Microsystems Enterprise 10000 computer. The
Company paid a deposit of Cdn.$700,000 at the time of signing. The
commencement date of the lease is the 16th day following delivery of the
equipment. The equipment had not been delivered as of June 30, 1999. After
delivery of the equipment, the lease requires monthly payments of
Cdn.$59,197 over a term of 36 months.
F-34
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
June 30, 1999 Unaudited
4. 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 values of financial instruments classified as current assets or
liabilities including cash and cash equivalents, accounts receivable, due from
ACT and accounts payable and accrued liabilities as of June 30, 1999 approximate
the carrying values due to the short-term maturity of the instruments.
Concentration of credit risk
The Company invests its cash and cash equivalents primarily with a major
Canadian chartered bank. Certain deposits, at times, are in excess of limits
insured by the Canadian government.
Note receivable from Cherokee Mining Company Inc.
Pursuant to an agreement dated November 23, 1998, as amended April 20, 1999, and
effective December 18, 1998, InfoCast [the acquired entity] sold its equity
interest in its two subsidiaries, Gold King Mines Corporation ["Gold King"] and
Madison Mining Corporation ["Madison Mining"] to Cherokee Mining Company Inc.
["Cherokee"], a company controlled by a former director of InfoCast, for [i] a
non-interest bearing note of $600,000 due November 25, 1999 and [ii] the
entitlement to 80% of the net proceeds received by Madison Mining and Gold King
in excess of $681,175 from the sale of their mining properties and assets.
InfoCast did not record a value on the $600,000 note receivable because of the
uncertainty of whether the management of Cherokee, Gold King and Madison Mining
will be able to sell the capital assets of Gold King and Madison Mining for
sufficient proceeds to enable the note to be repaid to InfoCast. As a result,
VPS did not reflect the note in the purchase equation upon the acquisition of
InfoCast in January 1999. In the event that the note is repaid, the amount
received will be credited to stockholders' equity.
F-35
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
June 30, 1999 Unaudited
5. SUBSEQUENT EVENT
Private placement
During July and August 1999, the Company completed the placement of 1,100,000
common shares at $5.50 per share for gross proceeds of $6,050,000, less an
agent's fee of $605,041.
F-36
<PAGE>
AUDITORS' REPORT
To the Directors of
Homebase Work Solutions Ltd.
We have audited the balance sheets of Homebase Work Solutions Ltd. [a
development stage company] as at March 31, 1999 and December 31, 1998 and the
statements of loss and accumulated development stage deficit and cash flows for
the three-month period ended March 31, 1999, the 101-day period ended December
31, 1998 and the cumulative period from inception, September 22, 1998, to March
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at March 31, 1999 and
December 31, 1998 and the results of its operations and its cash flows for the
three-month period ended March 31, 1999, the 101-day period ended December 31,
1998 and the cumulative period from inception, September 22, 1998, to March 31,
1999 in accordance with accounting principles generally accepted in Canada.
Toronto, Canada, /s/ Ernst & Young LLP
June 11, 1999. Chartered Accountants
F-37
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
BALANCE SHEETS
[expressed in Canadian dollars]
<TABLE>
<CAPTION>
As at As at
March 31, December 31,
1999 1998
$ $
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
Current
<S> <C> <C>
Cash 332,198 66,716
Prepaid expenses 2,140 2,140
Accounts receivable 9,719 41,455
- --------------------------------------------------------------------------------------------------------------------------
Total current assets 344,057 110,311
- --------------------------------------------------------------------------------------------------------------------------
Fixed assets, net [note 3] 9,643 1,900
Software distribution rights, net [note 4] 389,244 --
- --------------------------------------------------------------------------------------------------------------------------
742,944 112,211
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities 134,378 6,920
Promissory note payable to InfoCast Corporation [note 6] 150,000 --
Due to shareholders [note 7] 283 1,117
First preferred series A shares [note 5] 258,639 236,683
Dividends payable on first preferred series A shares [note 5] 28,125 --
- --------------------------------------------------------------------------------------------------------------------------
Total current liabilities 571,425 244,720
- --------------------------------------------------------------------------------------------------------------------------
Shareholders' equity (deficiency)
Common shares [note 5] 727,275 8,212
Accumulated development stage deficit (555,756) (140,721)
- --------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity (deficiency) 171,519 (132,509)
- --------------------------------------------------------------------------------------------------------------------------
742,944 112,211
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-38
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
STATEMENTS OF LOSS AND ACCUMULATED
DEVELOPMENT STAGE DEFICIT
[expressed in Canadian dollars]
<TABLE>
<CAPTION>
Cumulative period
from inception,
Three-month 101-day period September 22,
period ended ended 1998,
March 31, December 31, to March 31,
1999 1998 1999
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C>
Interest 288 719 1,007
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Professional fees 46,460 78,545 125,005
Wages and benefits 81,733 29,511 111,244
National Environmental Policy
Institute funding [note 9] 143,884 -- 143,884
Bank charges and interest 234 193 427
First preferred series A share interest
accretion [note 5] 21,956 11,683 33,639
First preferred series A share dividend
expense [note 5] 28,125 -- 28,125
Other 62,605 21,508 84,113
Depreciation and amortization 30,326 -- 30,326
- ------------------------------------------------------------------------------------------------------------------------------------
415,323 141,440 556,763
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss for the period (415,035) (140,721) (555,756)
Accumulated development stage deficit,
beginning of period (140,721) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated development stage deficit,
end of period (555,756) (140,721) (555,756)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-39
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
STATEMENTS OF CASH FLOWS
[expressed in Canadian dollars]
<TABLE>
<CAPTION>
Cumulative period
from inception,
Three-month 101-day period September 22,
period ended ended 1998,
March 31, December 31, to March 31,
1999 1998 1999
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss for the period (415,035) (140,721) (555,756)
Add items not affecting cash
Depreciation and amortization 30,326 -- 30,326
First preferred series A share interest
accretion [note 5] 21,956 11,683 33,639
First preferred series A share dividend
expense [note 5] 28,125 -- 28,125
- ------------------------------------------------------------------------------------------------------------------------------------
(334,628) (129,038) (463,666)
Net change in non-cash working capital
balances related to operations 158,360 (35,558) 122,802
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities (176,268) (164,596) (340,864)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of fixed assets (8,250) (1,900) (10,150)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (8,250) (1,900) (10,150)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of preferred shares -- 225,000 225,000
Proceeds from issuance of common shares 300,000 8,212 308,212
Promissory note payable to
InfoCast Corporation 150,000 -- 150,000
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 450,000 233,212 683,212
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash during the period 265,482 66,716 332,198
Cash, beginning of period 66,716 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash, end of period 332,198 66,716 332,198
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-40
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
1. NATURE OF OPERATIONS
Incorporation
Homebase Work Solutions Ltd. [the "Company"] was incorporated on September 22,
1998 under the Alberta Corporations Act. The Company is in the development stage
and is engaged in the development of information delivery technologies.
Economic dependence
In May 1999, the Company was acquired by InfoCast Corporation ["InfoCast"], a
company also in the development stage [note 8]. As a result of the Company's
limited financial resources, the Company is economically dependent upon
InfoCast.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada which conform in all material respects
with accounting principles generally accepted in the United States ["US GAAP"],
except as outlined in note 12. The preparation of financial statements in
accordance with such principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could vary from the estimates that were used.
The Company's significant accounting policies are summarized as follows:
Fiscal periods presented
The Company has not yet chosen a year end. The financial periods reported in
these financial statements conform with those of the Company's acquirer,
InfoCast [note 8].
F-41
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
Fixed assets
Fixed assets are recorded at cost less accumulated depreciation. If it is
determined that a fixed asset is not recoverable over its estimated useful life,
the fixed asset will be written down to its net recoverable value. Maintenance
and repairs are charged to expenses as incurred. Gains and losses on disposition
of fixed assets are included in income. Depreciation is provided for at the
following annual rate and method:
Office furniture and equipment 30% declining balance
Software distribution rights
Software distribution rights are recorded at cost less accumulated amortization.
If it is determined that a software distribution right is not recoverable over
its estimated useful life, the software distribution right will be written down
to its net recoverable value.
Amortization is provided on a straight-line basis over two years.
Research and development
Software development costs are expensed as incurred unless they meet generally
accepted accounting criteria for deferral and amortization. Software development
costs incurred prior to the establishment of technological feasibility do not
meet these criteria and are expensed as incurred. Research costs are expensed as
incurred.
Income taxes
The Company follows the tax liability method of income tax allocation.
F-42
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
March 31, 1999
------------------------------------------------
Accumulated Net book
Cost depreciation value
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Office furniture and equipment 10,150 507 9,643
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1998
------------------------------------------------
Accumulated Net book
Cost depreciation value
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
Office furniture and equipment 1,900 -- 1,900
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4. SOFTWARE DISTRIBUTION RIGHTS
Software distribution rights consist of the following:
<TABLE>
<CAPTION>
March 31, 1999
--------------------------------------------------
Accumulated Net book
Cost amortization value
$ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Facet Decisions software distribution rights 218,385 28,719 189,666
Facet Petroleum software distribution rights 200,678 1,100 199,578
- ------------------------------------------------------------------------------------------------------------------------------------
419,063 29,819 389,244
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pursuant to a licensing and distribution agreement dated March 7, 1999 between
the Company and Facet Decisions Inc. ["Facet Decisions"], a private British
Columbia company, the Company acquired the exclusive right in the telework
market to distribute Facet Decisions' computer software for a period of two
years in consideration for 6,910 common shares of the Company valued at
$218,385. The software subject to the agreement includes Cause&Effect Complex
Decision Support Software and optional modules, HeadsUp Business Intelligence
Software and optional modules, FastTracks Methodology and Decision Frameworks
Industry Applications
F-43
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
["Facet Decisions' Software"]. In addition, all sales of Facet Decisions'
Software to the Company will be discounted by 30% from Facet Decisions'
published prices.
Pursuant to a licensing and distribution agreement dated March 30, 1999 between
the Company and Facet Petroleum Solutions Inc. ["Facet Petroleum"], a private
British Columbia company, the Company acquired the exclusive right in the
telework market to distribute Facet Petroleum's Telework Operational Data Store
["TODS"] software for a period of two years in consideration for 6,910 common
shares of the Company valued at $200,678. In addition, all sales of the TODS
software to the Company will be discounted by 50% from Facet Petroleum's
published prices.
The ascribed value of the shares issued to Facet Decisions and Facet Petroleum
is based on the 50,000 total InfoCast shares received by Facet Decisions and
Facet Petroleum upon the acquisition of the Company by InfoCast [note 8] and the
market price of the InfoCast shares on the effective dates of the respective
licensing and distribution agreements with Facet Decisions and Facet Petroleum.
A principal shareholder, director and officer of the Company is a director of
Facet Decisions and Facet Petroleum.
5. CAPITAL STOCK
Authorized
The Company is authorized to issue an unlimited number of common shares and an
unlimited number of first and second preferred shares.
First and second preferred shares may be issued in series and the directors of
the Company may fix, before issuance, the rights, privileges, restrictions and
conditions attached thereto.
F-44
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
Issued and outstanding
<TABLE>
<CAPTION>
Shares Amount
# $
- ------------------------------------------------------------------------------------------------------------------------------------
Common shares
<S> <C> <C>
On incorporation, issued for cash 1,000 1
Issued for cash, pursuant to a private placement 820,180 8,211
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as at December 31, 1998 821,180 8,212
Issued pursuant to a private placement 120,000 300,000
Issued for acquisition of software distribution rights [note 4] 13,820 419,063
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as at March 31, 1999 955,000 727,275
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Amount
# $
- ------------------------------------------------------------------------------------------------------------------------------------
First preferred series A shares
<S> <C> <C>
Issued for cash, pursuant to a private placement
dated November 10, 1998 45,000 225,000
Interest accretion to redemption price -- 11,683
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as at December 31, 1998 45,000 236,683
Interest accretion to redemption price -- 21,956
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding as at March 31, 1999 45,000 258,639
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
First preferred series A units
Series A of the first preferred shares were issued in units. Each unit consisted
of 2,000 redeemable first preferred series A shares, 3,000 common share purchase
warrants, and 1,500 penalty common share purchase warrants. Each first preferred
series A share was required to be redeemed by the Company by December 31, 1999
at $7.50 per share and commanded 50% cumulative dividends commencing January 1,
1999. The Company has recorded first preferred series A share interest expenses
of $21,956 for the three-month period ended March 31, 1999 and $11,683 for the
101-day period ended December 31, 1998 based on the accretion of the first
preferred series A shares from the $5.00 issuance price to the December 31, 1999
$7.50 redemption price using the effective yield method. In addition, the
Company has recorded first preferred Series A share dividend expenses of $28,125
in respect of the three-month period ended March 31, 1999. The first preferred
series A shares were acquired by InfoCast [note 8].
F-45
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
Each common share purchase warrant entitled the holder thereof to purchase one
common share of the Company at $5.00 per share. The common share purchase
warrants would have expired 30 days subsequent to the redemption of the first
preferred series A shares in proportion to such redemption. Each penalty common
share purchase warrant entitled the holder to purchase one common share of the
Company at $5.00 per share. The penalty common share purchase warrants would
have vested three years after the issuance of the first preferred series A units
in proportion to the number of first preferred series A shares that had not been
redeemed at that time, and would have expired 30 days subsequent to the
redemption of the first preferred series A shares in proportion to such
redemption. The outstanding 67,500 common share purchase warrants and 33,750
penalty common share purchase warrants of the Company were acquired by InfoCast
[note 8].
6. PROMISSORY NOTE PAYABLE TO INFOCAST CORPORATION
The promissory note payable to InfoCast [note 8] bears interest at prime plus
1%, is secured by a general security agreement covering all assets of the
Company and is due on demand. No interest was paid by the Company on the note
during the three-month period ended March 31, 1999. The note was repaid during
May 1999.
7. DUE TO SHAREHOLDERS
Amounts due to shareholders are payable on demand and are non-interest bearing.
8. ACQUISITION BY INFOCAST CORPORATION
Pursuant to a share purchase agreement dated May 13, 1999, all of the Company's
outstanding common shares, first preferred series A shares, common share
purchase warrants and penalty common share purchase warrants were acquired by
InfoCast in consideration for 3.4 million exchangeable shares of InfoCast Canada
Corporation ["InfoCast Canada"], a 100% owned subsidiary of InfoCast. The
InfoCast Canada exchangeable shares are convertible into InfoCast common shares
on a one-for-one basis at no additional consideration. InfoCast is a development
F-46
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
stage technology company traded on the NASDAQ OTC Bulletin Board and is engaged
in the research and development of information delivery technologies.
As a condition of the closing of the share purchase agreement, InfoCast will pay
$210,000 to officers of the Company and must pay an additional $210,000 to the
officers of the Company if InfoCast completes a private placement financing for
gross proceeds of at least US$1,000,000 or completes a letter of credit
financing of at least US$500,000.
9. NATIONAL ENVIRONMENTAL POLICY INSTITUTE FUNDING
During the three-month period ended March 31, 1999, the Company paid US$25,000
to the National Environmental Policy Institute ["NEPI"], a United States based
non-profit environmental lobbyist group, to assist NEPI's efforts in promoting
telework policies in the United States. In addition, as at March 31, 1999, the
Company has committed an additional US$70,000 in funding to NEPI which has been
provided for in the accounts.
10. INCOME TAX LOSS CARRYFORWARDS
As at March 31, 1999, the Company has accumulated non-capital losses for
Canadian income tax purposes of approximately $319,000 which are available to
reduce future years' taxable income. The future income tax benefits associated
with these non-capital losses have not yet been recognized in the accounts.
The loss carryforwards will expire as follows:
$
- ----------------------------------------------------------
2005 126,000
2006 193,000
- ----------------------------------------------------------
319,000
- ----------------------------------------------------------
F-47
<PAGE>
Homebase Work Solutions Ltd.
[a development stage company]
NOTES TO FINANCIAL STATEMENTS
[expressed in Canadian dollars]
March 31, 1999
11. 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. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
12. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada which conform in all material respects
with US GAAP except as follows:
Interest accretion and dividends on first preferred shares
Under US GAAP, first preferred share interest accretion and dividends payable
are charged directly to shareholders' equity. Accordingly, the net loss would
have decreased by $50,081 in respect of the three-month period ended March 31,
1999 [101-day period ended December 31, 1998 - $11,683].
F-48
<PAGE>
AUDITORS' REPORT
To the Shareholders of
APPLIED COURSEWARE TECHNOLOGY INC.
We have audited the balance sheet of Applied Courseware Technology Inc., as at
August 31, 1998 and the statements of income and retained earnings together with
the statement of changes in financial position for the year then ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
The accompanying financial statements, in our opinion, do not draw attention
explicitly to doubts concerning the company's ability to realize its assets and
discharge its liabilities in the normal course of business. These doubts arise
because it is uncertain whether the company will be able to generate sufficient
revenues to meet it's long term debt of $670,604. and also because of the
recurring losses in the past three years. It is not known whether the company's
research and development product can realized the projected revenues.
In our opinion, except for the omission of the disclosure described in the
preceding paragraph, these financial statements present fairly in all material
respects, the financial position of the company as at August 31, 1998 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles.
/s/ Boudreau Porter Hetu
.......................................
CERTIFIED GENERAL ACCOUNTANTS
Moncton, New Brunswick
March 5, 1999
F-49
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31, 1998 1998 1997
---- ----
<S> <C> <C>
REVENUES $155,406 $ 279,471
---------- ---------
EXPENSES
Advertising and promotion 44,814 21,559
Bad debt 53,888 --
Amortization 15,152 22,393
Commissions 19,890 4,465
Dues and fees 820 6,785
Equipment rental 3,946 1,682
Insurance 3,675 136
Interest and bank charges 11,452 6,627
Interest on long term debt 14,131 3,106
Meals and entertainment 6,248 9,635
Office expenses and postage 11,106 8,678
Printing materials 10,225 30,507
Production Distribution 647 14,072
Professional fees 23,776 26,571
Rent and electricity 6,477 9,857
Repairs and maintenance 137 313
Salaries and benefits 132,801 153,896
Sub contracting -- 44,566
Telephone 11,037 9,802
Trade shows, seminars and direct mail 16,818 16,019
Travel and accommodations 47,146 82,767
Vehicle lease 3,942 --
---------- ---------
438,128 473,436
---------- ---------
Loss before income taxes (282,722) (193,965)
Income taxes - recovered (1,287) --
Income taxes - deferred (90,893) (58,663)
---------- ---------
Net (Loss) (190,542) (135,302)
Retained Earnings, beginning of year 251,230 386,532
---------- ---------
Retained Earnings, end of year $ 60,688 $ 251,230
---------- ---------
</TABLE>
See accompanying notes to the financial statements.
F-50
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
BALANCE SHEET
AUGUST 31, 1998 1998 1997
- --------------- ---- ----
ASSETS
CURRENT
Accounts receivable $ 108,549 $ 138,856
Prepaid expenses -- 5,010
Investment tax credit receivable 301,361 444,879
---------- ----------
409,910 588,745
Capital (Note 3) 32,567 46,805
Deferred development costs (Notes 2(b) & 4) 578,720 329,205
Deferred income taxes (Notes 2(c)& 5) 197,770 106,877
Deferred investment tax credit 149,942 149,108
---------- ----------
$1,368,909 $1,220,740
---------- ----------
LIABILITIES
CURRENT
Bank indebtedness (Note 6) $ 179,226 $ 835
Note payable 60,000 60,000
Deferred revenue 100,000 --
Accounts payable & accrued liabilities 101,072 149,613
Due to shareholders 38,404 --
Current portion of long term debt 196,429 300,000
---------- ----------
675,131 510,448
Long term debt (Note 7) 474,175 250,000
Due to shareholders (Note 8) 158,914 209,061
1,308,220 969,509
Contingencies (Note 9) -- --
---------- ----------
1,308,220 969,509
SHAREHOLDERS' EQUITY
Capital stock (Note 10) 1 1
Retained earnings 60,688 251,230
---------- ----------
60,689 251,231
---------- ----------
$1,368,909 $1,220,740
---------- ----------
APPROVED ON BEHALF OF THE BOARD:
................................DIRECTOR.
See accompanying notes to the financial statements.
F-51
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED AUGUST 31, 1998 1998 1997
---- ----
FUNDS PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net (Loss) $(190,542) $(135,302)
Amortization 15,152 22,393
Deferred income taxes (90,893) (58,663)
--------- ---------
(266,283) (171,572)
CHANGES IN NON CASH WORKING
CAPITAL ACCOUNTS
Accounts receivable 30,307 35,626
Prepaid expenses 5,010 (5,010)
Investment tax credit 143,518 (86,473)
Note payable -- 15,000
Deferred revenue 100,000 --
Accounts payable (48,541) 53,209
Due to Shareholders 38,404 --
--------- ---------
2,415 (159,220)
--------- ---------
FINANCING ACTIVITIES
Proceeds from long term debt 125,000 550,000
Interest charges capitalized 5,604 --
Repayment of long term debt (10,000) --
Advances from shareholders -- 81,422
Repayment to shareholders (50,147) --
--------- ---------
70,457 631,422
--------- ---------
INVESTING ACTIVITIES
Additions to capital assets (914) (3,660)
Additions to deferred development costs (249,515) (192,967)
Increase in deferred investment tax credit (834) (47,267)
--------- ---------
(251,263) (243,894)
--------- ---------
Increase (Decrease) In Cash (178,391) 228,308
Cash and Equivalents (Deficiency),Beginning (835) (229,143)
--------- ---------
Cash and Equivalents (Deficiency),Ending $(179,226) $ (835)
--------- ---------
Represented by:
Bank Indebtedness $(179,226) $ (835)
--------- ---------
See accompanying notes to the financial statements.
F-52
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED AUGUST 31, 1998
NOTE 1 LEGAL STATUS
The company was incorporated under the Corporation Act of the Province
of Newfoundland on August 22, 1988 under the name of Norcos Operations
Inc. The company applied for and was granted a name change to Applied
Courseware Technology (A.C.T.) Inc., on April 11, 1990. The Company was
registered as an extra- provincial corporation under the Business
Corporations Act of the Province of New Brunswick on January 6, 1997.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICY
(A) Capital assets are recorded at cost, net of investment tax credit
and amortized over the estimated useful lives of the assets as
follows:
Building 5% Declining Balance
Furniture and Equipment 20% Declining Balance
Computer Equipment 30% Declining Balance
Computer Software 50% Straight line
NOTE: Assets acquired during the current year are amortized at 50%
of the stated rates.
(B) Research and Software Development Costs
Research costs are expensed as incurred. Software Development costs
undertaken with a reasonable expectation of commercial success and
of future benefits arising from the work are recorded at cost and
deferred to future period for subsequent amortization on a straight
line basis over a period not exceeding 3 years. Amortization will
commence with commercial production of the software. Software
development costs are recorded net of government grants and
investment tax credits.
(C) Income Taxes
The Company has always accounted for income taxes on the tax
payable basis which only recognizes the current income tax expense.
Effective September 1, 1995, management adopted the tax allocation
basis which provides a more realistic approach of matching the tax
effect of a temporary difference in the period such a difference
occurs.
F-53
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED AUGUST 31, 1998
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICY
(C) Income Taxes (continued)
As indicated above, the company accounts for income taxes using the
tax allocation basis effective September 1, 1995 by charging
against its net income for accounting purposes income taxes
currently payable and also income taxes deferred by claiming
certain costs for income tax purposes in amounts differing from the
related costs charged to income, and by recognizing the tax
benefits of losses available for carry forward. The accumulated
total of such tax deferrals is reflected in the balance sheet as
deferred income taxes.
<TABLE>
<CAPTION>
NOTE 3 CAPITAL ASSETS Accumulated 1998 1997
Amorti- Net Book Net Book
Cost zation Value Value
---- ------ ----- -----
<S> <C> <C> <C> <C>
Furniture & Equipment $ 38,625 $ 20,581 $ 18,044 $ 22,155
Computer Equipment 86,331 72,162 14,169 19,958
Computer Software 35,016 34,662 354 4,692
---------------------------------------------
$159,972 $127,405 $ 32,567 $ 46,805
---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NOTE 4 DEFERRED DEVELOPMENT COSTS
1998 1997
AT COST
<S> <C> <C>
Software Development $1,265,451 $ 1,013,026
Less: Government Grants (185,733) (185,733)
Investment Tax Credits (500,998) (498,088)
------------------------
$ 578,720 $ 329,205
------------------------
</TABLE>
As explained in Note 2 (b), amortization will commence with
commercial production of the software product and will be recorded
on a straight line basis over a period of three years.
F-54
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED AUGUST 31, 1998
NOTE 5 INCOME TAXES
The Company is a Canadian Controlled Private Corporation (CCPC) as
defined under the Canadian Income Tax Act. The combined Federal and
Provincial tax rate on the first $200,000 of Canadian taxable income is
20.12%.
A tax liability may be reduced by the presence of investment tax credit
and unused losses from prior years. These losses are created by the
temporary differences between the financial reporting basis and the
income tax basis of a company's assets and liabilities. The major
temporary differences that give rise to these losses are depreciation,
amortization, gains or losses on dispositions of capital assets and
development costs.
1998 1997
Net loss before taxes $(282,722) $(193,965)
Timing differences
- Excess of depreciation over
capital cost allowance 1,527 4,355
- Excess of Research and
Development expenditures for
income tax purposes over
accounting purposes (77,294) (113,937)
Permanent differences
- Non deductible expense 3,124 11,979
--------- ---------
Net Loss for tax purposes $(355,365) $(291,568)
--------- ---------
F-55
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED AUGUST 31, 1998
NOTE 5 INCOME TAXES (continued)
The deferred income taxes asset of $197,770 as at August 31, 1998
represents the tax benefit of the net loss for tax purposes at the rate
of 20.12%. The total amount of losses incurred by the company and
available to reduce taxable income of future years amounts to $982,951
and expires in the years 2003 $(336,018) and 2004 $(291,568) and 2005
$(355,365).
NOTE 6 BANK INDEBTEDNESS 1998 1997
Bank overdraft $179,226 $ 835
The Canadian Imperial Bank of Commerce bank indebtedness is secured by a
general assignment of accounts receivable, all personal property of the
business and by the personal guarantee of the shareholders. The bank
charges bank prime plus 2% interest on the company's bank overdraft.
NOTE 7 LONG TERM DEBT
1998 1997
Canadian Imperial Bank of Commerce
Demand Instalment loan, repayable
at $5,000 per month plus interest
at prime plus 2% (see Note 6 for security). $240,000 $250,000
Province of New Brunswick, Department
of Economic Development and Tourism,
Debenture loan, repayable at $10,714 per
month without interest beginning in
December 1998. Maturity date March 31,
2001. The loan does not bear any
interest until or unless the security
shall become enforceable. The loan is
secured by a fixed and specific mortgage
on all equipment and personal property
and by a floating charge on all undertaking. 300,000 300,000
F-56
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED AUGUST 31, 1998
NOTE 7 LONG TERM DEBT (continued) 1998 1997
Business Development Bank of Canada
authorized term loan of $250,000, non disbursed
amount of $125,000, repayable at $4,200. per
month plus interest at 7.1% plus a variance.
Maturity date October 23, 2003. The loan
is secured by a general security agreement
providing a security interest in all present and
after acquired personal property and
specifically including a charge on equipment,
furniture and fixture and a floating charge over
residential assets subject to prior charge by the
Canadian Imperial Bank of Commerce and the
Province of New Brunswick. 130,604 --
-------------------
670,604 550,000
-------------------
Principal due within one year 196,429 300,000
-------------------
$474,175 $250,000
-------------------
Principal repayment over the next four years will be as follows:
1999 $196,429
2000 238,971
2001 175,204
2002 60,000
NOTE 8 DUE TO SHAREHOLDERS 1998 1997
Balance, beginning of year $209,061 $127,639
Advances during the year 38,336 117,152
--------------------
247,397 244,791
Repayments during the year 88,483 35,730
---------------------
Balance, end of year $158,914 $209,061
---------------------
The loan has no set term of repayment or interest and has been assigned
as security to the debenture loan with the Department of Economic
Development and Tourism.
F-57
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED AUGUST 31, 1998
NOTE 9 CONTINGENCIES
A) Legal proceedings
The Company has received claims in respect of the following:
1. A claim by Janice Yates for compensation with respect to her
termination as an employee of the company on or about July 17, 1996.
2. Claims by Janice Yates, Lee McAboy and the consulting firm of McAboy,
Yates Corporation for their alleged loss of interest in the company
as a result of them no longer participating in the business.
Because the amounts in issue are not clear, the extent of financial
liability cannot be determined. Management takes the position that both
Yates and McAboy are in breach of the contract.
No provision has been made in these financial statements since it is not
possible to determine the outcome of this threatened litigation. If a
settlement should occur concerning this contingency, it will be recorded
as a charge to the statement of income in the period in which it takes
place.
B) Revenue Canada Audit
1. During the year, Revenue Canada completed their examination of the
Scientific Research and Experimental Development ( R & D) claim for
the fiscal year ended August 31, 1996. Certain expenses were
disallowed for R & D purposes and as a result the company's claim for
investment tax credit was reduced by $108,287. However, the net loss
for income tax purposes was increased by $96,386. The financial
statements were adjusted by increasing the deferred income taxes by
$19,393.
2. As noted in the notes to the financial statements for the year ended
August 31, 1997 the company has filed notice of objection to appeal
Revenue Canada Notice of Assessments for the years ending August 31,
1994 and 1995. The appeal have not been resolved by Revenue Canada as
of the date of these financial statements.
F-58
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED AUGUST 31, 1998
NOTE 10 CAPITAL STOCK
1998 1997
AUTHORIZED
5,000 common shares,
without par value.
ISSUED AND FULLY PAID
100 common shares. $ 1 $ 1
NOTE 11 DIVIDENDS AND SHARES RESTRICTIONS
Covenants respecting the company`s long term debt restrict the company`s
ability to declare or pay dividends on its capital stock, redeem any of
its capital stock or allow the ownership in respect of the majority of
the shares of any class in its capital stock to change, without the
prior written consent of the lender.
NOTE 12 SUBSEQUENT EVENT
On November 5, 1998, Revenue Canada completed their examination of the R
& D claim for the fiscal year ended August 31, 1997. The claim was
accepted as filed and the company received a refund of $152,607.
NOTE 13 GOVERNMENT ASSISTANCE
A) ATLANTIC CANADA OPPORTUNITY AGENCY
Under the ACOA Action Program, the company has received financial
assistance as contribution towards the implementation of the company`s
marketing plan. The duration of the project was from August 1, 1994 to
August 1, 1997. During the year, $8,832 (1997 - $18,212) was credited to
revenues. The assistance is not conditionally repayable.
B) CANADIAN INTERNATIONAL DEVELOPMENT AGENCY
During the year 1997, the Company received financial assistance of
$114,500 representing contribution of 38% of expenses resulting from the
participation in an industrial cooperation project (Training and
Technology Facility) in Trinidad and Tobago. The assistance is repayable
if the company obtains contracts or realizes export sales of at least
$5.0 million as a direct result of the contributions.
F-59
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED AUGUST 31, 1998
NOTE 13 GOVERNMENT ASSISTANCE (continued)
C) INDUSTRY CANADA
Pursuant to a Program for Export Market Development (PEMD), the Company
has received financial assistance as contribution toward eligible costs
incurred in establishing a market development strategy for a software
product. The assistance is repayable if the Company derived sales in
excess of a predefined level during each of the next fiscal years.
During the year, $19,956 (1997 - $50,000) was credited to revenues.
NOTE 14 COMPARATIVE FIGURES
Certain comparative figures have been revised to conform with current
statement format.
F-60
<PAGE>
NOTICE TO READER
To the Directors of
APPLIED COURSEWARE TECHNOLOGY INC.
We have compiled the Interim Balance Sheet of Applied Courseware Technology
Inc., as at June 30, 1999 and June 30, 1998 and the Interim Statement of Income
and Retained Earnings together with the Interim Statement of Cash Flows for the
ten month period then ended from information provided from Management. We have
not audited, reviewed or otherwise attempted to verify the accuracy or
completeness of such information.
Accordingly, readers are cautioned that these Interim Financial Statements may
not be appropriate for their purposes.
/s/ Boudreau Porter Hetu
.........................................
CERTIFIED GENERAL ACCOUNTANTS
Moncton, New Brunswick
August 30, 1999
F-61
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
INTERIM STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TEN MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER 1999 1998
---- ----
REVENUES
Sales and Consulting - InfoCast Corporation $ 498,000 $ --
Sales and Consulting - Others 93,373 136,223
Interest 4,270 --
-------------------------
595,643 136,223
-------------------------
EXPENSES
Advertising and promotion -- 42,071
Amortization 11,349 12,615
Commissions -- 17,850
Due and Fees 4,765 500
Equipment rental 6,894 6,291
Insurance 2,223 2,760
Interest and bank charges 17,197 13,949
Interest on long term debt 36,582 17,023
Meals and entertainment 3,107 4,177
Office expenses and postage 5,832 17,716
Printing materials -- 25,562
Production distribution 3,557 647
Professional fees 40,315 35,257
Rent and electricity 10,785 10,200
Repairs and maintenance 92 138
Salaries and benefits 197,314 253,338
Sub contracting 76,092 26,237
Telephone 12,219 17,438
Trade shows, seminars and direct mail 1,785 16,818
Travel and accommodations 43,111 28,574
Vehicle lease 4,248 3,092
-------------------------
477,467 552,253
-------------------------
Income (Loss) Before Income Taxes 118,176 (416,030)
Income Taxes Recovered -- 1,287
-------------------------
Net Income (Loss) 118,176 (414,743)
Retained Earnings, (Deficit) Beginning of the period (197,082) 144,352
-------------------------
(Deficit), End of the period $ (78,906) $ (270,391)
-------------------------
See accompanying notes to the interim financial statements.
F-62
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
INTERIM BALANCE SHEET - "SEE NOTE 2 - BASIS OF PRESENTATION"
AS AT JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER 1999 1998
ASSETS
CURRENT
Bank $ 27,804 $ --
Accounts receivable 7,998 188,877
Prepaid expenses -- 5,010
Investment tax credit receivable 153,024 292,574
---------------------
188,826 486,461
Capital 53,928 35,104
Deferred development costs 728,662 478,313
---------------------
$971,416 $999,878
---------------------
LIABILITIES
CURRENT
Bank indebtedness (Note 3) $ -- $161,207
Notes payable (Note 4) 200,000 60,000
Accounts payable & accrued liabilities 164,588 201,289
Current portion of long term debt 490,000 675,000
---------------------
854,588 1,097,496
Long term debt (Note 5) -- --
Due to shareholders 195,733 172,772
---------------------
1,050,321 1,270,268
---------------------
CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY
Capital Stock (Note 7) 1 1
Deficit (78,906) (270,391)
---------------------
(78,905) (270,390)
---------------------
$ 971,416 $ 999,878
---------------------
APPROVED ON BEHALF OF THE BOARD
...........................................................DIRECTOR.
See accompanying notes to the interim financial statements.
F-63
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
INTERIM STATEMENT OF CASH FLOWS
FOR THE TEN MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER 1999 1998
---- ----
FUNDS PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net Loss $118,176 $(414,743)
Amortization 11,349 12,615
-----------------------
129,525 (402,128)
CHANGES IN NON CASH WORKING
CAPITAL ACCOUNTS
Accounts receivable 551 (50,021)
Investment tax credit 148,337 152,305
Notes payable 140,000 --
Accounts payable 3,516 51,676
-----------------------
421,929 (248,168)
-----------------------
FINANCING ACTIVITIES
Proceeds from long term debt -- 125,000
Repayment of long term debt (180,604) --
Repayment to shareholders (1,585) (36,289)
-----------------------
(182,189) 88,711
-----------------------
INVESTING ACTIVITIES
Additions to capital assets (32,710) (915)
-----------------------
Increase (Decrease) In Cash 207,030 (160,372)
Cash and Equivalents (Deficiency),Beginning (179,226) (835)
-----------------------
Cash and Equivalents (Deficiency),Ending $ 27,804 $(161,207)
-----------------------
Represented by:
Bank $ 27,804 $ --
Bank Indebtedness 18,751 (161,207)
-----------------------
$ 27,804 $(161,207)
-----------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the period $ 52,564 $ 30,518
-----------------------
See accompanying notes to the interim financial statements.
F-64
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE TEN MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER
NOTE 1 LEGAL STATUS
The company was incorporated under the Corporation Act of the Province
of Newfoundland on August 22, 1988 under the name of Norcos Operations
Inc. The company applied for and was granted a name change to Applied
Courseware Technology (A.C.T.) Inc., ("A.C.T."or the "Company")on April
11, 1990. The Company was registered as an extra-provincial corporation
under the Business Corporations Act of the Province of New Brunswick on
January 6, 1997. The Company was continued under the Canada Business
Corporations Act on July 9, 1998 and received permission to change it's
name to Applied Courseware Technology Inc.
NOTE 2 BASIS OF PRESENTATION
The Company's financial statements have been presented on the basis that
it is a going concern which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The
Company has incurred losses in the last three years, has a working
capital deficiency of $865,762 and is in default of its bank covenants
(Notes 3 & 5). The ability of the Company to continue as a going concern
is uncertain and is dependent on the continued financial support of its
shareholders and creditors, the successful development and
implementation of the Company's software and the Company's ability to
arrange financing. The outcome of these matters cannot be predicted at
this time.
These financial statements do not include any adjustments to the
carrying values and classification of assets and liabilities should the
Company be unable to continue as a going concern.
The financial statements have been prepared in accordance with
accounting principles generally accepted in Canada which conform in all
material respects with accounting principles generally accepted in the
United States (US "GAAP") except as outlined in Note 11.
F-65
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE TEN MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER
NOTE 3 BANK INDEBTEDNESS
1999 1998
Bank overdraft $ -- $161,207
The Canadian Imperial Bank of Commerce bank indebtedness is secured by a
general assignment of accounts receivable, all personal property of the
business and by the personal guarantee of the shareholders. The bank
charges bank prime plus 2% interest on the company's bank overdraft.
According to the Company's banking agreement, the bank overdraft is
limited to the lessor of i) $150,000 and ii) the sum of 75% of the
accounts receivable from the Canadian Government and 50% of the accounts
receivable less priority claims and non-government accounts receivable
over 90 days past due. The Company is in default of the agreement under
the limit imposed under ii) above.
NOTE 4 NOTES PAYABLE
1999 1998
InfoCast Corporation $140,000 $ --
Mary Costello 60,000 60,000
-----------------------
$200,000 $ 60,000
-----------------------
As indicated in Note 9, InfoCast Corporation, pursuant to a letter of
intent dated February 10, 1999 intends to purchase a 100% interest in
Applied Courseware Technology Inc.
F-66
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE TEN MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER
NOTE 5 LONG TERM DEBT
1999 1998
Canadian Imperial Bank of Commerce ("CIBC")
Demand Instalment loan, repayable
at $5,000 per month plus interest
at prime plus 2% (see Note 3 for security). $190,000 $250,000
Province of New Brunswick, Department
of Economic Development and Tourism,
Debenture loan, repayable at $10,714 per
month without interest beginning in
December 1998. Maturity date March 31,
2001. The loan does not bear any
interest until or unless the security
shall become enforceable. The loan is
secured by a fixed and specific mortgage
on all equipment and personal property
and by a floating charge on all undertaking. 300,000 300,000
Business Development Bank of Canada
authorized term loan of $250,000, non disbursed
amount of $125,000 repayable at $4,200. per
month plus interest at 7.1% plus an interest
adjustment factor. Maturity date
October 23, 2003. The loan is secured
by a general security agreement providing
a security interest in all present and
after acquired personal property and
specifically including a charge on equipment,
furniture and fixture and a floating charge over
residential assets subject to prior charge by
the Canadian Imperial Bank of Commerce and the
Province of New Brunswick. -- 125,000
-------------------
490,000 675,000
Principal due within one year 490,000 675,000
-------------------
$ -- $ --
-------------------
F-67
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE TEN MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER
NOTE 5 LONG TERM DEBT (continued)
According to the Company's banking agreement with the CIBC, the Company
is required to maintain a 2:1 debt to equity ratio. The Company was in
default of this covenant during 1999 and 1998.
NOTE 6 CONTINGENCIES
As noted in the notes to the financial statements for the year ended
August 31, 1997, the Company has filed notice of objection to appeal
Revenue Canada Notice of Assessments for the year ending August 31, 1994
and 1995. The appeal has not been resolved by Revenue Canada as of the
date of these financial statements. The investment tax credit receivable
on the balance sheet includes $68,621 related to amounts being appealed
or in dispute with Revenue Canada.
NOTE 7 CAPITAL STOCK
1999 1998
AUTHORIZED
Unlimited number of common shares
without par value. Unlimited number
of preference shares without par value.
ISSUED AND FULLY PAID
100 common shares. $ 1 $ 1
NOTE 8 DIVIDENDS AND SHARES RESTRICTIONS
Covenants respecting the Company's long term debt restrict the Company's
ability to declare or pay dividends on its capital stock, redeem any of
its capital stock or allow the ownership in respect of the majority of
the shares of any class in its capital stock to change without the prior
written consent of the lender.
F-68
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE TEN MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER
NOTE 9 SUBSEQUENT EVENT
Pursuant to a Letter of Intent dated February 10, 1999 between the
Company and InfoCast Corporation ("InfoCast"), InfoCast intended to
purchase a 100% interest in A.C.T. in consideration for (i) $280,000
cash, (ii) 750,000 common shares of InfoCast and (iii) the settlement of
the Company's debts. Pursuant to subsequent negotiations, the cash
component of the consideration was changed from $280,000 to nil. The
transaction is subject to satisfactory due diligence. During the period,
InfoCast settled the Company's debt to the Business Development Bank of
Canada in consideration for note secured by general security agreement
and made cash advances to A.C.T. totaling $450,000 to fund certain
development expenditures incurred on behalf of InfoCast.
NOTE 10 RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP")
which conforms in all material respects with accounting principles
generally accepted in the United States ("US GAAP") except as follows:
Deferred Development Costs
Under Canadian GAAP, research and development costs of companies in the
development stage may be capitalized if management expects the amounts
to be recovered through future revenues. Under US GAAP, research and
development incurred prior to the establishment of technological
feasibility are expensed as incurred. Under Canadian GAAP deferred
development costs were $728,662 as at June 30, 1999 (1998 - $478,313).
As a result, the significant income recognition and presentation
differences between Canadian and US GAAP would be as follows:
F-69
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE TEN MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER
NOTE 10 RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES
For the ten month period
ended June 30
1999 1998
Net loss determined in accordance
with Canadian GAAP $ (81,824) $(414,743)
Research and Development costs
(net of government grants and
investment tax credits) -- --
Net Loss determined in accordance
with US GAAP. $ (81,824) $(414,743)
Deferred development costs (net of
government grants and investment tax
credits) determined in accordance with
Canadian GAAP 728,662 478,313
Adjustment to opening retained earnings (728,662) (478,313)
Expense costs incurred during year -- --
Deferred development costs (net of
government grants and investment tax
credits) determined in accordance with
US GAAP Nil Nil
F-70
<PAGE>
APPLIED COURSEWARE TECHNOLOGY INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE TEN MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED) - SEE NOTICE TO READER
NOTE 10 RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES
For the ten month period
ended June 30
1999 1998
Cash and Cash Equivalents
Under Canadian GAAP, for the purposes of the statement of changes in
financial position, cash and cash equivalents may include bank
overdrafts. Under US GAAP, only cash and short-term investments with
original maturities of less than three months would be included in cash
and cash equivalents. Bank overdrafts amounted to $161,207 as at June
30, 1998.
As a result the significant presentation differences between Canadian
and US GAAP would be as follow:
<TABLE>
<CAPTION>
Canadian US Canadian US
GAAP GAAP GAAP GAAP
<S> <C> <C> <C> <C>
Cash provided by financing activities (182,189) (182,189) 88,711 88,711
</TABLE>
<TABLE>
<CAPTION>
As at June 30
1999 1998
Canadian US Canadian US
GAAP GAAP GAAP GAAP
<S> <C> <C> <C> <C>
Cash and cash equivalents, end of period (27,804) 27,804 (161,207) Nil
</TABLE>
F-71
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
BASIS OF PRESENTATION
The unaudited pro-forma consolidated financial information of InfoCast
Corporation [formerly Virtual Performance Systems Inc.] [a development stage
company] [the "Company"] set forth below gives effect to the acquisitions of
Homebase Work Solutions Ltd. ["Homebase"] and Applied Courseware Technology
(A.C.T.) Inc. ["ACT"] as if the Company had acquired ACT on June 30, 1999 for
the purpose of the pro-forma consolidated balance sheet and as if the Company
had acquired Homebase and ACT as of January 1, 1998 for purposes of the
pro-forma consolidated statements of operations for the three-month periods
ended June 30, 1999 and March 31, 1999 [the transition period] and for the year
ended December 31, 1998. Homebase was acquired by the Company on May 13, 1999,
and the acquisition of ACT is expected to close before December 31, 1999.
The pro-forma consolidated financial statements are not necessarily indicative
of the results that actually would have occurred had the Company acquired
Homebase and ACT on the dates indicated or which would be obtained in the
future.
The unaudited pro-forma consolidated information should be read in conjunction
with the audited and unaudited consolidated financial statements of the Company,
the audited financial statements of Homebase and the audited and unaudited
financial statements of ACT appearing elsewhere in this registration statement.
The unaudited pro-forma consolidated balance sheet as of June 30, 1999 has been
prepared from the unaudited consolidated balance sheet of the Company as of June
30, 1999 and the unaudited balance sheet of ACT as of June 30, 1999 after
translation of the ACT balance sheet from Canadian dollars to United States
dollars. The unaudited balance sheet of ACT as of June 30, 1999 has been
prepared in accordance with accounting principles generally accepted in Canada
["Canadian GAAP"].
The unaudited pro-forma statement of operations for the year ended December 31,
1998 and the three-month periods ended March 31, 1999 and June 30, 1999 have
been prepared from the audited and unaudited consolidated statements of
operations of the Company and the audited and unaudited pre-acquisition
statements of operations of Homebase and ACT after translation of their
statements of operations from Canadian dollars to United States dollars. ACT's
unaudited statements of operations for the year ended November 30, 1998, the
three-month period ended February 28, 1999 and the three-month period ended June
30, 1999 were used in respect of the preparation of the pro-forma statements of
operations for the year ended December 31, 1998, the three-month period ended
March 31, 1999 and the three-month period ended June 30, 1999, respectively. The
audited and unaudited statements of operations of Homebase and ACT have been
prepared in accordance with Canadian GAAP.
F-72
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
The pro-forma adjustments do not reflect any operating efficiencies or potential
synergies that may be achievable with respect to the combined companies.
The pro-forma adjustments reflecting the acquisitions of Homebase and ACT under
the purchase method of accounting are based on available financial information
and certain estimates and assumptions. The actual adjustments to the Company's
consolidated financial statements upon consummation of the acquisition of ACT
and the completion of the allocation of the purchase price of Homebase will
depend on a number of factors, including additional financial information at
such time, changes in values and changes in ACT's operating results between the
date of preparation of the unaudited pro-forma consolidated information.
Therefore, it is likely that the actual adjustments will differ from the
pro-forma adjustments. Management of the Company believes that such assumptions
provide a reasonable basis for presenting all of the significant effects of the
transactions contemplated and that the pro-forma adjustments give appropriate
effect to those assumptions and are properly applied in the pro-forma combined
financial statements. Management of the Company also believes that actual
financial position and results of operations will not differ materially from the
pro-forma amounts reflected herein.
F-73
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
PRO-FORMA CONSOLIDATED BALANCE SHEET - ASSETS
As of June 30, 1999
<TABLE>
<CAPTION>
Applied
Courseware
InfoCast Technology Pro-forma Pro-forma
Corporation (A.C.T.) Inc. adjustment consolidated
$ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
Current
<S> <C> <C> <C>
Cash and cash equivalents 1,493,205 18,935 1,512,140
Accounts receivable 114,253 5,447 119,700
Investment tax credit
receivable -- 104,209 104,209
Due from Applied Courseware
Technology (A.C.T.) Inc. 97,120 -- [f] (97,120) --
Prepaid expenses and
refundable deposits 586,968 -- 586,968
- ------------------------------------------------------------------------------------------------------------------------------------
2,291,546 128,591 (97,120) 2,323,017
Capital assets, net 239,197 36,725 275,922
Distribution rights 2,975,000 -- 2,975,000
Completed technology 16,600,291 -- [d] 641,000 17,241,291
In-process research and [d] 220,000
development -- [j] (220,000) --
Trademarks 830,323 -- [d] 243,000 1,073,323
Workforce-in-place 241,904 -- [d] 256,000 497,904
Goodwill, net 5,695,731 -- [d] 2,939,953 8,635,684
Deferred development
costs, net 496,219 [d] (496,219) --
Software license 62,825 -- 62,825
- ------------------------------------------------------------------------------------------------------------------------------------
28,936,817 661,535 3,486,614 33,084,966
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-74
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
PRO-FORMA CONSOLIDATED BALANCE SHEET - LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)
As of June 30, 1999
<TABLE>
<CAPTION>
Applied
Courseware
InfoCast Technology Pro-forma Pro-forma
Corporation (A.C.T.) Inc. adjustment consolidated
$ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
Current
<S> <C> <C> <C> <C>
Accounts payable and
accrued liabilities 2,375,898 112,084 -- 2,487,982
Notes payable -- 40,860 -- 40,860
Due to InfoCast Corporation -- 95,340 [f] (95,340) --
Current portion of long-term
debt -- 333,690 -- 333,690
- ------------------------------------------------------------------------------------------------------------------------------------
2,375,898 581,974 (95,340) 2,862,532
Due to shareholder -- 133,295 -- 133,295
Deferred income taxes 6,699,395 -- 6,699,395
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,075,293 715,269 (95,340) 9,695,222
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity (deficiency)
Common stock 20,492 1 [d] 750
-- [d] (1) 21,242
Additional paid-in-capital 38,125,727 -- [d] 3,749,250 41,874,977
Deferred compensation (6,448,694) -- (6,448,694)
Warrants 712,800 -- 712,800
Accumulated other
comprehensive loss (14,655) -- (14,655)
Accumulated development
stage deficit (12,534,146) (53,735) [d] 53,735
-- -- [f] (1,780)
-- -- [j] (220,000) (12,755,926)
- ------------------------------------------------------------------------------------------------------------------------------------
19,861,524 (53,734) 3,581,954 23,389,744
- ------------------------------------------------------------------------------------------------------------------------------------
28,936,817 661,535 3,486,614 33,084,966
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-75
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three-month period ended June 30, 1999
<TABLE>
<CAPTION>
Homebase Work
Solutions Ltd. Applied
[43-day period Courseware
InfoCast ended Technology Pro-forma Pro-forma
Corporation May 13, 1999] (A.C.T.) Inc. adjustment consolidated
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Other revenue -- -- 293,354 [g] (290,596) 2,758
Interest 23,157 473 -- [e] (1,664) 21,966
- ------------------------------------------------------------------------------------------------------------------------------------
23,157 473 293,354 (292,260) 24,724
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
General, administrative
and selling 1,936,815 68,130 167,637 2,172,582
Stock option
compensation 5,829,647 -- -- 5,829,647
Research and
development 730,657 -- -- [g] (339,145) 391,512
Interest and loan fees -- -- 5,633 5,633
Amortization and
depreciation 654,835 16,872 2,312 [c] 546,351
[i] 212,531 1,432,901
First preferred Series A
share interest accretion -- 7,518 -- [b] (7,518) --
First preferred Series A
share dividend expense -- 8,813 -- [b] (8,813) --
- ------------------------------------------------------------------------------------------------------------------------------------
9,151,954 101,333 175,582 403,406 9,832,275
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before
income taxes (9,128,797) (100,860) 117,772 (695,666) (9,807,551)
Deferred income taxes (198,605) -- -- [c] (156,486) (355,091)
Net income (loss)
for the period (8,930,192) (100,860) 117,772 (539,180) (9,452,460)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average
number of shares
outstanding 20,035,410 3,400,000 750,000 24,185,410
- ------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted
income (loss) per share (0.45) (0.03) 0.16 (0.39)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-76
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three-month period ended March 31, 1999
<TABLE>
<CAPTION>
Applied
Courseware
Technology
(A.C.T.) Inc.
[three-month
Homebase period ended
InfoCast Work February 28, Pro-forma Pro-forma
Corporation Solutions Ltd. 1999] adjustment consolidated
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Other revenue -- -- 8,282 [g] (6,617) 1,665
Interest 4,478 191 [a] (105)
[e] (107) 4,457
- ------------------------------------------------------------------------------------------------------------------------------------
4,478 191 8,282 (6,829) 6,122
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
General, administrative
and selling 635,334 221,453 50,179 906,966
Stock option
compensation 2,256,938 -- -- 2,256,938
Research and
development 162,914 -- -- [h] -- 162,914
Interest and loan fees 23,562 155 8,567 32,284
First preferred Series A
share interest accretion -- 14,528 -- [b] (14,528) --
First preferred Series A
share dividend expense -- 18,610 -- [b] (18,610) --
Amortization and
depreciation 9,651 20,066 1,542 [c] 1,187,067
[i] 212,531 1,430,857
- ------------------------------------------------------------------------------------------------------------------------------------
3,088,399 274,812 60,288 1,366,460 4,789,959
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before
income taxes (3,083,921) (274,621) (52,006) (1,373,289) (4,783,837)
Deferred income taxes -- -- -- [c] (340,006) (340,006)
Net loss for the period (3,083,921) (274,621) (52,006) (1,033,283) (4,443,831)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average
number of shares
outstanding 11,583,995 3,400,000 750,000 15,733,995
- ------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted
loss per share (0.27) (0.08) (0.07) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-77
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Homebase Applied
Work Courseware
Solutions Ltd. Technology
[101-day (A.C.T.) Inc.
period ended [year ended
InfoCast December 31, November 30, Pro-forma Pro-forma
Corporation 1998] 1998] adjustment consolidated
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Other revenue 43,446 -- 108,255 151,701
Interest -- 485 2,878 3,363
- ------------------------------------------------------------------------------------------------------------------------------------
43,446 485 111,133 -- 155,064
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
General, administrative
and selling 375,302 87,337 266,819 729,458
Research and
development 88,180 -- -- [h] 168,756 256,936
Interest and loan fees -- 130 30,040 30,170
First preferred Series A
share interest accretion -- 7,875 -- [b] (7,875) --
Amortization and
depreciation 3,836 -- 10,214 [c] 4,827,192
[i] 850,124 5,691,366
- ------------------------------------------------------------------------------------------------------------------------------------
467,318 95,342 307,073 5,838,197 6,707,930
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before
income taxes (423,872) (94,857) (195,940) (5,838,197) (6,552,866)
Deferred income taxes -- -- -- (1,390,015) (1,390,015)
Net loss for the period (423,872) (94,857) (195,940) (4,448,182) (5,162,851)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average
number of shares
outstanding 768,301 3,400,000 750,000 4,918,301
- ------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted
loss per share (0.55) (0.03) (0.26) (1.05)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-78
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
PRO-FORMA ADJUSTMENTS
The unaudited pro-forma consolidated financial statements give effect to the
following pro-forma adjustments:
[a] The elimination of nil and $105 of interest revenue recorded in the
accounts of the Company for the 43-day period ended May 13, 1999 and the
three-month period ended March 31, 1999, respectively, in respect of the
note payable from Homebase to the Company. ACT did not accrue the
corresponding interest expense.
[b] Homebase's first preferred series A shares were purchased by the Company
on May 13, 1999. Accordingly, Homebase's first preferred Series A share
interest accretion of $7,518, $14,528 and $7,875 in respect of the 43-day
period ended May 13, 1999, the three-month period ended March 31, 1999 and
the 101-day period ended December 31, 1998, respectively, have been
eliminated. In addition, Homebase's first preferred Series A share
dividend expenses of $8,813, $18,610 and nil in respect of the 43-day
period ended May 13, 1999, the three-month period ended March 31, 1999 and
the 101-day period ended December 31, 1998, respectively, have been
eliminated.
[c] The amortization of the $17,015,000 of completed technology, $853,000 of
trademarks, $253,000 of workforce-in-place and $5,846,293 of goodwill
created by the purchase of Homebase by the Company over the
pre-acquisition 43-day period ended May 13, 1999, the three-month period
ended March 31, 1999 and the year ended December 31, 1998 on a
straight-line basis utilizing amortization periods of five years in
respect of the completed technology, trademarks and goodwill and three
years in respect of the workforce-in-place. In addition, the amortization
of the $6,898,00 deferred income tax liability [created by the purchase of
Homebase by the Company in respect of the difference between the tax and
accounting basis of the completed technology, trademarks and
workforce-in-place] over the periods of the underlying assets.
[d] The acquisition of ACT by InfoCast. Pursuant to a letter of intent dated
February 10, 1999, as amended during subsequent negotiations and subject
to due diligence, ACT will be acquired by the Company in consideration for
[i] 750,000 common shares of the Company and [ii] the assumption of
certain of ACT's liabilities.
The pro-forma acquisition has been accounted for by the purchase method
whereby the pro-forma purchase price is equal to the ascribed value of the
750,000 common shares. For accounting purposes the common shares of the
Company have been valued at $5.00 which is equal to the price per share
received by the Company on a private placement conducted in June 1999. As
a result, the total pro-forma purchase price is $3,750,000 and has been
allocated as follows:
F-79
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
$
- ----------------------------------------------------------------------------
Cash 18,935
Accounts receivable 5,447
Investment tax credit receivable 104,209
Capital assets 36,725
Completed technology 641,000
In-process research and development 220,000
Trademarks 243,000
Workforce-in-place 256,000
Goodwill 2,939,953
Accounts payable and accrued liabilities (112,084)
Notes payable (40,860)
Due to directors, officers and shareholders (133,295)
Long-term debt (333,690)
Due to the Company (95,340)
- -----------------------------------------------------------------------
3,750,000
- -----------------------------------------------------------------------
[e] The elimination of the $1,664 and $107 of interest revenue recorded in the
accounts of the Company for the three-month periods ended June 30, 1999
and March 31, 1999, respectively, in respect of the note payable from ACT
to the Company. ACT did not accrue the corresponding interest expense.
[f] The elimination of the $97,120 [Cdn.$142,611] amount payable from ACT to
the Company as of June 30, 1999, including interest of $1,780
[Cdn.$2,611]. ACT did not accrue the corresponding interest expense.
[g] The elimination of $290,596 [Cdn.$428,000] and $6,617 [Cdn.$10,000] of
consulting revenue from InfoCast recorded by ACT during the three-month
period ended June 30, 1999 and the three-month period ended February 28,
1999, respectively, and the elimination of $339,145 [Cdn.$498,000] of
research and development expenses recorded by InfoCast during the
three-month period ended June 30, 1999 in respect of payments made to ACT
of Cdn.$10,000 during February 1999, Cdn.$60,000 during March 1999 and
Cdn.$428,000 during the three-month period ended June 30, 1999.
[h] Under Canadian GAAP, development costs of companies in the development
stage may be capitalized if management expects the amounts to be recovered
through future revenues. Under US GAAP, development costs incurred prior
to the establishment of technological feasibility are expensed as
incurred. As a result, development costs incurred by ACT, net of
investment tax credits, of $168,756 during the year ended November 30,
1998, nil during the
F-80
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
[Expressed in United States dollars unless otherwise stated]
Prepared without audit or review
June 30, 1999
three-month period ended February 28, 1999 and nil during the three-month
period ended June 30, 1999 have been charged to income.
[i] The amortization of the $641,000 of completed technology, $243,000 of
trademarks, $256,000 of workforce-in-place and $2,939,953 of goodwill
created by the purchase of ACT by the Company, as described in [d] above,
over the three-month period ended June 30, 1999, the three-month period
ended March 31, 1999 and the year ended December 31, 1998 on a
straight-line basis utilizing amortization periods of five years in
respect of the completed technology, trademarks and goodwill and three
years in respect of the workforce-in-place. The amortization of the
$297,000 deferred income tax liability [created by the purchase of ACT by
the Company in respect of the difference between the tax and accounting
basis of the completed technology, trademarks and workforce-in-place] over
the periods of the underlying assets has been limited to nil because of an
offsetting deferred income tax debit created in respect of estimated tax
loss carryforwards.
[j] The write-off of the $220,000 of in-process research and development
created by the purchase of ACT by the Company as described in [d] above.
This adjustment is a non-recurring item and has therefore only been
reflected in the pro-forma consolidated balance sheet.
F-81
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
September 13, 1999
INFOCAST CORPORATION
By: /s/ A. Thomas Griffis
-------------------------
A. Thomas Griffis
Co-Chairman of the Board
By: /s/ Darcy Galvon
-------------------------
Darcy Galvon
Co-Chairman of the Board
Articles of Incorporation, as amended, of the Company
(PURSUANT TO NRS 78) Filing fee:
STATE OF NEVADA Receipt #:
Secretary of State
(For filing office use) (For filing office use)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IMPORTANT: Read instructions on reverse side before completing this form.
TYPE OR PRINT (BLACK INK ONLY)
1. NAME OF CORPORATION: Grant Reserve Corporation
-------------------------------------------------------
2. RESIDENT AGENT:(designated resident agent and his STREET ADDRESS in Nevada
where process may be served) --------------
Name of Resident Agent: THE CORPORATION TRUST COMPANY OF NEVADA
----------------------------------------------------
Street Address: One East First Street Reno, NV 89501
------------------------------------------------------------
Street No Street Name City Zip
3. SHARES: (number of shares the corporation is authorized to issue)
SEE ATTACHMENT REGARDING SHARES
Number of shares with par value:____________ Par value:______________
Number of shares without par value:____________
4. GOVERNING BOARD: shall be styled as (check one): x Directors Trustees
--- ----
The FIRST BOARD OF DIRECTORS shall consist of 4 members and the names
---
and addresses are as follows (attach additional pages if necessary):
See attached Appendix
------------------------------------- --------------------------------
Name Address City/State/Zip
------------------------------------- --------------------------------
Name Address City/State/Zip
5. PURPOSE (optional-see reverse side): The purpose of the corporation shall
be:
------------------------------------------------------------------------
6. OTHER MATTERS: This form includes the minimal statutory requirements to
incorporate under NRS 78. You may attach additional information pursuant to
NRS 78.037 or any other information you deem appropriate. If any of the
additional information is contradictory to this form it cannot be filed and
will be returned to you for correction. Number of pages attached
----------------.
7. SIGNATURES OF INCORPORATORS: The names and addresses of each of the
incorporators signing the articles: (Signatures must be notarized) (Attach
additional pages if there are more than two incorporators.)
Laura Garcia Hiedi Liesch
------------------------------------- ----------------------------------
Name (print) Name (print)
CT Corporation System, CT Corporation System,
1675 Broadway, Suite 1200, 1675 Broadway, Suite 1200,
Denver, Colorado 80202 Denver, Colorado 80202
------------------------------------- ----------------------------------
Address City/State/Zip Address City/State/Zip
------------------------------------- ----------------------------------
Signature Signature
State of Colorado County of Denver State of Colorado County of Denver
-------- ------ -------- ------
This instrument was acknowledged This instrument was acknowledged
before me on December 23, 1997, by before me on December 23, 1997, by
----------- -- ----------- --
Laura Garcia Hiedi Liesch
------------------------------------- ----------------------------------
Name of Person Name of Person
as incorporator as incorporator
of Grant Reserve Corporation of Grant Reserve Corporation
------------------------------------- ----------------------------------
(name of party on behalf of whom (name of party on behalf of whom
instrument was executed) instrument was executed)
------------------------------------- ----------------------------------
Notary Public Signature Notary Public Signature
Virginia Omstead Virginia Omstead
(affix notary stamp or seal) (affix notary stamp or seal)
8. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
The Corporation Trust Company of Nevada hereby accept appointment as
---------------------------------------
Resident Agent for the above named corporation.
The Corporation Trust Company of Nevada By:
------------------------------------------------- -----------------------
Signature of Resident Agent (Assistant Secretary) Date
-1-
<PAGE>
ATTACHMENT TO ARTICLES OF INCORPORATION
GRANT RESERVE CORPORATION
This Attachment sets forth the authorized shares of stock of the corporation:
- ----------------------------------------------------------------------------
The total number of shares of capital stock that the Corporation shall be
authorized to issue is Two Hundred Million (200,000,000) which is divided into
two (2) classes as follows: (a) One Hundred Million (100,000,000) shares of
common stock, with a par value per share of one-tenth of a cent ($.001) ("Common
Stock"), and (b) One Hundrfed Million (100,000,000) shares of preferred stock,
with a par value per share of one-tenth of a cent ($.001) ("Preferred Stock").
In accordance with NRS 78, 195, authority is vested in the Board of Directors to
divide the Preferred Stock into series and to prescribe the voting powers,
designations, preferences, limitations, restrictions, relative rights and
distinguishing designation of each such series.
-2-
<PAGE>
SIXTY DAY OF OFFICERS, DIRECTORS AND AGENT OF
FILE NUMBER
Grant Reserve Corporation
A Nevada CORPORATION. FOR THE FILING PERIOD 12/23/97 TO 12/23/98
The Corporation's duly appointed Resident Agent in charge FOR OFFICE USE ONLY
of said principal once in the State of Nevada upon whom FILED (DATE)_________
process can be served is: _____________________
The Corporation Trust Company of Nevada _____________________
One East First Street _____________________
Reno, Nevada 89501 _____________________
RETURN ALL COPIES OF THIS FORM
We want to help you get your business with our office completed in the fastest,
most efficient manner. TO AVOID DELAYS, RETURNS AND LATE CHARGES, PLEASE BE SURE
YOU HAVE:
1. Names and mailing addresses for all officers and directors. A President,
Secretary, Treasurer and Directors must be named.
2. An officer's signature at the bottom of this form.
3. Returned ALL COPIES of this form with the $85.00 filing fee. A $15.00
penalty must be added if this form isn't filed within 60 days from the date
of incorporation.
4. Make your check payable to the Secretary of State. If you need a receipt,
enclose a self-addressed stamped envelope.
5. If you have changed the resident agent or principal place of business,
please contact our office for the proper forms to make the change before
filling this 60 day list.
SECRETARY OF STATE
Capitol Complex
Carson City, NV 89710
FILING FEE: $85.00 LATE PENALTY: $15.00
-----------------------------------------------
THIS FORM MUST BE FILED 60 DAYS FROM THE DATE OF INCORPORATION
--------------------------------------------------------------
NAME TITLE(S)
William R. Wilson PRESIDENT
P.O. BOX STREET ADDRESS CITY ST ZIP
410 17th Street, Denver CO 80202
NAME TITLE(S)
Arnold T. Kondrat SECRETARY
P.O. BOX STREET ADDRESS CITY ST ZIP
181 University Ontario M5H3M7
NAME TITLE(S)
Arnold T. Kondrat TREASURER
P.O. BOX STREET ADDRESS CITY ST ZIP
181 University Toronto, M5H3M7
NAME TITLE(S)
see attached rider DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
NAME TITLE(S)
DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
NAME TITLE(S)
DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
-3-
<PAGE>
Appendix to Nevada
Sixty Day List of Officers, Directors and Agent
Grant Reserve Corporation
- --------------------------------------------------------------------------------
List of Directors of Grant Reserve Corporation
1. Lloyd Joseph Bardswich
PO Box 156
Virginia City, Montana 59755
2. William R. Wilson
410 17th Street, Suite 1375
Denver, Colorado 80202
3. Rodney D. Knutson
1625 Broadway, Suite 1600
Denver, Colorado 80202
4. Arnold T. Kondrat
181 University Avenue, Suite 2110
Ontario, Canada M5H3M7
-4-
<PAGE>
INITIAL LIST OF OFFICERS, DIRECTORS AND RESIDENT AGENT OF
FILE NUMBER
The Corporation's duly appointed Resident Agent in the FOR OFFICE USE ONLY
State of Nevada upon whomprocess can be served is: FILED (DATE)
THE CORPORATION TRUST CO. OF NEV.
ONE EAST 1ST STREET
RENO, NEVADA 89501
/ / IF THE ABOVE INFORMATION IS INCORRECT, PLEASE CHECK THIS BOX AND A CHANGE
OF RESIDENT AGENT/ADDRESS FORM WILL BE SENT.
PLEASE READ INSTRUCTIONS BEFORE COMPLETING AND RETURNING
THIS FORM.
1. Include the names and addresses, either residence or business, for all
officers and directors. A President, Secretary, Treasurer and all Directors
must be named. There must be at least one director. Last year's information
has been preprinted. If you need to make changes, cross out the incorrect
information and insert the new information above it. An officer must sign
the form. FORM WILL BE RETURNED IF UNSIGNED.
2. If there are additional directors attach a list of them in this form.
3. Return the completed form with the $85.00 filing fee. A $15.00 penalty must
be added for failure to file this form by the deadline indicated at the top
of this form.
4. Make your check payable to the Secretary of State. If you need a receipt,
enclose a self-addressed stamped envelope. To receive a certified copy,
enclose a copy of this completed form, an additional $10.00 and appropriate
instructions.
5. Return the completed form to: Secretary of State, Capitol Complex, Carson
City, NV 89710, (702) 687-5105
FILING FEE: $85.00 LATE PENALTY: $15.00
----------------------------------------------------
NAME TITLE(S)
William R. Wilson PRESIDENT
P.O. BOX STREET ADDRESS CITY ST ZIP
410 17th St., Ste. 1375 Denver CO 80202
NAME TITLE(S)
Arnold T. Kondrat SECRETARY
P.O. BOX STREET ADDRESS CITY ST ZIP
181 Univ. Ave., Ste. 2110 Ontario CAN M5H 3M7
NAME TITLE(S)
Arnold T. Kondrat TREASURER
P.O. BOX STREET ADDRESS CITY ST ZIP
the same as above
NAME TITLE(S)
See Attached Rider DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
NAME TITLE(S)
DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
NAME TITLE(S)
DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
-5-
<PAGE>
INITIAL LIST OF OFFICERS, DIRECTORS AND RESIDENT AGENT OF
FILE NUMBER
Grant Reserve Corporation 12/29/97 C29331-97
- ------------------------------------------ -------------------- ---------
(Name of Corporation) (Incorporation Date)
A Nevada CORPORATION FOR THE FILING PERIOD 12/97 TO 12/98
--------------- -------- -------
The Corporation's duly appointed Resident Agent FOR OFFICE USE ONLY
in the State of Nevada upon whom process FILED (DATE)
can be served is:
The Corporation Trust Company Of Nevada
One East First Street
Reno, Nevada 89501
PLEASE READ INSTRUCTIONS BEFORE COMPLETING AND RETURNING THIS FORM.
1. Print or type names and addresses, either residence or business, for all
officers and directors. A president secretary, treasurer and at least one
director must be named.
2. Have an officer sign the form, FORM WILL BE RETURNED IF UNSIGNED.
3. Return the completed form with the $85.00 filing fee. A $15.00 penalty must
be added for failure to file this form by the 1st day of the 2nd month
following incorporation date.
4. Make your check payable to the Secretary of State. If you need a receipt,
enclose a self-addressed stamped envelope. To receive a certified copy,
enclose a copy of this completed form, an additional $10.00 and appropriate
instructions.
5. Return the completed form to: Secretary of State, 101 North Carson Street,
Suite 3, Carson City, NV 89701-4786, (702) 687-5203
FILING FEE: $85.00 LATE PENALTY: $15.00
----------------------------------------------------
THIS FORM MUST BE FILED BY THE 1ST DAY OF THE 2ND MONTH
-------------------------------------------------------
FOLLOWING INCORPORATION DATE
----------------------------
NAME TITLE(S)
William R. Wilson PRESIDENT
P.O. BOX STREET ADDRESS CITY ST ZIP
410 17th Street, Suite 1375 Denver CO 80202
NAME TITLE(S)
Arnold T. Kondrat SECRETARY
P.O. BOX STREET ADDRESS CITY ST ZIP
181 University Avenue, Suite 2110 Toronto, Ontario Canada M5H 3M7
NAME TITLE(S)
Arnold T. Kondrat TREASURER
P.O. BOX STREET ADDRESS CITY ST ZIP
181 University Avenue, Suite 2110 Toronto, Ontario Canada M5H 3M7
NAME TITLE(S)
William R. Wilson DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
410 17th Street, Suite 1375 Denver CO 80202
NAME TITLE(S)
Arnold T. Kondrat DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
181 University Avenue, Suite 2110 Toronto, Ontario Canada M5H 3M7
NAME TITLE(S)
Rodney D. Knutson DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
1625 Broadway, Suite 1600 Denver CO 80202
I hereby certify this initial list. (See attachment for additional director.)
X Signature of officer(s) Rodney D. Knutson Title(s) Director Date
-6-
<PAGE>
ATTACHMENT TO
INITIAL LIST OF OFFICERS, DIRECTORS AND RESIDENT AGENT OF
GRANT RESERVE CORPORATION
Name Title
Lloyd Joseph Bardswich DIRECTOR
P.O. BOX STREET ADDRESS City ST ZIP
P.O. Box 156 Virginia City Montana 59755
-7-
<PAGE>
January 30, 1998
Grant Reserve Corporation
The name of the custodian of the stock ledger or duplicate stock ledger
of this corporation is William R. Wilson-President and the president and
complete post office address where such stock ledger or duplicate stock ledger
is kept is 410 17th Street, Suite 1375, Denver, State of Colorado.
The statement is made pursuant to Section 78.105 of the Nevada Revised
Statutes, as amended, and is to be kept in the registered office of this
corporation in the State of Nevada in lieu of keeping at said office a stock
ledger or duplicate stock ledger.
/s/ Rodney D. Knutson
---------------------------------
Director
-8-
<PAGE>
Filed
The Office of the
Secretary of State of
the State of Nevada
Filed December 29, 1998
Dean Heller STATE OF NEVADA Telephone 702.687.5203
Secretary of State OFFICE OF THE SECRETARY Fax 702.687.3471
OF STATE Web site HTTP://SOS.
101 N. CARSON ST. STE 3 STATE.NV.US
CARSON CITY, NEVADA 89701-4786 Filing Fee: $75.00
Certificate of Amendment to Articles of Incorporation
-----------------------------------------------------
For Profit Nevada Corporations
------------------------------
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
-Remit in Duplicate-
1. Name of corporation: Grant Reserve Corporation
-------------------------------------------------------
- --------------------------------------------------------------------------------
2. The articles have been amended as follows (provide article numbers,
if available): To change to Corporation's name to Infocast Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a
vote by classes or series, or as may be required by the provisions of the
articles of incorporation have voted in favor of the amendment is:
________________.* 11,802,100 of 11,802,200 votes
4. Signatures:
/s/ William R. Wilson /s/ Rodney D. Knutson
--------------------------------- ------------------------------
President or Vice President Secretary or Asst. Secretary
(acknowledgement required) (acknowledgement not required)
State of: Colorado
County of: Denver
This instrument was acknowledged before me on
December 23, 1998, by
William R. Wilson (Name of Person)
as President [Notary]
as designated to sign this certificate
of Kathryn P. Tasset
(name on behalf of whom instrument was
executed)
---------------------------------------------
Notary Public Signature
*If any proposed amendment would alter or change any preference or any
relative or other right given to any class or series of outstanding shares,
then the amendment must be approved by the vote, in addition to the
affirmative vote otherwise required, of the holders of shares representing
a majority of the voting power of each class or series affected by the
amendment regardless of limitations or restrictions on the voting power
thereof.
IMPORTANT: Failure to include any of the above information and remit the
proper fees may cause this filing to be rejected.
-9-
<PAGE>
ANNUAL LIST OF OFFICERS, DIRECTORS AND AGENTS OF
FILE NUMBER
GRANT RESERVE CORPORATION
FOR THE PERIOD DEC 1998 TO 1999. DUE BY DEC 31, 1998. FOR OFFICE USE ONLY
The Corporation's duly appointed Resident Agent in FILED (DATE)
the State of Nevada upon whom process can be served is: Filed Dec. 29, 1998
Dean Heller
Secretary of State
THE CORPORATION TRUST COMPANY OF NEVADA
ONE EAST FIRST STREET
RENO, NEVADA 89501
/ / IF THE ABOVE INFORMATION IS INCORRECT,
PLEASE CHECK THIS BOX AND A CHANGE OF RESIDENT
AGENT/ADDRESS FORM WILL BE SENT.
PLEASE READ INSTRUCTIONS BEFORE COMPLETING AND RETURNING
THIS FORM.
1. Include the names and addresses, either residence or business, for all
officers and directors. A President, Secretary, Treasurer and all Directors
must be named. There must be at least one director. Last year's information
has been preprinted. If you need to make changes, cross out the incorrect
information and insert the new information above it. An officer must sign
the form. FORM WILL BE RETURNED IF UNSIGNED.
2. If there are additional directors attach a list of them in this form.
3. Return the completed form with the $85.00 filing fee. A $15.00 penalty must
be added for failure to file this form by the deadline indicated at the top
of this form. 4. Make your check payable to the Secretary of State. If you
need a receipt, enclose a self-addressed stamped envelope. To receive a
certified copy, enclose a copy of this completed form, an additional $10.00
and appropriate instructions.
FILING FEE: $85.00 LATE PENALTY: $15.00
----------------------------------------------------
NAME TITLE(S)
WILLIAM R. WILSON PRESIDENT
P.O. BOX STREET ADDRESS CITY ST ZIP
410 17TH ST., STE. 1375 DENVER CO 80202
NAME TITLE(S)
RODNEY D. KNUTSON SECRETARY
P.O. BOX STREET ADDRESS CITY ST ZIP
1625 BROADWAY, STE. 1600 DENVER CO 80202
NAME TITLE(S)
ARNOLD T. KONDRAT TREASURER
P.O. BOX STREET ADDRESS CITY ST ZIP
181 UNIVERSITY AVE., STE. 211 TORONTO OT CN N5H3M
NAME TITLE(S)
DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
NAME TITLE(S)
DIRECTOR
P.O. BOX STREET ADDRESS CITY ST ZIP
I hereby certify this annual list.
/s/ William R. Wilson
X Signature of officer Title(s) Date December 21,
1998
-10-
AMENDED AND RESTATED BYLAWS
OF
INFOCAST CORPORATION
(formerly Grant Reserve Corporation)
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of Infocast
Corporation (the "Corporation") shall be at The Corporation Trust Company of
Nevada, One East First Street, Reno, Nevada 89501, and the name of the
registered agent at such address is The Corporation Trust Company of Nevada.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Nevada as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Nevada as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
SECTION 2. Annual Meetings. The annual meeting of shareholders shall be
held on such day in such month in each year and at such time as may be fixed by
the Board of Directors and stated in the notice of the meeting, for the purpose
of electing directors and for the transaction of only such other business as is
properly brought before the meeting in accordance with these Bylaws.
Written notice of an annual meeting stating the place, date and hour of
the meeting, shall be given to each stockholder entitled to vote at such meeting
not less than 10 nor more than 60 days before the date of the meeting.
SECTION 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, special meetings of stockholders, for any
purpose or purposes, may only be called by a majority of the entire Board of
Directors or by the Chairman of the Board, the Vice Chairman of the Board or the
President.
Written notice of a special meeting stating the place, date and hour of
the meeting, shall be given to each stockholder entitled to vote at such meeting
not less than 10 nor more than 60 days before the date of the meeting.
<PAGE>
SECTION 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the holders of a
majority of the votes entitled to be cast by the stockholders entitled to vote
thereat, present in person or represented by proxy may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented by proxy. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder entitled to vote at the meeting.
SECTION 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these Bylaws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder, unless
otherwise provided by the Certificate of incorporation. Such votes may be cast
in person or by proxy but no proxy shall be voted after three years from its
date, unless such proxy provides for a longer period. The Board of Directors, in
its discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in his discretion, may require that any votes cast at such meeting
shall be cast by written ballot.
SECTION 6. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least 10 days before every meeting of stockholders, a complete list
of the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present
SECTION 7. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to (i) the identity of the stockholders entitled to examine
the stock ledger, the list required by Section 6 of this Article II, or the
books of the Corporation, and (ii) who may vote in person or by proxy at any
meeting of stockholders.
-2-
<PAGE>
ARTICLE III
DIRECTORS
SECTION 1. Member; Meetings. The number of directors which shall
constitute the whole Board of Directors of the Corporation shall not be less
than one (1), nor more than ten (10) and shall be such as shall be determined
from time to time by the resolution of the Board of Directors. The Board of
Directors of the Corporation may hold meetings, both regular and special, either
within or without the State of Nevada. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as may from
time to time be determined by the Board of Directors. Special meetings of the
Board of Directors may be called by the Chairman of the Board, Vice Chairman of
the Board or the President or a majority of the entire Board of Directors.
Notice thereof stating the place, date and hour of the meeting shall be given to
each director either by mail not less than 72 hours before the date of the
meeting, by telephone or telegram on 48 hours' notice, or on such shorter notice
as the person or persons calling such meeting may deem necessary or appropriate
in the circumstances. Any director present at a special meeting will be deemed
to have received proper notice.
SECTION 2. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these Bylaws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, a majority of the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION 3. Actions of Board of Directors. Unless otherwise provided by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
SECTION 4. Meetings by Means of Conference Telephone. Unless otherwise
provided by law, the Certificate of Incorporation or these Bylaws, members of
the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
requirement by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 4 of Article
111 shall constitute presence in person at such meeting.
SECTION 5. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
-3-
<PAGE>
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
SECTION 6. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 7. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
SECTION 8. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by the affirmative vote of a two-thirds majority of the remaining directors then
in office, although less than a quorum, or by a sole remaining director. When
one or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided
-4-
<PAGE>
above in the filling of other vacancies. A director elected to fill a vacancy
shall hold office for the unexpired term of his or her predecessor and until his
or her successor is elected and qualified.
SECTION 9. Compensation. The Board of Directors may fix the
compensation of directors.
ARTICLE IV
OFFICERS
SECTION 1. General. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also choose a Chairman of the
Board of Directors (who must be a director), a Co- Chairman of the Board of
Directors (who must be a director), a Vice Chairman of the Board of Directors
(who also must be a director) and one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number of offices may
be held by the same person, unless otherwise prohibited by law, the Certificate
of Incorporation or these Bylaws. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman and Vice
Chairman of the Board of Directors, need such officers be directors of the
Corporation.
SECTION 2. Election. The Board of Directors at its first meeting held
after each annual meeting of stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers who are directors of the Corporation
shall be fixed by the Board of Directors.
SECTION 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
SECTION 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of
-5-
<PAGE>
Directors. Except where by law the signature of the President is required, the
Chairman of the Board of Directors shall possess the same power as the President
to sign all contracts, certificates and other instruments of the Corporation
which may be authorized by the Board of Directors. During the absence or
disability of the President, the Chairman of the Board of Directors shall
exercise all the powers and discharge all the duties of the President. The
Chairman of the Board of Directors shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
Bylaws or by the Board of Directors.
SECTION 5. Vice Chairman of the Board of Directors. The Vice Chairman
of the Board of Directors shall preside at all meetings of the stockholders and
Board of Directors, where the Chairman of the Board is absent. In general, the
Vice Chairman will be responsible for the supervision and control of the day to
day business operations of the Corporation. Except where prohibited by law, he
may sign with the Secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, certificates for shares of the
Corporation, deeds, mortgages, bonds, and contracts or other instruments which
the Board has authorized to be executed so as to ensure compliance with the
Board's directives as they relate to the operations of the Corporation. The Vice
Chairman of the Board may also exercise such powers as from time to time may be
assigned to him by these Bylaws or by the Board of Directors.
SECTION 6. President. The President shall, subject to the control of
the Board of Directors and, if their offices are filled, subject to the control
of the Chairman and Vice Chairman of the Board of Directors, have general
supervision of the Corporation, be its Chief Executive Officer and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. He shall execute all bonds, mortgages, contracts and other instruments
of the Corporation requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except that the other officers of the Corporation may sign and execute documents
when so authorized by these Bylaws, the Board of Directors, or the President. In
the absence or disability of both the Chairman and Vice Chairman of the Board of
Directors, the President shall preside at all meetings of the stockholders and
the Board of Directors. The President shall also perform such other duties and
may exercise such other powers as from time to time may be assigned to him by
these Bylaws or by the Board of Directors.
SECTION 7. Vice Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice President or the Vice Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all of the restrictions upon the President. Each
Vice President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors, Vice Chairman of the Board of Directors and no Vice
President, the Board of Directors shall designate the officer of the Corporation
who, in the absence of the President or in the event of the inability or refusal
of the President to act, shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President.
-6-
<PAGE>
SECTION 8. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. If the Secretary shall be unable
or shall refuse to cause to be given notice of all meetings of the stockholders
and special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the President may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his signature. The Secretary
shall see that all books, reports, statements, certificates and other documents
and records required by law to be kept or filed are properly kept or filed, as
the case may be.
SECTION 9. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the Corporation. If
required by the Board of Directors, the Treasurer shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office
and for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
SECTION 10. Assistant Secretaries. Except as may be otherwise provided
in these Bylaws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors, the President, any Vice President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his disability
or refusal to act, shall perform the duties of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.
SECTION 11. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice Present, if
there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the
-7-
<PAGE>
Treasurer. If required by the Board of Directors, an Assistant Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Director for the faithful performance of
the duties of his office and for the restoration of the Corporation, in case of
his death resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
SECTION 12. Controller. The Controller shall establish and maintain the
accounting records of the Corporation in accordance with generally accepted
accounting principles applied on a consistent basis, maintain proper internal
control of the assets of the Corporation and shall perform such other duties as
the Board of Directors, the President, the Treasurer, or any Vice President of
the Corporation may prescribe.
SECTION 13. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
SECTION 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the Vice Chairman of
the Board of Directors, the President or a Vice President and (ii) by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by him in the
Corporation.
SECTION 2. Signatures. Any or all of the signatures on the certificate
may be a facsimile, including, but not limited signatures of officers of the
Corporation and countersignatures of a transfer agent or registrar. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his representative, to advertise the same in such manner as the
Board of Directors shall require and/or to give the Corporation a bond in such
sums as it may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
-8-
<PAGE>
SECTION 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named on the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificates therefor, which shall be canceled before a new certificate shall be
issued.
SECTION 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at my meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than 60 days nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
SECTION 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation orthese Bylaws, to tee given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, facsimile, telex or cable.
SECTION 2. Waiver of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
-9-
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, and of law, may be declared by the Board of Directors at any regular or
special meeting, and may be paid in cash, in property, or in shares of the
capital stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
SECTION 2. Disbursement. All checks or demand for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
SECTION 2. Fiscal Year. The fiscal year of the Corporation shall end on
March 31, unless the fiscal year is otherwise fixed by affirmative resolution of
the Board of Directors.
Duly approved and adopted on May 12, 1999.
/s/ (signature is illegible)
------------------------------------------
Secretary
-10-
NUMBER InfoCast Corporation SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
AUTHORIZED: 100,000,000 COMMON SHARES, $.001 PAR VALUE SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 45664S 10 0
This Certifies that ****************SPECIMEN ****************
is the owner of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES, $.001 PAR VALUE OF
InfoCast Corporation
transferable upon the books of the Corporation in person or by duly
authorized attorney upon surrender of this Certificate properly
endorsed or assigned. This Certificate is not valid until countersigned
and registered by the Transfer Agent and Registrar.
WITNESS, the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
INFOCAST CORPORATION
CORPORATE
SEAL
NEVADA
Secretary President
COUNTERSIGNED:
CORPORATE STOCK TRANSFER, INC.
370-17th Street, Suite 2350-, Denver, Colorado 80202
By:_________________________________________________
Transfer Agent and Registrar Authorized Officer
<PAGE>
InfoCast Corporation
Corporate Stock Transfer, Inc.
Transfer Fee: $15.00 Per Certificate
- --------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM __ as tenants in common UNIF GIFT MIN ACT - Custodian for...
(Cust.) (Minor)
TEN ENT __ as tenants by the entireties under Uniform Gifts to Minors
JT TEN __ as joint tenants with right of Act of . . . . . . . . . . .
survivorship and not as tenants (State)
in common
Additional abbreviations may also be used through not in the above list.
For value received ................... hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
-------------------------------------------
-------------------------------------------
Please print or type name and address of assignee
............................................................................
............................................................................
............................................................................
......................................................................shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
............................................................................
............................................................................
Attorney to transfer the said stock on the books of the within named
Corporation, with full power of substitution in the premises.
Dated........................ 19 .....................
SIGNATURE GUARANTEED: X ________________________
X ________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACT OF THIS CERTIFICATE IN EVERY PARTICULAR. WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S) MUST BE
GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings
and Loan Association and Credit Union) WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM.
-2-
GRANT RESERVE CORPORATION
1998 AMENDED AND RESTATED STOCK OPTION PLAN
ARTICLE I - GENERAL
1.01 Purpose. The purpose of this 1998 Stock Option Plan (the "Plan")
are to: (1) closely associate the interests of the management of and directors,
consultants and advisors to Grant Reserve Corporation and its subsidiaries and
affiliates (collectively referred to as the "Company") with the shareholders by
reinforcing the relationship between participants' rewards and shareholder
gains; (2) provide management, directors, consultants and advisors with an
equity ownership in the Company commensurate with Company performance, as
reflected in increased shareholder value; (3) maintain competitive compensation
levels; and (4) provide an incentive to management for continuous employment
with the Company.
1.02 Administration. (a) The Plan shall be administered by a Committee
of disinterested persons appointed by the Board of Directors of Grant Reserve
Corporation (the "Committee"), as constituted from time to time. The Committee
shall consist of at least two members of such Board.
(b) The Committee shall have the authority, in its sole
discretion and from time to time to:
(i) designate the employees, directors, consultants and
advisors eligible to participate in the Plan;
(ii) grant awards provided in the Plan in such form and
amount as the committee shall determine;
(iii) impose such limitations, restrictions and
conditions upon any such award as the Committee
shall deem appropriate; and
(iv) interpret the Plan, adopt, amend and rescind rules
and regulations relating to the Plan, and make all
other determinations and take all other action
necessary or advisable for the implementation and
administration of the Plan.
(c) Decisions and determinations of the Committee on all
matters relating to the Plan shall be in its sole discretion and shall be
conclusive. No member of the Committee shall be liable for any action taken or
decision made in good faith relating to the Plan or any award thereunder.
<PAGE>
1.03. Eligibility for Participation. Participants in the Plan shall be
selected by the Committee from the executive officers and other key employees of
the Company who occupy responsible managerial or professional positions and who
have the capability of making a substantial contribution to the success of the
Company and directors, consultants and advisors to the Company. In making this
selection and in determining the form and amount of awards, the Committee shall
consider any factors deemed relevant, including the individual's functions,
responsibilities, value of services to the Company and past and potential
contributions to the Company's profitability and sound growth.
1.04 Types of Awards Under Plan. Awards under the Plan may be in the
form of any one or more of the following:
(i) Stock Options, as described in Article II; and
(ii) Incentive Stock Options, as described in Article III.
1.05 Aggregate Limitation on Awards. (a) Shares of stock which may be
issued under the Plan shall be authorized and unissued or treasury shares of
Common Stock of Grant Reserve Corporation ("Common Stock"). The maximum number
of shares of Common Stock which may be issued under the Plan shall be 2,250,000.
(b) Any shares of Common Stock subject to a Stock Option or
Incentive Stock Option which for any reason is terminated unexercised or expires
shall again be available for issuance under the Plan.
1.06 Effective Date and Term of Plan. (a) The Plan shall become
effective on the date approved by the holders of a majority of the shares of
Common Stock present in person or by proxy and entitled to vote at the Special
Meeting of Shareholders of Grant Reserve Corporation to be called to consider
and vote upon the Plan.
(b) No awards shall be made under the Plan after the last day
of the Company's fiscal year ending in 2003 provided, however, that the Plan and
all awards made under the Plan prior to such date shall remain in effect until
such awards have been satisfied or terminated in accordance with the Plan and
the terms of such awards.
ARTICLE II - STOCK OPTIONS
2..01 Award of Stock Options. The Committee may from time to time, and
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, grant to any participant in the Plan one or more
options to purchase for cash the number of shares of Common Stock ("Stock
Options") allotted by the Committee. The date a Stock Option is granted shall
mean the date selected by the Committee as of which the Committee allots a
specific number of shares to a participant pursuant to the Plan.
-2-
<PAGE>
2.02 Stock Option Agreements. The grant of a Stock Option shall be
evidenced by a written Stock Option Agreement, executed by the Company and the
holder of a Stock Option (the "optionee"), stating the number of shares of
Common Stock subject to the Stock Option evidenced thereby, and in such form as
the Committee may from time to time determine.
2.03 Stock Option Price. The option price per share of Common Stock
deliverable upon the exercise of a Stock Option shall be $1.00 per share.
2.04 Term and Exercise. Each Stock Option shall be fully exercisable
six months from the date of its grant unless a longer period is provided by the
Committee and may be exercised during a period to be determined by the Committee
but not to exceed ten years from the date of grant thereof (the "option term").
No Stock Option shall be exercisable after the expiration of its option term.
2.05. Manner of Payment. Each Stock Option Agreement shall set forth
the procedure governing the exercise of the Stock Option granted thereunder, and
shall provide that, upon such exercise in respect of any shares of Common Stock
subject thereto, the optionee shall pay to the Company, in full, the option
price for such shares with cash.
2.06 Delivery of Stock Certificates. As soon as practicable after
receipt of payment, the Company shall deliver to the optionee a certificate or
certificates for such shares of Common Stock. The optionee shall become a
shareholder of the Company with respect to Common Stock represented by share
certificates so issued and as such shall be fully entitled to receive dividends,
to vote and to exercise all other rights of a shareholder.
2.07. Death of Optionee. (a) Upon the death of the optionee, any rights
which have become exercisable on or before the date of death may be exercised by
the optionee's estate, or by a person who acquires the right to exercise such
Stock Option by bequest or inheritance following the death of the optionee,
provided that such exercise occurs within both the remaining effective term of
the Stock Option and one year after the optionee's death.
(b) The provisions of this Section shall apply notwithstanding
the fact that the optionee's employment may have terminated prior to death, but
only to the extent of any rights which were exercisable on the date of death.
2.08. Retirement or Disability. Upon termination of the optionee's
employment by reason of retirement or permanent disability (as each is
determined by the Committee), the optionee may, within 36 months from the date
of termination, exercise any Stock Options to the extent such options had become
exercisable on or before such termination of employment.
2.09 Termination for Other Reasons. Except as provided in Sections 2.07
and 2.08, or except as otherwise determined by the Committee, all Stock Options
shall terminate upon the termination of the optionee's employment.
-3-
<PAGE>
ARTICLE III - INCENTIVE STOCK OPTIONS
3.01 Award of Incentive Stock Options. The Committee may, from time to
time and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any participant in the Plan
one or more "incentive stock options" (intended to qualify as such under the
provisions of Section 422 of the Internal Revenue Code of 1986, as amended
("Incentive Stock Options") to purchase for cash the number of shares of Common
Stock allotted by the Committee. The date an Incentive Stock Option is granted
shall mean the date selected by the Committee as of which the Committee allots a
specific number of shares to a participant pursuant to the Plan. Notwithstanding
the foregoing, Incentive Stock Options shall not be granted to any owner of
shares of capital stock having 10% or more of the total combined voting power of
all shares of the capital stock of the Company entitled to vote.
3.02 Incentive Stock Option Agreements. The grant of an Incentive Stock
Option shall be evidenced by a written Incentive Stock Option Agreement,
executed by the Company and the holder of an Incentive Stock Option (the
"optionee"), stating the number of shares of Common Stock subject to the
Incentive Stock Option evidenced thereby, and in such form as the Committee may
from time to time determine.
3.03 Incentive Stock Option Price. The option price per share of Common
Stock deliverable upon the exercise of an Incentive Stock Option shall be 100%
of the fair market value of a share of Common Stock on the date the Incentive
Stock Option is granted.
3.04 Term and Exercise. Each Incentive Stock Option shall be fully
exercisable six months from the date of its grant unless a longer period is
provided by the Committee and may be exercised during a period to be determined
by the Committee but not to exceed ten years from the date of grant thereof (the
"option term"). No Incentive Stock Option shall be exercisable after the
expiration of its option term.
3.05 Maximum Amount of Incentive Stock Option Grant. The aggregate fair
market value (determined on the date the option is granted) of Common Stock
subject to an Incentive Stock Option granted to an optionee by the Committee in
any calendar year shall not exceed $100,000.
3.06 Death of Optionee. (a) Upon the death of the optionee, any
Incentive Stock Option which had become exercisable on or before the date of
death may be exercised by the optionee's estate or by a person who acquires the
right to exercise such Incentive Stock Option by bequest or inheritance
following the death of the optionee, provided that such exercise occurs within
both the remaining option term of the Incentive Stock Option and one year after
the optionee's death.
(b) The provisions of this Section shall apply notwithstanding
the fact that the optionee's employment may have terminated prior to death, but
only to the extent of any Incentive Stock Options which were exercisable on the
date of death.
-4-
<PAGE>
3.07 Retirement or Disability. Upon the termination of the optionee's
employment by reason of permanent disability or retirement (as each is
determined by the Committee), the optionee may, within 36 months from the date
of such termination of employment, exercise any Incentive Stock Options to the
extent such Incentive Stock Options had become exercisable on or before the date
of such termination of employment. Notwithstanding the foregoing, the tax
treatment available pursuant to Section 422 of the Internal Revenue Code of 1986
upon the exercise of an Incentive Stock Option will not be available to an
optionee who exercises any Incentive Stock Options more than (i) 12 months after
the date of termination of employment due to permanent disability or (ii) three
months after the date of termination of employment due to retirement.
3.08 Termination for Other Reasons. Except as provided in Sections 3.06
and 3.07 or except as otherwise determined by the Committee, all Incentive Stock
Options shall terminate upon the termination of the optionee's employment.
3.09 Applicability of Stock Options Sections. Sections 2.05 and 2.06
shall also apply to Incentive Stock Options. Said Sections are incorporated by
reference in this Article III as though fully set forth herein.
ARTICLE IV - MISCELLANEOUS
4.01 General Restrictions. Each award under the Plan shall be subject
to the requirement that, if at any time the Committee shall determine that (i)
the listing, registration or qualification of the shares of Common Stock subject
or related thereto upon any securities exchange or under any state or Federal
law, or (ii) the consent or approval of any government regulatory body, or (iii)
an agreement by the grantee of an award with respect to the disposition of
shares of Common Stock, is necessary or desirable as a condition of, or in
connection with, the granting of such award or the issue or purchase of shares
of Common Stock thereunder, such award may not be consummated in whole or in
part unless such listings, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee. The certificates evidencing ownership of shares of
Common Stock acquired upon exercise of any Stock Option or Incentive Stock
Option awarded under the Plan shall bear such legends as the Committee shall
approve as necessary or desirable to conform to applicable laws and regulations
relating to the sale of securities.
4.02 Non-Assignability. No award under the Plan shall be assignable or
transferable by the recipient thereof, except by will or by the laws of descent
and distribution. During the life of the recipient, such award shall be
exercisable only by such person or by such person's guardian or legal
representative.
4.03 Withholding Taxes. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Company shall have
the right to require the grantee to remit to the Company an amount sufficient to
satisfy any Federal, state and/or local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares.
-5-
<PAGE>
Alternatively, the Company may issue or transfer such shares of Common Stock net
of the number of shares sufficient to satisfy the withholding tax requirements.
For withholding tax purposes, the shares of Common Stock shall be valued on the
date the withholding obligation is incurred.
4.04 Right to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any participant
the right to continue in the employment of the Company or effect any right which
the Company may have to terminate the employment of such participant.
4.05. Non-Uniform Determinations. The Committee's determinations under
the Plan (including without limitation determinations of the persons to receive
awards, the form, amount and timing of such awards, the terms and provisions of
such awards and the agreements evidencing same) need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan, whether or not such persons are similarly situated.
4.06 Rights as a Shareholder. The recipient of any award under the Plan
shall have no rights as a shareholder with respect thereto unless and until
certificates for shares of Common Stock are issued to him.
4.07 Definitions. In this Plan the following definitions shall apply:
(a) "Subsidiary" means any corporation of which, at the time
more than 50% of the shares entitled to vote generally in an election of
directors are owned directly or indirectly by Grant Reserve Corporation or any
subsidiary thereof.
(b) "Affiliate" means any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with Grant Reserve Corporation.
(c) "Fair market value" as of any date and in respect of any
share of Common Stock means the closing price on such date or on the next
business day, if such date is not a business day, of a share of Common Stock on
any stock exchange or any stock market upon which the Common Stock may then be
listed or traded, or if the Common Stock is not so listed or traded then the
fair market value of shares of Common Stock shall be as determined by the
Committee in such other manner as it may deem appropriate. In no event shall the
fair market value of any share of Common Stock be less than its par value.
(d) "Option" means Stock Option or Incentive Stock Option.
(e) "Option price" means the purchase price per share of
Common Stock deliverable upon the exercise of a Stock Option or Incentive Stock
Option.
-6-
<PAGE>
4.08 Leaves of Absence. The Committee shall be entitled to make such
rules, regulations and determinations as it deems appropriate under the Plan in
respect of any leave of absence taken by the recipient of any award. Without
limiting the generality of the foregoing, the Committee shall be entitled to
determine (i) whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan and (ii) the impact, if
any, of any such leave of absence on awards under the Plan theretofore made to
any recipient who takes such leave of absence.
4.09 Newly Eligible Employees. The Committee shall be entitled to make
such rules, regulations, determinations and awards as it deems appropriate in
respect of an employee who becomes eligible to participate in the Plan or any
portion thereof after the commencement of an award or incentive period.
4.10 Adjustments. In any event of any change in the outstanding Common
Stock by reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, the
Committee may appropriately adjust the number of shares of Common Stock which
may be issued under the Plan, the number of shares of Common Stock subject to
Options theretofore granted under the Plan, the option price of Options
theretofore granted under the Plan, and any and all other matters deemed
appropriate by the Committee.
4.11 Amendment of the Plan. (a) The Committee may, without further
action by the shareholders and without receiving further consideration from the
participants, amend this Plan or condition or modify awards under the Plan in
response to changes in securities or other laws or rules, regulations or
regulatory interpretations thereof applicable to this Plan or to comply with
stock exchange rules or requirements.
(b) The Committee may at any time and from time to time
terminate or modify or amend the Plan in any respect, except that without
shareholder approval the Committee may not (i) increase the maximum number of
shares of Common Stock which may be issued under the Plan (other than increases
pursuant to Section 4.10), (ii) extend the period during which any award may be
granted or exercised, or (iii) extend the term of the Plan. The termination or
modification or amendment of the Plan, except as provided in subsection (a),
shall not, without the consent of a participant, affect his or her rights under
an award previously granted to him or her.
-7-
INFOCAST CORPORATION
1 Richmond Street West
Toronto, Ontario M5H 3W4
As of February 8, 1999
To: [Optionee]
We are pleased to inform you that as of February 8, 1999, the Board of
Directors of Infocast Corporation (the "Company") granted you Stock Options (the
"Option") pursuant to the Company's 1998 Stock Option Plan (the "Plan"), to
purchase [ ] shares (the "Shares") of common stock, par value $.001 per
share ("Common Stock"), of the Company, at a price of $1.00 per share.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Plan.
No part of the Option is currently exercisable. The Option may be
exercised with respect to all of the Shares at any time or from time to time on
or after August 8, 1999. In the event of a change in control of the Company, all
Options granted hereby immediately become fully vested and exercisable. A
"change in control" is defined as (i) approval by the stockholders of the
Company of any consolidation or merger of the Company in which the holders of
voting stock of the Company immediately before the merger or consolidation will
not own 50 percent or more of the voting shares of the continuing or surviving
corporation or of a sale or other transfer of all or substantially all the
assets of the Company or (ii) a change of 50 percent in the membership of the
Board of Directors of the Company within a 12-month period, unless the election
of such new directors was approved by the vote of 85 percent of the directors
then in office who were in office at the beginning of such period.
The Option, to the extent not previously exercised, will expire at 5:00
p.m., Eastern Time, on February 7, 2002. You must purchase a minimum of 100
Shares each time you choose to purchase Shares, except to purchase the remaining
Shares available to you.
The Option is issued in accordance with and is subject to and
conditioned upon all of the terms and conditions of the Plan (a copy of which in
its present form is attached hereto), as from time to time amended, provided,
however, that no future amendment or termination of the Plan shall, without your
consent, alter or impair any of your rights or obligations under the Option.
Reference is made to the terms and conditions of the Plan, all of which are
incorporated by reference herein as if fully set forth herein.
<PAGE>
Unless at the time of the exercise of the Option a registration
statement under the Securities Act of 1933, as amended (the "Act") is in effect
as to the Shares, any Shares purchased by you upon the exercise of the Option
shall be acquired for investment and not for sale or distribution, and if the
Company so requests, upon any exercise of the Option, in whole or in part, you
will execute and deliver to the Company a certificate to such effect. The
Company shall not be obligated to issue any Shares pursuant to the Option if, in
the opinion of counsel to the Company, the Shares to be so issued are required
to be registered or otherwise qualified under the Act or under any other
applicable statute, regulation or ordinance affecting the sale of securities,
unless and until such Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law, unless at the
time of the exercise of the Option a registration statement under the Act is in
effect as to the Shares (i) any Shares purchased by you upon exercise of the
Option may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain circumstances, restrict the number
of Shares which may be sold and the manner in which Shares may be sold); (iii)
in the case of securities to which Rule 144 is not applicable, compliance with
Regulation A promulgated under the Act or some other disclosure exemption will
be required; (iv) certificates for Shares to be issued to you hereunder shall
bear a legend to the effect that the Shares have not been registered under the
Act and that the Shares may not be sold, hypothecated or otherwise transferred
in the absence of an effective registration statement under the Act relating
thereto or an opinion of counsel satisfactory to the Company that such
registration is not required; (v) the Company will place an appropriate "stop
transfer" order with its transfer agent with respect to such Shares; and (vi)
the Company has undertaken no obligation to register the Shares or to include
the Shares in any registration statement which may be filed by it subsequent to
the issuance of the Shares to you. In addition, you understand and acknowledge
that the Company has no obligation to you to furnish information necessary to
enable you to make sales under Rule 144.
The Option (or installment thereof) is to be exercised by delivering to
the Company a written notice of exercise in the form attached hereto as Exhibit
A, specifying the number of Shares to be purchased, together with payment of the
purchase price of the Shares to be purchased. The purchase price is to be paid
in cash or certified check.
-2-
<PAGE>
Would you kindly evidence your acceptance of the Option and your
agreement to comply with the provisions hereof and of the Plan by executing this
letter under the words "Agreed To and Accepted."
Very truly yours,
INFOCAST CORPORATION
By: ___________________________________
Name:
Title:
AGREED TO AND ACCEPTED:
- -----------------------
[Optionee]
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<PAGE>
Exhibit A
Infocast Corporation
1 Richmond Street West
Toronto, Ontario M5H 3W4
Gentlemen:
Notice is hereby given of my election to purchase _____ shares of
Common Stock, $.001 par value (the "Shares"), of Infocast Corporation, at a
price of $____ per Share, pursuant to the provisions of the stock option granted
to me as of February 8, 1999, under the Company's 1998 Stock Option Plan.
Enclosed in payment for the Shares is:
----
/___/ my check in the amount of $________.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
-------------------
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
[Optionee]
-4-
INFOCAST CORPORATION
1999 STOCK OPTION PLAN
1. Purpose of the Plan.
This 1999 Stock Option Plan (the "Plan") is intended as an
incentive, to retain in the employ of and as consultants and advisors to
INFOCAST CORPORATION, a Nevada corporation (the "Company") and any Subsidiary of
the Company, within the meaning of Section 424(f) of the United States Internal
Revenue Code of 1986, as amended (the "Code"), persons of training, experience
and ability, to attract new employees, directors, advisors and consultants whose
services are considered valuable, to encourage the sense of proprietorship and
to stimulate the active interest of such persons in the development and
financial success of the Company and its Subsidiaries.
It is further intended that certain options granted pursuant
to the Plan shall constitute incentive stock options within the meaning of
Section 422 of the Code (the "Incentive Options") while certain other options
granted pursuant to the Plan shall be nonqualified stock options (the
"Nonqualified Options"). Incentive Options and Nonqualified Options are
hereinafter referred to collectively as "Options."
The Company intends that the Plan meet the requirements of
Rule 16b-3 ("Rule 16b- 3") promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and that transactions of the type
specified in subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and
directors of the Company pursuant to the Plan will be exempt from the operation
of Section 16(b) of the Exchange Act. Further, the Plan is intended to satisfy
the performance-based compensation exception to the limitation on the Company's
tax deductions imposed by Section 162(m) of the Code. In all cases, the terms,
provisions, conditions and limitations of the Plan shall be construed and
interpreted consistent with the Company's intent as stated in this Section 1.
2. Administration of the Plan.
The Board of Directors of the Company (the "Board") shall
appoint and maintain as administrator of the Plan a Committee (the "Committee")
consisting of two or more directors that are "Non-Employee Directors" (as such
term is defined in Rule 16b-3) and "Outside Directors" (as such term is defined
in Section 162(m) of the Code), which shall serve at the pleasure of the Board.
The Committee, subject to Sections 3 and 5 hereof, shall have full power and
authority to designate recipients of Options, to determine the terms and
conditions of respective Option agreements (which need not be identical) and to
interpret the provisions and supervise the administration of the Plan. The
Committee shall have the authority, without limitation, to designate which
Options granted under the Plan shall be Incentive Options and which shall be
Nonqualified Options. To the extent
<PAGE>
any Option does not qualify as an Incentive Option, it shall constitute a
separate Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall
interpret the Plan and all Options granted under the Plan, shall make such rules
as it deems necessary for the proper administration of the Plan, shall make all
other determinations necessary or advisable for the administration of the Plan
and shall correct any defects or supply any omission or reconcile any
inconsistency in the Plan or in any Options granted under the Plan in the manner
and to the extent that the Committee deems desirable to carry into effect the
Plan or any Options. The act or determination of a majority of the Committee
shall be the act or determination of the Committee and any decision reduced to
writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority at a meeting duly held. Subject
to the provisions of the Plan, any action taken or determination made by the
Committee pursuant to this and the other Sections of the Plan shall be
conclusive on all parties.
In the event that for any reason the Committee is unable to
act or if the Committee at the time of any grant, award or other acquisition
under the Plan of Options or Stock as hereinafter defined does not consist of
two or more Non-Employee Directors, or if there shall be no such Committee, then
the Plan shall be administered by the Board and any such grant, award or other
acquisition may be approved or ratified in any other manner contemplated by
subparagraph (d) of Rule 16b-3; provided, however, that options granted to the
Company's Chief Executive Officer or to any of the Company's other four most
highly compensation officers that are intended to qualify as performance-based
compensation under Section 162(m) of the Code may only be granted by the
Committee.
3. Designation of Optionees.
The persons eligible for participation in the Plan as
recipients of Options (the "Optionees") shall include employees, officers and
directors of, and consultants and advisors to, the Company or any Subsidiary;
provided that Incentive Options may only be granted to employees of the Company
and the Subsidiaries. In selecting Optionees, and in determining the number of
shares to be covered by each Option granted to Optionees, the Committee may
consider the office or position held by the Optionee or the Optionee's
relationship to the Company, the Optionee's degree of responsibility for and
contribution to the growth and success of the Company or any Subsidiary, the
Optionee's length of service, age, promotions, potential and any other factors
that the Committee may consider relevant. An Optionee who has been granted an
Option hereunder may be granted an additional Option or Options, if the
Committee shall so determine.
4. Stock Reserved for the Plan.
Subject to adjustment as provided in Section 7 hereof, a total
of 2,000,000 shares of the Company's Common Stock, $0.001 par value per share
(the "Stock"), shall be subject to the Plan. The maximum number of shares of
Stock that may be subject to options granted under the Plan to
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<PAGE>
any individual in any calendar year shall not exceed 800,000, and the method of
counting such shares shall conform to any requirements applicable to
performance-based compensation under Section 162(m) of the Code. The shares of
Stock subject to the Plan shall consist of unissued shares or previously issued
shares held by any Subsidiary of the Company, and such amount of shares of Stock
shall be and is hereby reserved for such purpose. Any of such shares of Stock
that may remain unsold and that are not subject to outstanding Options at the
termination of the Plan shall cease to be reserved for the purposes of the Plan,
but until termination of the Plan the Company shall at all times reserve a
sufficient number of shares of Stock to meet the requirements of the Plan.
Should any Option expire or be cancelled prior to its exercise in full or should
the number of shares of Stock to be delivered upon the exercise in full of an
Option be reduced for any reason, the shares of Stock theretofore subject to
such Option may be subject to future Options under the Plan.
5. Terms and Conditions of Options.
Options granted under the Plan shall be subject to the
following conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Option Price. The purchase price of each share of Stock
purchasable under an Incentive Option shall be determined by the Committee at
the time of grant, but shall not be less than 100% of the Fair Market Value (as
defined below) of such share of Stock on the date the Option is granted;
provided, however, that with respect to an Optionee who, at the time such
Incentive Option is granted, owns (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of stock
of the Company or of any Subsidiary, the purchase price per share of Stock shall
be at least 110% of the Fair Market Value per share of Stock on the date of
grant; provided, however, that if an option granted to the Company's Chief
Executive Officer or to any of the Company's other four most highly compensation
officers is intended to qualify as performance-based compensation under Section
162(m) of the Code, the exercise price of such Option shall not be less than
100% of the Fair Market Value of such share of Stock on the date the Option is
granted. The purchase price of each share of Stock purchasable under a
Nonqualified Option shall not be less than 80% of the Fair Market Value of such
share of Stock on the date the Option is granted. The exercise price for each
Option shall be subject to adjustment as provided in Section 7 below. Fair
Market Value means the closing price of publicly traded shares of Stock on the
principal securities exchange on which shares of Stock are listed (if the shares
of Stock are so listed), or on the NASDAQ Stock Market (if the shares of Stock
are regularly quoted on the NASDAQ Stock Market), or, if not so listed or
regularly quoted, the mean between the closing bid and asked prices of publicly
traded shares of Stock in the over-the-counter market, or, if such bid and asked
prices shall not be available, as reported by any nationally recognized
quotation service selected by the Company, or as determined by the Committee in
a manner consistent with the provisions of the Code. Anything in this Section
5(a) to the contrary notwithstanding, in no event shall the purchase price of a
share of Stock be less than the minimum price permitted under rules and policies
of the rules and policies of the national securities exchange on which the
shares of Stock are listed.
-3-
<PAGE>
(b) Option Term. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten years after the date
such Option is granted.
(c) Exercisability. Subject to Section 5(j) hereof, Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at the time of grant.
(d) Method of Exercise. Options to the extent then exercisable
may be exercised in whole or in part at any time during the option period, by
giving written notice to the Company specifying the number of shares of Stock to
be purchased, accompanied by payment in full of the purchase price, in cash, by
check or such other instrument as may be acceptable to the Committee. As
determined by the Committee, in its sole discretion, at or after grant, payment
in full or in part may also be made in the form of Stock owned by the Optionee
(based on the Fair Market Value of the Stock on the trading day before the
Option is exercised). An Optionee shall have the right to dividends and other
rights of a stockholder with respect to shares of Stock purchased upon exercise
of an Option after (i) the Optionee has given written notice of exercise and has
paid in full for such shares and (ii) becomes a stockholder of record with
respect thereto.
(e) Non-transferability of Options. Options are not
transferable and may be exercised solely by the Optionee during his lifetime or
after his death by the person or persons entitled thereto under his will or the
laws of descent and distribution. Any attempt to transfer, assign, pledge or
otherwise dispose of, or to subject to execution, attachment or similar process,
any Option contrary to the provisions hereof shall be void and ineffective and
shall give no right to the purported transferee.
(f) Termination by Death. Unless otherwise determined by the
Committee at grant, if any Optionee's employment with or service to the Company
or any Subsidiary terminates by reason of death, the Option may thereafter be
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal representative of the
estate or by the legatee of the Optionee under the will of the Optionee, for a
period of one year after the date of such death or until the expiration of the
stated term of such Option as provided under the Plan, whichever period is
shorter.
(g) Termination by Reason of Disability. Unless otherwise
determined by the Committee at grant, if any Optionee's employment with or
service to the Company or any Subsidiary terminates by reason of total and
permanent disability, any Option held by such Optionee may thereafter be
exercised, to the extent it was exercisable at the time of termination due to
Disability (or on such accelerated basis as the Committee shall determine at or
after grant), but may not be exercised after 30 days after the date of such
termination of employment or service or the expiration of the stated term of
such Option, whichever period is shorter; provided, however, that, if the
Optionee dies within such 30 day period, any unexercised Option held by such
Optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period
-4-
<PAGE>
of one year after the date of such death or for the stated term of such Option,
whichever period is shorter.
(h) Termination by Reason of Retirement. Unless otherwise
determined by the Committee at grant, if any Optionee's employment with or
service to the Company or any Subsidiary terminates by reason of Normal or Early
Retirement (as such terms are defined below), any Option held by such Optionee
may thereafter be exercised to the extent it was exercisable at the time of such
Retirement (or on such accelerated basis as the Committee shall determine at or
after grant), but may not be exercised after 30 days after the date of such
termination of employment or service or the expiration of the stated term of
such Option, whichever period is shorter; provided, however, that, if the
Optionee dies within such 30 day period, any unexercised Option held by such
Optionee shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of one year after the date of
such death or for the stated term of such Option, whichever period is shorter.
For purposes of this paragraph (h), Normal Retirement shall
mean retirement from active employment with the Company or any
Subsidiary on or after the normal retirement date specified in
the applicable Company or Subsidiary pension plan or if no
such pension plan, age 65. Early Retirement shall mean
retirement from active employment with the Company or any
Subsidiary pursuant to the early retirement provisions of the
applicable Company or Subsidiary pension plan or if no such
pension plan, age 55.
(i) Other Termination. Unless otherwise determined by the
Committee at grant, if any Optionee's employment with or service to the Company
or any Subsidiary terminates for any reason other than death, Disability or
Normal or Early Retirement, the Option shall thereupon terminate, except that
the portion of any Option that was exercisable on the date of such termination
of employment may be exercised for the lesser of 30 days after the date of
termination or the balance of such Option's term if the Optionee's employment or
service with the Company or any Subsidiary is terminated by the Company or such
Subsidiary without cause (the determination as to whether termination was for
cause to be made by the Committee). The transfer of an Optionee from the employ
of the Company to a Subsidiary, or vice versa, or from one Subsidiary to
another, shall not be deemed to constitute a termination of employment for
purposes of the Plan.
(j) Limit on Value of Incentive Option. The aggregate Fair
Market Value, determined as of the date the Incentive Option is granted, of
Stock for which Incentive Options are exercisable for the first time by any
Optionee during any calendar year under the Plan (and/or any other stock option
plans of the Company or any Subsidiary) shall not exceed $100,000.
(k) Transfer of Incentive Option Shares. The stock option
agreement evidencing any Incentive Options granted under this Plan shall provide
that if the Optionee makes a disposition, within the meaning of Section 424(c)
of the Code and regulations promulgated thereunder, of any share or shares of
Stock issued to him upon exercise of an Incentive Option granted under the Plan
-5-
<PAGE>
within the two-year period commencing on the day after the date of the grant of
such Incentive Option or within a one-year period commencing on the day after
the date of transfer of the share or shares to him pursuant to the exercise of
such Incentive Option, he shall, within 10 days after such disposition, notify
the Company thereof and immediately deliver to the Company any amount of United
States federal income tax withholding required by law.
6. Term of Plan.
No Option shall be granted pursuant to the Plan on or after
April 7, 2009, but Options theretofore granted may extend beyond that date.
7. Capital Change of the Company.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number and option price of shares subject to outstanding Options
granted under the Plan, to the end that after such event each Optionee's
proportionate interest shall be maintained as immediately before the occurrence
of such event.
8. Purchase for Investment.
Unless the Options and shares covered by the Plan have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or the Company has determined that such registration is unnecessary, each person
exercising an Option under the Plan may be required by the Company to give a
representation in writing that he is acquiring the shares for his own account
for investment and not with a view to, or for sale in connection with, the
distribution of any part thereof.
9. Taxes.
The Company may make such provisions as it may deem
appropriate, consistent with applicable law, in connection with any Options
granted under the Plan with respect to the withholding of any taxes or any other
tax matters.
10. Effective Date of Plan.
The Plan shall be effective on April 8, 1999, provided however
that the Plan shall subsequently be approved by majority vote of the Company's
stockholders not later than April 7, 2000.
-6-
<PAGE>
11. Amendment and Termination.
The Board may amend, suspend, or terminate the Plan, except
that no amendment shall be made that would impair the rights of any Optionee
under any Option theretofore granted without his consent, and except that no
amendment shall be made which, without the approval of the stockholders of the
Company would:
(a) materially increase the number of shares that may be
issued under the Plan, except as is provided in Section 7;
(b) materially increase the benefits accruing to the Optionees
under the Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) decrease the exercise price of an Incentive Option to less
than 100% of the Fair Market Value per share of Stock on the date of grant
thereof or the exercise price of a Nonqualified Option to less than 80% of the
Fair Market Value per share of Stock on the date of grant thereof; or
(e) extend the term of any Option beyond that provided for in
Section 5(b).
The Committee may amend the terms of any Option theretofore
granted, prospectively or retroactively, but no such amendment
shall impair the rights of any Optionee without his consent.
The Committee may also substitute new Options for previously
granted Options, including options granted under other plans
applicable to the participant and previously granted Options
having higher option prices, upon such terms as the Committee
may deem appropriate.
12. Government Regulations.
The Plan, and the grant and exercise of Options hereunder, and
the obligation of the Company to sell and deliver shares under such Options,
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies, national securities exchanges and
interdealer quotation systems as may be required.
13. General Provisions.
(a) Certificates. All certificates for shares of Stock
delivered under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, or other
securities commission having jurisdiction, any applicable Federal or state
securities law, any
-7-
<PAGE>
stock exchange or interdealer quotation system upon which the Stock is then
listed or traded and the Committee may cause a legend or legends to be placed on
any such certificates to make appropriate reference to such restrictions.
(b) Employment Matters. The adoption of the Plan shall not
confer upon any Optionee of the Company or any Subsidiary any right to continued
employment or, in the case of an Optionee who is a director, continued service
as a director, with the Company or a Subsidiary, as the case may be, nor shall
it interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of any of its employees, the service of any of its
directors or the retention of any of its consultants or advisors at any time.
(c) Limitation of Liability. No member of the Board or the
Committee, or any officer or employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action, determination
or interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
(d) Registration of Stock. Notwithstanding any other provision
in the Plan, no Option may be exercised unless and until the Stock to be issued
upon the exercise thereof has been registered under the Securities Act and
applicable state securities laws, or are, in the opinion of counsel to the
Company, exempt from such registration in the United States. The Company shall
not be under any obligation to register under applicable federal or state
securities laws any Stock to be issued upon the exercise of an Option granted
hereunder in order to permit the exercise of an Option and the issuance and sale
of the Stock subject to such Option however, the Company may in its sole
discretion register such Stock at such time as the Company shall determine. If
the Company chooses to comply with such an exemption from registration, the
Stock issued under the Plan may, at the direction of the Committee, bear an
appropriate restrictive legend restricting the transfer or pledge of the Stock
represented thereby, and the Committee may also give appropriate stop transfer
instructions to the Company's transfer agents.
INFOCAST CORPORATION
April 8, 1999
-8-
INFOCAST CORPORATION
1 Richmond Street West
Toronto, Ontario M5H 3W4
June 1, 1999
To: [Optionee]
We are pleased to inform you that on June 1, 1999, the Board
of Directors of Infocast Corporation (the "Company") granted you a Nonqualified
Option (the "Option") to purchase [_______] shares of common stock (the
"Shares"), $.001 par value, of the Company ("Common Stock") pursuant to the
Company's 1999 Stock Option Plan (the "Plan"), at a price of $7.00 per Share.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Plan (a copy of which in its present form is attached
hereto).
No part of the Option is currently exercisable. Prior to May
31, 2004 (the date on which the Option will, to the extent not previously
exercised, expire) the Option may be exercised, as follows: ___________]. You
must purchase a minimum of 100 Shares each time you choose to purchase Shares,
except to purchase the remaining Shares available to you. In the event of a
change in control of the Company, all Options granted hereby immediately become
fully vested and exercisable. A "change in control" is defined as (i) approval
by the stockholders of the Company of any consolidation or merger of the Company
in which the holders of voting stock of the Company immediately before the
merger or consolidation will not own 50 percent or more of the voting shares of
the continuing or surviving corporation or of a sale or other transfer of all or
substantially all the assets of the Company or (ii) a change of 50 percent in
the membership of the Board of Directors of the Company within a 12-month
period, unless the election of such new directors was approved by the vote of 85
percent of the directors then in office who were in office at the beginning of
such period.
This Option is issued in accordance with and is subject to and
conditioned upon all of the terms and conditions of the Plan, as from time to
time amended, provided, however, that no future amendment or termination of the
Plan shall, without your consent, alter or impair any of your rights or
obligations under the Option. Reference is made to the terms and conditions of
the Plan, all of which are incorporated by reference herein as if fully set
forth herein.
The Company, in its sole discretion, may file a registration
statement under the Securities Act of 1933, as amended (the "Act"), in order to
register the Shares. Unless at the time of the exercise of the Option a
registration statement under the Act is in effect as to such Shares, any
<PAGE>
Shares purchased by you upon the exercise of the Option shall be acquired for
investment and not for sale or distribution, and if the Company so requests,
upon any exercise of the Option, in whole or in part, you will execute and
deliver to the Company a certificate to such effect. The Company shall not be
obligated to issue any Shares pursuant to the Option if, in the opinion of
counsel to the Company, the Shares to be so issued are required to be registered
or otherwise qualified under the Act or under any other applicable statute,
regulation or ordinance affecting the sale of securities, unless and until such
Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law,
unless at the time of the exercise of the Option a registration statement under
the Act is in effect as to such Shares (i) any Shares purchased by you upon
exercise of the Option may be required to be held indefinitely unless such
Shares are subsequently registered under the Act or an exemption from such
registration is available; (ii) any sales of such Shares made in reliance upon
Rule 144 promulgated under the Act may be made only in accordance with the terms
and conditions of that Rule (which, under certain circumstances, restrict the
number of shares which may be sold and the manner in which shares may be sold);
(iii) in the case of securities to which Rule 144 is not applicable, compliance
with some other disclosure exemption will be required before any Shares may be
sold; (iv) certificates for Shares to be issued to you hereunder shall bear a
legend to the effect that the Shares have not been registered under the Act and
that the Shares may not be sold, hypothecated or otherwise transferred in the
absence of an effective registration statement under the Act relating thereto or
an opinion of counsel satisfactory to the Company that such registration is not
required; (v) the Company will place an appropriate "stop transfer" order with
its transfer agent with respect to such Shares; and (vi) the Company has
undertaken no obligation to register the Shares or to include the Shares in any
registration statement which may be filed by it subsequent to the issuance of
the Shares to you.
The Option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash or, at the discretion of the Committee, by
delivering shares of Common Stock already owned by you and having a Fair Market
Value on the trading day immediately preceding the date of exercise equal to the
exercise price of the Option, or a combination of shares of Common Stock and
cash, or otherwise in accordance with the Plan.
-2-
<PAGE>
Would you kindly evidence your acceptance of the Option and
your agreement to comply with the provisions hereof and of the Plan by executing
this letter under the words "Agreed To and Accepted."
Very truly yours,
INFOCAST CORPORATION
By: ____________________________
Name:
Title:
AGREED TO AND ACCEPTED:
[Optionee]
-3-
<PAGE>
Exhibit A
INFOCAST CORPORATION
1 Richmond Street West
Toronto, Ontario M5H 3W4
Gentlemen:
Notice is hereby given of my election to purchase _____ Shares
of Common Stock, $.001 par value (the "Shares"), of Infocast Corporation at a
price of $____ per Share, pursuant to the provisions of the option granted to me
on June 1, 1999, under the Company's 1999 Stock Option Plan. Enclosed in payment
for the Shares is:
----
/___/ my check in the amount of $________.
----
*/___/ ___________ Shares having a total value $________.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
__________________________
*Subject to the approval of the
-4-
<PAGE>
Board of Directors
-5-
INFOCAST CORPORATION
1 Richmond Street West
Toronto, Ontario M5H 3W4
June 1, 1999
To: James William Leech
61 Inglewood Drive
Toronto, Ontario M4T 1H2
We are pleased to inform you that on June 1, 1999, the Board
of Directors of Infocast Corporation (the "Company") granted you a non-qualified
stock option (the "Option") to purchase 750,000 shares of common stock (the
"Shares"), $.001 par value, of the Company ("Common Stock"), at a price of
US$7.00 per Share.
Prior to May 31, 2004 (the date on which the Option will, to
the extent not previously exercised, expire) the Option may be exercised, as
follows: (i) as to 250,000 Shares at any time on or after the date you assume
the position of the Company's President and Chief Executive Officer (the "Start
Date"); (ii) as to an additional 250,000 Shares at any time after the first
anniversary of the Start Date; (iii) as to the remaining 250,000 Shares at any
time after the second anniversary of the Start Date. You must purchase a minimum
of 1,000 Shares each time you choose to purchase Shares, except to purchase the
remaining Shares available to you. In the event of a change in control of the
Company, all Options granted hereby immediately become fully vested and
exercisable. A "change in control" is defined as (i) the direct or indirect
sale, lease, exchange or other transfer of all or substantially all (50% or
more) of the assets of the Company to any person or entity or group of persons
or entities acting jointly or in concert as a partnership or other group (a
"Group of Persons"); (ii) the merger, consolidation or other business
combination of the Company with or into another corporation with the effect that
the shareholders of the Company immediately following the merger, consolidation
or other business combination, hold 50% or less of the combined voting power of
the then outstanding securities of the surviving corporation of such merger,
consolidation or other business combination ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors; (iii) the replacement of majority of the Board of Directors of the
Company or of any committee of the Board of Directors of the Company in any
given year as compared to the
<PAGE>
directors who constituted the Board of Directors of the Company or such
committee at the beginning of such year, and such replacement shall not have
been approved by the Board of Directors of the Company, as the case may be, as
constituted at the beginning of such year; (iv) a person or Group of Persons
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases, merger, consolidation or other business
combination, or otherwise, have become the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
securities of the Company representing 20% or more of the combined voting power
of the then outstanding securities of such corporation ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors; or (v) the voluntary liquidation, dissolution or
winding-up of the Company, in connection with which a distribution is made to
the holders of the Company's Common Stock.
The Option is not transferable and may be exercised solely by
you during your lifetime or after your death by the person or persons entitled
thereto under your will or the laws of descent and distribution. Any attempt to
transfer, assign, pledge or otherwise dispose of, or to subject to execution,
attachment or similar process, the Option contrary to the provisions hereof
shall be void and ineffective and shall give no right to the purported
transferee.
If your employment with or service to the Company or any
Subsidiary terminates by reason of death, the Option shall immediately become
fully vested and exercisable and the Option may thereafter be exercised by the
legal representative of your estate or by your legatee under your will, for a
period of one year after the date of such death or until the expiration of the
stated term of the Option, whichever period is shorter. As used in this
Agreement, the term "Subsidiary" means any Subsidiary of the Company within the
meaning of Section 425(f) of the United States Internal Revenue Code of 1986, as
amended.
If your employment with or service to the Company or any
Subsidiary terminates by reason of disability as will be provided for in your
employment agreement, the Option shall immediately become fully vested and
exercisable and the Option may thereafter be exercised for a period of one year
after the date of such termination of employment or service or until the
expiration of the stated term of the Option, whichever period is shorter.
-2-
<PAGE>
If your employment with or service to the Company or any
Subsidiary is terminated by the Company for cause as will be provided for in
your employment agreement, the Option shall thereupon immediately terminate.
If your employment with or service to the Company or any
Subsidiary is terminated by the Company for any reason other than cause, death,
disability or at any time within 24 months following the occurrence of a "change
in control," the Option shall immediately become fully vested and exercisable
and the Option may be exercised for the lesser of 24 months after the date of
termination or the balance of the Option's term. Your transfer from the employ
of the Company to a Subsidiary, or vice versa, or from one Subsidiary to
another, shall not be deemed to constitute a termination of employment for
purposes of the Option.
If your employment with or service to the Company or any
Subsidiary is terminated by the Company at any time within 24 months following
the occurrence of a "change in control", the Option may be exercised for the
lesser of 36 months after the date of termination or the balance of the Option's
term.
If your employment with or service to the Company or any
Subsidiary is terminated by you, the Option shall thereupon immediately
terminate except that the portion of the Option that was exercisable on the date
of such termination of employment or service may thereafter be exercised for a
period of 30 days after the date of such termination of employment or service or
until the expiration of the stated term of the Option, whichever period is
shorter.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Common Stock, the Board of Directors of the Company shall make an
appropriate and equitable adjustment in the number and option price of shares
subject to the Option to the end that after such event your proportionate
interest shall be maintained as immediately before the occurrence of such event.
The Company may make such provisions as it may deem
appropriate, consistent with applicable law, in connection with the Option with
respect to the withholding of any taxes or any other tax matters.
The Company, in its sole discretion, may file a registration
statement under the Securities Act of 1933, as amended (the "Act"), in order to
register the Shares. Unless at the time of the exercise of the Option a
registration statement under the Act is in effect as to such Shares, any Shares
purchased by you upon the exercise of the Option shall be acquired for
investment and not for sale or distribution, and if the Company so requests,
upon any exercise of the Option, in whole or in part, you will execute and
deliver to the Company a certificate to such effect. The Company shall not be
obligated to issue any Shares pursuant to the Option if, in the opinion of
counsel to the Company, the Shares to be so issued are required to be registered
or otherwise qualified under the Act or under any other applicable statute,
regulation or ordinance affecting the sale of securities, unless
-3-
<PAGE>
and until such Shares have been so registered or otherwise qualified.
You understand and acknowledge that, under existing law,
unless at the time of the exercise of the Option a registration statement under
the Act is in effect as to such Shares (i) any Shares purchased by you upon
exercise of the Option may be required to be held indefinitely unless such
Shares are subsequently registered under the Act or an exemption from such
registration is available; (ii) any sales of such Shares made in reliance upon
Rule 144 promulgated under the Act may be made only in accordance with the terms
and conditions of that Rule (which, under certain circumstances, restrict the
number of shares which may be sold and the manner in which shares may be sold);
(iii) in the case of securities to which Rule 144 is not applicable, compliance
with some other disclosure exemption will be required before any Shares may be
sold; (iv) certificates for Shares to be issued to you hereunder shall bear a
legend to the effect that the Shares have not been registered under the Act and
that the Shares may not be sold, hypothecated or otherwise transferred in the
absence of an effective registration statement under the Act relating thereto or
an opinion of counsel satisfactory to the Company that such registration is not
required; (v) the Company will place an appropriate "stop transfer" order with
its transfer agent with respect to such Shares; and (vi) the Company has
undertaken no obligation to register the Shares or to include the Shares in any
registration statement which may be filed by it subsequent to the issuance of
the Shares to you.
The Option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment in full of the purchase price of the Shares to be purchased. The
purchase price is to be paid in cash, by check, such other instrument as may be
acceptable to the Board of Directors of the Company, or, at the discretion of
the Board of Directors of the Company, by delivering shares of Common Stock
already owned by you and having a Fair Market Value (as hereinafter defined) on
the trading day immediately preceding the date of exercise equal to the exercise
price of the Option, or a combination of shares of Common Stock and cash.
Fair Market Value means the closing price of publicly traded
shares of Common Stock on the principal securities exchange on which shares of
Common Stock are listed (if the shares of Common Stock are so listed), or on the
NASDAQ Stock Market (if the shares of Common Stock are regularly quoted on the
NASDAQ Stock Market), or, if not so listed or regularly quoted, the mean between
the
-4-
<PAGE>
closing bid and asked prices of publicly traded shares of Common Stock in the
over-the-counter market, or, if such bid and asked prices shall not be
available, as reported by any nationally recognized quotation service selected
by the Company, or as determined by the Board of Directors of the Company.
Anything in this provision to the contrary notwithstanding, in no event shall
the purchase price of a share of Common Stock be less than the minimum price
permitted under rules and policies of the rules and policies of the national
securities exchange on which the shares of Common Stock are listed.
-5-
<PAGE>
Would you kindly evidence your acceptance of the Option and
your agreement to comply with the provisions hereof by executing this letter
under the words "Agreed To and Accepted."
Very truly yours,
INFOCAST CORPORATION
By:/S/ A.T. Griffis
---------------------
Name: A. Thomas Griffis
Title: Chairman of the Board
AGREED TO AND ACCEPTED:
/s/ James William Leech
James William Leech
-6-
<PAGE>
Exhibit A
INFOCAST CORPORATION
1 Richmond Street West
Toronto, Ontario M5H 3W4
Gentlemen:
Notice is hereby given of my election to purchase _____ Shares
of Common Stock, $.001 par value (the "Shares"), of Infocast Corporation at a
price of U.S.$_____ per Share, pursuant to the provisions of the option granted
to me on June 1, 1999. Enclosed in payment for the Shares is:
----
/___/ my check in the amount of $________.
----
*/___/ ___________ Shares having a total value
$________.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
Social Security Number ___________________
Dated: _______________, ____
Very truly yours,
--------------------------
*Subject to the approval of the
Board of Directors
-7-
[PURCHASER'S WARRANT]
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO INFOCAST CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED
Dated: June 24, 1999
WARRANT
To Purchase 50,000 Shares of Common Stock
EXPIRING 5:00 p.m. New York Time on June 23, 2001.
THIS IS TO CERTIFY THAT, for value received, Thomson Kernaghan
& Co. Limited, or registered assigns (the "Holder") is entitled to purchase from
Infocast Corporation, a Nevada corporation (the "Company"), at any time or from
time to time prior to 5:00 p.m., New York City time, on June 23, 2001 at the
principal executive offices of the Company, at the Exercise Price (as
hereinafter defined), the number of shares of Common Stock shown above, all
subject to adjustment and upon the terms and conditions as hereinafter provided,
and is entitled also to exercise the other appurtenant rights, powers and
privileges hereinafter described.
Certain terms used in this Warrant are defined in Article V.
ARTICLE I
EXERCISE OF WARRANTS
1.1. Method of Exercise. To exercise this Warrant in whole or
in part, the Holder shall deliver to the Company, at the Company's offices at
the address set forth in Section 6.1, (a) this Warrant, (b) a written notice, in
substantially the form of the Exercise Notice attached hereto (or a
<PAGE>
reasonable facsimile thereof), of such Holder's election to exercise this
Warrant, which notice shall specify the number of shares of Common Stock to be
purchased, the denominations of the certificate or certificates desired, and the
name or names in which such certificates are to be registered, and (c) payment
of the Exercise Price with respect to such Common Stock. Payment made pursuant
to clause (c) above may be made, at the option of the Holder by cash, money
order, certified or bank cashier's check or wire transfer.
1.2. Delivery of Stock Certificates, etc. The Company shall,
as promptly as practicable and in any event within five Business Days after the
delivery to the Company of an Exercise Notice or Conversion, as the case may be,
execute and deliver or cause to be executed and delivered, in accordance with
such notice, a certificate or certificates representing the aggregate number of
Shares of Common Stock specified in said notice. The certificate or certificates
so delivered shall be in such denominations as may be specified in such notice
or, if such notice shall not specify denominations, shall be in the amount of
the number of shares of Common Stock for which the Warrant is being exercised
and shall be issued in the name of the Holder or such other name or names as
shall be designated in such notice. Such certificate or certificates shall be
deemed to have been issued, and such Holder or any other Person so designated to
be named therein shall be deemed for all purposes to have become a holder of
record of such Common Stock, as of the date the aforementioned notice,
accompanied by full payment of the Exercise Price with respect to such Common
Stock pursuant to Section 1.1, is received by the Company. If this Warrant shall
have been exercised only in part, the Company shall, at the time of delivery of
the certificate or certificates, deliver to the Holder a new warrant certificate
evidencing the rights to purchase the remaining Common Stock provided for by
this Warrant, which new warrant certificate shall in all other respects be
identical with this warrant, or, at the request of the Holder, appropriate
notation may be made on this Warrant which shall then be returned to the Holder.
The Company shall pay all expenses, taxes (other then income taxes of a Holder)
and other charges payable in connection with the preparation, issuance and
delivery of any such certificates for Common Stock and new Warrants, except
that, if any such Common Stock certificates or new Warrants shall be registered
in a name or names other than the name of the Holder, funds sufficient to pay
all transfer taxes payable as a result of such transfer shall be paid by the
Holder at the time of delivering the aforementioned notice of exercise or
promptly upon receipt of a written request of the Company for payment.
1.3. Securities To Be Fully Paid and Nonassessable. All Common
Stock issued upon the exercise of this Warrant: (i) shall be validly issued,
fully paid and nonassessable and free from all preemptive rights of any holder
of Common Stock, and from all taxes, liens and charges with respect to the issue
thereof (other than transfer taxes); and (ii) if the Common Stock is then listed
on any national securities exchanges (as defined in the Exchange Act) or quoted
on NASDAQ, shall be duly listed or quoted thereon, as the case may be.
1.4. Securities Legend. Each certificate for Common Stock
issued upon exercise of this Warrant, unless at the time of exercise such Common
Stock are registered under the Securities Act, shall bear the following legend:
-2-
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION OR COUNSEL, REASONABLY
SATISFACTORY TO INFOCAST CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED.
Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the reasonable
opinion of counsel to the Company, the securities represented thereby are no
longer subject to restrictions on resale under the Securities Act.
1.5. Reservation; Authorization. The Company has reserved and
will keep available for issuance upon exercise of the Warrants the total number
of shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of such Common Stock has been duly and validly
authorized.
ARTICLE II
TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1. Ownership of Warrant. The Company may deem and treat the
Person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any
Person) for all purposes and shall not be affected by any notice to the
contrary, until presentation of this Warrant for registration of transfer as
provided in this Article II.
2.2. Transfer of Warrant. The Company agrees to maintain at
its principal executive offices books for the registration of transfers of the
Warrants, and transfer of this Warrant and all rights hereunder shall be
registered, in whole or in part, on such books, upon surrender of this Warrant
at the Company's principal executive offices, together with a written assignment
of this Warrant duly executed by the Holder or his duly authorized agent or
attorney, with (unless the Holder is the original Holder of this Warrant)
signatures guaranteed by a bank or trust Company or a broker or dealer
registered with the NASD, and funds sufficient to pay any transfer taxes payable
upon such transfer. Upon surrender the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in the instrument of assignment, and this Warrant shall
promptly be canceled. The Company shall not be required to register any
transfers absent an opinion of counsel to the Company that such transfer is
exempt from the registration requirements of the Securities Act.
-3-
<PAGE>
2.3. Loss, Theft, Destruction or Mutilation of Warrants. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company (the original Holder's or any institutional Holder's indemnity being
satisfactory indemnity in the event of loss, theft or destruction of any Warrant
owned by such holder), or, in the case of any such mutilation, upon surrender
and cancellation of such Warrant, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and representing the right to purchase the same aggregate number of Common Stock
as provided for in such lost, stolen, destroyed or mutilated Warrant.
2.4. Expenses of Delivery of Warrants. The Company shall pay
all expenses, taxes (other than transfer taxes or income taxes of a Holder) and
other charges payable in connection with the preparation, issuance and delivery
of Warrants and Common Stock issuable upon exercise of the Warrants hereunder.
ARTICLE III
CERTAIN RIGHTS
3.1. Registration Rights. The Common Stock issuable upon
exercise of this Warrant are entitled to the benefits of the registration rights
contemplated in the Securities Purchase Agreement.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1. Adjustments Generally. The Exercise Price and the number
of shares of Common Stock (or other securities or property) issuable upon
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events, as provided in this Article IV.
4.2. Common Stock. In the event that the Exercise Price is
adjusted pursuant to the terms hereof, then, effective at the time of such
adjustment, the number of shares subject to this Warrant shall be adjusted to an
amount equal to the result obtained by multiplying: (i) the number of shares of
Common Stock subject to this Warrant prior to such adjustment by; (ii) a
fraction the numerator of which shall be the Exercise Price immediately prior to
such adjustment and the denominator of which shall be the Exercise Price
following such adjustment.
-4-
<PAGE>
4.3. Adjustments to Exercise Price
(a) Dividends. In the event the Company shall make or
issue, or shall fix a record date for the determination of holders of Common
Stock entitled to receive a dividend or other distribution (other than a
distribution in liquidation or other distribution otherwise provided for herein)
with respect to the Common Stock payable in (i) securities of the Company other
than shares of Common Stock, or (ii) other assets (excluding cash dividends or
distributions), then and in each such event provision shall be made so that the
Holders shall receive upon exercise of this Warrant in addition to the number of
shares of Common Stock receivable thereupon, the number of securities or such
other assets of the Company which each Holder would have received had such
Holder exercised this Warrant and acquired Common Stock on the date of such
event and had such holder thereafter, during the period from the date of such
event to and including the exercise of this Warrant by the Holder, retained such
securities or such other assets receivable by such holder during such period,
giving application to all other adjustments called for during such period under
this Article IV with respect to the rights of the holders of the Common Stock.
(b) Capital Reorganization or Reclassification. If
the Common Stock issuable upon the exercise of this Warrant shall be changed
into the same or different number of shares of any class or classes of capital
stock, whether by capital reorganization, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for elsewhere in this Section 4.3, or the sale of all or substantially
all of the Company's capital stock or assets to any other person), then and in
each such event each Holder shall have the right thereafter to acquire the kind
and amount of shares of capital stock and other securities and property
receivable upon such reorganization, recapitalization, reclassification or other
change by the holders of the number of shares of Common Stock for which such
Warrant might have been exercised immediately prior to such reorganization,
recapitalization, reclassification or change, all subject to further adjustment
as provided herein.
(c) Certificate as to Adjustments; Notice by Company.
In each case of an adjustment or readjustment hereunder, the Company at its
expense will furnish each Holder not later than the fifth Business Day following
any such adjustment or readjustment, at such Holder's registered address as
shall appear on the records of the Company, a certificate prepared by the
Treasurer or Chief Financial Officer of the Company, showing such adjustment or
readjustment, and stating in detail the facts upon which such adjustment or
readjustment is based.
(d) Reservation of Common Stock. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the exercise of the
Warrants, such number of its shares of Common Stock as shall from time to time
be sufficient to effect the exercise of the Warrants and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the exercise of Warrants, the Company shall take such action as may be
necessary to increase, and it shall increase, its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purpose.
-5-
<PAGE>
4.4. Merger, Consolidation, Etc.
(a) If at any time or from time to time there shall
be (i) a merger, or consolidation of the Company with or into another
corporation, (ii) the sale of all or substantially all of the Company's capital
stock or assets to any other person, (iii) any other form of business
combination or reorganization in which the Company shall not be the continuing
or surviving entity of such business combination or reorganization, or (iv) any
transaction or series of transactions by the Company in which in excess of 50
percent of the Company's voting power is transferred (each, a "Reorganization"),
then as a part of such Reorganization, provision shall be made so that the
Holders shall thereafter be entitled to receive upon exercise the same kind and
amount of stock or other securities or property (including cash) of the Company,
or of the successor corporation resulting from such Reorganization to which such
Holder would have been entitled if such Holder had exercised its Warrants
immediately prior to the effective time of such Reorganization. In any such
case, appropriate adjustment shall be made in the application of the provisions
of Article IV to the end that the provisions of Article IV (including adjustment
of the Exercise Price then in effect and the number of shares of Common Stock or
other securities issuable upon exercise of the Warrants) shall be applicable
after that event in as nearly equivalent a manner as may be practicable.
(b) The Company will not effect any of the
transactions described in clause (a) of this Section 4.4 hereof unless, prior to
the consummation thereof, each person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
this Warrant as provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the Holders: (i) the obligations of the
Company under this Warrant (and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this Warrant),
(ii) the obligations of the Company under the Securities Purchase Agreement with
respect to Registration Rights and (iii) the obligation to deliver to each
holder such shares of stock, securities, cash or property as, in accordance with
the foregoing provisions of this Article IV, each Holder may be entitled to
receive, and such Person shall have similarly delivered to such Holder an
opinion of counsel for such Person, stating that this Warrant shall thereafter
continue in full force and effect and the terms hereof (including without
limitation all of the provisions of this Article IV) shall be applicable to the
stock, securities, cash or property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any rights pursuant hereto.
(c) The provisions of this Section 4.4 are in
addition to and not in lieu of the other provisions of Article IV hereof.
4.5. Notice of Adjustment. In addition to any other notice
required hereunder, not less than 10 nor more than 60 days prior to the record
date or effective date, as the case may be, of any action which would require an
adjustment or readjustment pursuant to this Article IV, the Company shall give
notice to each Holder of such event, describing such event in reasonable detail
and specifying the record date or effective date, as the case may be, and, if
determinable, the required
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<PAGE>
adjustment and the computation thereof. If the required adjustment is not
determinable at the time of such notice, the Company shall give notice to each
Holder of such adjustment and computation promptly after such adjustment becomes
determinable.
4.6. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
(b) any capital reorganization of the Company,
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to the holder of this Warrant a notice specifying (i) the
date or expected date on which any record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation, winding-up or Sale of the Company is to take
place, the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction. Such
notice shall be mailed promptly after the decision is made to take any of the
actions specified in (a)-(c) above.
ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the
following respective meanings:
"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" shall mean (a) if any Common Stock is listed or
admitted to trading on a national securities exchange or Nasdaq, a day on which
the principal national securities exchange Nasdaq on which such class of Common
Stock are listed or admitted to trading is open for
-7-
<PAGE>
business or (b) if Common Stock is not so listed or admitted to trading, a day
on which any New York Stock Exchange member firm is open for business.
"Common Stock" means the common stock, $.001 par value, of the
Company.
"Company" shall have the meaning set forth in the first
paragraph of this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Securities and Exchange Commission (or its successor)
thereunder, all as the same shall be in effect at the time.
"Exercise Price" shall mean $7.00 per share of Common Stock,
adjusted as contemplated herein.
"Holder" shall have the meaning set forth in the first
paragraph of this Warrant.
"Market Price" at any date shall be deemed to be the last
reported sale price of the Common Stock on such date, or, in case no such
reported sale takes place on such day, the average of the last reported sales
prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or if any such exchange
on which the Common Stock is listed is not its principal trading market, the
last reported sale price as furnished by the NASD through the Nasdaq National
Market or SmallCap Market, or, if applicable, the OTC Bulletin Board, or if the
Common Stock is not listed or admitted to trading on the Nasdaq National Market
or SmallCap Market or OTC Bulletin Board or similar organization, as determined
in good faith by resolution of the Board of Directors of the Company, based on
the best information available to it.
"NASD" means the National Association of Securities Dealers,
Inc.
"Nasdaq" means The National Association of Securities Dealers,
Inc. Automated Quotation System.
"Person" means any individual, corporation, limited liability
company, partnership, limited liability partnership, joint venture or other
entity.
"Requisite Holders" means, as of any date of determination,
persons holding outstanding Warrants entitling them to purchase a majority of
the Common Stock issuable upon exercise of the Warrants originally represented
hereby.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Securities and Exchange Commission (or its successor)
thereunder, all as the same shall be in effect at the time.
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<PAGE>
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated June 24, 1999 between the Company and Thomson Kernaghan & Co.
Limited.
"Shares" shall have the meaning set forth in the Securities
Purchase Agreement.
"Warrant or Warrants" means this Warrant and any Warrant
issued to a transferee of all or any part of this Warrant.
ARTICLE VI
MISCELLANEOUS
6.1. Notices. All notices or other communications required
hereby shall be in writing and shall be sent either by (a) courier, or (b) by
telecopy as well as by registered or certified mail, and shall be regarded as
properly given in the case of a courier upon actual delivery to the proper place
of address; in the case of telecopy, on the day following the date of
transmission if properly addressed and sent without transmission error to the
correct number and receipt is confirmed by telephone within 48 hours of the
transmission; in the case of a letter for which a telecopy could not be
successfully transmitted or receipt of which could not be confirmed as herein
provided, three (3) days after the registered or certified mailing date if the
letter is properly addressed and postage prepaid; and shall be regarded as
properly addressed if sent to the parties and their representatives at the
addresses given below:
To the Company: Infocast Corporation
1 Richmond Street West
Suite 901
Toronto, Ontario M5H 3W4
Attention: President and Chief Executive Officer
Facsimile: (416) 867-9320
Confirmation: (416) 867-9087
With a copy to: Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Jeffrey Spindler, Esq.
Facsimile: (212) 755-1467
Confirmation: (212) 753-7200
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<PAGE>
To the Holder: Thomson Kernaghan & Co. Limited
365 Bay Street, 10th Floor
Toronto, Ontario M5H 2V2
Attention: Mark Valentine
Facsimile: (416) 860-6355
Confirmation: (416) 860-6130
or such other address as any of the above may have furnished to the other
parties in writing in compliance with the terms of this Section.
6.2. Waivers: Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the Requisite Holders.
Any such amendment, modification or waiver effected
pursuant to this Section shall be binding upon the Holders of all Warrants and
Common Stock issued upon exercise thereof, upon each future holder thereof and
upon the Company. In the event of any such amendment, modification or waiver,
the Company shall give prompt notice thereof to all Holders and, if appropriate,
notation thereof shall be made on all Warrants thereafter surrendered for
registration of transfer or exchange.
No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other
circumstances.
6.3. Governing Law. This Warrant shall be construed in
accordance with and governed by the laws of the State of New York without regard
to principles of conflicts of law.
6.4. Survival of Agreements; Representations and Warranties,
etc. All representations, warranties and covenants made by the Company herein or
in any certificate or other instrument delivered by or on behalf of it in
connection with the Warrants shall be considered to have been relied upon by the
Holder and shall survive the issuance and delivery of the Warrants, regardless
of any investigation made by the Holder, and shall continue in full force and
effect so long as any Warrant is outstanding.
6.5. Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.
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<PAGE>
6.6. Severability. In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
6.7. Section Headings. The sections headings used herein are
for convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
6.8. No Impairment. The Company shall not by any action
including, without limitation, amending its organizational documents or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Stock upon the exercise of this Warrant, and (b) use
its commercially reasonable best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
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<PAGE>
IN WITNESS WHEREOF, Infocast Corporation has caused this
Warrant to be executed in its corporate name by one of its officers thereunto
duly authorized, and attested by its Secretary or an Assistant Secretary, all as
of the day and year first above written.
INFOCAST CORPORATION
By: /s/ A.T. Griffis
----------------------------------
Name:
Title:
Attest:
/s/ Elia Crespo
- --------------------------------
Name:
Title:
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<PAGE>
FORM OF EXERCISE NOTICE
(To be executed upon exercise of Warrant)
TO:
The undersigned hereby irrevocably elects to exercise the
right to purchase represented by the attached Warrant for, and to purchase
thereunder, __________________ Common Stock, as provided for therein, and
tenders herewith payment of the Exercise Price in full in accordance with the
terms of the attached warrant.
Please issue a certificate or certificates for such Common
Stock in the following name or names and denominations:
If said number of Common Stock shall not be all the Common
Stock issuable upon exercise of the attached Warrant, a new Warrant is to be
issued in the name of the undersigned for the balance remaining of such Common
Stock.
Dated: _____________, _____
---------------------------------
Note: The above signature should correspond exactly with the name on
the face of the attached Warrant or with the name of the
assignee appearing in the assignment form below.
<PAGE>
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ________________________________ hereby
sells, assigns and transfers unto __________________ the attached Warrant,
together with all rights, title and interest therein, and does hereby
irrevocably constitute and appoint ____________________ attorney to transfer
said Warrant on the books of , with full power of substitution in the premises.
---------------------------------
Note: The above signature should
correspond exactly with the
name on the face of the
attached Warrant.
[PLACEMENT AGENT'S WARRANT]
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO INFOCAST CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED
Dated: June 24, 1999
WARRANT
To Purchase 20,000 Shares of Common Stock
EXPIRING 5:00 p.m. New York Time on June 23, 2001.
THIS IS TO CERTIFY THAT, for value received, Thomson Kernaghan
& Co. Limited, or registered assigns (the "Holder") is entitled to purchase from
Infocast Corporation, a Nevada corporation (the "Company"), at any time or from
time to time prior to 5:00 p.m., New York City time, on June 23, 2001 at the
principal executive offices of the Company, at the Exercise Price (as
hereinafter defined), the number of shares of Common Stock shown above, all
subject to adjustment and upon the terms and conditions as hereinafter provided,
and is entitled also to exercise the other appurtenant rights, powers and
privileges hereinafter described.
Certain terms used in this Warrant are defined in Article V.
ARTICLE I
EXERCISE OF WARRANTS
1.1. Method of Exercise. To exercise this Warrant in whole or
in part, the Holder shall deliver to the Company, at the Company's offices at
the address set forth in Section 6.1, (a) this Warrant, (b) a written notice, in
substantially the form of the Exercise Notice attached hereto (or a
<PAGE>
reasonable facsimile thereof), of such Holder's election to exercise this
Warrant, which notice shall specify the number of shares of Common Stock to be
purchased, the denominations of the certificate or certificates desired, and the
name or names in which such certificates are to be registered, and (c) payment
of the Exercise Price with respect to such Common Stock. Payment made pursuant
to clause (c) above may be made, at the option of the Holder by cash, money
order, certified or bank cashier's check or wire transfer.
1.2. Delivery of Stock Certificates, etc. The Company shall,
as promptly as practicable and in any event within five Business Days after the
delivery to the Company of an Exercise Notice or Conversion, as the case may be,
execute and deliver or cause to be executed and delivered, in accordance with
such notice, a certificate or certificates representing the aggregate number of
Shares of Common Stock specified in said notice. The certificate or certificates
so delivered shall be in such denominations as may be specified in such notice
or, if such notice shall not specify denominations, shall be in the amount of
the number of shares of Common Stock for which the Warrant is being exercised
and shall be issued in the name of the Holder or such other name or names as
shall be designated in such notice. Such certificate or certificates shall be
deemed to have been issued, and such Holder or any other Person so designated to
be named therein shall be deemed for all purposes to have become a holder of
record of such Common Stock, as of the date the aforementioned notice,
accompanied by full payment of the Exercise Price with respect to such Common
Stock pursuant to Section 1.1, is received by the Company. If this Warrant shall
have been exercised only in part, the Company shall, at the time of delivery of
the certificate or certificates, deliver to the Holder a new warrant certificate
evidencing the rights to purchase the remaining Common Stock provided for by
this Warrant, which new warrant certificate shall in all other respects be
identical with this warrant, or, at the request of the Holder, appropriate
notation may be made on this Warrant which shall then be returned to the Holder.
The Company shall pay all expenses, taxes (other then income taxes of a Holder)
and other charges payable in connection with the preparation, issuance and
delivery of any such certificates for Common Stock and new Warrants, except
that, if any such Common Stock certificates or new Warrants shall be registered
in a name or names other than the name of the Holder, funds sufficient to pay
all transfer taxes payable as a result of such transfer shall be paid by the
Holder at the time of delivering the aforementioned notice of exercise or
promptly upon receipt of a written request of the Company for payment.
1.3. Securities To Be Fully Paid and Nonassessable. All Common
Stock issued upon the exercise of this Warrant: (i) shall be validly issued,
fully paid and nonassessable and free from all preemptive rights of any holder
of Common Stock, and from all taxes, liens and charges with respect to the issue
thereof (other than transfer taxes); and (ii) if the Common Stock is then listed
on any national securities exchanges (as defined in the Exchange Act) or quoted
on NASDAQ, shall be duly listed or quoted thereon, as the case may be.
1.4. Securities Legend. Each certificate for Common Stock
issued upon exercise of this Warrant, unless at the time of exercise such Common
Stock are registered under the Securities Act, shall bear the following legend:
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<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION OR COUNSEL, REASONABLY
SATISFACTORY TO INFOCAST CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED.
Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the reasonable
opinion of counsel to the Company, the securities represented thereby are no
longer subject to restrictions on resale under the Securities Act.
1.5. Reservation; Authorization. The Company has reserved and
will keep available for issuance upon exercise of the Warrants the total number
of shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of such Common Stock has been duly and validly
authorized.
ARTICLE II
TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1. Ownership of Warrant. The Company may deem and treat the
Person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any
Person) for all purposes and shall not be affected by any notice to the
contrary, until presentation of this Warrant for registration of transfer as
provided in this Article II.
2.2. Transfer of Warrant. The Company agrees to maintain at
its principal executive offices books for the registration of transfers of the
Warrants, and transfer of this Warrant and all rights hereunder shall be
registered, in whole or in part, on such books, upon surrender of this Warrant
at the Company's principal executive offices, together with a written assignment
of this Warrant duly executed by the Holder or his duly authorized agent or
attorney, with (unless the Holder is the original Holder of this Warrant)
signatures guaranteed by a bank or trust Company or a broker or dealer
registered with the NASD, and funds sufficient to pay any transfer taxes payable
upon such transfer. Upon surrender the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in the instrument of assignment, and this Warrant shall
promptly be canceled. The Company shall not be required to register any
transfers absent an opinion of counsel to the Company that such transfer is
exempt from the registration requirements of the Securities Act.
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<PAGE>
2.3. Loss, Theft, Destruction or Mutilation of Warrants. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company (the original Holder's or any institutional Holder's indemnity being
satisfactory indemnity in the event of loss, theft or destruction of any Warrant
owned by such holder), or, in the case of any such mutilation, upon surrender
and cancellation of such Warrant, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and representing the right to purchase the same aggregate number of Common Stock
as provided for in such lost, stolen, destroyed or mutilated Warrant.
2.4. Expenses of Delivery of Warrants. The Company shall pay
all expenses, taxes (other than transfer taxes or income taxes of a Holder) and
other charges payable in connection with the preparation, issuance and delivery
of Warrants and Common Stock issuable upon exercise of the Warrants hereunder.
ARTICLE III
CERTAIN RIGHTS
3.1. Registration Rights. The Common Stock issuable upon
exercise of this Warrant are entitled to the benefits of the registration rights
contemplated in the Securities Purchase Agreement.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1. Adjustments Generally. The Exercise Price and the number
of shares of Common Stock (or other securities or property) issuable upon
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events, as provided in this Article IV.
4.2. Common Stock. In the event that the Exercise Price is
adjusted pursuant to the terms hereof, then, effective at the time of such
adjustment, the number of shares subject to this Warrant shall be adjusted to an
amount equal to the result obtained by multiplying: (i) the number of shares of
Common Stock subject to this Warrant prior to such adjustment by; (ii) a
fraction the numerator of which shall be the Exercise Price immediately prior to
such adjustment and the denominator of which shall be the Exercise Price
following such adjustment.
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<PAGE>
4.3. Adjustments to Exercise Price
(a) Dividends. In the event the Company shall make or
issue, or shall fix a record date for the determination of holders of Common
Stock entitled to receive a dividend or other distribution (other than a
distribution in liquidation or other distribution otherwise provided for herein)
with respect to the Common Stock payable in (i) securities of the Company other
than shares of Common Stock, or (ii) other assets (excluding cash dividends or
distributions), then and in each such event provision shall be made so that the
Holders shall receive upon exercise of this Warrant in addition to the number of
shares of Common Stock receivable thereupon, the number of securities or such
other assets of the Company which each Holder would have received had such
Holder exercised this Warrant and acquired Common Stock on the date of such
event and had such holder thereafter, during the period from the date of such
event to and including the exercise of this Warrant by the Holder, retained such
securities or such other assets receivable by such holder during such period,
giving application to all other adjustments called for during such period under
this Article IV with respect to the rights of the holders of the Common Stock.
(b) Capital Reorganization or Reclassification. If
the Common Stock issuable upon the exercise of this Warrant shall be changed
into the same or different number of shares of any class or classes of capital
stock, whether by capital reorganization, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for elsewhere in this Section 4.3, or the sale of all or substantially
all of the Company's capital stock or assets to any other person), then and in
each such event each Holder shall have the right thereafter to acquire the kind
and amount of shares of capital stock and other securities and property
receivable upon such reorganization, recapitalization, reclassification or other
change by the holders of the number of shares of Common Stock for which such
Warrant might have been exercised immediately prior to such reorganization,
recapitalization, reclassification or change, all subject to further adjustment
as provided herein.
(c) Certificate as to Adjustments; Notice by Company.
In each case of an adjustment or readjustment hereunder, the Company at its
expense will furnish each Holder not later than the fifth Business Day following
any such adjustment or readjustment, at such Holder's registered address as
shall appear on the records of the Company, a certificate prepared by the
Treasurer or Chief Financial Officer of the Company, showing such adjustment or
readjustment, and stating in detail the facts upon which such adjustment or
readjustment is based.
(d) Reservation of Common Stock. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the exercise of the
Warrants, such number of its shares of Common Stock as shall from time to time
be sufficient to effect the exercise of the Warrants and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the exercise of Warrants, the Company shall take such action as may be
necessary to increase, and it shall increase, its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purpose.
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<PAGE>
4.4. Merger, Consolidation, Etc.
(a) If at any time or from time to time there shall
be (i) a merger, or consolidation of the Company with or into another
corporation, (ii) the sale of all or substantially all of the Company's capital
stock or assets to any other person, (iii) any other form of business
combination or reorganization in which the Company shall not be the continuing
or surviving entity of such business combination or reorganization, or (iv) any
transaction or series of transactions by the Company in which in excess of 50
percent of the Company's voting power is transferred (each, a "Reorganization"),
then as a part of such Reorganization, provision shall be made so that the
Holders shall thereafter be entitled to receive upon exercise the same kind and
amount of stock or other securities or property (including cash) of the Company,
or of the successor corporation resulting from such Reorganization to which such
Holder would have been entitled if such Holder had exercised its Warrants
immediately prior to the effective time of such Reorganization. In any such
case, appropriate adjustment shall be made in the application of the provisions
of Article IV to the end that the provisions of Article IV (including adjustment
of the Exercise Price then in effect and the number of shares of Common Stock or
other securities issuable upon exercise of the Warrants) shall be applicable
after that event in as nearly equivalent a manner as may be practicable.
(b) The Company will not effect any of the
transactions described in clause (a) of this Section 4.4 hereof unless, prior to
the consummation thereof, each person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
this Warrant as provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the Holders: (i) the obligations of the
Company under this Warrant (and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this Warrant),
(ii) the obligations of the Company under the Securities Purchase Agreement with
respect to Registration Rights and (iii) the obligation to deliver to each
holder such shares of stock, securities, cash or property as, in accordance with
the foregoing provisions of this Article IV, each Holder may be entitled to
receive, and such Person shall have similarly delivered to such Holder an
opinion of counsel for such Person, stating that this Warrant shall thereafter
continue in full force and effect and the terms hereof (including without
limitation all of the provisions of this Article IV) shall be applicable to the
stock, securities, cash or property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any rights pursuant hereto.
(c) The provisions of this Section 4.4 are in
addition to and not in lieu of the other provisions of Article IV hereof.
4.5. Notice of Adjustment. In addition to any other notice
required hereunder, not less than 10 nor more than 60 days prior to the record
date or effective date, as the case may be, of any action which would require an
adjustment or readjustment pursuant to this Article IV, the Company shall give
notice to each Holder of such event, describing such event in reasonable detail
and specifying the record date or effective date, as the case may be, and, if
determinable, the required
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<PAGE>
adjustment and the computation thereof. If the required adjustment is not
determinable at the time of such notice, the Company shall give notice to each
Holder of such adjustment and computation promptly after such adjustment becomes
determinable.
4.6. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
(b) any capital reorganization of the Company,
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to the holder of this Warrant a notice specifying (i) the
date or expected date on which any record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation, winding-up or Sale of the Company is to take
place, the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction. Such
notice shall be mailed promptly after the decision is made to take any of the
actions specified in (a)-(c) above.
ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the
following respective meanings:
"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" shall mean (a) if any Common Stock is listed or
admitted to trading on a national securities exchange or Nasdaq, a day on which
the principal national securities exchange Nasdaq on which such class of Common
Stock are listed or admitted to trading is open for
-7-
<PAGE>
business or (b) if Common Stock is not so listed or admitted to trading, a day
on which any New York Stock Exchange member firm is open for business.
"Common Stock" means the common stock, $.001 par value, of the
Company.
"Company" shall have the meaning set forth in the first
paragraph of this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Securities and Exchange Commission (or its successor)
thereunder, all as the same shall be in effect at the time.
"Exercise Price" shall mean $7.00 per share of Common Stock,
adjusted as contemplated herein.
"Holder" shall have the meaning set forth in the first
paragraph of this Warrant.
"Market Price" at any date shall be deemed to be the last
reported sale price of the Common Stock on such date, or, in case no such
reported sale takes place on such day, the average of the last reported sales
prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or if any such exchange
on which the Common Stock is listed is not its principal trading market, the
last reported sale price as furnished by the NASD through the Nasdaq National
Market or SmallCap Market, or, if applicable, the OTC Bulletin Board, or if the
Common Stock is not listed or admitted to trading on the Nasdaq National Market
or SmallCap Market or OTC Bulletin Board or similar organization, as determined
in good faith by resolution of the Board of Directors of the Company, based on
the best information available to it.
"NASD" means the National Association of Securities Dealers,
Inc.
"Nasdaq" means The National Association of Securities Dealers,
Inc. Automated Quotation System.
"Person" means any individual, corporation, limited liability
company, partnership, limited liability partnership, joint venture or other
entity.
"Requisite Holders" means, as of any date of determination,
persons holding outstanding Warrants entitling them to purchase a majority of
the Common Stock issuable upon exercise of the Warrants originally represented
hereby.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Securities and Exchange Commission (or its successor)
thereunder, all as the same shall be in effect at the time.
-8-
<PAGE>
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated June 24, 1999 between the Company and Thomson Kernaghan & Co.
Limited.
"Shares" shall have the meaning set forth in the Securities
Purchase Agreement.
"Warrant or Warrants" means this Warrant and any Warrant
issued to a transferee of all or any part of this Warrant.
ARTICLE VI
MISCELLANEOUS
6.1. Notices. All notices or other communications required
hereby shall be in writing and shall be sent either by (a) courier, or (b) by
telecopy as well as by registered or certified mail, and shall be regarded as
properly given in the case of a courier upon actual delivery to the proper place
of address; in the case of telecopy, on the day following the date of
transmission if properly addressed and sent without transmission error to the
correct number and receipt is confirmed by telephone within 48 hours of the
transmission; in the case of a letter for which a telecopy could not be
successfully transmitted or receipt of which could not be confirmed as herein
provided, three (3) days after the registered or certified mailing date if the
letter is properly addressed and postage prepaid; and shall be regarded as
properly addressed if sent to the parties and their representatives at the
addresses given below:
To the Company: Infocast Corporation
1 Richmond Street West
Suite 901
Toronto, Ontario M5H 3W4
Attention: President and Chief Executive Officer
Facsimile: (416) 867-9320
Confirmation: (416) 867-9087
With a copy to: Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Jeffrey Spindler, Esq.
Facsimile: (212) 755-1467
Confirmation: (212) 753-7200
-9-
<PAGE>
To the Holder: Thomas Kernaghan & Co. Limited
365 Bay Street, 10th Floor
Toronto, Ontario M5H 2V2
Attention: Mark Valentine
Facsimile: (416) 860-6355
Confirmation: (416) 860-6130
or such other address as any of the above may have furnished to the other
parties in writing in compliance with the terms of this Section.
6.2. Waivers: Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the Requisite Holders.
Any such amendment, modification or waiver effected
pursuant to this Section shall be binding upon the Holders of all Warrants and
Common Stock issued upon exercise thereof, upon each future holder thereof and
upon the Company. In the event of any such amendment, modification or waiver,
the Company shall give prompt notice thereof to all Holders and, if appropriate,
notation thereof shall be made on all Warrants thereafter surrendered for
registration of transfer or exchange.
No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other
circumstances.
6.3. Governing Law. This Warrant shall be construed in
accordance with and governed by the laws of the State of New York without regard
to principles of conflicts of law.
6.4. Survival of Agreements; Representations and Warranties,
etc. All representations, warranties and covenants made by the Company herein or
in any certificate or other instrument delivered by or on behalf of it in
connection with the Warrants shall be considered to have been relied upon by the
Holder and shall survive the issuance and delivery of the Warrants, regardless
of any investigation made by the Holder, and shall continue in full force and
effect so long as any Warrant is outstanding.
6.5. Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.
-10-
<PAGE>
6.6. Severability. In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
6.7. Section Headings. The sections headings used herein are
for convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
6.8. No Impairment. The Company shall not by any action
including, without limitation, amending its organizational documents or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Stock upon the exercise of this Warrant, and (b) use
its commercially reasonable best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
-11-
<PAGE>
IN WITNESS WHEREOF, Infocast Corporation has caused this
Warrant to be executed in its corporate name by one of its officers thereunto
duly authorized, and attested by its Secretary or an Assistant Secretary, all as
of the day and year first above written.
INFOCAST CORPORATION
By: /s/ A.T. Griffis
----------------------------------
Name:
Title:
Attest:
/s/ Elia Crespo
- --------------------------------
Name:
Title:
-12-
<PAGE>
FORM OF EXERCISE NOTICE
(To be executed upon exercise of Warrant)
TO:
The undersigned hereby irrevocably elects to exercise the
right to purchase represented by the attached Warrant for, and to purchase
thereunder, __________________ Common Stock, as provided for therein, and
tenders herewith payment of the Exercise Price in full in accordance with the
terms of the attached warrant.
Please issue a certificate or certificates for such Common
Stock in the following name or names and denominations:
If said number of Common Stock shall not be all the Common
Stock issuable upon exercise of the attached Warrant, a new Warrant is to be
issued in the name of the undersigned for the balance remaining of such Common
Stock.
Dated: _____________, _____
---------------------------------
Note: The above signature should correspond exactly with the name on
the face of the attached Warrant or with the name of the
assignee appearing in the assignment form below.
<PAGE>
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ________________________________ hereby
sells, assigns and transfers unto __________________ the attached Warrant,
together with all rights, title and interest therein, and does hereby
irrevocably constitute and appoint ____________________ attorney to transfer
said Warrant on the books of , with full power of substitution in the premises.
---------------------------------
Note: The above signature should correspond
exactly with the name on the face of the
attached Warrant.
NEITHER THIS WARRANT NOR THE COMMON STOCK WHICH MAY BE ACQUIRED UPON THE
EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT THERETO UNDER THE ACT AND COMPLIANCE WITH ANY APPLICABLE
STATE SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M. EASTERN TIME, MAY 31, 2001.
For the Purchase of
25,000 shares of
Common Stock
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
INFOCAST CORPORATION
(A Nevada corporation)
Infocast Corporation, a Nevada corporation (the "Company"), hereby
certifies that for value received, The Poretz Group or its registered assigns
(the "Registered Holder"), residing at 1650 Tysons Boulevard, McLean, Virginia
22102, is entitled, subject to the terms set forth below, to purchase from the
Company, pursuant to this Warrant ("Warrant"), at any time or from time to time
on or after June 1, 2000, and at or before 5:00 p.m., Eastern Time, May 31, 2001
("Expiration Date"), but not thereafter, 25,000 shares of Common Stock, $.001
par value, of the Company ("Common Stock"), at a purchase price (the "Purchase
Price") equal to $7.00 per share of Common Stock. The number of shares of Common
Stock purchasable upon exercise of this Warrant, and the purchase price per
share, each as adjusted from time to time pursuant to the provisions of this
Warrant, are hereinafter referred to as the "Warrant Shares" and the "Purchase
Price," respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in
whole or in part, by the surrender of this Warrant (with the Notice of Exercise
Form attached hereto as Exhibit I duly executed, completed and delivered by such
Registered Holder) at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full,
in lawful money of the United States, of an amount equal to the then applicable
<PAGE>
Purchase Price multiplied by the number of Warrant Shares then being purchased
upon such exercise. If the rights represented hereby shall not be exercised at
or before 5:00 p.m., Eastern Time, on the Expiration Date, this Warrant shall
become and be void and without further force or effect, and all rights
represented hereby shall cease and expire.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in subsection
l(a) above. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise as provided
in subsection I (c) below shall be deemed to have become the holder or holders
of record of the Warrant Shares represented by such certificates.
(c) As soon as practicable after the exercise of the purchase
right represented by this Warrant, the Company at its expense will use its best
efforts to cause to be issued in the name of the Registered Holder and delivered
to you:
(i) a certificate or certificates for the number of
full shares of Warrant Shares to which such Registered Holder shall be entitled
upon such exercise plus, in lieu of any fractional share to which such
Registered Holder would otherwise be entitled, a Warrant Share representing the
remainder of the fractional share to the next whole Warrant Share, and
(ii) in case such exercise is in part only, a new
warrant or warrants (dated the date hereof) of like tenor, stating on the face
or faces thereof the number of shares currently stated on the face of this
Warrant minus the number of such shares purchased by the Registered Holder upon
such exercise as provided in subsection l(a) above.
2. Adjustments.
(a) Split, Subdivision or Combination of Shares. If the
outstanding shares of the Company's Common Stock at any time while this Warrant
remains outstanding and unexpired shall be subdivided or split into a greater
number of shares, or a dividend in Common Stock shall be paid in respect of
Common Stock, or a similar change in the Company's capitalization occurs which
affects the outstanding Common Stock, as a class, then the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall, simultaneously with the effectiveness of such subdivision or
split or immediately after the record date of such dividend (as the case may
be), be proportionately decreased. If the outstanding shares of Common Stock
shall be combined or reverse-split into a smaller number of shares, the Purchase
Price in effect immediately prior to such combination or reverse split shall,
simultaneously with the effectiveness of such combination or reverse split, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Shares purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such
-2-
<PAGE>
adjustment, multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) Reclassification, Reorganization, Consolidation or Merger.
In the case of any reclassification of the Common Stock or any reorganization,
consolidation or merger of the Company with or into another corporation (other
than a merger or reorganization with respect to which the Company is the
continuing corporation and which does not result in any reclassification of the
Common Stock), or a transfer of all or substantially all of the assets of the
Company, or the payment of a liquidating distribution then, as part of any such
reorganization, reclassification, consolidation, merger, sale or liquidating
distribution, the Company shall arrange for the other party to the transaction
to agree to, and lawful provision shall be made, so that the Registered Holder
of this Warrant shall have the right thereafter to receive upon the exercise
hereof (to the extent, if any, still exercisable), the kind and amount of shares
of stock or other securities or property which such Registered Holder would have
been entitled to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution, as
the case may be, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this Warrant. In any such
case, appropriate adjustment (as reasonably determined by the Board of Directors
of the Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Registered
Holder of this Warrant such that the provisions set forth in this Section 2
(including provisions with respect to the Purchase Price) shall thereafter be
applicable, as nearly as is reasonably practicable, in relation to any shares of
stock or other securities or property thereafter deliverable upon the exercise
of this Warrant.
3. Limitation on Sales. Each holder of this Warrant acknowledges that
this Warrant and the Warrant Shares have not been registered under the
Securities Act of 1933, as now in force or hereafter amended, or any successor
legislation (the "Act"), and agrees not to sell, pledge, distribute, offer for
sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued
upon its exercise in the absence of (a) an effective registration statement
under the Act as to this Warrant or such Warrant Shares and registration or
qualification of this Warrant or such Warrant Shares under any applicable Blue
Sky or state securities law then in effect or (b) an opinion of counsel,
satisfactory to the Company, that such registration and qualification are not
required. Without limiting the generality of the foregoing, unless the offering
and sale of the Warrant Shares to be issued upon the particular exercise of the
Warrant shall have been effectively registered under the Act, the Company shall
be under no obligation to issue the shares covered by such exercise unless and
until the Registered Holder shall have executed an investment letter in form and
substance satisfactory to the Company, including a warranty at the time of such
exercise that it is acquiring such shares for its own account, and will not
transfer the Warrant Shares unless pursuant to an effective and current
registration statement under the Act or an exemption from the registration
requirements of the Act and any other applicable restrictions, in which event
the Registered Holder shall be bound by the provisions of a legend or legends to
such effect which shall be endorsed upon the certificate(s) representing the
Warrant Shares issued pursuant to such exercise. The Warrant
-3-
<PAGE>
Shares issued upon exercise thereof shall be imprinted with legends in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT THERETO UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT AND COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
4. Notices of Record Date. In case:
(a) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution (other than a dividend or
distribution payable solely in capital stock of the Company or out of funds
legally available therefor), or to receive any right to subscribe for or
purchase any shares of any class or any other securities, or to receive any
other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice, provided
that the failure to mail such notice shall not affect the legality or validity
of any such action.
-4-
<PAGE>
5. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such shares of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
6. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
7. Transfers, etc.
(a) The Company will maintain or cause to be maintained a
register containing the names and addresses of the Registered Holders of this
Warrant. Any Registered Holder may change its, his or her address as shown on
the warrant register by written notice to the Company requesting such change.
(b) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
8. No Rights as Shareholder. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
9. Change or Waiver. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
10. Headings. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
11. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Nevada as such laws are applied to
contracts made and to be fully performed entirely within that state between
residents of that state.
12. Mailing of Notices, etc. All notices and other communications under
this Warrant (except payment) shall be in writing and shall be sufficiently
given if delivered to the addressees in person, by Federal Express or similar
receipt delivery, by facsimile delivery or, if mailed, postage prepaid, by
certified mail, return receipt requested, as follows:
-5-
<PAGE>
Registered Holder: To his or her address on page 1 of this Warrant.
The Company: Infocast Corporation
One Richmond Street West
Suite 901
Toronto, Ontario M5H3W4
Canada
Attn: A.T. Griffis
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attn: Jeffrey S. Spindler, Esq.
or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or by mailing.
INFOCAST CORPORATION
By: /s/ A.T. Griffis
-------------------------------------
Name:
Title:
-6-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: Infocast Corporation
One Richmond Street West
Suite 901
Toronto, Ontario M5H3W4
Canada
1. The undersigned hereby elects to purchase _______ shares of the
Common Stock of Infocast Corporation, pursuant to terms of the attached Warrant,
and tenders herewith payment of $________ in payment of the purchase price of
such shares in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of the Common Stock in the name of the undersigned or in such other name as is
specified below:
3. The undersigned represents that it will sell the shares of Common
Stock only pursuant to an effective Registration Statement under the Securities
Act of 1933, as amended, or an exemption from registration thereunder.
(Name)
(Address)
(Taxpayer Identification Number)
[print name of Registered Holder]
By:
Title:
Date:
-7-
INFOCAST CANADA CORPORATION
PROVISIONS ATTACHING TO COMMON SHARES
The Common Shares in the capital of the Corporation shall have the following
rights, privileges, restrictions and conditions:
1. Voting Rights. Each holder of Common Shares shall be entitled to
receive notice of and to attend all meetings of shareholders of the Corporation
and to vote thereat, except meetings at which only holders of a specified class
of shares (other than Common Shares) or specified series of shares are entitled
to vote. At all meetings of which notice must be given to the holders of the
Common Shares, each holder of Common Shares shall be entitled to one vote in
respect of each Common Share held by such holder.
2. Dividends. The holders of the Common Shares shall be entitled,
subject to the rights, privileges, restrictions and conditions attaching to any
other class of shares of the Corporation, to receive any dividend declared by
the Corporation.
3. Liquidation. Dissolution or Winding-up. The holders of the Common
Shares shall be entitled, subject to the rights, privileges, restrictions and
conditions attaching to any other class of shares of the Corporation, to receive
the remaining property of the Corporation on a liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary.
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the Corporation shall have the
following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"Affiliate" and "control" have the respective meanings ascribed thereto in the
OBCA.
"Board of Directors" means the Board of Directors of the Corporation.
<PAGE>
"Business Day" means any day other than a Saturday, a Sunday or a day when
Canadian chartered banks are not open for business in Toronto, Ontario.
"Canadian Dollar Equivalent" means in respect of a dollar amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the Board of Directors to be
appropriate for such purpose.
"Common Shares" means the Common Shares of the Corporation.
"Corporation" means this Corporation.
"Exchange Agreement" means an exchange agreement among InfoCast Canada, InfoCast
Corporation and a holder of Exchangeable Shares.
"Exchangeable Shares" mean the Exchangeable Shares of the Corporation having the
rights, privileges, restrictions and conditions set forth herein.
"InfoCast" means InfoCast Corporation, a corporation organized and existing
under the laws of the State of Nevada and any successor corporation thereof.
"InfoCast Call Notice" has the meaning ascribed thereto in Section 5.3 of these
share provisions.
"InfoCast Common Shares" means the shares of common stock of InfoCast and any
other securities into which such shares may be changed.
"InfoCast Dividend Declaration Date" means the date on which the board of
directors of InfoCast declares any cash dividend on the InfoCast Common Shares.
"Liquidation Amount" has the meaning ascribed thereto in Section 4.1 of these
share provisions.
"Liquidation Call Right" has the meaning ascribed thereto in the Exchange
Agreement.
"Liquidation Date" has the meaning ascribed thereto in Section 4.1 of these
share provisions.
"OBCA" means the Business Corporations Act (Ontario) as the same may be amended
from time to time.
"Purchase Price" has the meaning ascribed thereto in Section 5.3 of these share
provisions.
<PAGE>
"Redemption Call Right" has the meaning ascribed thereto in the Exchange
Agreement.
"Redemption Date" has the meaning ascribed thereto in Section 6.2 of these share
provisions.
"Redemption Price" has the meaning ascribed thereto in Section 6.1 of these
share provisions.
"Retracted Shares" has the meaning ascribed thereto in Section 5.1 of these
share provisions.
"Retraction Call Right" has the meaning ascribed thereto in Section 5.1 of these
share provisions.
"Retraction Date" has the meaning ascribed thereto in Section 5.1 of these share
provisions.
"Retraction Price" has the meaning ascribed thereto in Section 5.1 of these
share provisions.
"Retraction Request" has the meaning ascribed thereto in Section 5. l of these
share provisions.
"Triggering Event" has the meaning ascribed thereto in the Exchange Agreement.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall, with respect to the
payment of dividends and the distribution of assets
in the event of the liquidation, dissolution or
winding-up of the Corporation, whether voluntary or
involuntary, or any other distribution of the assets
of the Corporation among its shareholders for the
purpose of winding up its affairs, rank pari passu
with Common Shares and any other shares of the
Corporation.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled
to receive such dividends and distributions, as if
they held one InfoCast Common Share for each
Exchangeable Share.
3.2 Cheques of the Corporation payable at par at any
branch of the bankers of the Corporation shall be
issued in respect of any cash dividends contemplated
by Section 3.1 hereof and the sending of such a
cheque to each holder of an Exchangeable Share shall
satisfy the cash dividend represented
<PAGE>
thereby unless the cheque is not paid on
presentation. Certificates registered in the name of
the registered holder of Exchangeable Shares shall be
issued in respect of any stock distributions
contemplated by Section 3.1 hereof and the sending of
such a certificate to each holder of an Exchangeable
Share shall satisfy the stock distribution
represented thereby. No holder of an Exchangeable
Share shall be entitled to recover by action or other
legal process against the Corporation any dividend
that is represented by a cheque that has not been
duly presented to the Corporation's bankers for
payment or that otherwise remains unclaimed for a
period of six years from the date on which such
dividend was payable.
ARTICLE 4
DISTRIBUTION ON LIQUIDATION
4.1 In the event of the liquidation, dissolution or
winding-up of the Corporation or any other
distribution of the assets of the Corporation among
its shareholders for the purpose of winding up its
affairs, a holder of Exchangeable Shares shall be
entitled, subject to applicable law, to receive from
the assets of the Corporation in respect of each
Exchangeable Share held by such holder on the
effective date (the "Liquidation Date") of such
liquidation, dissolution or winding-up, an amount per
share equal to the fair market value of a InfoCast
Common Share on the last Business Day prior to the
Liquidation Date which shall be satisfied in full by
the Corporation causing to be delivered to such
holder one InfoCast Common Share (the "Liquidation
Amount").
4.2 On or promptly after the Liquidation Date (and
subject to the exercise by InfoCast of the
Liquidation Call Right), the Corporation shall cause
to be delivered to the holders of the Exchangeable
Shares the Liquidation Amount (less any tax required
to be deducted and withheld therefrom by the
Corporation) for each such Exchangeable Share upon
presentation and surrender of the certificates
representing such Exchangeable Shares together with
such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares
under the OBCA and the by-laws of the Corporation and
such additional documents and instruments as the
Corporation may reasonably require, at the registered
office of the Corporation. Payment of the total
Liquidation Amount for such Exchangeable Shares shall
be made by delivery to each holder, at the address of
the holder recorded in the securities register of the
Corporation for the Exchangeable Shares or by holding
for pick up by the holder at the registered
<PAGE>
office of the Corporation, on behalf of the
Corporation of certificates representing InfoCast
Common Shares (less any tax required to be deducted
and withheld therefrom by the Corporation). On and
after the Liquidation Date, the holders of the
Exchangeable Shares shall cease to be holders of such
Exchangeable Shares and shall not be entitled to
exercise any of the rights of holders in respect
thereof, other than the right to receive their
proportionate part of the total Liquidation Amount
unless payment of the total Liquidation Amount for
such Exchangeable Shares shall not be made upon
presentation and surrender of share certificates in
accordance with the foregoing provisions, in which
case the rights of the holder shall remain unaffected
until the total Liquidation Amount has been paid in
the manner hereinbefore provided. The Corporation
shall have the right at any time on or after the
Liquidation Date to deposit or cause to be deposited
in trust for the holders of the Exchangeable Shares
the total Liquidation Amount in respect of the
Exchangeable Shares represented by certificates that
have not at the Liquidation Date been surrendered by
the holders thereof in a custodial account with any
chartered bank or trust company in Canada. Upon such
deposit being made, the rights of the holders of
Exchangeable Shares after such deposit shall be
limited to receiving their proportionate part of the
total Liquidation Amount so deposited (less any tax
required to be deducted and withheld therefrom)
without interest for such Exchangeable Shares against
presentation and surrender of the said certificates
held by them, respectively, in accordance with the
foregoing provisions. The Corporation is hereby
authorized to sell or otherwise dispose of such
portion of the property then payable to the holder as
is necessary to provide sufficient funds to the
Corporation in order to enable it to comply with such
deduction or withholding requirement and the
Corporation shall give an accounting to the holder
with respect thereto and any balance of such proceeds
of sale.
4.3 After the Corporation has satisfied its obligations
to pay the holders of the Exchangeable Shares the
Liquidation Amount per Exchangeable Share pursuant to
Section 4.1 of these share provisions, such holders
shall not be entitled to share in any further
distribution of the assets of the Corporation.
ARTICLE 5
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
5.1 A holder of Exchangeable Shares shall be entitled at
any time, subject to applicable law and otherwise
upon compliance with the provisions of this Article
5, to require the Corporation to redeem any or all of
the Exchangeable
<PAGE>
Shares registered in the name of such holder for an
amount per share equal to the fair market value of an
InfoCast Common Share on the last Business Day prior
to the Retraction Date, which shall be satisfied in
full by the Corporation causing to be delivered to
such holder one InfoCast Common Share for each
Exchangeable Share presented and surrendered by the
holder (collectively the "Retraction Price"). To
effect such redemption, the holder shall present and
surrender at the registered office of the Corporation
the certificate or certificates representing the
Exchangeable Shares which the holder desires to have
the Corporation redeem, together with such other
documents and instructions as may be required to
effect a transfer of Exchangeable Shares under the
OBCA and the by-laws of the Corporation and such
additional documents and instruments as the
Corporation may reasonably require together with a
duly executed statement (the "Retraction Request"):
(a) specifying that the holder desires to have
all or any number specified therein of the
Exchangeable Shares represented by such
certificate or certificates (the "Retracted
Shares") redeemed by the Corporation and
representing and warranting that the holder
has good title to and owns such shares free
and clear of all liens, claims and
encumbrances;
(b) stating the Business Day on which the holder
desires to have the Corporation redeem the
Retracted Shares (the "Retraction Date"),
provided that the Retraction Date shall be
not less than 5 Business Days nor more than
30 Business Days after the date on which the
Retraction Request is received by the
Corporation and further provided that, in
the event that no such Business Day is
specified by the holder in the Retraction
Request, the Retraction Date shall be deemed
to be the twentieth Business Day after the
date on which the Retraction Request is
received by the Corporation; and
(c) acknowledging the overriding right (the
"Retraction Call Right") of InfoCast to
purchase all but not less than all the
Retracted Shares directly from the holder.
A holder of Retracted Shares may, by notice in
writing (the "Withdrawal Notice") given by the holder
to the Corporation and InfoCast before the close of
business on the Business Day immediately preceding
the Retraction Date, withdraw its Retraction Request
in whole, or as to the number of shares stipulated in
the Withdrawal Notice in which event such Retraction
Request shall be deemed to have been withdrawn or to
have been withdrawn as to the
<PAGE>
shares stipulated in the Withdrawal Notice, as the
case may be, provided that in respect of such
Withdrawal Notice the holder reimburses the
Corporation and InfoCast for any expenses incurred in
respect of the withdrawal of such Retraction Request
pro rata based on the number of Retracted Shares
stipulated in the Withdrawal Notice.
5.2 Subject to the exercise by InfoCast of the Retraction
Call Right upon receipt by the Corporation in the
manner specified in Section 5.1 hereof of a
certificate or certificates representing the number
of Exchangeable Shares which the holder desires to
have the Corporation redeem; together with a
Retraction Request, the Corporation shall redeem the
Retracted Shares effective at the close of business
on the Retraction Date and shall cause to be
delivered to such holder the total Retraction Price
with respect to such shares on the Retraction Date.
If only a part of the Exchangeable Shares represented
by any certificate are redeemed (or purchased by
InfoCast pursuant to the Retraction Call Right), a
new certificate for the balance of such Exchangeable
Shares shall be issued to the holder by the
Corporation.
5.3 Upon receipt by the Corporation of a Retraction
Request, the Corporation shall immediately notify
InfoCast thereof. In order to exercise the Retraction
Call Right, InfoCast must notify the Corporation in
writing of InfoCast's determination to do so (the
"InfoCast Call Notice") in accordance with the
provisions of the Exchange Agreement. If InfoCast
does not so notify the Corporation, the Corporation
will notify the holder as soon as possible thereafter
that InfoCast will not exercise the Retraction Call
Right. If InfoCast delivers the InfoCast Call Notice,
the Retraction Request shall thereupon be considered
only to be an offer by the holder to sell the
Retracted Shares to InfoCast in accordance with the
Retraction Call Right. In such event the Corporation
shall not redeem the Retracted Shares and InfoCast
shall purchase from such holder and such holder shall
sell to InfoCast on the Retraction Date the Retracted
Shares for a purchase price (the "Purchase Price")
per share equal to the Retraction Price per share.
For the purposes of completing a purchase pursuant to
the Retraction Call Right, InfoCast shall deposit
with the Corporation or a Canadian trust company, in
trust for such holder, on or before the Retraction
Date, certificates representing InfoCast Common
Shares. Provided that the total Purchase Price has
been so deposited with the Corporation, the closing
of the purchase and sale of the Retracted Shares
pursuant to the Retraction Call Right shall be deemed
to have occurred as at the close of business on the
Retraction Date and, for greater certainty, no
redemption by the Corporation of such Retracted
Shares shall take place on the Retraction Date. In
the event that
<PAGE>
InfoCast does not deliver an InfoCast Call Notice or
fails to deposit with the Corporation the
consideration for the Retracted Shares, the
Corporation shall redeem the Retracted Shares on the
Retraction Date and in the manner otherwise
contemplated in this Article 5.
5.4 The Corporation or InfoCast, as the case may be,
shall deliver to the relevant holder, at the address
specified in the holder's Retraction Request or if
not so specified, at the address of the holder
recorded in the securities register of the
Corporation for the Exchangeable Shares or by holding
for pick up by the holder at the registered office of
the Corporation, certificates representing the
InfoCast Common Shares registered in the name of the
holder or in such other name as the holder may
request in payment of the total Retraction Price or
the total Purchase Price, as the case may be (less
any tax required to be deducted and withheld
therefrom by the Corporation) and such delivery of
such certificates on behalf of the Corporation or
InfoCast, as the case may be, by the Corporation
shall be deemed to be payment of and shall satisfy
and discharge all liability of the Corporation or
InfoCast, as the case may be, to the extent that the
same is represented by such share certificates (less
any tax required and in fact deducted and withheld
therefrom and remitted to the proper tax authority).
The Corporation or InfoCast, as the case may be, is
hereby authorized to sell or otherwise dispose of
such portion of the property then payable to the
holder as is necessary to provide sufficient funds to
the Corporation or InfoCast in order to enable it to
comply with such deduction or withholding requirement
and shall give an accounting to the holder with
respect thereto and any balance of such proceeds of
sale.
5.5 On and after the close of business on the Retraction
Date, the holder of the Retracted Shares shall cease
to be a holder of such Retracted Shares and shall not
be entitled to exercise any of the rights of a holder
in respect thereof, other than the right to receive
the total Retraction Price or total Purchase Price,
as the case may be, to which such holder is entitled
unless upon presentation and surrender of
certificates in accordance with the foregoing
provisions, payment of the total Retraction Price or
the total Purchase Price, as the case may be, shall
not be made, in which case the rights of such holder
shall remain unaffected until the total Retraction
Price or the total Purchase Price, as the case may
be, has been paid in the manner hereinbefore
provided.
5.6 Notwithstanding any other provision of this Article
5, the Corporation shall not be obligated to redeem
Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption
of Retracted Shares
<PAGE>
would be contrary to solvency requirements or other
provisions of applicable law, including, without
limitation, applicable securities laws. If the
Corporation believes that on any Retraction Date it
would not be permitted by any of such provisions to
redeem the Retracted Shares tendered for redemption
on such date and provided that InfoCast shall not
have exercised the Retraction Call Right with respect
to the Retracted Shares, the Corporation shall only
be obligated to redeem Retracted Shares specified by
a holder in a Retraction Request to the extent of the
maximum number that may be so redeemed (rounded down
to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at
least two Business Days prior to the Retraction Date
as to the number of Retracted Shares which will not
be redeemed by the Corporation. In any case in which
the redemption by the Corporation of all of the
Retracted Shares would be contrary to solvency
requirements or other provisions of applicable law,
the Corporation shall redeem that number of Retracted
Shares permitted without contravening such provision
in accordance with Section 5.2 of these share
provisions on a pro rata basis and shall issue to
each holder of Retracted Shares a new certificate, at
the expense of the Corporation, representing the
Retracted Shares not redeemed by the Corporation
pursuant to Section 5.2 hereof. The holder of any
such Retracted Shares not redeemed by the Corporation
pursuant to Section 5.2 of these share provisions as
a result of solvency requirements or other provisions
of applicable law shall be deemed by giving the
Retraction Request to require InfoCast to purchase
such Retracted Shares from such holder on the
Retraction Date or as soon as practicable thereafter
on payment by InfoCast to such holder of the Purchase
Price for each such Retracted Share.
ARTICLE 6
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
6.1 Subject to applicable law and to the right of a
holder to require the Corporation to redeem
Exchangeable Shares pursuant to Article 5 hereof, and
subject (in any case) to the exercise by InfoCast of
the Redemption Call Right, the Corporation may, at
any time on or after the first to occur of any of the
Triggering Events, redeem all of the then outstanding
Exchangeable Shares for an amount per share equal to
the fair market value of an InfoCast Common Share on
the last Business Day prior to the Redemption Date
which shall be satisfied in full by the Corporation
causing to be delivered to the holder of each
Exchangeable Share one InfoCast Common Share (the
"Redemption Price").
<PAGE>
6.2 In any case of any redemption of Exchangeable Shares
under this Article 6, the Corporation shall, at least
30 days before the date set for redemption by the
Corporation (the "Redemption Date"), send or cause to
be sent to each holder of Exchangeable Shares to be
redeemed a notice in writing of the redemption by the
Corporation or the purchase by InfoCast under the
Redemption Call Right, as the case may be, of the
Exchangeable Shares held by such holder. Such notice
shall set out the formula for determining the
Redemption Price or the Redemption Call Purchase
Price as the case may be, the Redemption Date, and,
if applicable, particulars of the Redemption Call
Right. On or after the Redemption Date and subject to
the exercise by InfoCast of the Redemption Call
Right, the Corporation shall cause to be delivered to
the holders of the Exchangeable Shares to be redeemed
the Redemption Price (less any tax required to be
deducted and withheld therefrom by the Corporation)
for each such Exchangeable Share upon presentation
and surrender at the registered office of the
Corporation, together with such other documents and
instruments as may be required to effect a transfer
of Exchangeable Shares under the OBCA and the by-laws
of the Corporation and such additional documents and
instruments as the Corporation may reasonably
require. Payment of the total Redemption Price for
such Exchangeable Shares shall be made by delivery to
each holder, at the address of the holder recorded in
the securities register of the Corporation or by
holding for pick up by the holder at the registered
office of the Corporation, certificates representing
InfoCast Common Shares (less any tax required to be
deducted and withheld therefrom by the Corporation)
without interest in respect of the Redemption Price,
as the case may be. On and after the Redemption Date,
the holders of the Exchangeable Shares called for
redemption shall cease to be holders of such
Exchangeable Shares and shall not be entitled to
exercise any of the rights of holders in respect
thereof, other than the right to receive their
proportionate part of the total Redemption Price,
unless payment of the total Redemption Price for such
Exchangeable Shares shall not be made upon
presentation and surrender of certificates in
accordance with the foregoing provisions, in which
case the rights of the holders with respect to those
Exchangeable Shares as to which the Redemption Price
has not been paid shall remain unaffected until the
total Redemption Price with respect thereto has been
paid in the manner hereinbefore provided. The
Corporation shall have the right at any time after
the sending of notice of its intention to redeem
Exchangeable Shares as aforesaid to deposit or cause
to be deposited in trust for the holders of the
Exchangeable Shares, the total Redemption Price of
the Exchangeable Shares so called for redemption, or
of such of the said Exchangeable Shares represented
by certificates that have not at the date of such
deposit been
<PAGE>
surrendered by the holders thereof in connection with
such redemption, in a custodial account with any
chartered bank or trust company in Canada named in
such notice. Upon the later of such deposit being
made and the Redemption Date, the Exchangeable Shares
in respect whereof such deposit shall have been made
shall be redeemed and the rights of the holders
thereof after such deposit or Redemption Date, as the
case may be, shall be limited to receiving their
proportionate part of the total Redemption Price so
deposited (less any tax required to be deducted and
withheld therefrom by the Corporation) without
interest for such Exchangeable Shares against
presentation and surrender of the said certificates
held by them, respectively, in accordance with the
foregoing provisions. The Corporation is hereby
authorized to sell or otherwise dispose of such
portion of the property then payable to the holder as
is necessary to provide sufficient funds to the
Corporation in order to enable it to comply with such
deduction or withholding requirement and shall give
an accounting to the holder with respect thereto and
any balance of such proceeds of sale.
ARTICLE 7
VOTING RIGHTS
7.1 The holders of the Exchangeable Shares shall be
entitled to receive notice of and to attend and vote
together with the holders of Common Shares as a class
at all meetings of the shareholders of the
Corporation and at such meetings, each holder of
Exchangeable Shares shall be entitled to one vote per
Exchangeable Share.
ARTICLE 8
AMENDMENT AND APPROVAL
8.1 The rights, privileges, restrictions and conditions
attaching to the Exchangeable Shares may be added to,
changed or removed but only with the approval of the
holders of the Exchangeable Shares given as
hereinafter specified.
8.2 Any approval given by the holders of the Exchangeable
Shares to add to, change or remove any right
privilege, restriction or condition attaching to the
Exchangeable Shares or any other matter requiring the
approval or consent of the holders of the
Exchangeable Shares shall be deemed to have been
sufficiently given if it shall have been given in
accordance with
<PAGE>
applicable law subject to a minimum requirement that
such approval be evidenced by resolution passed by
not less than two-thirds of the votes cast on such
resolution at a meeting of holders of Exchangeable
Shares duly called and held at which the holders of
at least 50% of the outstanding Exchangeable Shares
at that time are present or represented by proxy;
provided that if at any such meeting the holders of
at least 50% of the outstanding Exchangeable Shares
at that time are not present or represented by proxy
within one-half hour after the time appointed for
such meeting then the meeting shall be adjourned to
such date not less than 10 days thereafter and to
such time and place as may be designated by the Chair
of such meeting. At such adjourned meeting the
holders of Exchangeable Shares present or represented
by proxy thereat may transact the business for which
the meeting was originally called and a resolution
passed thereat by the affirmative vote of not less
than two-thirds of the votes cast on such resolution
at such meeting shall constitute the approval or
consent of the holders of the Exchangeable Shares.
ARTICLE 9
LEGEND
9.1 The certificates evidencing the Exchangeable Shares
shall contain or have affixed thereto a legend, in
form and on terms approved by the Board of Directors,
with respect to the Exchange Agreement and any
restrictions of applicable securities law.
ARTICLE 10
NOTICES
10.1 Any notice, request or other communication to be
given to the Corporation by a holder of Exchangeable
Shares shall be in writing and shall be valid and
effective if given by facsimile or by delivery to the
registered office of the Corporation and addressed to
the attention of the President. Any such notice,
request or other communication, if given by facsimile
or delivery, shall only be deemed to have been given
and received upon actual receipt thereof by the
Corporation.
10.2 Any presentation and surrender by a holder of
Exchangeable Shares to the Corporation of
certificates represent Exchangeable Shares in
connection with the liquidation, dissolution or
winding up of the Corporation
<PAGE>
or the retraction or redemption of Exchangeable
Shares shall be made by delivery to the registered
office of the Corporation addressed to the attention
of the President of the Corporation. Any such
presentation and surrender of certificates shall only
be deemed to have been made and to be effective upon
actual receipt thereof by the Corporation.
10.3 Any notice, request or other communication to be
given to a holder of Exchangeable Shares by or on
behalf of the Corporation shall be in writing and
shall be valid and effective if given by delivery to
the address of the holder recorded in the securities
register of the Corporation or, in the event of the
address of any such holder not being so recorded,
then at the last known address of such holder. Any
such notice, request or other communication, if given
by delivery, shall be deemed to have been given and
received on the date of delivery. Accidental failure
or omission to give any notice, request or other
communication to one or more holders of Exchangeable
Shares shall not invalidate or otherwise alter or
affect any action or proceeding to be taken by the
Corporation pursuant thereto.
<PAGE>
8. The issue, transfer or ownership of shares
is/is not restricted and the restrictions
(if any) are as follows:
No shareholder of the Corporation shall be entitled to transfer any share or
shares of the Corporation without either
(a) the consent of the holders of more than fifty per cent of the Common Shares
and Exchangeable Shares for the time being outstanding expressed by a resolution
passed by the votes of the holders of more than fifty per cent of the Common
Shares and Exchangeable Shares for the time being outstanding at a meeting of
the holders of the Common Shares and Exchangeable Shares or by a resolution in
writing signed by all the holders of the Common Shares and Exchangeable Shares
for the time being outstanding or by an instrument or instruments in writing
signed by the holders of more than fifty per cent of the Common Shares and
Exchangeable Shares for the time being outstanding; or
(b) the consent of the directors of the Corporation expressed by a resolution
passed by the votes of a majority of the directors of the Corporation at a
meeting of the board of directors of the Corporation or by a resolution in
writing signed by all the directors of the Corporation or by an instrument or
instruments in writing signed by a majority of directors of the Corporation.
<PAGE>
9. Other provisions, if any, are: Autres dispositions, s'il y a lieu:
The following provisions apply to the Corporation:
(a) The directors of the Corporation may, without authorization of the
shareholders of the Corporation,
(i) borrow money upon the credit of the Corporation;
(ii) issue, reissue, sell or pledge debt obligations of the Corporation;
(iii) give a guarantee on behalf of the Corporation to secure performance
of an obligation of any person; and
(iv) mortgage, hypothecate, pledge or otherwise create a security
interest in all or any property of the Corporation, owned or subsequently
acquired, to secure any obligation of the Corporation.
The directors may by resolution delegate any one or all of the powers
referred to in this clause to a director, a committee of directors or an officer
of the Corporation.
(b) The number of shareholders of the Corporation, exclusive of persons who are
in its employment and exclusive of persons who, having been formerly in the
employment of the Corporation, were, while in that employment, and have
continued after termination of that employment to be, shareholders of the
Corporation, is hereby 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.
(c) Any invitation to the public to subscribe for securities in the Corporation
is prohibited.
(d) Except where specifically provided under article 7 of these articles of
incorporation, the holders of shares of a class or of a series of the
Corporation are not entitled to vote separately as a class or series and are not
entitled to dissent, upon a proposal to amend the articles to:
(i) increase or decrease any maximum number of authorized shares of
such class or series, or increase any maximum number of authorized shares of a
class or series having rights or privileges equal or superior to the shares of
such class or series;
(ii) effect an exchange, reclassification or cancellation of the shares
of such class or series; or
(iii) create a new class or series of shares equal or superior to the
shares of such class or series.
EXCHANGE AGREEMENT
This Exchange Agreement (this "Agreement"), dated as of May 13, 1999, is entered
into by and among Homebase Work Solutions Ltd., on behalf of each of the parties
set out on Schedule "A" attached hereto (each such person or entity is referred
to herein as a "Shareholder" and such individuals or entities are referred to
herein collectively as the "Shareholders"), InfoCast Canada Corporation, an
Ontario corporation (the "Corporation") and InfoCast Corporation, a Nevada
corporation ("InfoCast");
WITNESSETH:
WHEREAS pursuant to a share purchase agreement and related letters of
transmittal contemplated thereby (collectively, the "Purchase Agreement") dated
as of the 13th day of May, 1999 by and among the Shareholders, the Corporation
and InfoCast, the parties agreed that they would execute and deliver this
Exchange Agreement;
AND WHEREAS pursuant to the Purchase Agreement, as consideration for the
purchase of all of the issued and outstanding securities of Homebase Work
Solutions Ltd., the Corporation issued 3,400,000 exchangeable shares of the
Corporation (each an "Exchangeable Share" and collectively the "Exchangeable
Shares");
AND WHEREAS the articles of incorporation of the Corporation set forth the
rights, privileges, restrictions and conditions (collectively, the "Exchangeable
Share Provisions") attaching to the Exchangeable Shares;
AND WHEREAS InfoCast is the registered and beneficial owner of 10,000,000 common
shares of the Corporation, being all OF THE issued and outstanding common shares
of the Corporation as of the date hereof;
AND WHEREAS the Shareholders are the registered and beneficial owners of
3,400,000 Exchangeable Shares;
AND WHEREAS Homebase has full power and authority to execute and deliver this
Agreement by and on behalf of each of the Shareholders;
AND WHEREAS the Shareholders have agreed to grant InfoCast the right to purchase
the Exchangeable Shares on the terms and subject to the conditions set out
herein;
NOW THEREFORE in consideration of the premises and mutual agreements and
covenants herein contained (the receipt and adequacy of which consideration as
to each of the parties hereto are hereby mutually acknowledged), the parties
hereto hereby covenant and agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. All capitalized terms used in this Agreement shall, unless
otherwise defined herein, have the meanings given to them in the Exchangeable
Share Provisions. In addition, the following terms shall have the following
meanings:
"Automatic Exchange Right" means the benefit of the obligation of InfoCast to
effect the automatic exchange of Exchangeable Shares for InfoCast Common Shares
pursuant to section 2.10.
"Insolvency Event" means the institution by the Corporation of any proceeding to
be adjudicated a bankrupt or insolvent or to be dissolved or wound up, or the
consent of the Corporation to the institution of bankruptcy, insolvency,
dissolution, restructuring or winding up proceedings against it, or the filing
of a petition, answer or consent seeking dissolution or winding up under any
bankruptcy, insolvency or analogous laws, including without limitation the
Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency
Act (Canada), and the failure by the Corporation to contest in good faith any
such proceedings commenced in respect of the Corporation within 15 days of
becoming aware thereof, or the consent by the Corporation to the filing of any
such petition or to the appointment of a receiver, or the making by the
Corporation of a general assignment for the benefit of creditors, or the
admission in writing by the Corporation of its inability to pay its debts
generally as they become due, or the Corporation not being permitted, pursuant
to solvency requirements of applicable law, to redeem any Retracted Shares
pursuant to Section 5.1 of the Exchangeable Share Provisions.
1.2 Interpretation not Affected by Headings, etc. The division of this Agreement
into articles, sections and paragraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.3 Number, Gender, etc. Words importing the singular number only shall include
the plural and vice versa. Words importing the use of any gender shall include
all genders.
1.4 Date for any Action. In the event that any date on or by which any action as
required or permitted to be taken under this Agreement is not a Business Day,
such action shall be required or permitted to be taken on or by the next
succeeding Business Day. For the purposes of this Agreement, a "Business Day"
means any day other than a Saturday, Sunday or a day when banks are not open for
business in either or both of New York, New York or Toronto, Ontario.
-2-
<PAGE>
ARTICLE 2
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
2.1 Grant and Ownership of the Exchange Right. InfoCast hereby grants to
the Shareholders, subject to the provisions of applicable law (including
applicable securities laws), the right (the "Exchange Right"), upon the
occurrence and during the continuance of an Insolvency Event or in the case of a
Triggering Event (such term having the meaning ascribed thereto in Section 3.3
hereof), to require InfoCast to purchase from each or any Shareholder all but
not less than all of the Exchangeable Shares held by the Shareholder and hereby
grants to the Shareholders the Automatic Exchange Right, all in accordance with
the provisions of this Agreement.
2.2 Legended Share Certificates. The Corporation will cause each
certificate representing the Exchangeable Shares to bear a legend as follows:
The shares represented by this Certificate:
(i) are subject to the terms and conditions of an Exchange Agreement (the
"Agreement") and Support Agreement, both of which are dated May 13,
1999, and are between the Corporation, InfoCast and various other
parties;
(ii) provide the holder with an Exchange Right and Automatic Exchange Right,
as defined in the Agreement (collectively the "Rights"), which Rights
may be exercised in accordance with the Agreement;
(iii) have been issued pursuant to exemptions from the registration and
prospectus requirements of each of the Securities Act (Ontario) and
Securities Act (Alberta) and are therefore subject to resale
restrictions; and
(iv) have not been registered under the Securities Act of 1933, as amended,
and may not be resold or otherwise transferred unless they are either
registered under said Act or sold or otherwise transferred pursuant to
an exemption from such registration requirements.
2.3 Purchase Price. The purchase price payable by InfoCast for each Exchangeable
Share to be purchased by InfoCast under the Exchange Right shall be one (1)
InfoCast Common Share plus that additional consideration set out below. The
purchase of such Exchangeable Share may be satisfied only by InfoCast delivering
to the relevant Shareholder that number of InfoCast Common Shares equal to the
number of Exchangeable Shares so purchased plus (i) an additional amount equal
to the full amount of all cash dividends declared, payable and unpaid on such
Exchangeable Share and all undeclared but payable cash dividends payable on such
Exchangeable Share, plus (ii) an additional amount equal to all dividends
declared and paid on the InfoCast Common Stock which have not been declared on
the Exchangeable Shares in accordance herewith or with the Exchangeable Share
Provisions, plus (iii) an additional amount representing any non-cash dividends
declared, payable and unpaid on such Exchangeable Share ("Additional
Consideration"). In connection with the foregoing, notwithstanding the terms of
the Exchangeable Share Provisions, InfoCast hereby waives
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its right to participate pari passu with the Exchangeable Shares with respect to
the payment of dividends and the distribution of assets in the event of the
liquidation, dissolution or wind-up of the Corporation, whether voluntary or
involuntary, or any other distribution of the assets of the Corporation among
its shareholders for the purpose of winding-up its affairs, and hereby
irrevocably acknowledges and agrees that the Exchangeable Shares held by the
Shareholders shall be entitled to a preference over the Common Shares and any
other shares ranking junior to the Exchangeable Shares with respect to the
payment of dividends and the distribution of assets in the event of the
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary, or any other distribution of the assets of the Corporation, among
its shareholders for kite purpose of winding-up its affairs. The foregoing
priority shall also apply between the parties with respect to any Liquidation
Amount, Redemption Price and Retraction Price, notwithstanding any provisions in
the Exchangeable Share Provisions to the contrary.
2.4 Exercise Instructions. Subject to the terms and conditions herein set forth,
a Shareholder shall be entitled, upon the occurrence and during the continuance
of an Insolvency Event or Triggering Event, to exercise the Exchange Right with
respect to all but not less than all of the Exchangeable Shares registered in
the name of such Shareholder on the books of the Corporation, subject to
applicable securities laws. To exercise the Exchange Right, the Shareholder
shall deliver to InfoCast in person, by courier service or by certified or
registered mail, the certificates representing all of the Exchangeable Shares
registered in the name of such Shareholder, duly endorsed in blank, and
accompanied by such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the Business Corporations Act (Ontario)
and the by-laws of the Corporation and such additional documents and instruments
as InfoCast may reasonably require (including evidence reasonably satisfactory
to InfoCast that the holder of Exchangeable Shares is not a non-resident of
Canada within the meaning of the Income Tax Act (Canada) or a Section 1 16
certificate with a certificate limit in the payment amount) together with (a) a
duly completed form of notice of exercise of the Exchange Right, contained on
the reverse of or attached to the Exchangeable Share certificates, stating (i)
that the Shareholder thereby exercises the Exchange Right so as to require
InfoCast to purchase from the Shareholder the Exchangeable Shares specified
therein, (ii) that such Shareholder has good title to and owns all such
Exchangeable Shares to be acquired by InfoCast free and clear of all liens,
claims and encumbrances, (iii) the names in which the certificates representing
InfoCast Common Shares deliverable in connection with the exercise of the
Exchange Right are to be issued and (iv) the names and addresses of the persons
to whom such new certificates should be delivered and (b) payment (or evidence
satisfactory to the Corporation and InfoCast of payment) of the taxes (if any)
payable as contemplated by section 2.7 of this Agreement.
2.5 Delivery of InfoCast Common Shares; Effect of Exercise. Promptly after
receipt of the certificates representing all of the Exchangeable Shares
registered in the name of the Shareholder together with such documents and
instruments of transfer and a duly completed form of notice of exercise of the
Exchange Right (and payment of taxes, if any, or evidence thereto), duly
endorsed
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for transfer to InfoCast, InfoCast shall as soon as practicable thereafter, and
in any event within four business days, deliver to the Shareholder (or to such
other persons, if any, properly designated by such Shareholder), the
certificates for the number of InfoCast Common Shares deliverable in connection
with the exercise of the Exchange Right, which shares shall be duly issued as
fully paid and non-assessable and free and clear of any lien, claim,
encumbrance, security interest or adverse claim (other any such lien, claim,
encumbrance, security interest or adverse claim arising as a result of any
action or inaction by a Shareholder), and the Additional Consideration, if any,
the closing of the transaction of purchase and sale contemplated by the Exchange
Right shall be deemed to have occurred, and the holder of such Exchangeable
Shares shall be deemed to have transferred to InfoCast all of its right, title
and interest in and to such Exchangeable Shares and shall cease to be a holder
of such Exchangeable Shares and shall not be entitled to exercise any of the
rights of a holder in respect thereof, other than the right to receive his
proportionate part of the total purchase price therefor, unless the requisite
number of InfoCast Common Shares is not allotted, issued and delivered by
InfoCast to such Shareholder (or to such other persons, if any, properly
designated by such Shareholder), within twenty Business Days of the date of
exercise, in which case the rights of the Shareholder shall remain unaffected
until such InfoCast Common Shares are so allotted, issued and delivered by
InfoCast. Concurrently with such Shareholder ceasing to be a holder of
Exchangeable Shares, the Shareholder shall be considered and deemed for all
purposes to be the holder of InfoCast Common Shares to which it is entitled
pursuant to the Exchange Right.
2.6 Exercise of Exchange Right Subsequent to Retraction. In the event that a
Shareholder has exercised its right under Article 5 of the Exchangeable Share
Provisions to require the Corporation to redeem any or all of the Exchangeable
Shares held by the Shareholder (the "Retracted Shares") and provided that the
Shareholder has not revoked the Retraction Request delivered by the Shareholder
to the Corporation pursuant to Section 5.1 of the Exchangeable Share Provisions,
the Corporation hereby agrees with the Shareholder to forward or cause to be
forwarded within 2 business days to InfoCast all relevant materials delivered by
the Shareholder to the Corporation (including without limitation a copy of the
Retraction Request delivered pursuant to Section 5.1 of the Exchangeable Share
Provisions) in connection with such proposed redemption of the Retracted Shares
and, subject to the provisions of applicable law (including applicable
securities laws) and the Retraction Call Right, InfoCast will purchase such
shares in accordance with the provisions of this Article 2.
2.7 Stamp or Other Transfer Taxes. Upon any sale of Exchangeable Shares to
InfoCast pursuant to the Exchange Right, the Automatic Exchange Right, the
Redemption Call Right, the Liquidation Call Right and the Retraction Call Right,
the share certificate or certificates representing InfoCast Common Shares to be
delivered in connection with the payment of the total purchase price therefor
shall be issued in the name of the Shareholder of the Exchangeable Shares so
sold or in such name as such Shareholder may otherwise direct in writing without
charge to the holder of the Exchangeable Shares so sold; provided, however, that
such Shareholder (a) shall pay (and neither InfoCast nor the Corporation shall
be required to pay) any documentary stamp, transfer or other
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<PAGE>
taxes that may be payable in respect of any transfer involved in the issuance or
delivery of such shares to a person other than such Shareholder or (b) shall
have established to the satisfaction of InfoCast and the Corporation that such
taxes, if any, have been paid.
2.8 Notice of Insolvency Event and Triggering Event. As soon as practicably
possible upon the occurrence of a Triggering Event or Insolvency Event or any
event which with the giving of notice or the passage of time or both would be an
Insolvency Event or Triggering Event, the Corporation and InfoCast shall give
written notice thereof to the Shareholder, which notice shall include a brief
description of the Exchange Right.
2.9 Reservation of InfoCast Common Shares. InfoCast hereby represents, warrants
and covenants that it has irrevocably reserved for issuance and will at all
times keep available, out of its authorized and unissued capital stock, such
number of InfoCast Common Shares equal to the number of Exchangeable Shares
issued and outstanding from time to time and InfoCast further represents,
warrants and covenants that such number of InfoCast Common Shares shall be
issuable free and clear of any lien, claim, encumbrance, security interest or
adverse claim (other any such lien, claim, encumbrance, security interest or
adverse claim arising as a result of any action or inaction by a Shareholder)
notwithstanding that the issuance of such InfoCast Common Shares may give rise
to certain rights of third parties against InfoCast pursuant to pre-emptive or
other rights granted by InfoCast to such third parties.
2.10 Automatic Exchange on Liquidation of InfoCast.
(a) InfoCast will give each Shareholder notice (in the identical form and
at the same time given by InfoCast to its stockholders) of each of the
following events at the time set forth below:
(i) in the event of any determination by the Board of Directors of
InfoCast to institute voluntary liquidation, dissolution or
winding up proceedings with respect to InfoCast or to effect
any other distribution of assets of InfoCast among its
shareholders for the purpose of winding up its affairs at
least 30 days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution;
and
(ii) immediately, upon receipt by InfoCast of notice of or InfoCast
otherwise becoming aware of any threatened or instituted
claim, suit, petition or other proceedings with respect to the
involuntary liquidation, dissolution or winding-up of InfoCast
or to effect any other distribution of assets of InfoCast
among its shareholders for the purpose of winding up its
affairs;
(any such event being hereinafter referred to as a "Liquidation Event").
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<PAGE>
(b) In order that the Shareholders will be able to participate on
a pro rata basis with the holders of InfoCast Common Shares in
the distribution of assets of InfoCast in connection with a
Liquidation Event, on the fifth Business Day prior to the
effective date (the "Liquidation Event Effective Date") of a
Liquidation Event all of the then outstanding Exchangeable
Shares shall be automatically exchanged for InfoCast Common
Shares, subject to the provisions of applicable law (including
applicable securities law). To effect such automatic exchange,
InfoCast shall purchase each Exchangeable Share outstanding as
soon as practicable prior to the Liquidation Event Effective
Date and held by a Shareholder, and each Shareholder shall
sell the Exchangeable Shares held by it at such time, for a
purchase price per Exchangeable Share equal to one InfoCast
Common Share plus the Additional
Consideration, if any, which shall be satisfied in full by InfoCast delivering
to the Shareholder such number of InfoCast Common Shares equal to the number of
Exchangeable Shares so purchased plus the Additional Consideration, if any.
(c) The closing of the transaction of purchase and sale
contemplated by the automatic exchange of Exchangeable Shares
for InfoCast Common Shares shall be deemed to have occurred,
and each Shareholder shall be deemed to have transferred to
InfoCast all of the Shareholder's right, title and interest in
and to its Exchangeable Shares and shall cease to be a holder
of such Exchangeable Shares upon InfoCast delivering to the
Shareholder InfoCast Common Shares deliverable upon the
automatic exchange of Exchangeable Shares for InfoCast Common
Shares and the Additional Consideration, if any. Concurrently
with such Shareholder ceasing to be a holder of Exchangeable
Shares, the Shareholder shall be considered and deemed for all
purposes to be the holder of InfoCast Common Shares issued to
it pursuant to the automatic exchange of Exchangeable Shares
for InfoCast Common Shares and the certificates held by the
Shareholder previously representing the Exchangeable Shares
exchanged by the Shareholder with InfoCast pursuant to such
automatic exchange shall thereafter be deemed to represent
InfoCast Common Shares delivered to the Shareholder by
InfoCast pursuant to such automatic exchange. Upon the request
of a Shareholder and the surrender by the Shareholder of
Exchangeable Share certificates deemed to represent InfoCast
Common Shares, duly endorsed in blank and accompanied by such
instruments of transfer as InfoCast may reasonably require,
InfoCast shall deliver to the Shareholder certificates
representing InfoCast Common Shares of which the Shareholder
is the holder.
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<PAGE>
ARTICLE 3
CERTAIN RIGHTS OF INFOCAST
TO ACQUIRE EXCHANGEABLE SHARES
3.1 InfoCast Liquidation Call Right.
(a) Upon the occurrence and during the continuation of an Insolvency Event,
InfoCast shall have the overriding right (the "Liquidation Call
Right"), in the event of and notwithstanding the proposed liquidation,
dissolution or winding-up of the Corporation pursuant to Article 4 of
the Exchangeable Share Provisions to purchase from all but not less
than all of the holders of Exchangeable Shares on the Liquidation Date
(as defined in the Exchangeable Share Provisions) all but not less than
all of the Exchangeable Shares held by each such holder on payment by
InfoCast of an amount per Exchangeable Share equal to one InfoCast
Common Share plus the Additional Consideration per share, if any, which
shall be satisfied in full by delivering to each such holder for each
Exchangeable Share an equivalent number of InfoCast Common Shares plus
the Additional Consideration per share, if any, (the "Liquidation Call
Purchase Price"), provided that if the record date for any declared and
unpaid dividends occurs on or after the Liquidation Date, the
Liquidation Call Purchase Price shall not include such additional
amount equivalent to such dividends. In the event of the exercise of
the Liquidation Call Right by InfoCast, each holder shall be obligated
to sell all the Exchangeable Shares held by the holder to InfoCast on
the Liquidation Date on payment by InfoCast to the holder of the
Liquidation Call Purchase Price for each such Exchangeable Share.
(b) To exercise the Liquidation Call Right, InfoCast must notify the
Corporation as agent for the holders of Exchangeable Shares of
InfoCast's intention to exercise such right at least 30 days before the
Liquidation Date in the case of a voluntary liquidation, dissolution or
winding up of the Corporation and at least five Business Days before
the Liquidation Date in the case of an involuntary liquidation,
dissolution or winding up of the Corporation; provided, however, that
if it is impractical for InfoCast to give such notice, such lesser
amount of notice as practicable shall be given. The Corporation will
notify the holders of Exchangeable Shares as to whether or not InfoCast
has exercised the Liquidation Call Right forthwith after the expiry of
the period during which the same may be exercised by InfoCast. If
InfoCast exercises the Liquidation Call Right, on the Liquidation Date
InfoCast will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per Exchangeable Share
equal to the Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Liquidation Call Right, InfoCast shall deposit with the
Corporation (as agent for the holders of Exchangeable Shares) on or
before the Liquidation Date, certificates representing the aggregate
number of InfoCast Common Shares and the Additional Consideration, if
any, deliverable by InfoCast in payment of the total Liquidation Call
Purchase Price. Provided that the total Liquidation Call Purchase Price
has been so deposited with the Corporation, on and after the
Liquidation Date the rights of each holder of Exchangeable Shares will
be limited to receiving such holder's proportionate part of the total
Liquidation Call Purchase
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<PAGE>
Price payable by InfoCast upon presentation and surrender by the holder
of certificates representing the Exchangeable Shares held by such
holder and the holder shall on and after the Liquidation Date be
considered and deemed for all purposes to be the holder of the InfoCast
Common Shares to which it is entitled. Upon surrender to the
Corporation of a certificate or certificates representing Exchangeable
Shares, together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the Business
Corporations Act (Ontario) and the by-laws of the Corporation and such
additional documents and instruments as the Corporation may reasonably
require (including evidence reasonably satisfactory to the Corporation
that the holder of Exchangeable Shares is not a non-resident of Canada
within the meaning of the Income Tax Act (Canada) or a Section 1 16
certificate with a certificate limit in the payment amount) the holder
of such surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and the Corporation shall deliver to such
holder, certificates representing the InfoCast Common Shares to which
the holder is entitled. If InfoCast does not exercise the Liquidation
Call Right in the manner described above, on the Liquidation Date the
holders of the Exchangeable Shares will be entitled to receive in
exchange therefor the liquidation price otherwise payable by the
Corporation in connection with the liquidation, dissolution or
winding-up of the Corporation pursuant to Article 4 of the Exchangeable
Share Provisions.
3.2 InfoCast Redemption Call Right.
(a) InfoCast shall have the overriding right (the "Redemption Call Right"),
notwithstanding the proposed redemption of Exchangeable Shares by the
Corporation pursuant to Article 6 of the Exchangeable Share Provisions,
to purchase from all but not less than all of the holders of
Exchangeable Shares to be redeemed on the Redemption Date (as defined
in the Exchangeable Share Provisions) all but not less than all of the
Exchangeable Shares held by each such holder on payment by InfoCast to
the holder of an amount per Exchangeable Share equal to one (1)
InfoCast Common Share which shall be satisfied in full by delivering to
such holder such number of InfoCast Common Shares equal to the number
Exchangeable Shares so purchased plus the Additional Consideration, if
any, (the "Redemption Call Purchase Price"). In the event of the
exercise of the Redemption Call Right by InfoCast, each holder shall be
obligated to sell all the Exchangeable Shares held by the holder and
otherwise to be redeemed to InfoCast on the Redemption Date on payment
by InfoCast to the holder of the Redemption Call Purchase Price for
each such Exchangeable Share.
(b) To exercise the Redemption Call Right, InfoCast must notify the
Corporation (as agent for the holders of Exchangeable Shares) of
InfoCast's intention to exercise such right at least 30 days before the
Redemption Date (as defined in the Exchangeable Share Provisions);
provided, however, that if it is impracticable for InfoCast to give
such notice, such lesser amount of notice as practicable shall be
given. The Corporation will notify the holders of the Exchangeable
Shares as to whether or not InfoCast has exercised the Redemption Call
Right
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<PAGE>
forthwith after the expiry of the period during which the same may be
exercised by InfoCast. If InfoCast exercises the Redemption Call Right,
on the Redemption Date InfoCast will purchase and the holders will sell
all of the Exchangeable Shares to be redeemed for a price per
Exchangeable Share equal to the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of Exchangeable Shares
pursuant to the Redemption Call Right, InfoCast shall deposit with the
Corporation (as agent for the holders of Exchangeable Shares) on or
before the Redemption Date, certificates representing the aggregate
number of InfoCast Common Shares plus the Additional Consideration, if
any, deliverable by InfoCast in payment of the total Redemption Call
Purchase Price. Provided that the total Redemption Call Purchase Price
has been so deposited with the Corporation, on and after the Redemption
Date the rights of each holder of Exchangeable Shares so purchased will
be limited to receiving such holder's proportionate part of the total
Redemption Call Purchase Price payable by InfoCast upon presentation
and surrender by the holder of certificates representing the
Exchangeable Shares purchased by InfoCast from such holder and the
holder shall on and after the Redemption Date be considered and deemed
for all purposes to be the holder of the InfoCast Common Shares to
which it is entitled. Upon surrender to the Corporation of a
certificate or certificates representing Exchangeable Shares, together
with such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the Business Corporations Act
(Ontario) and the by-laws of the Corporation and such additional
documents and instruments as the Corporation may reasonably require
(including evidence reasonably satisfactory to the Corporation that the
holder of Exchangeable Shares is not a non-resident of Canada within
the meaning of the Income Tax Act (Canada) or ~ Section 1 16
certificate with a certificate limit in the payment amount) the holder
of such surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and the Corporation shall deliver to such
holder, certificates representing the InfoCast Common Shares to which
the holder is entitled. If InfoCast does not exercise the Redemption
Call Right in the manner described above, on the Redemption Date the
holders of the Exchangeable Shares will be entitled to receive in
exchange therefor the Redemption Price (subject to Section 2.3 hereof)
otherwise payable by the Corporation in connection with the redemption
of Exchangeable Shares pursuant to Article 6 of the Exchangeable Share
Provisions.
3.3 Tender Offers, Etc. In the event that:
(i) a tender offer, share exchange offer, issuer bid, take-over
bid or similar transaction with respect to InfoCast Common
Shares is proposed by InfoCast or its shareholders and is
recommended for acceptance by the Board of Directors of
InfoCast;
(ii) less than fifty percent (50%) of the outstanding shares of
InfoCast are held of record by InfoCast's stockholders as of
the date hereof; or
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(iii) InfoCast elects to initiate the voluntary liquidation,
dissolution or winding-up of InfoCast Canada (each a
"Triggering Event" and collectively the "Triggering Events"),
InfoCast shall have the right to purchase all of the Exchangeable Shares then
outstanding in accordance with the provisions of Article 6 of the Exchangeable
Share Provisions.
ARTICLE 4
MISCELLANEOUS
4.1 Withholding Rights. InfoCast shall be entitled to deduct and withhold from
the consideration otherwise payable to the Shareholder pursuant to this
Agreement such amounts as InfoCast is required or permitted to deduct and
withhold with respect to such payment under the United States Internal Revenue
Code of 1986, as amended, the Income Tax Act (Canada), as amended, or any
provision of state, provincial, local or foreign tax law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
hereof as having been paid to the Shareholder in respect of which such deduction
and withholding was made, provided 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 the
Shareholder exceeds the cash portion of the consideration otherwise payable to
the Shareholder, InfoCast is hereby authorized to sell or otherwise dispose of
at fair market value such portion of such consideration as is necessary to
provide sufficient funds to InfoCast, in order to enable it to comply with such
deduction or withholding requirement and InfoCast shall give an accounting to
the Shareholder with respect thereto and any balance of such proceeds of sale.
4.2 Time of the Essence. Time shall be of the essence of this Agreement and all
of the provisions of this Agreement.
4.3 No Assignment. The Shareholder may not assign, transfer or otherwise convey
the whole or any part of such Shareholder's rights or obligations under this
Agreement to any person without the express written consent of InfoCast.
InfoCast may assign, transfer or otherwise convey its rights and obligations
under this Agreement to any affiliate of InfoCast without the prior written
consent of any other party provided that such affiliate agrees to be bound by
the terms of this Agreement and provided that InfoCast shall not be relieved of
its obligations under this Agreement.
4.4 Successors. This Agreement shall be binding upon and shall enure to the
benefit of the parties hereto, their heirs, legal representatives, successors
and permitted assigns.
4.5 Further Assurances. Each of the parties shall do all such things and provide
all such reasonable assurances as may be required to consummate the agreements
and transactions contemplated hereby and each party shall execute and deliver
such further documents or instruments
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required by any other party as may be reasonably necessary or desirable to
effect the purpose of this Agreement and to carry out its provisions.
4.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
4.7 Attornment. InfoCast hereby irrevocably attorns and submits to, and agrees
to take all further steps necessary to submit to, the non-exclusive jurisdiction
of the Ontario Court of Justice (General Division) in any action or proceeding
arising out of or related to this Agreement and irrevocably agrees that all
claims in respect of any such action or proceeding shall be heard and determined
in such Ontario court. InfoCast hereby irrevocably waives, to the fullest extent
it may effectively do so, the defence of an inconvenient forum to the
maintenance of such action or proceeding. InfoCast hereby agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. InfoCast hereby irrevocably designates and appoints Aird &
Berlis, Attention: M. Craig G. Brown as its authorized agent to accept and
acknowledge on its behalf service of any and all process that may be served in
any such action or proceeding in any such court and agrees that service of
process upon such agent, and written notice of such service to InfoCast
delivered to such agent, shall be deemed in every respect effective service of
process upon InfoCast in any such suit, action, or proceeding and shall be taken
and held to be valid personal service upon InfoCast.
4.8 Ontario Securities Law. The rights of the Shareholders pursuant to this
Agreement are subject to Section 1 1.15 of the Purchase Agreement.
4.9 Interpretation. Subject to Section 2.3 hereof, in the event that any
provisions of this Agreement are inconsistent with or conflict with the
Exchangeable Share Provisions, the Exchangeable Share Provisions shall govern
and be paramount.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly signed, sealed and delivered as of the date first above
written.
INFOCAST CANADA CORPORATION
By: /s/ (signature is illegible
---------------------------
INFOCAST CORPORATION
By:/s/ A.T. Griffis
---------------------------
HOMEBASE WORK SOLUTIONS LTD., as duly
authorized signatory for each of the
SHAREHOLDERS
By:
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SUPPORT AGREEMENT
This Support Agreement (this "Agreement"), dated for reference
May 13, 1999, is by and among InfoCast Corporation, a Nevada corporation
("InfoCast"), InfoCast Canada Corporation, an Ontario corporation ("InfoCast
Canada") and Homebase Work Solutions Ltd., on behalf of each of those parties
listed on Schedule "A" attached hereto (individually a "Shareholder" and
collectively the "Shareholders").
W I T N E S S E T H:
WHEREAS InfoCast is the sole holder of InfoCast Canada's
issued and outstanding common shares (the "InfoCast Canada Common Stock");
AND WHEREAS pursuant to a share purchase agreement dated as of
the 1 3th day of May, 1999 (the "Purchase Agreement") InfoCast Canada acquired
all of the 955,000 issued and outstanding common shares and all of the 45,000
issued and outstanding preferred shares of Homebase Work Solutions Ltd. and
issued in consideration therefore, 3,400,000 Exchangeable Shares of InfoCast
Canada (the "Exchangeable Shares") which are exchangeable for common shares in
the capital of InfoCast ("InfoCast Common Stock");
AND WHEREAS InfoCast Canada's articles of incorporation dated
January 27, 1999 set forth the rights, privileges, restrictions and conditions
(the "Exchangeable Share Provisions") attaching to the Exchangeable Shares;
AND WHEREAS the parties hereto desire to establish a procedure
whereby InfoCast will take certain actions and make certain payments and
deliveries necessary to ensure that InfoCast Canada will be able to make certain
payments and to deliver or cause to be delivered shares of InfoCast Common Stock
in satisfaction of the obligations of InfoCast Canada under the Exchangeable
Share Provisions with respect to the payment and satisfaction of dividends, the
Liquidation Amount, Redemption Price and Retraction Price, all in accordance
with the Exchangeable Share Provisions;
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
<PAGE>
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ARTICLE 1
INTERPRETATION
1.1 Interpretation not Affected by Headings, etc. The division of this
Agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and will not affect the construction or
interpretation of this Agreement.
1.2 Number, Gender, etc. Words imparting the singular number only include
the plural and vice versa. Words imparting the use of any gender include all
genders.
1.3 Date for any Action. If any date on which any action is required to be
taken under this Agreement is not a Business Day, such action is required to be
taken on the next succeeding Business Day. For the purposes of this Agreement, a
"Business Day" means a day other than a Saturday, a Sunday or a statutory
holiday in the City of Toronto, Ontario or the City of New York, New York.
1.4 Ontario Securities Law. The rights of the Shareholders pursuant to this
Agreement are subject to Section 1 1.14 of the Purchase Agreement.
1.5 Defined Terms. Capitalized terms not otherwise defined herein have the
meanings ascribed to such terms in the Exchangeable Share Provisions.
ARTICLE 2
COVENANTS OF INFOCAST AND INFOCAST CANADA
2.1 Covenants of Parent Regarding Exchangeable Shares. So long as any
Exchangeable Shares are outstanding, InfoCast will:
(a) in the event that it declares or pays any dividend on the
InfoCast Common Stock, it shall ensure that (i) InfoCast
Canada has sufficient assets, funds or other property
available to enable the due declaration and the due and
punctual payment in accordance with applicable law, of an
equivalent dividend on the Exchangeable Shares and (ii)
InfoCast Canada simultaneously declares or pays, as the case
may be, an equivalent dividend on the Exchangeable Shares;
(b) cause InfoCast Canada to declare simultaneously with the
declaration of any dividend on InfoCast Common Stock an
equivalent dividend on the Exchangeable Shares and, when such
dividend is paid on InfoCast Common Stock, cause InfoCast
Canada to pay simultaneously therewith such equivalent
dividend on the Exchangeable Shares, in each case in
accordance with the Exchangeable Share Provisions;
<PAGE>
-3-
(c) advise InfoCast Canada sufficiently in advance of the
declaration by InfoCast of any dividend on InfoCast Common
Stock and take all such other actions as are necessary, in
cooperation with InfoCast Canada, to ensure that the
respective declaration date, record date and payment date for
a dividend on the Exchangeable Shares will be the same as the
record date, declaration date and payment date for the
corresponding dividend on InfoCast Common Stock;
(d) take all such actions and do all such things as are necessary
or desirable to enable and permit InfoCast Canada, in
accordance with applicable law, to pay and otherwise perform
its obligations with respect to the satisfaction of the
Liquidation Amount with respect to each issued and outstanding
Exchangeable Share upon the liquidation, dissolution or
winding-up of InfoCast Canada, including without limitation
all such actions and all such things as are necessary or
desirable to enable and permit InfoCast Canada to cause to be
delivered shares of InfoCast Common Stock to the holders of
Exchangeable Shares in accordance with the provisions of
Article 4 of the Exchangeable Share Provisions; and
(e) take all such actions and do all such things as are necessary
or desirable to enable and permit InfoCast Canada, in
accordance with applicable law, to pay and otherwise perform
its obligations with respect to the satisfaction of the
Retraction Price or Redemption Price, as applicable, including
without limitation all such actions and all such things as are
necessary or desirable to enable and permit InfoCast Canada to
cause to be delivered shares of InfoCast Common Stock to the
holders of Exchangeable Shares upon the retraction of the
Exchangeable Share.
2.2 Segregation of Funds. InfoCast will cause InfoCast Canada to, and
InfoCast Canada shall, deposit sufficient funds in a separate account and
segregate a sufficient amount of such assets and other property as is necessary
to enable InfoCast Canada to pay or otherwise satisfy the applicable dividends,
Liquidation Amount or Retraction Price, in each case for the benefit of holders
from time to time of the Exchangeable Shares, and will cause InfoCast Canada to,
and InfoCast Canada shall, use such funds, assets and other property so
segregated exclusively for the payment of dividends and the payment or other
satisfaction of the Liquidation Amount as applicable.
2.3 Reservation of Shares of InfoCast Common Stock. InfoCast hereby
represents, warrants and covenants that it has irrevocably reserved for issuance
and will at all times keep available out of its authorized and unissued capital
stock such number of shares of InfoCast Common Stock (or other shares or
securities into which InfoCast Common Stock may be reclassified or changed as
contemplated by section 2.7 hereof) (a) as is equal to the number of
Exchangeable Shares issued and outstanding from time to time and (b) as are now
and may hereafter be required to enable and permit InfoCast Canada to meet its
obligations hereunder, under the Exchange Agreement, under the Exchangeable
Share Provisions and under any other security or commitment
<PAGE>
-4-
pursuant to which InfoCast may now or hereafter be required to issue shares of
InfoCast Common Stock.
2.4 Notification of Certain Events. In order to assist InfoCast to comply
with its obligations hereunder, InfoCast Canada will give InfoCast notice of
each of the following events at the time set forth below:
(a) in the event of any determination by the Board of Directors of
InfoCast Canada to institute voluntary liquidation,
dissolution or winding up proceedings with respect to InfoCast
Canada or to effect any other distribution of the assets to
InfoCast Canada among its shareholders for the purpose of
winding up its affairs, at least 60 days prior to the proposed
effective date of such voluntary liquidation, dissolution,
winding up or other distribution;
(b) immediately, upon the earlier of (i) receipt by InfoCast
Canada of notice, and (ii) InfoCast Canada otherwise becoming
aware of, any threatened or instituted claim, suit, petition
or other proceedings with respect to the involuntary
liquidation, dissolution or winding up of InfoCast Canada or
to effect any other distribution of the assets of InfoCast
Canada among its shareholders for the purpose of winding up
its affairs;
(c) immediately, upon receipt by InfoCast Canada of a Retraction
Request (as defined in the Exchangeable Share Provisions); and
(d) as soon as practicable upon the issuance by InfoCast Canada of
any Exchangeable Shares or rights to acquire Exchangeable
Shares.
2.5 Delivery of Shares of InfoCast Common Stock. In furtherance of its
obligations under sections 2.1(d) and 2.1(e) hereof, upon notice of any event
which requires InfoCast Canada to cause to be delivered shares of InfoCast
Common Stock to any holder of Exchangeable Shares, InfoCast will forthwith issue
and deliver the requisite shares of InfoCast Common Stock to or to the order of
the former holder of the surrendered Exchangeable Shares, as InfoCast Canada
directs. All such shares of InfoCast Common Stock will be duly issued as fully
paid and non-assessable and will be free and clear of any lien, claim,
encumbrance, security interest or adverse claim.
2.6 Economic Equivalence
(a) In the event that InfoCast determines to:
(i) issue or distribute shares of InfoCast Common Stock
(or securities exchangeable for or convertible into
or carrying rights to acquire shares of
<PAGE>
-5-
InfoCast Common Stock) to the holders of all or
substantially all of the then outstanding InfoCast
Common Stock by way of stock dividend or other
distribution, other than an issue of shares of
InfoCast Common Stock (or securities exchangeable for
or convertible into or carrying rights to acquire
shares of InfoCast Common Stock) to holders of shares
of InfoCast Common Stock who exercise an option to
receive dividends in InfoCast Common Stock (or
securities exchangeable for or convertible into or
carrying rights to acquire shares of InfoCast Common
Stock) in lieu of receiving cash dividends; or
(ii) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then
outstanding shares of InfoCast Common Stock entitling
them to subscribe for or to purchase shares of
InfoCast Common Stock (or securities exchangeable for
or convertible into or carrying rights to acquire
shares of InfoCast Common Stock); or
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding shares of
InfoCast Common Stock (A) shares or securities of
InfoCast of any class other than InfoCast Common
Stock (other than shares convertible into or
exchangeable for or carrying rights to acquire shares
of InfoCast Common Stock), (B) rights, options or
warrants other than those referred to in subsection
2.6(a)(ii) above, (C) evidences of indebtedness of
InfoCast or (D) assets of InfoCast;
InfoCast will cause InfoCast Canada to simultaneously issue or distribute the
economic equivalent on an after tax basis, if any, on a per share basis of such
rights, options, securities, shares, evidences of indebtedness or other assets
to holders of the Exchangeable Shares.
(b) In the event that InfoCast determines to:
(i) subdivide, redivide or change the then outstanding shares of
InfoCast Common Stock into a greater number of shares of
InfoCast Common Stock; or
(ii) reduce, combine or consolidate or change the then outstanding
shares of InfoCast Common Stock into a lesser number of shares
of InfoCast Common Stock; or
<PAGE>
-6-
(iii) reclassify or otherwise change the shares of InfoCast Common
Stock or effect an amalgamation, merger, reorganization or
other transaction affecting the shares of InfoCast Common
Stock;
InfoCast will cause InfoCast Canada to simultaneously make the same or an
economically equivalent change with respect to the rights of holders of the
Exchangeable Shares.
(c) InfoCast will ensure that the record date for any event referred to
in section 2.6(a) or 2.6(b) above is the same as the record date established by
InfoCast for holders of InfoCast Common Stock and InfoCast covenants to give
simultaneous notice thereof to InfoCast Canada and the holders of the
Exchangeable Shares.
(d) The Board of Directors of InfoCast will determine, in good faith
and in its sole discretion (with the assistance of such reputable and qualified
independent financial advisors and/or other experts as are customary for
transactions of this type and as the board may require), economic equivalence
for the purposes of any event referred to in sections 2.6(a) or 2.6(b) above. In
making each such determination, the following factors will, without excluding
other factors determined by the Board to be relevant, be considered by the Board
of Directors of InfoCast:
(i) in the case of any stock dividend or other
distribution payable in shares of InfoCast Common
Stock, the number of such shares issued in proportion
to the number of shares of InfoCast Common Stock
previously outstanding;
(ii) in the case of the issuance or distribution of any
rights, options or warrants to subscribe for or
purchase shares of InfoCast Common Stock (or
securities exchangeable for or convertible into or
carrying rights to acquire shares of InfoCast Common
Stock), the relationship between the exercise price
of each such right, option or warrant and the current
market value (as determined by the Board of Directors
of InfoCast in the manner above contemplated) of a
share of InfoCast Common Stock;
(iii) in the case of the issuance or distribution of any
other form of property (including without limitation
any shares or securities of InfoCast of any class
other than InfoCast Common Stock, any rights options
or warrants other than those referred to in
subsection 2.6(d)(ii) above, any evidences of
indebtedness of InfoCast or any assets of InfoCast),
the relationship between the fair market value (as
determined by the Board of Directors of InfoCast in
the manner above contemplated) of such property to be
issued or distributed with respect to each
outstanding share of InfoCast Common Stock and the
current market value (as determined by the Board of
Directors of InfoCast Canada in the manner above
contemplated) of a share of InfoCast Common Stock;
<PAGE>
-7-
(iv) in the case of any subdivision, redivision or change
of the then outstanding shares of InfoCast Common
Stock into a greater number of shares of InfoCast
Common Stock or the reduction, combination or
consolidation or change of the then outstanding
shares of InfoCast Common Stock into a lesser number
of shares of InfoCast Common Stock or any
amalgamation, merger, reorganization or other
transaction affecting InfoCast Common Stock, the
effect thereof upon the then outstanding shares of
InfoCast Common Stock; and
(v) in all such cases, the general taxation consequences
of the relevant event to holders of Exchangeable
Shares to the extent that such consequences may
differ from the taxation consequences to holders of
shares of InfoCast Common Stock as a result of
differences between taxation laws of Canada and the
United States (except for any differing consequences
arising as a result of differing marginal taxation
rates and without regard to the individual
circumstances of holders of Exchangeable Shares).
For purposes of the foregoing determinations, the current market value of any
security listed and traded or quoted on a securities exchange will be the
weighted average of the daily trading prices of such security during a period of
not less than 20 consecutive trading days ending not more than five trading days
before the date of determination on the principal securities exchange on which
such securities are listed and traded or quoted; provided, however, that if
there is no public market for InfoCast Common Stock or if in the opinion of the
Board of Directors of InfoCast, acting reasonably, the public distribution or
trading activity of such securities during such period does not create a market
which reflects the fair market value of such securities, then the current market
value thereof will be determined by the Board of Directors of InfoCast, in good
faith and in its sole discretion.
2.7 Parent Not To Vote Exchangeable Shares. InfoCast covenants and agrees
that it will appoint and cause to be appointed proxyholders with respect to all
Exchangeable Shares held by InfoCast and its subsidiaries for the sole purpose
of attending each meeting of holders of Exchangeable Shares in order to be
counted as part of the quorum for each such meeting. InfoCast further covenants
and agrees that it will not, and will cause its subsidiaries not to, exercise
any voting rights which may be exercisable by holders of Exchangeable Shares
from time to time pursuant to the Exchangeable Share Provisions or pursuant to
the provisions of the Business Corporations Act (Ontario) (or any successor or
other corporate statute by which InfoCast Canada may in the future be governed)
with respect to any Exchangeable Shares held by it or by its subsidiaries in
respect of any matter considered at any meeting of holders of Exchangeable
Shares.
<PAGE>
-8-
ARTICLE 3
GENERAL
3.1 Term. This Agreement will come into force and be effective as of the
date hereof and will terminate and be of no further force and effect at such
time as no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable Shares) are held by
any party other than InfoCast and any of its Affiliates.
3.2 Changes in Capital of Parent and InfoCast Canada. Notwithstanding the
provisions of section 3 4 hereof, at all times after the occurrence of any event
effected pursuant to section 2.7 hereof, as a result of which either InfoCast
Common Stock or the Exchangeable Shares or both are in any way changed, this
Agreement will forthwith be amended and modified as necessary in order that it
will apply with full force and effect, mutatis mutandis, to all new securities
into which InfoCast Common Stock or the Exchangeable Shares or both are so
changed and the parties hereto will execute and deliver an agreement in writing
giving effect to and evidencing such necessary amendments and modifications
3.3 Severability. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this Agreement will not in any way be affected or impaired thereby
and this Agreement will be carried out as nearly as possible in accordance with
its original terms and conditions.
3.4 Amendments, Modifications, etc. This Agreement may not be amended or
modified except by an agreement in writing executed by InfoCast Canada and
InfoCast and approved by the holders of the Exchangeable Shares in accordance
with Article 8 of the Exchangeable Share Provisions
3.5 Ministerial Amendments. Notwithstanding the provisions of section 3 .4,
the parties to this Agreement may in writing, at any time and from time to time,
without the approval of the holders of the Exchangeable Shares, amend or modify
this Agreement for the purposes of:
(a) adding to the covenants of either or both parties for the
protection of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with
this Agreement as may be necessary or desirable with respect
to matters or questions which, in the opinion of the Board of
Directors of each of InfoCast Canada and InfoCast, it may be
expedient to make, provided that each such board of directors
is of the opinion that such amendments or modifications will
not be prejudicial to the interests of the holders of the
Exchangeable Shares; or
<PAGE>
-9-
(c) making such changes or corrections which, on the advice of
counsel to InfoCast Canada and InfoCast, are required for the
purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error, provided that the boards of directors of each
of InfoCast Canada and InfoCast are of the opinion that such
changes or corrections will not be prejudicial to the
interests of the holders of the Exchangeable Shares.
3.6 Meeting to Consider Amendments. InfoCast Canada, at the request of
InfoCast, will call a meeting or meetings of the holders of the Exchangeable
Shares for the purpose of considering any proposed amendment or modification
requiring approval pursuant to section 3.4 hereof. Any such meeting or meetings
will be called and held in accordance with the by-laws of InfoCast Canada, the
Exchangeable Share Provisions and all applicable laws.
3.7 Amendments only in Writing. No amendment to or modification or waiver
of any of the provisions of this Agreement otherwise permitted hereunder will be
effective unless made in writing and signed by both of the parties hereto.
3.8 Enurement. This Agreement will be binding upon and enure to the benefit
of the parties hereto and their respective successors and assigns.
3.9 Notices to Parties. Whenever this Agreement requires or permits any
notice, request, or demand from one party to another, the notice, request, or
demand must be in writing to be effective and will be deemed to be delivered and
received (i) if personally delivered or if delivered by telex, telegram, or
courier service, when actually received by the party to whom notice is sent (ii)
if delivered by telecopier, on the date of sending provided such sending is
evidenced by electronic verification or receipt and is and a hard copy is sent
by regular mail, or (iii) if delivered by mail, upon receipt by the party
addressed at the address of such party set forth below (or at such other address
as such party may designate by written notice to all other parties in accordance
herewith):
If to InfoCast: InfoCast Corporation
1 Richmond Street West
Suite 900
Toronto, Canada
M5H 3W4
Fax No.: (416) 867-9320
Attn: A. Thomas Grifffis
with a copy to: Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
<PAGE>
-10-
Fax No.: (212) 755-1367
Attn: Stephen Irwin
If to InfoCast Canada: c/o Aird & Berlis
Barristers and Solicitors
BCE Place
Suite 1800
181 Bay Street
Toronto, Ontario
M5J 2T9
Fax No.: (416) 863-1515
Attn.: M. Craig G. Brown
If to the Shareholders: c/o Homebase Work Solutions Ltd.
505 8th Avenue S.W.
Suite 515
Calgary, Alberta
T2P 1G2
Fax No.: (403) 237-5047
Attn.: Scott Fleming
with a copy to: Burnet, Duckworth & Palmer
1400, 350 7th Avenue S.W.
Calgary, Alberta
T2P 3N9
Fax No.: (403) 260-0332
Attn.: Jeffery G. Lawson
3.10 Counterparts. This Agreement may be executed in counterparts each of
which will be deemed an original, and all of which taken together will
constitute one and the same instrument.
3.11 Attornment. The parties hereto agree that the forum for resolution of
any dispute arising under this Agreement shall be the Province of Ontario, and
InfoCast and InfoCast Canada hereby consent, and submit themselves to the
jurisdiction of any court sitting in the Province of Ontario.
<PAGE>
-11-
3.12 Further Assurances. The parties hereto will promptly do all such acts
and things and execute and deliver all such further agreements, instruments,
deeds and documents as may be required to carry out the transactions
contemplated by this Agreement to give effect to the intent of said agreement.
3.13 Time of Essence. Time shall be of the essence in all respects of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly signed, sealed and delivered as of the date first above
written.
INFOCAST CANADA. CORPORATION
By:
INFOCAST CORPORATION
By:
HOMEBASE WORK SOLUTIONS LTD.,
on behalf of the Shareholders
By:
<PAGE>
SCHEDULE "A"
to Support Agremnent
dated May 13, 1999
LIST OF SHAREHOLDERS
(attached)
<PAGE>
HOME BASE WORK SOLUTIONS LTD. SHAREHOLDER LIST
# PREFERRED SHARE GROUP
1. Arlis Rackham #109, 540 -18 Ave. SW, Calgary, AB. T2S 0L5
2. Lorraine Toews 14 Evergreen Bay, SW, Calgary, AB T2Y 3E9
3. Craig Coulombe 393 Macewan Park View, NW, Calgary, AB. T3K 4G5
4. Dave Olson 1661 East Camelback Rd. Suite 245 Phoenix AZ. 85016
5. Ed Lambert 6620 Bow Cres., NW, Calgary, AB. T3B 2B9
6. Roger Broberg 2594 Fairview Place, Blind Bay, BC VOE 1H1
7. Systemix Ltd. 80 Shawnee Way, SW, Calgary AB T2Y 2V3
8. Bob Blackshaw 568 Coach Grove Road, SW, Calgary AB T3H 1R8
9. Dave Rackham #109, 540 -18 Ave. SW, Calgary AB. T2S OL5
10, Jeff Craig 435 Cannington Close, SW, Calgary AB. T2W 3E9
11. Jim Rackham 91 Sunlake Close, SE, Calgary AB. T2X 3H2
12. Mike Mikusta 9 Douglas Ridge Close, SE,;:, Calgary, AB T2Z 2M4
13. Dave Duckett 35 Patterson Dr. SW, Calgary, AB. T3H 2B8
COMMON SHAREHOLDER
1. Ken MacLean 131 Signature Crt.. SW, Calgary AB T2Y 2V3
2. Scott Fleming Suite 820, 639 - s Ave. SW Calgary AB T2P OM9
3. Ken MacLean 131 Signature Crt. SW, Calgary, AB T2Y 21/3
4. Scott Fleming Suite 820, 639 - 5 Ave. SW, Calgary, AB T2P OM9
5. Darcy Galvon 21 Ridge Point Dr. RR 1, DeWinton, AB T0L 0X0
6. Rick Shannon Suite 820 639 - 5 Ave. SW, Calgary, AB T2P 0M9
7. Kevin Baker Suite 2000, 335 - 8 Ave. SW Calgary, AB. T2P 1C9
8. Dave Synnott Suite 820, 639 - 5 Ave SW, Calgary, AB. T2P 0M9
9. Pat Dennis 80 Shawnee Way, SW, Calgary, AB T2Y 2V3
10. Anthony Rehlinger Suite 820, 639 - 5 Ave. SW, Calgary, AB. T2P 0M9
11. Francis M. Parsons 1800, 700 - 4 Ave. SW, Calgary, AB. T2P 3J4
12. Dave Allan Suite 820 - 639 - 5 Ave. SW, Calgary, AB. T2P 0M9
13. Scott Grim 1100 W. Mantpelier St. Broken Arrow, OK. 74012
14. Jeff Craig 435 Cannington Close, SW, Calgary, AB. T2W 3E9
15. Ivan Holloway Suite 920, 112 - 4 Ave. SW, Calgary, AB. T2P OH3
16. Pave Terbelco Suite 920, 112 -4 Ave.. SW, Calgary, AB. T2P 0H3
17. Dave Rackham #109 540 -18 Ave. SW, Calgary,AB. T2S OL5
18. Guy Nelson Suite 1506, 150 York St.Toronto, Ont.. M5H 3S5
19. Don Ritter Suite 330, 1100 - 17 St. NW, Washington, DC. 20036
20. Martin Cooper 13 Shannon Circle, SW, Calgary, AB. T2y 2H4
21. Shirley Crow 3207 Jacotte Circle, Dallas TX 75214
22. Rod Hall Bay 4, 3510 - 17 St. NE, Calgary, AB. T2Y 5E2
23. Harold Jeffers Suite 2U0Q, 335 - 8 Ave. SW, Calgary, AB. TZP 1C9
24. Martin Bunting 5630 Signal Hill Centre, SW, Calgary, A-B. T3H 3P8
25. Fred Cadham 593SChurchillSt.,Vancouver, BC V6M 3H4
26. lan Morrison 1635 Bay Laurel Drive, Menlo Park, CA. 94025
27. Ray Antony 900, 520 - 5 Avenue,, SW, Calgary, AB T2P 3R7
28. 786384 Alberta Ltd. 2402 - 37 Sr. SW, Calgary, AB. T2B 0Z2
29 786206 Alberta Ltd. 2402 - 37 St. SW, Calgary, AB. T2B 0Z2
30. First Marathon - ITF 130 King St. West, Toronto. ON M5X lJ9
31. T.D. Evergreen - lTF 32 Flr 100 Wellington St. W., Toronto, ON. M5K 1A2
<PAGE>
32. T.D.. Evergreen - ITF 32 Flr. 100 Wellington St. S Toronto, ON. M5K 1A2
33. T S Evergreen - lTF 32 Flr. 100 Wellington SW, w. Toronto, ON. M5K 1A2
34. R8C Dominion - ITF PO Box 50, Royal Bank Plaza, Toronto, ON. M5J 2W7
35. RBC Dominion - ITF PO Box 50, Royal Bank Plaza, Toronto. ON M5J 2W7
36. RBC Dominion - ITF P() Box 50, Royal Bank Plaza, Toronto, ON. M5J 2W7
37. Facet Petroleum
Solutions Inc. 1125, 333 -1l Ave. SW, Calgary, AB. T2R lL9
38 Facet Decision Systems
Inc. #305 1505 West 2 Ave., Vancouver, BC, V6H 3Y4
INFOCAST CORPORATION
1 Richmond Street West, Suite 901
Toronto Ontario Canada M5H 3W4
March 17, 1999
Via Fax (902) 466-6889
Mr. Sandy Walsh
One Research Drive
Dartmouth, Nova Scotia
B2Y 4M9
Dear Sandy:
This letter is intended to outline the general terms of your employment
with InfoCast and will, upon your execution as outlined below, represent our
obligations to you.
As you now know, we consider your involvement with InfoCast to be
extremely important and critical to our future growth and trust that the terms
of this letter represent fair and equitable compensation to you. I would also
add that once we are on a solid revenue growth pattern, it is my intention to
revisit the terms of each senior executive's compensation package and revise it
upwards if so warranted.
It is assumed that your employment will commence on May 1, 1999 and you
will be guaranteed a minimum of one year's salary. Obviously we intend to make
it a much longer commitment from our side but until the company has matured, a
one year contract is the most we can offer at this time. The terms of employment
will also include:
a. Your annual salary will be Cdn. $110,000;
b. You will participate on a yet to be determined bonus sharing
program;
c. You will have the equivalent of 300,000 shares of InfoCast
issued in your name through your direct holding in Tree Top;
and
<PAGE>
d. You will be given options in InfoCast in the amount of no less
than 100,000 and no more than 200,000 shares. The exact number
will be determined when the Company more clearly defines its
option plan after our current financing is completed.
I trust the above accurately sets out our agreement and, if so, please
acknowledge your agreement by signing at the space indicated below.
Yours truly,
INFOCAST CORPORATION
/s/ A.T. Griffis
--------------------------
A.T. Griffis
Chairman
ACKNOWLEDGED AND AGREED TO:
/s/ Sandy Walsh
- ------------------------------
Sandy Walsh
Dated: March 20, 1999
-2-
SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 5th day of August, 1999 (the "Effective
Date").
B E T W E E N:
INFOCAST CORPORATION, a corporation
incorporated under the laws of the State of Nevada,
in the United States of America
(hereinafter referred to as the "Employer")
OF THE; FIRST PART
and
JAMES WILLIAM LEECH, of the City of Toronto,
in the Province of Ontario
(hereinafter referred to as the "Employee")
OF THE SECOND PART
WHEREAS the Employer wishes to employ the Employee in the
capacity of President and Chief Executive Officer effective September 4, 1999
(the "Start Date");
AND WHEREAS the Employer recognizes that the Employee will
render and provide to the Employer special skills which are essential to the
continued growth of the Employer's business and the Employer believes that it is
reasonable and fair to the Employer that the Employee receive fair incentive and
security of employment and compensation terms;
AND WHEREAS the Employer and the Employee have agreed to enter
into this Employment Agreement to formalize in writing the terms and conditions
reached between them governing the Employee's employment;
NOW THEREFORE in consideration of the mutual covenants and
agreements herein contained and Or other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties, the
parties hereto agree as follows:
<PAGE>
Article 1.
RETENTION. DUTIES AND POP OF THE EMPLOYEE
1.1. Employment of Employee.
The Employer hereby employs the Employee effective the Start Date as
its President and Chief Executive Officer to perform the duties and
responsibilities incident to such position, subject at all times to the control
and discretion of the Board of Directors of the Employer (the "Board"). Such
employment shall continue, unless and until terminated in accordance with
Article 4 of this Agreement.
1.2. Acceptance of Employment: Time and Attention.
The Employee hereby accepts such employment and agrees that throughout
the period of his employment hereunder, except as hereinafter provided, he will
devote substantially all his time, attention, knowledge and skills, faithfully,
diligently and to the best of his ability, in furtherance of the business of the
Employer, and will perform the duties and responsibilities assigned to him
pursuant to Section 1, subject, at all times, to the direction and control of
the Board. As an executive officer, the Employee shall perform such specific
duties and shall exercise such specific authority related to the management of
the day-to-day operations of the Employer consistent with his position as
President and Chief Executive Officer as may be assigned to the Employee from
time to time by the Board. The Employee shall at all times be subject to,
observe and carry out such rules, regulations, policies, directions and
restrictions as the Employer shall from time to time establish. During the
period of his employment hereunder, the Employee shall not, directly or
indirectly, accept employment or compensation from, or perform services of any
nature for, any business enterprise other than the Employer. Notwithstanding the
foregoing, the Employer acknowledges and agrees that (i) during the term of this
Agreement, the Employee may serve as a member of the Board of Directors of other
corporations, and receive remuneration for such services, provided that the
business of the Employer and provided that it does not otherwise interfere with
the performance of his duties to the Employer in any material way and (ii) the
Employee's current employer may require that the Employee provide transition
assistance for up to 30 days after the Start Date. The Employee shall be elected
to such offices of the Employer as may from time to time be determined by the
Board. During the period of the Employee's employment hereunder, he shall not be
entitled to additional compensation for serving in any offices of the Employer
to which he is elected or appointed.
-2-
<PAGE>
1.3. Board of Directors
The Employer agrees to include the Employee as a management nominee for
election to the Board to solicit proxies in favour of such election at all
meetings of Shareholders during the term of this Agreement.
Article 2.
COMPENSATION AND BENEFITS
2.1. Remuneration.
For the performance of his services hereunder, the Employee shall be
paid a salary (the "Base Salary") of Cdn. $330,000 per annum, payable twice
monthly in arrears. The Employee's Base Salary shall be reviewed annually by the
Board and, from time to time during the term of this Agreement, may be increased
in the sole discretion of the Board.
In the event that the Employee ceases to be a full-time employee but is
a member of the Board, the Employee shall paid the same director fees paid by
the Employer to its outside directors, from the date full-time employment
ceases.
2.2. Benefits and Perquisites
Provided the Employee is otherwise eligible, the Employee will be
entitled to participate in all benefit plans and to receive all perquisites
enjoyed by the senior employees of the Employer. The Employer will pay the costs
of the Employee's existing disability insurance with annual premiums of
approximately Cdn. $5,000. All benefit plans will be governed and interpreted by
their written terms, if applicable. In the event that the Employee's employment
is terminated for any reason whatsoever, the Employer shall pay for and on
behalf of the Employee the cost of all outplacement services reasonably required
by the Employee which cost shall not exceed Cdn. $35,000.
2.3. Incentive Plans.
The Employee will be entitled to participate in all incentive plans
(including, without limitation, a Bonus Plan which includes an entitlement to an
annual target bonus of 50 percent of Base Salary to be paid within 90 days
following the Employer's fiscal year end, and the Share Option Plan) made
available to any employee of the Employer. Except as provided for herein, all
incentive plans will be governed and interpreted by their written terms, if
applicable.
It is agreed that the Employee's bonus for the period ending March 31,
2000 shall be Cdn. $30,000 and shall be paid, on a prorated basis, at the end of
each calendar quarter. It is further agreed that for all subsequent 12 month
periods, the minimum annual bonus shall be Cdn. $50,000, payable Cdn. $12,500
per quarter.
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<PAGE>
It is acknowledged that on June 1, 1999 the Employer granted the
Employee 750,000 options to purchase common shares on terms substantially the
same as those set forth in the InfoCast Corporation 1999 Share Option Plan (a
copy of which is attached as Schedule A hereto) except as otherwise provided
herein. These options were issued with an exercise price of US$7.00 each, which
the Employer represents was the fair market value of the underlying common
shares at the date the options were issued, and a term of 5 years from their
date of issue. The terms of these options provide that they vest as to 250,000
options upon the Employee assuming the position of the Employer's President and
Chief Executive Officer, 250,000 on the first anniversary thereof and the
remaining 250,000 on the first anniversary thereof and the remaining 250,000 on
the second anniversary thereof.
2.4. Out-of-Pocket Expenses.
The Employee shall, upon production of supporting statements and
vouchers, be reimbursed forthwith by the Employer in accordance with applicable
policies of the Employer for all reasonable out-of-pocket expenses actually
incurred by the Employee in the performance of his duties under this Agreement.
The Employer shall pay the Employee's reasonable legal fees and expenses
incurred in connection with finalizing his employment arrangements to a maximum
of Cdn. $10,000.
2.5. Vacation.
The Employee is entitled to a minimum of four weeks paid vacation in
respect of each 12 month period of his employment hereunder. To the extent that
the Employee does not utilize his full vacation entitlement in any given year,
the Employee shall be entitled to carry forward his vacation entitlement to the
next year provided that the Employee shall not be entitled to accumulate more
than 10 weeks vacation.
Article 3.
EMPLOYEE'S NEGATIVE COVENANTS
3.1. Confidential Information.
The Employee acknowledges that, in the course of carrying out,
performing and fulfilling his obligations to the Employer under this Agreement,
the Employee will have access to and will be entrusted with information that
would reasonably be considered confidential to the Employer and its affiliates,
clients or suppliers, the disclosure of any of which to competitors of the
Employer or any of its affiliates, clients or suppliers, or the general public,
would be highly detrimental to the best interests of the Employer. Except as may
be required in the course of carrying out his duties under this Agreement, the
Employee therefore covenants and agrees that he will not disclose or directly or
indirectly caused to be disclosed, during his employment or any time thereafter,
any of such information to any person, other than the directors, officers or
employees of the Employee or any of its affiliates that have a need to know such
information, nor
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<PAGE>
shall the Employee use or exploit, directly or indirectly, the same for any
purpose other than the purposes of the Employer. This provision will not apply
to any confidential information which is publicly available through no fault of
the Employee or which the Employee is required by law to disclose.
3.2. Corporate Opportunities.
Any business opportunities related to the business of the Employer or
any of its affiliates which become known to the Employee during the period of
his employment hereunder must be fully disclosed and made available to the
Employer by the Employee and the Employee agrees not to take or omit to take any
action if the result would be to divert from the Employer or any of its
affiliates any opportunity which is within the scope of its business as known to
the Employee from time to time.
3.3. Proprietary Information.
The Employee acknowledges and agrees that all right, title and interest
in and to any information, trade secrets, inventions, discoveries, improvements,
research materials and databases, including but not limited to patents,
copyright, design and moral rights in the results thereof, made or conceived by
the Employee during his employment with the Employer relating to the business or
affairs of the Employer or any of its affiliates shall belong to the Employer
and the Employee hereby waives any and all moral rights he may have in
connection thereto. The Employee shall promptly communicate to the Employer all
information concerning such proprietary information and, if requested by the
Employer, the Employee shall provide, at the expense of the Employer, all such
assistance as the Employer considers necessary to secure the vesting of such
rights in the Employer. The Employee hereby, for the term of this Agreement,
irrevocably appoints the Employer as the Employee's attorney with full power in
Employee's name to execute and deliver documents and do any things which the
Employer may consider necessary or desirable for purposes of giving effect to
this Section 3.3. The Employee hereby agrees to ratify and confirm whatever the
Employer may lawfully do as the Employee's attorney.
3.4. Non-Competition.
(a) In consideration of his employment hereunder, the Employee
shall not, during the Employee's term of employment (as set
forth in Section 1.1) and during the 6 month period following
the date that the Employee ceases to be an employee of the
Employer or other termination of this Agreement (regardless of
what initiated the termination and whether with or without
cause), either individually or in partnership or in
conjunction in any way with any person or persons,
corporation, partnership or other entity, whether as principal
agent, director, member, officer, consultant, shareholder,
guarantor, creditor in or any other manner whatsoever,
directly or indirectly:
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<PAGE>
(i) solicit, interfere with, endeavour to entice away
from the Employer or any of its affiliates, accept
any business related to the Restricted Business from,
or sell any product or render any service related to
the Restricted Business to, any person, firm, or
corporation who is or was a client, customer or
supplier of the Employer or any of its affiliates
with whom the Employer or its affiliate has or has
had any dealing during the 6 month period immediately
preceding the date upon which the Employee ceases to
be an employee of the Employer;
(ii) offer employment to (unless previously terminated by
Employer) or endeavour to entice away from the
Employer or any of its affiliates, any person
employed by the Employer or its affiliates at the
date upon which the Employee ceases to be an employee
of the Employer or interfere in any way with the
employment relationship between such employee and the
Employer or its affiliate, as the case may be or
induce, influence or seek to induce or influence any
person engaged as an employee, representative, agent,
independent contractor or otherwise by the Employer,
to terminate his or her relationship with the
Employer;
(iii) engage in, carry on or otherwise be concerned with or
have any interest in, or advice, lend money to,
guarantee the debts or obligations of, or permit the
Employer's name or any part thereof to be used to
employer by, and person, firm, association, syndicate
or corporation engaged in or concerned with, a
Restricted Business in North America; or
(iv) own, manage, operate, join, control, participate in,
invest in, or otherwise be connected with, in any
manner, whether as an officer, director, employee,
partner, investor or otherwise, any business entity
engaged in or concerned with, a Restricted Business
in North America.
For the purpose of this Section 3.4(a), "Restricted Business"
means any business carried on by the Employer or any of its
affiliates at the date upon which the Employee ceases to be an
employee of the Employer.
(b) The foregoing covenants are given by the Employee
acknowledging that the Employee either has or will have
specific knowledge of the affairs or the Employer and its
business. Therefore, the Employee hereby acknowledges and
agrees that all covenants, provisions and restrictions
contained in this Article 3 are reasonable and valid in the
circumstances of this Agreement, and all defenses to the
strict enforcement thereof by the Employer are hereby waived
by the Employee. The Employee acknowledges and agrees that any
breach by the Employee of the covenants, provisions and
restrictions contained in this Article 3
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<PAGE>
during the term of his employment under this Agreement shall
constitute cause for termination.
(c) The Employee further acknowledges and agrees that in the event
of a breach of the covenants, provisions and restrictions in
this Article 3, the Employer's remedy in the form of monetary
damages may be inadequate and that the Employer shall be and
is hereby authorized and entitled, in addition to all other
rights and remedies available to the Employer, to apply for
and obtain from any court of competent jurisdiction interim
and permanent injunctive relief and an accounting of all
profits and benefits arising out of such breach. The Employee
also acknowledges that the operation of the foregoing
covenants may seriously constrain his freedom to seek other
remunerative employment.
3.5. Investments.
Nothing in this Agreement shall be deemed to prevent or prohibit the
Employee from owning shares in a public company as an investment, so long as the
Employee does not own more than 5 percent of the outstanding voting shares
thereof.
3.6. Survival.
Neither the termination of this Agreement, nor of the Employee's
employment hereunder, shall terminate or affect in any manner any provision of
this Article 3 that is intended by its terms to survive such termination.
3.7. Qualification of Non-Competition.
If the provisions of Section 3.4 are ever adjudicated to exceed the
limitations on time or geographic scope permitted by applicable law, then such
provisions shall be deemed to be amended to the maximum time or geographic scope
permitted by applicable law.
Article 4.
TERMINATION
4.1. Termination for Cause, Disability, Etc.
(a) Subject to Section 4.4, the Employer may terminate this
Agreement and the Employee's employment hereunder without
payment of any compensation either by way of anticipated
earnings or damages of any kind for any of the following
reasons:
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<PAGE>
(i) cause which, for the purposes of this Agreement,
means a wilful refusal on the part of the Employee to
perform the services required of him under this
Agreement (including the wilful and intentional
withholding of services thereunder), any breach of
his fiduciary duties to the Employer likely to cause
material harm to the Employer, fraud or any
conviction of a felony or indictable offense or any
crime involving moral turpitude or any of the theft
or dishonesty relating to a matter material to the
Employer, provided that a wilful refusal to perform
the services required under this Agreement will
constitute cause only if the Employee fails to
terminate the relevant actions or cure the relevant
failure to act and remedy any harm therefrom within
10 business days after receipt of written notice to
such wrongful act, failure to act or harm from the
Employer;
(ii) disability which, for the purposes of this Agreement,
means the eligibility of the Employee for long term
disability benefits under the disability insurance
referred to in Section 2.2 of this Agreement; or
(iii) death of the Employee.
(b) In the event of termination pursuant to Section 4.1(a), the
Employee's sole entitlement shall be his Base Salary to and
including the date of termination, all benefits accrued to the
date of termination and all rights pursuant to any Share
Option Plan governing options issued to the Employee. For
greater certainty, the Employee shall not be entitled to any
part or pro rata payment for any unpaid bonus or payments
pursuant to any incentive plans except to the extent earned
but not yet paid for the fiscal year immediately preceding the
date of termination.
(c) In the event of termination pursuant to Section 4.1(a)(ii) or
(iii) above, the Employee's sole entitlement shall be his Base
Salary to and including the date of termination, all benefits
accrued to the date of termination, all rights pursuant to any
Share Option Plan governing options issued to the Employee
(provided that all such options shall immediately accelerate
and vest in the Employee or the legal representative of his
estate, as applicable) and a pro rata payment for all bonuses
(calculated as the greater of the bonus which would be paid
under the Employer's bonus plan on the basis that targets were
met and 50% of annual Base Salary) and payments pursuant to
any incentive plans up to the date on which the Employee's
active employment ceased.
4.2. Other Termination by Employer without Cause.
Notwithstanding anything contained in this Agreement and subject to
Section 4.4, where the provisions of Section 4.1 do not apply, this Agreement
and the Employee's employment under this Agreement may be terminated at any time
by the Employer during the term set out in Section 1.1 as follows:
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<PAGE>
(a) the Employer shall pay to the Employee his Base Salary to and
including the date of termination, together with a lump sum
amount equal to 2 times his annual Base Salary (the "Base
Severance");
(b) the Employer shall pay the Employee a lump sum amount in lieu
of his annual bonus equal to the Base Severance times the
higher of 50% or the percentage last used in determining the
Employee's annual bonus.
(c) all options for shares of the Employer issued to the Employee
shall immediately accelerate and vest in the Employee and the
exercise period for all options for shares of the Employer
issued to the Employee shall be 24 months from the date of the
termination.
(d) the Employer shall continue, for a period of 24 months from
the date of termination of this Agreement, all group
insurance, pension or other benefits and all perquisites at a
level equivalent to those provided to the Employee immediately
proceeding the date of termination, provided that if the
Employer cannot continue any particular group insurance or
other benefit or perquisite, the Employer shall reimburse the
Employee for the cost to the Employee to replace such group
insurance or other benefit or perquisite; and
(e) the Employer shall pay the Employee all bonuses (calculated as
the greater of the bonus which would be paid under the
Employer's bonus plan on the basis that targets were met and
50% of annual Base Salary) and payments under the incentive
plans pro rata to the date of termination.
4.3. Other Termination by Employee.
Notwithstanding anything contained in this Agreement and subject to
Section 4.4, where the provisions of Section 4.1 do not apply, this Agreement
and the Employee's employment under this Agreement may be terminated at any time
by the Employee during the term set out in Section 1.1 upon three (3) months'
notice in the case of termination before the second anniversary of the Start
Date, and one (1) months' notice in the case of termination on or after the
second anniversary of the Start Date, in writing by the Employee to the
Employer. In that event, the following shall apply:
(a) the Employer shall pay to the Employee his Base Salary to the
effective date of resignation;
(b) the Employer shall pay the Employee a lump sum amount in lieu
of his annual bonus equal to the Base Salary times the higher
of 50% or the percentage last used in determining the
Employee's annual bonus, pro rata to the effective date of
resignation; and
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<PAGE>
(c) the exercise period for all options for shares of the Employer
issued to the Employee shall be as provided pursuant to the
Share Option Plans under which they were issued.
4.4. Other Termination By Reason of Change in Control.
(a) In the event of termination by the Employer of the Employee at
any time within 24 months following the occurrence of a
"Change of Control" (as hereinafter defined), then the
provisions of Section 4.1, 4.2 and 4.3 shall not apply.
Rather, notwithstanding anything contained in this Agreement,
the following shall apply:
(i) the Employer shall pay to the Employee an amount
equal to 3 times his annual Base Salary (the
"Enhanced Severance");
(ii) the Employer shall pay the Employee an amount in lieu
of his annual bonus equal to the Enhanced Severance
times the higher of 50% or the percentage last used
in determining the Employee's annual bonus;
(iii) all options for shares of the Employer issued to the
Employee shall immediately accelerate and vest in the
Employee and the exercise period for all options for
shares of the Employer issued to the Employee shall
be 36 months from the date of the termination;
(iv) the Employer shall continue, for a period of 36
months from the date of termination of this
Agreement, all group insurance, pension or other
benefits and all perquisites at a level equivalent to
those provided to the Employee immediately proceeding
the date of termination, provided that if the
Employer cannot continue any particular group
insurance or other benefit or perquisite, the
Employer shall reimburse the Employee for the cost to
the Employee to replace such group insurance or other
benefit perquisite; and
(v) the Employer shall pay the Employee all bonuses and
payments under the incentive plans pro rata to the
date of termination.
(b) For the purposes of this Agreement, "Change of Control" shall
mean the occurrence, at any time, of any of the following
events:
(i) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all (50% or more) of
the assets of the Employer to any person or entity or
group of persons or entities acting jointly or in
concert as a partnership or other group (a "Group of
Persons");
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<PAGE>
(ii) the merger, consolidation or other business
combination of the Employer with or into another
corporation with the effect that the shareholders of
the Employer immediately following the merger,
consolidation or other business combination, hold 50%
or less of the combined voting power of the then
outstanding securities of the surviving corporation
of such merger, consolidation or other business
combination ordinarily (and apart from rights
accruing under special circumstances) having the
right to vote in the election of directors;
(iii) the replacement of a majority of the Board or of any
committee of the Board in any given year as compared
to the directors who constituted the Board or such
committee at the beginning of such year, and such
replacement shall not have been approved by the
Board, as the case may be, as constituted at the
beginning of such year;
(iv) a person or Group of Persons shall, as a result of a
tender or exchange offer, open market purchases,
privately registered purchases, merger, consolidation
or other business combination, or otherwise, have
become the beneficial owner (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934,
as amended) of securities of the Employer
representing 20% or more of the combined voting power
of the then outstanding securities of such
corporation ordinarily (and apart from rights
accruing under special circumstances) having the
right to vote in the election of directors; or
(v) the voluntary liquidation, dissolution or winding-up
of the Employer, in connection with which a
distribution is made to the holders of the Employer's
common shares.
4.5. General Termination Provisions.
(a) Upon any termination of this Agreement for any reason, the
Employee shall at once deliver or cause to be delivered to the
Employer all books, documents, effects, money, securities or
other property belonging to the Employer or for which the
Employer is liable to others, which are in the possession,
charge, control or custody of the Employee.
(b) All amounts referred to in this Agreement, specifically
including the Employer's payment obligations pursuant to this
Article 4, shall constitute when due a debt owned by the
Employer to the Employee. The Employee shall not be required
to mitigate damages by seeking other employment or otherwise,
nor shall the amount provided for under this Agreement be
reduced in any respect in the event that the Employee shall
secure alternative employment, or not reasonably pursue
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<PAGE>
alternative employment, following the termination of the
Employee's employment with the Employer. Notwithstanding the
foregoing, should the Employee replace any life, health or
accident plan, at an equivalent level, upon obtaining
alternate employment or otherwise, the Employer shall not be
required to continue such benefits.
(c) As a condition to any payment pursuant to this Article 4, the
Employee agrees to deliver to the Employer at the time of
payment a full and final release from all actions or claims,
such release to be in form reasonably satisfactory to the
Employer and to be for the benefit of the Employer, its
affiliates, directors, officers and employees.
Article 5.
DIRECTORS AND OFFICERS
5.1. Resignation.
If the Employee is a director or officer at the relevant time, the
Employee agrees that, after termination of his employment with the Employer for
any reason, he will tender his resignation from any position he may hold as an
officer or director of the Employer or any of its affiliated or associated
companies. If the Employee fails to resign, the Employer is irrevocably
authorized to appoint another person to act in his name and on his behalf to
sign any documents necessary to give effect to the resignation.
5.2. Indemnity.
(a) Subject to the provisions of applicable law, the Employer
agrees to indemnify and save the Employee harmless from and
against all demands, claims, costs, charges and expenses,
including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil,
criminal or administrative action or proceeding to which the
Employee is made a party by reason of being or having been a
director or officer of the Employer or any affiliated company,
whether before or after any termination if:
(i) the Employee acted honestly and good faith with a
view to the best interests of the Employer;
(ii) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty,
the Employee had reasonable grounds for believing
that his conduct was lawful.
(b) Subject to the provisions of applicable law, the Employer
agrees, with the approval of the court, to indemnify and save
the Employee harmless from and
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<PAGE>
against all demands, claims, costs, charges and expenses
reasonably incurred by him in connection with an action by or
on behalf of the Employer to procure a judgment in the
Employer's favour to which the Employee is made a party by
reason of being or having been a director or officer of the
Employer or of any affiliated company, whether before or after
any termination, if:
(i) the Employee acted honestly and in good faith with a
view to the best interest of the Employer; and
(ii) in the case of criminal or administrative action or
proceeding that is enforced by a monetary penalty,
the Employee had reasonable grounds for believing
that his conduct was lawful.
(c) The Employer agrees to obtain and maintain comprehensive
directors and officers liability insurance in respect of the
Employee in an amount (i) equal to coverage customary for
companies in the same industry as the Employer and (ii) to be
agreed to between the Employer and the Employee and subject to
periodic review.
Article 6.
GENERAL CONTRACT PROVISIONS
6.1. Notices.
Any notice or other document ("Notice") required or permitted to be
given hereunder shall be in writing and shall be given by hand delivery,
responsible over night delivery service, or facsimile transmission (with
confirmation of receipt), to be addressed to:
(a) the Employer or the Board of Directors at:
1 Richmond St. West, Suite #901
Toronto, Ontario
M5H 3W4
Telephone: 416-867-9087
Facsimile: 416-867-9320
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Jeffrey S. Spindler, Esq.
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<PAGE>
or to such other person as the Employer may designate;
(b) the Employee at:
61 Inglewood Drive
Toronto, Ontario
M4T 1H2
Telephone: 416-489-3737
Facsimile: 416-489-0005
Any notice hand delivered personally or by delivery service or
transmitted by facsimile shall be deemed to have been received by and given to
the addressee on the day of delivery or transmission occurs after normal
business hours, on the business day next following the date of transmission.
6.2. Currency.
All dollar amounts set forth or referred to in this Agreement and all
uses of the dollar sign ($) used herein refer to Canadian currency, except as
otherwise indicated.
6.3. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
6.4. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein.
The parties hereto attorn to the jurisdiction of the courts of the Province of
Ontario.
6.5. Interpretation not Affected by Headings, etc.
Any headings preceding the text and paragraphs in this Agreement hereof
have been inserted for convenience and reference only and shall not be construed
to affect the meaning, construction, or effect of this Agreement.
6.6. Deemed Amendments.
If any paragraph or provision of this Agreement is adjudicated to be
invalid or unenforceable, in whole or in part then such paragraph or provision,
or part thereof, shall be
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deemed amended to delete therefrom the objectionable portion and the remaining
portions of this Agreement shall continue to remain in full force and effect.
6.7. Non-Assignability
Neither this Agreement, nor the right to receive any payments
hereunder, may be assigned by the Employee without the prior written consent of
the Employer.
6.8. Time of the Essence.
Time shall be of the essence of this Agreement.
6.9. Binding Effect.
This Agreement shall be binding upon and shall enure to the benefits of
each of the parties and their respective heirs, executors, administrators,
successors and permitted assigns.
6.10. Entire Agreement
This Agreement (together with the plans and documents referred to
herein, that certain letter agreement between the parties hereto dated the date
hereof, and the arrangements regarding the Employee's option to purchase shares
of Treetop Capital, Inc.) supersedes and replaces all prior negotiations and/or
agreements made between the parties, whether oral or written, and shall
constitute the entire Agreement between the parties with respect to all matters
relating to the Employee's employment and the execution of this Agreement has
not been induced by, nor do any of the parties hereto rely upon or regard as
material any representations or writings whatsoever not incorporated into and
made a part of this Agreement. This Agreement shall not be amended, altered or
modified except in writing signed by the parties hereto.
6.11. Taxes.
All payments under this Agreement shall be subject to withholding of
such amounts, if any relating to tax or other payroll deduction as the Employer
may reasonably determine should be withheld pursuant to any applicable law or
regulation.
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<PAGE>
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement
as of the Effective Date.
INFOCAST CORPORATION
Per: /s/ A.T. Griffis
--------------------------------
Per: ________________________________
/s/ JAMES WILLIAM LEECH
__________________________ _____________________________________ l/s
Witness JAMES WILLIAM LEECH
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THIS CONSULTING AGREEMENT made as of the 1st day of December 1998
BETWEEN: INFOCAST CORPORATION
(hereinafter referred to as the "Corporation")
OF THE FIRST PART
- and -
THREE HUNDRED & SIXTY DEGREES INC.
(hereinafter referred to as the "Consultant"
OF THE SECOND PART
WHEREAS the Corporation wishes to retain the Consultant as an investor relations
and financial consultant for its business and financial operations and the
Consultant has agreed to provide such services to the Corporation. NOW THEREFORE
THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, it is
hereby agreed by and between the parties as follows:
ARTICLE 1.
Definitions
1.1 "Consulting Services" shall mean the corporate and financial planning
services relating to the business and services of the Corporation to be provided
by the Consultant, and in particular but without restricting the generality of
the foregoing, means the providing of advice and assistance in connection with
the business of the Corporation.
1.2 The terms "subsidiaries", "associates" and "affiliated corporations" shall
have the meanings ascribed thereto in the Business Corporations Act (Ontario).
ARTICLE 2.
Engagement of the Consultant and Its Duties
2.1 The Corporation hereby engages the services of the Consultant and the
Consultant hereby accepts the engagement of its services by the Corporation,
subject to the terms and conditions hereinafter contained.
2.2 The Consultant shall provide the Consulting Services to the corporation in
such manner as the Corporation and the Consultant may reasonably agree, and
shall, devote such of its time as
<PAGE>
is necessary to properly manage the affairs of the Corporation, and all its
efforts, skills, attention and energies during that time to the performance of
its duties as herein set forth.
2.3 The Corporation acknowledges that it is aware of the Consultant's many
outside activities, duties and financial interests and agrees that the
performance of such activities and duties and involvement of such financial
interests will not be construed as a breach of this Agreement, provided that the
Consultant provides the Consulting Services on a basis which does not impair the
activities and business interests of either the Corporation or the Consultant.
2.4 The Corporation agrees to co-operate with the Consultant and to provide such
information, financial records and documents as may facilitate the performance
of the Consulting Services by the Consultant.
2.5 The term of this Agreement shall commence on the 1st day of December, 1998
for a period of thirteen (13) months ending on December 31st, 1999 and may be
terminated earlier by either party giving fifteen (15) days prior written notice
to the other party that it wishes to terminate this Agreement.
2.6 The Consultant may be dismissed by the Corporation without notice on the
happening of any of the following events, namely;
(a) if Cliff Jones is found mentally incompetent;
(b) if the consultant becomes bankrupt or suspends payment or
compounds with their creditors or makes an authorized
assignment under the Bankruptcy Act or is declared insolvent;
or
(c) for just cause if the Consultant violates any of the
provisions of this Agreement or fails to properly fulfill the
duties of the Consultant's engagement hereunder.
ARTICLE 3.
Compensation
3.1 The Corporation agrees to pay the Consultant, in consideration of the
provision by the Consultant of the Consulting Services of the Corporation, the
following compensation:
(a) Four thousand dollars ($4,000.00) per month paid on the last
business day of each month;
(b) An option to purchase _____________ shares of InfoCast
Corporation at a price of _______________ per share until
December 31, 2000.
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<PAGE>
(c) In the event the Corporation wishes to retain the services of
the Consultant beyond December 31, 1999 it will do so on terms
and conditions negotiated between the parties at that time.
ARTICLE 4.
Compensation
4.1 The Consultant shall not disclose, during the term of this Agreement or at
any time thereafter, any information concerning the business and affairs of the
corporation or its subsidiaries, affiliated corporations or associates which it
may have learned while providing the Consulting Services, to any person not an
officer or Director of the Corporation other than in the proper discharge of its
duties under this Agreement and it shall not use, for its own purpose or for any
purpose other than that of the Corporation, either during the continuance of its
engagement under this Agreement or at any time thereafter, any information it
may have acquired, or may acquire, in or relation to the business of the
Corporation, its subsidiaries, affiliated corporations or associates.
ARTICLE 5.
Miscellaneous
5.1 Any notice required or permitted to be given hereunder shall be given by
hand delivery, facsimile transmission or by registered mail, postage prepaid,
addressed to the parties at their respective address set forth below:
(a) If to the Corporation: InfoCast Corporation
1 Richmond St. West
Suite 901
Toronto, Ontario
Telecopier No.: 416-867-9320
(b) If to Consultant 181 University Ave.
Suite 2110
Toronto, Ontario
M5H 3M7
Telecopier No.: 416-366-1890
and any such notices given by hand delivery or by facsimile transmission shall
be deemed to have been received on the date of delivery or transmission and if
given by prepaid registered mail, shall be deemed to have been received on the
third business day immediately following the date of mailing. The parties shall
be entitled to give notice of changes of address from time to time in the manner
hereinbefore provided for the giving of notice.
-3-
<PAGE>
5.2 This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario.
5.3 Time shall be of the essence of this Agreement.
5.4 The provisions of this Agreement shall enure to the benefit of and be
binding upon the Corporation and the Consultant and their respective successors
and assigns. This Agreement shall not be assignable by the Consultant.
5.5 This Agreement constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties hereto in connection with the subject
matter hereof. No supplement, modification, waiver or termination of this
Agreement shall be binding, unless executed in writing by the parties to be
bound thereby.
5.6 The Consultant acknowledges having been advised to obtain independent legal
advice and acknowledges either having obtained independent legal advice or
having waived the right to independent legal advice.
IN WITNESS WHEREOF this Agreement has been executed by the parties
SIGNED, SEALED AND DELIVERED ) InfoCast Corporation
)
)
)
) Per: /s/ A.T. Griffis
) A.T. Griffis
)
)
) THREE HUNDRED & SIXTY DEGREES
) INC.
)
)
) Per: /s/ Cliff A. Jones
) Cliff A. Jones
-4-
CONSULTING AGREEMENT
This Agreement is made and entered into as of March 22, 1999 by and
between INFOCAST CORPORATION, a Nevada corporation (the "Company") and Thompson
Kernaghan & Co. Limited ("Consultant").
WHEREAS, the Company is engaged in the business of electronic content
delivery and information management, and
WHEREAS, the Company wishes to engage the services of the Consultant
pursuant to the terms of this Agreement, and
WHEREAS, the Consultant wishes to be engaged by the Company pursuant to
the terms hereof, it is
NOW THEREFORE AGREED AS FOLLOWS:
1. Engagement of Consultant. The Company does hereby engage the
Consultant and the Consultant hereby accepts the engagement, pursuant to the
term of this Agreement.
2. Services. Services to be provided to the Company by the Consultant
are set forth on Schedule A hereto ("Services"). The Consultant will devote so
much time to the business of the Company as necessary and appropriate in order
to provide the Services. It is understood that no minimum number of hours will
be required of the Consultant.
3. Term. The Term of this Agreement shall be for a period of 1 years,
commencing on the date hereof.
4. Compensation. In full compensation for all of Services to be
rendered to the Company hereunder, the Company shall issue to the Consultant
upon execution of this
<PAGE>
Agreement, 60,000 shares (the "Shares") of the Company's common stock, $.01 par
value (the "Common Stock").
The Consultant represents and warrants that it is acquiring the Shares
for its own account for investment purposes only; that it has no present
intention of selling or otherwise disposing of the Shares or any part thereof;
that it will not transfer the Shares in violation of the securities laws of the
United States; that it is familiar with the business operations, management and
financial conditions and affairs of the Company. The Consultant further confirms
that it has been advised that the Shares have not been registered under the
Securities Act of 1933, as amended, and that the Consultant has consulted with
and been advised by counsel as to the restrictions on resale to which the Shares
will thereby be subject.
5. Confidentiality. It is acknowledged by the Consultant that in
providing its services hereunder the Consultant will be privy to all
confidential and proprietary information of the Company The Consultant agrees
that it shall hold all information of the Company in its possession which is not
publicly disseminated, in confidence and as proprietary to the benefit of the
Company. The Consultant shall take such steps as it deems appropriate in order
to protect the confidentiality of such information. The Consultant shall not,
without the prior written approval of the Company, directly or indirectly,
solicit, raid, entice, or induce any person who presently is or shall be, an
employee, director or officer of the Company or any of its affiliates to become
employed by the Consultant or any of its affiliates.
6. Full Agreement of Parties. This Agreement shall constitute the full
understanding of the parties. Any modification hereof shall be enforceable only
if made in writing and executed by the party against whom such modification is
sought.
-2-
<PAGE>
7. Assignability. This Agreement and the rights hereunder may not be
assigned by either party (except by operation of law) without the prior written
consent of the other.
8. Notices. Any notice or other communication between the parties
hereto shall be sent by certified or registered mail, postage prepaid, if to the
Company, addressed to it at 1 Richmond Street West, Suite 901, Toronto, Ontario
M5H 2V2, Attention: [ ], or if to the Consultant, addressed to it at 365 Bay
Street, Toronto, Ontario M5H 2V2, Attention: [ ], or to such address as may
hereafter be designated in writing by one party to the other. Such notice or
other communication shall be deemed to be given on the date of receipt.
9. Independent Contractor. It is agreed that the Consultant is an
independent contractor vis-a-vis the Company and shall have no authority to
execute instruments on behalf of the Company.
10. Governing Law. This Agreement shall be governed by the laws of the
State of Nevada, without giving effect to conflicts of laws rules of such state.
11. Expenses. Subject to the prior approval of the Company and upon
receipt of appropriate supporting documentation, the Company shall reimburse the
Consultant for any and all reasonable out-of-pocket expenses incurred by the
Consultant in connection with services rendered by the Consultant to the Company
pursuant to this Agreement. Expenses payable by the Company under this Section
11 shall not include allocable overhead expenses of the Consultant, including
but not limited to, secretarial charges and rent.
12. Counterparts. This Agreement may be executed in more than one
counterpart with the same effect as if the parties executing the several
counterparts had each executed one counterpart.
-3-
<PAGE>
INFOCAST CORPORATION
By:
Name:
Title:
Agreed and Accepted as of the date
first written above: March 22, 1999
THOMSON KERNAGHAN & CO. LIMITED
By: /s/ Mark Valentine
----------------------------
Name: Mark Valentine
Title: Exec. V.P. & Director
-4-
<PAGE>
SCHEDULE A
TO AGREEMENT DATED AS OF MARCH __, 1999
BETWEEN INFOCAST CORPORATION
AND
THOMSON KERNAGHAN & CO. LIMITED
The Consultant shall confer with the Company and its senior officers in
respect of:
1. Providing financial consulting services and advice
pertaining to the Company's business affairs.
2. Providing sponsorship and exposure in connection with
the dissemination of corporate information regarding
the Company to the investment community at large
under a systematic planned approach.
3. Rendering advice and assistance in connection with
the preparation of annual and interim reports and
press releases.
4. Assisting in the Company's financial public
relations, including discussions between the Company
and the financial community.
5. Rendering advice with respect to any acquisition
program of the Company.
6. Rendering advice regarding a future public or private
offering of securities of the Company or any
subsidiary.
-5-
CONSULTING AGREEMENT
THIS AGREEMENT is made this 15th day of April, 1999.
BETWEEN:
INFOCAST CORPORATION, a body corporate duly
incorporated, and having its Registered office at 1
Richmond Street West, Suite 902, Toronto, ON M5H 3W4
Canada,
(hereinafter called the "Company")
OF THE FIRST PART
AND:
MICHAEL BAYBAK AND COMPANY, INC., a body corporate,
incorporated under the laws of the State of California,
having an office at 4515 Ocean View Blvd., Suite 305, La
Canada, California 91011, U.S.A.
(hereinafter called the "Consultant")
OF THE SECOND PART
WHEREAS:
A. The Consultant is a firm carrying on the business of providing national media
consulting services and financial community investor relations consulting
services for emerging companies;
B. The Company is desirous of retaining the consulting services of the
Consultant on a fixed term basis and the Consultant has agreed to serve the
Company as an independent contractor upon the terms and conditions herewith set
forth;
FOR VALUABLE CONSIDERATION it is hereby agreed as follows:
1. The Consultant shall provide major media consulting services to the company,
such duties to include news feature development, relations with marketing
newsletter and with other trade and advertising media interested in the Company
and its technology. The Consultant shall also provide an investor relations
program of communications to the U.S. institutional, brokerage and retail
investor publics. Additionally, the Consultant shall consult and advise the CEO
and Company on a variety of corporate matters on an on-going basis, as these may
relate to the above programs. This work is SUBJECT ALWAYS to the control and
direction of the CEO and Board of Directors of the Company.
<PAGE>
2. The Company shall provide to Consultant copies of all proposed Company
literature prior to the dissemination of such literature to any third parties
and the Consultant shall not disseminate any such materials or documents without
the prior approval of the Company,
3. The term of this Agreement shall be for a period of twelve (12) months from
the date of this Agreement. This Agreement can be renewed at the option of the
Company for a further twelve (12) months, upon notice in writing to the
Consultant at least thirty (30) days prior to the end of the initial term.
4. The basic remuneration of the Consultant for its services hereunder shall be
$US 6,000 per month, billed at the start of each monthly service period and
payable in 15 days. The first monthly fee is payable immediately on
implementation of this Agreement.
5. The Consultant shall be responsible for the payment of its income taxes as
shall be required by any governmental entity with respect to any compensation
paid by the Company to the Consultant.
6. During the term of this Agreement, the Consultant shall provide its services
to the Company primarily through Michael Baybak and through George Duggan, and
the Consultant shall ensure that Michael Baybak and/or George Duggan will be
available to provide such services to the Company in a timely manner subject to
their availability at the time of the request.
7. The Consultant shall be reimbursed for all reasonable out-of-pocket expenses
actually and properly incurred by it in connection with its duties hereunder
with the prior consent of the Company. For all such expenses, the Consultant
shall furnish to the Company statements, receipts and vouchers. The costs of any
dissemination programs to be undertaken with the approval of the Company shall
be paid in advance when such costs exceed $US 1,500 per dissemination program.
8. The Consultant shall not, either during the continuance of its contract
hereunder or any time thereafter, disclose the private affairs of the Company
and/or its subsidiary or subsidiaries, or any secrets of the Company and/or its
subsidiary or subsidiaries, to any person for its or their own personal benefit
or purposes whether or not to the detriment of the Company and shall not use any
information it may acquire in relation to the business and affairs of the
Company and/or its subsidiary or subsidiaries for its own benefit or purposes,
or for any purpose other than those of the Company as more particularly
described in paragraph 1 above.
<PAGE>
9. The Company agrees to indemnify and save the Consultant harmless from any
loss, costs or expenses incurred as a result of or arising out of the
Consultant=s dissemination or publication of any documents or literature issued
or approved in writing by the Company in accordance with the provisions of
paragraph 2 of this Agreement, in the event that it is established by a Court of
competent jurisdiction that such materials contain material misrepresentations
or false or misleading information, or omit to state a material fact necessary
to prevent a statement that is made from being false or misleading. The Company
shall be solely responsible for all required registrations/exemptions for its
securities at the federal and state levels. 10. The Consultant shall well and
faithfully serve the Company or any subsidiary as aforesaid during the
continuance of its employment hereunder and use its best efforts to promote the
interests of the Company.
10. The Consultant shall well and faithfully serve the Company or any subsidiary
as aforesaid during the continuance of its employment hereunder and use its best
efforts to promote the interests of the Company.
11. This Agreement may be terminated forthwith by the Company without prior
notice if at any time:
(a) The Consultant shall commit any breach of any of the provisions
herein contained; or
(b) The Consultant shall be guilty of any misconduct or neglect in the
discharge of its duties hereunder.
(c) The Consultant shall become bankrupt or make any arrangements or
composition with its creditors; or
(d) Michael Baybak shall become of unsound mind or be declared
incompetent to handle his own personal affairs.
12. The Company is aware that the Consultant has now and will continue to have
business interests in other companies and the Company recognizes that these
companies will require a certain portion of the Consultant=s time. The Company
agrees that the Consultant may continue to devote time to such outside
interests, PROVIDED THAT such interests do not conflict with, in any way, the
time required for the Consultant to perform its duties under this Agreement.
13. The services to be performed by the Consultant pursuant hereto are personal
in character, and neither this Agreement nor any rights or benefits arising
thereunder are assignable by the Consultant without the prior written consent of
the Company.
14. Any notice in writing or permitted to be given to the Consultant hereunder
shall be sufficiently given if delivered to the Consultant personally or mailed
by registered mail, postage prepaid, addressed to the Consultant at its last
business address known to the Secretary of the Company. Any such notice mailed
as aforesaid shall be deemed to have been received by the Consultant on the
first business day following the date of the mailing. Any notice in writing
required or permitted to be given to the Company hereunder shall be given by
registered mail, postage prepaid, addressed to the Company at the address shown
on page 1 hereof. Any such notice mailed as aforesaid shall be deemed to have
been received by the Company on the first business day following the date of
mailing. Any such address for the giving of notices hereunder may be changed by
notice in writing given hereunder.
<PAGE>
15. The provisions of this Agreement shall inure to the benefit of and be
binding upon the Consultant and the successors and assigns of the Company. For
this purpose, the terms "successors" and "assigns" shall include any person,
firm or corporation or other entity which at any time, whether by merger,
purchase or otherwise, shall acquire all or substantially all of the assets or
business of the Company.
16. Every provision of this Agreement is intended to be severable. If any term
or provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity of the remainder of the
provisions of this Agreement.
17. This Agreement is being delivered and is intended to be performed in the
State of California and shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of that State. This
Agreement may not be changed orally, but only by an instrument in writing signed
by the party against whom or which enforcement of any waiver, change,
modification or discharge is sought.
IN WITNESS WHEREOF this Agreement has been executed as of the day,
month and year first above written.
THE COMMON SEAL OF )
INFOCAST CORPORATION )
was hereto affixed )
c/s
in the presence of: )
)
) per: /s/ A.T. Griffis
/s/ Elin Crespo ) --------------------------------
Signature of Witness ) Authorized Signatory
)
)
_________________________________ ) 21 April 1999
---------------------------------------
Address of Witness Date:
SIGNED, SEALED AND DELIVERED by )
MICHAEL BAYBAK AND )
COMPANY, INC. by its authorized )
signatory in the presence of: ) MICHAEL BAYBAK AND
) COMPANY, INC.
)
/s/ George Duggan ) per: /s/ Michael Baybak
- -------------------------------- -------------------------------
Signature of Witness ) Authorized Signatory
)
)
_________________________________ ) 15 April 1999
-------------------------------
Address of Witness ) Date:
LASSO Communications Inc.
1881 Yonge Street Toronto Ontario M4S 3C4
Tel. 416.486.7746 Fax 416.486.8240
June 15, 1999
Mr. James Hines
President
Infocast
1 Richmond Street
Suite 902
Toronto, Ontario
M5H 3W4
Dear Mr. Hines:
This letter will confirm your advice on behalf of Infocast Corporation
("Infocast") to Lasso Communications Inc. ("Lasso") that Infocast has secured
the rights as a Value Added Reseller of ITC Learning Corporation to offer for
sale in Canada licenses to use the electronic format of the ITC Learning
courseware curriculum ("ITC Libraries") for delivery over the Interenet,
Intranets or other networks. This letter will also confirm that Infocast has
agreed to sell to Lasso licenses to use such ITC Libraries in association with
Lasso's Long Distance Learning systems and related projects, at Infocast's best
customer pricing, which in any event shall be no less than 40% off Infocast's
list prices.
We will work our purchase order arrangements with your sales staff. Please
provide us with a copy of the ITC Libraries end-user license so that we can
ensure that we will be in compliance as we go forward with incorporating the ITC
Libraries into our projects.
Please confirm the above terms by signing and returning the duplicate copy of
this letter.
Best regards,
/s/ Tony Russell
Tony Russell
C.O.O.
Grey Interactive/Lasso Communications
Infocast Corporation
Per: /s/ James Hines
--------------------
AGREEMENT
Agreement for advertising services effective July 1, 1999, between Infocast
Corporation, (hereinafter referred to as the "Client") with offices at 1
Richmond Street West, Suite 902, Toronto, Ontario, M5H 3W4 and Lasso
Communications Inc. (hereinafter referred to as the "Agency") with offices at
1881 Yonge Street, Suite 500, Toronto, Ontario, M4S 3C4
Whereas the Agency has the facilities and expertise to provide advertising
services in Canada and is willing to provide such advertising services to Client
in relation to such of Client's products and services as designated by Client
and accepted by Agency; and
Whereas Client wishes to avail itself of such advertising facilities services
and expertise;
Now therefore in consideration of the mutual promises made herein and for other
good and valuable consideration, the parties do agree as follows:
1. TERM. The term of this Agreement (the "Term") shall commence effective
July 1, 1999 and continue for a fixed term until May 31, 2000 (the
"Initial Term"). Thereafter this agreement, shall be automatically
renewed from year to year (the "Renewal Term"), unless either party
delivers written notice of termination as hereinafter provided.
2. PRODUCTS. Client hereby engages the Agency to perform, in Canada and
the U.S. (the "Territory"), advertising services customarily performed
by an advertising agency in respect of the Client products and services
designated by the Client and agreed to by the Agency (collectively
referred to herein as "Client Products").
3. SERVICES. Agency shall provide in the Territory the following core
advertising services in respect of the creation, production and
placement of authorized Client advertising in the Territory for the
Client Products:
A. General Advertising
-------------------
i) the development, preparation and production of copy, layouts,
and/or finished advertisements, for all types of print media
including, without restriction, newspaper, magazine, all forms
of outdoor advertising, billboards, transit advertising,
in-store advertising;
ii) the preparation of copy, storyboard, finished films, tapes
and/or recordings for all types of broadcast media including,
without restriction, television, radio, video formats of all
kinds, electronic messaging, theaters and cinemas;
<PAGE>
iii) the purchase of artwork, engravings, film, tapes, and/or other
mechanical and collateral materials;
iv) testimonials, endorsements, researchers, etc., on Client's
behalf with Client's written approval;
B. Media
-----
i) to provide, media planning, buying and reporting;
ii) the auditing of all billings submitted by all media or other
parties for material and services provided;
iii) strategic input and recommendations on an ongoing basis as may
be reasonably requested by Client.
C. Interactive Media Services
--------------------------
i) to provide web-site design and development, software
engineering and application development.
D. General
-------
i) the carrying out of such special assignments within the
framework of this Agreement as Client and Agency may agree,
from time to time, in writing.
4. COMPENSATION. The Agency shall be compensated according to the terms
set forth in Schedule A, attached hereto and made part hereof (the
"Agency Compensation").
5. AGENT STATUS. The Agency will conduct and represent itself as agent for
the Client. The Agency shall not enter into any contract or make any
commitment on behalf of the Client, unless Client's approval of such
contract or commitment has first been secured.
6. OWNERSHIP.
A. All creative materials (herein collectively referred to as "Creative
Material") adopted by the Client for use in its advertising shall, as
between Client and the Agency be the sole and exclusive property of
Client provided Client has fully paid Agency for the costs of
production, out-of-pocket expenses and all outstanding fees and
commissions owing to Agency in respect of such Creative Material.
B. In consideration of the payments aforesaid, Agency hereby assigns to
Client copyright in the Creative Material and Client shall have the
right to obtain and hold in its
-2-
<PAGE>
own name copyrights, registrations and similar protection which may be
available in the Creative Material. Agency agrees to give Client, at
Client's expense, all assistance reasonably required to perfect such
rights.
C. Agency agrees that with respect to all items prepared for and
submitted to Client containing or proposed to contain any pre-existing
or third party created materials in respect of which rights have been
reserved by some third party (hereinafter collectively referred to as
"Third Party Works"), Agency will specifically identify all Third Party
Works.
D. Any agreement or license for Third Party Works, authorized by Client
and entered into by Agency on behalf of Client with a third party,
shall be entered into in the name of the Client.
E. Notwithstanding anything to the contrary herein contained, all
copyright, patents and code, including source and object code for any
programs designed by Agency relating tot he provision of Interactive
Media Services to Client shall remain the sole property of the Agency.
7. DOCUMENT RETENTION/DESTRUCTION. The Agency shall retain for two years
all contracts, papers, correspondence, copy books, account, invoices,
and all other information in its possession relating to the business of
the Client and make all of such material or such portions of it as the
Client may reasonably request available at the Agency's principal
office for examination, copying and retrieval by the Client's
authorized representatives at such times during the Agency's normal
business hours as the Client may reasonably request.
On an annual basis, stored artwork, mechanicals, film and tape shall be
reviewed and at the written direction of the Client be (i) retained by
Agency, (ii) returned to Client, provided that there is no undisputed
overdue indebtedness owing by Client to Agency, or (iii) destroyed.
8. CONFIDENTIALITY. Client will supply all information reasonably
requested by the Agency as necessary for the performance of its duties
and obligations hereunder. Unless otherwise specified by Client, all
information obtained from Client shall be held in confidence by Agency
and the Agency will not disseminate or utilize such information for its
own purposes and will restrict dissemination of such information within
its own personnel on a "need to know basis" both during the Term of
this Agreement and after its termination. Upon termination of this
Agreement, the Agency will return to Client all copies of documents or
other material containing such information.
Notwithstanding the foregoing, the Agency shall have no obligation to
keep confidential information which (a) is or becomes generally
available to the public through no fault of the Agency, (b) is
disclosed to others by Client without obligation of confidentiality,
(c) was known to the Agency prior to its being obtained from Client by
the Agency, and (d) required to be disclosed by statute, regulation,
court order or legal process.
-3-
<PAGE>
Client expressly reserves the right, in its own discretion and for
reasons deemed by it to be sufficient, to modify or reject any and all
schedules, plans or production submitted by the Agency and to instruct
the Agency to cease work on any schedules, plans or production
performed on its behalf. All such advice or instructions shall be given
in writing. When advised to cease work, the Agency shall immediately
cease internal activities and notify all publishers, printers,
engravers, artists, designers or other third parties engaged in
carrying out such schedules or plans to cease work thereon. Client
shall be liable for all non-cancellable committed costs and penalties
incurred.
9. APPROVAL OF ESTIMATES. The Agency shall not commence work on any
project on behalf of Client, unless and until they have submitted an
estimate for that project to Client, and in turn have received a
written approval of that estimate from Client. In case of any changes
affecting the ultimate billing to Client as it would relate to the
estimate by more than 10%, the Agency will submit written revisions to
Client, and not proceed with the project until such revisions have been
approved in writing by Client.
10. A. AUTHORIZED CLIENT PERSONNEL. Client shall advise the Agency of the
individuals authorized by Client to provide the instructions, advice
and/or approvals called for under this Agreement.
B. AGENCY PERSONNEL. Agency will involve such Agency personnel as may
be required to perform the Services.
11. DUE CARE. The Agency shall exercise all reasonable due care and
precautions in the preparation and examination of all material used by
it on behalf of Client.
12. ETHICAL APPLICATIONS. The Agency has the right to refuse to handle any
advertising or other service that, in its opinion, does or may violate
a law, regulation, or self-regulatory rule or policy to which the
Agency, Client or the media have subjected themselves. In any such
event, the Agency shall, at Client's request and expense, furnish
counsel's opinion.
13. INDEMNIFICATION. Client shall indemnify Agency against any liabilities
and expenses (including reasonable attorney's fees) Agency may incur as
a result of any loss, liability, claim, cause of action, suit, damage,
injury, cost or expense relating to:
(i) any undertaking or obligation on the part of Client
under this Agreement;
(ii) Client Products;
(iii) any alleged injury or death to persons or injury or
damage to property during the term of this Agreement
if such injury occurs as a result of acts of Client
or Client's employees, whether said loss is sustained
by Agency or any other person(s) or third party.
-4-
<PAGE>
(iv) false, deceptive, or misleading description,
depiction or comparison of Client and/or competitive
products results directly and to the extent that
inaccurate information, material or data was supplied
by or on behalf of Client to Agency.
Upon the assertion of any claim or the commencement of any suit or
proceeding against Agency by and third party that may give rise to
liability of the Client hereunder, the Agency shall promptly notify the
Client of the existence of such claim for Client's defense and/or
settlement of the claim at Client's own expense and with counsel of its
own selection. Agency shall at all times have the right to fully
participate in such defense at its own expense and shall not be
obligated, against its consent, to participate in any settlement which
it reasonably believes would have an adverse affect on its business.
The Agency shall make available to the Client all books and records
relating to the claim, and the parties agree to render to each other
such assistance as may reasonably be requested in order to insure a
proper and adequate defense. The Agency shall not make any settlement
of any claims which might give rise to liability of an Client hereunder
without the prior written consent of the Client.
14. TRADE-MARKS. Agency shall ensure that all Client advertising, creative
and promotional material prepared by the Agency which contains any of
the Client's trade-marks as identified to the Agency from time to time
properly and accurately identifies the Client's trade-marks in
accordance with any Client written trade-mark policy delivered to the
Agency.
15. INSURANCE. During the Term of this agreement, the Agency shall, at its
own cost and expense, maintain the following insurance in full force
and effect:
(a) Agency shall maintain in full force and effect at its own cost
and expense an advertising Agency Liability Policy issued by
an insurance company acceptable to Client protecting against
the following named perils: libel; slander; defamation;
infringement of copyright or of title or slogan; piracy;
plagiarism; unfair competition or idea misappropriation under
implied contract; and/or invasion of rights of privacy, in an
amount not less than $1,000,000; and
(b) Comprehensive general liability insurance providing coverage
for operations and for contractual liability with respect to
liability assumed by the Agency hereunder. The limits shall be
not less than $1,000,000 for bodily injury per occurrence and
$1,000,000 for property damage; or alternatively, the limits
shall be not less than $2,000,000 combined single limit
coverage.
16. AGREEMENT NOT ASSIGNABLE. This Agreement is not assignable. Provided
that Agency and Client hereby agree that either of them may assign
their respective interests, rights and obligations under this Agreement
to any entity with which such party has merged or
-5-
<PAGE>
amalgamated or by which such party has been acquired or to which fifty
percent (50%) or more of such party's capital stock, partnership
interest or other analogous ownership interest has been sold or
transferred, provided that such transferee assumes the transferor's
obligations hereunder.
17. NOTICE. Communications, notices, directions and demands which either
party hereto desires, or may under the provisions of this Agreement be
required, to make or give the other shall be properly given and shall
be in full compliance with the Terms hereof, if in writing, and
delivered or sent by prepaid first class mail addressed to:
To Agency: Lasso Communications Inc.
1881 Yonge Street
Suite 500
Toronto, Ontario
M4S 3C4
Attention: President
To Client: Infocast Corporation
1 Richmond Street West
Suite 902
Toronto, Ontario
M5H 3W4
Attention: President
Any communications, notice or direction so given shall be deemed to
have been given and received when delivered or when sent by mail on the
fifth business day following the day on which it was so mailed, subject
to disruptions in the postal service. The Agency and Client may from
time to time by notice aforesaid change their respective addresses for
notice hereunder.
18. TERMINATION. The Initial Term of this Agreement is non-cancellable by
the Client. In the event: i) the Client purports to terminate or cancel
this Agreement prior to the end of the Initial Term for whatever
reason; or ii) the Agency terminates this Agreement for material breach
by the Client, the unpaid balance of the retainer fee set out in
Schedule A shall immediately become due and payable in full, and any
outstanding adjustments to such retainer fee and all outstanding
disbursements shall immediately become due and payable.
The Agency may terminate this Agreement for convenience during the
Initial Term on at least thirty (30) days prior written notice in which
event none of the retainer fee installments which would have become due
subsequent to the effective date of termination shall be
-6-
<PAGE>
payable, provided that any Agency compensation payable on a periodic
basis shall be prorated to the effective date of termination.
The Agency will be paid in full, in accordance with the terms of this
Agreement and the attached Schedules, for all authorized costs,
charges, expenses and disbursements incurred prior to the effective
date of termination.
The Agency's rights, duties and responsibilities shall continue during
the applicable termination notice period.
During any renewal terms following the Initial Term, either party shall
have the right to terminate this Agreement at any time upon ninety (90)
days prior written notice to the other.
Effective upon the termination of this Agreement by Client or Agency,
Client agrees to assume, and to indemnify and hold harmless Agency
from, any responsibility for all talent payment for the
post-termination use or re-use of advertising materials, which payments
may be required pursuant to any applicable performers' union agreement,
including without limitation ACTRA and L'Union des Artistes; and Client
further agrees to so notify the applicable union in writing, copying
the Agency (or to execute Agency's notification for, if so requested)
forthwith upon termination of this Agreement. The Agency shall provide
a list of all such continuing obligations.
The provisions of this Agreement relating respectively to Ownership,
Confidentiality and Indemnification shall not be affected by any
termination of this Agreement.
19. NO PARTNERSHIP. This Agreement is a contract for the performance of a
service, and nothing shall be construed as constituting either party
the employer, servant, partner, or joint venture of the other.
20. WAIVER. No waiver by either party of the breach of any provision of
this Agreement shall be construed to be a waiver of any preceding or
succeeding breach of the same or any other provision.
21. REMEDIES CUMULATIVE. Either party's various rights and remedies
hereunder shall be cumulative, and the exercise or enforcement of any
one or more of them shall not preclude either party from exercising or
enforcing any of the others or any right or remedy allowed by law.
22. APPLICABLE LAW. This Agreement shall be construed in accordance with
the laws of the Province of Ontario.
-7-
<PAGE>
In Witness Whereof, the parties have duly executed this Agreement
INFOCAST CORPORATION
By: /s/ (signature is illegible)
Title: President
Date: July 20, 1999
By: A.T. Griffis
Title: Chairman
Date: July 20, 1999
LASSO COMMUNICATIONS INC.
By: /s/ (signature is illegible)
Title: Chief Executive Officer
Date: June 15, 1999
By: /s/ (signature is illegible)
Title: Chief Financial Officer
Date: June 15, 1999
-8-
<PAGE>
SCHEDULE "A"
------------
AGENCY COMPENSATION
-------------------
Compensation Basis
------------------
1. FEE COMPONENT
(a) The Client shall pay Agency for the services described in the agreement
to which this schedule is attached (the "Agreement") in accordance with
the following fees and rates:
i) RETAINER: Agency shall bill the Client, and the Client shall pay the
Agency an annual retainer fee of $250,000 (plus GST) payable in equal
monthly installments of $20,833 (plus GST) in advance, with the first
payment payable on execution of this Agreement and thereafter on the
first day of each month during the Initial Term until the last payment
is made on May 1, 2000. During any Renewal Term the retainer fee shall
continue at an annual rate equal to the immediately previous year's
annual retainer fee and shall continue to be payable monthly in advance
in equal monthly installments, unless at least sixty (60) days prior to
the end of the Initial Term or any subsequent Renewal Term, the
retainer fee is renegotiated and fixed between the parties.
Notwithstanding payment of the monthly installments paid in respect of
the retainer fee, actual staff time will be reported to Client monthly.
Staff time will be summarised in a report delivered every six months
("Reporting Period") which report shall set out the staff time spent on
behalf of the Client at the Agency's then current blended hourly rate
(currently $145 per hour) applied against Client's account.
ii) RETAINER ADJUSTMENT INITIAL TERM: In the event the aggregate of the
staff time charges calculated at the applicable blended hourly rate for
the first Reporting Period during the Initial Term of this Agreement
exceeds the aggregate of the monthly installments paid during the first
Reporting Period, Client shall forthwith, upon delivery of the report
for the said Reporting Period, pay to Agency the shortfall (plus GST)
as indicated on such report (the "First Period Differential").
Within 90 days following the end of the second Reporting Period during
the Initial Term of this Agreement, the Agency shall provide the Client
with a summary report (the "Annual Report") of the total staff time
spent on behalf of the Client during the first two Reporting Periods of
the Initial Term.
In the event the aggregate of the staff time charges calculated at the
applicable hourly rate for the two Reporting Periods set out in the
Annual Report (the "Annual Staff Charges") exceeds the aggregate of the
monthly installments paid during the said two Reporting Periods plus
any First Period Differential paid to the Agency (the "One Year
Aggregate"), Client
<PAGE>
shall forthwith, upon delivery of the report for the said Reporting
Period, pay to Agency the shortfall as indicated in such report.
In the event the Client has paid to Agency a First Period Differential,
and the Annual Staff Charges are less than the One Year Aggregate,
Agency shall forthwith after delivering the Annual Report, rebate to
the Client the difference between the One Year Aggregate and the Annual
Staff Charges provided that the aforesaid rebate shall not exceed the
First Period Differential.
iii) RETAINER ADJUSTMENT RENEWAL TERM: During any Renewal Term, the
provisions and formulae contained in Section 1(a)(ii) with respect to
the adjustment of the retainer fee shall apply mutatis mutandis to each
particular Renewal Term.
(b) The Client shall pay to Agency, in advance, all amounts required to
secure media space and time, including newspaper, periodical, trade
paper, public vehicle transit, radio, television, outdoor, direct mail
advertising and other similar advertising expenditures. The Agency
shall have no obligation to advance any sums on behalf of the client
for the purchase of media. The Agency will allow the Client the benefit
of any arrangements the Agency is able to make with media for terms
more favourable than published rate card rates. The Agency shall not be
entitled to a commission on the placement of media by the Agency.
(c) For Client approved expenditures for externally produced layouts,
storyboards, artwork, photographs, type composition, mechanicals,
engravings, electro-typing, patterns, plates, mats, printing film etc.,
and for all elements of broadcast production including, without
limitation, external storyboards and artwork, music, recording
session(s), talent payment and repayment, colour corrections, rights of
all kinds, release prints, and for all other similar and comparable
items required in and for the production of print, outdoor, transit,
radio and television advertising, the Agency shall bill the Client at
net cost to Agency. Agency agrees to obtain at least three quotes for
the external jobs as noted above when the job is estimated to exceed
$15,000.
(d) All expenditures shall be supported by invoices and purchase orders
which shall be made available to Client upon request.
(f) Client will pay for Client approved:
(i) product testing and product and package development;
(ii) sample surveys for measuring the size, characteristics and
trends of markets;
(iii) advertising testing both before advertising is exposed in
media and after advertisements or campaigns are in use; and
<PAGE>
(iv) production, time and space costs, inclusive of commission,
incurred in the testing of copy.
For all such research, Client will be billed and pay to Agency,
supplier's invoices and out-of-pocket expenses at net cost plus 15%
(g) Other expenses not specifically identified will be agreed between the
Client and Agency prior to their expenditure.
2. Miscellaneous Costs and Charges
-------------------------------
(a) The Client will pay at net cost reasonable travel and accommodation
expenses for Agency personnel associated with the creation and
production of television and radio commercials or print advertisements.
Such expenditures must be authorized in advance by the Client as part
of a production estimate.
(b) The Client will pay, on a net basis, travel and accommodation expenses
of Agency personnel who attend presentations, business or sales
meetings at the Client's request. The cost of travel between Agency
offices and Client offices within the same municipality are not payable
by Client.
(c) The Client will pay Agency charges at net cost for:
(i) long distance telephone and facsimile (FAX) charges;
(ii) all extraordinary documents' duplication;
(iii) courier, shipping, delivery or storage charges for
extraordinary service specifically requested by Client; other
than as aforesaid, each of Client and Agency shall be
responsible for all their shipping, delivery and courier
charges for shipments (including without limitation, all forms
of correspondence) originating from each of their own
respective offices;
Receipts and invoices in support of such charges shall be made
available upon request by Client.
(d) The Client will pay all customs duties, federal, provincial and state
taxes, GST and any other value added taxes, excise taxes and any other
taxes (other than Agency's income taxes) applied to or which may become
applicable to any of the fees, costs, charges and expenses billed,
charged or invoiced to the Client hereunder.
<PAGE>
3. Vendor's Discounts
------------------
All discounts in the amounts allowed to the Agency from all vendors for prompt
payment, volume, frequency and other similar discounts will be passed on to
Client.
4. Payment Terms
-------------
The Agency will submit its accounts for amounts other than the fixed fee
retainer, monthly by the fifteenth day of the next subsequent month. The terms
of payment, for amounts other than the fixed fee retainer, are net 30 days.
Media costs and charges will be billed in advance by media estimate and,
notwithstanding the foregoing, must be received by Agency prior to Agency
booking or ordering the media. Client's funds shall be in the Agency's hands in
time for the Agency to make timely payment to other suppliers and where
applicable, to secure discounts. On Agency request, the Client shall advance to
Agency any amounts for external supplier costs and expenses detailed in Client
approved Agency estimates. Overdue fees and accounts will be charged a late
payment interest penalty of 2% per month (24% per annum).
Release
IN CONSIDERATION of (i) the execution of the certain agreement made between
Infocast Corporation and Lasso Communications Inc. effective July 1, 1999 (the
"Agreement") and, (ii) the fulfillment by Infocast of all of the above terms and
conditions associated with the agreement, including without restriction, the
full payment of the retainer fee set out therein, Lasso agrees that Infocast and
Hines and Gruber will be fully released, acquitted and discharged from any and
all claims which Lasso may have had against Hines, Gruber or Infocast arising
from the departure of James Hines and Michael Gruber from Lass in order to
accept a position of employment at Infocast Corporation.
In the event Infocast fails to fulfill the terms and conditions associated with
the Agreement, including without restriction, the full payment of the retainer
fee, Lasso shall be entitled to bring whatever actions Lasso may deem necessary
provided that (i) in such case Infocast shall be entitled to set off judgments
or awards that may be obtained against Infocast by Lasso in respect of the above
noted claims or claims under the Agreement, an amount equal to any payments of
the retainer fee Infocast has already made or that it will be ordered to make
under the agreement, less the value of services provided by Lasso under the
terms of the Agreement as calculated in accordance with the terms thereof, and,
(ii) if such action is brought, time periods will be deemed to have suspended
between the effective date of the agreement and the end of the initial term of
Agreement or the date of any breach of the Agreement during the Initial Term,
whichever comes first.
Executed at the City of Toronto, Province of Ontario, this 14th day of July,
1999.
Lasso Communications
/s/ P.B. Jones
-----------------------------------
By: P.B. Jones
Title: CFO
/s/ James Hines
- ------------------------------- -----------------------------------
Witness James Hines
/s/ Michael Gruber
- ------------------------------- -----------------------------------
Witness Michael Gruber
Infocast Corporation
/s/ A.T. Griffis
-----------------------------------
By: A.T. Griffis
Title: Chairman
WILLOW CSN CANADA AND INFOCAST CORPORATION
MEMORANDUM OF UNDERSTANDING
The following represents a basis of discussions but does not represent a final
agreement.
WHEREAS, Willow CSN (Canada) Inc. ("Willow"), is the developer and operator of
The CyberAgent Network, (the "Network"), a economically viable alternative to
the conventional call center model. The Network is supported by, a consortium of
private corporations, education and government agencies working together to
assemble a social and economical model that provides incentive to the
CyberAgents, clients, governments and corporations involved,
WHEREAS, Infocast Corporation ("Infocast"), is a company in the business of
creation and provision of interactive software that delivers and manages
information/electronic content on multiple communications platforms in real
time, and,
WHEREAS Infocast and Willow confirm their mutual desire to commence discussions
and to exchange information with the goal of entering into formal agreement(s)
establishing an on-going relationship. This memorandum is to define the terms,
parameters and goals for the parties to reach a mutually beneficial agreement.
Infocast agrees to provide Willow with appropriate documentation in regards to
Infocast's financial viability. This information is to include but is not
limited to Infocast's most recent financial statement, future plans for private
funding, IPO and current lines of credit. Willow reserves the right to cease
discussions with Infocast if this information is not provided or the financial
viability of Infocast is deemed unacceptable.
Infocast agrees to provide Willow with documentation outlining a transition plan
and agreement if Infocast were to be sold or ceases to exist.
Additionally, a term agreement can only be executed when both parties have
agreed to all issues addressed in the Willow Request for Information (RFI).
<PAGE>
Understanding of Roles and Responsibilities
1.0 Infocast Corporations Roles and Responsibilities
Cyber Agent Support for the following Items:
(a) Cyber Agent Applications
(b) Cyber Agent Desk Top Support
(c) Secure Voice and Data Connectivity to the Willow Network
Network Coordination
(a) Act as a Single Point of Contact for all Network Issues
(b) Provide a Best in Breed Network for Virtual Call Center Solutions
(c) Provide a Network Topology and Coverage for all of Canada
Client Integration
(a) Provide Secure Access into the Willow's Client Databases
(b) Provide Computer Telephony Integration into Clients Networks
(c) Provide Expertise to Create Enhanced Applications and Services
Reporting/Monitoring
(a) Provide a Level of Call Reporting and Monitoring Similar to Nortel's
DMS100 and CCMIS.
Billing
(a) Provide Direct Billing to the Cyber Agents and Clients as Agreed Upon
2.0 Willow CSN (Canada) Inc. Primary Canadian Roles and Responsibilities
(a) Recruit Clients to Become CyberNetwork Users
(b) Recruit CyberAgents to Become Call Takers
(c) Provide Training Course Material in Conjunction with Training
Affiliates for CyberAgent Training
-2-
<PAGE>
(d) Provide Infocast a Best Estimate of Clients, CyberAgents and Call
(e) Coordinate Consortium Members to Provide an End to End Cost Effective
Call Center Solution
3.0 Joint Discussions and Responsibilities
Operations and Service Levels
(a) The parties agree to collaborate on levels of service, service
agreements, points of contact and escalation procedures.
Revenue Sharing and Profits
(a) The parties agree to discuss profit margins and will work to a mutually
beneficial agreement.
Compensation
(a) The parties agree the intent of this business arrangement is to provide
a per call transaction based cost model.
(b) The parties agree they will work in collaboration to mutually determine
the price model for CyberAgents, clients, Infocast and Willow.
Project Team
(a) The parties agree to provide adequate resources during the exploration
process, initial implementation and the on-going relationship.
Non Disclosure
(a) The parties agree to abide by the non-disclosure agreement in place.
Non Compete
(a) The parties agree that they will not compete against each other with
respect to their core business as defined in the preamble.
-3-
<PAGE>
Implementation
(a) Infocast anticipates and Willow agrees that the parties will commence
implementation on or about July 1 st, 1999 if the terms and issues
identified in this document are met.
Conclusion.
The parties acknowledge that there are many details that need to be addressed in
respect to structuring and implementing a final agreement. However, based upon
the understanding contained within, the parties will each endeavor to work
expeditiously toward a formal agreement.
NOW THEREFORE, based upon the foregoing being generally in accordance with the
parties understanding of their discussions to date, the parties affix their
signatures and date the agreement as follows:
Infocast Corporation Willow CSN Canada
Per: /s/ James Hines A.T. Griffis Per: /s/ Christopher B. Richardson
--------------- ------------ -----------------------------
Authorized Signature Authorized Signature
/s/ James Hines Christopher B. Richardson
Typed Name Typed Name
President/CEO
Willow CSN, Canada
Title President Title
Infocast
Date June 7, 1999 Date
-4-
Summary of Terms and Conditions
For a Definitive Agreement
Between
CosmoCom, Inc. and Infocast Corporation
The purpose of this document is to present a summary of the terms and conditions
to be included in more definitive agreements which will implement the March 23,
1999 Letter of Intent between Infocast and CosmoCom, covering the period from
the date of this agreement to the end of the year 2000, and to serve as an
initial purchase order from Infocast to CosmoCom.
I. Software Purchases
Infocast intends to purchase CosmoCall software licenses sufficient to
enable at least 2000 CosmoCall Agents by year-end 2000, and may purchase more.
CosmoCall software is licensed in various price element codes, which are defined
on the attached Exhibit A. By signing this agreement, Infocast hereby places an
initial order for licenses enabling 300 Agents as enumerated on the price
quotation attached as Exhibit B, subject to the following terms, conditions, and
milestones:
A. Dates, Purchases, Milestones, Payments
1. Year 1999
Purchase order - 300 CosmoCall Agents per attached
quote, and per the feature list attached as Exhibit
C.
Total License Value US$754,500, payable in four parts
as defined in the following table, with go/no-go
decision based on passing of Acceptance Test
Procedure (ATP) for initial phase of 50 agents. ATP
Definition will be proposed by CosmoCom, discussed,
and mutually agreed.
All Prices in U.S. Dollars
<PAGE>
Date Description Amount
21 April 99 Purchase Order Signed
21 April 99 Payment 50% of 50 Agents (50/300 of Total) $62,875
1 June 99 Delivery of 50 Agents
1 July 99 Acceptance of 50 Agents per ATP (TBD, but
including supervisor/monitor feature)
1 July 99 Payment - Remaining 50% of 50 Agents $62,875
1 July 99 Payment - 50% of 250 Agents $314,375
1 Aug 99 Delivery of 250 Agents
1 Sept 99 Payment - Remaining 50% of 250 Agents $314,375
TOTAL $754,500
Professional services to be billed monthly as actually used (see III
below).
Infocast intends to purchase 700 additional CosmoCall Agents for
delivery prior to year end 1999.
2. Year 2000
Infocast intends to purchase 1000 additional CosmoCall Agents for delivery
during the year 2000.
B. Pricing
1. Subsequent Order Pricing
For its subsequent orders in fulfillment of the future purchase
intentions expressed in this agreement, the base price per Live
Connection will be $1,100. All other future price elements will be
enumerated on the quotation in Exhibit B.
2. Volume Purchase Incentives
In addition to the CosmoCall Live Connection discount reflected in
the above price, special pricing incentives will take effect for
all future orders if cumulative software purchases reach the
following levels by the end of the year 2000:
All Prices in U.S. Dollars
<PAGE>
(i) At $2M and up to $5M - 5% discount; and
(ii) Over $5M in purchases - 8% discount.
C. Payment terms
50% with order(s) and balance net 30 days.
II. Maintenance and Technical Support
A. CosmoCall Support Program. Infocast will purchase, and
CosmoCom will provide, maintenance and technical support
services to InfoCast from the date of this agreement until the
end of the year 2000 under a separate support agreement to be
developed. This section summarizes the key points of that
agreement. The support program includes 24 x 7 telephone and
remote support, and access to all software upgrades of
licensed products. Support will be provided to designated
Infocast personnel who have received CosmoCall product
training. Infocast will provide technical support to its own
end-users.
B. Pricing. The price of the support program is 19% of the then
current, pre-volume discount, Infocast price of purchased
software. Infocast's ninety (90) day product warranty for the
initial purchase will begin on August 1, 1999 with the
delivery of 300 CosmoCall Agents. All subsequent purchases
will include a 90 day warranty from date of delivery.
Maintenance pricing during the year 2000 will be phased in
quarterly as follows: 5% for Q1, 10% for Q2, 15% for Q3, and
19% for QA. Renewal of the support agreement after the year
2000 will be by mutual agreement.
C. Payment terms. Maintenance and technical support is billed on
the first day of each calendar quarter.
III. Project Management and Professional Services
A. CosmoCom will designate a project manager for the Infocast
project. Project management will be provided by CosmoCom at no
charge through 1999.
B. Professional services provided by CosmoCom will be used as
agreed in advance between Infocast and the CosmoCom Project
Manager and will be charged on a time and material basis at
the prevailing published hourly rate, currently $225 per hour,
not to exceed $1800 per person per day, plus T&E.
All Prices in U.S. Dollars
<PAGE>
C. After 1999, the Project Manager provided by CosmoCom will be
billable on a time and material basis at the prevailing
published hourly rate, currently $300 per hour, not to exceed
$2400 per day, plus T&E.
D. CosmoCom and Infocast will jointly define the requirements and
method for interfacing CosmoCall with third party help-desk
applications like Willow's.
E. CosmoCom will load, integrate and test its software on
Infocast's actual server platform in Hauppauge, NY. Infocast
will provide this server platform by May 1, 1999.
Additionally, Infocast will provide an identical duplicate
hardware platform to be retained in CosmoCom's lab as a
dedicated Infocast test bed.
F. In the interest of mutual benefit and continuous improvement,
CosmoCom and Infocast will engage in a quarterly review of all
aspects of their relationship. This review will be attended by
the project managers of each company and by appropriate
representation of the senior management of each company.
IV. UNIX Porting
A. Porting Option. Infocast's initial order of 300 agents is for
CosmoCall's current software version, which runs on a
Microsoft NT Server platform. CosmoCom understands and
acknowledges Infocast's interest in having an implementation
of CosmoCall software that is based on a Unix platform. At any
time following the payment by Infocast for the initial order
of 300 CosmoCall Agents, Infocast will have the option,
exercisable within 2 years, to require CosmoCom to convert the
CosmoCall software to run in whole or in part, as mutually
agreed, on a Unix platform.
B. Port Delivery. CosmoCom will deliver the ported Server to
Infocast for acceptance testing no more than 6 calendar months
from the date on which the option is exercised. The software
functionality will be the same as current NT version of
CosmoCall at the time of delivery.
C. Pricing
(1) Project engineering fee: $350,000, payable
20% on exercise of the option, 30% on
agreement to proceed after high level design
review, and 50% on passing of ATP.
(2) Purchase Credit. 50% of the project
engineering fee will be available to
Infocast as credit against the price of
additional CosmoCall software license
purchases.
(3) Ported Server and Live Connection Pricing.
The same as that of the NT Version.
All Prices in U.S. Dollars
<PAGE>
(4) Migration of Purchased NT Licenses to Unix.
No charge.
D. Intellectual Property. CosmoCom retains all intellectual
property rights to the ported Server and other software.
E. Development Environment. Infocast will provide CosmoCom, at no
charge, with the Unix hardware development platform to be held
by CosmoCom for as long as its technical support and
maintenance obligations to Infocast are in place. Infocast
will attempt to obtain for the project the cooperation and
assistance of Sun Microsystems if that is the platform of
choice.
V. Software Source Code Escrow
Infocast and CosmoCom will develop a source code escrow agreement and
implement a source code escrow program that will give Infocast access
to the CosmoCom source code for both NT and Unix versions of CosmoCall
under reasonable and customary terms. Infocast will bear the escrow
cost associated with this program.
VI. Publicity
The parties will engage in joint marketing activities, including a
joint press release, joint seminars for end users, preparation of white papers
and the like. All such activities will be subject to the approval of both
parties.
Reviewed and Approved by: Reviewed and Approved by:
/s/ Michael J. Sheehan /s/ Stephen R. Karaesky
- ------------------------ ---------------------------------
Infocast Representative CosmoCom Representative
CEO 4/21/99 EVP 21 April 99
- ------------------------ ------------------------------------
All Prices in U.S. Dollars
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT made as of the 17th day of November, 1998
B E T W E E N
ADVANCED SYSTEMS COMPUTER CONSULTANTS INC., a corporation
incorporated under the laws of the Province of Ontario, Canada
(hereinafter called the "Vendor")
- and -
CHELTENHAM TECHNOLOGIES (BERMUDA)
CORPORATION, a corporation incorporated under
the laws of the Island of Barbados
(hereinafter called the "Purchaser")
WHEREAS the Vendor has all rights and title to certain computer
software and all intellectual properties rights relating thereto as more
particularly described in Schedule "1" hereto (the "Assets");
AND WHEREAS the Vendor wishes to sell, and the purchaser wishes to
purchase, all rights and title to the Assets on the terms and subject to the
conditions hereinafter contained.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and agreements herein contained and the sum of $2.00 and other
good and valuable consideration paid by each of the parties hereto to the other
(the receipt and sufficiency of which are hereby acknowledged), the parties
hereto agree as follows:
1.0 PURCHASE AND SALE
1.1 On the terms and subject to the fulfillment of the conditions hereof, Vendor
hereby sells, assigns, conveys, transfers and delivers unto the Purchaser all of
the Vendor's right, title and interest in the Assets (as described in Schedule
"1" hereto).
2.0 PURCHASE PRICE
<PAGE>
2.1 The purchase price payable by the Purchaser to the Vendor for the Assets is
the sum of CDN $400,000 (the "Purchase Price").
2.2 The Purchaser agrees to pay the Vendor on terms and conditions as follows:
(i) Payment of Cdn$75,000 when the Purchaser or its
parent/affiliated company becomes public and has completed a
minimum financing of Cdn$2 million; and
(ii) The balance of Cdn$325,000 when the Remote Banking generates
its first revenue whether such revenue is generated from
license payments or actual transaction fees.
3.0 REPRESENTATIONS WARRANTIES OF THE VENDOR
3.1 The Vendor hereby represents and warrants to the Purchaser as follows, and
confirms that the Purchaser is relying upon the accuracy of each of such
representations and warranties in connection with the purchase of the Assets and
the completion of the other transactions hereunder:
(1) Corporate Authority and Binding Obligation
The Vendor has good right, full corporate power and absolute authority
to enter into this Agreement and to sell, assign and transfer the
Assets to the Purchaser in the manner contemplated herein and to
perform all of the Purchaser's obligations under this Agreement. The
Vendor and its shareholders and board of directors have taken all
necessary or desirable actions, steps and corporate and other
proceedings to approve or authorize, validly and effectively, the
entering into of, and the execution, delivery and performance of, this
Agreement and the sale and transfer of the Assets by the Vendor to the
Purchaser. This Agreement is a legal, valid and binding obligation of
the Vendor, enforceable against it in accordance with its terms subject
to (i) bankruptcy, insolvency, moratorium, reorganization and other
laws relating to or affecting the enforcement of creditors' rights
generally and (ii) the fact that equitable remedies, including the
remedies of specific performance and injunction, may only be granted in
the discretion of a court.
(2) No Other Purchase Agreements
No person has any agreement, option, understanding or commitment, or
any right or privilege (whether by law, preemptive or contractual)
capable of becoming an agreement, option or commitment, for the
purchase or other acquisition from the Vendor of any of the Asset, or
any rights or interest therein.
(3) Contractual and Regulatory Approvals
The Vendor is not under any obligation, contractual or otherwise, to
request or obtain the consent of any person and no permits, licenses,
certifications, authorizations or approvals
-2-
<PAGE>
of, or notifications to any government or governmental agency, board,
commission or authority are required to be obtained by the Vendor,
i) in connection with the execution, delivery or
performance by the Vendor of this Agreement or the
completion of any of the transactions contemplated
herein, or
ii) to avoid the loss of any permit, licence,
certification or other authorization relating to the
Assets.
(4) Corporate Status
The Vendor is a corporation duly incorporated and validly subsisting in
all respects under the laws of its jurisdiction of incorporation.
(5) Compliance With Constating Documents, Agreements and Laws
The execution, delivery and performance of this Agreement and each of
the other agreements contemplated or referred to herein by the Vendor,
and the completion of the transactions contemplated hereby, will not
constitute or result in a violation, breach or default under:
(i) any term or provision of any of the articles, by-laws
or other constating documents of the Vendor, or
(ii) the terms of any indenture, agreement (written or
oral), instrument or understanding or other
obligation or restriction to which the Vendor is a
party or by which it is bound; or
(iii) any term or provision of any licenses or any order of
any court, governmental authority or regulatory body
or any law or regulation of any jurisdiction in which
the Vendor carries on business.
(6) Liabilities
There are no liabilities (contingent or otherwise) relating to the
Assets of any kind whatsoever in respect of which the Purchaser may
become liable on or after the consummation of the transactions
contemplated by this Agreement.
(7) Litigation
There are no actions suits or proceedings, judicial or administrative
(whether or not purportedly on behalf of the Vendor) pending or, to the
best of the knowledge of the
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<PAGE>
Vendor, threatened, by or against or affecting the Vendor which relate
to the Assets, at law or in equity, or before or by any court or any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(8) Title to Assets
The Vendor is the owner of and has good and marketable title to all of
the Assets free and clear of any encumbrances whatsoever.
(9) Intellectual Property
(a) The Vendor owns or is licensed or otherwise possesses legally
enforceable rights to use, sell and license, free and clear of claims
or rights of others, all patents, trademarks, trade names, trade
secrets, industrial designs, slogans, logos, service marks, copyrights
and any applications therefor, technology, inventions, ideas, circuit
topographies, know how computer software programs or applications (in
both source code and object code form), manufacturing and other
processes, hardware and other designs, formulae, programming and other
processes, software, algorithms, source and object codes, user manuals,
working papers, tapes, charts, plans, models, drawings, concepts,
ideas, discoveries, inventions, developments, modifications,
adaptations, derivative works, and other information and written matter
required for or incident to the Assets and tangible or intangible
proprietary information or material that are necessary to, required
for, used in or proposed to be used in the Assets and the commercial
exploitation thereof (the "Vendor Intellectual Property Rights").
Schedule "2" to this Agreement lists all current and past (lapsed,
expired, abandoned or canceled) patents, registered and material
unregistered trademarks and service marks, registered and material
unregistered copyrights, registered material unregistered industrial
designs, and trade names, and any applications in respect of the Vendor
Intellectual Property Rights, and specifies the jurisdictions in which
each such Vendor Intellectual Property Right has been issued or
registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners, together
with a list of all of the Vendor's currently marketed software products
and an indication as to which, if any, of such software products have
been registered for copyrights or other protection with the United
States or Canadian Copyright Office and any other foreign offices and
by whom such items have been registered.
(b)The Vendor is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations
hereunder, in violation in any material respect of any license,
sublicense or agreement described in Schedule "2", nor will the
execution and delivery of this Agreement or the performance of its
obligations hereunder cause the forfeiture or termination or give rise
to a right of forfeiture or termination of any Vendor Intellectual
Property Right. No claims with respect to the Vendor Intellectual
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<PAGE>
Property Rights, any trade secret or other intellectual property right
material to the Assets are currently pending or, to the best knowledge
of the Vendor, are threatened by any person, nor are there any valid
grounds for any bona fide claims (i) to the effect that the
manufacture, sale, licensing or use of the Assets as now used, sold or
licensed or proposed for use, sale or license by the Purchaser as
disclosed to the Vendor infringes on any copyright, patent design,
service mark industrial design or trade secret or other intellectual
property right of any other person. There is no material unauthorized
use, infringement or misappropriation of any of the Vendor Intellectual
Property by any third party, including any employee or former employee
or contractor of the Vendor or any of its subsidiaries. Neither the
Vendor nor any of its subsidiaries (i) has been sued or charged in
writing as a defendant in any claim, suit, action or proceeding which
involves a claim or infringement of any trade secrets, patents,
trademarks, service marks, maskworks, copyrights or contractor and
which has not been finally terminated prior to the date hereof, or been
informed or notified by any third party that the Vendor may be engaged
in such infringement by, or (ii) has knowledge of any infringement
liability with respect to, or infringement by, the Vendor or any of its
subsidiaries of any trade secret, patent, trademark, service mark,
maskwork, copyright or other intellectual property right of any other
person.
(c) The Vendor has taken all reasonable, necessary and appropriate
steps to safeguard and maintain the secrecy and confidentiality of, and
its proprietary rights in, the Assets and all Vendor Intellectual
Property Rights. All of the Vendor Intellectual Property Rights are and
have been properly marked and, if applicable, licensed in accordance
with the appropriate legislation so as to protect the property rights
therein and allow proper enforcement of such rights against infringing
third parties.
(d) All software applications and products comprising the Assets (the
"Software Applications and Products") have been tested internally and
conform to Year 2000 date criteria. The Software Applications and
Products:
(i) accurately process date data (including, but not
limited to calculating, comparing and sequencing)
from, into and between the twentieth and twenty-first
centuries, including leap year calculations, without
a decrease in the functionality of such Software
Applications and Products;
(ii) are designed to be used prior to, during and after
the calendar year 2000, and that will operate during
each such time period without interruption, delay,
impediment or error relating to date data,
specifically including any interruption, delay,
impediment or error relating to, or the product of,
date data which represents or references different
centuries or more than once century; and
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<PAGE>
(iii) shall not be adversely affected, interrupted, delayed
or impeded by the internal computer clock turning to
January 1, 2000.
Date elements in interfaces and data storage in the Software
Applications and Products will permit specifying the century to
eliminate date ambiguity.
(10) Outstanding Agreements
The Vendor is not a party to or bound by any outstanding or executory
agreement, contract or commitment, whether written or oral, relating to
the Assets or Vendor Intellectual Property Rights.
4.0 REPRESENTATIONS AND WARRANTIES BY THE PURCHASER
4.1 The Purchaser hereby represents and warrants to the Vendor as follows, and
confirms that the Vendor is relying upon the accuracy of each of such
representations and warranties in connection with the sale of the Assets and the
completion of the other transactions hereunder:
(1) Corporate Authority and Binding Obligation
The Purchaser is a corporation duly incorporated and validly subsisting
in all respects under the laws of its jurisdiction of incorporation.
The Purchaser has good right, full corporate power and absolute
authority to enter into this Agreement and to purchase the Assets from
the Vendor in the manner contemplated herein and to perform all of the
Purchaser's obligations under this Agreement. The Purchaser and its
shareholders and board of directors have taken all necessary or
desirable actions, steps and corporate and other proceedings to approve
or authorize, validly and effectively, the entering into of, and the
execution, delivery and performance of, this Agreement and the purchase
of the Assets by the Purchaser from the Vendor. This Agreement is a
legal, valid and binding obligation of the Purchaser, enforceable
against it in accordance with its terms subject to (i) bankruptcy,
insolvency, moratorium, reorganization and other laws relating to or
affecting the enforcement of creditors' rights generally and (ii) the
fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
(2) Contractual and Regulatory Approvals
The Purchaser is not under any obligation, contractual or otherwise to
request or obtain the consent of any person, and no permits, licenses,
certifications, authorizations or approvals or, or notifications to,
any government or governmental agency, board, commission or authority
are required to be obtained by the Purchaser in connection with the
execution, delivery or performance by the Purchaser of this Agreement
or the completion of any of the transactions contemplated herein.
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<PAGE>
(3) Compliance with Constating Documents,. Agreements and Laws
The execution, delivery and performance of this Agreement and each of
the other agreements contemplated or referred to herein by the
Purchaser, and the completion of the transactions contemplated hereby,
will not constitute or result in a violation or breach of or default
under:
(i) any term or provision of any of the articles, by-laws
or other constating documents of the Purchaser, or
(ii) the terms of any indenture, agreement (written or
oral), instrument or understanding or other
obligation or restriction to which the Purchaser is a
party or by which it is bound, or
(iii) any term or provision of any licenses, registrations
or qualification of the Purchaser or any order of any
court, governmental authority or regulatory body or
any applicable law or regulation of any jurisdiction.
5.0 SURVIVAL AND LIMITATIONS OF REPRESENTATIONS AND WARRANTS
Survival of Representations and Warranties by the Vendor
5.1 The representations and warranties made by the Vendor and contained in this
Agreement, or contained in any document or certificate given in order to carry
out the transactions contemplated hereby, will survive the closing of the
purchase of the Assets provided for herein and, notwithstanding such closing or
any investigation made by or on behalf of the Purchaser or any other person or
any knowledge of the Purchaser or any other person, shall continue in full force
and effect for the benefit of the Purchaser, subject to the following provisions
of this section.
Subject to paragraph 5.1(b), no warranty claim may be made or brought by the
Purchaser after the date which is three years following the Closing Date.
Any warranty claim which is based upon or relates to the title to the Assets or
which is based upon intentional misrepresentation or fraud by the Vendor may be
made or brought by the Purchaser at any time.
After the expiration of the period of time referred to in paragraph (a) of this
section, the Vendor will be released from all obligations and liabilities in
respect of the representations and warranties made by the Vendor and contained
in this Agreement or in any document or certificate given in order to carry out
the transactions contemplated hereby except with respect to any claims made by
the Purchaser in writing prior to the expiration of such period and subject to
the rights of the Purchaser to make any claim permitted by paragraph (b) of this
section.
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<PAGE>
Survival of Warranties by Purchaser
5.2 The representations and warranties made by the Purchaser and contained in
this Agreement or contained in any document or certificate given in order to
carry out the transactions contemplated hereby will survive the closing of the
purchase and sale of the Assets provided for herein and, notwithstanding such
closing or any investigation made by or on behalf of the Vendor or any other
person or any knowledge of the Vendor or any other person, shall continue in
full force and effect for the benefit of the Vendor.
6.0 CLOSING
Closing Arrangements
6.1 Subject to the terms and conditions hereof, the transactions contemplated
herein shall be closed at 10:00 AM (the "Closing Time") at the offices of the
Vendor or at such other place or places and may be mutually agreed upon by the
Vendor and the Purchaser.
Documents be Delivered
6.2 At or before the Closing Time, the Vendor shall execute, or cause to be
executed, and shall deliver, or cause to be delivered, to the Purchaser all
documents, instruments and things which are to be delivered by the Vendor
pursuant to the provisions of this Agreement, and the Purchaser shall execute,
or cause to be executed, and shall deliver, or cause to be delivered, to the
Vendor all cheques or bank drafts and all documents, instruments and things
which the Purchaser is to deliver or cause to be delivered pursuant to the
provisions of this Agreement.
7.0 GENERAL PROVISIONS
Further Assurances
7.01 Each of the Vendor and the Purchaser hereby covenants and agrees that at
any time and from time to time after the Closing Date it will, upon the request
of the others, do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered all such further acts, deeds, assignments,
transfers, conveyances and assurances as may be required for the better carrying
out and performance of all the terms of this Agreement.
Notices
7.02 Any notice, designation, communication, request, demand or other document,
required or permitted to be given or sent or delivered hereunder to any party
hereto shall be in writing and shall be sufficiently given or sent or delivered
if it is:
(a) delivered personally to an officer or director of such party,
or
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<PAGE>
(b) sent to the party entitled to receive it by registered mail,
postage prepaid, mailed in Bermuda, BVI, Barbados or Canada,
or
(c) sent by telecopy machine.
Notices shall be sent to the following addresses or telecopy numbers:
(i) in the case of the Vendor,
Advance Systems Computer Consultants Inc.
1050 Castlefield Avenue, Suite 310
Toronto, Ontario MOB 1E7
Telephone/Telecopy: 416-787-4673
Attention: Mr. Satish Kumeta
(ii) in the case of the Purchaser,
Cheltenham Technologies (Bermuda) Corporation
129 Front Street
Penthouse Suite
Hamilton HM12, Bermuda
Telephone: 441-296-4545
Telecopy: 441-232-0637
Attention: Mr. A.T. Griffis
or to such other address or telecopier number as the party entitled to or
receiving such notice, designation, communication, request, demand or other
document shall, by a notice given in accordance with this section, have
communicated to the party giving or sending or delivering such notice
designation, communication, request, demand or other document.
Any notice, designation, communication, request, demand or other document giving
or sent or delivered as aforesaid shall
if delivered as aforesaid, be deemed to have been given, sent, delivered and
received on the date of delivery;
if sent by mail as aforesaid, be deemed to have been given, sent, delivered and
received (but not actually received) on the fourth business day following the
date of mailing, unless at
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<PAGE>
any time between the date of mailing and the fourth business day thereafter
there is a discontinuation or interruption of regular postal service, whether
due to strike or lockout or work slowdown, affecting postal service at the point
of dispatch or delivery of any intermediate point, in which case the same shall
be deemed to have been given, sent, delivered and received in the ordinary
course of the mails, allowing for such discontinuance or interruption of regular
postal service; and
if sent by telecopy machine, be deemed to have been given, sent, delivered and
received on the date the sender receives the telecopy answer back confirming
receipt by the recipient.
Counterparts
7.03 This Agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts together shall
constitute but one and the same instrument.
Expenses of Parties
7.04 Each of the parties hereto shall bear all expenses incurred by it in
connection with this Agreement including, without limitation, the charges of
their respective counsel, accountants, financial advisors and finders.
Assignment
7.05 This rights of the Vendor and the Shareholder hereunder shall not be
assignable without the written consent of the Purchaser. The rights of the
Purchaser hereunder shall not be assignable without the written consent of the
Vendor and the Shareholder.
Successors and Assigns
7.06 This Agreement shall be binding upon and endure to the benefit of the
parties hereto and their respective successors and permitted assigns. Nothing
herein, express or implied, is intended to confer upon any person, other than
the parties hereto and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement
Entire Agreement
7.07 This Agreement and the Schedules referred to herein constitute the entire
agreement between the parties hereto and supersede all prior agreements,
representations, warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied, with respect to the
subject matter hereof None of the parties hereto shall be bound or charged with
any oral or written agreements, representations,
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<PAGE>
warranties, statements, promises, information, arrangements or understandings
not specifically set forth in this Agreement or in the Schedules, documents and
instruments to be delivered on or before the Closing Date pursuant to this
Agreement. The parties hereto further acknowledge and agree that, in entering
into this Agreement and in delivering the Schedules, documents and instruments
to be delivered on or before the Closing Date, they have not in any way relied,
and will not in any way rely, upon any oral or written agreements,
representations, warranties, statements, promises, information, arrangements or
understandings, express or implied, not specifically set forth in this Agreement
or in such Schedules, documents or instruments.
The Purchaser may wish to modify the foregoing section if it is relying on
information provided by the Vendor or its agent in an offering document. In that
case, appropriate references would also be made to such information in the
representations and warranties.
Waiver
7.08 Any party hereto which is entitled to the benefits of this Agreement may,
and has the right to, waive any term or condition hereof at any time on or prior
to the Closing Time; provided; however, that such waiver shall be evidenced by
written instrument duly executed on behalf of such party.
Amendments
7.09 No modifications or amendments to this Agreement may be made unless agreed
to by the parties hereto in writing.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement under seal as of the day and year first above written.
ADVANCED SYSTEMS COMPUTER
CONSULTANTS INC.
By: /s/ Satish Kumeta 17 Nov. 1998
---------------------
Authorized Signatory
CHELTENHAM TECHNOLOGIES
(BERMUDA) CORPORATION
By: /s/ A.T. Griffis
---------------------
Authorized Signatory
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ASSET SALE AGREEMENT
THIS ASSET SALE AGREEMENT ("Agreement") is made as of the 23rd
day of November, 1998, by and between Grant Reserve Corporation, a Nevada
corporation (the "Seller') and Cherokee Mining Company Inc., a Wyoming
corporation (the "Purchaser"). The parties hereby agree as follows:
1. Sale of Assets
1.1 Assets to be Sold. Subject to the terms and conditions of
this Agreement, the Seller will sell to the Purchaser, and the Purchaser will
purchase from the Seller all of the Seller's right, title and interest in and to
(i) 7,620,000 shares of common stock, without par value, of Madison Mining
Corporation, a Montana corporation, ("Madison"), a wholly owned subsidiary of
the Seller and (ii) 36,388 shares of common stock, without par value, of Gold
King Mines Corporation ("Gold King"), representing ninety-four and thirty-two
one hundredths percent (94.32%) of Gold King's issued and outstanding shares.
The shares of Madison and Gold King common stock being sold to the Purchaser
hereunder constitute substantially all of the Seller's assets and are
collectively referred to as the "Shares."
1.2 Purchase Price. The price (the "Purchase Price") to be
paid by or on behalf of the Purchaser to the Seller for the Shares shall be (i)
$600,000 payable on the terms set forth in a Promissory Note substantially in
the form thereof attached hereto as Exhibit 1 (the "Promissory Note") and (ii)
an amount equal to eighty percent (80%) of the Net Proceeds (as defined in
Section 6.4 below) received by the Purchaser in excess of $681,715.
2. Closing Date, Delivery
2.1 Closing Date. Subject to the satisfaction of the terms and
conditions hereof, to purchase and sale of the Shares to be purchased and sold
pursuant to Section 1.1 shall be held as soon as practicable following the
approval of this Agreement by the Seller's shareholders. Such time is
hereinafter referred to as the "Closing" and the date of the Closing is
hereinafter referred to as the "Closing Date."
2.2 Deliveries by the Seller and the Purchaser.
(a) Delivery by the Seller. At the Closing the Seller shall
deliver to the Purchaser certificates evidencing the Shares to be purchased
hereunder by the Purchaser, which certificates shall be duly endorsed in blank
or accompanied by stock powers duly endorsed in blank.
<PAGE>
(b) Delivery by the Purchaser. At the Closing, the Purchaser
shall deliver to the Seller:
(i) The Promissory Note; and
(ii) A Pledge Agreement in the form attached hereto as Exhibit
2 (the "Pledge Agreement") pursuant to which the Shares shall be held
as security for, among other things, the payment and performance by the
Purchaser of its obligations under the Promissory Note, this Agreement
and the Pledge Agreement.
3. Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Purchaser as follows:
3.1 Organization and Good Standing. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Each of Madison and Gold King is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Montana and Colorado, respectively. Each of Madison and Gold King is duly
qualified or authorized to do business in each jurisdiction in which it conducts
business, or own property, except where the failure so to qualify would not in
the aggregate have a material adverse effect on the Seller, Madison and Gold
King.
3.2 Authorization. The Seller has full corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement is a
valid and binding agreement of the Seller, enforceable in accordance with its
terms except (a) as the same may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws of general application relating to or
affecting creditors' rights, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyances and preferential
transfers, and (b) for the limitations imposed by general principles of equity.
The foregoing exceptions set forth in subsections (a) and (b) of this Section
3.2 are hereinafter referred to as the "Enforceability Exceptions."
3.3 Licenses and Permits. Madison and Gold King are each duly
licensed, with all requisite permits and qualifications, as required by
applicable law for the purpose of conducting their respective business or owning
their respective properties or both, in each jurisdiction in which they do
business or own property, and where the failure to have such license, permit or
qualification could have a material adverse effect on the assets, liabilities
(whether absolute, accrued, contingent or otherwise), condition (financial or
otherwise), results of operations or business of either Madison or Gold King
(hereinafter, a "Material Adverse Effect"). Madison and Gold King are each in
substantial compliance with all such licenses, permits and qualifications. There
are no proceedings pending or, to the Seller's best knowledge, threatened to
revoke or terminate any such presently existing license, permit or qualification
and the Seller knows of no reason why any such license, permit or qualification
would not be renewed in the ordinary course.
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<PAGE>
Purchaser is familiar with the required licenses and permits
required of, and held by, Madison and Gold King. Purchaser has been given full
access to Seller's records to review, and make copies of if so desired, all such
licenses and permits. Purchaser also has been informed by Seller that Madison
and Gold King are in substantial compliance with all such licenses and permits.
Purchaser is purchasing the Shares with full knowledge of the attendant
responsibilities and liabilities associated with such licenses and permits.
3.4 Consents and Approvals. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will violate, result in a breach of any of the terms or provisions of,
constitute a default (or an event which, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of any indebtedness under or performance required by, result in any
right of termination of, increase any amounts payable under, decrease any
amounts receivable under, change any other rights pursuant to, or conflict with,
any material agreement, indenture or other instrument to which the Seller is a
party or by which any of its properties are bound, or any judgment, decree,
order or award of any court, governmental body or arbitrator (domestic or
foreign) against the Seller. No consent, license, approval, order or
authorization of, or declaration, filing or registration with, or payment of
tax, fee, fine or penalty to, any governmental bureau, agency or commission or
regulatory authority (domestic or foreign) or any other person (either
governmental or private), is required to be obtained or made in connection with
the execution and delivery by the Seller of this Agreement or the consummation
of the transactions contemplated hereby except to the extent that the failure to
obtain such consent, license, approval, order or authorization or to make such
declaration, filing, registration or payment would not have a Material Adverse
Effect. All prior consents, approvals and authorizations of, and declarations,
filings and registrations with, and payments of all taxes, fees, fines and
penalties to, any governmental or regulatory authority (domestic or foreign) or
any other person (either governmental or private) required in connection with
the executions and delivery by the Seller of this Agreement or the consummation
of the transactions contemplated hereby have been obtained, made and satisfied.
The shareholders of Seller must approve this transaction.
3.5 Financial Information. The Seller's consolidated financial
statements for the year ended December 31, 1997 as reported on by the firm of
Jackson & Rhodes, P.C. and the Seller's unaudited consolidated financial
statements for the nine (9) months ended September 30, 1998 have been prepared
from the books and records of the Seller, Madison and Gold King and present
fairly the financial condition of the Seller, Madison and Gold King at and as of
such dates in accordance with generally accepted accounting principles
consistently applied ("GAAP"), except that required footnote disclosures may be
omitted. Copies of such financial statements have previously been delivered to
Purchaser.
3.6 Real Property. The Seller has previously delivered to
Purchaser a complete description of all real property owned by Gold King and
Madison at the Closing Date (the "Real Property").
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<PAGE>
3.7 Shares of Madison and Gold King. The Shares to be
delivered to Purchaser pursuant hereto are duly and validly issued, full paid
and non-assessable and when delivered to Purchaser hereunder will not be subject
to any mortgage, lien, claim or other encumbrance whatsoever (other than as
provided in Section 2.2(b) hereof) and shall vest in Purchaser legal title to
the Shares.
4. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to the Seller as follows:
4.1 Organization and Good Standing. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Wyoming and is duly qualified or authorized to do business in each
jurisdiction in which it conducts business, or owns property, except where the
failure to so qualify would not in the aggregate have a material adverse effect
on the Purchaser.
4.2 Authorization. The Purchaser has full corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement is a
valid and binding agreement of the Purchaser, enforceable in accordance with its
terms except for the Enforceability Exceptions.
4.3 Acquisition of Securities. This Agreement is made with the
Purchaser in reliance upon the Purchaser's representation to the Seller, which
by the Purchaser's execution of this Agreement the Purchaser hereby confirms,
that the Shares to be received by the Purchaser will be acquired for investment
for the Purchaser's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same, and the Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof.
4.4 No Registration. The Purchaser understands and
acknowledges that the Shares are not registered under the Securities Act of
1933, as amended (the "Act"), or under any other applicable blue sky or state
securities law. The Purchaser understands that there is no current market for
the Shares and the Purchaser further understands that it is not expected that
any such market will develop.
4.5 Consents and Approvals. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will violate, result in a breach of any of the terms or provisions of,
constitute a default (or an event which, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of any indebtedness under or performance required by, result in any
right of termination of, increase any amounts payable under, decrease any
amounts receivable under, change any other rights pursuant to, or conflict with,
any material agreement, indenture or other instrument to which the Purchaser is
a party or by which any of its properties are bound, or any judgment, decree,
order or
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<PAGE>
award of any court, governmental body or arbitrator (domestic or foreign)
applicable to the Purchaser. No consent, approval or authorization of, or
declaration, filing or registration with, or payment of any material tax, fee,
fine or penalty to, any governmental or regulatory authority (domestic or
foreign) or any other person (either governmental or private), is required in
connection with the execution, delivery and performance by the Purchaser of this
Agreement.
5. Conditions.
5.1 Conditions to Closing.
(a) Conditions to Purchaser Obligations. The obligation of the
Purchaser to purchase the Shares at the Closing is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any of which may be
waived in accordance with the provisions of Section 8.1 hereof:
(i) Representations and Warranties Correct:
Performance of Obligations. The representations and warranties
made by the Seller in Section 3 hereof shall be true and
correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had
been made on and as said date; the Seller shall have performed
all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date.
(ii) Authorization. All action on the part of the
Seller necessary to authorize the execution, delivery and
performance of this Agreement and other agreements provided
for herein including the approval of this transaction by the
Seller's shareholders, and the consummation of the
transactions contemplated herein and therein, shall have been
duly and validly taken by the Seller, and the Purchaser shall
have been furnished with copies of resolutions and other
instruments authorizing this Agreement and the transactions
contemplated herein.
(iii) Consents and Waivers. The Seller shall have
obtained any and all consents, permits, orders, approvals and
waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement, including the
approval of Seller's shareholders and all authorizations,
approvals or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are
required in connection with the lawful sale of the Shares
pursuant to the terms of this Agreement.
(iv) Documents. All documents and instruments
incident to the transactions contemplated hereby shall be
reasonably satisfactory in substance and form to the Purchaser
and Purchaser's counsel.
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<PAGE>
(v) Certificate of Compliance. The Seller shall have
delivered to the Purchaser a Certificate, executed by an
authorized officer of the Seller, dated the Closing Date, to
the effect that the conditions in Section 5.1(a) have been
satisfied as of such date.
(b) Conditions to Seller Obligations. The Seller's obligation
to sell the Shares at the Closing is subject to the fulfillment on or
prior to the Closing Date of the following conditions, any of which may
be waived by the Seller in accordance with the provisions of Section
8.1 hereof:
(i) Representations and Warranties Correct. The
representations and warranties made by the Purchaser in
Section 4 hereof shall be true and correct when made, and
shall be true and correct on the Closing Date with the same
force and effect as if they had been made on and as of said
date.
(ii) Shareholder Approval. The Seller's Shareholders
shall have approved the sale of the Shares to Purchaser in
accordance with the laws of the State of Nevada.
(iii) Documents. All documents and instruments
incident to the transactions contemplated hereby shall be
reasonably satisfactory in substance and form to the Seller
and the Seller's counsel.
(iv) Certificate of Compliance. The Purchaser shall
have delivered to the Seller a Certificate, executed by an
authorized officer of the Purchaser, dated the Closing Date,
to the effect that the conditions in Section 5.1(b) have been
satisfied as of such date.
6. Purchaser's Covenants.
The Purchaser covenants that on and after the Closing Date,
and for so long as it owns any of the Real Property and until all the Real
Property is sold it will:
6.1 Sale of Real Property. Use its best efforts to sell the
Real Property, in arms length transactions, for cash considerations equal to or
greater than the fair market value of the Real Property at the time of such
sale.
6.2 Payment of Taxes. The Purchaser will pay, before they
become delinquent, all taxes, assessments and governmental charges or levies
imposed upon it or the Real Property, provided that such items need not be paid
while being contested in good faith by appropriate proceedings.
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<PAGE>
6.3 Maintenance of Corporate Existence, Etc.
The Purchaser will:
(a) Financial Records - keep true and correct records and
accounts and will prepare its financial statements, and financial
statements for Madison and Gold King, in accordance with GAAP,
consistently applied;
(b) Corporate Existence - do or cause to be done all things
necessary to preserve and keep in full force and effect its, and
Madison's and Gold King's corporate existence, rights and franchises;
(c) Compliance with Law - not be in violation of any laws,
ordinances, or governmental rules and regulations to which it or the
Real Property is subject and will not fail to obtain or maintain any
licenses, permits, franchises or other governmental authorizations
necessary to the ownership of the Real Property or to the conduct of
its business, which violation or failure to obtain or maintain, might
materially adversely affect its business or the Real Property.
6.4 Payments of Portion of Sale Proceeds Upon Sale of Real
Property. Purchaser hereby agrees to pay Seller as part of the Purchase Price
for the Shares pursuant to Section 1.2, an amount equal to eighty percent (80%)
of the cumulative Net Proceeds (as defined below) received upon the sale of the
Real Property. "Net Proceeds" shall mean any and all amounts received by
Purchaser in excess of $681,715 in connection with bona fide sales of all of the
Real Property to persons unrelated to the Purchaser or the holders or beneficial
owners of the capital stock of Purchaser, less, the reasonable costs and
expenses of sale, including reasonable brokerage commissions, attorneys fees and
recording taxes and fees, if any, incurred by Purchaser in connection with such
sales of the Real Property. The terms, including the sale price, of all sales of
Real Property must be approved by Seller, such approval shall not be
unreasonably withheld.
6.5 Sale of Shares; Issuance of Additional Shares. So long as
the Promissory Note is not fully paid, and so long as any of the Real Property
remains unsold, Purchaser will not sell or otherwise depose of, or grant any
option or warrant with respect to, any of the Shares or create or permit to
exist any lien or encumbrance upon or with respect to any of the Shares (except
for the lien created pursuant to the Pledge Agreement) and at all times will be
the sole beneficial owner of the Shares.
6.6 Sale of Assets or Merger. So long as the Promissory Note
is not fully paid and so long as any of the Real Property remains unsold,
Purchaser will not sell distribute or otherwise dispose of any of its assets or
permit the sale, distribution or other deposition of any of the assets of
Madison and Gold King, other than the Real Property in accordance with the terms
of this Agreement, and the Purchaser will not consolidate or merge with or into
any other person nor will it allow Madison or Gold King to so merge or
consolidate with or into any other person.
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<PAGE>
6.7 Liens and Encumbrances. Purchaser shall not create, permit
or suffer to exist (other than as provided in this Agreement) any mortgage,
encumbrance, lien, security interest, claim or charge against the Real Property
or any part thereof, except as expressly agreed to in writing by the Seller, and
Purchaser shall defend and cause Madison and Gold King to defend their
respective interest in and to the Real Property against the claims and demands
of all persons whomsoever, other than the claims of the Seller as provided for
herein.
7. Defaults.
7.1 Nature of Events. A "Default" shall exist if any
of the following occur and is continuing:
(a) Principal and Interest Payments - Purchaser fails to make
any payment of principal or interest on the Promissory Note on the date
such payment is due, and such payment remains unpaid for ten (10) days
after written notice of non-payment is received from Seller;
(b) Covenant Default - Purchaser fails (1) to observe or
perform any of its covenants and agreements contained in this Agreement
or (2) defaults or fails to observe and perform any of its covenants
and agreements contained in the Promissory Note or the Pledge
Agreement;
(c) Representations and Warranties - Any representation or
warranty or other statement by or on behalf of Purchaser contained in
this Agreement or in any instrument furnished in compliance with this
Agreement is false or misleading in any material respect at the time
when made;
(d) Voluntary Bankruptcy Proceedings - Purchaser shall (A)
apply for or consent to the appointment of a receiver, trustee,
liquidator or similar official for all or any substantial part of the
property of Purchaser, (B) admit in writing its inability to pay its
debts as they mature, (C) make a general assignment for the benefit of
its creditors, (D) be adjudicated bankrupt or insolvent, (E) file a
voluntary petition in bankruptcy or an answer seeking reorganization or
seeking to take advantage of any applicable insolvency law, (F) file
any answer admitting the material allegations of a petition filed
against Purchaser in any bankruptcy, reorganization or insolvency
proceeding, or (G) take any corporate action for the purpose of
effecting any of the foregoing under any bankruptcy, insolvency or any
other applicable law.
(e) Involuntary Bankruptcy Proceedings - If without its
application, approval or consent, a proceeding shall be instituted in
any court of competent jurisdiction, seeking in respect of Purchaser an
adjudication in bankruptcy, dissolution, winding-up, liquidation, a
composition arrangement with creditors, a readjustment of debt, the
appointment of a receiver, a trustee, a liquidator or similar official
for Purchaser or other like relief under any
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<PAGE>
applicable bankruptcy or insolvency law; and either (A) such proceeding
shall not be actively contested by Purchaser in good faith, or (B) such
proceedings shall continue undismissed for any period of 90 consecutive
days, or (C) any conclusive order, judgment or decree shall be entered
by any court of competent jurisdiction to effect any of the foregoing.
(f) Dissolution, Merger, Etc. - Any dissolution, merger, or
consolidation of Madison or Gold King, or any transfer of a substantial
part of the property of Madison or Gold King, should occur other than
the sale of the Real Property pursuant to the terms and provisions of
this Agreement.
(g) Covenant Default - Purchaser shall fail to pay or perform
any obligation under, or the Purchaser shall fail to keep or perform
any covenant, promise or warranty of Purchaser contained in, the
Promissory Note or this Agreement.
(h) Pledge Agreement - A Default under the Pledge Agreement.
7.2 Remedies
Upon the occurrence of any Default hereunder, all remaining
unpaid amounts due hereunder or under the Promissory Note shall, at the option
of Seller, become immediately due and payable, and Seller may exercise at any
time any rights and remedies available to it under the laws of the State of
Colorado or other applicable jurisdictions. Purchaser shall, in case of a
Default, pay all costs incurred by Seller in enforcing the rights of Seller
hereunder, including reasonable attorneys' fees and other expenses.
8. Miscellaneous
8.1 Modifications, Amendments and Waivers. The Seller and the
Purchaser may by written agreement:
(a) Extend the time for the performance of any of the
obligations or other acts of the parties hereto;
(b) Waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered
pursuant to this Agreement;
(c) Waive compliance with any of the covenants and agreements
contained in this Agreement; or
(d) Amend or supplement any of the provisions of this
Agreement.
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<PAGE>
8.2 Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed and enforced in accordance with, the internal law,
and not the law pertaining to conflicts or choice of law, of the State of
Colorado.
8.3 Survival of Covenants. The covenants and agreements made
herein shall survive the Closing. All statements as to factual matters contained
in any certificate or other instrument delivered by or on behalf of the Seller
pursuant hereto or in connection with the transactions contemplated hereby shall
be deemed to be representations and warranties by the Seller hereunder as of the
date of such certificate or instrument.
8.4 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto, except that no party may assign or otherwise transfer any of
its rights under this Agreement without the written consent of the other party
hereto.
8.5 Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subject matter hereof and
thereof.
8.6 Notices. All notices and other communication required or
permitted hereunder shall be effective upon receipt and shall be in writing and
delivered personally, by facsimile transmission, by overnight delivery service
or by certified mail, return receipt requested, postage prepaid, addressed as
set forth below the respective name on the signature page hereto, or at such
other address as such party shall have furnished in writing.
8.7 Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
8.8 Titles and Subtitles. The titles of the Sections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
8.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one instrument.
8.10 Construction of Agreement. None of the parties hereto or
their respective counsel shall be deemed to have drafted this Agreement for
purposes of construing the terms hereof. The language in all parts of this
Agreement shall in all cases be construed according to its fair meaning, and not
strictly for or against any party hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Asset
Sale Agreement to be duly executed and delivered as of the date first above
written.
THE SELLER
GRANT RESERVE CORPORATION
By: /s/ Arnold T. Kondrat
-----------------------------
Name: Arnold T. Kondrat
Title: Chairman
Address for Notices:
410 17th Street
Suite 1375
Denver, CO 80202
Attention: Arnold T. Kondrat
THE PURCHASER
CHEROKEE MINING COMPANY INC.
By: /s/ William R. Wilson
---------------------------------
Name: William R. Wilson
Title: President
Address for Notices:
410 17th Street
Suite 1375
Denver, CO 80202
Attention: William R. Wilson
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<PAGE>
EXHIBIT 1
PROMISSORY NOTE
Denver, Colorado
November 25, 1998
For Value Received, Cherokee Mining Company Inc. ("Cherokee"),
a Wyoming corporation, hereby promises to pay to the order of Grant Reserve
Corporation, a Nevada corporation ("Grant"), on November 25, 1999, upon the
presentation ans surrender hereof at the principal office of Cherokee, the
Principal Sum of SIX HUNDRED THOUSAND DOLLARS ($600,000), and to pay interest on
the amount of such Principal sum remaining unpaid from time to time at the rates
and times provided herein, until said Principal Sum is paid in full. The
interest on this Note, when due and payable, shall be paid to the registered
owner of this Note at the close of business on the Record Date applicable to
such interest payment, mailed to such registered owner at such registered
owner's address appearing as of the close of business on such Record Date on the
Note Register (as herein defined). For the purposes of this Note, the Record
Date applicable to any interest payment hereunder shall be the fifth day
(whether or not a business day) prior to the day upon which such interest
payment is due and payable hereunder.
Cherokee shall have the right at any time to prepay this Note,
in whole or in part, without any premium or penalty of any kind.
SECTION ONE
SECURITY
To secure payment of this Note, Cherokee, pursuant to the terms and provisions
of a pledge agreement of even date herewith (the "Pledge Agreement"), has
granted to Grant a security interest in (i) 7,620,000 of shares of Common Stock
in Madison Mining Corporation ("Madison") and (ii) 36,388 of shares of Common
Stock in Gold King Mines Corporation ("Gold King") acquired by Cherokee from
Grant pursuant to an asset sale agreement of even date herewith (the "Asset Sale
Agreement").
SECTION TWO
DEFAULT
The occurrence of any of the following events shall constitute
a Default hereunder:
1. Any material statement or representation of Cherokee herein
or in any other writing at any time furnished by Cherokee to Grant which shall
prove to be false or misleading in any material respect.
2. If Cherokee shall (A) apply for or consent to the
appointment of a receiver, trustee, liquidator or similar official for all or
any substantial part of the property of Cherokee. (B)
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<PAGE>
admit in writing its inability to pay its debts as they mature. (C) make a
general assignment for the benefit of its creditors, (D) be adjudicated bankrupt
or insolvent, (E) file a voluntary petition in bankruptcy or an answer seeking
reorganization or seeking to take advantage of any applicable insolvency law,
(F) file any answer admitting the material allegations of a petition filed
against Cherokee in any bankruptcy, reorganization or insolvency proceeding, or
(G) take any corporate action for the purpose of effecting any of the foregoing
under any bankruptcy, insolvency or any other applicable law.
3. If without its application, approval or consent, a
proceeding shall be instituted in any court of competent jurisdiction, seeking
in respect of Cherokee an adjudication in bankruptcy, dissolution, winding-up,
liquidation, a composition arrangement with creditors, a readjustment of debt,
the appointment of a receiver, a trustee, a liquidator or similar official for
Cherokee or other like relief under any applicable bankruptcy or insolvency law;
and either (A) such proceeding shall not be actively contested by Cherokee in
good faith, or (B) such proceedings shall continue undismissed for any period of
90 consecutive days, or (C) any conclusive order, judgment or decree shall be
entered by any court of competent jurisdiction to effect any of the foregoing.
4. The dissolution, merger or consolidation of Cherokee, or
transfer of a substantial part of the property of Cherokee, other than the sale
of the real property of Madison and Gold King pursuant to the terms and
provisions of the Asset Sale Agreement.
5. An Event of Default under the Asset Sale Agreement or the
failure of Cherokee to pay or perform any obligation under, or the failure by
Cherokee to keep or perform any covenant, promise or warranty of Cherokee
contained in, this Note, the Asset Sale Agreement or the Pledge Agreement.
SECTION THREE
REMEDIES
On any Default hereunder, all remaining unpaid amounts on the
Note shall, at the option of Grant, become immediately due and payable, and
Grant may exercise at any time any rights and remedies available to it under the
laws of the State of Colorado. Cherokee shall, in case of Default, pay all costs
incurred by Grant in collecting on the Note and enforcing the rights of Grant
hereunder, including reasonable attorneys' fees and legal expenses. In addition,
from and after the occurrence of a Default, interest shall, without the
necessity for the giving of notice or the taking of any other action by the
holder hereof, become payable by Cherokee on the balance of the Principal Sum
remaining unpaid from time to time thereafter at a floating annual percentage
rate equal to two (2) percent plus the Prime Rate existing from time to time
while any part of the Principal Sum of this Note shall remain unpaid, payable
monthly in arrears on the last calendar day of each month until the Principal
Sum of this Note shall have been paid in full. For the purposes hereof, the
Prime Rate shall be as determined by reference to The Wall Street Journal.
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<PAGE>
SECTION FOUR
NOTICE
Cherokee hereby waives presentment for payment, notice of
dishonor, protest and notice of protest and agrees to pay reasonable attorneys'
fees in the event that the same are incurred in connection with the collection
of the indebtedness evidenced hereby. Cherokee agrees not to interpose any
offsets or counterclaims in any action for the collection of the indebtedness
evidenced by this Note.
SECTION FIVE
MISCELLANEOUS
This Note shall be governed by, and construed and enforced in
accordance with, the internal law of the State of Colorado.
Cherokee shall maintain at its principal office a register
(the "Note Register") for the registration and transfer of the Note. Upon
presentation of this Note for such purpose at such principal office, Cherokee
shall register therein, and permit to be transferred thereon, this Note. The
Note shall be transferable only upon the Note Register at the written request of
the registered owner thereof or his representative duly authorized in writing,
upon surrender thereof, together with a written instrument of transfer duly
executed by the registered owner or his representative duly authorized in
writing.
The titles of the Sections of this Note are for convenience of
reference only and are not to be considered in construing this Note.
IN WITNESS WHEREOF, Cherokee Mining Company Inc. has caused
this Promissory Note to be executed in its name and on its behalf by its proper
officer thereunto duly authorized, as of the date first above written.
CHEROKEE MINING COMPANY INC.
By: /s/ William R. Wilson
----------------------------------
Name: William R. Wilson
Title: President
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PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of November 25, 1998 (this "Pledge
Agreement"), between Cherokee Mining Company Inc. ("Cherokee"), a Wyoming
corporation, and Grant Reserve Corporation ("Grant"), a Nevada corporation.
W I T N E S S E T H:
WHEREAS, Cherokee and Grant have entered into that certain
asset sale agreement (the "Asset Sale Agreement") of even date herewith, under
which Cherokee has acquired (i) 7,620,000 shares of Common Stock, no par value,
in Madison Mining Corporation, a Montana corporation ("Madison") and (ii) 36,388
of shares of Common Stock, no par value, in Gold King Mines Corporation ("Gold
King") (collectively, the "Pledged Shares");
WHEREAS, as part of the consideration for the sale of the
Shares under the Asset Sale Agreement, Cherokee has agreed to pay Grant the
principal sum of SIX HUNDRED THOUSAND DOLLARS ($600,000), which obligation is
evidenced by a certain promissory note of even date herewith, (the "Note");
WHEREAS, to secure its obligations under the Asset Sale
Agreement and the Note, Cherokee has agreed to (i) pledge to Grant, and grant to
Grant, a security interest in, the Pledged Securities and (ii) execute and
deliver this Pledge Agreement.
NOW THEREFORE, the parties hereto agree as follows:
1. Pledge and Grant of Security Interest.
Cherokee hereby pledges to Grant, and grants to Grant a
continuing security interest in and to all of Cherokee's right, title and
interest in (i) the Pledged Shares, (ii) the certificates representing the
Pledged Shares and (iii) all products and proceeds of any of the Pledged Shares,
including, without limitation, all dividends, interest, principal payments,
cash, options, warrants, rights, instruments, subscriptions and other property
or proceeds from time to time received, receivable or otherwise distributed or
distributable in respect of or exchange for the any of the Pledged Shares
(collectively (i), (ii) and (iii), the "Collateral") as collateral security for
the prompt and complete payment and performance due (whether at stated maturity,
by acceleration or otherwise) of the Obligations.
As used herein, "Obligations" means, collectively, the unpaid
principal and interest, if any, on the Note and all other obligations and
liabilities of Cherokee, whether direct or indirect, which may arise under or in
connection with the Asset Sale Agreement, the Note and this Pledge Agreement.
<PAGE>
2. Delivery of the Collateral
(a) All certificates evidencing the Pledged Shares shall be
delivered to and held by Grant pursuant thereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer in blank, all in form and substance reasonably satisfactory to
Grant.
(b) On the date hereof, Cherokee shall take all actions
necessary in order to transfer each item of the Collateral to Grant in a manner
sufficient to create in favor of Grant, a perfected first priority security
interest in the Collateral. In the event of any change in applicable law,
Cherokee shall promptly take such action as may be required in order to continue
Grant's security interest in the Collateral as a perfected first priority
security interest and Grant shall cooperate with Cherokee in any such action.
3. Representations and Warranties
Cherokee hereby represents and warrants that:
(a) The execution, delivery and performance by Cherokee on
this Pledge Agreement do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of incorporation
of Cherokee or of any material agreement, judgment, injunction, order, decree or
other instrument binding upon Cherokee or result in the creation or imposition
of any lien encumbrance or security interest on or in any assets of Cherokee,
except for the security interests granted under this Pledge Agreement to Grant.
(b) Upon the delivery to Grant of the certificates
representing the Pledged Shares, the pledge of the Collateral pursuant to this
Pledge Agreement creates a valid and perfected first priority security interest
in and to the Collateral, securing the payment and fulfillment of the
Obligations for the benefit of Grant enforceable as such against all creditors
of Cherokee and any persons purporting to purchase any of the Collateral from
the Cherokee, except as such enforcement may be limited by (i) the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditor's rights generally and (ii) general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
(c) No consent of any other person and no consent,
authorization, approval, or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for the pledge by
Cherokee of the Collateral pursuant to this Pledge Agreement or for the
execution, delivery or performance of this Pledge Agreement by Cherokee (except
for any actions, notices, filings and notations necessary to perfect liens on or
the security interest in the Collateral created pursuant to this Pledge
Agreement).
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<PAGE>
4. Further Assurances
Cherokee agrees to promptly take such actions and to execute
and deliver or cause to be executed and delivered, or use its best efforts to
procure, such stock or bond powers, proxies, assignments, instruments and such
other or different writings that may be necessary or as Grant may reasonably
request, all in form and substance reasonably satisfactory to Grant, deliver any
instruments to Grant and take any other actions that are necessary or, in the
reasonably opinion of Grant, desirable, to perfect, continue the perfection of,
confirm and assure the first priority of Grant's security interest in the
Collateral, to perfect the Collateral against the rights, claims or interests of
third persons, and to otherwise effect the purpose of this Pledge Agreement.
5. Covenants
Cherokee covenants and agrees with Grant from and after the
date of this Pledge Agreement until the payment in full and fulfillment of
Obligations due and owing under the Asset Sale Agreement, the Note and of this
Pledge Agreement that it will not:
(a) (i) sell or otherwise dispose of, or grant any option or
warrant with respect to, any of the Collateral or (ii) create or permit to exist
any lien or encumbrance upon or with respect to any of the Collateral (except
for the lien created pursuant to this Pledge Agreement) and at all times will be
the sole beneficial owner of the Collateral; and
(b) (i) enter into any agreement that purports to or may
restrict or inhibit Grant's rights or remedies hereunder, including, without
limitation, Grant's right to sell or otherwise dispose of the Collateral or (ii)
fail to pay or discharge any tax assessment or levy of any nature not later than
five days prior to the date of any proposed sale under any judgment, writ or
warrant of attachment with respect to such tax assessment or levy with regard to
the Collateral.
6. Power of Attorney
Cherokee hereby appoints and constitutes Grant as Cherokee's
attorney-in-fact to exercise to the fullest extent permitted by law, all of the
following powers upon and at any time after the occurrence and during the
continuance of a Default under the Note or the occurrence and during the
continuance of an Event of Default under the Asset Sale Agreement: (i)
collection of proceeds of any Collateral; (ii) conveyance of any item of
Collateral to any purchaser thereof; (iii) giving of any notices or recording of
any liens under Section 4 hereto; (iv) making of any payments or taking any acts
under Section 7 hereof and (v) paying or discharging taxes or liens levied or
placed upon the Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by Grant in its reasonable
discretion, and such payment made by Grant to become the Obligations of Cherokee
to Grant, due and payable immediately upon demand. Grant's authority to execute
and give receipt for any certificate of ownership or any document constituting
Collateral, transfer title to any item of Collateral, sign Cherokee's name on
all financing statements (to the extent permitted by applicable law) or any
other documents reasonably deemed necessary or
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<PAGE>
appropriate by Grant to preserve, protect or perfect the security interest in
the Collateral and to file the same, prepare, file and sign Cherokee's name on
any notice of lien, and to take any other actions arising from the powers
granted to Grant in this Pledge Agreement. This power of attorney is coupled
with an interest and is irrevocable by Cherokee.
7. Grant May Perform
If Cherokee fails to perform any agreement contained herein,
Grant may itself perform, or cause performance of, such agreement. Grant shall
provide written notice to Cherokee or any exercise of rights pursuant to
Sections 6 or 7 hereof.
8. No Assumption of Duties: Reasonable Care
The rights and powers granted to Granted hereunder are being
granted in order to preserve and protect Grant's security interest in and to the
Collateral granted hereby and shall not be interpreted to, and shall not, impose
any duties on Grant in connection therewith other than those imposed under
applicable law. Grant agrees to exercise reasonable care in the custody,
preservation and disposition of the Collateral.
9. Indemnity
Cherokee shall indemnify, defend and hold harmless Grant and
its directors, officers, agents and employees from and against all claims,
actions, obligations, losses, liabilities and expenses, including reasonably
costs, reasonable fees and reasonable disbursements of counsel (including,
without limitation, the reasonable cost to Grant of legal counsel), the
reasonable costs of investigations, and claims for damages, arising from or in
connection with Grant's performance of its duties or exercise of its rights or
powers under this Pledge Agreement (other than such claims, actions,
obligations, losses, liabilities and expenses which result from the bad faith,
gross negligence or willful misconduct of Grant).
10. Security Interest Absolute
All rights of Grant and security interests hereunder, and all
obligations of Cherokee hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Asset Sale
Agreement or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations or of this Pledge Agreement.
(c) any exchange, surrender, release or non-perfection of any
liens on any other collateral for all or any of the Obligations; or
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<PAGE>
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, Cherokee in respect of the Obligations or of this Pledge
Agreement.
11. Continuing Security Interest: Termination
(a) The Pledge Agreement shall create a continuing security
interest in and to the Collateral and shall, unless otherwise provided in the
Asset Sale Agreement, remain in full force and effect until the fulfillment of
and payment in full of all Obligations due and owing under the Asset Sale
Agreement, the Note and this Pledge Agreement. At such time this Pledge
Agreement shall terminate and Grant shall, at the written request of Cherokee,
promptly reassign and redeliver to Cherokee all of the Collateral hereunder that
has not been sold, disposed of, retained or applied by Grant in accordance with
the terms of this Pledge Agreement and the Asset Sale Agreement. Such
reassignment and redelivery shall be without warranty (either express or
implied) by or recourse to Grant, except as to the absence of any prior
assignments or encumbrances by Grant of the Collateral or its interests therein,
and shall be at the reasonable expense of Cherokee. This Pledge Agreement shall
be binding upon Cherokee, its successors and assigns, and shall inure, together
with the rights and remedies of Grant hereunder, to the benefit of Grant and its
successors, transferees and assigns.
(b) Notwithstanding any provision in this Pledge Agreement, if
any Default under the Note or an Event of Default under the Asset Sale Agreement
occurs, Cherokee shall use its best efforts to immediately cause Grant, to have
a perfected first priority security interest in the Collateral. This paragraph
shall survive the termination of this Pledge Agreement.
12. Notices
Any communication, notice or demand to be given hereunder to
any party shall be duly given hereunder if given in writing and in the form and
manner, and delivered to their address set forth in the Asset Sale Agreement, or
in such other form and manner or to such other address and Persons as shall be
designated by and party hereto to each other party hereto in a written notice
delivered in accordance with the terms of the Asset Sale Agreement.
13. Governing Law
THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF COLORADO.
14. Execution in Counterparts
This Pledge Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
-5-
<PAGE>
15. No Personal Liability of Directors, Officer,
Employees and Others
No past, present or future director, officer, employee,
incorporator, partner or stockholder of Cherokee will have any liability for any
obligations of Cherokee under this Pledge Agreement or for any claim based on,
in respect of or by reason of such obligations or their creation.
-6-
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Pledge
Agreement to be duly executed as of the date first above written.
PLEDGOR
CHEROKEE MINING COMPANY INC.
By: /s/ William R. Wilson
Name: William R. Wilson
Title President
Address for Notices:
410 17th Street, Suite 1375
Denver, Colorado 30302
(303) 320-2840
(303) 595-9717
Attention: William R. Wilson
PLEDGEE
GRANT RESERVE CORPORATION
By: /s/ (signature is illegible)
Name:
Title
Address for Notices:
131 University Ave., Suite 2100
Toronto, Canada M5H 3M7
(416) 366-2221
(416) 366-7722
Attention: Arnold T. Kondrat
-7-
THIS AGREEMENT made as of the 18th day of May, 1999
BETWEEN:
CALL CENTER LEARNING SOLUTIONS, INC.
an Arizona corporation
("CCLS")
OF THE FIRST PART,
- and -
INFOCAST CORPORATION
a Nevada corporation
("InfoCast")
OF THE SECOND PART.
BACKGROUND
CCLS is the owner of certain copyrights, trademarks, trade
names, trade secrets and other rights in and to certain call center course
materials listed in Schedule "A" (collectively, the "Underlying Intellectual
Property"). CCLS currently markets the course materials utilizing the Underlying
Intellectual Property to CCLS's existing clients.
InfoCast is in the business of designing and developing
electronic versions of content such as the Underlying Intellectual Property,
developing marketing and promotional materials, and providing technical support
for the electronic distribution of content.
CCLS and InfoCast have agreed to form a new corporation
("Newco") to be owned equally by CCLS and InfoCast. The purpose of Newco is to
develop, own and exploit the aforementioned courses as detailed in Schedule "A"
which will be converted to an electronic format capable of electronic
distribution (referred to hereafter as "Electronic Products"). Newco will engage
and draw upon CCLS' and InfoCast's resources to market, sell and distribute the
Electronic Products. CCLS will initially contribute to Newco:
(a) the exclusive rights:
(i) to convert the Underlying Intellectual Property in
the first five courses described in Schedule "A"
(Phase 1) to electronic format capable of electronic
distribution (Electronic Products), and
(ii) to sell, license or otherwise commercially exploit
the first five Electronic Products described in
Schedule "A" (Phase 1) by electronic distribution;
<PAGE>
(b) subject matter expertise to support the conversion of the
Underlying Intellectual Property into the Electronic Products;
(c) access to the CCLS customer base as detailed in the Marketing
and Sales Plans and for a period of at least one year
leadership by CCLS in making sales of the Electronic Products;
(d) upon certain events occurring as detailed in section 2.5 of
this Agreement, the exclusive rights to convert and to
commercially exploit the balance of the Underlying
Intellectual Property listed in Schedule "A" under Phase 2 to
electronic format capable of electronic distribution.
InfoCast will initially contribute to Newco:
(a) the resources necessary to convert the Underlying Intellectual
Property in the first initial five courses described in
Schedule "B" to the Electronic Products;
(b) funding of the marketing and technical support efforts for the
Electronic Products during the initial "Six Month Period"
commencing on the date of execution of this Agreement and
ending six months thereafter;
(c) access to InfoCast's customer base as detailed in the
Marketing and Sales Plans;
(d) courseware development expertise to support the conversion of
the Underlying Intellectual Property into the Electronic
Products;
(e) access to InfoCast's Learning Management System ("LMS"), for
utilization with the Electronic Products; and
(f) funding the incorporation and organization of Newco and
ongoing corporate expenses for the initial Six Month Period.
AGREEMENT
In consideration of the mutual covenants and agreements
contained in this agreement and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged and agreed, CCLS and InfoCast
hereby declare, covenant and agree as follows:
1. FORMATION OF NEWCO
1.1 InfoCast shall cause to be formed under the laws of the State
of Delaware, a new corporation to be called "Call Center Learning Solutions On
Line, Inc." ("Newco") or such other name as may be mutually agreed and
acceptable to applicable regulatory authorities.
<PAGE>
1.2 The capitalization of Newco shall consist of 100 common
shares. Each of CCLS and InfoCast shall subscribe for and be issued 50 common
shares for US$1.00 per share.
1.3 Initially, the corporate records and accounting records of
Newco shall be maintained at the Toronto, Canada office of InfoCast at Suite
902, 1 Richmond Street West, Toronto, Ontario M5H 3W4.
1.4 The board of directors of Newco shall consist of four persons.
CCLS shall nominate two persons to the board of directors of Newco and InfoCast
shall nominate two persons. In the event of a deadlock of the Board of
Directors, either party may refer the subject matter of the deadlock to
arbitration.
2. OBLIGATIONS TO NEWCO
2.1 CCLS will initially contribute to Newco:
(a) the exclusive rights:
(i) to convert the Underlying Intellectual Property in
the first five courses described in Schedule "A"
Phase 1 to electronic format capable of electronic
distribution ("Electronic Products"), and
(ii) to sell, license or otherwise commercially exploit
the first five Electronic Products described in
Schedule "A" by electronic distribution;
(b) subject matter expertise ("SME") to support the conversion of
the Underlying Intellectual Property into all the Electronic
Products. The Subject Matter Expertise should demonstrate a
highly proficient level of understanding and comprehensive
knowledge pertaining to the subject matter of the course and
the competency requirement of call center personnel. The SME
should also demonstrate extensive training experience
pertaining to subject matter covered by the course. Subject
Matter Experts will interface with an instructional designer
to prepare course outlines and scripts;
(c) access to CCLS customer base as detailed in the Marketing and
Sales Plans and leadership for a period of at least one year
by CCLS in making sales of all the Electronic Products.
Leadership in this section contemplates a half time commitment
of CCLS' lead sales person, an identification of CCLS' client
who are candidates for the electronic products and sales
initiatives that include setting appointments, demonstrating
the electronic products and closing sales;
(d) upon certain events occurring as detailed in section 2.5 of
this Agreement, the exclusive rights to convert the balance of
the Underlying Intellectual Property to electronic format
capable of electronic distribution.
<PAGE>
2.2 InfoCast will initially contribute to Newco:
(a) the resources necessary to convert the Underlying Intellectual
Property in the first initial five courses described in Schedule "A"
Phase 1 to the first five Electronic Products;
(b) funding of the marketing and technical support efforts for the first
five Electronic Products during the initial Six Month Period
commencing on the date of execution of this Agreement and ending six
months thereafter as detailed in Schedule "C";
(c) access to InfoCast's customer base as detailed in the Marketing and
Sales Plan;
(d) courseware development expertise to support the conversion of the
Underlying Intellectual Property into the first five Electronic
Products as set out in Schedule "A" and more clearly defined in
Schedule "B";
(e) access to InfoCast's Learning Management System ("LMS") which is
being developed concurrently with the conversion of the first five
Electronic Products and which will provide learner tracking and
reporting; and
(f) funding the incorporation and organization of Newco.
2.3 In order to ensure the development of quality courseware and
successful launches of the Electronic Products, both parties agree that
important input will be required from both CCLS and InfoCast and each party will
utilize its commercially reasonable efforts to attain the quality of products
and to meet the target completions contemplated in this contract.
2.4 The Electronic Products courseware will be developed according to
the Project Implementation Plan as set out as Schedule "B", with sign off
approvals required from both CCLS and InfoCast at regular, scheduled milestones.
2.5 On or before November 1, 1999 Newco shall have the right and
conditional obligation to convert the remaining six courses as detailed in
Schedule "A" (Phase 2) at InfoCast's sole expense. The resultant Electronic
Products shall be contributed to Newco absolutely. CCLS shall be obligated to
contribute to Newco absolutely the intellectual property contained in the
remaining six courses in the same manner as the aforementioned initial five
courses.
InfoCast's obligations under this section for the six remaining
courses are conditional upon Newco securing 20,000 unit sales at a price between
$50-$75 (U.S.) per unit by November 1, 1999. If these sales have not been
secured, InfoCast does not have any obligation to go forward on the conversion
of the remaining six courses.
InfoCast has the unfettered right however, to proceed with the
conversion of the six remaining courses in the event that the 20,000 unit sales
are not secured.
<PAGE>
Should InfoCast decide to proceed with the conversion of the
remaining six courses, it will utilize its commercially reasonable efforts to
complete the conversion of the courses by May 1, 2000.
If InfoCast decides not to proceed with the conversion of the
remaining six courses then CCLS shall not be obligated to contribute its
intellectual property with respect to the remaining six courses. CCLS may
develop, convert and distribute these six courses thereafter as it deems fit in
its sole discretion. Newco shall have no surviving rights to these six
Electronic Products and Newco will cease to have any rights to a separate and
exclusive section on the DXL as contemplated in section 7.4. If only the first
five courses are developed by Newco as Electronic Products then InfoCast will
maintain these courses in a call center section of its DXL on a non-exclusive
basis.
3. ROLE OF NEWCO
3.1 The purpose of Newco shall be to develop, own and exploit the
Electronic Products.
3.2 Newco shall establish pricing for sales of Electronic Products to
generate optimum profits for Newco.
3.3 Newco will brand all Electronic Products for sale under the CCLS
brand.
3.4 InfoCast acknowledges and agrees that CCLS is the sole and exclusive
owner of all copyrights, trademarks, tradenames, trade secrets and other rights
in the Underlying Intellectual Property. InfoCast and CCLS acknowledge and agree
that Newco shall be the sole and exclusive owner of all copyrights, trademarks,
tradenames, trade secrets and other rights in the Electronic Products. This
Agreement gives InfoCast no rights in any such copyrights, trademarks,
tradenames, trade secrets and other rights in the Underlying Intellectual
Property and InfoCast shall never assert any rights therein; provided, however,
that (a) CCLS grants to Newco a non-royalty bearing license to reproduce the
trade names and trademarks of CCLS associated with the Underlying Intellectual
Property in connection with the Electronic Products in advertisements and other
promotional materials; and (b) Newco will reproduce on the Electronic Products
the tradenames and trademarks of CCLS associated with the Underlying
Intellectual Property. All components of the Electronic Products shall clearly
identify Newco as the owner of the copyrights thereof.
3.5 CCLS acknowledges and agrees that InfoCast is the sole and exclusive
owner of all copyrights, trademarks, trade secrets and other rights in software
applications and technology that will be utilized in the project. This Agreement
gives CCLS and Newco no rights in any of such copyrights, trademarks, trade
secrets or other rights that are incorporated in the software applications and
technology.
<PAGE>
3.6 All sales shall be booked through Newco. CCLS and InfoCast shall be
entitled to charge Newco certain recoverable expenses as set out in Schedule "C"
for reimbursement which shall be accounted for through Newco.
3.7 Accounting records and functions shall be established and carried
out by InfoCast on behalf of Newco in accordance with generally accepted
accounting standards.
3.8 Both CCLS and InfoCast herein acknowledge that InfoCast and CCLS are
operating and developing a distance learning business and that nothing in this
Agreement will prevent InfoCast or CCLS from pursuing and developing other
distance learning initiatives as it sees fit from time to time.
3.9 InfoCast and CCLS shall not be required to devote all of its time or
business efforts to the affairs of Newco but shall devote so much of its time
and attention to Newco as is reasonably necessary and advisable to meet its
obligations under this Agreement. Except as otherwise expressly provided herein,
either party and any shareholder, officer, or director may engage in or possess
an interest in other business ventures of every nature and description,
independently or with others whether or not such ventures are competitive with
Newco.
3.10 InfoCast and CCLS agree that a dividend policy will be put into
place for Newco wherein quarterly distributions will be made to the
shareholders. The dividends will effectively distribute all profits while
leaving enough funding to keep Newco operational.
4. MARKETING AND SALES INITIATIVES
4.1 Newco intends to market and sell the Electronic Products both to
existing clients of CCLS and InfoCast and new clients developed by Newco, CCLS
and InfoCast. Newco will appoint CCLS and InfoCast as sales agents for the
Electronic Products. The parties shall pursue joint marketing and sales efforts
of the Electronic Products. The following steps will be designed and utilized.
(a) marketing plan and sales plan, each with mutual signoff to be
completed by June 15, 1999. CCLS and InfoCast acknowledge the
following marketing issues to be addressed (the following list is
non-exclusive): collateral materials, web page design, web page
interlinks, branding, publicity, sales strategy, client maintenance
strategy, pricing, positioning and effort priorities;
(b) beta site and system rollout management, including addressing such
beta issues as technology integration, Learning Management System
("LMS") integration and navigation integration and rollout issues
such as ongoing technology support and LMS monitoring;
(c) help desk including customer service and technical support shall be
established in conjunction with the sale and distribution of the
first course;
<PAGE>
(d) development and drafting of a maintenance agreement to reflect a
maintenance policy, including considering free upgrades within
versions and costs for new versions (which are to be determined by
Newco); and
(e) a program to develop certification and accreditation alliances with
appropriate academic and industry organizations for the Electronic
Products.
During the initial Six Month Period commencing on the date of
execution of this Agreement and ending six months thereafter, InfoCast shall
fund the marketing and sales efforts for the Electronic Products, the costs of
which are estimated and detailed in Schedule "D".
4.2 InfoCast will provide up to 5 days training for the three principals
of CCLS to ensure their personal fluency with Newco's Electronic Products and
services.
5. REVIEW AND AUDIT RIGHTS
5.1 Each of CCLS and InfoCast (the "Auditing Party") shall have the
right which right may be exercised at any time, during normal business hours and
upon ten (10) days' prior written notice, to audit the books and records of
Newco. The audit may be conducted by a representative of Auditing Party who may
either, at its election, audit the books and records at the offices of Newco or
require Newco to forward copies of the same to the representative's offices. The
costs of one audit per year shall be borne by Newco and the results should be
shared with each party. If more than one request for audit occurs during the
calendar year, the Auditing Party shall pay for such audit and the results shall
be shared with each party.
5.2 InfoCast and CCLS will have the right to electronically access and
review on a read only basis, the records and accounts of Newco for monitoring
purposes at any time.
6. CONVERSION AND DELIVERY
6.1 Subject to CCLS's timely input and adherence to the milestone
objectives of Schedule "B" as detailed in section 6.4., InfoCast will use its
commercially reasonable efforts to convert the Underlying Intellectual Property
into the Electronic Products according to the Project Implementation Plan set
out in Schedule "B". InfoCast shall use commercially reasonable efforts to
initially convert the course materials entitled "Customer Care and Call Handling
Skills for Call Center Agents" on or before July 21, 1999 and the remaining four
courses listed in Schedule "A" Phase 1 on or before September 30, 1999.
6.2 The parties acknowledge and agree to use their commercially
reasonable efforts to create top quality electronically deliverable courseware
for the call center market as described in "Recommended System Requirements" as
listed in "Schedule E".
6.3 The conversion of the Underlying Intellectual Property shall be
completed to a standard acceptable to both CCLS and InfoCast, each acting
reasonably. The benchmark for the quality of courseware development under this
Agreement will be the design document as mutually revised for the existing CD
Rom version of the CCLS course known as "Effective
<PAGE>
Skills In Dealing With Customers and Situations". The Electronic Products will
have record and non-record visions.
6.4 During the conversion of the Underlying Intellectual Property of
each CCLS course into Electronic Products, InfoCast shall require CCLS to
contribute and CCLS shall contribute to Newco its SME in accordance with CCLS
SME participation in Schedule "B". CCLS shall review and approve the build of
the Electronic Products in accordance with the designated milestones in Schedule
"B" to ensure that the content build is on schedule and in keeping with the
quality standard and purpose of the Underlying Intellectual Property. CCLS
acknowledges that time shall be of the essence in reviewing and approving the
content build. CCLS shall use its commercially reasonable efforts to expedite
the review and approval process in order to permit InfoCast to complete
conversion as scheduled. CCLS and InfoCast acknowledge that the schedule for
conversion set out in Schedule "B" is crucial to the successful launch of the
Electronic Products.
6.5 CCLS agrees that InfoCast's ability to meet the aforementioned
schedule is also contingent upon CCLS delivering quality and detailed instructor
led material that includes outlines, behavioral objectives, teaching points,
specific examples and learner exercises.
6.6 Subject to section 2.5 of this Agreement, upon successful conversion
of the first five Electronic Products CCLS, InfoCast and Newco shall mutually
agree upon the schedule and implementation plan for the conversion of the course
materials for the remaining six courses.
6.7 If InfoCast goes forward with the completion of the last six courses
under clause 2.5 then CCLS shall have first right of refusal to develop
instructor led versions and to play the role of SME for the conversion of the
Electronic format for all new products agreed to be included in the "Call Center
Training" section of the DXL for Newco. InfoCast will also provide its resources
for design and conversion to Newco. Both parties will provide their services at
cost.
7. PROMOTIONAL DUTIES
7.1 Each party shall devote its commercially reasonable efforts to
advertise, promote and sell the Electronic Products, to protect the goodwill
created in the Electronic Products and to cooperate with the end-users of the
Electronic Products.
7.2 Neither party shall use any advertising or promotional materials to
promote the Electronic Products that have not been approved by Newco.
7.3 InfoCast acknowledges that CCLS is very active in selling the
courseware products utilizing the Underlying Intellectual Property. CCLS and
InfoCast will use their commercially reasonable efforts to support Newco sales
of the Electronic Products to existing clients of CCLS. InfoCast shall refer all
requests and leads for leader-led version of the Electronic Products to CCLS and
no commissions shall be paid to InfoCast. Similarly, CCLS shall refer all
requests and leads for virtual call center opportunities, IT outsourcing and
content conversion and delivery to InfoCast and no commission shall be paid to
CCLS. CCLS and
<PAGE>
Newco however will be given the opportunity to sell all products in the InfoCast
DXL library subject to a reseller agreement to be negotiated.
7.4 All Newco promotional materials, electronic and written, will carry
a dedicated Call Center Training category. Only Newco Electronic Products will
be listed and marketed under this dedicated category. InfoCast agrees to create
a separate and exclusive section on Digital Exchange Library (the "DXL") that
will exclusively list the Electronic Products under the title "Call Center
Training".
7.5 InfoCast will set up a website for Newco with transparent links to
the InfoCast website and the DXL. InfoCast will set up transparent links from
the CCLS website to the InfoCast website and Newco website. InfoCast will
e-commerce enable the Newco website.
7.6 Each of CCLS and InfoCast shall provide to Newco, on a monthly
basis, the names and addresses of customers that have been approached as
determined by the Marketing and Sales Plans.
7.7 InfoCast and CCLS shall provide assistance to Newco to promote,
market, sell and distribute the Electronic Products and InfoCast shall provide
Newco with technical support for the Electronic Products including presale, sale
(including e-commerce solutions) and post sales activities. During the initial
six month period after the execution of this Agreement, InfoCast shall provide
such assistance to Newco at no cost to Newco. Thereafter, InfoCast and CCLS
shall be entitled to charge Newco for the provision of such assistance on a cost
recovery basis as set out in Schedule "C".
7.8 InfoCast shall use its commercially reasonable efforts to introduce
one of the Electronic Products in the initial submission to College Boreal for
approval and inclusion in the College Boreal/AT&T Canada Learning Partner
Program curriculum. InfoCast shall use similar efforts to introduce three of the
Electronic Products in a subsequent submission to College Boreal for approval
and inclusion in the College Boreal/AT&T Canada Learning Partner Program
curriculum. CCLS and InfoCast acknowledge that inclusion in the College Boreal
curriculum of any course is at the sole discretion of College Boreal and AT&T
Canada. If any CCLS courses are included in this College Boreal/AT&T curriculum,
CCLS and Newco herein acknowledge and agree that all pricing policies, marketing
decisions, promotional materials and business activities shall be solely
determined and developed by InfoCast, AT&T and College Boreal in their sole and
unfettered discretion. Newco shall set the price at which the Electronic
Products are offered to AT&T Canada, College Boreal and Infocast.
8. INTELLECTUAL PROPERTY
8.1 CCLS and InfoCast acknowledge and agree that the value of the
Electronic Products and the resultant ability of CCLS and InfoCast to
commercially exploit the Electronic Products will be based in part upon the
quality, scope and breadth of the content of the Electronic Products. Each of
CCLS and InfoCast agree that they shall use their commercially reasonable
efforts to do all such things as may be necessary or desirable to ensure that
the Electronic Products are top quality. CCLS and InfoCast acknowledge that in
order to ensure that the
<PAGE>
Electronic Products are top quality, Newco may be required to acquire and/or
develop similar, compatible or competing content products for the call center
market and CCLS and InfoCast agree to use their commercially reasonable efforts
to ensure that such steps as are necessary are taken to develop and maintain the
Electronic Products as top quality courseware for the call center market.
8.2 CCLS and InfoCast acknowledge that the Underlying Intellectual
Property and the Electronic Products including, without limitation, all source
codes, whether reduced to written form, contained on disks or other media,
consist of proprietary and confidential information. Each of CCLS and InfoCast
recognize and acknowledge that in the course of fulfilling their respective
obligations under this Agreement and commercially exploiting the Electronic
Products, they will be significantly responsible for maintaining and enhancing
the goodwill of each other with customers, potential customers and new
customers. Each of CCLS and InfoCast shall use commercially reasonable efforts
to preserve their respective goodwill.
8.3 Each party shall immediately notify the other party of (i) any
legal, governmental or other official investigation of or proceeding involving
the Electronic Products or (ii) of the existence of any infringement claim or
any other claim that has been or could be asserted by or against Licensor with
respect to its trademarks or other intellectual property.
8.4 Each party shall have sole responsibility for (and bear the cost of)
insuring that the Electronic Products as marketed and used by such party are in
compliance with the laws and regulations of any governmental body with
jurisdiction and that all necessary permits and licenses are procured.
8.5 Newco shall market, promote, and use the Electronic Products under
the tradenames and trademarks incorporating the tradenames and trademarks of
CCLS.
9. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF INFOCAST
InfoCast hereby represents, warrants, covenants and agrees as
follows:
9.1 InfoCast is a corporation, duly organized, validly existing and in
good standing under the laws of Nevada. InfoCast has full power to carry on its
business as it is now conducted, under any applicable laws. InfoCast is or will
be qualified to do business in all jurisdictions where it conducts business.
9.2 This Agreement has been adopted and its execution and delivery by
InfoCast have been duly authorized and no further action is necessary on the
part of InfoCast to make this Agreement valid and binding upon InfoCast.
9.3 The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby do not conflict with, or result in a breach
of, or constitute a default under, or result in the acceleration of any
indebtedness under, or result in the creation or imposition of any lien or
charge under, any agreement or instrument to which InfoCast is a party or by
which InfoCast may be bound, nor does such action violate any statute, law, rule
<PAGE>
or regulation nor any order, writ, injunction or decree of any court or
governmental authority binding upon or affecting InfoCast.
9.4 No consent of any third party is required to be obtained by InfoCast
in order to consummate the transaction contemplated by this Agreement or to
enable InfoCast to perform InfoCast's obligations hereunder.
9.5 There are no actions, suits, claims, investigations or legal or
administrative or arbitration proceedings pending, or to the best of InfoCast's
knowledge, threatened against InfoCast or any of its assets: (i) which involve
an agency, dealer, distributorship or other type of representation of a third
party; or (ii) which, if adversely determined, might have a materially adverse
effect on the validity or enforceability of this Agreement or on the financial
condition or capability of InfoCast to perform hereunder.
9.6 InfoCast is familiar with the contents and purposes of the Foreign
Corrupt Practices Act, ("FCPA") of the United States. InfoCast has not and shall
not make, in the performance of its obligations hereunder, any payments, loans
or gifts or promises or offers of payments, loans or gifts of money or anything
of value, directly or indirectly: (i) to or for the use or benefit of any
official, officer, employee or representative of any foreign government or any
agency or instrumentality thereof; (ii) to any foreign political party of any
official, officer, employee representative or candidate thereof, or (ii) to any
other person, if InfoCast knows or has reason to know that any part of such
payment, loan or gift will, directly or indirectly, be given or paid to any such
governmental official, officer, employee or representative or candidate thereof.
If requested by CCLS, InfoCast shall provide to CCLS duly executed affidavits,
in form and substance satisfactory to CCLS, of all of its officers, directors,
shareholders and employees who may assist InfoCast in the performance of its
obligations under this Agreement, each such affidavit shall affirm that InfoCast
has informed the affiant of InfoCast's obligation to abide by the FCPA and that
affiant shall abide by the provisions of the FCPA.
9.7 Neither this Agreement nor the Electronic Products must be notified
to, approved by or registered with, any governmental body, agency or
instrumentality in any jurisdiction.
9.8 To the best of InfoCast's knowledge, this Agreement does not have to
be executed in any language other than the English language in order to become
effective or to be enforceable.
<PAGE>
9.9 To the best of InfoCast's knowledge, InfoCast has the capacity under
the applicable laws to agree to the choice of law and the choice of forum set
forth in this Agreement and such choices are enforceable against InfoCast under
the applicable laws.
9.10 To the best of InfoCast's knowledge, nothing in this Agreement
violates the fundamental public policy of any application jurisdiction.
9.11 Each of the representations and warranties set forth in this Section
shall survive the execution of this Agreement.
10. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF CCLS
CCLS hereby represents, warrants, covenants and agrees as follows:
10.1 CCLS is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Arizona. CCLS has full power to carry on
its business as it is now conducted, and to own the Underlying Intellectual
Property under applicable state and federal law. CCLS is or will be qualified to
do business in all jurisdictions where it conducts business.
10.2 This Agreement has been adopted and its execution and delivery by
CCLS have been duly authorized and no further corporate action is necessary on
the part of CCLS to make this Agreement valid and binding upon CCLS.
10.3 The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby do not conflict with, or result in a breach
of, or constitute a default under, or result in the acceleration of any
indebtedness under, or result in the creation or imposition of any lien or
charge under, any agreement or instrument to which CCLS is a party or by which
CCLS may be bound, nor does such action violate any statute, law, rule or
regulation or any order, writ, injunction or decree of any court of governmental
authority binding upon or affecting CCLS.
10.4 No consent of any third party or any state or federal governmental
agency is required to be obtained by CCLS in order to consummate the transaction
contemplated by this Agreement or to enable CCLS to perform CCLS's obligations
hereunder.
10.5 There are no actions, suits, claims, investigations or legal or
administrative or arbitration proceedings pending, or to the best of CCLS's
knowledge, threatened against CCLS or any of its assets: (i) which involve an
agency, dealer, distributorship or other type of representation of a third
party; or (ii) which, if adversely determined, might have a materially adverse
effect on the validity or enforceability of this Agreement or on the financial
condition or capability of Licensee to perform hereunder.
10.6 CCLS is familiar with the contents and purposes of the Foreign
Corrupt Practices Act, ("FCPA") of the United States. CCLS has not and shall not
make, in the performance of its obligations hereunder, any payments, loans or
gifts or promises or offers of payments, loans or gifts of money or anything of
value, directly or indirectly: (i) to or for the use or benefit of any official,
officer, employee or representative of any foreign government or any agency or
instrumentality thereof; (ii) to any foreign political party of any official,
officer, employee representative or candidate thereof, or (ii) to any other
person, if CCLS knows or has reason to know that any part of such payment, loan
or gift will, directly or indirectly, be given or paid to any such governmental
official, officer, employee or representative or candidate thereof. If requested
by InfoCast, CCLS shall provide to InfoCast duly executed affidavits, in form
and substance satisfactory to InfoCast, of all of its officers, directors,
shareholders and employees who may assist CCLS in the performance of its
obligations under this Agreement, each such affidavit shall affirm that CCLS has
informed the affiant of CCLS's obligation to abide by the FCPA and that affiant
shall abide by the provisions of the FCPA.
<PAGE>
10.7 Neither this Agreement nor the Underlying Intellectual Property must
be notified to, approved by or registered with, any governmental body, agency or
instrumentality in any jurisdiction.
10.8 To the best of CCLS's knowledge, this Agreement does not have to be
executed in any language other than the English language in order to become
effective or to be enforceable.
10.9 To the best of CCLS's knowledge, CCLS has the capacity under the
applicable laws to agree to the choice of law and the choice of forum set forth
in this Agreement and such choices are enforceable against CCLS under the
applicable laws.
10.10 To the best of CCLS's knowledge, nothing in this Agreement violates
the fundamental public policy of any application jurisdiction.
10.11 Each of the representations and warranties set forth in this Section
shall survive the execution of this Agreement.
<PAGE>
11. INDEMNITY
11.1 InfoCast does hereby agree to defend indemnify and hold CCLS
harmless from and against any cost, damage, liability, responsibility or
obligation, including, without limitation, reasonable attorney's fees, incurred
in connection with, as a result of or arising out of: (i) a breach by InfoCast
of any of the representations, warranties, covenants or obligations of InfoCast
contained in this Agreement; or (ii) third party claims arising from any
negligent act or inaction or willful misconduct of InfoCast, its agents and
employees.
11.2 CCLS does hereby indemnify and hold InfoCast harmless from and
against any cost, damage, liability, responsibility or obligation, including,
without limitation, reasonable attorney's fees, incurred in connection with, as
a result of or arising out of: (i) a breach by CCLS of any of the
representations, warranties, covenants or obligations of CCLS contained in this
Agreement; or (ii) third party claims arising from any negligent act or inaction
or willful misconduct of CCLS, its agents and employees.
12. ARBITRATION
12.1 If any dispute or controversy shall occur between the parties hereto
relating to the interpretation or implementation of any of the provisions of
this Agreement, such dispute shall be resolved by arbitration. Such arbitration
shall be conducted by a panel of three (3) arbitrators. Each party shall appoint
a single arbitrator and those two arbitrators shall appoint a third independent
arbitrator by agreement between those two arbitrators or, in default of
agreement, such arbitrator shall be appointed by a Judge of appropriate
jurisdiction in the State of Delaware upon the application of any of the said
parties and such Judge shall be entitled to act as such arbitrator, if he so
desires. Any such arbitration shall be held in the State of Delaware. The
procedure to be followed shall be agreed by the arbitrators appointed by the
parties or, in default of agreement, determined by the third arbitrator. The
arbitrators shall have the power to proceed with the arbitration and to deliver
their award, which shall be determined by a majority decision, notwithstanding
the default by any party in respect of any procedural order made by the
arbitrators. The arbitration shall proceed in accordance with the provision of
applicable arbitration laws of the State of Delaware. The majority decision
arrived at by the arbitrators shall be final and binding and no appeal shall lie
therefrom. Judgement upon the award rendered by the arbitrators may be entered
in any court having jurisdiction. Travel and lodging expenses for all parties
shall be charged to Newco.
13. RIGHT OF FIRST REFUSAL
13.1 Each of CCLS and InfoCast hereby grants to the other, upon the terms
and conditions set out herein, a right of first refusal in respect of the common
shares of Newco held by them.
<PAGE>
13.2 In the event that either CCLS or InfoCast (the "Vendor") receives
from a third party, acting as principal and dealing at arm's length with the
Vendor, a bona fide written offer (the "Offer") to purchase from the Vendor all
or some of the common shares of Newco held by the Vendor (the "Shares") and the
Offer is acceptable to the Vendor, then CCLS shall, prior to accepting the
Offer, deliver to the other party (the "Rightholder") a notice of the Offer
setting forth the terms thereof, including the name and address of the offeror
and the number, price and other terms and conditions of the Offer.
13.3 In the event that the Vendor wishes to sell all or some of the
Shares then the Vendor shall, prior to offering to sell the Shares, deliver to
the Rightholder a notice setting forth the terms in which the Vendor wishes to
sell the Shares, including the number, price and other terms and condition.
13.4 In either case, such notice shall be deemed to be an invitation to
the Rightholder to purchase from the Vendor all of the Shares that are the
subject of the offer or the number of shares which the Vendor wishes to sell as
the case may be, on the terms and conditions specified in the offer. Within
seven (7) days following the giving notice to the Rightholder, the Rightholder
may by written notice to the Vendor elect to purchase from the Vendor all but
not less than all of the Shares subject of the Offer or the number of Shares
which the Vendor wishes to sell, as the case may be, on the terms and conditions
specified in the notice to the Rightholder. Upon receipt by the Vendor of such
notice, there shall be constituted between the Vendor and the Rightholder a
binding agreement of purchase and sale in respect of such Shares at the same
price and upon the same terms and conditions as specified in the notice to the
Rightholder.
13.5 In the event that the Vendor has not received the response from the
Rightholder within seven (7) days, the Vendor shall so inform the Rightholder
and shall be at liberty to accept the Offer or sell the Shares in the number, at
the price and upon terms and conditions no more favourable to the purchaser than
those specified in the notice.
13.6 In the event that the Vendor does not sell all of the Shares subject
of the notice within a 30 day period from the date of notifying the Rightholder
of an Offer or of the Vendor's wish to sell the Shares, the Vendor shall lose
its right sell such Shares and the provisions of this Agreement shall thereupon
once again be applicable.
13.7 The purchase by the Rightholder and the sale by the Vendor of any
Shares shall be completed at the offices of the Vendor at 10:00 o'clock in the
forenoon on the 7th Business Day after the date the Vendor gives notice to the
RightHolder of an Offer or its wish to sell the Shares, at which time the
Rightholder shall pay by cash or certified cheque payable to or to the order of
the Vendor, the aggregate purchase price for the Shares then being purchased and
the Vendor shall deliver certificates representing the Shares then being
purchased either duly endorsed in blank for transfer or registered in the name
of the Rightholder.
<PAGE>
14. EVENTS OF DEFAULT
14.1 An Event of Default shall be deemed to occur with respect to a party
to this Agreement (the "Defaulting Party") if:
(a) such party makes an assignment for the benefit of creditors or a
proposal under the United States Bankruptcy Code or is declared
bankrupt or becomes insolvent; or
(b) any trustee in bankruptcy, liquidator or other office with similar
powers is appointed for such party or for all or any material part
of its property.
14.2 In addition to any rights or remedies that may be available to them,
if an Event of Default shall occur with respect to a party, then while the Event
of Default is continuing the other party who is not then the Defaulting Party
(the "Non-Defaulting Party") shall be entitled to purchase the common shares of
Newco held by the Defaulting Party.
14.3 In the event the Non-Defaulting Party wishes to purchase the common
shares of Newco held by the Defaulting Party, the Non-Defaulting Party shall
notify the Defaulting Party and Newco, in writing, of the date and time of
closing which date shall be within a period of 30 days after the giving of such
notice, on which date the purchase of the common shares of Newco shall take
place, which time and date are hereafter respectively called the "Time of
Closing" and the "Date of Closing".
14.4 The purchase price (the "Purchase Price") per share to be paid for
any common shares of Newco purchased pursuant to this section 14 shall be the
cost of acquisition of the Defaulting Party of the common shares of Newco to be
purchased as detailed in Section 1.2.
14.5 The Purchase Price in respect of the purchase and sale to be
effected pursuant to this section 14 shall be payable on the Date of Closing in
cash or by certified cheque made payable to or to the order of the Vendor.
14.6 The closing of the purchase and sale to be effected pursuant to this
section 14 shall be at the head office of Newco at the Time of Closing on the
Date of Closing.
<PAGE>
15. TERMINATION
15.1 If either CCLS or InfoCast wishes to terminate its business
association with the other party, it may do so under this section. The party
desiring the termination of the association (hereinafter referred to as the
"Initiating Party") shall serve written notice of its desire to terminate upon
the other party (hereinafter referred to as the "Receiving Party") and the
notice shall include an "Offer to Purchase" of all the shares of Newco held by
the Receiving Party.
15.2 The termination process shall result in a sale of all of the shares
held by either party to the other party which represents a 50% ownership sale of
Newco by one party to the other party. Newco shall continue to hold all the
intellectual property contemplated under this Agreement and to be entitled to
all the rights contemplated under this Agreement. The party that sells its share
of Newco to the other party shall forfeit all rights to the property and
business of Newco.
15.3 The written notice contemplated under this section shall include a
proposal for an independent third party (hereinafter referred to as the
"Valuator") that shall determine the selling price of the shares of Newco held
by each party. The proposal shall name either the auditors of Newco, a major
accounting firm or an independent certified valuating firm as a proposed
independent Valuator of the Newco business. Within seven days from the receipt
of this notice the Receiving Party shall either accept the named independent
Valuator or shall counter propose another Valuator from the aforementioned list.
15.4 Should there be a counterproposal the Initiating Party shall have
five business days to accept or reject the independent Valuator. If no consensus
can be reached as to a Valuator, then the matter shall be referred to
Arbitration and the Arbitrator shall select an independent Valuator and the
decision as to the Valuator shall be final.
15.5 The selling price of all of either parties shares or 50% of Newco
shall be calculated as follows: 100% of "Out of Pocket Costs" of the selling
party plus 50% of the "Going Concern Value" of Newco.
15.6 "Out of Pocket Costs" shall be defined as all direct costs incurred
by either party in the advancement of Newco's business from the date of this
Agreement henceforth but shall not include costs that have been reimbursed to
the party by Newco. In the case of InfoCast the list shall include but not be
limited to all development and conversion costs, marketing and sales costs and
salaries of InfoCast employees directly attributable to the support of Newco.
For greater clarity the budgeted InfoCast costs through the next six months and
including the conversion of the eleven courses is approximately $1.0 million
(USD). In the case of CCLS the list shall include but not be limited to SME
costs, marketing and sales costs and salaries of CCLS employees directly
attributable to the support of Newco. Additionally the contributed Underlying
Intellectual Property shall be calculated into the out of pocket costs and shall
have a deemed value of $65,000 (USD) per course. The billing rate for CCLS
executives for the above shall be US$150 per hour.
15.7 Going Concern Value shall be defined as the greater of $6,000,000
(USD) or an amount calculated as present value of discounted future cash flows
utilizing conservative growth assumptions, a discount rate of 10% and a five (5)
year time horizon or business life.
15.8 The Valuator shall seek independent input from both parties as to
each party's views with respect to Going Concern Value and Out of Pocket Costs.
The Valuator shall share with each party the input of the other party only after
all information has been received from both parties and each party shall have
the opportunity to comment to the Valuator on the opinion of the other party.
The Valuator shall, after consideration of all the information, fix the price
for the Going Concern Value as described in section 15.7 above. With respect to
each party's Out of Pocket Costs the Valuator may disallow or modify any costs
that the Valuator determines were not incurred either reasonably or in direct
advancement of Newco business. The Valuator shall make his determinations within
thirty (30) days of being appointed and his decisions shall be final.
<PAGE>
15.9 The Receiving Party shall have seven (7) days from receipt of the
Valuator's report to decide whether to accept the Offer to Purchase from the
Initiating Party and to sell its share of Newco. If the Receiving Party does
accept the Offer to Purchase the sale shall be finalized within forty-five (45)
business days. If the Receiving Party does not accept the Offer to Purchase then
the Receiving Party shall purchase the Initiating Party's share of Newco and the
sale shall be finalized within forty five (45) days.
16. MISCELLANEOUS
16.1 Whenever used in this Agreement, words importing the singular number
only shall include the plural, and vice versa, and words importing the masculine
gender shall include the feminine gender.
16.2 Time shall be of the essence in all matters pertaining to this
Agreement.
16.3 All dollar amounts expressed herein refer to lawful currency of the
United States of America.
16.4 Any notice, document or other communication required or permitted by
this Agreement to be given by a party hereto shall be in writing and is
sufficiently given if delivered personally, or if transmitted by any form of
telecommunication (which is tested prior to transmission, confirms to the sender
the receipt of the entire transmission by the recipient and reproduces a
complete written version of the transmission at the point of reception) to such
party addressed as follows:
(a) to Call Center Learning Solutions, Inc., at:
17263 E. Paradise Park Drive
Phoenix, Arizona 85032
email: [email protected]
[email protected]
Facsimile: (925) 516 - 2519
(b) to InfoCast Canada Corporation, at:
Suite 902
1 Richmond Street West
Toronto, Ontario
M5H 3W4
email: [email protected]
Facsimile: (416) 867-1679
Notice transmitted by a form of recorded telecommunication must be
accompanied by personal delivery. Notice transmitted by a form of recorded
telecommunication during normal business hours on a business day (9:00 a.m. to
5:00 p.m. local time at the place of receipt) shall be deemed to have been given
on the day of transmission or, in the case of notice transmitted outside of
normal business hours shall be deemed to have been given on the first business
day after the day of transmission. Notice delivered personally shall be deemed
to have been given on the day it was delivered. Any party may from time to time
notify the others in the manner provided herein of any change of address which
thereafter, until changed by like notice, shall be the address of such party for
all purposes hereof.
16.5 The parties agree to execute and deliver to each other such further
instruments and other written assurances and to do or cause to be done such
further acts or things as may be necessary or convenient to carry out and give
effect to the intent of this Agreement or as any of the parties may reasonably
request in order to carry out the transactions contemplated herein.
16.6 The insertion of headings and the division of this Agreement into
articles, sections, paragraphs, clauses or schedules are for convenience of
reference only and shall not affect or be utilized in the construction or the
interpretation hereof.
<PAGE>
16.7 This Agreement shall be construed, interpreted and the rights of the
Parties determined in accordance with the laws, other than the conflicts of laws
rules, of the State of Delaware and the laws of the United States of America
applicable therein and shall be treated in all respects as a Delaware contract.
The Parties hereby irrevocably attorn on a non-exclusive basis to the
jurisdiction of the courts of the State of Delaware.
16.8 Unless otherwise stated, a reference herein to a numbered or
lettered article, paragraph, clause or schedule refers to the article,
paragraph, clause or schedule bearing that number or letter in this Agreement. A
reference to "this Agreement", "hereof", "hereunder", "herein" or words of
similar meaning, means this Agreement including the schedules hereto, together
with any amendments thereof, and not any particular clause, subclause, section,
subsection or paragraph or other portion hereof.
16.9 Unless otherwise specifically noted, all dollar amounts expressed
herein refer to lawful currency of the United States of America.
16.10 This Agreement (including the Schedules hereto) sets forth the
entire agreement among the parties hereto pertaining to the specific subject
matter hereof and replaces and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written of the parties hereto, and
there are no warranties, representations or other agreements, whether oral or
written, express or implied, statutory or otherwise, between the parties hereto
in connection with the subject matter hereof except as specifically set forth
herein. No supplement, modification, waiver or termination of this Agreement
shall be binding unless executed in writing by the party to be bound thereby.
16.11 No delay or failure of any party in exercising any right or remedy
hereunder and no partial exercise of any such right or remedy shall be deemed to
constitute a waiver of such right or remedy or any other rights or remedies of
such party hereunder. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provisions (whether or not
similar) nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided. Any consent by a party to or any waiver by a party of any
breach of any provision of this Agreement shall not constitute a consent to or
waiver of any subsequent, further or other breach of the provisions of this
Agreement.
16.12 Each of the provisions of this Agreement (and each part of each such
provision) is severable from every other provision hereof (and every other part
thereof). In the event that any provision (or part thereof) contained in this
Agreement or the application thereof to any circumstance shall be invalid,
illegal or unenforceable, in whole or in part, in any jurisdiction and to any
extent:
(a) the validity, legality or enforceability of such
provision (or such part thereof) in any other
jurisdiction and of the remaining provisions contained
in this Agreement (or the remaining parts of such
provision, as the case may be) shall not in any way be
affected or impaired thereby;
(b) the application of such provision (or such part thereof)
to circumstances other than those as to which it is held
invalid, illegal or unenforceable shall not in any way
be affected or impaired thereby;
(c) such provision (or such part thereof) shall be severed
from this Agreement and ineffective to the extent of
such invalidity, illegality or unenforceability in such
jurisdiction and in such circumstances; and
(d) the remaining provisions of this Agreement (or the
remaining parts of such provision, as the case may be)
shall nevertheless remain in full force and effect.
16.13 This Agreement may be executed by the parties hereto in separate
counterparts or duplicates each of which when so executed and delivered shall be
an original, but all such counterparts or duplicates shall together constitute
one and the same instrument.
<PAGE>
16.14 In respect of this Agreement, no party is the partner or agent of
any of the other parties. No representations shall be made or acts taken by any
of the parties which could establish any apparent relationship or partnership or
agency and no party shall be bound in any manner whatsoever by any agreements,
warranties or representations made by any other party to any other Person with
respect to the action of any other party.
16.15 This Agreement shall be binding upon and shall enure to the benefit
of the parties hereto and their respective heirs, executors, administrators,
successors, assigns and legal representatives. This Agreement may only be
assigned upon the prior written consent of the parties hereto, which consent
shall not be unreasonably withheld.
16.16 (a) If either of the parties shall be prevented or delayed
from performing any of the obligations on its part to be
performed hereunder or under any agreements related
hereto, by reason of acts of God, strike, threat of
imminent strike, lockout or other labour disturbance,
action of the elements, lightning, storm, fire, flood,
interruption or delay in transportation, war,
insurrection, mob violence, blockade, riot, explosion,
law, rule, order or regulation of any duly constituted
court or governmental authority, unavoidable casualties,
shortage of labour, equipment or materials, plant
breakdown, dispute by a third party as to the parties'
ownership rights to or interests in the Underlying
Intellectual Property or any other disabling cause,
without regard to the foregoing enumeration, beyond the
control of the party so affected or which cannot be
overcome by the means normally employed in performance,
then and in every such event (each an "Intervening
Event"), any such failure to perform shall not be deemed
to be a breach of this Agreement but performance of any of
the aforesaid obligations shall be suspended during such
period of disability (or in the case of a dispute by a
third party as to the ownership rights to or interests in
the Underlying Intellectual Property, between the
commencement of proceedings in such a dispute and ten days
after the resolution of any such proceedings in a court or
arena of final resort from which no appeal can be taken by
any party involved therein) and the period of all such
delays resulting from an Intervening Event shall be
excluded in computing the time within which anything
required or permitted by such party to be done is to be
done hereunder, it being understood and agreed that the
time within which anything is to be done hereunder shall
be extended by the total period of all such delays and all
dates subsequent to the termination of such Intervening
Event shall be adjusted accordingly.
(b) A party relying on the provisions of this Section will
take all reasonable steps to eliminate any Intervening
Event and, if possible, will perform its obligations under
this Agreement as far as practical, but nothing herein
will require such party to settle or adjust any labour
dispute or to question or to test the validity of any law,
rule, order or regulation of any duly constituted court or
governmental authority or to complete its obligations
under this Agreement if an Intervening Event renders
completion impossible.
<PAGE>
(c) A party relying on the provisions of this Section shall
give notice to the other party forthwith upon the
occurrence of the Intervening Event and forthwith after
the end of the period of delay when such Intervening
Event has been eliminated or rectified.
(d) Nothing herein contained shall entitle any party to
invoke the provisions of this Section by reason of such
party's failure or inability to fulfil its financial
commitments or contributions under this Agreement.
16.17 All payments to be made to any party hereunder may be made by cheque
or draft mailed or delivered to such party at its address for notice purposes as
provided herein, or for the account of such party at such bank or banks in the
United States of America as such party may designate from time to time by
written notice. Such bank or banks shall be deemed the agent of the designating
party for the purposes of receiving, collecting and receipting such payment.
16.18 This Agreement may be executed by the parties hereto in separate
counterparts or duplicates each of which when so executed and delivered shall be
an original, but all such counterparts or duplicates shall together constitute
one and the same instrument.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement.
CALL CENTER LEARNING SOLUTIONS, INC.
Per: /s/ Janet M. Edwards
-------------------------
INFOCAST CORPORATION
Per: /s/ A.T. Griffis
-------------------------
DISTRIBUTION AGREEMENT
ITC LEARNING CORPORATION
- and -
INFOCAST CORPORATION
<PAGE>
TABLE OF CONTENTS
ARTICLEI - RECITALS CORRECT...................................................1
1.01 Recitals Correct......................................1
ARTICLE II - INTERPRETATION...................................................2
2.01 Defined Terms.........................................2
2.02 Other Uses............................................3
2.03 United States Funds...................................3
2.04 Headings, etc.........................................3
2.05 Gender................................................3
2.06 Governing Law.........................................3
2.07 Time of the Essence...................................3
2.08 Schedules.............................................3
ARTICLE III - CAPACITY TO CONTRACT............................................4
3.01 Covenants of ITC......................................4
3.02 Covenants of InfoCast.................................4
ARTICLE IV - APPOINTMENT AND GRANT OF DISTRIBUTION RIGHTS TO INFOCAST........5
4.01 Grant of Appointment and Attendant Rights.............5
4.02 Conversion............................................5
4.03 Relationship of Parties...............................5
4.04 Preferred Pricing.....................................6
ARTICLE V - THE PRODUCTS......................................................6
5.01 Title to Products.....................................6
5.02 New Products..........................................6
5.03 Creation, Modification and Use of Products............6
ARTICLE VI - RESPONSIBILITIES OF ITC..........................................7
6.01 Ongoing Responsibilities of ITC.......................7
6.02 Source Code Use and Protection........................7
ARTICLE VII - CO-OPERATIVE DISTRIBUTION, MARKETING AND INFORMATION SHARING....8
7.01 Co-operative Distribution.............................8
7.02 Co-operative Marketing Commitments....................8
7.03 Sharing of Client Lists and Related Information.......9
ARTICLE VIII - FINANCIAL ARRANGEMENTS.........................................9
8.01 Distribution Rights Fee...............................9
8.02 Revenue Sharing......................................10
<PAGE>
ARTICLE IX - ARBITRATION.....................................................11
9.01 Arbitration..........................................11
ARTICLE X - CONFIDENTIALITY PROVISIONS.......................................12
10.01 Confidentiality......................................12
ARTICLE XI - ASSIGNMENT......................................................12
11.01 Assignment...........................................12
ARTICLE XII - TERM, TERMINATION AND SURVIVAL.................................12
12.01 Term.................................................12
12.02 Termination..........................................12
12.03 Survival.............................................13
ARTICLE XIII - GENERAL CONTRACT PROVISIONS...................................13
13.01 Entire Agreement.....................................13
13.02 Severability.........................................13
13.03 Agreement Binding Upon Successors and Assigns........14
13.04 Waiver of Obligations................................14
13.05 Notices..............................................14
13.06 Counterparts.........................................15
SCHEDULE "1".................................................................17
PRODUCTS 17
SCHEDULE "2".................................................................18
REQUIRED SOURCE CODE COMPONENTS..................................18
SCHEDULE "3".................................................................19
PERMITTED ENCUMBRANCES...........................................19
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT made as of the 12th day of March, 1999.
B E T W E E N:
INFOCAST CORPORATION, a corporation incorporated under the laws of
the State of Nevada
(hereinafter called "InfoCast")
OF THE FIRST PART
ITC LEARNING CORPORATION, a corporation incorporated under the laws
of the State of Maryland
(hereinafter called "ITC")
OF THE SECOND PART
WHEREAS the parties hereto entered into a Memorandum of
Understanding dated December 15, 1998 (the "MOU"), together with International
Goldfields Limited ("IGL"), pursuant to which such parties agreed to the terms
and principles pursuant to which ITC is willing to grant InfoCast certain
distribution rights to products developed by and licensed to ITC;
AND WHEREAS IGL will, contemporaneously with the execution of this
agreement, assign to InfoCast all rights and obligations it has under the MOU
and InfoCast has agreed to accept such assignment;
AND WHEREAS the parties hereto wish to have this agreement prescribe
the definitive terms of their commercial relationship as generally contemplated
in the MOU.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and agreements herein contained and for other good and valuable
consideration (the receipt and sufficiency of which is hereby acknowledged) the
parties hereby agree as follows:
ARTICLE I - RECITALS CORRECT
1.1 Recitals Correct
The parties hereby acknowledge and declare that the foregoing
recitals are true and correct in substance and in fact.
<PAGE>
ARTICLE II - INTERPRETATION
2.01 Defined Terms
In this agreement, any amendment to this agreement or any schedule
to this agreement, unless the context indicates the contrary:
(1) "agreement" means this agreement between InfoCast and
ITC;
(2) "Electronic Distribution" means electronic distribution
effected by InfoCast via any electronic delivery medium,
including the InfoCast delivery engine, through any
distribution infrastructure including, without
limitation, intranets, the internet, cable networks
(excluding public television broadcasting), telephone
networks, wireless telecommunications and satellite;
(3) "Electronically Convert" or "Electronically Converted"
means the conversion by InfoCast of Products into an
electronic format capable of Electronic Distribution;
(4) "End User" means an individual learner/user of a
Product;
(5) "License Agreement" means an agreement between InfoCast
and licensees of Electronically Converted Products
disseminated by InfoCast via Electronic Distribution
which shall be consistent with industry standards and
satisfactory to both ITC and InfoCast;
(6) "Licensed Purchasers" means those End Users to whom
Products are distributed by InfoCast, ITC or their
authorized distribution agents via Electronic
Distribution;
(7) "person" means and includes an individual, body
corporate, sole proprietorship, partnership, firm, joint
venture, trust, trustee, government agency or board or
commission or instrumentality or authority and any other
form of entity or organization, whether or not
incorporated;
(8) "Preferred Pricing" means pricing at the best discounted
rate charged by a party to its most favoured customer
excluding the General Services Administration of the
United States Government;
(9) "Products" means the entire existing curriculum of
products offered by ITC which have either been created
by ITC or are under licence owned by ITC with
restrictions as listed in Schedule A1" hereto and all
future products developed or licensed by ITC from time
to time;
(10) "Source Code" mean those properties listed in Schedule
"2";
<PAGE>
(11) "Territory" means everywhere in the world; and
(12) "User Licenses" means non-transferrable and
non-exclusive licences of the Products disseminated by
InfoCast via Electronic Distribution as prescribed in
the form of License Agreement.
2.2 Other Uses
References to "this agreement", "the agreement", "hereof", "herein",
"hereto" and like references refer to this Distribution Agreement and to all
schedules hereto.
2.3 United States Funds
All dollar amounts referred to in this agreement shall be in United
States funds.
2.4 Headings, etc.
The division of this agreement into articles, sections, subsections
and schedules and the use of headings are interpretation or construction of this
agreement.
2.5 Gender
All words and personal pronouns relating thereto shall be read and
be construed as the number and gender of the party or parties referred to in
each case required and the verb shall be construed as agreeing with the prior
word and/or pronoun.
2.6 Governing Law
This agreement shall be construed by the laws of the State of
Delaware and the parties hereby irrevocably attorn to the jurisdiction of the
courts of said state.
2.7 Time of the Essence
Time shall be of the essence of this agreement and in every part
hereof and no extension or variation of this agreement shall operate as a waiver
of this provision.
2.8 Schedules
The following are the schedules attached to and incorporated in this
agreement by reference and deemed to be a part hereof:
<PAGE>
Schedule Description of Schedule
-------- -----------------------
"1" Products
"2" Required Source Code Components
"3" Permitted Encumbrances
ARTICLE III - CAPACITY TO CONTRACT
3.1 Covenants of ITC
ITC hereby covenants, represents and warrants that:
(a) it is entitled to grant to InfoCast the rights granted
herein;
(b) it is not a party to or subject to any other agreement
in conflict with this agreement;
(c) the execution and delivery by it of this agreement has
been duly authorized; and
(d) the execution and delivery by it of this agreement and
the fulfilment of the terms and conditions hereof do not
and will not result in the breach of any of the terms,
conditions, provisions of its constating documents, as
amended, by-laws or resolutions of the directors or
shareholders of it or any license, permit, contract,
agreement, instrument, order, decree or writ issued to
it or to which it is a party or by which it is bound or
constitute a default (or would with the passage of time
or the giving of notice, or both, constitute a default)
under any contract, agreement or instrument to which it
is a party or by which it is bound.
3.2 Covenants of InfoCast
InfoCast hereby represents, covenants and warrants that:
(a) it is not a party to or subject to any agreement in
conflict with this agreement;
(b) the execution and delivery by it of this agreement has
been duly authorized; and
(c) the execution and delivery by it of this agreement and
the fulfilment of the terms and conditions hereof do not
and will not result in the breach of any of the terms,
conditions, provisions of its constating documents, as
amended, by-laws or resolutions of the directors or
shareholders of it or any license, permit, contract,
agreement, instrument, order, decree or writ issued to
it or to which it is a party or by which it is bound or
constitute a default) under any contract, agreement or
instrument to which it is a party or by which it is
bound.
<PAGE>
ARTICLE 4 - APPOINTMENT AND GRANT
OF DISTRIBUTION RIGHTS TO INFOCAST
4.1 Grant of Appointment and Attendant Rights
Subject to the terms and conditions set forth herein, ITC appoints
InfoCast as a non-exclusive distributor to market and sell the Products in their
current format (CD ROM platform) ("Non-converted Products"). ITC further grants
to InfoCast and InfoCast hereby accepts a non-exclusive perpetual license to use
the Products, after they have been Electronically Converted as contemplated in
section 4.02 hereof, in the Territory for an unlimited term. ITC hereby grants
InfoCast the perpetual rights to effect Electronic Distribution of the Products,
for an unlimited term, in the Territory to Licensed Purchasers subsequent to
conversion of the Products by InfoCast as contemplated in Section 4.02 hereof.
InfoCast hereby accepts said appointment and agrees that all electronic
conversion and Electronic Distribution of Products and all sales of
Non-converted Products by it shall be effected in accordance with the terms and
conditions of this agreement.
4.2 Conversion
(a) ITC hereby grants InfoCast the unrestricted right to
Electronically Convert all the Products. InfoCast and
ITC agree that any Products Electronically Converted by
InfoCast may be electronically distributed in perpetuity
by both InfoCast and ITC and that revenues generated
therefrom shall be shared in accordance with Article
VIII hereof.
(b) ITC may have a third party other than InfoCast (the
"third party") electronically convert certain Products
provided ITC gives written notice to Infocast, within
ten (10) days of engagement of the Third Party
confirming its engagement of a Third Party and stating
which Products the Third Party will be electronically
converting. Any such engagement of a Third Party by ITC
does not relieve ITC of its obligation hereunder to
provide InfoCast all the Products for electronic
conversion during the term of this agreement.
Furthermore, ITC will use it best efforts to ensure that
any Products electronically converted by a Third Party
during the term of this agreement shall be made
available to InfoCast for Electronic Distribution and
revenues generated therefrom shall be shared between
InfoCast and ITC in the manner prescribed in Section
8.02(b).
4.3 Relationship of Parties
<PAGE>
The relationship of InfoCast to ITC under this agreement is that of
an independent contractor. This agreement shall in no way constitute InfoCast a
partner, joint venturer, agent, servant, employee or legal representative of
ITC. The parties shall have no authority to bind, obligate or incur any
liability on behalf of one another in any way whatsoever and shall be solely
responsible for its own obligations and liabilities and shall have no right to
indemnity or contribution from the other in respect thereof.
4.4 Preferred Pricing
InfoCast and ITC agree that they shall offer each other Preferred
Pricing in connection with the sale of goods and services to each other.
ARTICLE 5 - THE PRODUCTS
5.1 Title to Products
(a) ITC hereby represents and warrants that it has full
title and right to possession of all the Products, as
described and subject to the restrictions listed in
Schedule "I", free and clear of any interest, lien,
encumbrance or claim of any person and that there are no
impediments to ITC granting to InfoCast Electronic
Distribution rights in respect of the Products as
contemplated by this agreement other than as disclosed
in Schedule A3" hereof.
(b) ITC and InfoCast agree that all Products Electronically
Converted by InfoCast shall, upon completion of such
conversion, become a new product that is a derivative of
certain intellectual property contributed by each of ITC
and InfoCast (the "Derivative Product"). Notwithstanding
that InfoCast will have certain intellectual property
rights in the Derivative Product, InfoCast hereby
acknowledges and agrees that (other than the perpetual
license granted herein to use the Products) it has no
interest in or claims to any intellectual property
rights specific to the Products which InfoCast
acknowledges and agrees are the exclusive rights of ITC.
All revenue derived from the sale/licensing of
Electronically Converted Products effected via
Electronic Distribution shall be shared in accordance
with Section 8.02(b) and such revenue sharing
arrangements shall survive the term of this agreement.
5.2 New Products
Any new products developed from time to time by ITC shall be added to the list
of Products in respect of which InfoCast has Electronic Distribution and
conversion rights in accordance with this agreement.
5.3 Creation, Modification and Use of Products
The parties agree that:
<PAGE>
(a) InfoCast shall use its best efforts to maintain the
integrity of all the intellectual property of all
Products which it electronically converts for the
purpose of effecting Electronic Distribution thereof;
(b) ITC shall promptly disclose to InfoCast all particulars
of any improvement or further invention applicable to
any of the Products which is made or discovered by ITC
or any of its employees or which comes to ITC's
knowledge; and
(c) ITC shall at all time supply to InfoCast new or updated
Products which have been modified, altered or improved
in any manner whatsoever.
ARTICLE 6 - RESPONSIBILITIES OF ITC
6.1 Ongoing Responsibilities of ITC
ITC agrees that it will:
(a) provide upon execution of this agreement Products as
defined in Schedule 1 to InfoCast for the purpose of
being electronically Converted; and
(b) provide Source Code for the Products as defined in
Schedule 1, including any updated Source Code for
Products previously delivered under the parties December
15, 1998 MOU, which shall be delivered to InfoCast upon
execution of this agreement. Source Code shall consist
of, but not necessarily limited to the items defined in
Schedule 2 ; and
(c) make available and provide to InfoCast without delay all
Source Code for all Products for the purpose of being
Electronically Converted when requested by InfoCast; and
(d) refer to InfoCast all inquiries relating to Electronic
Distribution of the Products from Licensed Purchasers.
6.2 Source Code Use and Protection
(a) ITC acknowledges and agrees that all Source Code
provided to InfoCast is provided and granted to InfoCast
for the purpose of being Electronically Converted by
InfoCast and InfoCast cannot be compelled by ITC or its
successors or assigns to return any ITC Source Code in
InfoCast's possession until the earlier of:
(i) the effective date of termination of this
agreement; or
<PAGE>
(ii) the date upon which the Source Code has been
Electronically Converted by InfoCast.
(b) All Source Code provided to InfoCast by ITC in respect
of the Products shall be treated as confidential and
restricted material by InfoCast and shall be used by
InfoCast only in connection with its conversion into a
format capable of Electronic Distribution and shall be
disclosed to employees and agents of InfoCast only on a
"need to know" basis. InfoCast shall not alter the
intellectual property of the Products without the prior
written consent of ITC. InfoCast will protect all ITC
Source Code provided to it with the same level of
confidentiality as would be provided for very sensitive
material. Precautions shall include, but not be limited
to the following:
(i) document tracking system;
(b) secure data storage on InfoCast servers;
(c) secure location of servers inaccessible from
outside the building housing such servers;
(d) secure, restricted access to any room in which
InfoCast servers are stored.
All Source Code created by InfoCast and provided to ITC shall be
afforded similar protections.
ARTICLE VII - CO-OPERATIVE DISTRIBUTION, MARKETING AND
INFORMATION SHARING
7.1 Co-operative Distribution
InfoCast and ITC agree that the distribution of all Electronically
Converted Products is beneficial to both parties hereto. In recognition thereof,
InfoCast will not charge ITC any fee in respect of storage of Electronically
Converted Products of any servers owned or licensed by InfoCast.
7.2 Co-operative Marketing Commitments
InfoCast and ITC agree to use their reasonable best efforts to
support each other's marketing efforts with respect to Electronically Converted
Products.
<PAGE>
7.3 Sharing of Client Lists and Related Information
Each of ITC and InfoCast will maintain databases ("Product Related
Databases") containing details of all persons to whom the Products are licensed
or sold via Electronic Distribution and all prospective licensees or purchasers
identified by the parties. ITC and InfoCast agree to provide each other with
access to their respective Product Related Databases for the purpose of
facilitating the marketing and promotion of the Products.
Each party's respective customers shall remain their property and
primary account. However, joint marketing efforts by ITC and InfoCast may be
made to such customers from time to time and, if agreed in writing to be a joint
marketing initiative as contemplated in Section 8.02(d), all revenues generated
from such joint marketing efforts will be shared in the manner prescribed in
Section 8.02(d).
7.4 Protection of Key Relationships
ITC recognizes the critical relationship that has been developed
among InfoCast, AT&T Canada Corp. ("AT&T") and Sun Microsystems Inc. ("Sun") in
connection with the development, implementation and commercial roll out of the
AT&T Learning Partner Program (the "LPP"). ITC hereby undertakes and covenants
not to deal directly with AT&T or Sun or their affiliated or related companies
(other than in circumstances where ITC has an existing contractual relationship
as of the date of this agreement with any such entity) in connection with the
Electronic Distribution of any of the Products.
ARTICLE VIII - FINANCIAL ARRANGEMENTS
8.1 Distribution Rights Fee
(a) In consideration of the distribution rights hereby
granted to InfoCast by ITC, InfoCast hereby agrees to
pay ITC $1,000,000 in accordance with the payment terms
prescribed in paragraph (b) of this Section 8.01. In the
event InfoCast effects Electronic Distribution of any of
the Products to more than 150,000 Licensed Purchasers
(such Licensed Purchasers in excess of the first 150,000
being referred to herein as "Additional Licensees"),
InfoCast and ITC shall share revenue generated therefrom
in accordance with Section 8.02.
(b) Payment by InfoCast of the fees contemplated in
paragraph (a) of this Section 8.01 shall be made by
certified cheque, bank draft or electronic wire transfer
as follows:
(i) $250,000 on March 5, 1999 and $250,000 on
March 12, 1999 in accordance with the terms
and conditions generally contemplated in the
MOU and more specifically prescribed herein;
and
<PAGE>
(ii) $500,000 on May 31, 1999.
(c) ITC and InfoCast acknowledge and agree that, as of the
date of this agreement, InfoCast and its legal counsel
have not yet been afforded the opportunity to review the
documentation pursuant to which certain licensors to and
creditors of ITC have certain rights or security
interests in the Products. ITC agrees to provide to
InfoCast within seven (7) days from the date of this
agreement, for review by its legal counsel:
(i) all material documents relating to those
Products licensed to ITC by third parties
that may contain provisions restricting ITC
from granting InfoCast rights to use the
Products as contemplated herein; and
(ii) all material documents in connection with
security interests of any third party over
the Products specifically or over all of the
assets of ITC generally (all material
documents referred to in the preceding
paragraph (I) and this paragraph (ii) being
called the "Encumbering Documents")
In the event legal counsel, in its reasonable
professional opinion, is of the view that the provisions
of any of the Encumbering Documents materially prejudice
or could reasonably be anticipated to materially
prejudice InfoCast=s rights under the agreement
(including, without limiting the generality of the
foregoing, materially prejudicing InfoCast=s perpetual
right to use and commercially exploit the Products
subsequent to them being Electronically Converted),
InfoCast shall give ITC written notice of the
determination of its legal counsel and termination of
the agreement and ITC shall, within 10 days of receipt
of such written notice from InfoCast, return by
certified cheque or bank draft all money advanced to ITC
pursuant to Section 8.01. All Encumbering Documents
will, after successful review by InfoCast's legal
counsel, be added to Schedule "3" of the agreement.
8.2 Revenue Sharing
(a) InfoCast and ITC acknowledge and agree that the payment
of $1,000,000 to ITC in accordance with Section 8.01(a)
represents payment in full to ITC in respect of the
first 150,000 User Licenses sold by InfoCast. ITC will
not be entitled to any revenue participation in respect
of the sale by InfoCast of the first 150,000 User
Licenses.
<PAGE>
(b) All revenue generated from licensing Products
Electronically Converted by InfoCast to Additional
Licensees (such term being defined in Section 8.01(a)
hereof) shall be shared between ITC and InfoCast. The
gross revenue generated from the licensing of an
Electronically Converted Product shall be the amount
actually received by InfoCast or ITC in respect of a
particular User Licence(the "Gross Revenue"). The Gross
Revenue in respect of each Product licensing transaction
shall be allocated 75% to whichever of ITC or InfoCast
consummated the licensing transaction and 25% to the
other party. All licensing transactions shall be
monitored and tracked by both ITC and InfoCast. The
Gross Revenue allocations from licensing transactions
shall be compiled and agreed to by each of ITC and
InfoCast each month and distributed in accordance with
the agreed allocations as soon as practicable
thereafter.
(c) All revenue generated from the sale and/or licensing of
Non-converted Products by InfoCast to End Users shall be
shared between ITC and InfoCast. The gross revenue
generated from the sale and/or licensing of
Non-converted Products (the "NCP Gross Revenue") shall
be the amount actually received by InfoCast in respect
of a particular sale or licensing of Non-converted
Product. The NCP Gross Revenue determined in respect of
the sale or licensing by InfoCast of each Non-converted
Product shall be allocated 30% to InfoCast and 70% to
ITC. NCP Gross Revenue allocated to ITC shall be
distributed to ITC within thirty (30) days of receipt
thereof by InfoCast.
(d) All revenue generated from the sale and/or licensing of
Electronically Converted Products resulting from
marketing initiatives agreed in advance and in writing
by ITC and InfoCast to be joint marketing initiatives
will be allocated equally among ITC and InfoCast and
distributed immediately following receipt by any one of
ITC and InfoCast.
ARTICLE IX - ARBITRATION
9.1 Arbitration
If any dispute or controversy shall occur between the parties hereto
relating to the interpretation or implementation of any of the provisions of
this agreement, such dispute shall be resolved by arbitration. Such arbitration
shall be conducted by a single arbitrator. The arbitrator shall be appointed by
agreement between the parties or, in default of agreement, such arbitrator shall
be appointed by a Judge of appropriate jurisdiction in the State of Delaware
upon the application of any of the said parties and such Judge shall be entitled
to act as such arbitrator, if he so desires. Any such arbitration shall be held
in the State of Delaware. The procedure to be followed shall be agreed by the
parties or, in default of agreement, determined by the arbitrator. The
arbitrator shall have the power to proceed with the arbitration and to deliver
his award notwithstanding the default by any party in respect of any procedural
order made by the arbitrator. The arbitration shall proceed in accordance with
the provisions of applicable arbitration laws of the State of Delaware. It is
further agreed that such arbitration shall be a condition precedent to the
commencement of any action at law. The decision arrived at by the arbitrator
shall be final and binding and no appeal shall lie therefrom. Judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction.
<PAGE>
ARTICLE X - CONFIDENTIALITY PROVISIONS
10.1 Confidentiality
InfoCast and ITC shall treat as confidential and appropriately
safeguard both during the life of this agreement and thereafter and all
technical information pertaining to the Products including any and all Source
Code materials and all information pertaining to their respective business or
assets. To the extent warranted each party hereto may, from time to time, grant
to the other non-exclusive licenses to utilize such knowhow and other
information pertaining to the Products in furtherance of marketing, selling and
distribution of Products as agreed upon hereunder.
ARTICLE XI - ASSIGNMENT
11.1 Assignment
Except as expressly provided herein, neither party to this agreement
shall be entitled to assign its rights and obligations hereunder without the
prior written consent of the party hereto, which shall not be unreasonably
withheld. Notwithstanding the foregoing, nothing contained herein shall prevent
InfoCast from effecting an assignment of this agreement and/or a transfer of all
or any of the shares to an affiliated, related or associated company of that
party (as such terms are used in the income tax legislation of the United States
of America or Canada) without the prior written consent of ITC.
ARTICLE XII - TERM, TERMINATION AND SURVIVAL
12.01 Term
The term of this Agreement commences on the date of this agreement
first written above and terminates on the third year anniversary thereof or
until it is terminated by one of the parties in accordance with this agreement.
12.02 Termination
(a) This agreement may be terminated immediately upon the
commencement or happening of any occurrence connected
with the insolvency, bankruptcy, dissolution or
liquidation of ITC or InfoCast (the "Insolvent Party")
by written notice of termination to the Insolvent Party
by the other party.
<PAGE>
(b) In the event of a material default by a party hereto
(the "Defaulting Party") in the performance of its
obligations under this agreement, the other party
hereunder (the "Non-defaulting Party") shall give the
Defaulting Party detailed written notice of the alleged
default (the "Default Notice"). In the event the
Defaulting Party is of the view that it is not in
default of a material obligation under the agreement,
the matter shall be arbitrated in accordance with
Section 9.01 hereof and the Defaulting Party shall give
the Non-Defaulting Party written notice thereof
("Arbitration Notice") within five (5) days of receipt
of the Default Notice. If an Arbitration Notice is not
given to the Non-Defaulting Party within the five (5)
day period, the Defaulting Party shall be deemed to have
acknowledged the alleged default and shall have sixty
(60) days from the date of receipt of the Default Notice
to remedy the default. If the default is not remedied
within the sixty (60) day period, the Non-Defaulting
Party may give written notice ("Termination Notice")
that the agreement is terminated and termination shall
be effective on the date of receipt by the Defaulting
Party of the Termination Notice.
(c) This agreement may be terminated by InfoCast in the
manner and under the restricted circumstances
contemplated in Section 8.18 hereof.
(d) Without prejudice to any other rights of either party
under this agreement, if this agreement is terminated
pursuant to paragraph (a), (b) or 8 above, all amounts
owing by one party hereunder to another shall
immediately become due and payable.
12.03 Survival
Notwithstanding termination of this agreement for any reason, the
rights and obligations of the parties prescribed in Section 4.01 and Sections
8.02(b) and (d) shall survive this agreement indefinitely.
ARTICLE XIII - GENERAL CONTRACT PROVISIONS
13.1 Entire Agreement
This agreement constitutes the entire agreement between and parties
and supercedes all previous agreements and understandings between the parties in
any way relating to the subject matter hereof. It is expressly understood and
agreed that no representations, inducements, promises or agreements between the
parties, oral or otherwise, not embodied herein shall be of any force or effect.
13.2 Severability
If any covenant or other provision of this agreement is invalid,
illegal or incapable of being enforced by reason of any rules of laws or public
policy, all other conditions and provisions of this agreement shall,
nevertheless, remain in full force and effect.
<PAGE>
13.3 Agreement Binding Upon Successors and Assigns
Subject to the restrictions on assignment herein contained, this
agreement shall enure to the benefit of and be binding upon the parties and
their respective successors and permitted assigns.
13.4 Waiver of Obligations
Either party hereto may be written instrument unilaterally waive any
obligation of or restriction imposed upon the other party under this agreement.
No failure, refusal or neglect of either party hereto to exercise any right
under this agreement or to insist upon full compliance by the other party with
its obligations hereunder shall constitute a waiver of any provision of this
agreement.
13.5 Notices
All notices, requests, demands or other communications by the terms
hereof required or permitted to be given by one party to another shall be given
in writing by personal delivery or by registered mail, postage prepaid,
addressed to the other party or delivered to such other party as follows:
To InfoCast Corporation: 1 Richmond Street West
Suite 901
Toronto, Ontario
M5H 3W4
Attention: A. T. Griffis
Fax: (416) 867-8160
To ITC: 13515 Dulles Technology Drive
Herndon, Virginia
20171
Attention: Carl Stevens
Fax: (703) 713-0065
or at such other address as may be given by either of them to the other in
writing from time to time, and such notices, requests, demands and other
communications shall be deemed to have been received when delivered, or if
mailed, forty-eight (48) hours after 12:01 a.m. on the date of mailing hereof,
provided that if any such notice, request, demand or other communication shall
have been mailed and if registered mail service shall be interrupted by strikes
or other irregularities on or before the second business day after the mailing
thereof, on or before the second business day after the mailing thereof, such
notices, requests, demands and other communications shall be deemed to have been
received forty-eight (48) hours after 12:01 a.m. on the date of resumption of
registered mail service.
<PAGE>
13.6 Counterparts
This agreement may be executed in several counterparts, each of
which so executed being deemed to be an original, and such counterparts together
shall constitute but one and the same instruments.
IN WITNESS WHEREOF:
INFOCAST CORPORATION
Per: /s/ (signature is illegible)
ITC LEARNING CORPORATION
Per: /s/ Carl D. Stevens
LICENSE AGREEMENT
DATED this 29th day of June, 1999.
BETWEEN:
INFOCAST CORPORATION
1 Richmond Street West, Suite 901
Toronto, Ontario M5H 3W4
(hereinafter referred to as "InfoCast")
AND
ITC LEARNING CORPORATION
13515 Dulles Technology Drive
Herndon, Virginia 20171
(hereinafter referred to as "ITC")
(Collectively referred to as the "Parties").
NOW THEREFORE, the Parties agree to the following:
1. InfoCast Corporation ("IFCC") will become ITC Learning Corporation's
("ITC") exclusive distance learning technology partner for hosting and
delivery services utilizing the A- STAR(TM) component within ITC's
Workforce Initiative Program ("WIP"). A-STAR and WIP are defined in
Exhibit 1.
2. ITC will be the Prime Contractor ("Prime") with the WIP accounts
drawing upon its existing and developing relationships with key state
executives across the United States of America.
3. As the Prime, ITC will utilize its proprietary A-STAR system, a
derivative of ITC's AdminSTAR training management system to facilitate
skills assessments, the creation of individual development plans and
the deployment of the requisite education and training in coordination
with state and federal job training initiatives.
4. As a Subcontractor, IFCC will provide the iHUB and the InfoCast Digital
Exchange Library and its inherent IS capabilities to host the A-STAR
system as well as electronically deliver the requisite education and
training to the participants in each state's workforce initiatives.
<PAGE>
5. Each party acknowledges that a typical workforce initiative investment
transaction with a state has several components. Such components
include:
a) Initial license fee associated with A-STAR system
b) Certain services as required by each state including
but not limited to, installation, setup, data
migration, customization and delivery on a per user
basis
c) The conversion of products for electronic delivery
via the A-STAR system and Infocast iHUB system
d) As required, on-going conversion, hosting and
delivery of requisite education and training
6. The parties mutually recognize that the combination of each others core
competencies and capabilities must meet the financial litmus test of
the customer as well as being technically viable.
7. IFCC is acquiring a perpetual license to host and deliver the A-STAR
system to the State of California as well as other states in
consideration for US$2 million, payable in three installments of US$1
million no later than August 10, 1999, US$500,000 no later than
September 10, 1999 and final payment of US$500,000 by October 10, 1999.
8. Size of Opportunity - ITC has defined the State of California's
workforce initiative as a potential US$20.0 million opportunity for
ITC's A-STAR system software as well as an additional US$20.0 million
associated with software services. The opportunity has been divided
into two programs. The first is a US$2.0 million (software only) pilot
program with the balance of US$18.0 million (software only) relating to
the statewide implementation.
9. Terms for Targeted Opportunities
a) State of California - IFCC will earn 40% on the net A-STAR
system license ITC and IFCC agree to a 50-50 revenue sharing
arrangement on all electronically delivered ITC courseware
content within the State of California workforce initiative.
Additional information relating to the State of California is
provided in Exhibit 2.
b) All Other States - IFCC will earn 20% on the net A-STAR system
license ITC and IFCC agrees to a 75-25 (in favor of ITC)
revenue sharing arrangement on all electronically delivered
ITC courseware content within a state workforce initiative.
10. Net revenues from licenses, products and services is defined as
revenues received by ITC after deducting any fees associated with ITC
Business Alliance Partners or other third party vendors.
-2-
<PAGE>
11. Should the total revenues to IFCC not equal or exceed US$2.0 million as
of December 31, 1999, then ITC agrees to modify its original
distribution agreement (dated December 15, 1998 and subsequently
modified on March 17, 1999) with IFCC to reflect a 50%-50% revenue
sharing arrangement between the two parties, regardless of the selling
agent.
12. Each party agrees not to publicize or disclose to any third party
without the consent of the other party, either the terms of this
agreement or the fact of its agreement and execution. No press releases
shall be made without the mutual consent of both parties with such
consent not being unreasonably withheld.
13. In accordance with ITC's standard return and cancellation policy, IFCC
is granted a 30 day right of return or cancellation provision relating
to this license agreement. Given the eminent national holidays in both
Canada and the United States, the return and cancellation provision has
been extended to 40 days.
14. Each party will bear its own legal and other fees and expenses incident
to the transactions contemplated herein.
ACCEPTED at Herndon, Virginia, USA this ____ day June, 1999.
INFOCAST CORPORATION
/s/ A.T. Griffis
---------------------------------------
Authorized Signatory
ITC LEARNING CORPORATION
/s/ Carl D. Stevens
---------------------------------------
Authorized Signatory
-3-
Agreement dated this 24 day of March, 1999
B E T W E E N
INFOCAST CANADA CORPORATION,
A company incorporated under the laws
of the Province of Ontario
(hereinafter referred to as "InfoCast")
OF THE FIRST PART
- and -
APPLIED COURSEWARE TECHNOLOGY INC.
A company incorporated under the laws
Of the Canadian Business Corporations Act.
(hereinafter referred to as ("ACT")
OF THE SECOND PART
WHEREAS ACT is under a long term contract with InfoCast;
AND WHEREAS ACT requires a cash advance of Cdn$ 140,000 to settle an outstanding
loan with the Business Development Bank ("BDB");
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants and agreement herein contained and for other good and valuable
consideration, it is hereby agreed by the parties as follows:
1. InfoCast will advance the necessary funds by way of a promissory
note attached hereto as Schedule "A" to enable ACT to cancel its
outstanding loan with the BDB and in exchange, Act undertakes to
give priority to the contract work undertaken with InfoCast towards
meeting the deadline on the ITC/College Boreal Agreement; and
2. As a guarantee of the repayment of the loan, ACT will effect the
transfer of the present escrowed agreement in place with the BDB to
be assigned to InfoCast.
IN WITNESS WHEREOF the parties cause this agreement to be duly executed this 24
day of March, 1999
INFOCAST CANADA CORPORATION
/s/ James Hines
- ----------------------------
Per: James Hines
APPLIED COURSEWARE TECHNOLOGY
/s/ Gerry Costello
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Per: Gerry Costello
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED the Undersigned acknowledges itself indebted and promises to
pay to, or to the order of, InfoCast Canada Corporation, 1 Richmond Street West,
Suite 901, Toronto, Ontario M5H 3W4 or where it otherwise may direct, the
principal sum of Cdn$ 140,000 bearing 7% interest per annum on or before
December 31, 1999.
This promissory note shall enure to the benefit of the holder and be binding
upon the undersigned and their respective successors and assigns.
DATED the 25 day of March, 1999
APPLIED COURSEWARE TECHNOLOGY (ACT) INC.
Per: /s/ Gerry Costello
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Authorized Signatory
WITNESS
Per: /s/ Elia Crespo
-----------------------------------
Name: Elia Crespo
GENERAL SECURITY AGREEMENT
1. SECURITY INTEREST
(a) For valuable consideration, the undersigned, APPLIED COURSEWARE
TECHNOLOGY INC. (the "Debtor"), hereby grants to INFOCAST CANADA CORPORATION
(the "Secured Party"), by way of mortgage, charge, assignment and transfer, a
security interest (the "Security Interest") in the undertaking of the Debtor and
in all Goods (including all parts, accessories, attachments, special tools,
additions and accessions thereto), Chattel Paper, Documents of Title (whether
negotiable or not), Instruments, Intangibles and Securities now owned or
hereafter owned or acquired by or on behalf of the Debtor (including such as may
be returned to or repossessed by the Debtor) and in all proceeds and renewals
thereof, accretions thereto and substitutions therefor, including, without
limitation, all of the following now owned or hereafter owned, or acquired by or
on behalf of the Debtor:
Equipment
(i) all present and future equipment of the Debtor, including without
limitation, all machinery, fixtures, plant, tools, furniture,
vehicles of any kind or description, all spare parts, accessories
installed in or affixed or attached to any of the foregoing, and all
drawings, specifications, plans and manuals relating thereto
("Equipment"); Inventory
(ii) all present and future inventory of the Debtor, including without
limitation, all raw materials, materials used or consumed in the
business or profession of the Debtor, work-in-progress, finished
goods, goods used for packing, materials used in the business of the
Debtor not intended for sale, and goods acquired or held for sale or
furnished or to be furnished under contracts of rental of service
("Inventory");
Accounts
(iii) all present and future debts, demands and amounts due or accruing
due to the Debtor whether or not earned by performance, including
without limitation, its book debts, accounts receivable, and claims
under policies of insurance; and all contracts, security interests
and other rights and benefits in respect thereof ("Accounts");
Intangibles
(iv) all present and future intangible personal property of the Debtor,
including without limitation all contract rights, goodwill, patents,
trade names, trade marks, copyrights and other intellectual
property, and all other choses in action of the Debtor of every
kind, whether due at the present time or hereafter to become due or
owing ("Intangibles");
<PAGE>
Documents of Title
(v) all present and future documents of title of the Debtor, whether
negotiable or otherwise, including all warehouse receipts and bills
of lading ("Documents of Title");
Chattel Paper
(vi) all present and future agreements made between the Debtor as secured
party and others which evidence both a monetary obligation and a
security interest in or a lease of specific goods ("Chattel Paper");
Instruments
(vii) all present and future bills, notes and cheques (as such are defined
pursuant to the Bills of Exchange Act (Canada)), and all other
writings that evidence a right to the payment of money and are of a
type that in the ordinary course of business are transferred by
delivery without any necessary endorsement or assignment and all
letters of credit and advices of credit of the Debtor provided that
such letters of credit and advices of credit state that they must be
surrendered upon claiming payment thereunder ("Instruments"); Money
(viii) all present and future money of the Debtor, whether authorized or
adopted by the Parliament of Canada as part of its currency or any
foreign government as part of its currency ("Money");
Securities
(ix) all present and future securities held by the Debtor, including
shares, options, rights, warrants, joint venture interests,
interests in limited partnerships, bonds, debentures and all other
documents which constitute evidence of a share, participation or
other interest of the Debtor in property or in an enterprise or
which constitute evidence of an obligation of the issuer; and
including an uncertificated security within the meaning of Part VI
(Investment Securities) of the Business Corporations Act (Ontario)
and all substitutions therefor and dividends and income derived
therefrom ("Securities");
Documents
(x) all books, accounts, invoices, letters, papers, documents and other
records in any form evidencing or relating to the collateral subject
to the Security Interest ("Documents");
<PAGE>
Undertaking
(xi) all present and future personal property, business, and undertaking
of the Debtor not being Inventory, Equipment, Accounts, Documents of
Title, Chattel Paper, Instruments, Money, Securities or Documents
("Undertaking"); and
Proceeds
(xii) all personal property in any form derived directly or indirectly
from any dealing with collateral subject to the Security Interest or
the proceeds therefrom, including insurance proceeds and any other
payment representing indemnity or compensation for loss of or damage
thereto or the proceeds therefrom ("Proceeds").
The Inventory, Equipment, Accounts, Documents of Title, Chattel
Paper, Instruments, Money, Securities, Documents, Undertaking and
Proceeds are collectively called the "Collateral". Any reference in
this agreement to Collateral shall mean Collateral or any part
thereof, unless the context otherwise requires.
(b) The Security Interest granted hereby shall not extend or apply to
and the Collateral shall not include the last day of the term of any lease or
agreement therefor but upon the enforcement of the Security Interest the Debtor
shall stand possessed of such last day in trust to assign the same to any person
acquiring such term.
(c) The terms "Accounts", "Goods", "Chattel Paper", "Equipment",
"Documents of Title", "Instruments", "Intangibles", "Securities", "Proceeds",
"Documents", "Inventory", "Money", "Undertaking" and "accession" whenever used
herein shall be interpreted pursuant to the respective meanings when used in the
Personal Property Security Act (Ontario), as amended from time to time, which
Act, including amendments thereto and any Act substituted therefor and
amendments thereto is herein referred to as the "PPSA". Provided always that the
term "Goods" when used herein shall not include "consumer goods" of the Debtor
as that term is defined in the PPSA, and the term "Inventory" when used herein
shall include livestock and the young thereof after conception and crops that
become such within one year of execution of this General Security Agreement. Any
reference herein to the "Collateral" shall, unless the context otherwise
requires, be deemed a reference to the "Collateral or any part thereof".
2. INDEBTEDNESS SECURED
The Security Interest granted hereby secures payment and
satisfaction of any and all obligations, indebtedness and liability of the
Debtor to the Secured Party pursuant to a promissory note dated March 25, 1999
(hereinafter called the "Indebtedness").
3. REPRESENTATIONS AND WARRANTIES OF THE DEBTOR
The Debtor represents and warrants and so long as this General
Security Agreement remains in effect shall be deemed to continuously represent
and warrant that:
<PAGE>
(a) the Collateral is genuine and owned by the Debtor free of all
security interests, mortgages, liens, claims, charges or other encumbrances
(hereinafter collectively called "Encumbrances"), save for the Security Interest
and those Encumbrances shown on Schedule "A" or hereafter approved in writing,
prior to their creation or assumption, by the Secured Party;
(b) each Debt, Chattel Paper and Instrument constituting the Collateral
is enforceable in accordance with its terms against the party obligated to pay
the same (the "Account Debtor"), and the amount represented by the Debtor to the
Secured Party from time to time as owing by each Account Debtor or by all
Account Debtors will be the correct amount actually and unconditionally owing by
such Account Debtor or Account Debtors, except for normal cash discounts where
applicable, and no Account Debtor will have any defence, set off, claim or
counterclaim against the Debtor which can be asserted against the Secured Party
whether in any proceeding to enforce the Collateral or otherwise;
(c) the locations specified in Schedule "B" as to business operations
and records are accurate and complete and, with respect to Goods (including
Inventory) constituting the Collateral, the locations specified in Schedule "B"
are accurate and complete save for goods in transit to such locations and
Inventory on lease or consignment; and all fixtures or Goods about to become
fixtures and all crops and all oil, gas or other minerals to be extract and all
timber to be cut which forms part of the Collateral will be situate at one of
such locations; and
(d) without limiting the generality of the descriptions of the
Collateral as set out in Clause 1 hereof, for greater certainty the Collateral
shall include all present and future personal property of the Debtor located on
or about or in transit to or from the address of the Debtor set out on Schedule
"B" attached hereto and the locations set out in Schedule "B" attached hereto.
4. COVENANTS OF THE DEBTOR
So long as this General Security Agreement remains in effect the
Debtor covenants and agrees:
(a) to defend the Collateral against the claims and demands of all other
parties claiming the same or an interest therein; to keep the Collateral free
from all Encumbrances, except for the Security Interest and those shown on
Schedule "A" or hereafter approved in writing, prior to their creation or
assumption by the Secured Party; and not to sell, exchange, transfer, assign,
lease, or otherwise dispose of the Collateral or any interest therein without
the prior written consent of the Secured Party; provided that, until default,
the Debtor may, in the ordinary course of the Debtor's business, sell or lease
Inventory and, subject to Clause 7 hereof, use monies available to the Debtor;
(b) to notify the Secured Party promptly of:
(i) any change in the information contained herein or in the
Schedules hereto relating to the Debtor, the Debtor's
business or the Collateral;
(ii) the details of any significant acquisition of the
Collateral;
(iii) the details of any claims or litigation affecting the
Debtor or the Collateral;
<PAGE>
(iv) any loss of or damage to the Collateral;
(v) any default by any Account Debtor in payment or other
performances of his obligations with respect to the
Collateral; and
(vi) the return to or repossessions by the Debtor of the
Collateral;
(c) to keep the Collateral in good order, condition and repair and not
to use the Collateral in violation of the provisions of this General Security
Agreement or any other agreement relating to the Collateral or any policy
insuring the Collateral or any applicable statute, law, by-law, rule, regulation
or ordinance;
(d) to do, execute, acknowledge and deliver such financing statements
and further assignments, transfers, documents, acts, matters and things
(including further schedules hereto) as may be reasonably requested by the
Secured Party of or with respect to the Collateral in order to give effect to
these presents and to pay all costs of searches and filings in connection
therewith;
(e) to pay all taxes, rates, levies, assessments and other charges of
every nature which may be lawfully levied, assessed or imposed against or in
respect of the Debtor or the Collateral as and when the same become due and
payable;
(f) to insure the Collateral for such periods, in such amounts, on such
terms and against loss or damage by fire and such other risks as the Secured
Party shall reasonably direct with loss payable to the Secured Party and the
Debtor, as insureds, as their respective interests may appear, and to pay all
premiums therefor;
(g) to prevent the Collateral, save Inventory sold or leased as
permitted hereby, from being or becoming an accession to other property not
covered by this General Security Agreement;
(h) to carry on and conduct the business of the Debtor in a proper and
efficient manner and so as to protect and preserve the Collateral and to keep,
in accordance with generally accepted accounting principles, consistently
applied, proper books of account for the Debtor's business as well as accurate
and complete records concerning the Collateral, and mark any and all such
records and the Collateral at the Secured Party's request so as to indicate the
Security Interest;
(i) to deliver to the Secured Party from time to time promptly upon
request:
(i) any Documents of Title, Instruments, Securities and
Chattel Paper constituting, representing or relating to
the Collateral;
(ii) all books of account and all records, ledgers, reports,
correspondence, schedules, documents, statements, lists
and other writings relating to the Collateral for the
purpose of inspecting, auditing or copying same;
(iii) all financial statements prepared by or for the Debtor
regarding the Debtor's business;
<PAGE>
(iv) all policies and certificates of insurance relating to the
Collateral; and
(v) such information concerning the Collateral, the Debtor and
the Debtor's business and affairs as the Secured Party may
reasonably request;
(j) the Debtor agrees to promptly inform the Secured Party in writing of
the acquisition by the Debtor of any personal property which is not of the
nature or type described herein, and the Debtor agrees to execute and deliver at
its own expense from time to time amendments to this agreement, or additional
security agreements as may be reasonably required by the Secured Party in order
that the Security Interest shall attach to such personal property;
(k) the Secured Party may, before as well as after demand, notify any
person obligated to the Debtor in respect of an Account, Chattel Paper or an
Instrument to make payment to the Secured Party of all such present and future
amounts due.
5. USE AND VERIFICATION OF THE COLLATERAL
Subject to compliance with the Debtor's covenants contained herein and
Clause 7 hereof, the Debtor may, until default, possess, operate, collect, use
and enjoy and deal with the Collateral in the ordinary course of the Debtor's
business in any manner not inconsistent with the provisions hereof; provided
always that the Secured Party shall have the right at any time and from time to
time verify the existence and state of the Collateral in any manner the Secured
Party may consider appropriate and the Debtor agrees to furnish all assistance
and information and to perform all such acts the Secured Party may reasonably
request in connection therewith and for such purpose to grant to the Secured
Party or its agents access to all places where the Collateral may be located and
to all premises occupied by the Debtor.
6. SECURITIES
If the Collateral at any time includes Securities, the Debtor
authorizes the Secured Party to transfer the same or any part thereof into its
own name or that of its nominee(s) so that the Secured Party or its nominee(s)
may appear of record as the sole owner thereof; provided that, until default,
the Secured Party shall delivery promptly to the Debtor all notices or other
communications received by it or its nominee(s) as such registered owner and,
upon demand and receipt of payment of any necessary expenses thereof, shall
issue to the Debtor or its order a proxy to vote an take all action with respect
to such Securities. After default, the Debtor waives all rights to receive any
notices or communications received by the Secured Party or its nominee(s) as
such registered owner and agrees that no proxy issued the Secured Party to the
Debtor or its order as aforesaid shall thereafter be effective.
7. COLLECTION OF DEBTS
After default under this General Security Agreement, the Secured Party
may notify all or any Account Debtors of the Security Interest and may also
direct such Account Debtors to make all payments on the Collateral to the
Secured Party. The Debtor acknowledges that any payments on or other proceeds of
the Collateral received by the Debtor from Account Debtors,
<PAGE>
whether before or after notification of this Security Interest to Account
Debtors and after default under the General Security Agreement shall be received
and held by the Debtor in trust for the Secured Party and shall be turned over
to the Secured Party upon request.
8. INCOME FROM AND INTEREST ON THE COLLATERAL
(a) Until default, the Debtor reserves the right to receive any monies
constituting income from or interest on the Collateral and if the Secured Party
receives any such monies prior to default, the Secured Party shall either credit
the same to the account of the Debtor or pay the same promptly to the Debtor.
(b) After default, the Debtor will not request or receive any monies
constituting income from or interest on the Collateral and if the Debtor
receives any such monies without any request by it, the Debtor will pay the same
promptly to the Secured Party.
9. DISPOSITION OF MONIES
Subject to any applicable requirements of the PPSA, all monies
collected or received by the Secured Party pursuant to or in exercise of any
right it possesses with respect to the Collateral shall be applied on account of
the Indebtedness in such manner as the Secured Party deems best or, at the
option of the Secured Party, may be held unappropriated in a collateral account
or released to the Debtor, all without prejudice to the liability of the Debtor
or the rights of the Secured Party hereunder, and any surplus shall be accounted
for as required by law.
10. EVENTS OF DEFAULT
The happening of any of the following events or conditions shall
constitute default hereunder which is herein referred to as "default":
(a) the non payment when due, whether by acceleration or otherwise, of any
principal or interest forming part of the Indebtedness or the failure of the
Debtor to observe or perform any obligation, covenant, term, provision or
condition contained in this General Security Agreement or any other agreement
between the Debtor and the Secured Party;
(b) the bankruptcy or insolvency of the Debtor; the filing against the
Debtor of a petition in bankruptcy the making of an unauthorized assignment of
the benefit of creditors by the Debtor; the appointment of a receiver or trustee
for the Debtor or for any assets of the Debtor; or the institution by or against
the Debtor of any other type of insolvency proceeding under the Bankruptcy Act
or otherwise;
(c) the institution by or against the Debtor of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against
or winding up of affairs of the Debtor;
(d) if any Encumbrance affecting the Collateral becomes enforceable against
the Collateral;
<PAGE>
(e) if the Debtor ceases or threatens to cease to carry on business or
makes or agrees to make a bulk sale of assets without complying with applicable
law or commits or threatens to commit an act of bankruptcy;
(f) if an execution, sequestration, extent or other process of any court
becomes enforceable against the Debtor or if a distress or analogous process is
levied upon the assets of the Debtor or any part thereof; and
(g) if any certificate, statement, representation, warranty or audit report
heretofore or hereafter furnished by or on behalf of the Debtor pursuant to or
in connection with the General Security Agreement, or otherwise (including,
without limitation, the representations and warranties contained herein) or as
an inducement to the Secured Party to extend any credit to or to enter into this
or any other agreement with the Debtor, provides to have false in any material
respect at the time as of which the facts therein set forth were stated or
certified, or provides to have omitted an substantial contingent or unliquidated
liability or claim against the Debtor; or if upon the date of execution of this
General Security Agreement, there have been any material adverse change in any
of the facts disclosed by any such certificate, representation, statement,
warranty or audit report, which change shall not have been disclosed to the
Secured Party at or prior to the time of such execution.
11. REMEDIES
(a) Upon default, the Secured Party may appoint or reappoint by instrument
in writing, any person or persons, whether an officer or officers or an employee
or employees of the Secured Party or not, to be a receiver or receivers
(hereinafter called a "Receiver", which term when used herein shall include a
receiver and manager) of the Collateral (including any interest, income or
profits therefrom) and may remove any Receiver so appointed and appoint another
in his stead. Any such Receiver shall, so far as concerns responsibility for his
acts, be deemed the agent of the Debtor and not the Secured Party, and the
Secured Party shall not be in any way responsible for any misconduct,
negligence, or non-feasance on the part of any such Receiver, his servants,
agents or employees. Subject to the provisions of the instrument appointing
him., any Receiver shall have power to take possession of the Collateral, to
preserve the Collateral or its value, to carry on or concur in carrying on all
or any part of the business of the Debtor and to sell, lease or otherwise
dispose of or concur in selling, leasing or otherwise disposing of the
Collateral. To facilitate foregoing powers, any such Receiver may, to the
exclusion of all others, including the Debtor, enter upon, use and occupy all
premises owned or occupied by the Debtor wherein the Collateral may be situate,
maintain the Collateral upon such premises, borrow money on a secured or
unsecured basis and use the Collateral directly in carrying on the Debtor's
business or otherwise, as such Receiver shall, in his discretion, determine.
Except as may be otherwise directed by the Secured Party, all monies received
from time to time by such Receiver in carrying out his appointment shall be
received in trust for an paid over to the Secured Party. Every such Receiver
may, in the discretion of the Secured Party, be vested with all or any of the
rights and powers of the Secured Party.
(b) Upon default, the Secured Party may, either directly or through its
agents or nominees, exercise all the power and rights given to a Receiver by
virtue of the foregoing sub-clause (a).
<PAGE>
(c) The Secured Party may take possession of, collect, demand, sue on,
enforce, recover and receive the Collateral and give valid and binding receipts
and discharges therefor and in respect thereof and, upon default, the Secured
Party may sell, lease or otherwise dispose of the Collateral in such manner, at
such time or times and place or places, for such consideration and upon such
terms and conditions as to the Secured Party may seem reasonable.
(d) In addition to those rights granted herein and in any other agreement
now or hereafter in effect between the Debtor and the Secured Party, and in
addition to any other rights the Secured Party, may have at law or in equity,
the Secured Party shall have, both before and after default, all rights and
remedies of a secured party under the PPSA. Provided always, that the Secured
Party shall not be liable or accountable for any failure to exercise its
remedies, take possession of, collect, enforce, realize, sell, lease or
otherwise dispose of the Collateral or to institute any proceedings for such
purposes. Furthermore, the Secured Party shall have no obligation to take any
steps to preserve rights against prior parties to any Instrument or Chattel
whether the Collateral or Proceeds and whether or not in the Secured Party's
possession and shall not be liable or accountable for failure to do so.
(e) The Debtor acknowledges that the Secured Party or any Receiver
appointed by it may take possession of the Collateral wherever it may be located
and by any method permitted by law and the Debtor agrees upon request from the
Secured Party or any such Receiver to assemble and deliver possession of the
Collateral at such place or places as directed.
(f) The Debtor agrees to pay all costs, charges and expenses reasonably
incurred by the Secured Party or any Receiver appointed by it, whether directly
or for services rendered (including reasonable solicitors and auditors costs and
other legal expenses and Receiver remuneration), in operating the Debtor's
accounts, in enforcing this General Security Agreement, taking custody of,
preserving, repairing, processing, preparing for disposition and disposing of
the Collateral and in enforcing or collecting the Indebtedness and all such
costs, charges and expenses together with any monies owing as a result of any
borrowing by the Secured Party or any Receiver appointed by it, as permitted
hereby, shall be a first charge on the proceeds of realization, collection or
disposition of the Collateral and shall be secured hereby.
(g) Unless the Collateral in question is perishable or unless the Secured
Party believes on reasonable grounds that the Collateral in question will
decline speedily in value, the Secured Party will give the Debtor such notice of
the date, time and place of any public sale or of the date after which any
private disposition of the Collateral is to be made, as may be required by the
PPSA.
12. MISCELLANEOUS
(a) The Debtor hereby authorizes the Secured Party to file such financing
statements and other documents and do such acts, matters and things (including
completing and adding schedules hereto identifying the Collateral or any
permitted Encumbrances affecting the Collateral or identifying the locations at
which the Debtor's business is carried on and the Collateral and records
relating thereto are situate) as the Secured Party may deem appropriate to
perfect and continue the Security Interest, to protect and preserve the
Collateral and to realize upon the Security Interest and the Debtor hereby
irrevocably constitutes and appoints the Secured Party the true and lawful
attorney of the Debtor, with full power of substitution, to do
<PAGE>
any of the foregoing in the name of the debtor whenever and wherever it may be
deemed necessary or expedient.
(b) Without limiting any other right of the Secured Party, whenever the
Indebtedness is immediately due and payable, the Secured Party may, in its sole
discretion, set off against the Indebtedness any and all monies then owed to the
Debtor by the Secured Party in any capacity and the Secured Party shall be
deemed to have exercised such right of set off immediately at the time of making
its decision to do so even though any charge therefor is made or entered on the
Secured Party's records subsequent thereto.
(c) Upon the Debtor's failure to perform any of its duties hereunder, the
Secured Party may, but shall not be obligated to, perform any or all of such
duties, and the Debtor shall pay to the Secured Party, forthwith upon written
demand therefor, an amount equal to the expense incurred by the Secured Party in
so doing plus interest thereon from the date such expense is incurred until it
is paid at the rate of 8% per annum.
(d) The Secured Party may grant extensions of time and other indulgences,
take and give up security, accept compositions, compound, compromise, settle,
grant releases and discharges and otherwise deal with the Debtor, debtors of the
Debtor, sureties and others and with the Collateral and other security as the
Secured Party may see fit without prejudice to the liability of the Debtor or
the Secured Party's right to hold and realize the Security Interest.
Furthermore, the Secured party may demand, collect and sue on the Collateral in
either the Debtor's or the Secured Party's name, at the Secured Party's option,
and may endorse the Debtor's name on any and all cheques, commercial paper, and
any other Instruments pertaining to or constituting the Collateral.
(e) No delay or omission by the Secured Party in exercising any right or
remedy hereunder or with respect to any of the Indebtedness shall operate as a
waiver thereof or of any other right or remedy, and no single or partial
exercise thereof shall preclude any other or further exercise thereof or the
exercise of any other right or remedy. Furthermore, the Secured Party, may
remedy any default by the Debtor hereunder or with respect to any Indebtedness
in any reasonable manner without waiving the default remedied and without
waiving any other prior or subsequent default by the Debtor. All rights and
remedies of the Secured party granted or recognized herein are cumulative and
may be exercised at any time and from time to time independently or in
combination.
(f) The Debtor waives protest of any Instrument constituting the Collateral
at any time held by the Secured Party on which the Debtor is in way liable and,
subject to Clause 11(g) hereof, notice of any other action taken by the Secured
Party.
(g) This General Security Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns. In
any action brought by an assignee of this General Security Agreement and the
Security Interest or any part thereof to enforce any rights hereunder, the
Debtor shall not assert against the assignee any claim or defence which the
Debtor now has or hereafter may have against the Secured Party.
(h) Save for any schedules which may be added hereto pursuant to the
provisions hereof, no modification, variation or amendment of any provision of
this General Security
<PAGE>
Agreement shall be made except by a written agreement, executed by the parties
hereto and no waiver of any provision hereof shall be effective unless in
writing.
(i) This General Security Agreement and the transactions evidenced hereby
shall be governed by and construed in accordance with the laws of the Province
of Ontario as the same may from time to time be in effect, including, where
applicable, the PPSA
(j) Subject to the requirements of Clauses 11(g) and 12(k) hereof, whenever
either party hereto is required or entitled to notify or direct the other or to
make a demand or request upon the other, such notice, direction, demand or
request shall be in writing and shall be sufficiently given only if delivered to
the party for whom it is intended at the principal address of such party herein
set forth or as changed pursuant hereto or if sent by prepaid registered mail
addressed to the party for whom it is intended at the principal address of such
party herein set forth or as changed pursuant hereto. Either party may notify
the other pursuant hereto of any change in such party's principal address to be
used for the purposes hereof:
Principal address of the Secured Party:
InfoCast Canada Corporation
Suite 901, 1 Richmond Street West
Toronto, Ontario M5H 3W4
Principal address of the Debtor:
Applied Courseware Technology Inc.
440 Wilsey Road, Suite 209
Fredericton, N.B. E3B 7G5
(k) This General Security Agreement and the security afforded hereby is in
addition to and not in substitution for any other security now or hereafter held
by he Secured Party, and is, and is intended to be a continuing General Security
Agreement and shall remain in full force and effect until the Secured Party
shall actually receive written notice of its discontinuance; and,
notwithstanding such notice, shall remain in full force and effect thereafter
until all the Indebtedness contracted for or created before the receipt of such
notice by the Secured Party, and any extension or renewal thereof (whether made
before or after receipt of such notice) together with interest accruing thereon
after such notice, shall be paid in full.
(l) The headings used in this General Security Agreement are for
convenience only and are not to be considered a part of this General Security
Agreement and do not in any way limit or amplify the terms and provisions of
this General Security Agreement.
<PAGE>
(m) When the context so requires, the singular number shall be read as if
the plural were expressed and the provisions hereof shall be read with all
grammatical changes necessary dependent upon the person referred to being a
male, female, firm or corporation.
(n) In the event any provisions of this General Security Agreement , as
amended from time to time, shall be deemed invalid or void, in whole or in part,
by any Court of competent jurisdiction, the remaining terms and provisions of
this General Security Agreement shall remain in full force and effect.
(o) Nothing herein contained shall in any way obligate the Secured Party to
grant, continue, renew, extend time for payment or accept anything which
constitutes or would constitute the Indebtedness.
(p) The Security Interest created hereby is intended to attach when this
General Security Agreement is signed by the Debtor and delivered to the Secured
Party.
13. EXCEPTION RE: LEASEHOLD INTERESTS
AND CONTRACTUAL RIGHTS
The day of the term of any lease, sublease or agreement therefor is
specifically excepted from the Security Interest, but the Debtor agrees to stand
possessed of such last day in trust for any person acquiring such interest of
the Debtor. To the extent that the creation of the Security Interest would
constitute a breach or cause the acceleration of any agreement right, licence or
permit to which the Debtor is a party, the Security Interest shall not attach
thereto but the Debtor shall hold its interest therein in trust for the Secured
Party, and shall assign such agreement, right, license or permit to the Secured
party forthwith upon obtaining the consent of the other party thereto.
<PAGE>
14. COPY OF AGREEMENT
The Debtor hereby acknowledges receipt of a copy of this General
Security Agreement.
IN WITNESS WHEREOF the Debtor has executed this General Security
Agreement this 25th day of March, 1999.
APPLIED COURSEWARE TECHNOLGY INC.
Per: /s/ signature is illegible
Shaw Fiberlink Memorandum of Understanding
between:
HOME BASE WORK
SOLUTIONS LTD.
And
SHAW FIBERLINK LTD.
This memorandum of Understanding (MOU) is entered into this 28th day of August,
1998, between Home Base Work Solutions Ltd., having offices at 131 Signature
Court S.W., Calgary, Alberta, T3H 2V8 ("HBWS"), and Shaw FiberLink Ltd. having
offices at 630 3rd Avenue S.W., Calgary, Alberta, T2P 4L4 ("SFL") and sets out
the parties' intent and interim agreement as to the supply of services and
development of a mutually beneficial business relationship. This document in and
of itself does not constitute a legally binding agreement.
The parties agree as follows:
1) Confidentiality
This MOU, the subject matter hereof, and any confidential and
proprietary information disclosed in connection with this MOU are
each hereby designated as "Confidential Information" and shall be
protected in accordance with the terms set out in "Agreement Not to
Disclose Confidential Information" signed by both parties and dated
August 28, 1998 (the "NDA"). All discussions currently underway are
covered by such confidentiality.
2) Strategic Planning
HBWS will be responsible for all aspects of their business plans for
the provision of the value added remote LAN service to their
customers (the "Service").
SFL will assist in market development, cooperative strategies and
facilities planning.
3) Network Management
HBWS and Shaw will discuss network management to support their
respective network activities including maintenance and provisioning
of circuits. Each company will maintain its own network via its 24 x
7 network management centers.
<PAGE>
HBWS agrees the first contact point for all customer service
problems relating to the service will be HBWS and that SFL will only
accept service escalations from HBWS, not directly from their end
customers.
4) Customer Service/Order Desk
HBWS and SFL will discuss the customer service/order desk function
and an appropriate order process model including the development and
maintenance of an "On-Net" and "Near-Net" database and an
appropriate RFQ process.
Until this process is defined the SFL Customer Care Center in
Calgary will process all orders.
5) Service Provisioning
SFL will be responsible for the provisioning of the cable modem
service and the transparent LAN service. HBWS will be responsible
for entering into the Service agreement directly with the customer
and for providing their customer with the overall solution, which
may including security software and hardware.
SFL will contact the residential customer directly to facilitate the
installation of the cable modem. All other end customer contact will
be through HBWS.
6) Network Backbone and Standards
HBWS and SFL will discuss and agree to conform to common network
architecture standards. This covers all network components including
fiber and fiber deployment, electronics and test equipment
procedures.
7) The Services
SFL shall provide to HBWS the following services;
Cable Modem Service
This shall constitute a service whereby Shaw will install a Hybrid
Fiber/Coax (HFC) FX modem at HBWS's residential customer premise and
transport the IP data from the residential customer premise to the
Shaw network core. The residential customer premise interface will
be Ethernet 10 base T. Shaw is not responsible for application or
security software. It is understood that the cable modem service is
on a shared transport medium and performance and throughout levels
are not guaranteed.
<PAGE>
The cable modem is provided to HBWS as part of the fees for the
cable modem service and shall remain the property of SFL. HBWS
assumes the entire risk of loss, theft or damage to the cable modem
due to any cause whatsoever and until the modem is returned to SFL.
Upon termination of any cable modem service HBWS shall be
responsible to disconnect the modem at its customer=s premises and
return the modem to SFL.
Transparent LAN service
This shall constitute a service whereby Shaw provides an Ethernet
circuit from it=s network core to the Customer corporate location.
This circuit will be used to transport the IP data collected from
the cable modem service and deliver it to the customer=s corporate
network/server. Shaw is responsible for the core routing of the data
and delivery on the transparent LAN circuit. Shaw is not responsible
for any application software, security software or servers. The
corporate customer interface will be Ethernet 10 base T.
7) Pricing and Commitment Levels
This agreement is for a period of 12 months from date of signing.
HBWS agrees to acquire 2,000 cable modems from SFL during this
period.
Based on this commitment SFL agrees to provide cable modem service
at a cost of $100.00 per residential customer premise. The modems
must be acquired on a monthly basis with a minimum of 150 new orders
being processed each month. The installation cost per modem will be
$150.00 per residential customer premise.
The pricing for the Transparent LAN services shall be based on SFL=s
current price structure. SFL will sell this service to HBWS based on
a 3% discount.
HBWS agrees to sell the customer solution, including the cable modem
service at a price no lower than SFL's "Remote LAN" service
offering, currently priced at $150.00 per month per residential
customer premise. SFL agrees that it will review this pricing on a
regular basis with HBWS and adjust it if the market conditions
demand a change.
This constitutes the understanding reached between Home Base Work Solutions Ltd.
And Shaw FiberLink Ltd. We hereby agree to a business relationship based on the
above, such relationship to be legally formalized in due course.
/s/ Robert C. Watson /s/ Ken MacLean
- --------------------------------- ------------------------------
Robert C. Watson, President Ken MacLean, President
Shaw FiberLink Ltd. Home Base Work Solutions Ltd.
_________________________________ August 28/98
Date Date
LICENSING AND DISTRIBUTION
AGREEMENT
Between
FACET DECISION SYSTEMS INC.
(being the Licensor of specified software)
AND
HOMEBASE WORK SOLUTIONS LTD.
(as Licensee)
March 7, 1999
<PAGE>
LICENSING AND DISTRIBUTION AGREEMENT
BETWEEN
FACET DECISION SYSTEMS INC., a body corporate having an office
and carrying on business in the Province of British Columbia
(hereinafter referred lo as "FDSI")
OF THE FIRST PART
and
HOMEBASE WORK SOLUTIONS LTD., a body corporate
organized under the laws of the Province of Alberta (hereinafter
referred to as Homebase. or the "Licensee")
OF THE SECOND PART
WHEREAS each Of Facet Decision Systems Inc. (the "Licensor") are
engaged in the business of developing and licensing certain software systems;
AND WHEREAS the Licensee Is desirous of obtaining the exclusive
bight to utilize, market and sell the software systems of the Licensor In the
"telework" industry market sector;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of
the premises, mutual covenants, agreements and warranties hereinafter set forth,
the parties hereto agree as follows:
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<PAGE>
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this agreement, Including the recitals, this clause and the
Licensees attached hereto, unless the context otherwise requires, or unless
otherwise defined herein, the following words and phrases shall have the
following meanings:
(1) "Affiliate" has the meaning ascribed thereto in the Securities Act
(Alberta);
(2) "Applicable Law"' means any applicable Canadian federal, provincial, or
local statute, regulation, by-law, and any regulation or order issued
in respect thereof by a Governmental Authority, and the terms and
conditions of any permit, licence, authorization, or approval issued by
a Governmental Authority;
(3) "Associate" has the meaning ascribed thereto in the Securities Act
(Alberta);
(4) "Claims" means any claim, demand, order, action, cause of action,
damage, loss, cost, liability or expense, including reasonable legal
fees and all reasonable costs incurred in investigating or pursuing any
of the foregoing or any proceeding relating to any of the foregoing;
(5) "Closing. means the date upon which the transactions contemplated
herein, being the granting of exclusive licenses to Homebase and the
issuance of Homebase Common Shares to the Licensor
(6) "Closing Date" means 9:00 o'clock a.m., Calgary time, on or such other
date or time as may be mutually agreed to by the parties hereto;
(7) "Confidential Information" means:
(1) Software;
(2) all software materials and component elements directly or
indirectly obtained from the Licensor or either of them
including, without limitation: all definitions of input and
output format, problem structure, statements of objectives and
goals; statements of solution structure and logic; program
algorithms; problem flow charts, coding notes and Instructions
source programs, assembly and compilation notes testing and
debugging notes; object programs; notes relating to program
execution and final production programs; documentation,
technical manuals, operational manuals. user documentation
manuals documents relating to program operation and
maintenance:
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<PAGE>
(3) all tangible personal property on which any part of the
foregoing is imprinted or recorded (whether designated
Hardware or "software" or otherwise); and
(4) the proprietary rights attached to i, ii and iii
(8) "CPU" means central processing unit;
(9) "Development Contract" means the contract to be entered into between
FDSI as developer and the Licensee as client for the development of an
application for the FDSI Software
(10) "Dollar" and "$" mean a dollar of lawful money of Canada:
(11) "Effective Date" means 9:00 o'clock a.m., Calgary time, on September
30, 1998;
(12) "Encumbrances" means all encumbrances, mortgages, pledges, liens,
claims, charges, security Interests, restrictive covenants, easements
or other similar Interests of any nature, whether or not consensual:
(13) "Enhancements" means improvements or additions to the Software by the
respective Licensor which add to the Functionality of the Software, as
determined by the respective Licensor;
(14) "FDSI Software. means the data processing programs usually called
"Cause & Effect" and identified In Schedule "A" consisting of a series
of instructions or statements in machine readable form and any related
software materials including, without limitation, flow charts, logic
diagrams and listings provided for use in connection with the data
processing program;
(1) any additional machine readable or printed material not
included in the foregoing from time to time provided by FDSI
to the Licensee: and
(2) all tangible personal property on which any of the foregoing
is imprinted or recorded, whether designated "hardware" or
"software" or otherwise;
(15) "Functionality" means the computer applications which the Software or
any part or It is capable of performing;
(16) "Governmental Authorities" means all applicable Canadian federal,
provincial and municipal agencies, commissions, boards, bureaus,
tribunals, ministries and departments;
(17) "Homebase Common Shares" means the common shares in the share capital
of Homebase, as presently constituted, and includes all shares for
which the common shares of Homebase are changed, reclassified;
subdivided, consolidated or converted into a different number or
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<PAGE>
class of shares or otherwise. as a result of a share reorganization,
merger, amalgamation, arrangement or other similar transaction;
(18) "Licence" means the rights and licenses granted to the Licensee
pursuant to Section 2.1;
(19) "Licensee" means Homebase Work Solutions Ltd., a body corporate
organized under the laws of the Province of Alberta,
(20) "Licensor" means FDSI;
(21) "Modifications, Refinements and Updates" means alterations or
refinements made by the Licensor to the Software which do not amount to
Enhancements;
(15) "Persons" means any person, corporation, partnership or other legal
entity;
(16) "Place of Closing" means the office of counsel to the Licensee. or as
otherwise agreed to by the parties hereto;
(17) "Purchase Price" has the meaning ascribed thereto in Section 2.1:
(18) "Right of First Refusal" means a right of first refusal. pre-emptive
right of purchase or similar right (including any requirement to obtain
consent of a third party in order for each of the Licensors to grant
the [exclusive licenses contemplated herein, other than a consent which
by the terms of the applicable agreement cannot be unreasonably
withheld) whereby any party has the right to acquire or purchase She
exclusive rights granted herein as a consequence of the Licensor having
agreed to grant the exclusive rights in accordance with this Agreement
(19) "Royalty Burdens" means all gross and net overriding royalties, net
profits interests, carried interests and all similar burdens and
encumbrances:
(20) "Security interest" means an assignment (including, without limitation,
any assignment of any right to receive income), mortgage, charge.
floating charge, hypothec, pledge, lien, encumbrance, conditional sales
agreement or security interest of any nature or kind;
(21) "Software" means the FDSI Software;
(22) "Software Maintenance Services" or "Maintenance Services" means:
(1) the provision of Modifications, Refinements and Updates to the
Software, and
(2) the remedial maintenance of the Software including all
adjustments, repairs and corrections of all errors in the
Software,
-5-
<PAGE>
(23) "Standard Release" means a release of Modifications, Refinement and
Updates from time to time;
(24) "Successors" means successors and includes any successor continuing by
reason of amalgamation or other reorganization and any Person to whom
assets are transferred by reason of a liquidation dissolution,
winding-up or otherwise;
(25) "Tax Act" means the Income Tax Act (Canada), as amended from time to
time:
(26) "Tax Returns" includes all returns, reports, declarations, elections,
filings, Information returns and statements filed in respect of Taxes;
(27) "Taxes" includes all taxes. duties, fees, premiums, royalties,
assessments, imposts, levies and other charges of any kind whatsoever
imposed by any taxing or other governmental authority or agency within
or outside of Canada, together with all interest, penalties or
additional amounts imposed in respect thereof; and
(28) "Telework Market is means the teleworking industry market sector.
1.2 Interpretation
In tints Agreement:
(1) the inclusion of headings and a table of contents are for convenience
of reference only and are not to be considered or taken into account in
construing the provisions of this Agreement or to in any way qualify,
modify or explain the effect of any such provisions
(2) references to an Article, Section or Schedules are references to an
Article, Section or Schedule, as the case may be, in this Agreement
(3) if any term or condition, whether express or implied, of a schedule
hereto conflicts with or is at variance with any term or condition of
the main body of this agreement, the main body of this agreement shall
prevail;
(4) "including" or "including without limitation" when used before a
specific item or list of items in relation to a previous general
description means "including, without limiting the generality of the
foregoing.;
(5) where in this agreement a representation or warranty is made on the
basis of knowledge or awareness, such knowledge or awareness shall be
conclusively deemed to consist of actual knowledge or awareness, as the
case may be, of the officers, directors or employees of the party
making the representations or warranty and does not Include the
knowledge and awareness of any other person or pe rsons;
-6-
<PAGE>
(6) words importing the singular shall include the plural and vice versa
and words importing a particular gender shall include all genders;
(7) references to a statute includes the regulations and any other
subordinate legislation made pursuant to that statute and includes any
amendment, consolidation, reenactment, substitution or replacement of
all or any part of such statute, regulation or other subordinate
legislation
(8) all monetary amounts are expressed in Canadian currency;
(9) where a period of time is specified, dated or calculated from a date or
event, the period shall be calculated excluding such date or the date
on which such event occurs, as the case may be; and
(10) where a term is defined in this Agreement, a derivative of that term
shall have a corresponding meaning unless the context otherwise
requires.
1.3 Business Days
If, pursuant to this Agreement, a notice must be given or an
action taken within a specified period or on or before a specified date and such
period ends on, or such date falls on a day that is a Saturday, Sunday or public
holiday, such notice may be given or such action may be taken on the next
succeeding day which is not a Saturday, Sunday or public holiday.
1.4 Schedules
The following Schedules are attached hereto and form a part of
this Agreement:
Schedule "A" -FDSI Software
Schedule "B" -FDSI License Terms and Conditions
Wherever any term or condition, express or implied, of such Schedules conflicts
or Is at variance with any term or condition in the body of this Agreement, such
term or condition in the body of this Agreement shall prevail.
ARTICLE 2
GRANT OF SOFTWARE LICENSE
2.1 Grant of Software License
(i) In consideration of the issue of 6,9t0 Homebase Common Shares to be
delivered to FDSI on the Closing Date subject only to the agreement by
the Licensee to abide by the terms and conditions of this License
Agreement FDSI grants to the Licensee an exclusive right in the
Telework Market (the 'FDSI License") to use and resell the FDSI
software program more
-7-
<PAGE>
particularly identified in Schedule "A" (hereinafter referred to as the
"Software') in connection with and incorporated in Software to be
jointly developed by FDSI and Homebase for a period of two (2) years
from the Closing Date and subject to the terms and conditions set out
in Schedule "B" it being understood and agreed that FDSI will be
entitled to receive license fees as per Schedule "B".
The Licensor and Licensee shall deliver such other documents
as may be necessary to complete the transactions provided for in this Agreement.
2.2 Development Agreement
FDSI and Homebase shall enter into the Development Agreement
before or aner the Closing. Under the forms of the Development Agreement, FDSI
will develop an application of the FDSI Software for the specifications to be
defined by Homebase. All rights, title and interest in the developed application
will, subject to the rights of FDSI in the FDSI Software which will form part of
the developed application and will be governed by this License Agreement, belong
to Homebase
2.3 Modifications, Refinements and Updates
As applicable, each of the respective Licensors shall without
additional charge to the Licensee, furnish the Licensee with Standard Releases
of the Software Licensee agrees to accept all Standard Releases and is solely
liable for any loss or damages incurred and assumes all risks resulting from
failure to install and implement the Standard Releases furnished by Licensors.
Upon Licensee's request, the Licensor shall install such
Standard Releases at the Licensee's site and will invoice Licensee at the
Licensor's standard rates for labour and expenses for such installation
services. If, Licensee does not request such Licensor's assistance in
installation, Licensee shall be solely responsible for the installation and
implementation of the Standard Releases.
The Licenser shall not be responsible to Licensee for loss of
use of the Software or for any other liabilities arising frond any alteration,
addition, adjustment or repair that is made by other than authorized
representatives of the Licensor.
2.4 Enhancements and New Application Modules
Enhancements and new computer application modules may be
developed or otherwise acquired by the Licensor from time to time. The
development and acquisition of Enhancements and new application modules,
includingthe nature and timing of same, shall be at the sole discretion of the
Licensor. Enhancements and new application modules may, In Licensor's
discretion, be priced separately and offered to the Licensee at each of the
respective Licensor's then-current price. This Article 2.4 shall in and of
itself, create no obligation on behalf of the Licensor or the Licensee to
develop, acquire or license, as the case may be, Enhancements or new application
modules.
-8-
<PAGE>
ARTICLE 3
REPRESENTATlONS AND WARRANTIES
3.1 Licensor's Representations, Warranties and Covenants Generally
The Licensor represents, warrants and covenants to and with
the Licensee that:
(1) Standing: such Licensor is a corporation duly organized and validly
subsisting under the laws of its jurisdiction of incorporation;
(2) Capacity: such Licensor has the requisite power and authority to
conduct its business as now conducted, to license the Software in the
manner provided in this Agreement
(3) Consents and Approv Is: no authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority or
regulatory body exercising jurisdiction over the Software is required
for the due execution, delivery and performance by such Licensor of
this Agreement except those which has been obtained prior to the date
hereof;
(4) No Conflicts: none of the execution, delivery or performance of this
Agreement by such Licensor does or, with the giving of notice or the
lapse of time or both' will:
(1) violate or conflict with any of the provisions of the
constating documents or other governing documents of such
Licensor;
(2) violate or conflict with any provision of any law or
administrative regulation or any Judicial or administrative
order, award, judgment or decree applicable to such Licensor;
(3) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the
performance required by any agreement, covenant, undertaking
or commitment to which such Licensor or any partner comprising
such Licensor is a party or by which such Licensor or any
Affiliate is bound or to which any properties or assets of
such Licensor are subject; and
(4) to the best of its knowledge, the use of such Licensor's
Software, in compliance with the terms and conditions of this
Agreement, will not infringe any patent or copyright of any
third parry; and any updates and modifications to such
Licensor's Software will be developed in a careful, diligent
and workmanlike manner;
(5) Execution and Enforce ability of Documents; this Agreement has been,
and all documents executed and delivered by such Licensor pursuant
hereto shall be' duty executed and delivered by it, and tints Agreement
does, and such documents will, constitute legal, valid and binding
obligations of such Licensor enforceable against such Licensor in
accordance
-9-
<PAGE>
with their respective terms, subject to bankruptcy, insolvency,
preference, reorganization, moratorium and other similar laws affecting
creditors rights generally and the discretionary nature of equitable
remedies and defences
(6) Finder's Fee: such Licensor has not incurred any obligation or
liability. contingent or otherwise, for brokers' or finders' fees in
respect of the transaction contemplated herein for which the Licensee
shall have any obligation or liability;
(7) Canadian Resident such Licensor is not a non-resident of Canada for the
purposes of the Income Tax Act (Canada)
(8) Private Company: such Licensor is a Private company" pursuant to the
Securities Act (Alberta) and is not a "reporting issuer" pursuant to
such Act and has no filing or reporting obligations pursuant to any
securities legislation of any jurisdiction;
(9) Lawsuits and Claims: there are no Material claims. violations, alleged
violations, proceedings, actions, lawsuits, administrative proceedings
or governmental investigations in existence, or to the best of such
Licensor's knowledge, contemplated or threatened against or with
respect to such Licensor such Licensor's Software or such Licensor
Interests in the Software which might result In impairment or loss of
such Licensor's Software or such Licencor's interests therein or which
might otherwise materially adversely affect such Licrnsor Software.
Such Licensor is not aware of any existing basis upon which any of such
claims. violations, alleged violations, proceedings, actions or
lawsuits might be commenced by any Person which or which might
materially adversely affect such Licensor's Software;
(10) Rights of First Refusal: the exclusive license rights granted by such
Licensor are not subject to any Rights of First Refusal created, by or
through under such Licensor or of which such Licensor is aware, that
become operative by virtue of this Agreement or the transactions
effected by this Agreement; is
(11) except as stated herein, the Software and all accompanying written
materials are provided "as is without warranty or condition of any
kind, express or implied, including but not limited to implied
warranties or conditions or merchantability or fitness for a particular
purpose and those arising by statute or otherwise in law or from a
usage in the trade. The entire risk as to results and performance of
the Software is with the Licensee. Such Licensor does not warrant,
guarantee or represent that the functions contained In the Software
will meet the Licensee's requirements or that the installation or
operation of the Software will be uninterrupted or error free.
The Licensee acknowlcdges that it has only relied upon the
representations, warranties and covenants contained in Article 3 and not on any
representations, warranties or covenants outside this Agreement and the Licensor
shall have no liability, whether In contract or in tort, In respect of any
statements, Information representations. warranties or covenants made by them
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<PAGE>
or their agents or representatives, except liability for the representations,
warranties and covenants contained in Article 3, which liability shall be
subject to the limitations contained in this Agreement.
3.2 Licensee's Representations, Warranties and Covenants
The Licensee hereby represents, warrants and covenants to and
with each Licensor that:
(1) Standing: it is a corporation validly existing and in good standing
under the laws of its jurisdiction of incorporation and is. registered
to do business under the laws of the Province of Alberta;
(2) Capacity the Licensee has good and sufficient power, authority and
right to enter into this Agreement and to complete the transactions to
be completed by the Licensee contemplated hereby and has taken all
requisite corporate action to authorize the due creation and issuance
of the Homebase Common Shares to be issued to the Licensor hereunder,
and, upon completion of Closing pursuant to this Agreement, the
Homebase Common Shares shall be validly issued and outstanding as fully
paid and non-assessable shares in the capital of the Licensee subject
only to the escrow terms set out in Schedule "C" in compliance with all
applicable securities laws and regulations;
(3) Capital the authorized capital of the Licensee consists of an
unlimited number of Homebase Common Shares and an unlimited number of
First Preferred Shares, Series A, of which,
prior to the issue of the Homebase Common Shares to the Licensor
hereunder, not more than 900,000 Homebase Common Shares and 50,000
Homebase First Preferred Shares, Series A are issued and outstanding,
all of which shares are fully paid and non-assessable;
(4) No Conflicts: none of he execution delivery or performance of this
Agreement by the Licensee does or, with the giving of notice or the
lapse of time or both, will:
(1) violate a conflict with any of the provisions of the charter,
articles, bylaws or other governing documents of the Licensee;
(2) violate Of conflict with any of the provisions of any law or
administrative regulation or any judicial or administrative
order, award, judgment or decree applicable to the Licensee;
(3) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the
performance required by any agreement, covenant, undertaking
or commitment to which the Licensee is a party whereby which
it is bound or to which any properties or assets of the
Licensee are subject;
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<PAGE>
(5) Execution and Enforce ability of Documents: this Agreement has been,
and all documents executed and delivered by the Licensee pursuant to
this Agreement shall be, duly executed and delivered by it, and this
Agreement does, and such documents will' constitute legal, valid and
binding obligations of the Licensee enforceable against the Licensee in
accordance with their respective terms, subject to bankruptcy,
insolvency, preference. reorganization, moratorium and other similar
laws affecting creditor's rights generally and the discretionary nature
of equitable remedies and defences;
(6) Finder's Fee: it has not incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of
the transaction contemplated herein for which the Licensor shall have
any obligation or liability;
(7) Residence: the Licensee is not a non-resident of Canada within the
meaning of Section 116 of The Income Tax Act (Canada).
3.3 No Merger
There shall not be any merger of any covenant, representation
or warranty in any assignment, conveyance, trans equity or statute to the
contrary offer or Document delivered pursuant hereto notwithstanding any rule of
law, and all such rules are hereby waived.
3.4 Breach
The covenants, representations and warranties of the parties
hereto set forth in Sections 3.1 and 3.2 shall be true or performed as the case
may be at the Closing Date or, if it is to be performed after the Closing Date,
shall be complied with after the Closing Date, but no claim or action commenced
in respect of a breach of any such covenant, representation or warranty shall be
made unless the party making the claim or prosecuting the action has given
written notice of such claim (including reasonable particulars of the
misrepresentation or breach) to the other party hereto within the period of
twelve (12) months from the Closing Date.
3.5 Survival of Covenants
Notwithstanding anything to the contrary herein expressed or
implied, the covenants, representations and warranties set forth in Sections 3.1
and 3.2 are relied upon by the Licensee and the Licensor as being true on the
date hereof and on the Closing Date and, notwithstanding the Closing or
deliveries of covenants, representations and warranties in any other agreements
at Closing or prior or subsequent thereto, the covenants, representations and
warranties set forth in Sections 3.1 and 3.2 hereof shall survive Closing for
the benefit of the parties hereto, subject to Sections 3.4 and 3.6 hereof.
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<PAGE>
3.6 Limitations
Notwithstanding anything In this agreement to the contrary,
the Licensee shall have no remedy or cause of action against either of the
Licensor for breach of representation, warranty or covenant or claim for
indemnity, for any circumstance, matter or thing actually known to the Licensee
or any employee, agent, consultant or representative thereof as at the Closing
Date.
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<PAGE>
ARTICLE 4
LIABILITIES AND INDEMNITIES
4.1 Licensor's Liabilities and Indemnities
(1) The is icensor shall remain liable for, and shall Indemnify the
Licensee and its directors, officers. servants, agents and employees
harmless from and against. all losses, costs, claims, damages, expenses
or liabilities! suffered, sustained, paid or incurred by the Licensee
or its directors, officers, servants, agents and employees arising as a
direct consequence of the breach, as of the Closing Date, of any of the
warranties and representations of such Licensor (and excluding the
warranties and representations of the other Licensor) contained In this
Agreement and the Licensee shall indemnify the Licensor and its
directors, officers, servants, agents and employees harmless from and
against all losses, costs, claims, damages, expenses or liabilities
suffered, sustained, paid or incurred by such Licensor or its
directors, officers, servants, agents and employees arising out of or
pertaining to or with respect to its Software occurring subsequent to
the Closing Date or as a direct consequence of the breach as of the
Closing Date, of any of the warranties and representations of the
Licensee; excepting, in each case, to the extent that such liabilities
are reimbursed by insurance or are caused by the party claiming
indemnity. Such indemnities shall be deemed to apply to all
assignments, transfers, conveyances, novations and other documents
licensing the Software to the Licensee notwithstanding the actual terms
thereof. Such indemnities shall extend to legal costs on a solicitor
and client basis.
(2) Neither party shall be entitled to any Indemnification in respect of
any matter or thing which is the subject of the indemnity in Section
(a) above unless it shall have given written notice of its claim for
indemnification (including reasonable particulars of the claim) to the
other party. within six (6) months of the Closing Date.
4.2 Subrogation
The Licensor license the Software to the Licensee with full
right of substitution and subrogation of the Licensee in and to all covenants,
representations and warranties of others given to the Licensor, or any of them,
or its 'predecessors in title in respect of the Software or any part thereof.
ARTICLE 5
PROPRIETARY INFORMATION, CONFIDENTIALITY AND RESTRICTIONS OF USE
5.1 Trade Secrets
The Licensee acknowledges that the Software includes
confidential data and know-how which are proprietary trade secrets of the
Licensor. The Licensee shall not disclose such
-14-
<PAGE>
data or knowhow to any third party and shall protect such data and know-how from
disclosure by taking reasonable steps to protect the confidentiality of such
data and know-how.
5.2 Licensee's Data
All data furnished by the Licensee, and processed on the
Licensee's CPUs, shall always be and remain the property of the Licensee, Such
data shall not include the software or any part thereof.
5.3 Injunctive Relief
lf the Licensee or any of its employees, agents or
representatives uses, or attempts to use, or disposes of the Software In any
manner contrary to the terms of this Agreement, the Licensor shall have the
right, In additio 1' to such other remedies that may be available to them, to
injunctive relief enjoining such acts or attempts, it being acknowledged that
legal remedies are inadequate.
5.4 Confidential Information"
All information and data, in whatever form, obtained by the
Licensee In respect of the subject-matter of this Agreement (the "Confidential
Information.) shall be held by the Licensee in the strictest confidence and
shall not be disclosed prior to Closing: provided that such Confidential
Information may be disclosed if the disclosure (i) is made with the consent of
all the parties; (ii) is made to an Affiliate of the Licensee; '(iii) is
required by law, by a government or governmental department, ministry, board,
commission or agency or by a court or other tribunal of competent Jurisdiction:
(iv) is required by a securities commission or stock exchange having
jurisdiction over the Licensee or an Affiliate of the Licensee; (v) is in
respect of Information" or data that Is in the public domain at the time of the
disclosure through no fault of the Licensee; (vi) is made on a need-to-know
basis to outside consultants, accounting, business or legal advisors who agree
to maintain the confidentiality of the Confidential Information.
ARTICLE 6
TERMINATION
6.1 Termination
This License Agreement is effective until terminated. The FDSI
License shall be subject to the termination provisions set out in Schedule "D".
6.2 Survival I
All obligations herein regarding confidentiality, secrecy and
disclosure including, without limitation, the provisions of Section 5.4 shall
survive termination of this Agreement.
-15-
<PAGE>
ARTICLE 7
GENERAL
7.1 Notice
All notices shall be in writing and shall be sufficiently
given or made if (i) delivered to the intended recipient personally or by
courier during normal business hours on a business day at the intended
recipient's addresses as set forth below; or telecopied to the intended
recipient and
If to FDSI:
Suite 305 - 1505 West 2nd Avenue
Vancouver, British Columbia V6H 3Y4
Attention: David Hawkins
Telecopier (604) 739-7753
If to Homebase:
Suite 901, 112 - 4th Avenue S.W.
Calgary, Alberta T2P
Attention Ken MacLean
Telecopier (403) 237- 047
Any notice given or made in the above-noted manner shall be deemed to have been
given or made and to have been received on the pay of its delivery or
transmission, as the case may be, if such day is a business day and such notice
is received prior to 4:00 p.m., local time, and, if not, on first business day
thereafter. I
7.2 Arbitration
If any master upon which the parties do not agree (6) required
to be referred to arbitration pursuant to the terms hereof or if the parties
agree to refer any matter arising hereunder to arbitration, the arbitration
shall be conducted before a single arbitrator. Any such arbitration, including
the selection of the arbitrator, shall be govern by the Arbitration Act
(Alberta) and the nobles of the Arbitration and Mediation Society of Alberta.
The decision of any such arbitrator shall be final and binding upon the parties
and the fees and costs relating thereto shall be borne and paid in the manner
the arbitrator determines l
7.3 Amendments and Waiver
-16-
<PAGE>
All amendments to tints Agreement, and all waivers of any
provision, or the breach of any provision, of this Agreement, shall be made in a
written instrument signed by all of the parties. A waiver shalt affect only the
matter specifically identified in the instrument granting the waiver and shall
not extend to any other matter, provision or breach
-17-
<PAGE>
7.4 Remedies Cumulative
No reference to of exercise of any specific right or remedy by
a party hereunder shall prejudice or preclude such party from exercising or
invoking any other remedy in respect thereof, whether allowed at law or in
equity or expressly provided for herein. No such remedy shall be exclusive or
dependent upon any other such remedy but each party may exercise any one or more
of such remedies independently or In combination .
7.5 Further Assurances
At the Closing and thereafter as may be necessary and without
further consideration, parties hereto shall execute, acknowledge and deliver
such other instruments and shall take such other action as may be necessary to
carry out their respective obligation under this agreement.
7.6 Time
Time shall be of the essence.
7.7 Governing Law
This Agreement shall be interpreted, construed and governed in
all respects by the laws of the Province of Alberta.
7.8 Prior Agreements and Amendments
This agreement shall supersede and replace any and all prior
agreements between the parties hereto relating to the licensing of the Software
and may be amended only by written instrument signed by the parties hereto.
7.9 Entire Agreement
This Agreements constitutes the entire agreement of the
parties In respect of the subject matter herein and supersedes all prior oral or
written agreements and understandings of the parties, or any one of them in
relation thereto.
7.10 Assignment
This Agreement may not be assigned by the other party hereto
without the prior written consent of the other party hereto, which consent may
not be unreasonably withheld.
7.11 Enurement
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<PAGE>
This Agreement is binding up and shall enure to the benefit of
the parties hereto and their respective successors and permitted assigns.
7.12 Counterpart Execution
This Agreement may be executed in any number of counterparts
each of which shall be an original and all counterparts together shall
constitute a single document.
IN WITNESS WHEREOF the parties have duly executed this
Agreement on the date first written above.
FACET DECISION 8YSTEMS INC.
Per: /s/ David Hawkins
________________________________
HOMEBASE WORK SOLUTIONS LTD.
/s/ Ken MacLean
________________________________
-19-
LICENSING AND DISTRIBUTION AGREEMENT
Between
FACET PETROLEUM SOLUTIONS INC.
(being the Licensor of specified software)
AND
HOMEBASE WORK SOLUTIONS LTD.
(as Licensee)
March 30, 1999
<PAGE>
Index
Page
ARTICLE 1
INTERPRETATION..............................................................1
1.1 Definitions.......................................................1
1.2 Interpretation....................................................1
1.3 Business Days.....................................................4
1.4 Schedules.........................................................5
ARTICLE 2
GRANT OF SOFTWARE LICENSE AND AGREEMENT OF PURCHASE AND SALE................5
2.1 Grant of Software License.........................................5
2.2 Development Agreement.............................................6
2.3 Modifications, Refinements and Updates............................6
2.4 Enhancements and New Application Modules..........................6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES.
3.1 Licensor's Representations, Warranties and Covenants Generally....7
3.2 Licensee's Representations, Warranties and Covenants..............8
3.3 No Merger.........................................................9
3.4 Breach ...........................................................9
3.5 Survival of Covenants.............................................9
3.6 Limitations.......................................................9
ARTICLE 4
LIABILITIES AND INDEMNITIES................................................10
4.1 Licensor's Liabilities and Indemnities...........................10
4.2 Subrogation......................................................11
ARTICLE 5
PROPRIETARY INFORMATION, CONFIDENTIALITY AND RESTRICTIONS OF USE...........10
5.1 Trade Secrets ...................................................10
5.2 Licensee's Data..................................................11
5.3 Injunctive Relief................................................11
5.4 Confidential Information.........................................11
ARTICLE 6
TERMINATION................................................................11
6.1 Termination......................................................11
6.2 Survival.........................................................11
ARTICLE 7
GENERAL....................................................................11
7.1 Notice...........................................................11
7.2 Arbitration .....................................................12
<PAGE>
7.3 Amendments and Waiver ...........................................12
7.4 Remedies Cumulative .............................................12
7.5 Further Assurances...............................................13
7.6 Time.............................................................13
7.7 Governing Law....................................................13
7.8 Prior Agreements and Amendments..................................13
7.9 Entire Agreement.................................................13
7.10 Assignment.......................................................13
7.11 Enurement........................................................13
7.12 Counterpart Execution............................................13
<PAGE>
LICENSING AND DISTRIBUTION AGREEMENT
BETWEEN:
FACET PETROLEUM SOLUTIONS INC., a body corporate having an
office and carrying on business in the City of Calgary, in the
Province of Alberta (hereinafter referred to as "Facet PS" or
the "Licensor")
OF THE FIRST PART
- and -
HOMEBASE WORK SOLUTIONS LTD., a body corporate organized under
the laws of the Province of Alberta (hereinafter referred to
as "Homebase" or the "Licensee')
OF THE SECOND PART
WHEREAS Facet Petroleum Solutions Inc. (the "Licensor") is
engaged in the business of developing and licensing certain software systems;
AND WHERAS the Licensee is desirous of obtaining the exclusive
right to utilize, market and sell the software systems of the Licensor in the
"telework" industry market sector;
NOW THEREFORE THIS AGREEMENT WlTNESSES that in consideration
of the premises, mutual covenants agreements and warranties hereinafter set
forth, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this agreement, including the recitals, this clause and the
Licensees attached hereto, unless the context otherwise requires, or unless
otherwise defined herein, the following words and phrases shall have the
following meanings:
(1) "Affiliate" has the meaning ascribed thereto in the Securities Act
(Alberta);
(2) "Applicable Law" means any applicable Canadian federal, provincial, or
local statute, regulation, by-law, and any regulation or order issued
in respect thereof by a Governmental Authority, and the terms and
conditions of any permit, license, authorization, or approval issued by
a Governmental Authority;
(3) "Associate" has the meaning ascribed thereto in the Securities Act
(Alberta);
<PAGE>
(4) "Claims" means any claim, demand, order, action, cause of action,
damage, loss, cost, liability or expense, including reasonable legal
fees and all reasonable costs incurred in investigating or pursuing any
of the foregoing or any proceeding relating to any of the foregoing;
(5) "Closing" means the date upon which the transactions contemplated
herein, being the granting of exclusive licenses to Homebase and the
issuance of Homebase Common Shares to the Licensor;
(6) "Closing Date" means 9:00 o'clock a.m., Calgary time, on 30 March, 1999
or such other date or time as may be mutually agreed to by the parties
hereto;
(7) "Confidential Information" means:
(1) Software;
(2) all software materials and component elements directly or
indirectly obtained from the Licensors or either of them
including, without limitation: all definitions of input and
output format, problem structure, statements of objectives and
goals; statements of solution structure and logic; program
algorithms; problem flow charts, coding notes and
instructions; source programs, assembly and compilation notes;
testing and debugging notes; object programs; notes relating
to program execution and final production programs;
documentation, technical manuals, operational manuals, user
documentation manuals; documents relating to program operation
and maintenance;
(3) all tangible personal property on which any part of the
foregoing is imprinted or recorded (whether designated
"hardware" or "software" or otherwise); and
(4) the proprietary rights attached to i, ii and iii;
(8) "CPU" means central processing unit;
(9) "Development Contract" means the contract to be entered into between
Facet PS as developer and the Licensee as client for the development of
an application for the Facet PS Software;
<PAGE>
(10) "Dollar" and "$" mean a dollar of lawful money of Canada. (USD) means a
dollar of lawful money of the United States of America.
(11) "Effective Date" means 9:00 o'clock a.m., Calgary time, on March 15,
1999;
(12) "Encumbrances" means all encumbrances, mortgages, pledges, liens,
claims, charges, security interests, restrictive covenants, easements
or other similar interests of any nature, whether or not consensual;
(13) "Enhancements" means improvements or additions to the Software by the
Licensor which add to the Functionality of the Software, as determined
by the Licensor;
(14) "Facet PS Software" means the data processing programs usually called
"Telework Operational Data Store (TODS)" and identified in Schedule "A"
consisting of a series of instructions or statements in machine
readable form and any related software materials including, without
limitation, flow charts, logic diagrams and listings provided for use
in connection with the data processing program;
(1) any additional machine readable or printed material not
included in the foregoing from time to time provided by Facet
PS to the Licensee; and
(1) all tangible personal property on which any of the foregoing
is imprinted or recorded, whether designated "hardware" or
"software" or otherwise;
(15) "Functionality" means the computer applications which the Software or
any part of it is capable of performing;
(16) "Governmental Authorities" means all applicable Canadian federal,
provincial and municipal agencies, commissions, boards, bureaus,
tribunals, ministries and departments;
(17) "Homebase Common Shares" means the common shares in the share capital
of Homebase, as presently constituted, and includes all shares for
which the common shares of Homebase are changed, reclassified,
subdivided, consolidated or converted into a different number or class
of shares or otherwise, as a result of a share reorganization, merger,
amalgamation, arrangement or other similar transaction;
(18) "License" means the rights and licenses granted to the Licensee
pursuant to Section 2.1;
<PAGE>
(19) "Licensee" means Homebase Work Solutions Ltd., a body corporate
organized under the laws of the Province of Alberta;
(20) "Licensor" means Facet Petroleum Solutions Inc., a body corporate
organized under the laws of the Province of Alberta;
(21) "Modifications, Refinements and Updates" means alterations or
refinements made by the Licensor to the Software which do not amount to
Enhancements;
(22) "Persons" means any person, corporation, partnership or other legal
entity;
(23) "Place of Closing" means the office of counsel to the Licensee, or as
otherwise agreed to by the parties hereto;
(24) "Purchase Price" has the meaning ascribed thereto in Section 2.1;
(25) "Right of First Refusal" means a right of first refusal, pre-emptive
right of purchase or similar right (including any requirement to obtain
consent of a third party in order for the Licensor to grant the
exclusive license contemplated herein, other than a consent which by
the terms of the applicable agreement cannot be unreasonably withheld)
whereby any party has the right to acquire or purchase the exclusive
rights granted herein as a consequence of the Licensor having agreed to
grant the exclusive rights in accordance with this Agreement:
(26) "Royalty Burdens" means all gross and net overriding royalties, net
profits interests, carried interests and all similar burdens and
encumbrances;
(27) "Security Interest" means an assignment (including, without limitation,
any assignment of any right to receive income), mortgage, charge,
floating charge, hypothec, pledge, lien, encumbrance, conditional sales
agreement or security interest of any nature or kind;
<PAGE>
(28) "Software" means the Facet PS Software;
(29) "Software Maintenance Services" or "Maintenance Services" means:
(1) the provision of Modifications, Refinements and Updates to the
Software; and
(2) the remedial maintenance of the Software including all
adjustments, repairs and corrections of all errors in the
Software;
(30) "Standard Release" means a release of Modifications, Refinement and
Updates from time to time;
(31) "Successors" means successors and includes any successor continuing by
reason of amalgamation or other reorganization and any Person to whom
assets are transferred by reason of a liquidation, dissolution,
winding-up or otherwise;
(32) "Tax Act" means the Income Tax Act (Canada), as amended from time to
time;
(33) "Tax Returns" includes all returns, reports, declarations, elections,
filings, information returns and statements filed in respect of Taxes;
(34) "Taxes" includes all taxes, duties, fees, premiums, royalties,
assessments, imposts, levies and other charges of any kind whatsoever
imposed by any taxing or other governmental authority or agency within
or outside of Canada, together with all interest, penalties or
additional amounts imposed in respect thereof; and
(35) "Telework Market " means the teleworking industry market sector.
1.2 Interpretation
In this Agreement:
(1) the inclusion of headings and a table of contents are for convenience
of reference only and are not to be considered or taken into account in
construing the provisions of this Agreement or to in any way qualify,
modify or explain the effect of any such provisions;
(2) references to an Article, Section or Schedules are references to an
Article, Section or Schedule, as the case may be, in this Agreement,
<PAGE>
(3) if any term or condition, whether express or implied, of a schedule
hereto conflicts with or is at variance with any term or condition of
the main body of this agreement, the main body of this agreement shall
prevail;
(4) "including" or "including without limitation" when used before a
specific item or list of items in relation to a previous general
description means "including, without limiting the generality of the
foregoing";
(5) where in this agreement a representation or warranty is made on the
basis of knowledge or awareness, such knowledge or awareness shall be
conclusively deemed to consist of actual knowledge or awareness, as the
case may be, of the officers, directors or employees of the party
making the representations or warranty and does not include the
knowledge and awareness of any other person or persons;
(6) words importing the singular shall include the plural and vice versa
and words importing a particular gender shall include all genders;
(7) references to a statute includes the regulations and any other
subordinate legislation made pursuant to that statute and includes any
amendment, consolidation, reenactment, substitution or replacement of
all or any part of such statute, regulation or other subordinate
legislation;
(8) all monetary amounts are expressed in Canadian currency;
(9) where a period of time is specified, dated or calculated from a date or
event, the period shall be calculated excluding such date or the date
on which such event occurs, as the case may be; and
(10) where a term is defined in this Agreement, a derivative of that term
shall have a corresponding meaning unless the context otherwise
requires.
1.3 Business Days
If, pursuant to this Agreement, a notice must be given or an
action taken within a specified period or on or before a specified date and such
period ends on, or such date falls on a day that is a Saturday, Sunday or public
holiday, such notice may be given or such action may be taken on the next
succeeding day which is not a Saturday, Sunday or public holiday.
<PAGE>
1.4 Schedules
The following Schedules are attached hereto and form a part of
this Agreement:
Schedule "A" - Facet PS Software
Schedule "B" - Facet PS Licensing Terms and Conditions
Schedule "C" - License Fee Schedule
Wherever any term or condition, express or implied, of such Schedules conflicts
or is at variance with any term or condition in the body of this Agreement, such
term or condition in the body of this Agreement shall prevail.
ARTICLE 1
GRANT OF SOFTWARE LICENSE
1.5 Grant of Software License
(i) In consideration of the issue of 6,910 Homebase Common Shares to Facet
PS at an aggregate deemed value of $125,000 ) (the "Purchase Price") to
be delivered to Facet PS on the Closing Date subject only to the
agreement by the Licensee to abide by the terms and conditions of this
License Agreement Facet PS grants to the Licensee an exclusive right in
the Telework Market (the "Facet PS License") to use and resell the
Facet PS software program more particularly identified in Schedule "A"
(hereinafter referred to as the "Software") in connection with and
incorporated in software to be jointly developed by Facet PS and
Homebase for a period of two (2) years from the Closing Date and
subject to the terms and conditions set out in Schedule B it being
understood and agreed that Facet PS will be entitled to receive license
and service fees as per Schedule "C".
The Licensor and Licensee shall deliver such other documents
as may be necessary to complete the transactions provided for in this Agreement.
<PAGE>
Development Agreement
Facet PS and Homebase shall enter into the Development
Agreement before or after the Closing. Under the terms of the Development
Agreement, Facet PS will develop an application of the Facet PS Software for the
specifications to be defined by Homebase. All rights, title and interest in the
developed application will, subject to the rights of Facet PS in the Facet PS
Software which will form part of the developed application and will be governed
by this License Agreement, belong to Homebase.
1.6 Modifications, Refinements and Updates
As applicable, the Licensor shall without additional charge to
the Licensee, furnish the Licensee with Standard Releases of the Software.
Licensee agrees to accept all Standard Releases and is solely liable for any
loss or damages incurred and assumes all risks resulting from failure to install
and implement the Standard Releases furnished by Licensors.
Upon Licensee's request, the Licensor shall install such
Standard Releases at the Licensee's site and will invoice Licensee at the
respective Licensor's standard rates for labour and expenses for such
installation services. If Licensee does not request such Licensor's assistance
in installation, Licensee shall be solely responsible for the installation and
implementation of the Standard Releases.
The Licensor shall not be responsible to Licensee for loss of
use of the Software or for any other liabilities arising from any alteration,
addition, adjustment or repair that is made by other than authorized
representatives of the Licensor.
1.7 Enhancements and New Application Modules
Enhancements and new computer application modules may be
developed or otherwise acquired by the Licensor from time to time. The
development and acquisition of Enhancements and new application modules,
including the nature and timing of same, shall be at the sole discretion of the
Licensor. Enhancements and new application modules may, in Licensor's
discretion, be priced separately and offered to the Licensee at the Licensor's
then-current price. This Article 2.4 shall in and of itself, create no
obligation on behalf of Licensor or the Licensee to develop, acquire or license,
as the case may be, Enhancements or new application modules.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
1.8 Licensor's Representations, Warranties and Covenants Generally
The Licensor represents, warrants and covenants to and with
the Licensee that:
(1) Standing: such Licensor is a corporation duly organized and validly
subsisting under the laws of its jurisdiction of incorporation;
<PAGE>
(2) Capacity: such Licensor has the requisite power and authority to
conduct its business as now conducted, to license the Software in the
manner provided in this Agreement;
(3) Consents and Approvals: no authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority or
regulatory body exercising jurisdiction over the Software is required
for the due execution, delivery and performance by such Licensor of
this Agreement except those which has been obtained prior to the date
hereof;
(4) No Conflicts: none of the execution, delivery or performance of this
Agreement by such Licensor does or, with the giving of notice or the
lapse of time or both, will:
(1) violate or conflict with any of the provisions of the
constating documents or other governing documents of such
Licensor;
(2) violate or conflict with any provision of any law or
administrative regulation or any judicial or administrative
order, award, judgment or decree applicable to such Licensor;
(3) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the
performance required by any agreement, covenant, undertaking
or commitment to which such Licensor or any partner comprising
such Licensor is a party or by which such Licensor or any
Affiliate is bound or to which any properties or assets of
such Licensor are subject; and
(4) to the best of its knowledge, the use of such Licensor's
Software, in compliance with the terms and conditions of this
Agreement, will not infringe any patent or copyright of any
third party; and any updates and modifications to such
Licensor's Software will be developed in a careful, diligent
and workmanlike manner;
(5) Execution and Enforceability of Documents: this Agreement has been, and
all documents executed and delivered by such Licensor pursuant hereto
shall be, duly executed and delivered by it, and this Agreement does,
and such documents will, constitute legal, valid and binding
obligations of such Licensor enforceable against such Licensor in
accordance with their respective terms, subject to bankruptcy,
insolvency, preference, reorganization, moratorium and other similar
laws affecting creditor's rights generally and the discretionary nature
of equitable remedies and defences;
(6) Finder's Fee: such Licensor has not incurred any obligation or
liability, contingent or otherwise, for brokers' or finders' fees in
respect of the transaction contemplated herein for which the Licensee
shall have any obligation or liability;
<PAGE>
(7) Canadian Resident: such Licensor is not a non-resident of Canada for
the purposes of the Income Tax Act (Canada);
(8) Private Company: such Licensor is a "private company" pursuant to the
Securities Act (Alberta) and is not a "reporting issuer" pursuant to
such Act and has no filing or reporting obligations pursuant to any
securities legislation of any jurisdiction;
(9) Lawsuits and Claims: there are no Material claims, violations, alleged
violations, proceedings, actions, lawsuits, administrative proceedings
or governmental investigations in existence, or to the best of such
Licensor's knowledge, contemplated or threatened against or with
respect to such Licensor, such Licensor's Software or such Licensor's
interests in the Software which might result in impairment or loss of
such Licensor's Software or such Licensor's interests therein or which
might otherwise materially adversely affect such Licensor's Software.
Such Licensor is not aware of any existing basis upon which any of such
claims, violations, alleged violations, proceedings, actions or
lawsuits might be commenced by any Person which or which might
materially adversely affect such Licensor's Software;
(10) Rights of First Refusal: Facet PS Inc. grants to Homebase Work
Solutions Ltd. a Right of First Refusal to purchase an exclusive
license in any related telework industry vertical during the effective
period of this Agreement. The definition of a related telework industry
vertical shall be as mutually agreed upon.
(11) except as stated herein, the Software and all accompanying written
materials are provided "as is" without warranty or condition of any
kind, express or implied, including but not limited to implied
warranties or conditions or merchantability or fitness for a particular
purpose and those arising by statute or otherwise in law or from a
usage in the trade. The entire risk as to results and performance of
the Software is with the Licensee. Such Licensor does not warrant,
guarantee or represent that the functions contained in the Software
will meet the Licensee's requirements or that the installation or
operation of the Software will be uninterrupted or error free.
The Licensee acknowledges that it has only relied upon the
representations, warranties and covenants contained in Article 3 and not on any
representations, warranties or covenants outside this Agreement and the Licensor
shall have no liability, whether in contract or in tort, in respect of any
statements, information, representations, warranties or covenants made by them
or their agents or representatives, except liability for the representations,
warranties and covenants contained in Article 3, which liability shall be
subject to the limitations contained in this Agreement.
1.9 Licensee's Representations, Warranties and Covenants
The Licensee hereby represents, warrants and covenants to and
with the Licensor that:
<PAGE>
(1) Standing: it is a corporation validly existing and in good standing
under the laws of its jurisdiction of incorporation and is registered
to do business under the laws of the Province of Alberta;
(2) Capacity: the Licensee has good and sufficient power, authority and
right to enter into this Agreement and to complete the transactions to
be completed by the Licensee contemplated hereby and has taken all
requisite corporate action to authorize the due creation and issuance
of the Homebase Common Shares to be issued to the Licensor hereunder,
and, upon completion of Closing pursuant to this Agreement, the
Homebase Common Shares shall be validly issued and outstanding as fully
paid and non-assessable shares in the capital of the Licensee in
compliance with all applicable securities laws and regulations;
(3) Capital: the authorized capital of the Licensee consists of an
unlimited number of Homebase Common Shares and an unlimited number of
First Preferred Shares, Series A, of which, prior to the issue of the
Homebase Common Shares to the Licensor hereunder, not more than 900,000
Homebase Common Shares and 50,000 Homebase First Preferred Shares,
Series A are issued and outstanding, all of which shares are fully paid
and non assessable;
(4) No Conflicts: none of the execution, delivery or performance of this
Agreement by the Licensee does or, with the giving of notice or the
lapse of time or both, will:
(1) violate a conflict with any of the provisions of the charter,
articles, bylaws or other governing documents of the Licensee;
(2) violate or conflict with any of the provisions of any law or
administrative regulation or any judicial or administrative
order, award, judgment or decree applicable to the Licensee;
(3) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the
performance required by any agreement, covenant, undertaking
or commitment to which the Licensee is a party whereby which
it is bound or to which any properties or assets of the
Licensee are subject;
(5) Execution and Enforceability of Documents: this Agreement has been, and
all documents executed and delivered by the Licensee pursuant to this
Agreement shall be, duly executed and delivered by it, and this
Agreement does, and such documents will, constitute legal, valid and
binding obligations of the Licensee enforceable against the Licensee in
accordance with their respective terms, subject to bankruptcy,
insolvency, preference, reorganization, moratorium and other similar
laws affecting creditor's rights generally and the discretionary nature
of equitable remedies and defences;
<PAGE>
(6) Finder's Fee: it has not incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of
the transaction contemplated herein for which the Licensor shall have
any obligation or liability;
(7) Residence: the Licensee is not a non-resident of Canada within the
meaning of Section 116 of The Income Tax Act (Canada).
1.10 No Merger
There shall not be any merger of any covenant, representation or
warranty in any assignment, conveyance, transfer or document delivered pursuant
hereto notwithstanding any rule of law, equity or statute to the contrary and
all such rules are hereby waived.
1.11 Breach
The covenants, representations and warranties of the parties hereto set
forth in Sections 3.1 and 3.2 shall be true or performed as the case may be at
the Closing Date or, if it is to be performed after the Closing Date, shall be
complied with after the Closing Date, but no claim or action commenced in
respect of a breach of any such covenant, representation or warranty shall be
made unless the party making the claim or prosecuting the action has given
written notice of such claim (including reasonable particulars of the
misrepresentation or breach) to the other party hereto within the period of
twelve (12) months from the Closing Date.
1.12 Survival of Covenants
Notwithstanding anything to the contrary herein expressed or implied,
the covenants, representations and warranties set forth in Sections 3.1 and 3.2
are relied upon by the Licensee and the Licensor respectively as being true on
the date hereof and on the Closing Date and, notwithstanding the Closing or
deliveries of covenants, representations and warranties in any other agreements
at Closing or prior or subsequent thereto, the covenants, representations and
warranties set forth in Sections 3.1 and 3.2 hereof shall survive Closing for
the benefit of the parties hereto, subject to Sections 3.4 and 3.6 hereof.
1 .13 Limitations
Notwithstanding anything in this agreement to the contrary, the
Licensee shall have no remedy or cause of action against either of the Licensors
for breach of representation, warranty or covenant or claim for indemnity for
any circumstance, matter or thing actually known to the Licensee or any
employee, agent, consultant or representative thereof as at the Closing Date.
<PAGE>
ARTICLE 3
LIABILITIES AND INDEMNITIES
1.14 Licensor's Liabilities and Indemnities
(1) The Licensor shall remain liable for, and shall indemnify the Licensee
and its directors, officers, servants, agents and employees harmless
from and against, all losses, costs, claims, damages, expenses or
liabilities suffered, sustained, paid or incurred by the Licensee or
its directors, officers, servants, agents and employees arising as a
direct consequence of the breach, as of the Closing Date, of any of the
warranties and representations of the Licensor contained in this
Agreement and the Licensee shall indemnify the Licensor and its
directors, officers, servants, agents and employees harmless from and
against all losses, costs, claims, damages, expenses or liabilities
suffered, sustained, paid or incurred by the Licensor or its directors,
officers, servants, agents and employees arising out of or pertaining
to or with respect to its Software occurring subsequent to the Closing
Date or as a direct consequence of the breach, as of the Closing Date,
of any of the warranties and representations of the Licensee;
excepting, in each case, to the extent that such liabilities are
reimbursed by insurance or are caused by the party claiming indemnity.
Such indemnities shall be deemed to apply to all assignments,
transfers, conveyances, novations and other documents licensing the
Software to the Licensee notwithstanding the actual terms thereof. Such
indemnities shall extend to legal costs on a solicitor and client
basis.
(2) Neither party shall be entitled to any indemnification in respect of
any matter or thing which is the subject of the indemnity in Section
(a) above unless it shall have given written notice of its claim for
indemnification (including reasonable particulars of the claim) to the
other party, within six (6) months of the Closing Date.
1.15 Subrogation
The Licensor licenses the Software to the Licensee with full right of
substitution and subrogation of the Licensee in and to all covenants,
representations and warranties of others given to the Licensor, or any of them,
or its predecessors in title in respect of the Software or any part thereof.
ARTICLE 4
PROPRIETARY INFORMATION, CONFIDENTIALITY AND RESTRICTIONS OF USE
1.16 Trade Secrets
The Licensee acknowledges that the Software includes confidential data
and knowhow which are proprietary trade secrets of the Licensor. The Licensee
shall not disclose such data or know-how to any third party and shall protect
such data and know-how from disclosure by taking reasonable steps to protect the
confidentiality of such data and know-how.
1.17 Licensee's Data
All data furnished by the Licensee, and processed on the Licensee's
CPUs, shall always be and remain the property of the Licensee. Such data shall
not include the Software or any part thereof.
1.18 Injunctive Relief
<PAGE>
If the Licensee or any of its employees, agents or representatives
uses. or attempts to use, or disposes of the Software in any manner contrary to
the terms of this Agreement, the Licensor shall have the right, in addition to
such other remedies that may be available to them, to injunctive relief
enjoining such acts or attempts, it being acknowledged that legal remedies are
inadequate.
1.19 Confidential Information
All information and data, in whatever form, obtained by the Licensee in
respect of the subject-matter of this Agreement (the "Confidential Information")
shall be held by the Licensee in the strictest confidence and shall not be
disclosed prior to Closing; provided that such Confidential Information may be
disclosed if the disclosure (i) is made with the consent of all the parties;
(ii) is made to an Affiliate of the Licensee; (iii) is required by law, by a
government or governmental department, ministry, board, commission or agency or
by a court or other tribunal of competent jurisdiction; (iv) is required by a
securities commission or stock exchange having jurisdiction over the Licensee or
an Affiliate of the Licensee; (v) is in respect of information or data that is
in the public domain at the time of the disclosure through no fault of the
Licensee; (vi) is made on a need-to-know basis to outside consultants.
accounting. business or legal advisors who agree to maintain the confidentiality
of the Confidential Information.
ARTICLE 5
TERMINATION
1.20 Termination
This License Agreement is effective until terminated. The Facet PS
License shall be subject to the termination provisions set out in Schedule "B".
1.21 Survival
All obligations herein regarding confidentiality, secrecy and
disclosure including, without limitation, the provisions of Section 5.4 shall
survive termination of this Agreement.
<PAGE>
ARTICLE 6
GENERAL
1.22 Notice
All notices shall be in writing and shall be sufficiently given or made
if (i) delivered to the intended recipient personally or by courier during
normal business hours on a business day at the intended recipient's addresses as
set forth below, or telecopied to the intended recipient; and
If to Facet PS:
1536 - 30th Avenue S.W.
Calgary, Alberta T2T 1 P3
Attention: lan B. Elliott
Telecopier: (403) 229-4468
If to Homebase:
Suite 910, 112 - 4th Avenue S.W.
Calgary, Alberta T2P OH3
Attention: Ken MacLean
Telecopier: (403) 237-5047
Any notice given or made in the above-noted manner shall be deemed to have been
given or made and to have been received on the day of its delivery or
transmission, as the case may be, if such day is a business day and such notice
is received prior to 4:00 p.m., local time, and, if not, on first business day
thereafter.
1.23 Arbitration
If any matter upon which the parties do not agree is required to be
referred to arbitration pursuant to the terms hereof or if the parties agree to
refer any matter arising hereunder to arbitration, the arbitration shall be
conducted before a single arbitrator. Any such arbitration, including the
selection of the arbitrator, shall be governed by the Arbitration Act (Alberta)
and the rules of the Arbitration and Mediation Society of Alberta. The decision
of any such arbitrator shall be final and binding upon the parties and the fees
and costs relating thereto shall be borne and paid in the manner the arbitrator
determines.
<PAGE>
1.24 Amendments and Waiver
All amendments to this Agreement, and all waivers of any provision, or
the breach of any provision, of this Agreement, shall be made in a written
instrument signed by all of the parties. A waiver shall affect only the matter
specifically identified in the instrument granting the waiver and shall not
extend to any other matter, provision or breach.
1.25 Remedies Cumulative
No reference to or exercise of any specific right or remedy by a party
hereunder, shall prejudice or preclude such party from exercising or invoking
any other remedy in respect thereof, whether allowed at law or in equity or
expressly provided for herein. No such remedy shall be exclusive or dependent
upon any other such remedy but each party may exercise any one or more of such
remedies independently or in combination.
1.26 Further Assurances
At the Closing and thereafter as may be necessary and without further
consideration, the parties hereto shall execute. acknowledge and deliver such
other instruments and shall take such other action as may be necessary to carry
out their respective obligations under this agreement.
1.27 Time
Time shall be of the essence.
1.28 Governing Law
This Agreement shall be interpreted, construed and governed in all
respects by the laws of the Province of Alberta.
1.29 Prior Agreements and Amendments
This agreement shall supersede and replace any and all prior agreements
between the parties hereto relating to the licensing of the Software and may be
amended only by written instrument signed by the parties hereto.
1.30 Entire Agreement
This Agreements constitutes the entire agreement of the parties in
respect of the subject matter herein and supersedes all prior oral or written
agreements and understandings of the parties, or any one of them in relation
thereto.
<PAGE>
1.31 Assignment
This Agreement may not be assigned by the other party hereto without
the prior written consent of the other party hereto, which consent may not be
unreasonably withheld.
1.32 Enurement
This Agreement is binding up and shall enure to the benefit of the
parties hereto and their respective successors and permitted assigns.
1.33 Counterpart Execution
This Agreement may be executed in any number of counterparts each of
which she.. be an original and all counterparts together shall constitute a
single document.
IN WITNESS WHEREOF the parties have duly executed this Agreement on the
date first written above.
FACET PETROLEUM SOLUTIONS INC.
Per: /s/ Ian Elliott
- ----------------------------------
HOMEBASE WORK SOLUTIONS LTD.
Per: /s/ Ken MacLean
- ----------------------------------
SHARE PURCHASE AGREEMENT
AMONG
HOMEBASE WORK SOLUTIONS LTD.
THE CONTROLLING SHAREHOLDERS NAMED HEREIN
AND
INFOCAST CANADA CORPORATION
AND
INFOCAST CORPORATION
DATED AS OF MAY 13, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS................................................................1
Section 1.01 Definitions................................................1
Section 1.02 Accounting Principles......................................4
ARTICLE II
AGREEMENT TO SELL AND PURCHASE THE PURCHASED SHARES........................9
Section 2.01 Sale and Purchase of the Purchased Shares..................9
Section 2.02 Purchase Price............................................10
ARTICLE III
CLOSING...................................................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE CONTROLLING SHAREHOLDERS..........................................10
Section 4.01 Organization, Good Standing and Qualification
of the Company............................................10
Section 4.02 Articles of Incorporation and By-Laws; Records............11
Section 4.03 Capitalization............................................12
Section 4.04 Authority; Binding Nature of Agreements...................13
Section 4.05 Non-Contravention; Consents...............................13
Section 4.06 Proprietary Rights; Proprietary Information
and Inventions Agreement..................................15
Section 4.07 Proceedings; Orders.......................................16
Section 4.08 Sale of Purchased Shares Valid............................16
Section 4.09 Financial Statements......................................17
Section 4.10 Title to Assets...........................................18
Section 4.11 Material Contracts........................................18
Section 4.12 Employees; Employee Benefits..............................20
Section 4.13 Receivables; Major Customers..............................21
Section 4.14 Major Suppliers...........................................22
Section 4.15 Compliance With Requirement of Laws.......................22
Section 4.16 Governmental Authorizations...............................23
Section 4.17 Tax Matters...............................................23
Section 4.18 Securities Laws Compliance;
Registration Rights.......................................26
Section 4.19 Finders and Brokers.......................................26
i
<PAGE>
Section 4.20 Environmental Compliance..................................26
Section 4.21 Insurance.................................................26
Section 4.22 Related Party Transactions................................28
Section 4.23 Absence of Changes........................................28
Section 4.24 Controlling Shareholders..................................30
Section 4.25 Powers of Attorney........................................31
Section 4.26 Full Disclosure...........................................32
Section 4.27 Investment Representations................................32
Section 4.28 Corporate Governance......................................33
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
AND INFOCAST..............................................................33
Section 5.01 Organization, Good Standing and
Qualification of the Purchaser............................33
Section 5.02 Capitalization............................................33
Section 5.03 Authority; Binding Nature of Agreements...................34
Section 5.04 Non-Contravention; Consents...............................34
Section 5.05 Proceedings; Orders.......................................35
Section 5.06 Sale of Exchangeable Shares Valid.........................35
Section 5.07 Investment Representations................................35
Section 5.08 Consents..................................................36
Section 5.09 Organization, Good Standing
and Qualification of InfoCast.............................36
Section 5.10 Articles of Incorporation and By-Laws;
Records...................................................37
Section 5.11 Capitalization............................................38
Section 5.12 Authority; Binding Nature of Agreements...................38
Section 5.13 Non-Contravention; Consents...............................38
Section 5.14 Proprietary Rights; Proprietary
Information and Inventions Agreement......................39
Section 5.15 Proceedings; Orders.......................................40
Section 5.16 Sale of Purchased Shares Valid............................41
Section 5.17 Financial Statements......................................41
Section 5.18 Title to Assets...........................................42
Section 5.19 InfoCast Material Contracts...............................42
Section 5.20 Employees and Employee Benefits...........................43
Section 5.21 Compliance With Requirement of Laws.......................45
Section 5.22 Tax Matters...............................................45
Section 5.23 Securities Laws Compliance;
Registration Rights.......................................47
Section 5.24 Insurance.................................................48
Section 5.25 Absence of Changes........................................49
Section 5.26 Full Disclosure...........................................51
Section 5.27 Corporate Governance......................................51
ii
<PAGE>
ARTICLE VI
PRE-CLOSING COVENANTS OF THE COMPANY
AND THE CONTROLLING SHAREHOLDERS..........................................52
Section 6.01 Access and Investigation..................................52
Section 6.02 Operation of Business.....................................52
Section 6.03 Filings and Consents......................................54
Section 6.04 Notification of Events or Conditions......................54
Section 6.05 Payment of Indebtedness by Related Parties................55
Section 6.06 No Negotiation............................................55
Section 6.07 Best Efforts..............................................56
Section 6.08 Confidentiality...........................................56
ARTICLE VII
PRE-CLOSING COVENANTS OF THE PURCHASER AND INFOCAST.......................56
Section 7.01 Filings and Consents......................................56
Section 7.02 Access and Investigation..................................57
Section 7.03 Operation of Business.....................................57
Section 7.04 Filings and Consents......................................59
Section 7.05 Notification of Events or Conditions......................59
Section 7.06 Best Efforts..............................................60
ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS AT CLOSING..........................60
Section 8.01 Representations and Warranties;
Performance of Obligations................................60
Section 8.02 Consents, Permits, Waivers and Approvals..................60
Section 8.03 Delivery of Certificates Evidencing
Purchased Shares..........................................61
Section 8.04 Delivery of Employment Agreements.........................61
Section 8.05 Compliance Certificate....................................61
Section 8.06 Corporate Documents.......................................61
Section 8.07 Exchange Agreement........................................61
Section 8.08 Proceedings and Documents.................................61
Section 8.09 Delivery of Non-Controlling Shareholder
Letters of Transmittal....................................62
ARTICLE IX
CONDITIONS TO THE SELLINGSHAREHOLDER'S OBLIGATIONS AT CLOSING.............62
Section 9.01 Representations and Warranties;
Performance of Obligations................................62
Section 9.02 Consents, Permits, Waivers and Approvals..................62
Section 9.03 Delivery of Certificates Evidencing
Exchangeable Shares.......................................62
iii
<PAGE>
Section 9.04 Compliance Certificate of Purchaser.......................63
Section 9.05 Compliance Certificate of InfoCast........................63
Section 9.06 Corporate Documents.......................................63
Section 9.07 Exchange Agreement........................................63
Section 9.08 Proceedings and Documents.................................63
Section 9.09 Homebase Governance.......................................64
Section 9.10 Darcy Galvon - Co-Chairman of InfoCast....................64
ARTICLE X
INDEMNIFICATION, ETC......................................................64
Section 10.01 Survival of Representations and Warranties................64
Section 10.02 Indemnification by Controlling Shareholders...............64
Section 10.03 Indemnification by the Purchaser and InfoCast.............65
Section 10.04 Interest..................................................66
Section 10.05 Defense of Third Party Claims.............................66
ARTICLE XI
MISCELLANEOUS.............................................................67
Section 11.01 Tax Elections.............................................67
Section 11.02 Termination...............................................68
Section 11.03 Governing Law.............................................68
Section 11.04 Jurisdiction; Venue.......................................68
Section 11.05 Successors and Assigns....................................69
Section 11.06 Entire Agreement..........................................69
Section 11.07 Severability..............................................69
Section 11.08 Amendment and Waiver......................................69
Section 11.09 Notices...................................................69
Section 11.10 Counterparts..............................................71
Section 11.11 Attorney's Fees...........................................71
Section 11.12 Delays or Omissions.......................................71
Section 11.13 Remedies Cumulative.......................................72
Section 11.14 Ontario Securities Law Matters............................72
iv
<PAGE>
SCHEDULES
Schedule 1 Name and Addresses of Selling Shareholders
Schedule 2.01 Purchased Shares
Schedule 2.02 Purchase Price
Schedule 4.01(b) Board of Directors; Committees; Officers
Schedule 4.01(d) Investments
Schedule 4.05(b) Consents
Schedule 4.06 Proprietary Assets
Schedule 4.10 Leases and Licensed Assets
Schedule 4.11 Material Contracts
Schedule 4.12 Employees; Employee Benefits
Schedule 4.13 Accounts Receivable; Major Customers
Schedule 4.14 Major Suppliers
Schedule 4.16 Government Authorizations
Schedule 4.17 Tax Matters
Schedule 4.21 Insurance
Schedule 4.22 Related Party Transactions
Schedule 4.23 Absence of Changes
Schedule 5.04 Purchaser Consents
Schedule 5.09(b) InfoCast Board of Directors; Committees; Officers
Schedule 5.14 InfoCast Proprietary Assets
Schedule 5.19 InfoCast Material Contracts
v
<PAGE>
Schedule 5.20 InfoCast Employees and Employee Benefits
Schedule 5.22 InfoCast Tax Matters
Schedule 5.24 InfoCast Insurance
Schedule 5.25 InfoCast Absence of Changes
Schedule 5.27 Corporate Governance of Homebase
Schedule 8.09 Non-Controlling Shareholder Letters of Transmittal
Schedule 9.09 Co-Chairmen Guidelines
vi
<PAGE>
EXHIBITS
Exhibit A Rights and Designations of Exchangeable Shares
Exhibit B Form of Exchange Agreement
vii
<PAGE>
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement is entered into as of May 13, 1999, by
and among Homebase Work Solutions Ltd., a corporation organized and existing
under the laws of Province of Alberta (the "Company"), the Controlling
Shareholders (as defined herein), InfoCast Canada Corporation, a corporation
organized and existing under the laws of Ontario (the "Purchaser"), and InfoCast
Corporation, a corporation organized and existing under the laws of Nevada
("InfoCast").
WITNESSETH:
WHEREAS the Selling Shareholders (as defined herein) own, in the
aggregate, a total of 955,000 common shares (the "Company Common Shares") in the
capital of the Company, and 45,000 first preferred shares, Series A (the
"Company Preferred Shares") which the holders thereof shall agree will be
treated as Company Common Shares (other than the exchange ratio therefor) for
purposes of this Agreement, which shares represent all of the issued and
outstanding shares in the capital of the Company;
AND WHEREAS the Purchaser desires to purchase from the Selling
Shareholders 100% of Company Common Shares and Company Preferred Shares
(collectively, the "Purchased Shares") owned by the Selling Shareholders (which
shall be accomplished by the direct purchases of such shares from the Selling
Shareholders) and the Selling Shareholders are willing to sell such Company
Purchased Shares, to the Purchaser, upon the terms and subject to the conditions
set forth herein;
AND WHEREAS InfoCast is the registered and beneficial owner of
10,000,000 common shares of the Purchaser, being all the issued and outstanding
common shares of the Purchaser;
NOW THEREFORE in consideration of the mutual promises and covenants
herein, the Purchaser, InfoCast, the Company and the Selling Shareholders, as
applicable, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions
For purposes of this Agreement, the following terms shall have the
meanings set forth in this Section 1.01:
"Acquisition Transaction" shall mean any transaction involving:
(a) the sale or other disposition of all or any portion of
the Company's business or assets (other than the sale of
goods or services in the Ordinary Course of Business);
<PAGE>
(b) the issuance, sale or other disposition of (i) any
shares in the capital of the Company, (ii) any option,
call, warrant or right (whether or not immediately
exercisable) to acquire any shares in the capital of the
Company, or (iii) any security, instrument or obligation
that is or may become convertible into or exchangeable
for any capital stock of the Company; or
(c) any merger, consolidation, amalgamation, business
combination, share exchange, reorganization,
recapitalization or similar transaction involving the
Company.
"Agreement" shall mean this Share Purchase Agreement, dated as of May 13, 1999,
by and among the Company, InfoCast, the Selling Shareholders and the Purchaser,
together with all schedules and exhibits attached thereto, as it may be amended,
supplemented or otherwise modified from time to time.
"Alberta Act" means the Securities Act (Alberta).
"Best Efforts" shall mean the efforts that a prudent Person desiring to achieve
a particular result would use in order to ensure that such result is achieved as
expeditiously as possible.
"Breach" shall mean, in respect of a representation, warranty, covenant,
obligation or other provision, that there is or has been (a) any material
inaccuracy in or breach of, or any failure to comply with or perform, such
representation, warranty, covenant, obligation or other provision, or (b) any
claim (by any Person) or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision, which has the
effect of imposing material limitations on the transactions contemplated hereby,
or would if the transactions were consummated, materially and adversely affect
any of the parties hereto.
"CDN$" shall mean the lawful currency of Canada.
"Closing" shall have the meaning specified in Article III.
"Closing Date" shall have the meaning specified in Article III.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Homebase Work Solutions Ltd., as specified in the first
paragraph of this Agreement.
"Company Common Shares" shall have the meaning specified in the recitals of this
Agreement.
2
<PAGE>
"Company Contract" shall mean any Contract (a) to which the Company is a party,
(b) by which the Company or any of its assets is or may become bound or (c)
under which the Company has, or may become subject to, any obligation or under
which the Company has or may acquire any right or interest.
"Company Preferred Shares" shall have the meaning specified in the recitals of
this Agreement.
Company Principals" means Messrs. Darcy Galvon, Ken Maclean and Scott Fleming.
"Company Returns" shall have the meaning specified in Section 4.17(b) of the
Agreement.
"Company Warrants" has the meaning ascribed hereto in Section 4.03(b) of this
Agreement.
"Consent" shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
"Contract" shall mean, with respect to any Person, any written, oral, implied or
other agreement, contract, understanding, arrangement, instrument, note,
guaranty, indemnity, representation, warranty, deed, assignment, power of
attorney, certificate, purchase order, work order, insurance policy, benefit
plan, commitment, covenant, assurance or undertaking of any nature to which such
Person is a party or by which its properties or assets may be bound or affected
or under which it or its respective business, properties or assets receive
benefits.
"Controlling Shareholders" shall mean Darcy Galvon, Ken MacLean, Scott Fleming,
7863640 Alberta Ltd. and 786206 Alberta Ltd. all of Alberta, Canada and
principal shareholders of the Company.
"Damages" shall mean any loss, damage, injury, decline in value, lost
opportunity, Liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee on a solicitor and his own client
basis, expert fee, accounting fee or advisory fee), charge, cost (including any
cost of investigation) or expense of any nature.
"Employee Benefit Plan" shall mean any and all bonus, deferred compensation,
incentive compensation, stock purchase, stock option, stock appreciation,
phantom stock, savings, profit sharing, severance or termination pay, health or
other medical, dental, life, disability or other insurance (whether insured or
self-insured), supplementary unemployment or employment benefit, pension,
retirement, registered retirement savings, supplementary retirement,
change-in-control and any other employment benefit or compensation plan,
program, agreement, arrangement, policy or practice (including any funding
mechanism therefore which is now in effect which will be required in the future
as a result of the Transactions), whether formal or informal, funded or
unfunded, registered or unregistered, oral or written, which are maintained or
contributed to or are required to be maintained, contributed to or provided by
the Company, under which any employee, former employee or independent contractor
(or any dependent of any such Persons) has any present or future right to
benefits or compensation or under which the Company has any present or future
liability or obligation.
3
<PAGE>
"Entity" shall mean any corporation (including any non profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, cooperative, foundation, society, political party,
union, company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.
"Environmental Law" shall mean any federal, provincial, state, local or foreign
Requirement of Law relating to pollution or protection of human health or the
environment.
"Exchange Agreement" shall mean a share exchange agreement among each Selling
Shareholder, the Purchaser and InfoCast, substantially in the form of Exhibit B,
as such agreement may be amended, supplemented or otherwise modified from time
to time, pursuant to which each Selling Shareholder agrees to sell to InfoCast
the Exchangeable Shares held by such Selling Shareholder for consideration in
the form of InfoCast Exchange Stock.
"Exchangeable Shares" shall mean the Exchangeable Shares in the capital of the
Purchaser having the rights and preferences described in Exhibit "A".
"Financial Statements" shall have the meaning specified in Section 4.9(a).
"Fleming Employment Agreement" shall mean an employment agreement, in form and
substance satisfactory to Scott Fleming, the Purchaser and InfoCast, as such
agreement may be amended, supplemented or otherwise modified from time to time.
"GAAP" shall mean generally accepted accounting principles in effect in Canada,
applied on a basis consistent with the basis on which the Financial Statements
were prepared.
"Galvon Management Agreement" shall mean a management agreement, in form and
substance satisfactory to Darcy Galvon, the Purchaser and InfoCast, as such
agreement may be amended, supplemented or otherwise modified from time to time.
"Governmental Authorization" shall mean any (a) permit, license, certificate,
franchise, concession, approval, consent, ratification, permission, clearance,
confirmation, endorsement, waiver, certification, designation, rating,
registration, qualification or authorization that is, has been or may in the
future be issued, granted, given or otherwise made available by or under the
authority of any Governmental Authority or pursuant to any Requirement of Law;
or (b) right under any Contract with any Governmental Authority.
4
<PAGE>
"Governmental Authority" shall mean any (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature, (b) federal, provincial, state, local, municipal,
foreign or other government, (c) governmental or quasi governmental authority of
any nature (including any governmental division, subdivision, department,
agency, bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or Entity and any
court or other tribunal), (d) multi national organization or body, or (e)
individual, Entity or body exercising, or entitled to exercise, any executive,
legislative, judicial, administrative, regulatory, police, military or taxing
authority or power of any nature.
"Indemnified Party" shall have the meaning specified in Section 10.04.
"InfoCast" shall mean InfoCast Corporation, a Delaware corporation.
"InfoCast Acquisition Transaction" shall mean any transaction involving:
i. the sale or other disposition of all or any portion of
InfoCast's business or assets (other than the sale of
goods or services in the ordinary course of business);
ii. the issuance, sale or other disposition of (i) any
shares in the capital of InfoCast, (ii) any option,
call, warrant or right (whether or not immediately
exercisable) to acquire any shares in the capital of
InfoCast, or (iii) any security, instrument or
obligation that is or may become convertible into or
exchangeable for any capital stock of InfoCast; or
iii. any merger, consolidation, amalgamation, business
combination, share exchange, reorganization,
recapitalization or similar transaction involving
InfoCast.
"InfoCast Common Stock" shall mean the common stock of InfoCast.
"InfoCast Contract" shall mean any Contract (a) to which InfoCast is a party,
(b) by which InfoCast or any of its assets is or may become bound or (c) under
which InfoCast has, or may become subject to, any obligation or under which
InfoCast has or may acquire any right or interest.
"InfoCast Exchange Stock" shall mean the InfoCast Common Stock issuable to the
Selling Shareholders upon the exchange of the Exchangeable Shares in accordance
with the Exchange Agreement.
"InfoCast Financial Statements" shall have the meaning specified in Section
5.17(a).
"InfoCast Material Contract" shall have the meaning specified in Section 5.19
(a).
"InfoCast Returns" shall have the meaning specified in Section 5.22(b) of the
Agreement.
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"Knowledge" shall mean, in respect of a particular fact or other matter by an
individual that (a) such individual is actually aware of such fact or other
matter, or (b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a diligent
and comprehensive investigation concerning the truth or existence of such fact
or other matter. A Person shall be deemed to have "Knowledge" of a particular
fact or other matter if any officer, employee or other Representative of such
Person has Knowledge of such fact or other matter.
"KPMG" means KPMG LLP, Chartered Accountants of Toronto, Canada.
"Liability" shall mean any debt, obligation, duty or liability of any nature
(including any unknown, undisclosed, uncaptured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability), regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet prepared
in accordance with GAAP and regardless of whether such debt, obligation, duty or
liability is immediately due and payable.
"Lien" shall mean any lien, pledge, hypothecation, charge, mortgage, security
interest, encumbrance, equity, trust, equitable interest, claim, preference,
right of possession, lease, tenancy, license, encroachment, covenant,
infringement, interference, Order, proxy, option, right of first refusal,
preemptive right, community property interest, legend, defect, impediment,
exception, reservation, limitation, impairment, imperfection of title, condition
or restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
"MacLean Employment Agreement" shall mean an employment agreement, in form and
substance satisfactory to Ken MacLean, the Purchaser and InfoCast, as such
agreement may be amended, supplemented or otherwise modified from time to time.
"Material Contract" shall have the meaning specified in Section 4.11.
"Non-Controlling Shareholders" means those Selling Shareholders who are not
Controlling Shareholders.
"Non-Controlling Shareholder Letters of Transmittal" means those Letters of
Transmittal substantially in the form of Schedule 8.08 hereto.
"Ontario Act" shall mean the Securities Act (Ontario), as amended.
"Order" shall mean any (a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award that is, has been or may in the future be issued, made, entered,
rendered or otherwise put into effect by or under the authority of any court,
administrative agency or other Governmental Authority or any arbitrator or
arbitration panel, or (b) Contract with any Governmental Authority that is, has
been or may in the future be entered into in connection with any Proceeding.
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"Ordinary Course of Business" shall mean, in respect of any action taken by or
on behalf of the Company, that (a) such action is recurring in nature, is
consistent with the Company's past practices and is taken in the ordinary course
of the Company's normal day to day operations, (b) such action is taken in
accordance with sound and prudent business practices, (c) such action is not
required to be authorized by any of the Company's shareholders, the Company's
board of directors or any committee of the Company's board of directors and does
not require any other separate or special authorization of any nature, and (d)
such action is similar in nature and magnitude to actions customarily taken,
without any separate or special authorization, in the ordinary course of the
normal day to day operations of other Entities that are engaged in businesses
similar to the Company's business.
"Person" shall mean any individual, Entity or Governmental Authority.
"Pre-Closing Period" shall mean the period commencing as of the date of the
Agreement and ending on the Closing Date.
"Proceeding" shall mean any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding and any informal proceeding), prosecution, contest, hearing, inquiry,
inquest, audit, examination or investigation that is, has been or may in the
future be commenced, brought, conducted or heard by or before, or that otherwise
has involved or may involve, any Governmental Authority or any arbitrator or
arbitration panel.
"Proprietary Asset" shall mean any patent, patent application, trademark
(whether registered or unregistered and whether or not relating to a published
work), trademark application, trade name, fictitious business name, service mark
(whether registered or unregistered), service mark application, copyright
(whether registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know how, franchise, system, computer software,
invention, design, blueprint, proprietary product, technology, proprietary right
or other intellectual property right or intangible asset.
"Purchase Price" shall have the meaning specified in Section 2.02.
"Purchased Shares" shall have the meaning specified in Section 2.01.
"Purchaser" shall have the meaning specified in the first paragraph of this
Agreement.
"Related Party" shall mean (a) each Controlling Shareholder, (b) each individual
who is, or who has at any time been, an officer of the Company, (c) each member
of the family of each of the individuals referred to in clause (b) above; and
(d) any Entity (other than the Company) in which any one of the Persons referred
to in clauses (a), (b) and (c) above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.
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"Representatives" shall mean as to any Person, the officers, directors,
employees, attorneys, accountants, advisors and representatives of such party.
Messrs Ken MacLean, Darcy Galvon, Scott Fleming and Richard Shannon shall be
deemed to be "Representatives" of the Company.
"Requirement of Law" shall mean any federal, provincial, state, local,
municipal, foreign or other law, statute, legislation, constitution, principle
of common law, resolution, ordinance, code, edict, decree, proclamation, treaty,
convention, rule, regulation, ruling, directive, pronouncement, requirement,
specification, determination, decision, opinion or interpretation that is, has
been or may in the future be issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or under the
authority of any Governmental Authority.
"Galvon" shall mean Darcy Galvon, an individual.
"MacLean" shall mean Ken MacLean, an individual.
"Fleming" shall mean Scott Fleming, an individual.
"Selling Shareholders" shall mean each of those entities and individuals listed
on Schedule I attached hereto.
"Tax" shall mean any tax (including any income tax, franchise tax, capital gains
tax, estimated tax, gross receipts tax, value added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, occupation tax, inventory tax, occupancy tax, withholding tax, capital tax,
land transfer tax, goods and services tax or payroll tax), levy, assessment,
tariff, impost, imposition, toll, duty (including any customs duty), deficiency
or fee, and any related charge or amount (including any fine, penalty or
interest), that is, has been or may in the future be (a) imposed, assessed or
collected by or under the authority of any Governmental Authority, or (b)
payable pursuant to any tax sharing agreement or similar Contract and all
unemployment insurance, health insurance and Canada, provincial or other
government pension plan premiums.
"Tax Act" means the Income Tax Act (Canada).
"Tax Return" shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Authority in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any
Requirement of Law relating to any Tax.
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"Transaction Documents" shall mean this Agreement, the Non-Controlling
Shareholder Letters of Transmittal, the Galvon Management Agreement, the MacLean
Employment Agreement, the Employment Agreement, the Fleming Employment
Agreement, the Exchange Agreement and all other agreements, certificates and
instruments executed or contemplated to be executed by any of the Parties in
connection with the Transactions.
"Transactions" shall mean all of the transactions contemplated by this Agreement
and each of the other Transaction Documents, including, without limitation, (a)
the sale of the Purchased Shares by the Selling Shareholders and the purchase
thereof by the Purchaser in accordance with this Agreement, (b) the issuance by
the Purchaser of the Exchangeable Shares to the Selling Shareholders in
connection with such purchase in accordance with this Agreement, (c) the
exchange of Exchangeable Shares by the Selling Shareholders for shares of
InfoCast Exchange Stock in accordance with the Exchange Agreement, and (d) the
execution and delivery of, and the performance under, the Galvon Management
Agreement, the MacLean Employment Agreement, the Fleming Employment Agreement.
"Unaudited Interim Balance Sheet" shall have the meaning specified in Section
4.9(a).
"US GAAP" shall mean generally accepted accounting principles in effect in the
United States, applied on a basis consistent with the basis on which the
InfoCast Financial Statements were prepared.
"US$" shall mean the lawful currency of the United States of America.
"U.S. Securities Act" shall mean the United States Securities Act of 1933, as
amended.
Section 1.02 Accounting Principles
All references to generally accepted accounting principles or GAAP
means references to principles recommended, from time to time, in the Handbook
of the Canadian Institute of Chartered Accountants and all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
such generally accepted accounting principles.
ARTICLE II
AGREEMENT TO SELL AND PURCHASE THE PURCHASED SHARES
Section II.1 Sale and Purchase of the Purchased Shares
Subject to the terms and conditions of this Agreement, at the
Closing, the Selling Shareholders shall sell, assign, transfer and deliver to
the Purchaser an aggregate of 955,000 Company Common Shares and 45,000 Company
Preferred Shares (collectively, the "Purchased Shares"). Set forth on Schedule
2.01 is a list of the number of shares of Purchased Shares to be so sold,
assigned, transferred and delivered to Purchaser by each Selling Shareholder.
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Section II.2 Purchase Price
At the Closing, the Purchaser shall pay to the Selling Shareholders
an aggregate purchase price (subject to adjustment as provided below) for the
Purchased Shares (the "Purchase Price") as follows:
(a) Exchangeable Shares. On the Closing Date, the Purchaser shall
issue to the Selling Shareholders an aggregate of three million four hundred
thousand (3,400,000) Exchangeable Shares. Set forth on Schedule 2.02 is a list
of the number of shares of Exchangeable Shares to be issued, transferred and
delivered to each of the Selling Shareholders.
(b) Allocation of Purchase Price. The Purchase Price shall be
allocated among the Selling Shareholders in accordance with the provisions of
Schedule 2.02. Each Selling Shareholder and the Purchaser agree to report the
purchase and sale of their Purchased Shares in any returns required to be filed
under the Tax Act and any other taxation statutes in accordance with the
provisions of Schedule 2.02.
ARTICLE III
CLOSING
The closing (the "Closing") shall take place at the offices of
InfoCast Canada Corporation, 1 Richmond Street West, Suite 901 Toronto, Ontario,
Canada at 10:00 A.M. (Eastern Standard Time) on May 13, 1999 or on such other
date or at such other place or time as the Company, the Selling Shareholders and
the Purchaser may mutually agree (such date is hereinafter referred to as the
"Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE CONTROLLING SHAREHOLDERS
The Company and each of the Controlling Shareholders, jointly and
severally, hereby represents and warrants to the Purchaser and InfoCast as
follows:
Section 4.01 Organization, Good Standing and Qualification of the Company
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(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Province of Alberta and is duly
qualified to conduct business and in corporate and tax good standing under the
laws of each jurisdiction in which the nature of its business or the ownership
or leasing of its properties require such qualification. The Company has all
requisite corporate power and authority to own and operate its properties and
assets, to execute, deliver and perform its obligations under this Agreement,
and to carry on its business as presently conducted and as presently proposed to
be conducted.
(b) Schedule 4.01(b) accurately sets forth (i) the names of the
members of the Company's board of directors, (ii) the names of the members of
each committee of the Company's board of directors and (iii) the names and
titles of the Company's officers.
(c) The Company is not insolvent within the meaning of applicable
laws, rules regulation or similar requirement, and has not made any assignment
in favour of its creditors nor a proposal in bankruptcy to its creditors or any
class thereof, nor has any petition for a receiver order been presented in
respect of the Company. The Company has not initiated any proceedings with
respect to a compromise or arrangement with its creditors or for the
dissolution, liquidation or reorganization of the Company or the winding up or
cessation of the business or affairs of the Company. No receiver has been
appointed in respect of the Company or any of its assets and no execution or
distress has been levied upon any of its assets.
(d) The Company has no subsidiaries, and, except as set forth in
Schedule 4.01(d), has never owned, beneficially or otherwise, any shares or
other securities of, or any direct or indirect interest of any nature in, any
Entity.
Section 4.02 Articles of Incorporation and By-Laws; Records
(a) The Company has delivered to the Purchaser accurate and
complete copies of:
(i) the articles of incorporation and bylaws,
including all amendments thereto of the
Company;
(ii) the share transfer register of the Company;
and
(iii) the minutes and other records of the
meetings and other proceedings (including
any actions taken by written consent or
otherwise without a meeting) of the
stockholders, board of directors and all
committees of the board of directors of the
Company.
(b) There have been no meetings or other proceedings of the
stockholders, the board of directors or any committee of the board of directors
of the Company, that are not fully reflected in such minutes or other records.
(c) The Company has never conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the name "Homebase Work Solutions Ltd.".
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(d) There has not been any material violation of any of the
provisions of the articles of incorporation or bylaws of the Company or of any
resolution adopted by the shareholders, board of directors or any committee of
the board of directors of the Company and no event has occurred, and no
condition or circumstance exists that might (with or without notice or lapse of
time) constitute or result directly or indirectly in such a violation.
(e) The books of account, stock records, minute books and other
records of the Company are accurate, up to date and complete in all material
respects, and have been maintained in accordance with sound and prudent business
practices. All of the records of the Company are in the actual possession and
direct control of the Company.
Section 4.03 Capitalization
(a) The authorized capital stock of the Company consists of an
unlimited number of Company Common Shares, an unlimited number of first
preferred shares and an unlimited number of second preferred shares of which
955,000 Company Common Shares and 45,000 Company Preferred Shares have been
issued and are outstanding, and will be the only Company Common Shares and
Company Preferred Shares issued and outstanding on the Closing Date, and are
owned and held beneficially and of record by the Selling Shareholders as set
forth on Schedule I hereto. All issued and outstanding shares of capital stock
of the Company have been duly authorized and validly issued in full compliance
with all applicable securities laws and other applicable Requirement of Laws,
and are outstanding as fully paid and non-assessable.
(b) There are no: (i) outstanding subscriptions, options, calls,
warrants or rights (whether or not currently exercisable) to acquire any shares
in the capital or other securities of the Company, other than 67,500 outstanding
share purchase warrants and 33,750 outstanding "penalty" share purchase warrants
(collectively, the "Company Warrants") associated with the Company Preferred
Shares, which Warrants shall be tendered for cancellation on the Closing Date,
(ii) outstanding security, instrument or obligation that is or may become
convertible into or exchangeable for any shares in the capital or other
securities of the Company, (iii) Contract under which the Company is or may
become obligated to sell or otherwise issue any shares of its capital stock or
any other securities, or (iv) condition or circumstance that may directly or
indirectly give rise to or provide a basis for the assertion of a claim by any
Person to the effect that such Person is entitled to acquire or receive any
shares in the capital, or other securities of, the Company.
(c) The Company has never repurchased, redeemed or otherwise
reacquired (and has not agreed, committed or offered (in writing or otherwise)
to reacquire) any shares of capital stock or other securities of the Company.
(d) Upon the acquisition by Purchaser of the Purchased Shares,
Purchaser will own 100% of the issued and outstanding shares of capital stock of
the Company.
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Section 4.04 Authority; Binding Nature of Agreements
(a) Subject to completion of the Non-Controlling Shareholder Letters
of Transmittal and the tender of the same at closing, the Company has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement and each of the other Transaction
Documents to which it is a party, and the execution, delivery and performance by
the Company of this Agreement and each of such other Transaction Documents have
been duly authorized by all necessary action on the part of the Company and its
shareholders, board of directors and officers. Each of this Agreement and such
other Transaction Documents constitutes, or upon execution and delivery will
constitute, the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and to general principles of
equity (regardless of whether such enforcement is sought in a proceeding in
equity or at law).
(b) Each of the Controlling Shareholders has the absolute and
unrestricted right, power and capacity to enter into and to perform its
obligations under this Agreement and each of the other Transaction Documents to
which it is a party, and the execution, delivery and performance by each
Controlling Shareholder of this Agreement and such other Transaction Documents
have been duly authorized by all necessary action on the part of such
Controlling Shareholder. Each of this Agreement and such other Transaction
Documents constitutes, or upon execution and delivery will constitute, the
legal, valid and binding obligation of each Controlling Shareholder party
thereto, enforceable against such Controlling Shareholder in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of creditors and
to general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law).
Section IV.5 Non-Contravention; Consents
(a) Neither the execution and delivery of this Agreement or any
other Transaction Document to which the Company or any of the Controlling
Shareholders is a party, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with or result in a
violation of (i) any of the provisions of
the articles of incorporation or bylaws of
the Company, or (ii) any resolution adopted
by the shareholders, board of directors or
any committee of the board of directors of
the Company, or (iii) the provision of any
agreement, whether or not written, between
the holders of Company Common Shares of
which the Company or the Controlling
Shareholders have knowledge;
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(ii) to the Knowledge of the Company or the
Controlling Shareholders, contravene,
conflict with or result in a violation of,
or give any Governmental Authority or other
Person the right to challenge any of the
Transactions or to exercise any remedy or
obtain any relief under, any Requirement of
Law or any Order to which the Company or any
of the Controlling Shareholders, or any of
the assets owned or used by the Company or
any of the Controlling Shareholders, is
subject;
(iii) to the Knowledge of the Company or the
Controlling Shareholders, cause the Company
to become subject to, or to become liable
for the payment of, any Tax;
(iv) to the Knowledge of the Company or the
Controlling Shareholders, cause any of the
assets owned or used by the Company or to be
reassessed or revalued by any taxing
authority or other Governmental Authority;
(v) contravene, conflict with or result in a
violation of any of the terms or
requirements of, or give any Governmental
Authority the right to revoke, withdraw,
suspend, cancel, terminate or modify, any
Governmental Authorization that is held by
the Company or any of its employees or that
otherwise relates to the business of the
Company or to any of the assets owned or
used by the Company;
(vi) contravene, conflict with or result in a
violation or breach of, or result in a
default under, any provision of any of the
Company Contracts;
(vii) give any Person the right to (i) declare a
default or exercise any remedy under any
Company Contract (ii) accelerate the
maturity or performance of any Company
Contract or (iii) cancel, terminate or
modify any Company Contract;
(viii) give any Person the right to any payment by
the Company or give rise to any acceleration
or change in the award, grant, vesting or
determination of options, warrants, rights,
severance payments or other contingent
obligations of any nature whatsoever of the
Company in favour of any Person, in any such
case as a result of the change in control of
the Company, or otherwise resulting from the
Transactions;
(ix) contravene, conflict with or result in a
violation or breach of or a default under
any provision of, or give any Person the
right to declare a default under, any
Contract to which any of the Controlling
Shareholders is a party or by which any of
the Controlling Shareholders is bound; or
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(x) result in the imposition or creation of any Lien
upon or with respect to any asset owned or used by the Company.
(b) Except as set forth on Schedule 4.05(b), and assuming the
completion and tender of the Non-Controlling Shareholder Letters of Transmittal
on Closing, neither the Company nor any of the Controlling Shareholders was, is
or will be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with the execution and delivery of
this Agreement or any of the other Transaction Documents or the consummation or
performance of any of the Transactions.
Section 4.06 Proprietary Rights; Proprietary Information and Inventions
Agreement
(a) Except as set forth in Schedule 4.06, there is no Proprietary
Asset that is owned by or licensed to the Company or that is otherwise used or
useful in connection with the Company's business.
(b) The Company has taken all reasonable measures and precautions to
protect the confidentiality and value of each Proprietary Asset identified or
required to be identified in Schedule 4.06.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been assigned to the Company
or are licensed by any of the Selling Shareholders as described in Schedule
4.06.
(d) To the Knowledge of the Controlling Shareholders, the Company
has conducted its business without infringement or claim of infringement of any
license, patent, copyright, service mark, trademark, trade name, trade secret or
other intellectual property right of others. The Company is not infringing, and
has not at any time infringed or received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential infringement
of, any Proprietary Asset owned or used by any other Person. To the Knowledge of
the Company and each of the Controlling Shareholders, no other Person is
infringing, and no Proprietary Asset owned or used by any other Person infringes
or conflicts with, any Proprietary Asset owned or used by the Company.
(e) The Company owns, licenses or has rights to all of the
Proprietary Assets owned or used by the Company which are material to the
business of the Company. The Proprietary Assets identified in Schedule 4.06
constitute all of the Proprietary Assets necessary to enable the Company to
conduct its business in the manner in which its business is currently being
conducted.
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Section 4.07 Proceedings; Orders
(a) There is no pending Proceeding and, to the Knowledge of the
Company and the Controlling Shareholders, no Person has threatened to commence
any Proceeding:
(i) that involves the Company or that otherwise
relates to or might affect the business of
the Company or any of the assets owned or
used by the Company (whether or not the
Company is named as a party thereto); or
(ii) that challenges, or that may have the effect
of preventing, delaying, making illegal or
otherwise interfering with, any of the
Transactions.
(b) No event has occurred, and no claim, dispute or other condition
or circumstance exists, that might directly or indirectly give rise to or serve
as a basis for the commencement of any material Proceeding of the type described
in Section 4.07(a).
(c) No Proceeding has ever been commenced by or against the Company
and no Proceeding otherwise involving or relating to the Company has been
pending or threatened at any time.
(d) There is no Order to which the Company or any of the assets
owned or used by the Company is subject, and to the Knowledge of the Company and
the Controlling Shareholders, none of the Selling Shareholders is subject to any
Order that relates to the business of the Company or to any of the assets owned
or used by the Company.
(e) No officer or employee of the Company is subject to any Order
that prohibits such officer or employee from engaging in or continuing any
conduct, activity or practice relating to the business of the Company.
(f) To the knowledge of the Company and the Controlling
Shareholders, there is no proposed Order that, if issued or otherwise put into
effect, (i) may have a material adverse effect on the business, condition,
assets, liabilities, operations, financial performance, net income or prospects
(or on any aspect or portion thereof) of the Company or on the ability of the
Company or any of the Controlling Shareholders to comply with or perform any
covenant or obligation under this Agreement or any of the other Transactional
Documents, or (ii) may have the effect of preventing, delaying, making illegal
or otherwise interfering with any of the Transactions.
Section 4.08 Sale of Purchased Shares Valid
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Assuming the accuracy of the representations and warranties of the
Purchaser and InfoCast contained in Section 5.07, the offer and sale of the
Purchased Shares will be exempt from the prospectus and registration
requirements of the Ontario Act. Neither the Company nor any of the Controlling
Shareholders nor any agent on behalf of any such party has solicited or will
solicit any offers to sell or has offered to sell or will offer to sell all or
any part of such shares to any person or persons so as to bring the offer or
sale of the Purchased Shares to the Purchaser within such requirements.
Section 4.09 Financial Statements
(a) The Company has delivered to the Purchaser the unaudited balance
sheet of the Company as at March 31, 1999 (the "Unaudited Interim Balance
Sheet"), and the related unaudited statements of operations, changes in
shareholders' equity and cash flows of the Company for the six months then
ended, together with the notes thereto (collectively, the "Financial
Statements").
(b) All of the Financial Statements are accurate and complete in all
material respects, and the dollar amount of each line item included in the
Financial Statements is accurate in all material respects. The Financial
Statements and notes referred to in Section 4.09(a) are in accordance with the
books and records of the Company and present fairly the financial position of
the Company as of the respective dates thereof and the results of operations,
changes in stockholder's equity and cash flows of the Company for the periods
covered thereby. The Financial Statements have been prepared in accordance with
GAAP, applied on a consistent basis throughout the periods covered.
(c) At the date of the Unaudited Interim Balance Sheet, (i) the
Company had no Liabilities of any nature (matured or unmatured, fixed or
contingent) required by GAAP to be provided for in the Unaudited Interim Balance
Sheet or described in the notes thereto which were not provided for in the
Unaudited Interim Balance Sheet, described in the notes thereto, or set forth in
Schedule 4.17 hereto, (ii) the Company had no material Liabilities of any nature
(matured or unmatured, fixed or contingent) which were not required by GAAP to
be provided for in the Unaudited Interim Balance Sheet or described in the notes
thereto and (iii) all reserves established by the Company and set forth in the
Unaudited Interim Balance Sheet were adequate for the purposes for which they
were established. As of the date of this Agreement, the Company has no
Liabilities, except for:
(i) Liabilities identified as such in the
"liabilities" column of the Unaudited
Interim Balance Sheet;
(ii) accounts payable (of the type required to be
reflected as current liabilities in the
"liabilities" column of a balance sheet
prepared in accordance with GAAP) incurred
by the Company in the Ordinary Course of
Business since the date of the Unaudited
Interim Balance Sheet; and
(iii) the Company's obligations under the
Contracts listed in Schedule 4.11 and
potential liabilities set forth on Schedule
4.17 hereof.
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Section 4.10 Title to Assets
(a) The Company owns and has good and valid title to all assets
purported to be owned by it, including:
(i) with respect to the Company, all assets
reflected on the Unaudited Interim Balance
Sheet (except for inventory sold by the
Company since the date of the Unaudited
Interim Balance Sheet in the Ordinary Course
of Business);
(ii) all of the Company's rights under Company
Contracts; and
(iii) all other assets reflected in the Company's
books and records as being owned by the
Company.
(b) Except as set forth in Schedule 4.10, all of said assets are
owned by the Company free and clear of any Liens except liens for current taxes
and assessments not delinquent.
(c) Schedule 4.10 identifies all assets that are being leased or
licensed to the Company. All leases pursuant to which the Company leases real or
personal property are in good standing and are valid and effective in accordance
with their respective terms and there exists no default thereunder or occurrence
or condition which could result in a default thereunder or termination thereof.
The buildings, equipment and other tangible assets of the Company are in good
operating condition (normal wear and tear excepted) and are useable in the
ordinary course of business, and the Company owns, or has valid leasehold
interests in, all assets necessary for the conduct of its business as presently
conducted.
Section 4.11 Material Contracts
(a) Schedule 4.11 identifies and provides an accurate and complete
description of each Company Contract which involves future payments, performance
of services or delivery of goods or materials to or by the Company of an
aggregate amount or value in excess of CDN$5,000, or which otherwise is material
to the business or prospects of the Company (collectively, the "Material
Contracts"). All nonmaterial contracts of the Company do not in the aggregate
represent a material portion of the assets or liabilities of the Company. The
Company has delivered to the Purchaser accurate and complete copies of all
Material Contracts, including all amendments thereto.
(b) Each Material Contract is valid and in full force and effect,
and is enforceable by the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and to general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
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(c) The Company is not in default under any Material Contract in any
material respect, and to the Knowledge of the Company and each of the
Controlling Shareholders, no Person has violated or breached, or declared or
committed any default under, any Material Contract;
(d) No event has occurred, and no circumstance or condition exists,
that might (with or without notice or lapse of time) (i) result in a material
violation or breach of any of the provisions of any Material Contract, (ii) give
any Person the right to declare a default or exercise any remedy under any
Material Contract, (iii) give any Person the right to accelerate the maturity or
performance of any Material Contract, or (iv) give any Person the right to
cancel, terminate or modify, any Material Contract.
(e) the Company has not waived any of its rights under any Material
Contract.
(f) The Company has never guaranteed or otherwise agreed to cause,
insure or become liable for, and has never pledged any of its assets to secure,
the performance or payment of any obligation or other Liability of any other
Person.
(g) Except as set forth in Schedule 4.11, the Company has never been
a party to or bound by (i) any joint venture agreement, partnership agreement,
profit sharing agreement, cost sharing agreement, loss sharing agreement or
similar Contract, or (ii) any Contract that creates or grants to any Person, or
provides for the creation or grant of, any share appreciation right, phantom
share right or similar right or interest.
(h) To the knowledge of the Company and the Controlling
Shareholders, the performance of the Material Contracts will not result in any
violation of, or failure to comply with, any Requirement of Law.
(i) No Person is renegotiating, or has the right to renegotiate, any
amount paid or payable to the Company under any Material Contract or any other
term or provision of any Material Contract.
(j) The Contracts identified in Schedule 4.11 collectively
constitute all of the Contracts necessary to enable the Company to conduct its
business in the manner in which such business is currently being conducted and
in the manner in which such business is proposed to be conducted.
(k) Schedule 4.11 identifies and provides an accurate and complete
description of each proposed Contract as to which any bid, offer, written
proposal, term sheet or similar document has been submitted or received by the
Company.
(l) No party to any Material Contract has made a claim to the effect
that the Company has failed to perform an obligation thereunder. There is no
known plan, intention or indication of any contracting party to any Contract to
cause the termination, cancellation or modification of such Contract or to
reduce or otherwise change its activity thereunder so as to adversely affect the
benefits derived or expected to be derived therefrom by the Company.
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(m) The Company is neither a party to, nor bound by, any contract,
agreement, commitment or restriction which obligates the Company to perform
services or to produce products unprofitably.
Section IV.12 Employees; Employee Benefits
(a) Schedule 4.12 contains a list of all employees of the Company as
of the date hereof and their material terms and conditions of employment
including salary or wages, bonus, position title and seniority date. Except as
disclosed on Schedule 4.12, no employee of the Company is on long-term
disability leave or extended absence or in receipt of workers' compensation
benefits.
(b) Schedule 4.12 contains a list of individuals who are currently
performing services for the Company related to its business and are classified
as "consultants" or "independent contractors".
(c) The Company is not a party to or subject to any collective
bargaining agreements with any trade union or collective bargaining agent
representing any of its employees. There is no labour union organizing activity
pending or, to the Company's or the Controlling Shareholders' knowledge,
threatened with respect to any employees of the Company. Except as specified on
Schedule 4.12, no employee of the Company has any agreement or contract, written
or verbal, regarding his employment, other than those deemed to exist at common
law.
(d) To the Knowledge of the Company and the Controlling
Shareholders, no employee of the Company, nor any consultant with whom the
Company has contracted, is in violation of any term of any employment contract,
proprietary information agreement or any other agreement relating to the right
of any such individual to be employed by, or to contract with, the Company
because of the nature of the business to be conducted by the Company, and to the
Company's knowledge the continued employment by the Company of its present
employees, and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. The Company has not received
any notice alleging that any such violation has occurred. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate his, her or their employment with the Company, nor does the
Company have a present intention to terminate the employment of any officer, key
employee or group of key employees.
(e) Except as set forth in Schedule 4.12 there are no employment
policies or plans, including policies or plans regarding incentive compensation,
stock options, severance pay or other terms or conditions of employment or terms
or conditions upon which Employees may be terminated, which are binding upon the
Company.
(f) The Company has been and is being operated in full compliance
with all Requirements of Law relating to employees, including employment
standards, occupational health and safety, pay equity and employment equity.
There have been no complaints under such laws against the Company.
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(g) There are no complaints nor, to the Knowledge of the Company and
the Controlling Shareholders, are there any threatened complaints, against the
Company, before any employment standards branch or tribunal or human rights
tribunal. To the Knowledge of the Company and the Controlling Shareholders,
nothing has occurred which might lead to a complaint against the Company, under
any human rights legislation or employment standards legislation. There are no
outstanding decisions or settlements or pending settlements under the employment
standards legislation which place any obligation upon the Company, to do or
refrain from doing any act.
(h) All current assessments under the Workers' Compensation Act
(Alberta) in relation to the Company have been paid or accrued and the Company
has not been subject to any special or penalty assessment under such legislation
which has not been paid.
(i) To the knowledge of the Company and the Controlling
Shareholders, there are no outstanding labour tribunal proceedings of any kind,
including any proceedings which could result in certification of a trade union
as bargaining agent for any employees or independent contractors of the Company.
Section 4.13 Receivables; Major Customers
(a) Schedule 4.13 provides an accurate and complete breakdown and
aging of all accounts receivable, notes receivable and other receivables of the
Company as of March 31, 1999.
(b) All existing accounts receivable of the Company (including those
accounts receivable reflected on the Unaudited Interim Balance Sheet that have
not yet been collected and those accounts receivable that have arisen since
March 31, 1999 and have not yet been collected):
(i) represent valid obligations of customers of
the Company arising from bona fide
transactions entered into in the Ordinary
Course of Business; and
(ii) are current and will be collected in full
(without any counterclaim or setoff) in the
Ordinary Course of Business;
(c) Schedule 4.13 accurately identifies, and provides an accurate
and complete breakdown of the revenues received from, each customer or other
Person that accounted for more than CDN$5,000 of the gross revenues of the
Company from September, 1998 through March 31, 1999 on an annualized basis. The
Company has not received any notice or other communication (in writing or
otherwise), and has not received any other information, indicating that any
customer or other Person identified in Schedule 4.13 may cease dealing with the
Company or may otherwise reduce the volume of business transacted by such Person
with the Company below historical levels.
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Section 4.14 Major Suppliers
(a) Schedule 4.14:
(i) provides an accurate and complete breakdown
and aging of the Company's accounts payable
as of March 31, 1999;
(ii) provides an accurate and complete breakdown
of all customer deposits and other deposits
held by the Company as of the date of this
Agreement; and
(iii) provides an accurate and complete breakdown
of the Company's long term debt as of the
date of this Agreement.
(b) Schedule 4.14 accurately identifies, and provides an accurate
and complete breakdown of the amounts paid to, each supplier or other Person
that received more than CDN$5,000 from the Company from September, 1998 through
March 31, 1999 on an annualized basis.
Section 4.15 Compliance With Requirement of Laws
(a) To the Knowledge of the Company and the Controlling
Shareholders, the Company is in full compliance with each Requirement of Law
that is applicable to it or to the conduct of its business or the ownership or
use of its assets.
(b) To the Knowledge of the Company and the Controlling
Shareholders, no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) constitute or result
directly or indirectly in a material violation by the Company of, or a material
failure on the part of the Company to comply with, any Requirement of Law.
(c) The Company has not received, at any time, any notice or other
communication (in writing or otherwise) from any Governmental Authority or any
other Person regarding (i) any actual, alleged, possible or potential violation
of, or failure to comply with, any Requirement of Law, or (ii) any actual,
alleged, possible or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any cleanup or any
remedial, corrective or response action of any nature.
(d) To the Knowledge of the Company and each of the Controlling
Shareholders, no Governmental Authority has proposed or is considering any
Requirement of Law that, if adopted or otherwise put into effect, (i) may have
an material adverse effect on the business, condition, assets, liabilities,
operations, financial performance, net income or prospects of the Company, or on
the ability of the Company or any of the Controlling Shareholders to comply with
or perform any covenant or obligation under any of the Transactional Documents,
or (ii) may have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
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Section 4.16 Governmental Authorizations
(a) Schedule 4.16 identifies:
(i) each Governmental Authorization that is held
by the Company; and
(ii) each other Governmental Authorization that,
to the Knowledge of the Company and each of
the Controlling Shareholders, is held by any
of the Company's employees and relates to or
is useful in connection with the Company's
business.
(b) The Company has delivered to the Purchaser accurate and complete
copies of all of the Governmental Authorizations identified in Schedule 4.16,
including all renewals thereof and all amendments thereto. Each Governmental
Authorization identified or required to be identified in Schedule 4.16 is valid
and in full force and effect.
(c) The Governmental Authorizations identified in Schedule 4.16
constitute all of the Governmental Authorizations necessary (i) to enable the
Company to conduct its business in the manner in which its business is currently
being conducted, and (ii) to permit the Company to own and use its assets in the
manner in which they are currently owned and used.
Section 4.17 Tax Matters
(a) Each Tax required to have been paid, or claimed by any
Governmental Authority to be payable, by the Company (whether pursuant to any
Tax Return or otherwise) has been duly paid in full on a timely basis including
all installments on account of Tax for the current year that are due and payable
by it. Any Tax required to have been withheld or collected by the Company has
been duly withheld and collected, and (to the extent required) each such Tax has
been paid to the appropriate Governmental Authority.
(b) Schedule 4.17 accurately identifies all Tax Returns required to
be filed by or on behalf of the Company with any Governmental Authority with
respect to any taxable period ending on or before the Closing Date ("Company
Returns"). All Company Returns (i) have been or will be filed when due, and (ii)
have been or will be, when filed, accurately and completely prepared in full
compliance with all applicable Requirement of Laws, and the Company have
completely and accurately reported all income and all other amounts of
information required to be reported thereon. All amounts shown on the Company
Returns to be due on or before the Closing Date, and all amounts otherwise
payable in connection with the Company Returns on or before the Closing Date,
have been or will be paid on or before the Closing Date. The Company, having
been incorporated in September 1998, has not yet been required to file a Tax
Return.
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(c) The Company's liability for unpaid Taxes for all periods ending
on or before March 31, 1999 does not, in the aggregate, exceed the amount of the
current liability accruals for Taxes (excluding reserves for deferred taxes)
reported in the Unaudited Interim Financial Statements. The Company will
establish, in the Ordinary Course of Business, reserves adequate for the payment
of all Taxes for the period from September 30, 1998 through the Closing Date in
addition to those not included on the Company's Unaudited Interim Balance Sheet,
and the Company will disclose the dollar amount of such reserves to the
Purchaser on or prior to the Closing Date.
(d) Schedule 4.17 accurately identifies each examination or audit of
any Company Return that has been conducted by any Governmental Authority since
the Company's inception. The Company has delivered to the Purchaser accurate and
complete copies of all material audit reports (to which the Company has access)
relating to Company Returns, elections, designations or similar things relating
to Taxes for which the Company is or may be liable. No extension or waiver of
the limitation period applicable to any of the Company Returns has been granted
(by the Company or any other Person), and no such extension or waiver has been
requested from the Company.
(e) There are no unsatisfied Liabilities for Taxes (including
liabilities for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document received
by the Company.
(f) There are no actions, suits, proceedings, investigations, audits
or claims now pending or, to the knowledge of the Company and the Controlling
Shareholders threatened, against the Company in respect of any Taxes and there
are no matters under discussion, audit or appeal with any Governmental Authority
relating to Taxes.
(g) Except as specifically disclosed in writing to the Purchaser,
for purposes of the Tax Act or any applicable provincial or municipal taxing
statute, no Person or group of Persons has ever acquired or had the right to
acquire control of the Company.
(h) The transfer pricing practices of the Company have not been the
subject of a review or audit by any revenue or other taxing authority and there
are no agreements, waivers or other agreement providing for an extension of time
with respect to the assessment or collection of any Tax against the Company with
respect to any matter relating to transfer pricing issues or the transfer
pricing practices of the Company. There are no suits or similar proceedings now
pending or threatened against the Company with respect to any transfer pricing
issue or transfer pricing practice of the Company. There are currently no
matters under discussion with any taxation or other authority relating to any
transfer pricing issue, transfer pricing practices of the Company, or any
advance pricing agreement or similar process or agreement concerning transfer
pricing practices and issues of the Company.
(i) No reserves are required to be taken by the Company for purposes
of the Tax Act.
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(j) There are no reassessments of the Company that are issued and
outstanding and there are no outstanding issues which have been raised and
communicated to the Company by any governmental body for any taxation year in
respect of which a Tax Return of the Company has been audited. No Governmental
Authority has challenged, disputed or questioned the Company in respect of Taxes
or of any returns, filings or other reports filed under any statute providing
for Taxes. The Company is not negotiating any draft assessment or reassessment
with any Governmental Authority. To the Knowledge of the Company and each of the
Controlling Shareholders, there are no grounds for an assessment or reassessment
of the Company of an amount which would have a material adverse effect on the
Company other than as disclosed in the Financial Statements. The Company has not
received any indication from any governmental body that an assessment (other
than an assessment accepting a Tax Return as filed) or reassessment of the
Company is proposed in respect of any Taxes, regardless of its merits. The
Company has not executed or filed with any governmental body any agreement or
waiver extending the period for assessment, reassessment or collection of any
Taxes.
(k) The Company 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 Tax Act, all amounts required by
law to be withheld, and furthermore, have remitted such withheld amounts within
the prescribed periods to the appropriate Governmental Authority. The Company
has remitted all Canada Pension Plan contributions, provincial pension plan
contributions, employment insurance premiums, employer health taxes, worker's
compensation premiums and other Taxes payable by it in respect of its employees
and has remitted such amounts to the proper governmental body within the time
required under the applicable legislation. Other than as set forth in Schedule
4.17, the Company has charged, collected and remitted on a timely basis all
Taxes as required under applicable legislation on any sale, supply or delivery
whatsoever it has made; and for any late filings disclosed on Schedule 4.17, no
penalties or fines will or have become due and owing as a result of such late
filings.
(l) The Company has not deducted any material amounts in computing
its income in a taxation year that are currently unpaid and that could, if they
remain unpaid, be required to be included in income in a subsequent taxation
year under Section 78 of the Tax Act.
(m) The Company will not at any time be deemed to have a capital
gain pursuant to subsection 80.03(2) of the Tax Act as a result of any
transactions or event taking place in any fiscal period or portion thereof
ending on or before the Closing Date.
(n) The Company (i) does not have a permanent establishment in any
jurisdiction other than Canada, (ii) is not subject to any form of taxation in
any jurisdiction other than Canada, and (iii) has never filed or is now or has
ever been required to file any federal, state, local, provincial or other form
of tax return in any jurisdiction other than Canada.
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Section 4.18 Securities Laws Compliance; Registration Rights
The offer and sale of the Purchased Shares to the Purchaser has
complied and will comply with all securities laws of the Province of Alberta.
The Company has complied with all applicable provincial securities laws of
Canada in connection with all offers and sales of securities of the Company
prior to the date of this Agreement. The Company has not heretofore granted any
purchaser of its securities the right to qualify the distribution of its
securities by prospectus in any province of Canada.
Section 4.19 Finders and Brokers
Neither the Company or any Controlling Shareholder nor any person
acting on behalf of the Company or any Controlling Shareholder has negotiated
with any finder, broker, intermediary or any similar person in connection with
the transactions contemplated herein. The Company and the Controlling
Shareholders will indemnify the Purchaser and hold it harmless from any
liability or expense arising from any claim for brokerage commissions, finder's
fees or other similar compensation based upon any agreement, arrangement or
understanding made by or on behalf of the Company or any Controlling
Shareholder.
Section 4.20 Environmental Compliance
The Company is in compliance in all material respect with all
applicable Environmental Laws. The Company has not received any notice or other
communication (in writing or otherwise) that alleges that the Company is not in
compliance with any Environmental Law, and, to the best Knowledge of the Company
and the Controlling Shareholders, there are no circumstances that may prevent or
interfere with the Company's compliance with any Environmental Law in the
future.
Section 4.21 Insurance
(a) Schedule 4.21 accurately sets forth, with respect to
each insurance policy maintained by or at the expense of, or for the direct or
indirect benefit of, the Company:
(i) the name of the insurance carrier that
issued such policy and the policy number of
such policy;
(ii) whether such policy is a "claims made" or an
"occurrences" policy;
(iii) a description of the coverage provided by
such policy and the material terms and
provisions of such policy (including all
applicable coverage limits, deductible
amounts and co-insurance arrangements and
any non customary exclusions from coverage);
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(iv) the annual premium payable with respect to
such policy, and the cash value (if any) of
such policy; and
(v) a description of any claims pending, and any
claims that have been asserted in the past,
with respect to such policy.
(b) Schedule 4.21 also identifies (i) each pending application for
insurance that has been submitted by or on behalf of the Company, and (ii) each
self-insurance or risk-sharing arrangement affecting the Company or any of its
assets. The Company has delivered to the Purchaser accurate and complete copies
of all of the insurance policies identified in Schedule 4.21 (including all
renewals thereof and endorsements thereto) and all of the pending applications
identified in Schedule 4.21.
(c) Each of the policies identified in Schedule 4.21 is valid,
enforceable and in full force and effect, and has been issued by an insurance
carrier that, to the Knowledge of the Company and the Controlling Shareholders,
is solvent, financially sound and reputable. All of the information contained in
the applications submitted in connection with said policies was (at the times
said applications were submitted) accurate and complete, and all premiums and
other amounts owing with respect to said policies have been paid in full on a
timely basis. The nature, scope and dollar amounts of the insurance coverage
provided by said policies are similar to the coverage customarily carried by
companies of similar size and character of the Company. Each of the policies
identified in Schedule 4.21 will continue in full force and effect following the
Closing. The Company has paid all premiums due, and has otherwise performed all
of its obligations, under each policy to which it is a party or that provides
coverage to it or any of its directors or officers in connection with their
performance of services to the Company.
(d) There is no pending material claim under or based upon any of the
policies identified in Schedule 4.21, and no event has occurred, and no
condition or circumstance exists, that might (with or without notice or lapse of
time) directly or indirectly give rise to or serve as a basis for any such
claim.
(e) The Company has not received:
(i) any notice or other communication (in
writing or otherwise) regarding the actual
or possible cancellation or invalidation of
any of the policies identified in Schedule
4.21 or regarding any actual or possible
adjustment in the amount of the premiums
payable with respect to any of said
policies;
(ii) any notice or other communication (in
writing or otherwise) regarding any actual
or possible refusal of coverage under, or
any actual or possible rejection of any
claim under, any of the policies identified
in Schedule 4.21; or
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(iii) any indication that the issuer of any of the
policies identified in Schedule 4.21 may be
unwilling or unable to perform any of its
obligations thereunder.
Section 4.22 Related Party Transactions
Except as set forth in Schedule 4.22:
(a) no Related Party has, and no Related Party has at any time since
September 1998 had, any direct or indirect interest of any nature in any asset
used in or otherwise relating to the business of the Company;
(b) no Related Party is, or has at any time since September 1998
been, indebted to the Company;
(c) since September 1998, no Related Party has entered into, or has
had any direct or indirect financial interest in, any Contract, transaction or
business dealing of any nature involving the Company;
(d) to the Knowledge of the Company and the Controlling
Shareholders, no Related Party is competing, or has at any time since September
1998 competed, directly or indirectly, with the Company in any market served by
the Company;
(e) to the Knowledge of the Company and the Controlling
Shareholders, no Related Party has any claim or right against the Company; and
(f) to the Knowledge of the Company and the Controlling
Shareholders, no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) directly or indirectly give
rise to or serve as a basis for any material claim or right in favour of any
Related Party against the Company.
Section 4.23 Absence of Changes
Except as set forth in Schedule 4.23, since January 1, 1999:
(a) there has not been any material adverse change in the Company's
business, condi tion, assets, liabilities, operations, financial performance,
net income or prospects (or in any aspect or portion thereof), and no event has
occurred that might have a material adverse effect on the Company's business,
condition, assets, liabilities, operations, financial performance, net income or
prospects (or on any aspect or portion thereof);
(b) there has not been any loss, damage or destruction to, or any
interruption in the use of, any of the Company's assets (whether or not covered
by insurance);
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(c) the Company has not (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, or (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold or otherwise issued any shares of
capital stock or any other securities;
(e) the Company has not amended its articles of incorporation or
bylaws and has not effected or been a party to any Acquisition Transaction,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(f) the Company has not purchased or otherwise acquired any asset
from any other Person, except for supplies acquired by the Company in the
Ordinary Course of Business;
(g) the Company has not leased or licensed any asset from any other
Person;
(h) the Company has not made any material capital expenditure;
(i) the Company has not sold or otherwise transferred, and has not
leased or licensed, any asset to any other Person except for products sold by
the Company from its inventory in the Ordinary Course of Business;
(j) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(k) the Company has not pledged or hypothecated any of its assets or
otherwise permitted any of its assets to become subject to any Lien;
(l) the Company has not made any loan or advance to any other
Person;
(m) the Company has not (i) established or adopted any employee
benefit plan, or (ii) paid any bonus or made any profit sharing or similar
payment to, or increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees;
(n) the Company has not increased the compensation of any of its
officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of its business;
(o) there has been no resignation or termination of employment of
any officer or key employee of the Company;
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(p) there has been no labour dispute involving the Company or its
employees and none is pending or, to the Company's Knowledge, threatened;
(q) the Company has not entered into, and neither the Company nor
any of the assets owned or used by the Company has become bound by, any Material
Contract;
(r) no Material Contract by which the Company or any of the assets
owned or used by the Company is or was bound, or under which the Company has or
had any rights or interest, has been amended or terminated;
(s) the Company has not incurred, assumed or otherwise become
subject to any Liability, other than accounts payable (of the type required to
be reflected as current liabilities in the "liabilities" column of a balance
sheet prepared in accordance with GAAP) incurred by the Company in the Ordinary
Course of Business;
(t) the Company has not discharged any Lien or discharged or paid
any indebtedness or other Liability, except for accounts payable that (i) are
reflected as current liabilities in the "liabilities" column of the Unaudited
Interim Balance Sheet or have been incurred by the Company since March 31, 1999
in the Ordinary Course of Business, and (ii) have been discharged or paid in the
Ordinary Course of Business;
(u) the Company has not forgiven any debt or otherwise released or
waived any right or claim;
(v) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(w) the Company has not entered into any transaction or taken any
other action outside the Ordinary Course of Business; and
(x) the Company has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses "(c)" through "(w)" above.
Section 4.24 Controlling Shareholders
(a) Each Controlling Shareholder has the capacity and financial
capability to comply with and perform all of his covenants and obligations under
each of the Transaction Documents to which it is or may become a party.
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(b) Each Controlling Shareholder is, and at the Closing will be, the
registered and beneficial owner and holder of the Purchased Shares set forth
beside its name on Schedule 2.01, free and clear of any Liens. Each Controlling
Shareholder has delivered to the Purchaser accurate and complete copies of the
stock certificates evidencing the Purchased Shares owned by such Controlling
Shareholder.
(c) Each Controlling Shareholder:
(i) has not, at any time, (A) made a general
assignment for the benefit of creditors, (B)
filed, or had filed against him, any
bankruptcy petition or similar filing, (C)
suffered the attachment or other judicial
seizure of all or a substantial portion of
his assets, (D) admitted in writing its
inability to pay his debts as they become
due, (E) been convicted of, or pleaded
guilty to, fraud or criminal dishonesty or
(F) taken or been the subject of any action
that may have an adverse effect on his
ability to comply with or perform his
respective covenants or obligations under
any of the Transaction Documents; and
(ii) is not subject to any Order that may have an
adverse effect on his ability to comply with
or perform its covenants or obligations
under any of the Transaction Documents.
(d) There is no Proceeding pending, and no Person has threatened to
commence any Proceeding, that may have an adverse effect on the ability of any
Controlling Shareholder to comply with or perform his covenants or obligations
under any of the Transaction Documents. No event has occurred, and no claim,
dispute or other condition or circumstance exists, that might directly or
indirectly give rise to or serve as a basis for the commencement of any such
Proceeding.
(e) No consent, approval, authorization, order, registration or
qualification of or by any Person is required in connection with the execution,
delivery and performance by any Controlling Shareholder of this Agreement or the
consummation of the Transactions contemplated hereby.
(f) To the Knowledge of the Company and the Controlling
Shareholders, each of the Selling Shareholders is not a non-resident of Canada
for purposes of the Tax Act and accordingly, Section 116 of the Tax Act has no
application to the transactions contemplated herein, with the exception of
Messrs. Dave Olson, Scott Grim, Don Ritter, Shirley Crow and Ian Morrison.
Section 4.25 Powers of Attorney
Neither the Company nor any of the Controlling Shareholders has or
have given a power of attorney to any Person.
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Section 4.26 Full Disclosure
(a) The representations and warranties of the Company and each
Controlling Shareholder contained in this Agreement, each of the other
Transaction Documents and each of the documents delivered or provided to the
Purchaser by or on behalf of the Company or any Controlling Shareholder in
connection with this Agreement or any of the Transactions (i) do not contain any
untrue statement of a material fact, or (ii) omit to state any material fact of
which the Company or any of the Controlling Shareholders has Knowledge, which
fact is necessary in order to make the statements and information contained in
this Agreement, the other Transaction documents and such documents not
misleading.
(b) The Company and the Controlling Shareholders have provided the
Purchaser and the Purchaser's Representatives with full and complete access to
all of the Company's records and other documents and data.
Section 4.27 Investment Representations
(a) Each Selling Shareholder has been advised by the Company and
understands that none of the Exchangeable Shares or the InfoCast Exchange Stock
issuable upon the exchange thereof has been registered under the U.S. Securities
Act or qualified by prospectus for distribution under the Securities Act or the
comparable registration in the other provinces of Canada. Each Selling
Shareholder has been advised by the Company and understands that the
Exchangeable Shares and the InfoCast Exchange Stock are being offered and sold
pursuant to an exemption from registration contained in the U.S. Securities Act,
and upon exemptions (which, in the case of trades in the InfoCast Exchange
Stock, may be unavailable unless and until a discretionary ruling is made by the
Ontario Securities Commission in respect thereof) from the prospectus and
registration requirements of the Securities Act, based in part upon each Selling
Shareholder's representations contained in this Agreement and the
Non-Controlling Shareholder Letters of Transmittal.
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(b) Each Selling Shareholder has been advised by the Company and
acknowledged that it must bear the economic risk of the investment in the
Exchangeable Shares and/or the InfoCast Exchange Stock indefinitely unless the
Exchangeable Shares or the InfoCast Exchange Stock, as the case may be, are
registered pursuant to the U.S. Securities Act, or an exemption from
registration is available, or are qualified for distribution by prospectus in
Canada, or an exemption from applicable prospectus requirements in respect of
the resale thereof is available. Each Selling Shareholder has been advised by
the Company and acknowledged that its right to obtain InfoCast Exchange Stock
upon the exchange of the Exchangeable Shares is subject to the availability of
exemptions from the prospectus and registration requirements under applicable
securities laws in respect of trades in the InfoCast Exchange Stock. Each
Selling Shareholder understands that there is no assurance that any exemption
from registration under the U.S. Securities Act or any exemption from the
prospectus requirements of the Securities Act will be available and that, even
if available, such exemption may not allow any Selling Shareholder to transfer
all or any portion of the Exchangeable Shares or the InfoCast Exchange Stock
under the circumstances, in the amounts or at the times such Selling Shareholder
might propose.
(c) Each Controlling Shareholder is acquiring the Exchangeable
Shares and the InfoCast Exchange Stock for such Controlling Shareholder's own
account for investment only, and not with the current intention of making a
public distribution thereof.
(d) Each Controlling Shareholder represents that by reason of its
business or financial experience, each Controlling Shareholder has the capacity
to protect its own interests in connection with the transactions contemplated in
this Agreement.
Section 4.28 Corporate Governance
The Company and each of the Controlling Shareholders agrees to and
agrees to be bound by the provisions and governance guidelines prescribed in
Schedule 5.27, which agreement and obligation shall survive the completion of
the transactions contemplated herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND INFOCAST
Each of the Purchaser and InfoCast, jointly and severally, hereby
represents and warrants to the Company and the Selling Shareholders as follows:
Section 4.1 Organization, Good Standing and Qualification of the Purchaser
(a) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of Ontario and is duly qualified to conduct
business and in corporate and tax good standing under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties requires such qualification. The Purchaser has all requisite
corporate power and authority to own and operate its properties and assets, to
execute, deliver and perform its obligations under this Agreement, and to carry
on its business as presently conducted and as presently proposed to be
conducted.
Section 4.2 Capitalization
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The authorized capital of the Purchaser consists of (a) an unlimited
number of common shares, 10,000,000 of which are issued and outstanding and
owned beneficially and of record by InfoCast, and (b) an unlimited number of
Exchangeable Shares, of which 1,500,000 are issued and outstanding as of the
date hereof and, after giving effect to the issuance of the Exchangeable Shares
in accordance with Section 2.02(b) on the Closing Date, a further 3,400,000 of
which shall be issued and outstanding. All issued and outstanding common shares
of the Purchaser have been, and on the Closing Date, all of the Exchangeable
Shares will be, duly authorized and validly issued in full compliance with all
applicable securities laws and other applicable Requirement of Laws, and are
fully paid and non-assessable.
Section 5.3 Authority; Binding Nature of Agreements
The Purchaser has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement and
each of the other Transaction Documents to which it is a party, and the
execution, delivery and performance by the Purchaser of this Agreement and each
of such other Transaction Documents have been duly authorized by all necessary
action on the part of the Purchaser, its shareholders, board of directors and
officers. Each of this Agreement and such other Transaction Documents
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and to general principles of equity (regardless of whether
such enforcement is sought in a proceeding in equity or at law).
Section 5.4 Non-Contravention; Consents
(a) Neither the execution and delivery of this Agreement or any
other Transaction Document to which the Purchaser is a party, nor the
consummation or performance of any of the Transactions, will directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in a
violation of (i) any of the provisions of
the Purchaser's articles of incorporation or
bylaws, or (ii) any resolution adopted by
the Purchaser's stockholders, the
Purchaser's board of directors or any
committee of the Purchaser's board of
directors;
(ii) to the Knowledge of the Purchaser and
InfoCast, contravene, conflict with or
result in a violation of, or give any
Governmental Authority or other Person the
right to challenge any of the Transactions
or to exercise any remedy or obtain any
relief under, any Requirement of Law or any
Order to which the Purchaser or any of the
assets owned or used by the Purchaser is
subject; or
(iii) contravene, conflict with or result in a
violation or breach of, or result in a
default under, any provision of any of
Contract to which the Purchaser is a party;
(b) Except as set forth on Schedule 5.04, the Purchaser was, is and
will not be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with the execution and delivery of
any of this Agreement or any of the other Transaction Documents or the
consummation or performance of any of the Transactions.
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Section 5.5 Proceedings; Orders
(a) There is no pending Proceeding, and, to the Knowledge of the
Purchaser, no Person has threatened to commence any Proceeding that challenges,
or that may have the effect of preventing, delaying, making illegal or otherwise
interfering with, any of the Transactions.
(b) No event has occurred, and no claim, dispute or other condition
or circumstance exists, that might directly or indirectly give rise to or serve
as a basis for the commencement of any Proceeding of the type described in
Section 5.05(a).
(c) To the Knowledge of the Purchaser and InfoCast, there is no
proposed Order that, if issued or otherwise put into effect may have the effect
of preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
Section 5.6 Sale of Exchangeable Shares Valid
Assuming the accuracy of the representations and warranties of the
Company and the Company Principals contained in Section 4.08, and of the Selling
Shareholders set forth in the Letters of Transmittal, and of the Non-Controlling
Shareholders set forth in the Non-Controlling Shareholder Letters of
Transmittal, the offer and sale of the Exchangeable Shares and the issuance of
the InfoCast Exchange Stock upon the exchange thereof in accordance with the
Exchange Agreement will be exempt from the registration requirements of the U.S.
Securities Act and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. The issuance of the
Exchangeable Shares to the Selling Shareholders is exempt from the prospectus
requirements of the Ontario Act. Neither the Purchaser nor any agent on behalf
of the Purchaser has solicited or will solicit any offers to sell or has offered
to sell or will offer to sell all or any part of the Exchangeable Shares or the
InfoCast Exchange Stock to any person or persons, so as to bring the offer or
sale of the Exchangeable Shares or the InfoCast Exchange Stock to the Selling
Shareholders within the registration provisions of the U.S. Securities Act or
any state securities laws.
Section 5.7 Investment Representations
(a) The Purchaser understands that none of the Purchased Shares have
been registered under the U.S. Securities Act. The Purchaser also understands
that the Purchased Shares are being offered and sold pursuant to an exemption
from registration contained in the U.S. Securities Act and upon an exemption
from the prospectus requirements of the Ontario Act based in part upon the
Purchaser's representations contained in this Agreement.
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(b) The Purchaser has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests. The
Purchaser must bear the economic risk of this investment indefinitely unless the
Purchased Shares are registered pursuant to the U.S. Securities Act or qualified
for distribution by prospectus in Canada, or an exemption from registration or
prospectus requirements is available. The Purchaser understands that there is no
assurance that any exemption from registration under the U.S. Securities Act or
from the prospectus requirements of Canadian securities legislation will be
available and that, even if available, such exemption may not allow Purchaser to
transfer all or any portion of the Purchased Shares under the circumstances, in
the amounts or at the times Purchaser might propose.
(c) The Purchaser is acquiring the Purchased Shares for the
Purchaser's own account for investment only, and not with the current intention
of making a public distribution thereof.
(d) The Purchaser represents that by reason of its, or of its
management's business or financial experience, the Purchaser has the capacity to
protect its own interests in connection with the transactions contemplated in
this Agreement.
Section 5.8 Consents
All consents, approvals, orders, or authorizations of, or
registration, qualification, designation, declaration or filing with any
Governmental Authority or banking authority required on the part of Purchaser in
connection with the consummation of the transactions contemplated in this
Agreement have been or shall have been obtained prior to and shall be effective
as of the Closing.
In addition to the joint and several representations and warranties
set forth above, InfoCast alone hereby represents and warrants to the Company
and each of the Selling Shareholders as follows:
Section 5.9 Organization, Good Standing and Qualification of InfoCast
(a) InfoCast is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and is duly qualified to
conduct business and in corporate and tax good standing under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties require such qualification. InfoCast has all requisite corporate
power and authority to own and operate its properties and assets, to execute,
deliver and perform its obligations under this Agreement, and to carry on its
business as presently conducted and as presently proposed to be conducted.
(b) Schedule 5.09(b) accurately sets forth (i) the names of the
members of InfoCast's board of directors, (ii) the names of the members of each
committee of InfoCast's board of directors and (iii) the names and titles of
InfoCast's officers.
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(c) InfoCast is not insolvent within the meaning of applicable laws,
rules regulation or similar requirement, and has not made any assignment in
favour of its creditors nor a proposal in bankruptcy to its creditors or any
class thereof, nor has any petition for a receiver order been presented in
respect of InfoCast. InfoCast has not initiated any proceedings with respect to
a compromise or arrangement with its creditors or for the dissolution,
liquidation or reorganization of InfoCast or the winding up or cessation of the
business or affairs of InfoCast. No receiver has been appointed in respect of
InfoCast or any of its assets and no execution or distress has been levied upon
any of its assets.
(d) InfoCast has no subsidiaries other than the Purchaser, Virtual
Performance Systems Inc. and Cheltenham Technologies (Bermuda) Ltd.
Section 5.10 Articles of Incorporation and By-Laws; Records
(a) InfoCast has delivered to the Company accurate and complete
copies of:
(i) the articles of incorporation and bylaws,
including all amendments thereto of
InfoCast;
(ii) the minutes and other records of the
meetings and other proceedings (including
any actions taken by written consent or
otherwise without a meeting) of the
stockholders, board of directors and all
committees of the board of directors of
InfoCast.
(b) There have been no meetings or other proceedings of the
stockholders, the board of directors or any committee of the board of directors
of InfoCast, that are not fully reflected in such minutes or other records.
(c) InfoCast has never conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the name "InfoCast Corporation" and "Grant
Reserve Corporation".
(d) There has not been any material violation of any of the
provisions of the articles of incorporation or bylaws of InfoCast or of any
resolution adopted by the shareholders, board of directors or any committee of
the board of directors of InfoCast and no event has occurred, and no condition
or circumstance exists that might (with or without notice or lapse of time)
constitute or result directly or indirectly in such a violation.
(e) The books of account, stock records, minute books and other
records of InfoCast are accurate, up to date and complete in all material
respects, and have been maintained in accordance with sound and prudent business
practices. All of the records of InfoCast are in the actual possession and
direct control of InfoCast.
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Section 5.11 Capitalization
(a) The authorized capital stock of InfoCast consists of an
unlimited number of common shares of which 16,672,333 shares have been issued
and are outstanding, and will be the only shares issued and outstanding on the
Closing Date. All issued and outstanding shares of capital stock of InfoCast
have been duly authorized and validly issued in full compliance with all
applicable securities laws and other applicable Requirement of Laws, and are
outstanding as fully paid and non-assessable.
(b) There are no: (i) outstanding subscriptions, options, calls,
warrants or rights (whether or not currently exercisable) to acquire any shares
in the capital or other securities of InfoCast, other than 2,075,000 options to
acquire 2,075,000 shares at exercise price of US$1.00 per share, (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares in the capital or other securities of
InfoCast, other than 1,500,000 shares of InfoCast Common Stock reserved for
issuance upon exercise of outstanding Exchangeable Shares, (iii) contracts under
which InfoCast is or may become obligated to sell or otherwise issue any shares
of its capital stock or any other securities, or (iv) condition or circumstance
that may directly or indirectly give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any shares in the capital, or other securities of, InfoCast.
(c) InfoCast has never repurchased, redeemed or otherwise reacquired
(and has not agreed, committed or offered (in writing or otherwise) to
reacquire) any shares of capital stock or other securities of InfoCast.
Section 5.12 Authority; Binding Nature of Agreements
(a) InfoCast has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement and
each of the other Transaction Documents to which it is a party, and the
execution, delivery and performance by InfoCast of this Agreement and each of
such other Transaction Documents have been duly authorized by all necessary
action on the part of InfoCast and its shareholders, board of directors and
officers. Each of this Agreement and such other Transaction Documents
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of InfoCast enforceable against InfoCast in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and to general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law).
Section 5.13 Non-Contravention; Consents
(a) Neither the execution and delivery of this Agreement or any
other Transaction Document to which InfoCast is a party, nor the consummation or
performance of any of the Transactions, will directly or indirectly (with or
without notice or lapse of time):
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(i) contravene, conflict with or result in a
violation of (i) any of the provisions of
the articles of incorporation or bylaws of
InfoCast, or (ii) any resolution adopted by
the shareholders, board of directors or any
committee of the board of directors of
InfoCast, or (iii) the provision of any
agreement, whether or not written, between
the holders of InfoCast Common Stock;
(ii) contravene, conflict with or result in a
violation of, or give any Governmental
Authority or other Person the right to
challenge any of the Transactions or to
exercise any remedy or obtain any relief
under, any Requirement of Law or any Order
to which InfoCast or any of the assets owned
or used by InfoCast is subject;
(iii) contravene, conflict with or result in a
violation of any of the terms or
requirements of, or give any Governmental
Authority the right to revoke, withdraw,
suspend, cancel, terminate or modify, any
Governmental Authorization that is held by
InfoCast or any of its employees or that
otherwise relates to the business of
InfoCast or to any of the assets owned or
used by InfoCast;
(iv) contravene, conflict with or result in a
violation or breach of, or result in a
default under, any provision of any of
InfoCast Contracts;
(v) give any Person the right to (i) declare a
default or exercise any remedy under any
InfoCast Contract (ii) accelerate the
maturity or performance of any InfoCast
Contract or (iii) cancel, terminate or
modify any InfoCast Contract;
(vi) give any Person the right to any payment by
InfoCast or give rise to any acceleration or
change in the award, grant, vesting or
determination of options, warrants, rights,
severance payments or other contingent
obligations of any nature whatsoever of
InfoCast in favour of any Person, in any
such case as a result of the change in
control of InfoCast, or otherwise resulting
from the Transactions; or
(vii) result in the imposition or creation of any
Lien upon or with respect to any asset owned
or used by InfoCast.
Section 5.14 Proprietary Rights; Proprietary Information
and Inventions Agreement
(a) Except as set forth in Schedule 5.14, there is no Proprietary
Asset that is owned by or licensed to InfoCast or that is otherwise used or
useful in connection with InfoCast's business.
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(b) InfoCast has taken all reasonable measures and precautions to
protect the confidentiality and value of each Proprietary Asset identified or
required to be identified in Schedule 5.14.
(c) To the Knowledge of InfoCast, InfoCast has conducted its
business without infringement or claim of infringement of any license, patent,
copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of others. InfoCast is not infringing, and has not
at any time infringed or received any notice or other communication (in writing
or otherwise) of any actual, alleged, possible or potential infringement of, any
Proprietary Asset owned or used by any other Person. To the Knowledge of
InfoCast no other Person is infringing, and no Proprietary Asset owned or used
by any other Person infringes or conflicts with, any Proprietary Asset owned or
used by InfoCast.
(d) InfoCast owns, licenses or has rights to all of the Proprietary
Assets owned or used by InfoCast. The Proprietary Assets identified in Schedule
5.14 constitute all of the Proprietary Assets necessary to enable InfoCast to
conduct its business in the manner in which its business is currently being
conducted.
Section 5.15 Proceedings; Orders
(a) There is no pending Proceeding and, to the Knowledge of
InfoCast, no Person has threatened to commence any Proceeding:
(i) that involves InfoCast or that otherwise
relates to or might affect the business of
InfoCast or any of the assets owned or used
by InfoCast (whether or not InfoCast is
named as a party thereto); or
(ii) that challenges, or that may have the effect
of preventing, delaying, making illegal or
otherwise interfering with, any of the
Transactions.
(b) No event has occurred, and no claim, dispute or other condition
or circumstance exists, that might directly or indirectly give rise to or serve
as a basis for the commencement of any material Proceeding of the type described
in Section 5.15(a).
(c) No Proceeding has ever been commenced by or against InfoCast and
no Proceeding otherwise involving or relating to InfoCast has been pending or
threatened at any time.
(d) There is no Order to which InfoCast or any of the assets owned
or used by InfoCast is subject that relates to the business of InfoCast or to
any of the assets owned or used by InfoCast.
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(e) To the knowledge of InfoCast, there is no proposed Order that,
if issued or otherwise put into effect, (i) may have a material adverse effect
on the business, condition, assets, liabilities, operations, financial
performance, net income or prospects (or on any aspect or portion thereof) of
InfoCast or on the ability of InfoCast to comply with or perform any covenant or
obligation under this Agreement or any of the other Transactional Documents, or
(ii) may have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
Section 5.16 Sale of Purchased Shares Valid
Assuming the accuracy of the representations and warranties of the
Controlling Shareholders and the Selling Shareholders contained herein and in
the Non-Controlling Shareholder Declarations, the issue of the Exchangeable
Shares and the InfoCast Exchange Stock will be exempt from the prospectus and
registration requirements of the Ontario Act and the Alberta Act.
Section 5.17 Financial Statements
(a) InfoCast has delivered to the Company the audited balance sheet
of InfoCast as at March 31, 1999 (the "InfoCast Balance Sheet"), and the related
audited statements together with the notes thereto (collectively, the "InfoCast
Financial Statements").
(b) The InfoCast Financial Statements are accurate and complete in
all material respects, and the dollar amount of each line item included in the
InfoCast Financial Statements is accurate in all material respects. The
Financial Statements and the notes thereto are in accordance with the books and
records of InfoCast and present fairly the financial position of InfoCast as of
the respective dates thereof and the results of operations, changes in
stockholder's equity and cash flows of InfoCast for the periods covered thereby.
The Financial Statements have been prepared in accordance with US GAAP, applied
on a consistent basis throughout the periods covered.
(c) At the date of the InfoCast Balance Sheet, (i) InfoCast had no
Liabilities of any nature (matured or unmatured, fixed or contingent) required
by US GAAP to be provided for in the InfoCast Balance Sheet or described in the
notes thereto which were not provided for in the InfoCast Balance Sheet, or
described in the notes thereto, (ii) InfoCast had no material Liabilities of any
nature (matured or unmatured, fixed or contingent) which were not required by US
GAAP to be provided for in the InfoCast Balance Sheet or described in the notes
thereto and (iii) all reserves established by InfoCast and set forth in the
InfoCast Balance Sheet were adequate for the purposes for which they were
established. As of the date of this Agreement, InfoCast has no Liabilities,
except for:
(i) Liabilities identified as such in the
"liabilities" column of the InfoCast Balance
Sheet;
(ii) accounts payable (of the type required to be
reflected as current liabilities in the
"liabilities" column of a balance sheet
prepared in accordance with US GAAP)
incurred by InfoCast in the ordinary course
of business since the date of the InfoCast
Balance Sheet; and
(iii) InfoCast's obligations under the Contracts
listed in Schedule 5.19.
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Section 5.18 Title to Assets
(a) InfoCast owns and has good and valid title to all assets
purported to be owned by it, including:
(i) with respect to InfoCast, all assets
reflected on the InfoCast Balance Sheet
(except for inventory sold by InfoCast since
the date of the InfoCast Balance Sheet in
the ordinary course of business);
(ii) all of InfoCast's rights under InfoCast
Contracts; and
(iii) all other assets reflected in InfoCast's
books and records as being owned by
InfoCast.
Section 5.19 InfoCast Material Contracts
(a) Schedule 5.19 identifies and provides an accurate and complete
description of each InfoCast Contract which involves future payments,
performance of services or delivery of goods or materials to or by InfoCast of
an aggregate amount or value in excess of US$100,000, or which otherwise is
material to the business or prospects of InfoCast (collectively, the "InfoCast
Material Contracts"). All nonmaterial contracts of InfoCast do not in the
aggregate represent a material portion of the assets or liabilities of InfoCast.
InfoCast has delivered to the Company accurate and complete copies of all
InfoCast Material Contracts, including all amendments thereto.
(b) Each InfoCast Material Contract is valid and in full force and
effect, and is enforceable by InfoCast in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and to general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
(c) InfoCast is not in default under any InfoCast Material Contract
in any material respect, and to the Knowledge of InfoCast, no Person has
violated or breached, or declared or committed any default under, any InfoCast
Material Contract.
(d) No event has occurred, and no circumstance or condition exists,
that might (with or without notice or lapse of time) (i) result in a material
violation or breach of any of the provisions of any InfoCast Material Contract,
(ii) give any Person the right to declare a default or exercise any remedy under
any InfoCast Material Contract, (iii) give any Person the right to accelerate
the maturity or performance of any InfoCast Material Contract, or (iv) give any
Person the right to cancel, terminate or modify, any InfoCast Material Contract.
(e) InfoCast has not waived any of its rights under any InfoCast
Material Contract.
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(f) InfoCast has never guaranteed or otherwise agreed to cause,
insure or become liable for, and has never pledged any of its assets to secure,
the performance or payment of any obligation or other Liability of any other
Person.
(g) Except as set forth in Schedule 5.19, InfoCast has never been a
party to or bound by (i) any joint venture agreement, partnership agreement,
profit sharing agreement, cost sharing agreement, loss sharing agreement or
similar Contract, or (ii) any Contract that creates or grants to any Person, or
provides for the creation or grant of, any share appreciation right, phantom
share right or similar right or interest.
(h) The performance of the InfoCast Material Contracts will not
result in any violation of, or failure to comply with, any Requirement of Law.
(i) No Person is renegotiating, or has the right to renegotiate, any
amount paid or payable to InfoCast under any InfoCast Material Contract or any
other term or provision of any InfoCast Material Contract.
(j) The Contracts identified in Schedule 5.19, collectively
constitute all of the Contracts necessary to enable InfoCast to conduct its
business in the manner in which such business is currently being conducted and
in the manner in which such business is proposed to be conducted.
(k) Schedule 5.19 identifies and provides an accurate and complete
description of each proposed Contract as to which any bid, offer, written
proposal, term sheet or similar document has been submitted or received by
InfoCast.
(l) No party to any InfoCast Material Contract has made a claim to
the effect that InfoCast has failed to perform an obligation thereunder. There
is no known plan, intention or indication of any contracting party to any
Contract to cause the termination, cancellation or modification of such Contract
or to reduce or otherwise change its activity thereunder so as to adversely
affect the benefits derived or expected to be derived therefrom by InfoCast.
(m) InfoCast is neither a party to, nor bound by, any contract,
agreement, commitment or restriction which obligates InfoCast to perform
services or to produce products unprofitably.
Section 5.20 Employees and Employee Benefits
(a) Schedule 5.20 contains a list of all employees of InfoCast as of
the date hereof and their material terms and conditions of employment including
salary or wages, bonus, position title and seniority date. Except as disclosed
on Schedule 5.20, no employee of InfoCast is on long-term disability leave or
extended absence or in receipt of workers' compensation benefits.
(b) Schedule 5.20 contains a list of individuals who are currently
performing services for InfoCast related to its business and are classified as
"consultants" or "independent contractors".
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(c) InfoCast is not a party to or subject to any collective
bargaining agreements with any trade union or collective bargaining agent
representing any of its employees. There is no labour union organizing activity
pending or, to InfoCast's knowledge, threatened with respect to any employees of
InfoCast. Except as specified on Schedule 5.20, no employee of InfoCast has any
agreement or contract, written or verbal, regarding his employment, other than
those deemed to exist at common law.
(d) To the Knowledge of InfoCast, no employee of InfoCast, nor any
consultant with whom InfoCast has contracted, is in violation of any term of any
employment contract, proprietary information agreement or any other agreement
relating to the right of any such individual to be employed by, or to contract
with, InfoCast because of the nature of the business to be conducted by
InfoCast, and to InfoCast's knowledge the continued employment by InfoCast of
its present employees, and the performance of InfoCast's contracts with its
independent contractors, will not result in any such violation. InfoCast has not
received any notice alleging that any such violation has occurred. InfoCast is
not aware that any officer or key employee, or that any group of key employees,
intends to terminate his, her or their employment with InfoCast, nor does
InfoCast have a present intention to terminate the employment of any officer,
key employee or group of key employees.
(e) Except as set forth in Schedule 5.20 there are no employment
policies or plans, including policies or plans regarding incentive compensation,
stock options, severance pay or other terms or conditions of employment or terms
or conditions upon which Employees may be terminated, which are binding upon
InfoCast.
(f) InfoCast has been and is being operated in full compliance with
all Requirements of Law relating to employees, including employment standards,
occupational health and safety, pay equity and employment equity. There have
been no complaints under such laws against InfoCast.
(g) There are no complaints nor, to the Knowledge of InfoCast, are
there any threatened complaints, against InfoCast, before any employment
standards branch or tribunal or human rights tribunal. To the Knowledge of
InfoCast nothing has occurred which might lead to a complaint against InfoCast,
under any human rights legislation or employment standards legislation. There
are no outstanding decisions or settlements or pending settlements under the
employment standards legislation which place any obligation upon InfoCast, to do
or refrain from doing any act.
(h) To the knowledge of InfoCast, there are no outstanding labour
tribunal proceedings of any kind, including any proceedings which could result
in certification of a trade union as bargaining agent for any employees or
independent contractors of InfoCast.
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Section 5.21 Compliance With Requirement of Laws
(a) InfoCast is in full compliance with each Requirement of Law that
is applicable to it or to the conduct of its business or the ownership or use of
any of its assets.
(b) No event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) constitute or result
directly or indirectly in a material violation by InfoCast of, or a material
failure on the part of InfoCast to comply with, any Requirement of Law.
(c) InfoCast has not received, at any time, any notice or other
communication (in writing or otherwise) from any Governmental Authority or any
other Person regarding (i) any actual, alleged, possible or potential violation
of, or failure to comply with, any Requirement of Law, or (ii) any actual,
alleged, possible or potential obligation on the part of InfoCast to undertake,
or to bear all or any portion of the cost of, any cleanup or any remedial,
corrective or response action of any nature.
(d) To the Knowledge of InfoCast, no Governmental Authority has
proposed or is considering any Requirement of Law that, if adopted or otherwise
put into effect, (i) may have an material adverse effect on the business,
condition, assets, liabilities, operations, financial performance, net income or
prospects of InfoCast, or on the ability of InfoCast to comply with or perform
any covenant or obligation under any of the Transactional Documents, or (ii) may
have the effect of preventing, delaying, making illegal or otherwise interfering
with any of the Transactions.
Section 5.22 Tax Matters
(a) Each Tax required to have been paid, or claimed by any
Governmental Authority to be payable, by InfoCast (whether pursuant to any Tax
Return or otherwise) has been duly paid in full on a timely basis including all
installments on account of Tax for the current year that are due and payable by
it. Any Tax required to have been withheld or collected by InfoCast has been
duly withheld and collected, and (to the extent required) each such Tax has been
paid to the appropriate Governmental Authority.
(b) Schedule 5.22 accurately identifies all Tax Returns required to
be filed by or on behalf of InfoCast with any Governmental Authority with
respect to any taxable period ending on or before the Closing Date ("InfoCast
Returns"). All InfoCast Returns (i) have been or will be filed when due, and
(ii) have been or will be, when filed, accurately and completely prepared in
full compliance with all applicable Requirement of Laws, and InfoCast have
completely and accurately reported all income and all other amounts of
information required to be reported thereon. All amounts shown on InfoCast
Returns to be due on or before the Closing Date, and all amounts otherwise
payable in connection with InfoCast Returns on or before the Closing Date, have
been or will be paid on or before the Closing Date.
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(c) InfoCast's liability for unpaid Taxes for all periods ending on
or before March 31, 1999 does not, in the aggregate, exceed the amount of the
current liability accruals for Taxes (excluding reserves for deferred taxes)
reported in the InfoCast Financial Statements. InfoCast will establish, in the
ordinary course of business, reserves adequate for the payment of all Taxes for
the period from March 31, 1999 through to the Closing Date in addition to those
included on the InfoCast Balance Sheet, and InfoCast will disclose the dollar
amount of such reserves to the Company on or prior to the Closing Date.
(d) Schedule 5.22 accurately identifies each examination or audit of
any InfoCast Return that has been conducted by any Governmental Authority since
InfoCast's inception. InfoCast has delivered to the Purchaser accurate and
complete copies of all material audit reports (to which InfoCast has access)
relating to InfoCast Returns, elections, designations or similar things relating
to Taxes for which InfoCast is or may be liable. No extension or waiver of the
limitation period applicable to any of InfoCast Returns has been granted (by
InfoCast or any other Person), and no such extension or waiver has been
requested from InfoCast.
(e) To the knowledge of InfoCast, there are no unsatisfied
Liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by InfoCast.
(f) To the knowledge of InfoCast, there are no actions, suits,
proceedings, investigations, audits or claims now pending or, to the knowledge
of InfoCast threatened, against InfoCast in respect of any Taxes and there are
no matters under discussion, audit or appeal with any Governmental Authority
relating to Taxes.
(g) Except as specifically disclosed in writing to the Company, for
purposes of the Tax Act or any applicable provincial or municipal taxing
statute, no Person or group of Persons has ever acquired or had the right to
acquire control of InfoCast.
(h) The transfer pricing practices of InfoCast have not been the
subject of a review or audit by any revenue or other taxing authority and there
are no agreements, waivers or other agreement providing for an extension of time
with respect to the assessment or collection of any Tax against InfoCast with
respect to any matter relating to transfer pricing issues or the transfer
pricing practices of InfoCast. To the knowledge of InfoCast, there are no suits
or similar proceedings now pending or threatened against InfoCast with respect
to any transfer pricing issue or transfer pricing practice of InfoCast. There
are currently no matters under discussion with any taxation or other authority
relating to any transfer pricing issue, transfer pricing practices of InfoCast,
or any advance pricing agreement or similar process or agreement concerning
transfer pricing practices and issues of InfoCast.
(i) No reserves are required to be taken by InfoCast for purposes of
the Tax Act.
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(j) There are no reassessments of InfoCast that are issued and
outstanding and there are no outstanding issues which have been raised and
communicated to InfoCast by any governmental body for any taxation year in
respect of which a Tax Return of InfoCast has been audited. No governmental body
has challenged, disputed or questioned InfoCast in respect of Taxes or of any
returns, filings or other reports filed under any statute providing for Taxes.
InfoCast is not negotiating any draft assessment or reassessment with any
governmental body. To the Knowledge of InfoCast, there are no grounds for an
assessment or reassessment of InfoCast of an amount which would have a material
adverse effect on InfoCast other than as disclosed in the Financial Statements.
InfoCast has not received any indication from any governmental body that an
assessment (other than an assessment accepting a Tax Return as filed) or
reassessment of InfoCast is proposed in respect of any Taxes, regardless of its
merits. InfoCast has not executed or filed with any governmental body any
agreement or waiver extending the period for assessment, reassessment or
collection of any Taxes.
(k) InfoCast 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 Tax Act, all amounts required by
law to be withheld, and furthermore, have remitted such withheld amounts within
the prescribed periods to the appropriate governmental body. InfoCast has
remitted all Taxes payable by it in respect of its employees and has remitted
such amounts to the proper governmental body within the time required under the
applicable legislation. Other than as set forth in Schedule 5.22, InfoCast has
charged, collected and remitted on a timely basis all Taxes as required under
applicable legislation on any sale, supply or delivery whatsoever it has made;
and for any late filings disclosed on Schedule 5.22, no penalties or fines will
or have become due and owing as a result of such late filings.
(l) InfoCast has not deducted any material amounts in computing its
income in a taxation year that are currently unpaid and that could, if they
remain unpaid, be required to be included in income in a subsequent taxation
year.
(m) InfoCast will not at any time be deemed to have a capital gain
pursuant to subsection 80.03(2) of the Tax Act as a result of any transactions
or event taking place in any fiscal period or portion thereof ending on or
before the Closing Date.
Section 5.23 Securities Laws Compliance; Registration Rights
The issue of the Exchangeable Shares to the Selling Shareholders has
complied and will comply with all securities laws of the Provinces of Alberta
and Ontario, and applicable securities laws of the United States. InfoCast has
complied with all applicable securities laws of Canada and the United States in
connection with all offers and sales of securities of InfoCast prior to the date
of this Agreement.
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Section 5.24 Insurance
(a) Schedule 5.24 accurately sets forth, with respect to each
insurance policy maintained by or at the expense of, or for the direct or
indirect benefit of, InfoCast:
(i) the name of the insurance carrier that
issued such policy and the policy number of
such policy;
(ii) whether such policy is a "claims made" or an
"occurrences" policy;
(iii) a description of the coverage provided by
such policy and the material terms and
provisions of such policy (including all
applicable coverage limits, deductible
amounts and co-insurance arrangements and
any non customary exclusions from coverage);
(iv) the annual premium payable with respect to
such policy, and the cash value (if any) of
such policy; and
(v) a description of any claims pending, and any
claims that have been asserted in the past,
with respect to such policy.
(b) Schedule 5.24 also identifies (i) each pending application for
insurance that has been submitted by or on behalf of InfoCast, and (ii) each
self-insurance or risk-sharing arrangement affecting InfoCast or any of its
assets. InfoCast has delivered to the Company accurate and complete copies of
all of the insurance policies identified in Schedule 5.24 (including all
renewals thereof and endorsements thereto) and all of the pending applications
identified in Schedule 5.24.
(c) Each of the policies identified in Schedule 5.24 is valid,
enforceable and in full force and effect, and has been issued by an insurance
carrier that, to the Knowledge of InfoCast, is solvent, financially sound and
reputable. All of the information contained in the applications submitted in
connection with said policies was (at the times said applications were
submitted) accurate and complete, and all premiums and other amounts owing with
respect to said policies have been paid in full on a timely basis. The nature,
scope and dollar amounts of the insurance coverage provided by said policies are
similar to the coverage customarily carried by companies of similar size and
character of InfoCast. Each of the policies identified in Schedule 5.24 will
continue in full force and effect following the Closing. InfoCast has paid all
premiums due, and has otherwise performed all of its obligations, under each
policy to which it is a party or that provides coverage to it or any of its
directors or officers in connection with their performance of services to
InfoCast.
(d) There is no pending material claim under or based upon any of
the policies identified in Schedule 5.24(a), and no event has occurred, and no
condition or circumstance exists, that might (with or without notice or lapse of
time) directly or indirectly give rise to or serve as a basis for any such
claim.
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(e) InfoCast has not received:
(i) any notice or other communication (in
writing or otherwise) regarding the actual
or possible cancellation or invalidation of
any of the policies identified in Schedule
5.24 or regarding any actual or possible
adjustment in the amount of the premiums
payable with respect to any of said
policies;
(ii) any notice or other communication (in
writing or otherwise) regarding any actual
or possible refusal of coverage under, or
any actual or possible rejection of any
claim under, any of the policies identified
in Schedule 5.24; or
(iii) any indication that the issuer of any of the
policies identified in Schedule 5.24 may be
unwilling or unable to perform any of its
obligations thereunder.
Section 5.25 Absence of Changes
Except as set forth in Schedule 5.25, since March 31, 1999:
(a) there has not been any material adverse change in InfoCast's
business, condition, assets, liabilities, operations, financial performance, net
income or prospects (or in any aspect or portion thereof), and no event has
occurred that might have an adverse effect on InfoCast's business, condition,
assets, liabilities, operations, financial performance, net income or prospects
(or on any aspect or portion thereof);
(b) there has not been any loss, damage or destruction to, or any
interruption in the use of, any of InfoCast's assets (whether or not covered by
insurance);
(c) InfoCast has not (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, or (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) InfoCast has not sold or otherwise issued any shares of capital
stock or any other securities;
(e) InfoCast has not amended its articles of incorporation or bylaws
and has not effected or been a party to any InfoCast Acquisition Transaction,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(f) InfoCast has not purchased or otherwise acquired any asset from
any other Person, except for supplies acquired by InfoCast in the ordinary
course of business;
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(g) InfoCast has not leased or licensed any asset from any other
Person;
(h) InfoCast has not made any material capital expenditure;
(i) InfoCast has not sold or otherwise transferred, and has not
leased or licensed, any asset to any other Person except for products sold by
InfoCast from its inventory in the ordinary course of business;
(j) InfoCast has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(k) InfoCast has not pledged or hypothecated any of its assets or
otherwise permitted any of its assets to become subject to any Lien;
(l) InfoCast has not made any loan or advance to any other Person;
(m) InfoCast has not (i) established or adopted any employee benefit
plan, or (ii) paid any bonus or made any profit sharing or similar payment to,
or increased the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors, officers or
employees;
(n) InfoCast has not increased the compensation of any of its
officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of its business;
(o) there has been no resignation or termination of employment of
any officer or key employee of InfoCast;
(p) there has been no labour dispute involving InfoCast or its
employees and none is pending or, to InfoCast's Knowledge, threatened;
(q) InfoCast has not entered into, and neither InfoCast nor any of
the assets owned or used by InfoCast has become bound by, any InfoCast Material
Contract;
(r) no InfoCast Material Contract by which InfoCast or any of the
assets owned or used by InfoCast is or was bound, or under which InfoCast has or
had any rights or interest, has been amended or terminated;
(s) InfoCast has not incurred, assumed or otherwise become subject
to any Liability, other than accounts payable (of the type required to be
reflected as current liabilities in the "liabilities" column of a balance sheet
prepared in accordance with US GAAP) incurred by InfoCast in the ordinary course
of business;
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(t) InfoCast has not discharged any Lien or discharged or paid any
indebtedness or other Liability, except for accounts payable that (i) are
reflected as current liabilities in the "liabilities" column of the InfoCast
Balance Sheet or have been incurred by InfoCast since March 31, 1999 in the
Ordinary Course of Business, and (ii) have been discharged or paid in the
Ordinary Course of Business;
(u) InfoCast has not forgiven any debt or otherwise released or
waived any right or claim;
(v) InfoCast has not changed any of its methods of accounting or
accounting practices in any respect;
(w) InfoCast has not entered into any transaction or taken any other
action outside the ordinary course of business; and
(x) InfoCast has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses "(c)" through "(w)" above.
Section 5.26 Full Disclosure
(a) The representations and warranties of InfoCast contained in this
Agreement, each of the other Transaction Documents and each of the documents
delivered or provided to the Company and the Selling Shareholders by or on
behalf of InfoCast in connection with this Agreement or any of the Transactions
(i) do not contain any untrue statement of a material fact, or (ii) omit to
state any material fact of which InfoCast has Knowledge, which fact is necessary
in order to make the statements and information contained in this Agreement, the
other Transaction documents and such documents not misleading.
(b) InfoCast has provided the Company with full and complete access
to all of InfoCast's records and other documents and data.
Section 5.27 Corporate Governance
InfoCast and the Purchaser agree to be bound by the provisions and
governance guidelines prescribed in Schedule 5.27, which agreement and
obligation shall survive the completion of the transactions contemplated herein.
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ARTICLE VI
PRE-CLOSING COVENANTS OF THE COMPANY
AND THE CONTROLLING SHAREHOLDERS
Section 6.1 Access and Investigation
The Company shall ensure that, at all times during the Pre-Closing
Period:
(a) The Company and its Representatives provide the Purchaser and
its Representatives with free and complete access to the Company's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company;
(b) The Company and its Representatives provide the Purchaser and
its Representatives with such copies of existing books, records, Tax Returns,
work papers and other documents and information relating to the Company as the
Purchaser may request in good faith; and
(c) The Company and its Representatives compile and provide the
Purchaser and its Representations with such additional financial, operating and
other data and information regarding the Company as the Purchaser may request in
good faith.
Section 6.2 Operation of Business
The Company and the Controlling Shareholders shall ensure that
during the Pre-Closing Period:
(a) The Company conducts its operations exclusively in the Ordinary
Course of Business and in the same manner as such operations have been conducted
prior to the date of this Agreement;
(b) The Company preserves intact its current business organization,
keeps available the services of its current officers and employees and maintains
its relations and good will with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with the Company;
(c) The Company keeps in full force all insurance policies
identified in Schedule 4.21;
(d) The Company's officers confer regularly with the Purchaser
concerning operational matters and otherwise report regularly to the Purchaser
concerning the status of the Company's business, condition, assets, liabilities,
operations, financial performance and prospects;
(e) The Company immediately notifies the Purchaser of any inquiry,
proposal or offer from any Person relating to any Acquisition Transaction;
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(f) The Company does not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares in its capital,
and does not repurchase, redeem or otherwise reacquire any such shares or other
securities (except as expressly contemplated by this Agreement);
(g) The Company does not sell or otherwise issue any shares or any
other securities;
(h) The Company does not amend its articles of incorporation or
bylaws, and does not effect or become a party to any Acquisition Transaction,
reclassification of shares, share split, reverse share split or similar
transaction;
(i) The Company does not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) The Company does not make any capital expenditure, except for
capital expenditures that are made in the Ordinary Course of Business and that,
when added to all other capital expenditures made on behalf of the Company
during the Pre-Closing Period, do not exceed CDN$25,000 in the aggregate;
(k) The Company does not enter into or permit any of the assets
owned or used by the Company to become subject to any Lien;
(l) The Company does not incur, assume or otherwise become subject
to any Liability, except for current liabilities (of the type required to be
reflected in the "liabilities" column of a balance sheet prepared in accordance
with GAAP) incurred in the Ordinary Course of Business;
(m) The Company does not establish or adopt any employee benefit
plan, and does not pay any bonus or make any profit sharing or similar payment
to, or increase the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors, officers or
employees;
(n) The Company does not change any of its methods of accounting or
accounting practices in any respect;
(o) The Company does not make any Tax election;
(p) The Company does not commence any Proceeding;
(q) The Company does not enter into any transaction or take any
other action of the type referred to in Section 4.23;
(r) The Company does not enter into any transaction or take any
other action outside the Ordinary Course of Business;
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(s) The Company does not enter into any transaction or take any
other action that might cause or constitute a Breach of any representation or
warranty made by the Company or any of the Selling Shareholders in this
Agreement any of the Non-Controlling Shareholder Letters of Transmittal or in
any other Transaction Document; and
(t) The Company does not agree, commit or offer (in writing or
otherwise), and does not attempt, to take any of the actions described in
clauses (g) through (t) of this Section 6.02.
Section 6.3 Filings and Consents
The Company and the Controlling Shareholders shall use its Best
Efforts to ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable Requirement of Law, Order or Material Contract, or otherwise) by
the Company or any of the Selling Shareholders in connection with the execution
and delivery of any of the Transaction Documents or in connection with the
consummation or performance of any of the Transactions (including each of the
filings and notices identified in Schedule 4.05) is made or given as soon as
possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
Requirement of Law, Order or Material Contract, or otherwise) by the Company or
any of the Selling Shareholders in connection with the execution and delivery of
any of the Transactional Documents or in connection with the consummation or
performance of any of the Transactions (including each of the Consents
identified in Schedule 4.05) is obtained as soon as possible after the date of
this Agreement and remains in full force and effect through the Closing Date;
(c) The Company promptly delivers to the Purchaser a copy of each
filing made, each notice given and each Consent obtained by the Company or any
Selling Shareholders during the Pre-Closing Period; and
(d) during the Pre-Closing Period, the Company and its
Representatives cooperate with the Purchaser and with the Purchaser's
Representatives, and prepare and make available such documents and take such
other actions as the Purchaser may request in good faith, in connection with any
filing, notice or Consent that the Purchaser is required or elects to make, give
or obtain.
Section 6.4 Notification of Events or Conditions
During the Pre-Closing Period, the Company and the Controlling
Shareholders shall promptly notify the Purchaser in writing of:
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(a) the discovery by the Company or any of the Controlling
Shareholders of any event, condition, fact or circumstance that occurred or
existed on or prior to the date of this Agreement and that caused or constitutes
a Breach of any representation or warranty made by the Company or any of the
Selling Shareholders in this Agreement or any of the Non-Controlling Shareholder
Letters of Transmittal;
(b) any event, condition, fact or circumstance that occurs, arises
or exists after the date of this Agreement and that would cause or constitute a
Breach of any representation or warranty made by the Company or any of the
Selling Shareholders in this Agreement or any of the Non-Controlling Shareholder
Letters of Transmittal if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
(c) any Breach of any covenant or obligation of the Company or any
of the Selling Shareholders; and
(d) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Article VIII
impossible or unlikely.
Section 6.5 Payment of Indebtedness by Related Parties
The Company and the Controlling Shareholders shall cause all
indebtedness and other Liabilities owing to each Related Party to the Company by
the Company to be discharged and paid in full prior to the Closing, other than
liabilities incurred in the Ordinary Course of Business which are not due at the
Closing Date, or are to be assumed by InfoCast at Closing.
Section 6.6 No Negotiation
The Company and the Controlling Shareholders shall ensure that,
during the Pre-Closing Period, neither the Company nor any of the Company's
Representatives directly or indirectly:
(a) solicits or encourages the initiation of any inquiry, proposal
or offer from any Person (other than the Purchaser) relating to any Acquisition
Transaction;
(b) participates in any discussions or negotiations with, or
provides any non public information to, any Person (other than the Purchaser)
relating to any Acquisition Transaction; or
(c) considers the merits of any unsolicited inquiry, proposal or
offer from any Person (other than the Purchaser) relating to any Acquisition
Transaction.
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Section 6.7 Best Efforts
During the Pre-Closing Period, the Company and the Controlling
Shareholders shall use their respective Best Efforts to cause the conditions set
forth in Articles VIII and Article IX to be satisfied on a timely basis, and
shall not take any action or omit to take any action, the taking or omission of
which would or could reasonably be expected to result in any of the
representations and warranties set forth in this Agreement or any of the other
Transaction Documents becoming untrue, in any of the conditions of Closing set
forth in Article VIII or Article IX not being satisfied or in the business of
the Company becoming materially less valuable.
Section 6.8 Confidentiality
The Company and the Controlling Shareholders shall ensure that,
during the Pre-Closing Period:
(a) The Company and its Representatives keep strictly confidential
the existence and terms of this Agreement;
(b) neither the Company nor any of its Representatives issues or
disseminates any press release or other publicity or otherwise makes any
disclosure of any nature (to any of the Company's suppliers, customers,
landlords, creditors or employees or to any other Person) regarding any of the
Transactions, except to employees of the Company involved in the consummation of
the Transactions or to the extent that the Company is required by law to make
any such disclosure regarding the Transactions; and
(c) if the Company is required by law to make any disclosure
regarding the Transactions, the Company advises the Purchaser, at least five
business days before making such disclosure, of the nature and content of the
intended disclosure.
ARTICLE VII
PRE-CLOSING COVENANTS OF THE PURCHASER AND INFOCAST
Section 7.1 Filings and Consents
The Purchaser and InfoCast shall ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable Requirement of Law or Order) by the Purchaser in connection with
the execution and delivery of any of the Transaction Documents or in connection
with the consummation or performance of any of the Transactions is made or given
as soon as possible after the date of this Agreement;
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(b) each Consent required to be obtained (pursuant to any applicable
Requirement of Law or Order) by the Purchaser in connection with the execution
and delivery of any of the Transaction Documents or in connection with the
consummation or performance of any of the Transactions is obtained as soon as
possible after the date of this Agreement and remains in full force and effect
through the Closing Date;
(c) the Purchaser promptly delivers to the Company a copy of each
filing made, each notice given and each Consent referred to in this Section 7.01
obtained by the Purchaser during the Pre-Closing Period; and
(d) during the Pre-Closing Period, the Purchaser and its
Representatives cooperate with the Company, the Controlling Shareholders and
their respective Representatives, and prepare and make available such documents
and take such other actions as the Company or any of the Controlling
Shareholders may request in good faith, in connection with any filing, notice or
Consent that the Company or the Selling Shareholders is required or elects to
make, give or obtain.
Section 7.2 Access and Investigation
InfoCast shall ensure that, at all times during the Pre-Closing
Period:
(a) InfoCast and its Representatives provide the Company and its
Representatives with free and complete access to InfoCast's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to InfoCast;
(b) InfoCast and its Representatives provide the Purchaser and its
Representatives with such copies of existing books, records, Tax Returns, work
papers and other documents and information relating to InfoCast as the Purchaser
may request in good faith; and
(c) InfoCast and its Representatives compile and provide the
Purchaser and its Representations with such additional financial, operating and
other data and information regarding InfoCast as the Purchaser may request in
good faith.
Section 7.3 Operation of Business
InfoCast shall ensure that during the Pre-Closing Period:
(a) InfoCast conducts its operations exclusively in the ordinary
course of business and in the same manner as such operations have been conducted
prior to the date of this Agreement;
(b) InfoCast keeps in full force all insurance policies identified
in Schedule 5.24;
(c) InfoCast immediately notifies the Company of any inquiry,
proposal or offer from any Person relating to any InfoCast Acquisition
Transaction;
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(d) InfoCast does not declare, accrue, set aside or pay any dividend
or make any other distribution in respect of any shares in its capital, and does
not repurchase, redeem or otherwise reacquire any such shares or other
securities (except as expressly contemplated by this Agreement);
(e) InfoCast does not sell or otherwise issue any shares or any
other securities;
(f) InfoCast does not amend its articles of incorporation or bylaws,
and does not effect or become a party to any InfoCast Acquisition Transaction,
reclassification of shares, share split, reverse share split or similar
transaction;
(g) InfoCast does not make any capital expenditure, except for
capital expenditures that are made in the ordinary course of business and that,
when added to all other capital expenditures made on behalf of InfoCast during
the Pre-Closing Period, do not exceed CDN$100,000 in the aggregate;
(h) InfoCast does not incur, assume or otherwise become subject to
any Liability, except for current liabilities (of the type required to be
reflected in the "liabilities" column of a balance sheet prepared in accordance
with US GAAP) incurred in the ordinary course of business;
(i) InfoCast does not establish or adopt any employee benefit plan,
and does not pay any bonus or make any profit sharing or similar payment to, or
increase the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees;
(j) InfoCast does not change any of its methods of accounting or
accounting practices in any respect;
(k) InfoCast does not make any Tax election;
(l) InfoCast does not commence any Proceeding;
(m) InfoCast does not enter into any transaction or take any other
action of the type referred to in Section 5.25;
(n) InfoCast does not enter into any InfoCast Acquisition
Transaction or take any other action outside the ordinary course of business;
(o) InfoCast does not enter into any transaction or take any other
action that might cause or constitute a Breach of any representation or warranty
made by InfoCast or the Purchaser in this Agreement or in any other Transaction
Document; and
(p) InfoCast does not agree, commit or offer (in writing or
otherwise), and does not attempt, to take any of the actions described in
clauses (e) through (o) of this Section 7.03.
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Section 7.4 Filings and Consents
InfoCast shall ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable Requirement of Law, Order or InfoCast Material Contract, or
otherwise) by InfoCast or the Purchaser in connection with the execution and
delivery of any of the Transaction Documents or in connection with the
consummation or performance of any of the Transactions is made or given as soon
as possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
Requirement of Law, Order or InfoCast Material Contract, or otherwise) by
InfoCast or the Purchaser in connection with the execution and delivery of any
of the Transactional Documents or in connection with the consummation or
performance of any of the Transactions is obtained as soon as possible after the
date of this Agreement and remains in full force and effect through the Closing
Date;
(c) InfoCast promptly delivers to the Company a copy of each filing
made, each notice given and each Consent obtained by InfoCast or the Purchaser
during the Pre-Closing Period; and
(d) during the Pre-Closing Period, InfoCast and its Representatives
cooperate with the Purchaser and with the Purchaser's Representatives, and
prepare and make available such documents and take such other actions as the
Purchaser may request in good faith, in connection with any filing, notice or
Consent that the Purchaser is required or elects to make, give or obtain.
Section 7.5 Notification of Events or Conditions
During the Pre-Closing Period, InfoCast and the Purchaser shall
promptly notify the Company in writing of:
(a) the discovery by InfoCast or the Purchaser of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a Breach of any representation
or warranty made by InfoCast or the Purchaser in this Agreement or any of the
Transaction Documents;
(b) any event, condition, fact or circumstance that occurs, arises
or exists after the date of this Agreement and that would cause or constitute a
Breach of any representation or warranty made by InfoCast or the Purchaser in
this Agreement or any of the Transaction Documents if (A) such representation or
warranty had been made as of the time of the occurrence, existence or discovery
of such event, condition, fact or circumstance, or (B) such event, condition,
fact or circumstance had occurred, arisen or existed on or prior to the date of
this Agreement;
(c) any Breach of any covenant or obligation of InfoCast or the
Purchaser; and
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(d) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth herein impossible or
unlikely.
Section 7.6 Best Efforts
During the Pre-Closing Period, InfoCast and the Purchaser shall use
their respective Best Efforts to cause the conditions set forth in Article VIII
and Article IX to be satisfied on a timely basis, and shall not take any action
or omit to take any action, the taking or omission of which would or could
reasonably be expected to result in any of the representations and warranties
set forth in this Agreement or any of the other Transaction Documents becoming
untrue, in any of the conditions of Closing set forth in Article VIII or Article
IX not being satisfied or in the business of InfoCast becoming materially less
valuable.
ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS AT CLOSING
The Purchaser's obligation to purchase the Purchased Shares and to
take the other actions required to be taken by the Purchaser at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
Section 8.1 Representations and Warranties; Performance of Obligations
The representations and warranties of the Company and the Selling
Shareholders contained in this Agreement and the Non-Controlling Shareholder
Letters of Transmittal and in each of the other Transaction Documents shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date and the Company shall have performed in all material
respects all obligations herein required to be performed or observed by it on or
prior to the Closing.
Section 8.2 Consents, Permits, Waivers and Approvals
The Company, the Selling Shareholders, the Purchaser and InfoCast
shall have obtained any and all consents, permits, waivers and approvals
necessary or appropriate for consummation of the transactions contemplated
hereunder (except for such as may be properly obtained subsequent to the
Closing).
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Section 8.3 Delivery of Certificates Evidencing Purchased Shares
The Selling Shareholders shall have delivered to the Purchaser
certificates representing 100% of the Purchased Shares, duly endorsed for
transfer.
Section 8.4 Delivery of Employment Agreements
Each of Darcy Galvon, Scott Fleming and Ken McLean shall have
delivered to the Purchaser the Galvon Management Agreement, MacLean Employment
Agreement or the Fleming Employment Agreement, as the case may be, duly executed
by Galvon, MacLean and Fleming, respectively.
Section 8.5 Compliance Certificate
The Company shall have delivered to the Purchaser a certificate,
executed by the President of the Company, dated the Closing Date, setting forth
the Company's representation and warranty that (i) each of the representations
and warranties made by the Company and, to the Knowledge of the Company, each of
the Selling Shareholders in this Agreement and the Non-Controlling Shareholder
Letters of Transmittal was accurate in all material respects as of the date of
this Agreement, (ii) each of the representations and warranties made by the
Company in this Agreement and in each of the other Transaction Documents is
accurate in all material respects as of the Closing, and (iii) each of the
covenants and obligations that the Company is required to have complied with or
performed pursuant to this Agreement at or prior to the Closing has been duly
complied with and performed in all material respects.
Section 8.6 Corporate Documents
The Company shall have delivered to the Purchaser or its counsel,
copies of all corporate documents of the Company as the Purchaser shall
reasonably request.
Section 8.7 Exchange Agreement
The Company, on behalf of each of the Selling Shareholders, shall
have duly executed and delivered to the Purchaser and InfoCast the Exchange
Agreement.
Section 8.8 Proceedings and Documents
All corporate and other proceedings in connection with the
transactions contemplated at the Closing hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchaser and its counsel, and the Purchaser and its
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
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Section 9.9 Delivery of Non-Controlling Shareholder Letters of Transmittal
Each of the Non-Controlling Shareholders shall have delivered to the
Purchaser, on or before the Closing Date, a duly executed Non-Controlling
Shareholder Declaration substantially in the form of Schedule 8.09 hereto.
ARTICLE IX
CONDITIONS TO THE SELLING
SHAREHOLDER'S OBLIGATIONS AT CLOSING
The Selling Shareholders' obligation to sell, assign, transfer and
deliver the Purchased Shares to the Purchaser and the Selling Shareholders'
obligation to take the other actions required to be taken on their part at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions:
Section 9.1. Representations and Warranties; Performance of Obligations
The representations and warranties of the Purchaser and InfoCast
contained in this Agreement and in each of the other Transaction Documents shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of the Closing Date and the Purchaser and InfoCast shall have performed
in all material respects all obligations herein required to be performed or
observed by them on or prior to the Closing.
Section 9.2 Consents, Permits, Waivers and Approvals
The Company, the Selling Shareholders, the Purchaser and InfoCast
shall have obtained any and all consents, permits, waivers and approvals
necessary or appropriate for consummation of the transactions contemplated
hereunder (except for such as may be properly obtained subsequent to the
Closing).
Section 9.3 Delivery of Certificates Evidencing Exchangeable Shares
The Purchaser shall issue certificates representing the Exchangeable
Shares issuable to the Selling Shareholders specified in Section 2.02(b),
bearing such legends as counsel may advise are necessary or desirable and
deposit same with legal counsel of the Purchaser until Section 116 Certificates
are issued in respect of the transaction contemplated herein, at which time they
will be delivered.
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Section 9.4 Compliance Certificate of Purchaser
The Purchaser shall have delivered to the Company and each of the
Selling Shareholders a certificate, executed by the President of the Purchaser,
dated the Closing Date, setting forth the Purchaser's representation and
warranty that (i) each of the representations and warranties made by the
Purchaser in this Agreement was accurate in all material respects as of the date
of this Agreement, (ii) each of the representations and warranties made by the
Purchaser in this Agreement and in each of the other Transaction Documents is
accurate in all material respects as of the Closing, and (iii) each of the
covenants and obligations that the Purchaser is required to have complied with
or performed pursuant to this Agreement at or prior to the Closing has been duly
complied with and performed in all material respects.
Section 9.5 Compliance Certificate of InfoCast
InfoCast shall have delivered to the Company and each of the Selling
Shareholders a certificate, executed by the President of InfoCast, dated the
Closing Date, setting forth InfoCast's representation and warranty that (i) each
of the representations and warranties made by InfoCast in this Agreement was
accurate in all material respects as of the date of this Agreement, (ii) each of
the representations and warranties made by InfoCast in this Agreement and in
each of the other Transaction Documents is accurate in all material respects as
of the Closing, and (iii) each of the covenants and obligations that InfoCast is
required to have complied with or performed pursuant to this Agreement at or
prior to the Closing has been duly complied with and performed in all material
respects.
Section 9.6 Corporate Documents
The Purchaser and InfoCast shall have delivered to the Company or
its counsel, copies of all corporate documents of the Purchaser and InfoCast as
the Controlling Shareholders shall reasonably request.
Section 9.7 Exchange Agreement
Each of the Purchaser and InfoCast shall have duly executed and
delivered to the Company and the Controlling Shareholders the Exchange
Agreement.
Section 8.8 Proceedings and Documents
All corporate and other proceedings in connection with the
transactions contemplated at the Closing hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Company, the Selling Shareholders and their respective
counsel, and the Company, the Selling Shareholders and their respective counsel
shall have received all such counterpart originals or certified or other copies
of such documents as they may reasonably request.
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Section 9.9 Homebase Governance
A resolution of the directors of each of InfoCast and InfoCast
Canada shall have been passed approving the terms of governance and support of
the Company prescribed in the memorandum attached hereto as Schedule 9.09.
Section 9.10 Darcy Galvon - Co-Chairman of InfoCast
All corporate proceedings shall have been taken and all necessary
resolutions of the directors of InfoCast shall have been duly passed to appoint
Darcy Galvon as a director and Co-Chairman of InfoCast, with the acknowledgement
that all decisions of the Co-Chairman must be unanimous.
ARTICLE X
INDEMNIFICATION, ETC.
Section 10.1 Survival of Representations and Warranties
The representations and warranties of each party contained in this
Agreement, the Non-Controlling Shareholder Letters of Transmittal and in each of
the other Transaction Documents shall survive the Closing for a period of one
year; provided that (i) each of the representations contained in Section 4.17,
and (ii) any representation the Breach of which the Company or any Selling
Shareholder had Knowledge on or prior to the Closing and any covenants or
obligations to be performed after the Closing, shall, in each case, survive and
continue for the applicable statute of limitation period or periods legally
applicable to them.
Section 10.2 Indemnification by Controlling Shareholders
(a) Each of the Controlling Shareholders shall, jointly and
severally in respect of representations, warranties or covenants made by or on
behalf of the Company, and severally only in respect of representations,
warranties or covenants made in respect of such Controlling Shareholders, hold
harmless and indemnify the Purchaser and its officers, directors, employees,
agents and representatives (collectively, the "Purchaser-Related Indemnitee" and
individually each a "Purchaser-Related Indemnitee") from and against, and shall
compensate and reimburse each of the Purchaser Indemnitees for, any Damages
which are suffered or incurred by any of the Purchaser-Related Indemnitees or to
which any of the Purchaser-Related Indemnitees may otherwise become subject at
any time (regardless of whether or not such Damages relate to any third party
claim) and which arise from or as a direct or indirect result of, or are
directly or indirectly connected with:
(i) any Breach of any representation or warranty
made by the Company or such Controlling
Shareholder in this Agreement or in any of
the other Transaction Documents;
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(ii) any Breach of any covenant or obligation of
the Company or such Controlling
Shareholders;
(iii) any Proceeding relating to any Breach, or
Liability or matter of the type referred to
in any of the clauses listed above
(including any Proceeding commenced by any
Purchaser-Related Indemnitee for the purpose
of enforcing any of its rights under this
Article X); or
(iv) the failure by the Company or such
Controlling Shareholder to obtain any
necessary consents in connection with any
Material Contracts.
(b) Each Controlling Shareholder acknowledges and agrees that, if
there is any Breach of any representation, warranty or other provision relating
to the Company or the Company's business, condition, assets, liabilities,
operations, financial performance, net income or prospects (or any aspect or
portion thereof), then the Purchaser itself shall be deemed, by virtue of its
ownership of Purchased Shares, to have incurred Damages as a result of such
Breach or Liability. Nothing contained in this Section 10.02(b) shall have the
effect of (i) limiting the circumstances under which the Purchaser may otherwise
be deemed to have incurred Damages for purposes of this Agreement, (ii) limiting
the other types of Damages that the Purchaser may be deemed to have incurred
(whether in connection with any such Breach or Liability or otherwise), or (iii)
limiting the rights of the Company under this Section 10.02.
(c) Notwithstanding anything to the contrary contained in this
Agreement, any liability of the Controlling Shareholders hereunder shall be
limited to the greater of: (i) the value of the Exchangeable Shares issued to
all the Selling Shareholders on closing of the transactions contemplated hereby
or (ii) the value of the Exchangeable Shares or any securities into which they
may have been exchanged at the time the liability giving rise to indemnification
hereunder is determined and notice of same is communicated to the Controlling
Shareholders.
Section 10.3 Indemnification by the Purchaser and InfoCast
(a) The Purchaser and InfoCast shall, jointly and severally, hold
harmless and indemnify each Selling Shareholder and each of their respective
agents and representatives (collectively, the "Selling Shareholder-Related
Indemnitees" and individually each a "Selling Shareholder-Related Indemnitee")
from and against, and shall compensate and reimburse each of the Selling
Shareholder-Related Indemnitees for, any Damages which are suffered or incurred
by any of the Selling Shareholder-Related Indemnitees or to which any of the
Selling Shareholder-Related Indemnitees may otherwise become subject at any time
(regardless of whether or not such Damages relate to any third party claim) and
which arise from or as a direct or indirect result of, or are directly or
indirectly connected with:
(i) any Breach of any representation or warranty
made by the Purchaser and InfoCast in this
Agreement or in any of the other Transaction
Documents;
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(ii) any Breach of any covenant or obligation of
the Purchaser and InfoCast; or
(iii) any Proceeding relating to any Breach, or
Liability or matter of the type referred to
in any of the clauses listed above
(including any Proceeding commenced by any
Selling Shareholder-Related Indemnitee for
the purpose of enforcing any of its rights
under this Section 10.03).
(b) Notwithstanding anything to the contrary contained in this
Agreement, any liability of the Purchaser or InfoCast hereunder, in respect of
any particular Selling Shareholder-Related Indemnitee, be limited to the greater
of:
(i) the value of the Exchangeable Shares issued
to such Selling Shareholder- Related
Indemnitee on Closing of the transactions
contemplated hereby or;
(ii) the value of the Exchangeable Shares or any
securities into which they may have been
exchanged at the time of the liability
giving rise to indemnification hereunder is
determined and notice of same is
communicated to such Selling
Shareholder-Related Indemnitee.
Section 10.4 Interest
Any party (the "Indemnifying Party") that is required to indemnify
any other Person (the "Indemnified Party") pursuant to this Article X with
respect to any Damages shall also be required to pay such Indemnified Party
interest on the amount of such Damages (for the period commencing as of the date
on which such Indemnified Party first incurred or otherwise became subject to
such Damages and ending on the date on which the applicable indemnification
payment is made by such party) at a rate per annum equal to 7%.
Section X.5 Defense of Third Party Claims
(a) In the event of the assertion or commencement by any Person of
any claim or Proceeding (whether against the Purchaser, any Selling Shareholder,
any other Indemnitee or any other Person) with respect to which any of the
Company, any Selling Shareholder, InfoCast or the Purchaser, as an Indemnifying
Party, may become obligated to indemnify, hold harmless, compensate or reimburse
any Indemnitee pursuant to this Article X, the Indemnified Party shall
reasonably promptly, following the Indemnified Party's actual knowledge thereof,
notify such Indemnifying Party of such claim or Proceeding. The Indemnified
Party shall have the right, at its election, to designate such Indemnifying
Party to assume the defense of such claim or Proceeding at the sole expense of
one or more of such Indemnifying Party. If the Indemnified Party so elects to
designate an Indemnifying Parties to assume the defense of any such claim or
Proceeding:
(i) such Indemnifying Party shall proceed to
defend such claim or Proceeding in a
diligent manner with counsel satisfactory to
the Indemnified Party;
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(ii) the Indemnifying Party shall keep the
Indemnified Party informed of all material
developments and events relating to such
claim or Proceeding;
(iii) the Indemnified Party shall have the right
to participate in the defense of such claim
or Proceeding at its sole expense, except
that in the event the defense is not being
conducted by the Indemnifying Party in a
diligent manner as recommended by the
Company's legal counsel, paragraph (b) below
shall apply; and
(iv) the Indemnifying Party shall not settle,
adjust or compromise such claim or
Proceeding without the prior written consent
of the Indemnified Party.
(b) If the Indemnified Party so proceeds with the defense of any
such claim or Proceeding on its own:
(i) all expenses incurred and relating to the
defense of such claim or Proceeding (whether
or not incurred by the Indemnified Party)
shall be borne and paid exclusively by the
Indemnifying Party;
(ii) the Indemnifying Party shall make available
to the Indemnified Party any documents and
materials in the possession or control of
the Indemnifying Party that may be necessary
to the defense of such claim or Proceeding;
(iii) the Indemnified Party shall keep the
Indemnifying Party informed of all material
developments and events relating to such
claim or Proceeding; and
(iv) the Indemnified Party shall have the right
to settle, adjust or compromise such claim
or Proceeding with the consent of the
Indemnifying Party, provided, that the
Indemnifying Party shall not unreasonably
withhold such consent.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Tax Elections
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The Selling Shareholders and the Purchaser shall elect in prescribed
form and manner to have the provisions of subsection 85(1) of the Tax Act apply
to the transfer of the Purchased Shares and the Selling Shareholders shall
through the facilities of KPMG, deliver to and file the same with Revenue
Canada, Customs, Excise and Taxation within the time prescribed in accordance
with the Tax Act. The Selling Shareholders shall pay any late filing fees or
penalties and shall provide the Purchaser with a copy of such forms as filed.
For this purpose the Parties shall elect amounts in respect of such Purchased
Shares equal to an amount to be determined by the Selling Shareholders in
accordance with the limits set out in the Tax Act. The Selling Shareholders and
the Purchaser shall file all necessary elections or filings under all
corresponding provincial legislation to make the transfer effective on the same
basis as contemplated under the Tax Act.
Section 11.2 Termination
This Agreement may be terminated:
(a) by the written agreement of each of the Parties;
(b) by the Purchaser, the Company or any Selling Shareholder if
there shall be in effect a non-appealable order of a court of competent
jurisdiction permanently prohibiting the consummation of the Transactions; or
(c) by the Purchaser, the Company or any Selling Shareholder if the
Closing shall not have occurred on or before May 31, 1999.
Section 11.3 Governing Law
This Agreement shall be construed in accordance with, and governed
in all respects by, the laws of the Province of Ontario.
Section 11.4 Jurisdiction; Venue
Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced in any provincial or federal court located in the
Province of Ontario, Canada. Each party to this Agreement:
(a) expressly and irrevocably consents and submits to the
jurisdiction of each provincial and federal court located in the Province of
Ontario, Canada (and each appellate court located in the Province of Ontario,
Canada) in connection with any such legal proceeding;
(b) agrees that each provincial and federal court located in the
Province of Ontario, Canada shall be deemed to be a convenient forum; and
(c) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any provincial or federal
court located in the Province of Ontario, Canada, any claim that such party is
not subject personally to the jurisdiction of such court, that such legal
proceeding has been brought in an inconvenient forum, that the venue of such
proceeding is improper or that this Agreement or the subject matter of this
Agreement may not be enforced in or by such court.
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Section 11.5 Successors and Assigns
This Agreement shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of each of the
parties hereto. No Party may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of the
other Parties; provided, however, that the Purchaser may (i) assign any or all
of its rights and interests hereunder to one or more of its affiliates and (ii)
designate one or more of its affiliates to perform its obligations hereunder (in
any or both of which cases the Purchaser nonetheless shall remain responsible
for the performance of all of its obligations hereunder).
Section 11.6 Entire Agreement
This Agreement, the other Transaction Documents and the other
documents delivered pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
Section 11.7 Severability
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 11.8 Amendment and Waiver
(a) This Agreement may be amended or modified only upon the mutual
written consent of the Company, InfoCast, the Purchaser and each of the Selling
Shareholders.
(b) Any amendment, modification or waiver effected pursuant to this
Section 11.07 shall be binding upon the Company, InfoCast, Purchaser and each of
the Selling Shareholders.
Section 11.9 Notices
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the parties hereto
at the respective addresses set forth below, or as notified by such party from
time to time at least ten (10) days prior to the effectiveness of such notice:
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if to the Company: Homebase Work Solutions Ltd.
639-5th Avenue S.W.
Suite 820
Calgary, Alberta T2P 0M9
Attention: Ken MacLean
Telecopier: (403) 265-8626
with a copy to: Burnet, Duckworth & Palmer
1400, 350-7th Avenue S.W.
Calgary, Alberta T2P 3N9
Attention: Jeff Lawson
Telecopier: (403) 260-0332
if to the Selling Shareholders: Shareholders of Homebase Work Solutions Ltd.
c/o Homebase Work Solutions Ltd.
639 - 5th Avenue S.W.
Suite 820
Calgary, Alberta T2P 0M9
Attention: Ken MacLean
Telecopier: (403) 265-8626
with a copy to: Burnet, Duckworth & Palmer
1400, 350-7th Avenue S.W.
Calgary, Alberta T2P 3N9
Attention: Jeff Lawson
Telecopier: (403) 260-0332
if to the Purchaser: InfoCast Canada Inc.
1 Richmond Street West
Suite 901
Toronto, Ontario M5H 3W4
Attention: A.T. Griffis
Telecopier: (416) 867-1681
with a copy to: Aird & Berlis
181 Bay Street, BCE Place
Suite 1800, P.O. Box 754
Toronto, Ontario M5J 2T9
Attention: M.C.G. Brown
Telecopier: (416) 863-1515
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if to InfoCast: InfoCast Corporation
1 Richmond Street West
Suite 901
Toronto, Ontario M5H 3W4
Attention: A.T. Griffis
Telecopier: (416) 867-1681
with a copy to: Aird & Berlis
181 Bay Street, BCE Place
Suite 1800, P.O. Box 754
Toronto, Ontario M5J 2T9
Attention: M.C.G. Brown
Telecopier: (416) 863-1515
Section 11.10 Counterparts
This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument.
Section 11.11 Attorney's Fees
InfoCast shall bear all reasonable legal fees and expenses incurred
by the Purchaser's Canadian counsel, Aird & Berlis, Toronto, Canada, in
connection with the negotiation and closing of the transaction contemplated
hereby. If any action at law or in equity (including arbitration) is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled. The Company
shall bear all reasonable legal fees and expenses incurred by Canadian counsel
to the Company and the Selling Shareholders, Burnet, Duckworth & Palmer,
Calgary, Alberta, in connection with the negotiation and closing of the
transaction contemplated hereby.
Section 11.12 Delays or Omissions
No delay or omission to exercise any right, power or remedy accruing
to any party hereto, upon any breach or default of any other party hereto, shall
impair any such right, power or remedy of such party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any holder of any
breach or default under this Agreement, or any waiver on the part of any holder
of any provisions or conditions of this Agreement, must be made in writing and
shall be effective only to the extent specifically set forth in such writing.
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Section 11.13 Remedies Cumulative
All remedies, either under this Agreement or by law or otherwise
afforded to any party hereto, shall be cumulative and not alternative.
Section 11.14 Ontario Securities Law Matters
The Purchaser hereby covenants and agrees to use its best efforts to
obtain, as promptly as practicable following the Closing Date, a discretionary
ruling of each of the Ontario Securities Commission and the Alberta Securities
Commission granting an exemption from the prospectus and registration
requirements of the Ontario Act and the Alberta Act in connection with any and
all trades of securities contemplated by or under the terms of the Exchangeable
Shares or the Exchange Agreement, on such terms and in such form as is customary
for transactions of this nature. The Controlling Shareholders covenant and agree
(and each Selling Shareholder has agreed in the Non-Controlling Shareholder
Letters of Transmittals) not to exercise any rights arising under the terms of
the Exchangeable Shares or the Exchange Agreement that would cause the Purchaser
or InfoCast to be required to effect a trade in securities that would constitute
a contravention of the Ontario Act or the Alberta Act. This Section shall also
operate as a waiver of the rights of a holder of Exchangeable Shares under the
terms thereof such that no holder of Exchangeable Shares may exercise such
rights in a manner contrary to the covenants provided for in this Section. Each
Selling Shareholder agrees not to transfer any Exchangeable Shares to any person
who does not first agree to be bound by the provisions of this Section, and to
cause any subsequent transferee to become so bound as a condition of any
subsequent transfer.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
as of the date set forth in the first paragraph hereof.
COMPANY:
HOMEBASE WORK SOLUTIONS LTD.
By: /s/ (signature is illegible)
-----------------------------
Name:
Title:
SELLING SHAREHOLDERS:
Witness: KEN MACLEAN
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Witness: DARCY GALVON
Witness: SCOTT FLEMING
786364 ALBERTA LTD.
By:
Name:
Title:
786206 ALBERTA LTD.
By:
Name:
Title:
PURCHASER:
INFOCAST CANADA CORPORATION
By:
Name:
Title:
INFOCAST CORPORATION
By:
Name:
Title:
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GENERAL SECURITY AGREEMENT
1. SECURITY INTEREST
(a) For valuable consideration, the undersigned, HOMEBASE WORK SOLUTIONS
LTD. (the "Debtor"), hereby grants to INFOCAST CANADA CORPORATION (the "Secured
Party"), by way of mortgage, charge, assignment and transfer, a security
interest (the "Security Interest") in the undertaking of the Debtor and in all
Goods (including all parts, accessories, attachments, special tools, additions
and accessions thereto), Chattel Paper, Documents of Title (whether negotiable
or not), Instruments, Intangibles and Securities now owned or hereafter owned or
acquired by or on behalf of the Debtor (including such as may be returned to or
repossessed by the Debtor) and in all proceeds and renewals thereof, accretions
thereto and substitutions therefor, including, without limitation, all of the
following now owned or hereafter owned, or acquired by or on behalf of the
Debtor:
Equipment
(i) all present and future equipment of the Debtor, including without
limitation, all machinery, fixtures, plant, tools, furniture,
vehicles of any kind or description, all spare parts, accessories
installed in or affixed or attached to any of the foregoing, and all
drawings, specifications, plans and manuals relating thereto
("Equipment"); Inventory
(ii) all present and future inventory of the Debtor, including without
limitation, all raw materials, materials used or consumed in the
business or profession of the Debtor, work-in-progress, finished
goods, goods used for packing, materials used in the business of the
Debtor not intended for sale, and goods acquired or held for sale or
furnished or to be furnished under contracts of rental of service
("Inventory");
Accounts
(iii) all present and future debts, demands and amounts due or accruing
due to the Debtor whether or not earned by performance, including
without limitation, its book debts, accounts receivable, and claims
under policies of insurance; and all contracts, security interests
and other rights and benefits in respect thereof ("Accounts");
Intangibles
(iv) all present and future intangible personal property of the Debtor,
including without limitation all contract rights, goodwill, patents,
trade names, trade marks, copyrights and other intellectual
property, and all other choses in action of the Debtor of every
kind, whether due at the present time or hereafter to become due or
owing ("Intangibles");
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Documents of Title
(v) all present and future documents of title of the Debtor, whether
negotiable or otherwise, including all warehouse receipts and bills
of lading ("Documents of Title");
Chattel Paper
(vi) all present and future agreements made between the Debtor as secured
party and others which evidence both a monetary obligation and a
security interest in or a lease of specific goods ("Chattel Paper");
Instruments
(vii) all present and future bills, notes and cheques (as such are defined
pursuant to the Bills of Exchange Act (Canada)), and all other
writings that evidence a right to the payment of money and are of a
type that in the ordinary course of business are transferred by
delivery without any necessary endorsement or assignment and all
letters of credit and advices of credit of the Debtor provided that
such letters of credit and advices of credit state that they must be
surrendered upon claiming payment thereunder ("Instruments");
Money
(viii) all present and future money of the Debtor, whether authorized or
adopted by the Parliament of Canada as part of its currency or any
foreign government as part of its currency ("Money");
Securities
(ix) all present and future securities held by the Debtor, including
shares, options, rights, warrants, joint venture interests,
interests in limited partnerships, bonds, debentures and all other
documents which constitute evidence of a share, participation or
other interest of the Debtor in property or in an enterprise or
which constitute evidence of an obligation of the issuer; and
including an uncertificated security within the meaning of Part VI
(Investment Securities) of the Business Corporations Act (Ontario)
and all substitutions therefor and dividends and income derived
therefrom ("Securities");
Documents
(x) all books, accounts, invoices, letters, papers, documents and other
records in any form evidencing or relating to the collateral subject
to the Security Interest ("Documents");
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Undertaking
(xi) all present and future personal property, business, and undertaking
of the Debtor not being Inventory, Equipment, Accounts, Documents of
Title, Chattel Paper, Instruments, Money, Securities or Documents
("Undertaking"); and
Proceeds
(xii) all personal property in any form derived directly or indirectly
from any dealing with collateral subject to the Security Interest or
the proceeds therefrom, including insurance proceeds and any other
payment representing indemnity or compensation for loss of or damage
thereto or the proceeds therefrom ("Proceeds").
The Inventory, Equipment, Accounts, Documents of Title, Chattel
Paper, Instruments, Money, Securities, Documents, Undertaking and
Proceeds are collectively called the "Collateral". Any reference in
this agreement to Collateral shall mean Collateral or any part
thereof, unless the context otherwise requires.
(b) The Security Interest granted hereby shall not extend or apply to
and the Collateral shall not include the last day of the term of any lease or
agreement therefor but upon the enforcement of the Security Interest the Debtor
shall stand possessed of such last day in trust to assign the same to any person
acquiring such term.
(c) The terms "Accounts", "Goods", "Chattel Paper", "Equipment",
"Documents of Title", "Instruments", "Intangibles", "Securities", "Proceeds",
"Documents", "Inventory", "Money", "Undertaking" and "accession" whenever used
herein shall be interpreted pursuant to the respective meanings when used in the
Personal Property Security Act (Ontario), as amended from time to time, which
Act, including amendments thereto and any Act substituted therefor and
amendments thereto is herein referred to as the "PPSA". Provided always that the
term "Goods" when used herein shall not include "consumer goods" of the Debtor
as that term is defined in the PPSA, and the term "Inventory" when used herein
shall include livestock and the young thereof after conception and crops that
become such within one year of execution of this General Security Agreement. Any
reference herein to the "Collateral" shall, unless the context otherwise
requires, be deemed a reference to the "Collateral or any part thereof".
2. INDEBTEDNESS SECURED
The Security Interest granted hereby secures payment and
satisfaction of any and all obligations, indebtedness and liability of the
Debtor to the Secured Party pursuant to a promissory note dated March 25, 1999
(hereinafter called the "Indebtedness").
3. REPRESENTATIONS AND WARRANTIES OF THE DEBTOR
The Debtor represents and warrants and so long as this General
Security Agreement remains in effect shall be deemed to continuously represent
and warrant that:
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(a) the Collateral is genuine and owned by the Debtor free of all
security interests, mortgages, liens, claims, charges or other encumbrances
(hereinafter collectively called "Encumbrances"), save for the Security Interest
and those Encumbrances shown on Schedule "A" or hereafter approved in writing,
prior to their creation or assumption, by the Secured Party;
(b) each Debt, Chattel Paper and Instrument constituting the Collateral
is enforceable in accordance with its terms against the party obligated to pay
the same (the "Account Debtor"), and the amount represented by the Debtor to the
Secured Party from time to time as owing by each Account Debtor or by all
Account Debtors will be the correct amount actually and unconditionally owing by
such Account Debtor or Account Debtors, except for normal cash discounts where
applicable, and no Account Debtor will have any defence, set off, claim or
counterclaim against the Debtor which can be asserted against the Secured Party
whether in any proceeding to enforce the Collateral or otherwise;
(c) the locations specified in Schedule "B" as to business operations
and records are accurate and complete and, with respect to Goods (including
Inventory) constituting the Collateral, the locations specified in Schedule "B"
are accurate and complete save for goods in transit to such locations and
Inventory on lease or consignment; and all fixtures or Goods about to become
fixtures and all crops and all oil, gas or other minerals to be extract and all
timber to be cut which forms part of the Collateral will be situate at one of
such locations; and
(d) without limiting the generality of the descriptions of the
Collateral as set out in Clause 1 hereof, for greater certainty the Collateral
shall include all present and future personal property of the Debtor located on
or about or in transit to or from the address of the Debtor set out on Schedule
"B" attached hereto and the locations set out in Schedule "B" attached hereto.
4. COVENANTS OF THE DEBTOR
So long as this General Security Agreement remains in effect the
Debtor covenants and agrees:
(a) to defend the Collateral against the claims and demands of all other
parties claiming the same or an interest therein; to keep the Collateral free
from all Encumbrances, except for the Security Interest and those shown on
Schedule "A" or hereafter approved in writing, prior to their creation or
assumption by the Secured Party; and not to sell, exchange, transfer, assign,
lease, or otherwise dispose of the Collateral or any interest therein without
the prior written consent of the Secured Party; provided that, until default,
the Debtor may, in the ordinary course of the Debtor's business, sell or lease
Inventory and, subject to Clause 7 hereof, use monies available to the Debtor;
(b) to notify the Secured Party promptly of:
(i) any change in the information contained herein or in the
Schedules hereto relating to the Debtor, the Debtor's
business or the Collateral;
(ii) the details of any significant acquisition of the
Collateral;
(iii) the details of any claims or litigation affecting the
Debtor or the Collateral;
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(iv) any loss of or damage to the Collateral;
(v) any default by any Account Debtor in payment or other
performances of his obligations with respect to the
Collateral; and
(vi) the return to or repossessions by the Debtor of the
Collateral;
(c) to keep the Collateral in good order, condition and repair and not
to use the Collateral in violation of the provisions of this General Security
Agreement or any other agreement relating to the Collateral or any policy
insuring the Collateral or any applicable statute, law, by-law, rule, regulation
or ordinance;
(d) to do, execute, acknowledge and deliver such financing statements
and further assignments, transfers, documents, acts, matters and things
(including further schedules hereto) as may be reasonably requested by the
Secured Party of or with respect to the Collateral in order to give effect to
these presents and to pay all costs of searches and filings in connection
therewith;
(e) to pay all taxes, rates, levies, assessments and other charges of
every nature which may be lawfully levied, assessed or imposed against or in
respect of the Debtor or the Collateral as and when the same become due and
payable;
(f) to insure the Collateral for such periods, in such amounts, on such
terms and against loss or damage by fire and such other risks as the Secured
Party shall reasonably direct with loss payable to the Secured Party and the
Debtor, as insureds, as their respective interests may appear, and to pay all
premiums therefor;
(g) to prevent the Collateral, save Inventory sold or leased as
permitted hereby, from being or becoming an accession to other property not
covered by this General Security Agreement;
(h) to carry on and conduct the business of the Debtor in a proper and
efficient manner and so as to protect and preserve the Collateral and to keep,
in accordance with generally accepted accounting principles, consistently
applied, proper books of account for the Debtor's business as well as accurate
and complete records concerning the Collateral, and mark any and all such
records and the Collateral at the Secured Party's request so as to indicate the
Security Interest;
(i) to deliver to the Secured Party from time to time promptly upon
request:
(i) any Documents of Title, Instruments, Securities and
Chattel Paper constituting, representing or relating to
the Collateral;
(ii) all books of account and all records, ledgers, reports,
correspondence, schedules, documents, statements, lists
and other writings relating to the Collateral for the
purpose of inspecting, auditing or copying same;
(iii) all financial statements prepared by or for the Debtor
regarding the Debtor's business;
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(iv) all policies and certificates of insurance relating to
the Collateral; and
(v) such information concerning the Collateral, the Debtor
and the Debtor's business and affairs as the Secured
Party may reasonably request;
(j) the Debtor agrees to promptly inform the Secured Party in writing of
the acquisition by the Debtor of any personal property which is not of the
nature or type described herein, and the Debtor agrees to execute and deliver at
its own expense from time to time amendments to this agreement, or additional
security agreements as may be reasonably required by the Secured Party in order
that the Security Interest shall attach to such personal property;
(k) the Secured Party may, before as well as after demand, notify any
person obligated to the Debtor in respect of an Account, Chattel Paper or an
Instrument to make payment to the Secured Party of all such present and future
amounts due.
5. USE AND VERIFICATION OF THE COLLATERAL
Subject to compliance with the Debtor's covenants contained herein
and Clause 7 hereof, the Debtor may, until default, possess, operate, collect,
use and enjoy and deal with the Collateral in the ordinary course of the
Debtor's business in any manner not inconsistent with the provisions hereof;
provided always that the Secured Party shall have the right at any time and from
time to time verify the existence and state of the Collateral in any manner the
Secured Party may consider appropriate and the Debtor agrees to furnish all
assistance and information and to perform all such acts the Secured Party may
reasonably request in connection therewith and for such purpose to grant to the
Secured Party or its agents access to all places where the Collateral may be
located and to all premises occupied by the Debtor.
6. SECURITIES
If the Collateral at any time includes Securities, the Debtor
authorizes the Secured Party to transfer the same or any part thereof into its
own name or that of its nominee(s) so that the Secured Party or its nominee(s)
may appear of record as the sole owner thereof; provided that, until default,
the Secured Party shall delivery promptly to the Debtor all notices or other
communications received by it or its nominee(s) as such registered owner and,
upon demand and receipt of payment of any necessary expenses thereof, shall
issue to the Debtor or its order a proxy to vote an take all action with respect
to such Securities. After default, the Debtor waives all rights to receive any
notices or communications received by the Secured Party or its nominee(s) as
such registered owner and agrees that no proxy issued the Secured Party to the
Debtor or its order as aforesaid shall thereafter be effective.
7. COLLECTION OF DEBTS
After default under this General Security Agreement, the Secured
Party may notify all or any Account Debtors of the Security Interest and may
also direct such Account Debtors to make all payments on the Collateral to the
Secured Party. The Debtor acknowledges that any payments on or other proceeds of
the Collateral received by the Debtor from Account Debtors, whether before or
after notification of this Security Interest to Account Debtors and after
default under the General Security Agreement shall be received and held by the
Debtor in trust for the Secured Party and shall be turned over to the Secured
Party upon request.
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8. INCOME FROM AND INTEREST ON THE COLLATERAL
(a) Until default, the Debtor reserves the right to receive any monies
constituting income from or interest on the Collateral and if the Secured Party
receives any such monies prior to default, the Secured Party shall either credit
the same to the account of the Debtor or pay the same promptly to the Debtor.
(b) After default, the Debtor will not request or receive any monies
constituting income from or interest on the Collateral and if the Debtor
receives any such monies without any request by it, the Debtor will pay the same
promptly to the Secured Party.
9. DISPOSITION OF MONIES
Subject to any applicable requirements of the PPSA, all monies
collected or received by the Secured Party pursuant to or in exercise of any
right it possesses with respect to the Collateral shall be applied on account of
the Indebtedness in such manner as the Secured Party deems best or, at the
option of the Secured Party, may be held unappropriated in a collateral account
or released to the Debtor, all without prejudice to the liability of the Debtor
or the rights of the Secured Party hereunder, and any surplus shall be accounted
for as required by law.
10. EVENTS OF DEFAULT
The happening of any of the following events or conditions shall
constitute default hereunder which is herein referred to as "default":
(a) the non payment when due, whether by acceleration or otherwise, of
any principal or interest forming part of the Indebtedness or the failure of the
Debtor to observe or perform any obligation, covenant, term, provision or
condition contained in this General Security Agreement or any other agreement
between the Debtor and the Secured Party;
(b) the bankruptcy or insolvency of the Debtor; the filing against the
Debtor of a petition in bankruptcy the making of an unauthorized assignment of
the benefit of creditors by the Debtor; the appointment of a receiver or trustee
for the Debtor or for any assets of the Debtor; or the institution by or against
the Debtor of any other type of insolvency proceeding under the Bankruptcy Act
or otherwise;
(c) the institution by or against the Debtor of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against
or winding up of affairs of the Debtor;
(d) if any Encumbrance affecting the Collateral becomes enforceable
against the Collateral;
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(e) if the Debtor ceases or threatens to cease to carry on business or
makes or agrees to make a bulk sale of assets without complying with applicable
law or commits or threatens to commit an act of bankruptcy;
(f) if an execution, sequestration, extent or other process of any court
becomes enforceable against the Debtor or if a distress or analogous process is
levied upon the assets of the Debtor or any part thereof; and
(g) if any certificate, statement, representation, warranty or audit
report heretofore or hereafter furnished by or on behalf of the Debtor pursuant
to or in connection with the General Security Agreement, or otherwise
(including, without limitation, the representations and warranties contained
herein) or as an inducement to the Secured Party to extend any credit to or to
enter into this or any other agreement with the Debtor, provides to have false
in any material respect at the time as of which the facts therein set forth were
stated or certified, or provides to have omitted an substantial contingent or
unliquidated liability or claim against the Debtor; or if upon the date of
execution of this General Security Agreement, there have been any material
adverse change in any of the facts disclosed by any such certificate,
representation, statement, warranty or audit report, which change shall not have
been disclosed to the Secured Party at or prior to the time of such execution.
11. REMEDIES
(a) Upon default, the Secured Party may appoint or reappoint by
instrument in writing, any person or persons, whether an officer or officers or
an employee or employees of the Secured Party or not, to be a receiver or
receivers (hereinafter called a "Receiver", which term when used herein shall
include a receiver and manager) of the Collateral (including any interest,
income or profits therefrom) and may remove any Receiver so appointed and
appoint another in his stead. Any such Receiver shall, so far as concerns
responsibility for his acts, be deemed the agent of the Debtor and not the
Secured Party, and the Secured Party shall not be in any way responsible for any
misconduct, negligence, or non-feasance on the part of any such Receiver, his
servants, agents or employees. Subject to the provisions of the instrument
appointing him., any Receiver shall have power to take possession of the
Collateral, to preserve the Collateral or its value, to carry on or concur in
carrying on all or any part of the business of the Debtor and to sell, lease or
otherwise dispose of or concur in selling, leasing or otherwise disposing of the
Collateral. To facilitate foregoing powers, any such Receiver may, to the
exclusion of all others, including the Debtor, enter upon, use and occupy all
premises owned or occupied by the Debtor wherein the Collateral may be situate,
maintain the Collateral upon such premises, borrow money on a secured or
unsecured basis and use the Collateral directly in carrying on the Debtor's
business or otherwise, as such Receiver shall, in his discretion, determine.
Except as may be otherwise directed by the Secured Party, all monies received
from time to time by such Receiver in carrying out his appointment shall be
received in trust for an paid over to the Secured Party. Every such Receiver
may, in the discretion of the Secured Party, be vested with all or any of the
rights and powers of the Secured Party.
(b) Upon default, the Secured Party may, either directly or through its
agents or nominees, exercise all the power and rights given to a Receiver by
virtue of the foregoing sub-clause (a).
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(c) The Secured Party may take possession of, collect, demand, sue on,
enforce, recover and receive the Collateral and give valid and binding receipts
and discharges therefor and in respect thereof and, upon default, the Secured
Party may sell, lease or otherwise dispose of the Collateral in such manner, at
such time or times and place or places, for such consideration and upon such
terms and conditions as to the Secured Party may seem reasonable.
(d) In addition to those rights granted herein and in any other
agreement now or hereafter in effect between the Debtor and the Secured Party,
and in addition to any other rights the Secured Party, may have at law or in
equity, the Secured Party shall have, both before and after default, all rights
and remedies of a secured party under the PPSA. Provided always, that the
Secured Party shall not be liable or accountable for any failure to exercise its
remedies, take possession of, collect, enforce, realize, sell, lease or
otherwise dispose of the Collateral or to institute any proceedings for such
purposes. Furthermore, the Secured Party shall have no obligation to take any
steps to preserve rights against prior parties to any Instrument or Chattel
whether the Collateral or Proceeds and whether or not in the Secured Party's
possession and shall not be liable or accountable for failure to do so.
(e) The Debtor acknowledges that the Secured Party or any Receiver
appointed by it may take possession of the Collateral wherever it may be located
and by any method permitted by law and the Debtor agrees upon request from the
Secured Party or any such Receiver to assemble and deliver possession of the
Collateral at such place or places as directed.
(f) The Debtor agrees to pay all costs, charges and expenses reasonably
incurred by the Secured Party or any Receiver appointed by it, whether directly
or for services rendered (including reasonable solicitors and auditors costs and
other legal expenses and Receiver remuneration), in operating the Debtor's
accounts, in enforcing this General Security Agreement, taking custody of,
preserving, repairing, processing, preparing for disposition and disposing of
the Collateral and in enforcing or collecting the Indebtedness and all such
costs, charges and expenses together with any monies owing as a result of any
borrowing by the Secured Party or any Receiver appointed by it, as permitted
hereby, shall be a first charge on the proceeds of realization, collection or
disposition of the Collateral and shall be secured hereby.
(g) Unless the Collateral in question is perishable or unless the
Secured Party believes on reasonable grounds that the Collateral in question
will decline speedily in value, the Secured Party will give the Debtor such
notice of the date, time and place of any public sale or of the date after which
any private disposition of the Collateral is to be made, as may be required by
the PPSA.
12. MISCELLANEOUS
(a) The Debtor hereby authorizes the Secured Party to file such
financing statements and other documents and do such acts, matters and things
(including completing and adding schedules hereto identifying the Collateral or
any permitted Encumbrances affecting the Collateral or identifying the locations
at which the Debtor's business is carried on and the Collateral and records
relating thereto are situate) as the Secured Party may deem appropriate to
perfect and continue the Security Interest, to protect and preserve the
Collateral and to realize upon the Security Interest and the Debtor hereby
irrevocably constitutes and appoints the Secured Party the true and lawful
attorney of the Debtor, with full power of substitution, to do
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any of the foregoing in the name of the debtor whenever and wherever it may be
deemed necessary or expedient.
(b) Without limiting any other right of the Secured Party, whenever the
Indebtedness is immediately due and payable, the Secured Party may, in its sole
discretion, set off against the Indebtedness any and all monies then owed to the
Debtor by the Secured Party in any capacity and the Secured Party shall be
deemed to have exercised such right of set off immediately at the time of making
its decision to do so even though any charge therefor is made or entered on the
Secured Party's records subsequent thereto.
(c) Upon the Debtor's failure to perform any of its duties hereunder,
the Secured Party may, but shall not be obligated to, perform any or all of such
duties, and the Debtor shall pay to the Secured Party, forthwith upon written
demand therefor, an amount equal to the expense incurred by the Secured Party in
so doing plus interest thereon from the date such expense is incurred until it
is paid at the rate of 8% per annum.
(d) The Secured Party may grant extensions of time and other
indulgences, take and give up security, accept compositions, compound,
compromise, settle, grant releases and discharges and otherwise deal with the
Debtor, debtors of the Debtor, sureties and others and with the Collateral and
other security as the Secured Party may see fit without prejudice to the
liability of the Debtor or the Secured Party's right to hold and realize the
Security Interest. Furthermore, the Secured party may demand, collect and sue on
the Collateral in either the Debtor's or the Secured Party's name, at the
Secured Party's option, and may endorse the Debtor's name on any and all
cheques, commercial paper, and any other Instruments pertaining to or
constituting the Collateral.
(e) No delay or omission by the Secured Party in exercising any right or
remedy hereunder or with respect to any of the Indebtedness shall operate as a
waiver thereof or of any other right or remedy, and no single or partial
exercise thereof shall preclude any other or further exercise thereof or the
exercise of any other right or remedy. Furthermore, the Secured Party, may
remedy any default by the Debtor hereunder or with respect to any Indebtedness
in any reasonable manner without waiving the default remedied and without
waiving any other prior or subsequent default by the Debtor. All rights and
remedies of the Secured party granted or recognized herein are cumulative and
may be exercised at any time and from time to time independently or in
combination.
(f) The Debtor waives protest of any Instrument constituting the
Collateral at any time held by the Secured Party on which the Debtor is in way
liable and, subject to Clause 11(g) hereof, notice of any other action taken by
the Secured Party.
(g) This General Security Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns. In
any action brought by an assignee of this General Security Agreement and the
Security Interest or any part thereof to enforce any rights hereunder, the
Debtor shall not assert against the assignee any claim or defence which the
Debtor now has or hereafter may have against the Secured Party.
(h) Save for any schedules which may be added hereto pursuant to the
provisions hereof, no modification, variation or amendment of any provision of
this General Security
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Agreement shall be made except by a written agreement, executed by the parties
hereto and no waiver of any provision hereof shall be effective unless in
writing.
(i) This General Security Agreement and the transactions evidenced
hereby shall be governed by and construed in accordance with the laws of the
Province of Ontario as the same may from time to time be in effect, including,
where applicable, the PPSA
(j) Subject to the requirements of Clauses 11(g) and 12(k) hereof,
whenever either party hereto is required or entitled to notify or direct the
other or to make a demand or request upon the other, such notice, direction,
demand or request shall be in writing and shall be sufficiently given only if
delivered to the party for whom it is intended at the principal address of such
party herein set forth or as changed pursuant hereto or if sent by prepaid
registered mail addressed to the party for whom it is intended at the principal
address of such party herein set forth or as changed pursuant hereto. Either
party may notify the other pursuant hereto of any change in such party's
principal address to be used for the purposes hereof:
Principal address of the Secured Party:
InfoCast Canada Corporation
Suite 901, 1 Richmond Street West
Toronto, Ontario M5H 3W4
Principal address of the Debtor:
Homebase Work Solutions Ltd.
Suite 515, 505-8th Avenue S.W.
Calgary, Alberta T2P 1G2
(k) This General Security Agreement and the security afforded hereby is
in addition to and not in substitution for any other security now or hereafter
held by he Secured Party, and is, and is intended to be a continuing General
Security Agreement and shall remain in full force and effect until the Secured
Party shall actually receive written notice of its discontinuance; and,
notwithstanding such notice, shall remain in full force and effect thereafter
until all the Indebtedness contracted for or created before the receipt of such
notice by the Secured Party, and any extension or renewal thereof (whether made
before or after receipt of such notice) together with interest accruing thereon
after such notice, shall be paid in full.
(l) The headings used in this General Security Agreement are for
convenience only and are not to be considered a part of this General Security
Agreement and do not in any way limit or amplify the terms and provisions of
this General Security Agreement.
11
<PAGE>
(m) When the context so requires, the singular number shall be read as
if the plural were expressed and the provisions hereof shall be read with all
grammatical changes necessary dependent upon the person referred to being a
male, female, firm or corporation.
(n) In the event any provisions of this General Security Agreement , as
amended from time to time, shall be deemed invalid or void, in whole or in part,
by any Court of competent jurisdiction, the remaining terms and provisions of
this General Security Agreement shall remain in full force and effect.
(o) Nothing herein contained shall in any way obligate the Secured Party
to grant, continue, renew, extend time for payment or accept anything which
constitutes or would constitute the Indebtedness.
(p) The Security Interest created hereby is intended to attach when this
General Security Agreement is signed by the Debtor and delivered to the Secured
Party.
13. EXCEPTION RE: LEASEHOLD INTERESTS
AND CONTRACTUAL RIGHTS
The day of the term of any lease, sublease or agreement therefor is
specifically excepted from the Security Interest, but the Debtor agrees to stand
possessed of such last day in trust for any person acquiring such interest of
the Debtor. To the extent that the creation of the Security Interest would
constitute a breach or cause the acceleration of any agreement right, licence or
permit to which the Debtor is a party, the Security Interest shall not attach
thereto but the Debtor shall hold its interest therein in trust for the Secured
Party, and shall assign such agreement, right, license or permit to the Secured
party forthwith upon obtaining the consent of the other party thereto.
14. COPY OF AGREEMENT
The Debtor hereby acknowledges receipt of a copy of this General
Security Agreement.
12
<PAGE>
IN WITNESS WHEREOF the Debtor has executed this General Security
Agreement this 25th day of March, 1999.
HOMEBASE WORK SOLUTIONS LTD.
Per:
COMPENSATION AGREEMENT
TO: Darcy Galvon
AND TO: Ken McLean
AND TO: Scott Fleming
Dear Sirs:
Reference is made to the purchase and sale agreement made as of the 6th
day of May, 1999 (the "Acquisition Agreement") among HomeBase Work Solutions
Ltd. ("HomeBase"), Darcy Galvon, Ken MacLean, Scott Fleming, 786382 Alberta Ltd.
and 786206 Alberta Ltd. (collectively, the "Controlling Shareholders"), Infocast
Canada Corporation ("Infocast Canada"), Infocast Corporation ("Infocast") and
the Controlling Shareholders (as defined therein). Capitalized terms used herein
but not otherwise defined shall have the same meaning as provided in the
Acquisition Agreement.
In conjunction with the completion of the various transactions
contemplated by the Acquisition Agreement, Infocast hereby covenants and agrees
that, in consideration of Messrs. Galvon, MacLean and Fleming entering into the
Acquisition Agreement and fulfilling their respective obligations thereunder,
each shall be entitled to receive a payment in the amount of $140,000 payable as
follows:
a. $70,000 shall be paid to each of Messrs. Galvon, MacLean and Fleming on
the Closing Date; and
b. An additional $70,000 shall be paid to each of Messrs. Galvon, McLean
and Fleming on the earlier of that date that (i) Infocast completes a
private placement(s) for gross proceeds of U.S. $1,000,000 and (ii)
completes a letter of credit financing with funds available Infocast of
not less than U.S. $800,000
This Compensation Agreement is meant to constitute a binding agreement
among the parties hereto on the terms set forth above. If you are in agreement
with the foregoing, please so indicate by executing a duplicate copy of the
agreement in the spaces set forth below.
DATED this ___ day of May, 1999.
INFOCAST CORPORATION
Per: /s/ A.T. Griffis
---------------------
Acknowledged and agree to this ___ day
of May, 1999
/s/ Darcy Galvon /s/
- -------------------- ------------------------------
Darcy Galvon Witness
/s/ Ken MacLean /s/
- ------------------ ------------------------------
Ken MacLean Witness
/s/ Sean Fleming /s/
- ----------------- ------------------------------
Sean Fleming Witness
MASTER LEASE AGREEMENT
Master Lease # _________________
Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor, subject
to the following terms of this Master Lease Agreement ("Master Lease") and any
Lease Schedule ("Schedule"), collectively referred to as the Lease ("Lease"),
the personal property described in any Schedule together with all attachments,
replacements, parts substitutions, additions, upgrades, accessories, software
licenses and operating manuals (the "Product"). Each Schedule shall constitute a
separate, distinct, and independent Lease and contractual obligation of Lessee.
1. Commencement Date and Term
The initial lease term ("Initial Term") and Lessee's rental obligations shall
begin on the Commencement Date and continue for the number of Rental Periods
specified in the Lease as set forth in Section 2 below and shall renew
automatically thereafter until terminated by either party upon not less than
ninety (90) days prior written notice. The Commencement Date with respect to
each item of Product shall be the 16th day after date of shipment to Lessee.
2. Rent and Rental Period
All rental payments and any other amounts payable under a Lease are collectively
referred to as "Rent." The Rental Period shall mean the rental payment period of
either calendar months, quarters, or as otherwise specified in each Schedule.
Rent for the specified Rental Period is due and payable in advance, to the
address specified in Lessor's invoice, on the first day of each Rental Period
during the Initial Term and any extension (collectively, the "Lease Term"),
provided, however, that Rent for the period of time (if any) from the
Commencement Date to the first day of the first Rental Period shall begin to
accrue on the Commencement Date. If any Rent is not paid when due, Lessee will
pay to Lessor interest at the rate of one and one half percent (1.5%) per month
(i.e. 18% per annum) on the amount of unpaid Rent.
3. Net Lease, Taxes and Fees
Each Schedule shall constitute a net lease and payment of Rent shall be absolute
and unconditional, and shall not be subject to any abatement, reduction,
set-off, defense, counterclaim, interruption, deferment or recoupment for any
reason whatsoever. Lessee agrees to pay Lessor when due shipping charges, fees,
and assessments. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Schedule against Lessor. Lessee or the Product by any governmental
authority (except only Federal, Provincial and local taxes on the capital or the
net income of Lessor, Lessor will file all personal property tax returns for the
Product and pay all property taxes when due. Lessee will reimburse Lessor for
property taxes within thirty (30) days of receipt of an invoice from Lessor.
<PAGE>
4. Title
Product shall always remain personal property, Lessee shall have no right or
interest in the Product except as provided in this Master Lease and the
applicable Schedule and shall hold the Product subject and subordinate to the
rights of Lessor, and Lessee shall not represent to any third party that the
Product is the property of Lessee. When necessary under applicable law, Lessee
authorizes Lessor, as Lessee's agent, to prepare, execute and file in Lessee's
name security registration statements, affidavits, or other instruments
reasonably required to evidence and protect the interest of the Lessor or the
Lessor's Assignee (as defined in Section 7 of this Master Lease) in the Product
and to insert serial numbers in Schedules as appropriate.
Lessee will, at its expense, keep the Product free and clear from any security
interests, liens or encumbrances of any kind (except any caused by Lessor) and
will indemnify and hold Lessor harmless from and against any loss or expense
caused by Lessee's failure to do so. Lessee shall give Lessor immediate written
notice of any attachment or judicial process affecting the Product or Lessor's
ownership. Lessee will label the Product as the property of Lessor, which label
shall provide that no party shall tamper with, obstruct, interfere with, remove
or alter the Product in which such label is affixed. Lessee shall allow, subject
to Lessee's reasonable security requirements, the inspection of the Product
during regular business hours.
5. Use, Maintenance and Repair
Lessee, at its own expense, shall keep the Product in good repair, appearance
and condition, other than normal wear and tear and shall obtain and keep in
effect throughout the term of the Schedule a hardware and software maintenance
agreement with the manufacturer or other party acceptable to Lessor. All parts
furnished in connection with such repair and maintenance shall be manufacturer
authorized parts and shall immediately become components of the Product and the
property of Lessor. Lessee shall use the Product in compliance with the
manufacturer's or supplier's guidelines.
6. Delivery and Return Product
Lessee assumes the full expense of transportation, insurance, and installation
to Lessee's site. Upon termination of each Schedule, Lessee will provide Lessor
a letter from the manufacturer certifying that the Product is in good operating
condition and is eligible for continued maintenance and that the operating
system is at then current level, unless under a Sun Microsystems of Canada Inc.
service contract during the Lease Term. Lessee, at its expense, shall deinstall,
pack and ship the Product to a Canadian location identified by Lessor. Lessee
shall remain obligated to pay Rent on the Product until the Product and
certification are received by Lessor.
7. Assignment and Relocation
Lessee may sublease or assign its rights under this Master Lease and a Schedule
with Lessor's prior written consent, subject to any terms and conditions which
Lessor may require. No permitted assignment or sublease shall relieve Lessee of
any of its obligations hereunder.
Lessee acknowledges Lessor may sell and/or assign its interest or grant a
security interest in each Lease and/or the Product to an assignee ("Lessor's
Assignee"). So long as Lessee is not in default
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<PAGE>
hereunder Lessor and Lessor's Assignee shall not interfere with Lessee's right
of quiet enjoyment and use of the Product. Upon the assignment of each Lease,
Lessor's Assignee shall not interfere with Lessee's right of quiet enjoyment and
use of the Product. Upon the assignment of each Lease, Lessor's Assignee shall
have any and all discretions, rights and remedies of Lessor and all references
to Lessor shall mean Lessor's Assignee. Notwithstanding any such assignment,
Lessor shall remain liable to Lessee for the performance of all duties,
covenants and conditions hereunder, and in no event shall Lessor's Assignee be
obligated to perform any duty, covenant or condition under this Lease and Lessee
agrees it shall pay Lessor's Assignee without any defense, rights of set-off or
counterclaims and shall not hold or attempt to hold Lessor's Assignee liable for
any of Lessor's obligations hereunder.
Lessee, at its expense, may relocate Product (after packing it for shipment in
accordance with the manufacturer's instructions) to a different address with
thirty (30) days prior written notice to Lessor. The Product shall at all times
be used solely within Canada and Lessee hereby covenants not to remove any
Products, of any part thereof, from such jurisdiction.
8. Upgrade and Additions
Lessee may affix or install any accessory, addition, upgrade, equipment or
device on the Product ("Additions") provided that such Additions are obtained
from or approved in writing by Sun Microsystems of Canada Inc. and are not
subject to the interest of any third party other than Lessor. At the end of the
Schedule Term, Lessee shall remove any Additions which (i) were not leased by
Lessor and (ii) are readily removable without causing material damage or
impairment of the intended function, use, or value of the Product and restore
the Product to its original configuration. Any Additions which are not so
removable will become the Lessor's property (lien free).
9. Lease End Options
Upon written service given at least ninety (90) days prior to expiration of the
Lease Term, provided Lessee is not in default under any Schedule. Lessee may (i)
exercise any purchase option set forth on the Schedule, or (ii) renew the
Schedule for a minimum extension period of twelve (12) months, or (iii) return
the Product to Lessor at the expiration date of the Schedule pursuant to Section
6 above.
10. Insurance, Loss or Damage
Effective upon shipment of Product to Lessee and until Product is returned to
Lessor in accordance with each Lease, Lessee shall provide at its expense (i)
Insurance against the loss or theft or damage to the Product for the full
replacement value, and (ii) Insurance against public liability and property
damage. Lessee shall provide a certificate of Insurance that such coverage is in
effect, upon request by Lessor, naming Lessor as co-loss payee or sole loss
payee and/or named insured as may be required.
Lessee shall bear the entire risk of loss, theft, destruction of or damage to
any item of Product. No loss or damage shall relieve Lessee of the obligation to
pay Rent or any other obligation under the Schedule. In the event of loss or
damage, Lessee shall promptly notify Lessor and shall, at Lessor's
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<PAGE>
option, (i) place the Product in good condition and repair, or (ii) replace the
Product with lien free Product of the same model, type and configuration in
which case the relevant Schedule shall continue in full force and effect and
clear title in such Product shall automatically vest in Lessor, or (iii) pay
Lessor the present value of remaining Rent (discounted at six (6%) percent per
annum, compounded monthly) plus the buyout purchase option price provided for in
the applicable Schedule.
11. Selection, Warranties and Limitation of Liability
Lessee acknowledges that it has selected the Product and disclaims any reliance
upon statements made by Lessor. Lessee acknowledges and agrees that use and
possession of the Product by Lessee shall be subject to and controlled by the
terms of any manufacturer's or, if appropriate, supplier's warranty, and Lessee
agrees to look solely to the manufacturer or, if appropriate, supplier with
respect to all mechanical, service and other claims, and the right to enforce
all warranties made by said manufacturer are hereby assigned to Lessee for the
term of the Schedule.
EXCEPT AS SPECIFICALLY PROVIDED HEREIN, LESSOR HAS NOT MADE AND DOES NOT MAKE
ANY REPRESENTATIONS, WARRANTIES OR CONDITIONS, EITHER EXPRESS OR IMPLIED, AS TO
ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, NON-INFRINGEMENT. THE
DESIGN, QUALITY, CAPACITY OR CONDITION OF THE PRODUCT, ITS MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE. IT BEING AGREED THAT AS THE LESSEE SELECTED
BOTH THE PRODUCT AND THE SUPPLIER, NO DEFECT, EITHER ______ OR LATENT SHALL
RELIEVE LESSEE OF ITS OBLIGATION HEREUNDER, LESSEE AGREES THAT LESSOR SHALL NOT
BE LIABLE FOR EQUITABLE REMEDIES, WHETHER IN CONTRACT OR TORT OR OTHERWISE OF
ANY REMEDIES, LIABILITY, LOSS, DAMAGE OR EXPENSE OF ANY KIND INCLUDING, WITHOUT
LIMITATION, DIRECT, INDIRECT, INCIDENTAL, THIRD PARTY, CONSEQUENTIAL OR SPECIAL
DAMAGES OF ANY NATURE, DAMAGES ARISING FROM THE LOSS OF USE OF PRODUCT, LOST
DATA, LOST PROFITS, OR FOR ANY CLAIM OR DEMAND.
12. Indemnity
Lessee shall indemnify and hold harmless Lessor and Lessor's Assignee from and
against any and all claims, suits, proceedings, liabilities, damages, penalties,
costs and expenses (including reasonable legal fees), arising out of the use,
operation, possession, ownership (for strict liability in tort only), selection,
leasing, maintenance, delivery or return of any item of Product.
13. Default and Remedies
Lessee shall be in fundamental breach of any Lease if (i) Lessee fails to pay
Rent within ten (10) days of due date; (ii) Lessee fails to perform or observe
or breaches any covenant or condition or any representation or warranty in such
Lease, and such failure or breach continues unremedied for a period of ten (10)
days after written notice from Lessor; (iii) Lessee, except as adversely
permitted in the Lease, attempts to move, sell, transfer, encumber, or sublet
without consent any item of Product leased under such Lease; (iv) Lessee files
or has filed against it a petition in bankruptcy or
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<PAGE>
becomes insolvent or makes an assignment for the benefit of creditors or
consents to the appointment of a trustee or receiver or either shall be
appointed for Lessee or for a substantial part of its property; or (v) Lessee or
any guarantor of Lessee is declared legally deceased or if Lessee shall
terminate its existence by amalgamation, winding up its business, sale of
substantially all of its assets or otherwise.
Upon any such breach, Lessor may, at its option, take one or more of the
following actions: (i) with notice and demand declare all sums due and to become
due under the Schedule immediately due and payable, and in so doing accelerate
and recover the present value of the remaining payment stream of all Rent due
under the defaulted Schedule (discounted at 6%, per annum, compounded monthly)
together with all Rent and other amounts currently due as liquidated damages and
not as a penalty; (ii) require Lessee to return immediately all Product leased
under such Schedule to Lessor in accordance with Paragraph 6 hereof, (iii)
without breach of the peace take immediate possession of and remove the Product;
(iv) sell any or all of the Product at public or private sale or otherwise
dispose of, hold, use or lease to others, or (v) exercise any right or remedy
which may be available to Lessor under applicable law, including the right to
recover damages for the breach of the Schedule. In addition, Lessee shall be
liable for reasonable legal fees, other costs and expenses resulting from any
default, or the exercise of Lessor's remedies, and expenses resulting from any
default, or the exercise of Lessor's remedies, including placing such Product in
the condition required by Paragraph 8 hereof. Each remedy shall be cumulative
and in addition to any other remedy otherwise available to Lessor at law or in
equity. Any waiver of default by Lessor must be in writing and no such waiver or
any default shall constitute a waiver of any of Lessor's other rights or future
defaults.
Except as may be prohibited by law, and to the extent the same extends to and
relates to this Master Lease, as amended, modified or supplemented or any
security collateral hereto, Lessee hereby waives the benefit of all provisions
of any applicable statutes and regulations which would in any manner affect,
restrict or limit the rights of Lessor hereunder including, without limitation,
the provisions of the Chattel Mortgages Act (British Columbia), the Sale of
Goods on Condition Act (British Columbia), the Limitation of Civil Rights Act
(Saskatchewan) and the Law of Property Act (Alberta) as the same may be amended,
supplemented, re-enacted, substituted or replaced from time to time. Lessee also
waives the right of any statutory exemption from execution or seizure and the
right to demand security for costs in the event of litigation. If this Master
Lease or any applicable Schedule is, or is deemed to be, subject to the laws of
the Province of Quebec, Lessee agrees that, to the extent not prohibited by law,
the provisions of the Civil Code of the Province of Quebec respecting the
leasing or hiring of things do not apply to this Master Lease or any applicable
Schedule or the rights, liabilities, and resources of Lessee hereunder.
14. Lessee's Representations
Lessee represents and warrants for this Master Lease and each Schedule that the
execution, delivery and performance by Lessee have been duly authorized by all
necessary corporate activities individual executing was duly authorized to do
so; the Master Lease and each Schedule constitute valid, binding agreements of
the Lessee enforceable in accordance with their terms; that all information
supplied by Lessee, including but not limited to the credit application and
other financial information
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<PAGE>
concerning Lessee, is accurate in all material respects as of the date provided;
and if there is any material change in such information prior to manufacturer's
or, if appropriate, supplier's shipment of Product under the Schedule, Lessee
will advise Lessor of such change in writing.
15. Applicable Law
This Master Lease and each Schedule shall in all respects be governed by and
construed in accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein and the parties hereto hereby irrevocably attorn to
the non-exclusive jurisdiction of the Province of Ontario.
16. Miscellaneous
Lessee agrees to execute and deliver to Lessor such further documents,
including, but not limited to, financing statements, assignments, and financial
reports and take such further action as Lessor may reasonably request to protect
Lessor's interest in the Product.
The performance of any act or payment by Lessor shall not be deemed a waiver of
any obligation or default on the part of Lessee. Lessor's failure to require
strict performance by Lessee of any of the provisions of this Master Lease shall
not be a waiver thereof.
This Master Lease together with any Schedule and other terms and conditions
attached hereto constitutes the entire understanding between the parties and
supercedes any previous representations or agreements whether verbal or written
with respect to the use, possession and lease of the Product described in that
Schedule. In the event of a conflict, the terms of the Schedule shall prevail
over the Master Lease.
No amendment or change of any of the terms or conditions herein shall be binding
upon either party unless they are made in writing and are signed by an
authorized representative of each party. Each Schedule is non-cancellable for
the full term specified and each Schedule shall be binding upon, and shall inure
to the benefit of Lessor, Lessee, and their respective successors, legal
representatives and permitted assigns.
All agreements, representations and warranties contained herein shall be for the
benefit of Lessor and shall survive the execution, delivery and termination of
this Master Lease, any Schedule or related document.
Any provision of this Master Agreement and/or each Schedule which is
unenforceable shall not cause any other remaining provision to be ineffective or
invalid. The captions set forth herein are for convenience only and shall not
define or limit any of the terms hereof. Any notices or demands in connection
with any Schedule shall be given in writing by courier or certified mail at the
address indicated in the Schedule, or to any other address specified.
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<PAGE>
17. Year 2000 Warranty
A. Sun warrants that specified versions of products identified on Sun's External
web site (url:www.sun.comm/y2000/cpl/html) as being year 2000 compliant ("listed
products") will not produce errors in the processing of date data related to the
year change from December 31, 1999 to January 1, 2000. Date representation,
including leap years, will be accurate when listed products are used in
accordance with their accompanying documentation, provided that all hardware and
software products used in combination with listed products properly exchange
date data with them.
B. Specified versions of products identified on Sun's external web site as not
yet compliant, but which have a compliance date scheduled, will become listed
products when a remedial patch, update or subsequent release is issued, but in
no event later than June 30, 1999. Other products are not covered by these
warranties.
C. Customer's sole and exclusive remedy for Sun's breach of these warranties
will be for Sun: (I) to use commercially reasonable efforts to provide customer
promptly with equivalent year 2000 compliant products: or (ii) if (i) is
commercially unreasonable, to refund to customer the net book value for
non-compliant listed products.
THIS MASTER LEASE SHALL BECOME EFFECTIVE ON THE DATE ACCEPTED BY
LESSOR.
LESSOR: SUN MICROSYSTEMS FINANCE LESSEE: Homebase Work Solutions
A division of Sun Microsystems of Ltd
Canada Inc.
BY:_________________________________ BY: /s/ R.D. Shannon
-----------------------------
(Authorized Signature) (Authorized Signature)
NAME:______________________________ NAME: R.D. Shannon
TITLE:______________________________ TITLE: President & CEO
DATE:_______________________________ DATE: June 25, 1999
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<PAGE>
LEASE SCHEDULE ("SCHEDULE") NUMBER:______
TO MASTER LEASE AGREEMENT ("MASTER LEASE") NUMBER ______
Lessee LESSOR
Name: HOMEBASE WORK SOLUTIONS LTD. SUN MICROSYSTEMS FINANCE
A DIVISION OF Sun Microsystems of Canada
Address: 820, 639-5th Avenue SW Inc.
Calgary, AB, T2P 0M9 100 Renfrew Drive
Markham, Ontario
L3R 9R6
Attention: Rick Shannon Attention: Bob Hagarty
Phone Number: (403) 294-1161 Phone Number: (905) 415-7935
Fax Number: (403) 265-8626 Fax Number: (905) 477-9423
BILLING ADDRESS PAYMENT SCHEDULE
Name: Homebase Work Solutions Ltd Lease Term: 36 [X] Months
[ ] Quarters
Address: same as above Rent 1 x $700,000.00
Followed by 36 x $59,197.00 per
Month
Attention: Rick Shannon
Phone Number: (403) 294-1161
LOCATION OF PRODUCT END OF LEASE OPTIONS
Lessee P.O. Number 1. Fair Market Value Purchase;
2. FMV Renewal; OR
Location: same as above 3. Return Equipment
Attention: Rick Shannon
Phone Number: (403) 294-1161
Other Terms: Fair Market Value not to exceed 27% of O.E.C.
PRODUCT DESCRIPTION: As per attached Sales Quotation number CAL-98711-l
MASTER LEASE: This original executed Schedule is issued and effective this date
set forth below pursuant to the Master Lease identified above. All of the terms,
conditions, representations and warranties of the Master Lease are hereby
incorporated herein and made a part hereof as if they were expressly set forth
in this Schedule and this Schedule constitutes a separately enforceable,
complete and independent Lease with respect to the Product described herein. By
their execution and delivery of this Schedule, the parties hereby affirm all of
the terms, conditions, representations and warranties of the Master Lease.
The additional terms set forth on the next page hereof are made a part of this
Schedule.
AGREED AND ACCEPTED BY AGREED AND ACCEPTED BY
SUN MICROSYSTEMS FINANCE LESSEE: HOMEBASE WORK SOLUTIONS LTD.
(A division of Sun Microsystems
of Canada Inc.)
By:_______________________________ By: /s/ R.D. Shannon
--------------------------------
Name_____________________________ Name R.D. Shannon
Title______________________________ Title President and CEO
Date:_____________________________ Date June 25, 1999
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<PAGE>
ADDITIONAL TERMS FOR SUN MICROSYSTEMS OF CANADA INC. PRODUCT
The following additional terms and conditions shall govern the use of Sun
Microsystems Inc. ("SMI") Products leased hereunder.
1.0 USE OF SOFTWARE
Lessee's use of any software Products ("Software") provided under this Schedule
shall be governed by the object code license accompanying such Software.
2.0 WARRANTY
Applicable warranties and terms and conditions relating to the Products released
hereunder accompany the Products at time of delivery. Software is warranted to
conform to published specifications for a period of ninety (90) days from the
date of delivery. Sun Microsystems of Canada Inc. ("SMC") does not warrant that:
(i) operation of any software will be uninterrupted or effort free; or (ii)
functions contained in Software will operate in combinations which may be
selected for use by the Licensee or meet the Licensee's requirements. These
warranties extend only to Lessee as an original Licensee.
Lessee's exclusive remedy and SMI's entire liability under these warranties will
be: (i) with respect to Product, repair or at SMI's option, replacement; and
(ii) with respect to Software, use its best efforts to correct such Software as
soon as practical after licensee has notified SMI of Software's nonconformance.
It such repair, replacement or correction is not reasonably achievable, SMI will
refund the rental fee/license fee. Unless Lessee has executed an on-site service
agreement, repair or replacement will be undertaken at a service location
authorized by SMI.
All Software customization is provided "AS IS," without a warranty of any kind.
No SMI warranty shall apply to any Software that is modified without SMI's
written consent or any Product or Software which has been misused, altered,
repaired or used with equipment or software not supplied or expressly approved
by SMI.
SMI reserves the right to change these warranties at any time upon Notice and
without liability to Lessee or third parties.
EXCEPT AS SPECIFIED IN THIS AGREEMENT, ALL EXPRESS OR IMPLIED REPRESENTATIONS
AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT, ARE HEREBY DISCLAIMED.
3.0 TRADEMARKS AND OTHER PROPRIETARY RIGHTS
"Trademarks" means all company names, products' names, marks, logos, designs,
trade dress and other designations or brands used by Sun Microsystems, Inc., its
subsidiaries and affiliates ("Sun")
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<PAGE>
in connection with Products, including, Sun, Sun Microsystems, the Sun logo,
SPARCstation, SPARCserver, and all Sun Product designs.
Lessee is granted no right, title, license or interest in the Trademarks. Lessee
acknowledges Sun's rights in Trademarks and agrees that any and all use of the
Trademarks by Lessee shall inure to the sole benefit of Sun.
4.0 HIGH RISK ACTIVITIES
PRODUCTS ARE NOT DESIGNED OR INTENDED FOR USE IN ON-LINE CONTROL OF AIRCRAFT,
AIR TRAFFIC, AIR CRAFT NAVIGATION OR AIRCRAFT COMMUNICATIONS; OR IN THE DESIGN,
CONSTRUCTION, OPERATION OR MAINTENANCE OF ANY NUCLEAR FACILITY. SMC DISCLAIMS
ANY EXPRESS OR IMPLIED WARRANTY OR FITNESS FOR SUCH USES.
Lessee represents and warrants that it will not use, distribute or resell
Products (including Software) for High Risk Activities and that it will ensure
that its end-users or customers of Products are provided with a copy of the
notice in the previous paragraph.
-10-
MEMORANDUM OF AGREEMENT made the 31st day of July, 1997.
B E T W E E N:
SATISH KUMETA
(hereinafter called the "Vendor")
OF THE FIRST PART,
- and -
VIRTUAL PERFORMANCE SYSTEMS INC.
(hereinafter called the "Purchaser")
OF THE SECOND PART,
WHEREAS the Vendor is the owner of the intellectual property
described in Schedule "A" hereto (the "Purchased Property");
AND WHEREAS the Vendor wishes to sell and the Purchaser wishes to
purchase such Purchased Property upon and subject to the terms and conditions
hereinafter set out;
NOW, THEREFORE THIS AGREEMENT WITNESSETH that in consideration of
the mutual covenants herein contained and other good and valuable consideration,
the receipt and sufficiency whereof are hereby acknowledged by each of the
parties from the other, the parties agree as follows:
1. Purchased Property
1.1 With effect as at the close of business on July 31, 1997 (the "Effective
Time"), the Vendor hereby sells, transfers, assigns, bargains and conveys to the
Purchaser and the Purchaser hereby purchases from the Vendor all right, title
and interest of the Vendor in and to the Purchased Property for a purchase price
determined as provided in Article 2 hereof.
2. Purchase Price
2.1 The purchase price of the Purchased Property (the "Purchase Price") shall be
the fair market value of the Purchased Property as at the Effective Time which
the parties have estimated to be Two Hundred Thousand dollars ($200,000).
3. Satisfaction of Purchase Price
3.1 The Purchase Price shall be satisfied by the allotment and issue to the
Vendor of 35 common shares in the capital of the Purchaser.
<PAGE>
3.2 The parties agree that the stated capital account maintained by the
Purchaser for such common shares is to be designated as one dollar ($1.00).
4. Adjustment to Purchase Price
4.1 The parties agree that the Purchase Price is intended to be the fair market
value of the Purchased Property and declare that the estimate set out in Article
2 is the parties= bona fide belief and agreement as to such fair market value.
Notwithstanding Section 2.1 in the event that any taxing authority having
jurisdiction alleges that the estimate as set out above is not the fair market
value of the Purchased Property or proposes to make an assessment of tax on the
basis that any benefit or advantage is or has been conferred on any person by
reason of the purchase and sale provided for herein, then the Purchase Price
shall be deemed to be and always to have been the fair market value of the
Purchased Property as at the Effective Time as subsequently determined by the
board of directors of the Purchaser after consultation with such taxing
authority, and the Purchase Price shall be adjusted accordingly nunc pro tunc,
with such other adjustments as may be necessary.
5. Representations and Warranties of the Vendor
5.1 The Vendor represents and warrants as follows and acknowledges that the
Purchaser is relying upon such representations and warranties in connection with
the purchase by the Purchaser of the Purchased Property:
a) The Purchased Property is owned by the Vendor as the beneficial
owner of records, with a good and marketable title thereto, free and
clear of all mortgages, liens, charges, security interests adverse
claims, pledges, encumbrances and demands whatsoever;
b) No person, firm or corporation has any agreement or option or any
right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option for the purchase from the
Vendor of any of the Purchased Property; and
c) The Vendor is, and as at the Effective Time will be, a resident of
Canada, for the purposes of the Income Tax Act (Canada).
6. Representations and Warranties of the Purchaser
6.1 The Purchaser represents and warrants as follows and acknowledges that the
Vendor is relying upon such representations and warranties in connection with
the sale by the Vendor of the Purchased Property:
a) The Purchaser has been duly incorporated and is validly subsisting
under the laws of Ontario; 1)
2
<PAGE>
b) The Purchaser has full authority to enter into and carry out the
provisions of this agreement; and
c) The common shares to be issued by the Purchaser to the Vendor in
payment of the Purchase Price will be validly allotted and issued as
fully paid and non-assessable to the Vendor, free and clear of all
mortgages, liens, charges, encumbrances and demands whatsoever.
7. Election under the Income Tax Act (Canada)
7.1 The parties shall elect jointly pursuant to the provisions of section 85 of
the Income Tax Act (Canada), by completing and filing all prescribed forms and
related documents in such manner and at such time as is prescribed, that for tax
purposes only, the proceeds of disposition received by the Vendor for the
Purchased Property and the cost of the Purchased Property to the Purchaser shall
be an amount that is not less than the adjusted cost base of the Purchased
Property to the Vendor nor greater than the fair market value of the Purchased
Property as at the Effective Time.
8. Transfer
8.1 This agreement is intended to be and shall be and operate as an immediate
and effective transfer and assignment of the Purchased Property by the Vendor to
the Purchaser as at the Effective Time. The parties agree to do all such other
acts and things as may be necessary to give effect to the provisions hereof, and
without limiting the generality of the foregoing, to validly and effectively
transfer the Purchased Property from the Vendor to the Purchaser as at the
Effective Time.
9. Applicable Law
9.1 This agreement shall be construed in accordance with and governed by the
laws of the Province of Ontario.
10. Binding Effect
10.1 This agreement shall enure to the benefit of and be binding upon the
parties and their respective heirs, legal representatives, successors and
assigns.
3
<PAGE>
IN WITNESS WHEREOF the parties have executed this agreement as of
the date first mentioned above.
/s/ Satish Kumeta
--------------------------------------
SATISH KUMETA
VIRTUAL PERFORMANCE SYSTEMS LTD.
Per: /s/ Anthony Comparelli
---------------------------
ANTHONY COMPARELLI
<PAGE>
Schedule "A"
INTELLECTUAL PROPERTY ASSIGNMENT
1. The undersigned SATISH KUMETA of 310-1050 Castlefield Avenue,
Toronto, Ontario, M6B 167 (the "Assignor"), in consideration of the
sum of $1.00 and other valuable consideration, the receipt and
sufficiency of which is acknowledged, does hereby grant, assign and
convey to and in favour of VIRTUAL PERFORMANCE SYSTEMS, INC., a
corporation incorporated under the laws of the Province of Ontario,
the full post office address of whose principal office or place of
business is suite 1800, 5775 Yonge Street, North York, Ontario M2M
4]1, (the "Assignee"), all the right, title and interest, including
all goodwill arising therefrom which the Assignor may have acquire
or has acquired worldwide, in the intellectual property identified
in Schedule AA:.
2. The Assignee appoints Tony Comparelli whose full post office address
in Canada is suite 1800, 5775 Yonge Street, North York, Ontario, M2M
4]1, as the person to which any notice in respect of this Assignment
or any application or registration may be sent and on which service
of any proceedings in respect of the Assignment or any application
or registration may be given or served with the same effect as if
they had been given or served on the Assignee, applicant or
registrant.
3. The Assignee accepts this Assignment.
IN WITNESS WHEREOF the Assignor and the Assignee have duly executed
this agreement as of the 8th day of August, 1997.
/s/ Satish Kumeta
------------------------------------
SATISH KUMETA
VIRTUAL PERFORMANCE SYSTEMS INC.
Per: /s/
-----------------------------------
[Authorized Officer]
<PAGE>
SCHEDULE "A"
VIRTUAL PERFORMANCE SYSTEMS INC.
1. Virtual Performance System (VPS)
The virtual performance system (VPS), is a 3D VRML (Virtual Reality
Modeling Language) interface into an Enterprise=s resources. It can
be considered as a framework to measure quantifiable data across an
enterprise using proprietary PUSH/PULL technology.
2. Technology Overview
VPS is a framework built in Java to measure quantifiable
data across clients and servers in an architecture, operating system
and application independent method on the Internet (or the
Intranet).
The core functionality of the system is to farm quantifiable data
from multiple clients and send it to a server. The server in turn
uses the data to perform required actions, such as draw graphs, send
notifications, data warehouse, modify client behavior or send it to
an external application. The clients and servers can be configured
to exchange data between each other in real time or at some
predetermined or configured intervals.
The distinguishing advantage of this proprietary technology is that
NO CHANGES need to be made to the existing applications to measure
data across a client(s) Server(s) platform(s).
The following picture is used to illustrate the logical flow of
control in the VPS framework.
VIRTUAL PERFORMANCE SYSTEMS INC.
Suite 901
1 Richmond Street West
Toronto, Ontario
MSH 3W4
November 27, 1998
Grant Reserve Corporation
410 17th Street
Suite 1375
Denver, Colorado
80202
- - and to -
Sheridan Reserve Incorporated
Suite 2110
181 University Avenue
Toronto, Ontario
MSH 3M7
Virtual Performance Systems Inc. ("VPS"), on behalf of itself
and its shareholders, wishes to set out the general terms and conditions
pursuant to which VPS and its shareholders will agree to be acquired by Grant
Reserve Corporation ("Grant") and Sheridan Reserve Incorporated ("Sheridan")
will agree to sell certain shares of Grant to or to the direction of
shareholders of VPS.
1. VPS is a corporation incorporated under the laws of Ontario which is in
the business of electronic content delivery and management on a multiple
communication platform. VPS has created software technology designed to
facilitate real-time communication in three primary areas:
1) convert and deliver real-time training/education
content and users;
2) establish a virtual call center; and
3) provide virtual banking and transaction processing
capabilities.
2. The authorized capital of VPS consists of:
1) VPS has outstanding 3,624,100 common shares.
<PAGE>
3. Grant Reserve Corporation is a corporation formed under the laws of the
State of Nevada. Grant's assets primarily consist of all of the outstanding
shares of Madison Mining Corporation ("Madison") and 94% of the outstanding
shares of Gold King Mines Corporation ("Gold King"). The board of directors and
senior management of Grant has determined to dispose of Grant's interest in
Madison and Gold King and acquire 100% of VPS. In that regard, a meeting of the
shareholders of Grant will be convened for December 18, 1998 to approve, among
other things, the approval of the sale of Grant's interest in Madison and Gold
King. Grant will prepare and delivere to its shareholders a management proxy
circular seeking shareholder approval of the proposed sale of Madison and Gold
King and additionally describing the proposed acquisition of VPS.
4. Sheridan is a corporation incorporated under the laws of the Province
of Ontario. The principal assets of Sheridan consist of 10,000,000 common shares
of Grant. In order to facilitate the acquisition of VPS by Grant, Sheridan
proposes to sell to the shareholders of VPS 9,000,000 of its shares of Grant for
an aggregate consideration of US$9,000. In connection with the proposed
disposition by Sheridan of 9,000,000 shares of Grant, a meeting of the
shareholders of Sheridan will be convened for December 30, 1998 to consider and
approve a special resolution authorizing the sale of the 9,000,000 shares of
Grant by Sheridan to shareholders of VPS.
In order to give effect to Grant acquiring from the VPS shareholders
all of the issued and outstanding shares of VPS and Sheridan selling to or to
the direction of VPS shareholders 9,000,000 shares of Grant, Sheridan, Grant,
VPS and its shareholders acknowledge and agree as follows:
1) Grant shall convene a meeting of the shareholders of Grant to
approve of the disposition by Grant of all of the share of
Madison and Gold King held by it;
2) Grant shall dispose of all of its shares of Madison and Gold
King. Upon completion of that disposition, the assets of Grant
shall consists solely of cash and/or promissory note payable
to Grant representing the proceeds of the sale of the
interests in Madison and Gold King;
3) Sheridan shall convene a meeting of shareholders to approve of
the disposition of 9,000,000 common shares of Grant for a
consideration of US$9,000;
4) Sheridan shall agree to sell to or to the direction of VPS
shareholders 9,000,000 common shares of Grant for US$9,000;
5) Grant shall agree to acquire 100% of the outstanding shares of
VPS in consideration of the issuance of 1,500,000 common
shares of Grant (or an economically equivalent transaction if
deemed prudent for tax purposes);
-2-
<PAGE>
6) The board of directors of Grant shall be reconstituted to
consist of four persons, three of whom shall be nominees of
VPS or its shareholders. A single nominee of VPS or its
shareholders shall be appointed to the board of directors of
Grant upon the approval by shareholders of Sheridan of the
sale 9,000,000 shares of Grant. Two further nominees of VPS
shall be appointed directors of VPS upon the closing of the
sale by Sheridan of the 9,000,000 shares of Grant.
This letter of intent sets out the proposed transactions to be carried
out by the parties. The parties shall conduct themselves with the intention of
concluding these transactions.
Could you kindly indicate that the foregoing sets out our intention by
signing below on all copies of this letter, retaining copies for your files and
returning an executed copy to our attention.
Yours very truly,
VIRTUAL PERFORMANCE SYSTEMS INC. for
itself and on behalf of its shareholders
Per:/s/ Anthony Comparelli
-----------------------------------
GRANT RESERVE CORPORATION
Per: /s/
------------------------
SHERIDAN RESERVE INCORPORATED
Per: /s/
------------------------
-3-
SHARE PURCHASE AGREEMENT
AMONG
VIRTUAL PERFORMANCE SYSTEMS INC.
THE SELLING SHAREHOLDERS NAMED HEREIN
AND
INFOCAST CANADA LIMITED
DATED AS OF JANUARY 29, 1999
<PAGE>
TABLE OF CONTENTS
EXHIBITS......................................................................iv
ARTICLE I
DEFINITIONS...............................................................1
Section 1.01 Definitions................................................1
Section 1.02 Accounting Principles......................................7
ARTICLE II
AGREEMENT TO SELL AND PURCHASE THE PURCHASED SHARES.......................8
Section 2.01 Sale and Purchase of the Purchased Shares..................8
Section 2.02 Purchase Price.............................................8
ARTICLE III
CLOSING...................................................................8
Section 3.01 Closing....................................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SELLING SHAREHOLDERS..............................................9
Section 4.01 Organization, Good Standing and Qualification
of the Company.............................................9
Section 4.02 Articles of Incorporation and By-Laws; Records.............9
Section 4.03 Capitalization............................................10
Section 4.04 Authority; Binding Nature of Agreements...................11
Section 4.05 Non-Contravention; Consents...............................11
Section 4.06 Proprietary Rights; Proprietary Information and
Inventions Agreement......................................13
Section 4.07 Proceedings; Orders.......................................13
Section 4.08 Sale of Purchased Shares Valid............................14
Section 4.09 Financial Statements......................................15
Section 4.10 Title to Assets...........................................15
Section 4.11 Material Contracts........................................16
Section 4.12 Compliance With Requirement of Laws.......................17
Section 4.13 Governmental Authorizations...............................18
Section 4.14 Tax Matters...............................................18
Section 4.15 Securities Laws Compliance; Registration Rights...........20
Section 4.16 Finders and Brokers.......................................20
Section 4.17 Environmental Compliance..................................21
Section 4.18 Selling Shareholder.......................................21
Section 4.19 Powers of Attorney........................................22
Section 4.20 Full Disclosure...........................................22
Section 4.21 Investment Representations................................22
i
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..........................23
Section 5.01 Organization, Good Standing and Qualification
of the Purchaser..........................................23
Section 5.02 Capitalization............................................24
Section 5.03 Authority; Binding Nature of Agreements...................24
Section 5.04 Non-Contravention; Consents...............................24
Section 5.05 Proceedings; Orders.......................................25
Section 5.06 Sale of Exchangeable Shares Valid.........................25
Section 5.07 Investment Representations................................25
Section 5.08 Consents..................................................26
ARTICLE VI
PRE-CLOSING COVENANTS OF THE COMPANYAND THE SELLING SHAREHOLDERS.........27
Section 6.01 Access and Investigation..................................27
Section 6.02 Operation of Business.....................................27
Section 6.03 Filings and Consents......................................29
Section 6.04 Notification of Events or Conditions......................29
Section 6.05 No Negotiation............................................30
Section 6.06 Best Efforts..............................................30
Section 6.07 Confidentiality...........................................30
ARTICLE VII
PRE-CLOSING COVENANTS OF THE PURCHASER...................................31
Section 7.01 Filings and Consents......................................31
ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS AT CLOSING.........................32
Section 8.01 Representations and Warranties;
Performance of Obligations................................32
Section 8.02 Consents, Permits, Waivers and Approvals..................32
Section 8.03 Delivery of Certificates Evidencing Purchased Shares......32
Section 8.04 Compliance Certificate....................................32
Section 8.05 Corporate Documents.......................................33
Section 8.06 Share Exchange Agreement..................................33
Section 8.07 Proceedings and Documents.................................33
ARTICLE IX
CONDITIONS TO THE SELLINGSTOCKHOLDER'S OBLIGATIONS AT CLOSING............33
Section 9.01 Representations and Warranties;
Performance of Obligations................................33
Section 9.02 Consents, Permits, Waivers and Approvals..................34
Section 9.03 Delivery of Certificates Evidencing Exchangeable Shares...34
ii
<PAGE>
Section 9.04 Compliance Certificate....................................34
Section 9.05 Corporate Documents.......................................34
Section 9.06 Share Exchange Agreement..................................34
Section 9.07 Proceedings and Documents.................................34
ARTICLE X
INDEMNIFICATION, ETC.....................................................35
Section 10.01 Survival of Representations and Warranties................35
Section 10.02 Indemnification by Selling Shareholders...................35
Section 10.03 Indemnification by the Purchaser..........................36
Section 10.04 Interest..................................................36
Section 10.05 Defense of Third Party Claims.............................37
ARTICLE XI
MISCELLANEOUS............................................................38
Section 11.01 Tax Elections.............................................38
Section 11.02 Termination...............................................38
Section 11.03 Governing Law.............................................38
Section 11.04 Jurisdiction; Venue.......................................39
Section 11.05 Successors and Assigns....................................39
Section 11.06 Entire Agreement..........................................39
Section 11.07 Severability..............................................40
Section 11.08 Amendment and Waiver......................................40
Section 11.09 Notices...................................................40
Section 11.10 Counterparts..............................................41
Section 11.11 Attorney's Fees...........................................41
Section 11.12 Delays or Omissions.......................................41
Section 11.13 Remedies Cumulative.......................................42
Section 11.14 No Contribution...........................................42
Section 11.15 Ontario Securities Law Matters............................42
iii
<PAGE>
SCHEDULES
Schedule 2.01 Purchased Shares
Schedule 2.02 Exchangeable Shares
Schedule 4.01(b) Board of Directors; Committees; Officers
Schedule 4.06 Proprietary Assets
Schedule 4.09 Financial Statements
Schedule 4.11 Material Contracts
EXHIBITS
Exhibit A Rights and Designations of Exchangeable Shares
Exhibit B Form of Share Exchange Agreement
iv
<PAGE>
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement is entered into as of January 29,
1999, by and among Virtual Performance Systems Inc., a corporation organized and
existing under the laws of Ontario (the "Company"), the entities and individuals
listed in Schedule 2.01 attached hereto (each, a "Selling Shareholder" and,
collectively, the "Selling Shareholders"), and InfoCast Canada Limited, a
corporation organized and existing under the laws of Ontario (the "Purchaser").
WITNESSETH:
WHEREAS the Selling Shareholders own, in the aggregate, a total of
3,624,100 common shares (the "Company Common Shares") in the capital of the
Company, which shares represent 100% of the issued and outstanding shares in the
capital of the Company;
AND WHEREAS, the Purchaser desires to purchase from the Selling
Shareholders 100% of the Company Common Shares owned by the Selling Shareholders
(which shall be accomplished by the direct purchases of such shares from the
Selling Shareholders) and the Selling Shareholders are willing to sell such
Company Common Shares, to the Purchaser, upon the terms and subject to the
conditions set forth herein;
NOW THEREFORE in consideration of the mutual promises and covenants
herein, the Purchaser, the Company and the Selling Shareholders hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions
For purposes of this Agreement, the following terms shall have the
meanings set forth in this Section 1.01:
"Acquisition Transaction" shall mean any transaction involving:
(a) the sale or other disposition of all or any portion of
the Company's business or assets (other than the sale of
goods or services in the Ordinary Course of Business);
(b) the issuance, sale or other disposition of (i) any
shares in the capital of the Company, (ii) any option,
call, warrant or right (whether or not immediately
exercisable) to acquire any shares in the capital of the
Company, or (iii) any security, instrument or obligation
that is or may become convertible into or exchangeable
for any capital stock of the Company; or
<PAGE>
(c) any merger, consolidation, amalgamation, business
combination, share exchange, reorganization,
recapitalization or similar transaction involving the
Company.
"Agreement" shall mean this Share Purchase Agreement, dated as of January 29,
1999, by and among the Company, the Selling Shareholders and the Purchaser,
together with all schedules and exhibits attached thereto, as it may be amended,
supplemented or otherwise modified from time to time.
"Best Efforts" shall mean the efforts that a prudent Person desiring to achieve
a particular result would use in order to ensure that such result is achieved as
expeditiously as possible.
"Breach" shall mean, in respect of a representation, warranty, covenant,
obligation or other provision, that there is or has been (a) any inaccuracy in
or breach of, or any failure to comply with or perform, such representation,
warranty, covenant, obligation or other provision, or (b) any claim (by any
Person) or other circumstance that is inconsistent with such representation,
warranty, covenant, obligation or other provision.
"CDN$" shall mean the lawful currency of Canada.
"Closing" shall have the meaning specified in Article III.
"Closing Date" shall have the meaning specified in Article III.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning specified in the first paragraph of this
Agreement.
"Company Common Shares" shall have the meaning specified in the recitals of this
Agreement.
"Company Contract" shall mean any Contract (a) to which the Company is a party,
(b) by which the Company or any of its assets is or may become bound or (c)
under which the Company has, or may become subject to, any obligation or under
which the Company has or may acquire any right or interest.
"Company Returns" shall have the meaning specified in Section 4.17(b) of the
Agreement.
"Consent" shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
2
<PAGE>
"Contract" shall mean, with respect to any Person, any written, oral, implied or
other agreement, contract, understanding, arrangement, instrument, note,
guaranty, indemnity, representation, warranty, deed, assignment, power of
attorney, certificate, purchase order, work order, insurance policy, benefit
plan, commitment, covenant, assurance or undertaking of any nature to which such
Person is a party or by which its properties or assets may be bound or affected
or under which it or its respective business, properties or assets receive
benefits.
"Damages" shall mean any loss, damage, injury, decline in value, lost
opportunity, Liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee, expert fee, accounting fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.
"Employee Benefit Plan" shall mean any and all bonus, deferred compensation,
incentive compensation, stock purchase, stock option, stock appreciation,
phantom stock, savings, profit sharing, severance or termination pay, health or
other medical, dental, life, disability or other insurance (whether insured or
self-insured), supplementary unemployment or employment benefit, pension,
retirement, registered retirement savings, supplementary retirement,
change-in-control and any other employment benefit or compensation plan,
program, agreement, arrangement, policy or practice (including any funding
mechanism therefore which is now in effect which will be required in the future
as a result of the Transactions), whether formal or informal, funded or
unfunded, registered or unregistered, oral or written, which are maintained or
contributed to or are required to be maintained, contributed to or provided by
the Company, under which any employee, former employee or independent contractor
(or any dependent of any such Persons) has any present or future right to
benefits or compensation or under which the Company has any present or future
liability or obligation.
"Entity" shall mean any corporation (including any non profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, cooperative, foundation, society, political party,
union, company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.
"Environmental Law" shall mean any federal, provincial, state, local or foreign
Requirement of Law relating to pollution or protection of human health or the
environment.
"Exchangeable Shares" shall mean the Exchangeable Shares in the capital of the
Purchaser having the rights and preferences described in Schedule II.
"Financial Statements" shall have the meaning specified in Section 4.9(a).
"GAAP" shall mean generally accepted accounting principles in effect in Canada,
applied on a basis consistent with the basis on which the Financial Statements
were prepared.
3
<PAGE>
"Governmental Authorization" shall mean any (a) permit, license, certificate,
franchise, concession, approval, consent, ratification, permission, clearance,
confirmation, endorsement, waiver, certification, designation, rating,
registration, qualification or authorization that is, has been or may in the
future be issued, granted, given or otherwise made available by or under the
authority of any Governmental Authority or pursuant to any Requirement of Law;
or (b) right under any Contract with any Governmental Authority.
"Governmental Authority" shall mean any (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature, (b) federal, provincial, state, local, municipal,
foreign or other government, (c) governmental or quasi governmental authority of
any nature (including any governmental division, subdivision, department,
agency, bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or Entity and any
court or other tribunal), (d) multi national organization or body, or (e)
individual, Entity or body exercising, or entitled to exercise, any executive,
legislative, judicial, administrative, regulatory, police, military or taxing
authority or power of any nature.
"Indemnified Party" shall have the meaning specified in Section 10.04.
"InfoCast" shall mean InfoCast Corporation, a Nevada corporation.
"InfoCast Common Stock" shall mean the common stock of InfoCast.
"InfoCast Exchange Stock" shall mean the InfoCast Common Stock issuable to the
Selling Shareholders upon the exchange of the Exchangeable Shares in accordance
with the Share Exchange Agreement.
"Knowledge" shall mean, in respect of a particular fact or other matter by an
individual that (a) such individual is actually aware of such fact or other
matter, or (b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a diligent
and comprehensive investigation concerning the truth or existence of such fact
or other matter. The Company shall be deemed to have "Knowledge" of a particular
fact or other matter if any officer, employee or other Representative of the
Company has Knowledge of such fact or other matter.
"KPMG" means KPMG LLP, Chartered Accountants of Toronto, Canada.
"Liability" shall mean any debt, obligation, duty or liability of any nature
(including any unknown, undisclosed, uncaptured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability), regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet prepared
in accordance with GAAP and regardless of whether such debt, obligation, duty or
liability is immediately due and payable.
4
<PAGE>
"Lien" shall mean any lien, pledge, hypothecation, charge, mortgage, security
interest, encumbrance, equity, trust, equitable interest, claim, preference,
right of possession, lease, tenancy, license, encroachment, covenant,
infringement, interference, Order, proxy, option, right of first refusal,
preemptive right, community property interest, legend, defect, impediment,
exception, reservation, limitation, impairment, imperfection of title, condition
or restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
"Material Contract" shall have the meaning specified in Section 4.11.
"Ontario Act" shall mean the Securities Act (Ontario), as amended.
"Order" shall mean any (a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award that is, has been or may in the future be issued, made, entered,
rendered or otherwise put into effect by or under the authority of any court,
administrative agency or other Governmental Authority or any arbitrator or
arbitration panel, or (b) Contract with any Governmental Authority that is, has
been or may in the future be entered into in connection with any Proceeding.
"Ordinary Course of Business" shall mean, in respect of any action taken by or
on behalf of the Company, that (a) such action is recurring in nature, is
consistent with the Company's past practices and is taken in the ordinary course
of the Company's normal day to day operations, (b) such action is taken in
accordance with sound and prudent business practices, (c) such action is not
required to be authorized by any of the Company's shareholders, the Company's
board of directors or any committee of the Company's board of directors and does
not require any other separate or special authorization of any nature, and (d)
such action is similar in nature and magnitude to actions customarily taken,
without any separate or special authorization, in the ordinary course of the
normal day to day operations of other Entities that are engaged in businesses
similar to the Company's business.
"Person" shall mean any individual, Entity or Governmental Authority.
"Pre-Closing Period" shall mean the period commencing as of the date of the
Agreement and ending on the Closing Date.
"Proceeding" shall mean any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding and any informal proceeding), prosecution, contest, hearing, inquiry,
inquest, audit, examination or investigation that is, has been or may in the
future be commenced, brought, conducted or heard by or before, or that otherwise
has involved or may involve, any Governmental Authority or any arbitrator or
arbitration panel.
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"Proprietary Asset" shall mean any patent, patent application, trademark
(whether registered or unregistered and whether or not relating to a published
work), trademark application, trade name, fictitious business name, service mark
(whether registered or unregistered), service mark application, copyright
(whether registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know how, franchise, system, computer software,
invention, design, blueprint, proprietary product, technology, proprietary right
or other intellectual property right or intangible asset.
"Purchase Price" shall have the meaning specified in Section 2.02.
"Purchased Shares" shall have the meaning specified in Section 2.01.
"Purchaser" shall have the meaning specified in the first paragraph of this
Agreement.
"Related Party" shall mean (a) each Selling Shareholder, (b) each individual who
is, or who has at any time been, an officer of the Company, (c) each member of
the family of each of the individuals referred to in clause (b) above; and (d)
any Entity (other than the Company) in which any one of the Persons referred to
in clauses (a), (b) and (c) above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.
"Representatives" shall mean as to any Person, the officers, directors,
employees, attorneys, accountants, advisors and representatives of such party.
The Selling Shareholders and all other Related Parties shall be deemed to be
"Representatives" of the Company.
"Requirement of Law" shall mean any federal, provincial, state, local,
municipal, foreign or other law, statute, legislation, constitution, principle
of common law, resolution, ordinance, code, edict, decree, proclamation, treaty,
convention, rule, regulation, ruling, directive, pronouncement, requirement,
specification, determination, decision, opinion or interpretation that is, has
been or may in the future be issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or under the
authority of any Governmental Authority.
"Selling Shareholders" shall have the meaning specified in the first paragraph
of this Agreement.
"Share Exchange Agreement" shall mean a share exchange agreement among each
Selling Shareholder, the Purchaser and InfoCast, substantially in the form of
Exhibit B, as such agreement may be amended, supplemented or otherwise modified
from time to time, pursuant to which each Selling Shareholder agrees to sell to
InfoCast the Exchangeable Shares held by such Selling Shareholder for
consideration in the form of InfoCast Exchange Stock.
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"Tax" shall mean any tax (including any income tax, franchise tax, capital gains
tax, estimated tax, gross receipts tax, value added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, occupation tax, inventory tax, occupancy tax, withholding tax, capital tax,
land transfer tax, goods and services tax or payroll tax), levy, assessment,
tariff, impost, imposition, toll, duty (including any customs duty), deficiency
or fee, and any related charge or amount (including any fine, penalty or
interest), that is, has been or may in the future be (a) imposed, assessed or
collected by or under the authority of any Governmental Authority, or (b)
payable pursuant to any tax sharing agreement or similar Contract and all
unemployment insurance, health insurance and Canada, Quebec and other government
pension plan premiums.
"Tax Return" shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Authority in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any
Requirement of Law relating to any Tax.
"Transaction Documents" shall mean this Agreement, the Share Exchange Agreement
and all other agreements, certificates and instruments executed or contemplated
to be executed by any of the Parties in connection with the Transactions.
"Transactions" shall mean all of the transactions contemplated by this Agreement
and each of the other Transaction Documents, including, without limitation, (a)
the sale of the Purchased Shares by the Selling Shareholders and the purchase
thereof by the Purchaser in accordance with this Agreement, (b)the issuance by
the Purchaser of the Exchangeable Shares to the Selling Shareholders in
connection with such purchase in accordance with this Agreement, and (c) the
exchange of Exchangeable Shares by the Selling Shareholders for shares of
InfoCast Exchange Stock in accordance with the Share Exchange Agreement.
"Unaudited Interim Balance Sheet" shall have the meaning specified in Section
4.9(a)(i).
"US$" shall mean the lawful currency of the United States of America.
"U.S. Securities Act" shall mean the United States Securities Act of 1933, as
amended.
Section 1.02 Accounting Principles
All references to generally accepted accounting principles or GAAP
means references to principles recommended, from time to time, in the Handbook
of the Canadian Institute of Chartered Accountants and all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
such generally accepted accounting principles.
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ARTICLE II
AGREEMENT TO SELL AND PURCHASE THE PURCHASED SHARES
Section 2.1 Sale and Purchase of the Purchased Shares
Subject to the terms and conditions of this Agreement, at the
Closing, the Selling Shareholders shall sell, assign, transfer and deliver to
the Purchaser an aggregate of 3,624,100 Company Common Shares (collectively, the
"Purchased Shares"). Set forth on Schedule 2.01 is a list of the number of
shares of Purchased Shares to be so sold, assigned, transferred and delivered to
Purchaser by each Selling Shareholder.
Section 2.2 Purchase Price
At the Closing, the Purchaser shall pay to the Selling Shareholders
an aggregate purchase price (subject to adjustment as provided below) for the
Purchased Shares (the "Purchase Price") as follows:
(a) Exchangeable Shares. On the Closing Date, the Purchaser shall
issue to the Selling Shareholders an aggregate of one million, five hundred
thousand (1,500,000) Exchangeable Shares. Set forth on Schedule 2.02 is a list
of the number of shares of Exchangeable Shares to be issued, transferred and
delivered to each of the Selling Shareholders.
(b) Allocation of Purchase Price. The Purchase Price shall be
allocated among the Selling Shareholders in proportion to the number of
Purchased Shares being sold by each Selling Shareholder is to the total number
of Purchased Shares as set out in Schedule 2.01. Each Selling Shareholder and
the Purchaser agree to report the purchase and sale of their Purchased Shares in
any returns required to be filed under the Tax Act and any other taxation
statutes accordingly.
ARTICLE III
CLOSING
Section 3.1 Closing
The closing (the "Closing") shall take place at the offices of Aird
& Berlis, Suite 1800 BCE Place, Bay Wellington Tower, P.O. Box 754, 181 Bay
Street, Toronto, Ontario, Canada at 10:00 A.M. (Eastern Standard Time) on
January 29, 1999 or on such other date or at such other place or time as the
Company, the Selling Shareholders and the Purchaser may mutually agree (such
date is hereinafter referred to as the "Closing Date").
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SELLING SHAREHOLDERS
The Company and each of the Selling Shareholders, jointly and
severally, hereby represents and warrants to the Purchaser as follows:
Section 4.1 Organization, Good Standing and Qualification of the Company
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of Ontario and is duly qualified to conduct
business and in corporate and tax good standing under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties require such qualification. The Company has all requisite
corporate power and authority to own and operate its properties and assets, to
execute, deliver and perform its obligations under this Agreement, and to carry
on its business as presently conducted and as presently proposed to be
conducted.
(b) Schedule 4.01(b) accurately sets forth (i) the names of the
members of the Company's board of directors, (ii) the names of the members of
each committee of the Company's board of directors and (iii) the names and
titles of the Company's officers.
(c) The Company is not insolvent within the meaning of applicable
laws, rules regulation or similar requirement, and have not made any assignment
in favour of its creditors nor a proposal in bankruptcy to its creditors or any
class thereof, nor has any petition for a receiver order been presented in
respect of the Company. The Company has not initiated any proceedings with
respect to a compromise or arrangement with its creditors or for the
dissolution, liquidation or reorganization of the Company or the winding up or
cessation of the business or affairs of the Company. No receiver has been
appointed in respect of the Company or any of its assets and no execution or
distress has been levied upon any of its assets.
(d) The Company has no subsidiaries, has never owned, beneficially
or otherwise, any shares or other securities of, or any direct or indirect
interest of any nature in, any Entity.
Section 4.2 Articles of Incorporation and By-Laws; Records
(a) The Company has delivered to the Purchaser accurate and complete
copies of:
(i) the articles of incorporation and bylaws, including all
amendments thereto of the Company;
(ii) the share transfer register of the Company; and
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(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written
consent or otherwise without a meeting) of the
stockholders, board of directors and all committees of the
board of directors of the Company.
(b) There have been no meetings or other proceedings of the
stockholders, the board of directors or any committee of the board of directors
of the Company, that are not fully reflected in such minutes or other records.
(c) The Company has never conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the name "Virtual Performance Systems
Inc.".
(d) There has not been any material violation of any of the
provisions of the articles of incorporation or bylaws of the Company or of any
resolution adopted by the shareholders, board of directors or any committee of
the board of directors of the Company and no event has occurred, and no
condition or circumstance exists that might (with or without notice or lapse of
time) constitute or result directly or indirectly in such a violation.
(e) The books of account, stock records, minute books and other
records of the Company are accurate, up to date and complete in all material
respects, and have been maintained in accordance with sound and prudent business
practices. All of the records of the Company are in the actual possession and
direct control of the Company.
Section 4.3 Capitalization
(a) The authorized capital stock of the Company consists of (i) an
unlimited number of shares of Company Common Shares, of which 3,624,100 shares
have been issued and are outstanding, and are owned and held beneficially and of
record by the Selling Shareholders as set forth on Schedule I hereto. All issued
and outstanding shares of capital stock of the Company have been duly authorized
and validly issued in full compliance with all applicable securities laws and
other applicable Requirement of Laws, and are outstanding as fully paid and
non-assessable.
(b) There are no: (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire any shares in
the capital or other securities of the Company, (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares in the capital or other securities of the Company, (iii) Contract
under which the Company is or may become obligated to sell or otherwise issue
any shares of its capital stock or any other securities, or (iv) condition or
circumstance that may directly or indirectly give rise to or provide a basis for
the assertion of a claim by any Person to the effect that such Person is
entitled to acquire or receive any shares in the capital, or other securities
of, the Company.
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(c) The Company has never repurchased, redeemed or otherwise
reacquired (and has not agreed, committed or offered (in writing or otherwise)
to reacquire) any shares of capital stock or other securities of the Company.
Section 4.4 Authority; Binding Nature of Agreements
(a) The Company has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement and
each of the other Transaction Documents to which it is a party, and the
execution, delivery and performance by the Company of this Agreement and each of
such other Transaction Documents have been duly authorized by all necessary
action on the part of the Company and its shareholders, board of directors and
officers. Each of this Agreement and such other Transaction Documents
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and to general principles of equity (regardless of whether
such enforcement is sought in a proceeding in equity or at law).
(b) Each of the Selling Shareholders has the absolute and
unrestricted right, power and capacity to enter into and to perform its
obligations under this Agreement and each of the other Transaction Documents to
which it is a party, and the execution, delivery and performance by each Selling
Shareholder of this Agreement and such other Transaction Documents have been
duly authorized by all necessary action on the part of such Selling Shareholder.
Each of this Agreement and such other Transaction Documents constitutes, or upon
execution and delivery will constitute, the legal, valid and binding obligation
of each Selling Shareholder party thereto, enforceable against such Selling
Shareholder in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and to general principles of equity (regardless
of whether such enforcement is sought in a proceeding in equity or at law).
Section 4.5 Non-Contravention; Consents
(a) Neither the execution and delivery of this Agreement or any
other Transaction Document to which the Company or any of the Selling
Shareholders is a party, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with or result in a violation of(i)
any of the provisions of the articles of incorporation or
bylaws of the Company, or (ii) any resolution adopted by
the shareholders, board of directors or any committee of
the board of directors of the Company, or the provision of
any agreement, whether or not written, between the holders
of Company Common Shares;
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(ii) contravene, conflict with or result in a violation of, or
give any Governmental Authority or other Person the right
to challenge any of the Transactions or to exercise any
remedy or obtain any relief under, any Requirement of Law
or any Order to which the Company or any of the Selling
Shareholders, or any of the assets owned or used by the
Company or any of the Selling Shareholders, is subject;
(iii) cause the Company to become subject to, or to become
liable for the payment of, any Tax;
(iv) cause any of the assets owned or used by the Company or
any of the Selling Shareholders to be reassessed or
revalued by any taxing authority or other Governmental
Authority;
(v) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental
Authority the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that
is held by the Company or any of its employees or that
otherwise relates to the business of the Company or to any
of the assets owned or used by the Company;
(vi) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of
any of the Company Contracts;
(vii) give any Person the right to (i) declare a default or
exercise any remedy under any Company Contract (ii)
accelerate the maturity or performance of any Company
Contract or (iii) cancel, terminate or modify any Company
Contract;
(viii) give any Person the right to any payment by the Company or
give rise to any acceleration or change in the award,
grant, vesting or determination of options, warrants,
rights, severance payments or other contingent obligations
of any nature whatsoever of the Company in favour of any
Person, in any such case as a result of the change in
control of the Company, or otherwise resulting from the
Transactions;
(ix) contravene, conflict with or result in a violation or
breach of or a default under any provision of, or give any
Person the right to declare a default under, any Contract
to which any of the Selling Shareholders is a party or by
which any of the Selling Shareholders is bound; or
(x) result in the imposition or creation of any Lien upon or
with respect to any asset owned or used by the Company.
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(b) Neither the Company nor any of the Selling Shareholders was, is
or will be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with the execution and delivery of
this Agreement or any of the other Transaction Documents or the consummation or
performance of any of the Transactions.
Section 4.6 Proprietary Rights; Proprietary Information and Inventions
Agreement
(a) Except as set forth in Schedule 4.06, there is no Proprietary
Asset that is owned by or licensed to the Company or that is otherwise used or
useful in connection with the Company's business.
(b) The Company has taken all reasonable measures and precautions to
protect the confidentiality and value of each Proprietary Asset identified or
required to be identified in Schedule 4.06.
(c) The Company is not aware that any of the employees or
consultants of the Company is in violation of such agreement. The Company does
not believe it is or will be necessary to utilize any inventions, trade secrets
or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company or are licensed by any of the
Selling Shareholders as described in Schedule 4.06.
(d) To the knowledge of the Selling Shareholders, the Company has
conducted its business without infringement or claim of infringement of any
license, patent, copyright, service mark, trademark, trade name, trade secret or
other intellectual property right of others. The Company is not infringing, and
has not at any time infringed or received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential infringement
of, any Proprietary Asset owned or used by any other Person. To the Knowledge of
the Company and each of the Selling Shareholders, no other Person is infringing,
and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any Proprietary Asset owned or used by the Company.
(e) The Company owns, licenses or has rights to all of the
Proprietary Assets owned or used by the Company. The Proprietary Assets
identified in Schedule 4.06 constitute all of the Proprietary Assets necessary
to enable the Company to conduct its business in the manner in which its
business is currently being conducted.
Section 4.7 Proceedings; Orders
(a) There is no pending Proceeding and, to the Knowledge of the
Company and the Selling Shareholders, no Person has threatened to commence any
Proceeding:
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(i) that involves the Company or that otherwise
relates to or might affect the business of
the Company or any of the assets owned or
used by the Company (whether or not the
Company is named as a party thereto); or
(ii) that challenges, or that may have the effect
of preventing, delaying, making illegal or
otherwise interfering with, any of the
Transactions.
(b) No event has occurred, and no claim, dispute or other condition
or circumstance exists, that might directly or indirectly give rise to or serve
as a basis for the commencement of any material Proceeding of the type described
in Section 4.07(a).
(c) No Proceeding has ever been commenced by or against the Company
and no Proceeding otherwise involving or relating to the Company has been
pending or threatened at any time.
(d) There is no Order to which the Company or any of the assets
owned or used by the Company is subject, and none of the Selling Shareholders is
subject to any Order that relates to the business of the Company or to any of
the assets owned or used by the Company.
(e) No officer or employee of the Company is subject to any Order
that prohibits such officer or employee from engaging in or continuing any
conduct, activity or practice relating to the business of the Company.
(f) There is no proposed Order that, if issued or otherwise put into
effect, (i) may have an adverse effect on the business, condition, assets,
liabilities, operations, financial performance, net income or prospects (or on
any aspect or portion thereof) of the Company or on the ability of the Company
or any of the Selling Shareholders to comply with or perform any covenant or
obligation under this Agreement or any of the other Transactional Documents, or
(ii) may have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
Section 4.8 Sale of Purchased Shares Valid
Assuming the accuracy of the representations and warranties of the
Purchaser contained in Section 5.07, the offer and sale of the Purchased Shares
will be exempt from the prospectus and registration requirements of the Ontario
Act. Neither the Company nor any of the Selling Shareholders nor any agent on
behalf of any such party has solicited or will solicit any offers to sell or has
offered to sell or will offer to sell all or any part of such shares to any
person or persons so as to bring the offer or sale of the Purchased Shares to
the Purchaser within such requirements.
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Section 4.9 Financial Statements
(a) The Company has delivered to the Purchaser the unaudited balance
sheet of the Company as at December 31, 1998 (the "Unaudited Balance Sheet"),
and the related unaudited statements of operations and changes in shareholders'
equity of the Company for the period ended December 31, 1998, together with the
notes thereto, all as set out in Schedule 4.09 hereof (collectively, the
"Financial Statements").
(b) All of the Financial Statements are accurate and complete in all
material respects, and the dollar amount of each line item included in the
Financial Statements is accurate in all material respects. The Financial
Statements and notes referred to in Section 4.09(a) are in accordance with the
books and records of the Company and present fairly the financial position of
the Company as of the respective dates thereof and the results of operations and
changes in stockholder's equity of the Company for the periods covered thereby.
The Financial Statements have been prepared in accordance with GAAP, applied on
a consistent basis throughout the periods covered.
(c) At the date of the Unaudited Balance Sheet, (i) the Company had
no Liabilities of any nature (matured or unmatured, fixed or contingent)
required by GAAP to be provided for in the Unaudited Balance Sheet or described
in the notes thereto which were not provided for in the Unaudited Balance Sheet,
described in the notes thereto, or set forth in Schedule 4.14 hereto, (ii) the
Company had no material Liabilities of any nature (matured or unmatured, fixed
or contingent) which were not required by GAAP to be provided for in the
Unaudited Balance Sheet or described in the notes thereto and (iii) all reserves
established by the Company and set forth in the Unaudited Interim Balance Sheet
were adequate for the purposes for which they were established. As of the date
of this Agreement, the Company has no Liabilities, except for:
(i) Liabilities identified as such in the
"liabilities" column of the Unaudited
Interim Balance Sheet; and
(ii) accounts payable (of the type required to be
reflected as current liabilities in the
"liabilities" column of a balance sheet
prepared in accordance with GAAP) incurred
by the Company in the Ordinary Course of
Business since the date of the Unaudited
Interim Balance Sheet; and
(iii) the potential liabilities set forth on
Schedule 4.14 hereof.
Section 4.10 Title to Assets
(a) The Company owns and has good and valid title to all assets
purported to be owned by it, including:
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(i) with respect to the Company, all assets
reflected on the Unaudited Interim Balance
Sheet (except for inventory sold by the
Company since the date of the Unaudited
Interim Balance Sheet in the Ordinary Course
of Business);
(ii) all of the Company's rights under Company
Contracts; and
(iii) all other assets reflected in the Company's
books and records as being owned by the
Company.
(b) All of said assets are owned by the Company free and clear of
any Liens except liens for current taxes and assessments not delinquent.
(c) None of the Company=s assets are being leased or licensed to the
Company.
Section 4.11 Material Contracts
(a) Schedule 4.11 identifies and provides an accurate and complete
description of each Company Contract which is material to the business or
prospects of the Company (collectively, the "Material Contracts"). All
nonmaterial contracts of the Company do not in the aggregate represent a
material portion of the assets or liabilities of the Company. The Company has
delivered to the Purchaser accurate and complete copies of all Material
Contracts, including all amendments thereto.
(b) Each Material Contract is valid and in full force and effect,
and is enforceable by the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and to general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
(c) The Company is not in default under any Material Contract in any
material respect, and to the Knowledge of the Company and each of the Selling
Shareholders, no Person has violated or breached, or declared or committed any
default under, any Material Contract;
(d) No event has occurred, and no circumstance or condition exists,
that might (with or without notice or lapse of time) (i) result in a material
violation or breach of any of the provisions of any Material Contract, (ii) give
any Person the right to declare a default or exercise any remedy under any
Material Contract, (iii) give any Person the right to accelerate the maturity or
performance of any Material Contract, or (iv) give any Person the right to
cancel, terminate or modify, any Material Contract.
(e) the Company has not waived any of its rights under any Material
Contract.
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(f) To the Knowledge of the Company and the Selling Shareholders,
each Person against which the Company has or may acquire any rights under any
Company Contract is solvent and is able to satisfy all of such Person's current
and future monetary obligations and other obligations and Liabilities to the
Company.
(g) The Company has never guaranteed or otherwise agreed to cause,
insure or become liable for, and has never pledged any of its assets to secure,
the performance or payment of any obligation or other Liability of any other
Person.
(h) Except as set forth in Schedule 4.11, the Company has never been
a party to or bound by (i) any joint venture agreement, partnership agreement,
profit sharing agreement, cost sharing agreement, loss sharing agreement or
similar Contract, or (ii) any Contract that creates or grants to any Person, or
provides for the creation or grant of, any share appreciation right, phantom
share right or similar right or interest.
(i) The performance of the Material Contracts will not result in any
violation of, or failure to comply with, any Requirement of Law.
(j) No Person is renegotiating, or has the right to renegotiate, any
amount paid or payable to the Company under any Material Contract or any other
term or provision of any Material Contract.
(k) The Contracts identified in Schedule 4.11 collectively
constitute all of the Contracts necessary to enable the Company to conduct its
business in the manner in which such business is currently being conducted and
in the manner in which such business is proposed to be conducted.
(l) Schedule 4.11 identifies and provides an accurate and complete
description of each proposed Contract as to which any bid, offer, written
proposal, term sheet or similar document has been submitted or received by the
Company.
(m) No party to any Material Contract has made a claim to the effect
that the Company has failed to perform an obligation thereunder. There is no
known plan, intention or indication of any contracting party to any Contract to
cause the termination, cancellation or modification of such Contract or to
reduce or otherwise change its activity thereunder so as to adversely affect the
benefits derived or expected to be derived therefrom by the Company.
(n) The Company is neither a party to, nor bound by, any contract,
agreement, commitment or restriction which obligates the Company to perform
services or to produce products unprofitably.
Section 4.12 Compliance With Requirement of Laws
(a) The Company is in full compliance with each Requirement of Law
that is applicable to each of them or to the conduct of each of their business
or the ownership or use of any of each of their assets.
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(b) No event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) constitute or result
directly or indirectly in a material violation by the Company of, or a material
failure on the part of the Company to comply with, any Requirement of Law.
(c) The Company has not received, at any time, any notice or other
communication (in writing or otherwise) from any Governmental Authority or any
other Person regarding (i) any actual, alleged, possible or potential violation
of, or failure to comply with, any Requirement of Law, or (ii) any actual,
alleged, possible or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any cleanup or any
remedial, corrective or response action of any nature.
(d) To the Knowledge of the Company and each of the Selling
Shareholders, no Governmental Authority has proposed or is considering any
Requirement of Law that, if adopted or otherwise put into effect, (i) may have
an material adverse effect on the business, condition, assets, liabilities,
operations, financial performance, net income or prospects of the Company, or on
the ability of the Company or any of the Selling Shareholders to comply with or
perform any covenant or obligation under any of the Transactional Documents, or
(ii) may have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
Section 4.13 Governmental Authorizations
(a) No Governmental Authorizations are necessary (i) to enable the
Company to conduct its business in the manner in which its business is currently
being conducted, or (ii) to permit the Company to own and use its assets in the
manner in which they are currently owned and used.
Section 4.14 Tax Matters
(a) Each Tax required to have been paid, or claimed by any
Governmental Authority to be payable, by the Company (whether pursuant to any
Tax Return or otherwise) has been duly paid in full on a timely basis including
all installments on account of Tax for the current year that are due and payable
by it, other than as set out in the financial statements. Any Tax required to
have been withheld or collected by the Company has been duly withheld and
collected, and (to the extent required) each such Tax has been paid to the
appropriate Governmental Authority, other than as set out in the financial
statements.
(b) No Tax Returns have been filed by or on behalf of the Company
with any Governmental Authority with respect to any taxable period ending on or
before the Closing Date ("Company Returns"). All Company Returns currently due
will be filed as soon as possible and in no event later than December 31, 1999,
and (ii) will be, when filed, accurately and completely prepared in full
compliance with all applicable Requirement of Laws, and the Company will
completely and accurately report all income and all other amounts of information
required to be reported thereon.
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(c) The Company's liability for unpaid Taxes for all periods ending
on or before December 31, 1998 does not, in the aggregate, exceed the amount of
the current liability accruals for Taxes (excluding reserves for deferred taxes)
reported in the Financial Statements. The Company will establish, in the
Ordinary Course of Business, reserves adequate for the payment of all Taxes
payable up to and as of the Closing Date in addition to those not included on
the Company's unaudited Balance Sheet, and the Company will disclose the dollar
amount of such reserves to the Purchaser on or prior to the Closing Date.
(d) The Company has never been audited.
(e) There are no actions, suits, proceedings, investigations, audits
or claims now pending or, to the knowledge of the Company threatened, against
the Company in respect of any Taxes and there are no matters under discussion,
audit or appeal with any Governmental Authority relating to Taxes.
(f) Except as specifically disclosed in writing to the Purchaser,
for purposes of the Tax Act or any applicable provincial or municipal taxing
statute, no Person or group of Persons has ever acquired or had the right to
acquire control of the Company.
(g) There are no suits or similar proceedings now pending or
threatened against the Company with respect to any transfer pricing issue or
transfer pricing practice of the Company. There are currently no matters under
discussion with any taxation or other authority relating to any transfer pricing
issue, transfer pricing practices of the Company, or any advance pricing
agreement or similar process or agreement concerning transfer pricing practices
and issues of the Company.
(h) No reserves are required to be taken by the Company for purposes
of the Tax Act.
(i) There are no reassessments of the Company that are issued and
outstanding and there are no outstanding issues which have been raised and
communicated to the Company by any governmental body for any taxation year. No
governmental body has challenged, disputed or questioned the Company in respect
of Taxes or of any returns, filings or other reports filed under any statute
providing for Taxes. The Company is not negotiating any draft assessment or
reassessment with any governmental body. The Company has not executed or filed
with any governmental body any agreement or waiver extending the period for
assessment, reassessment or collection of any Taxes.
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(j) The Company 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 Tax Act, all amounts required by
law to be withheld, and furthermore, have remitted such withheld amounts within
the prescribed periods to the appropriate governmental body except as reflected
in the Financial Statements. The Company has remitted all Canada Pension Plan
contributions, provincial pension plan contributions, employment insurance
premiums, employer health taxes, worker's compensation premiums and other Taxes
payable by it in respect of its employees and has remitted such amounts to the
proper governmental body within the time required under the applicable
legislation except as reflected in the Financial Statements. Other than as set
forth in the Financial Statements, the Company has charged, collected and
remitted on a timely basis all Taxes as required under applicable legislation on
any sale, supply or delivery whatsoever it has made.
(k) The Company has not deducted any material amounts in computing
its income in a taxation year that are currently unpaid and that could, if they
remain unpaid, be required to be included in income in a subsequent taxation
year under Section 78 of the Tax Act.
(l) The Company will not at any time be deemed to have a capital
gain pursuant to subsection 80.03(2) of the Tax Act as a result of any
transactions or event taking place in any fiscal period or portion thereof
ending on or before December 31, 1998.
(m) The Company (i) does not have a permanent establishment in
either the United States of America or the United Kingdom, (ii) is not subject
to any form of taxation in the United States of America, the United Kingdom, or
any jurisdiction or local thereof and (iii) has never filed or is now or has
ever been required to file any federal, state, local, provincial or other form
of tax return in either the United States of America or the United Kingdom;
provided, that any claim for indemnification pursuant to Article X with respect
to the representation and warranty set forth in this Section 4.17(n) shall be
net of any sales taxes actually received by the Company from customers relating
to periods prior to the Closing Date and for which a claim for indemnification
under Article X could be made due to the failure of the Company to collect such
sales taxes.
Section 4.15 Securities Laws Compliance; Registration Rights
The offer and sale of the Purchased Shares to the Purchaser has
complied and will comply with all securities laws of the Province of Ontario.
The Company and each Selling Shareholder have each complied with all applicable
provincial securities laws of Canada in connection with all offers and sales of
securities of the Company prior to the date of this Agreement. The Company has
not heretofore granted any purchaser of its securities the right to qualify the
distribution of its securities by prospectus in any province of Canada.
Section 4.16 Finders and Brokers
Neither the Company or any Selling Shareholder nor any person acting
on behalf of the Company or any Selling Shareholder has negotiated with any
finder, broker, intermediary or any similar person in connection with the
transactions contemplated herein. The Company and the Selling Shareholders will
indemnify the Purchaser and hold it harmless from any liability or expense
arising from any claim for brokerage commissions, finder's fees or other similar
compensation based upon any agreement, arrangement or understanding made by or
on behalf of the Company or any Selling Shareholder.
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Section 4.17 Environmental Compliance
The Company is in compliance in all material respect with all
applicable Environmental Laws. The Company has not received any notice or other
communication (in writing or otherwise) that alleges that the Company is not in
compliance with any Environmental Law, and, to the best knowledge of the Company
and the Selling Shareholders, there are no circumstances that may prevent or
interfere with the Company's compliance with any Environmental Law in the
future.
Section 4.18 Selling Shareholder
(a) Each Selling Shareholder has the capacity and financial
capability to comply with and perform all of his covenants and obligations under
each of the Transaction Documents to which it is or may become a party.
(b) Each Selling Shareholder is, and at the Closing will be, the
registered and beneficial owner and holder of the Purchased Shares set forth
beside its name on Schedule 2.01, free and clear of any Liens. Each Selling
Shareholder has delivered to the Purchaser accurate and complete copies of the
stock certificates evidencing the Purchased Shares owned by such Selling
Shareholder.
(c) Each Selling Shareholder:
(i) has not, at any time, (A) made a general
assignment for the benefit of creditors, (B)
filed, or had filed against him, any
bankruptcy petition or similar filing, (C)
suffered the attachment or other judicial
seizure of all or a substantial portion of
his assets, (D) admitted in writing its
inability to pay his debts as they become
due, (E) been convicted of, or pleaded
guilty to, any felony, or (F) taken or been
the subject of any action that may have an
adverse effect on his ability to comply with
or perform his respective covenants or
obligations under any of the Transaction
Documents; and
(ii) is not subject to any Order that may have an
adverse effect on his ability to comply with
or perform its covenants or obligations
under any of the Transaction Documents.
(d) There is no Proceeding pending, and no Person has threatened to
commence any Proceeding, that may have an adverse effect on the ability of any
Selling Shareholder to comply with or perform his covenants or obligations under
any of the Transaction Documents. No event has occurred, and no claim, dispute
or other condition or circumstance exists, that might directly or indirectly
give rise to or serve as a basis for the commencement of any such Proceeding.
(e) No consent, approval, authorization, order, registration or
qualification of or by any Person is required in connection with the execution,
delivery and performance by any Selling Shareholder of this Agreement or the
consummation of the Transactions contemplated hereby.
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(f) With the exception of Zipco Inc. and Edward Turner (both of
which undertake to comply with the provisions of Section 116 of the Tax Act and
to each provide the certificate contemplated thereby to the Purchaser prior to
or at Closing, failing which the Purchaser shall hold back all of the 155,211
and 83,607 Exchangeable Shares otherwise deliverable to Zipco Inc. and Edward
Turner, respectively, in respect of the 375,000 and 202,000 Purchased Shares
being sold by Zipco Inc. and Edward Turner, respectively, in order to avoid
non-compliance with section 116 of the Tax Act), each of the Selling
Shareholders is not a non-resident of Canada for purposes of the Tax Act.
Section 4.19 Powers of Attorney
Neither the Company nor the Selling Shareholders has or have given a
power of attorney to any Person.
Section 4.20 Full Disclosure
(a) The representations and warranties of the Company and each
Selling Shareholder contained in this Agreement, each of the other Transaction
Documents and each of the documents delivered or provided to the Purchaser by or
on behalf of the Company or any Selling Shareholder in connection with this
Agreement or any of the Transactions (i) do not contain any untrue statement of
a material fact, or (ii) omit to state any material fact of which the Company or
any of the Selling Shareholders has Knowledge, which fact is necessary in order
to make the statements and information contained in this Agreement, the other
Transaction documents and such documents not misleading.
(b) The Company and the Selling Shareholders have provided the
Purchaser and the Purchaser's Representatives with full and complete access to
all of the Company's records and other documents and data.
Section 4.21 Investment Representations
(a) Each Selling Shareholder understands that none of the
Exchangeable Shares or the InfoCast Exchange Stock issuable upon the exchange
thereof has been registered under the U.S. Securities Act or qualified by
prospectus for distribution under the Securities Act or the comparable
registration in the other provinces of Canada. Each Selling Shareholder also
understands that the Exchangeable Shares and the InfoCast Exchange Stock are
being offered and sold pursuant to an exemption from registration contained in
the U.S. Securities Act, and upon exemptions (which, in the case of trades in
the InfoCast Exchange Stock, may be unavailable unless and until a discretionary
ruling is made by the Ontario Securities Commission in respect thereof) from the
prospectus and registration requirements of the Securities Act, based in part
upon each Selling Shareholder's representations contained in this Agreement.
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(b) Each Selling Shareholder acknowledges that it must bear the
economic risk of the investment in the Exchangeable Shares and/or the InfoCast
Exchange Stock indefinitely unless the Exchangeable Shares or the InfoCast
Exchange Stock, as the case may be, are registered pursuant to the U.S.
Securities Act, or an exemption from registration is available, or are qualified
for distribution by prospectus in Canada, or an exemption from applicable
prospectus requirements in respect of the resale thereof is available. Each
Selling Shareholder acknowledges that his right to obtain InfoCast Exchange
Stock upon the exchange of the Exchangeable Shares is subject to the
availability of exemptions from the prospectus and registration requirements
under applicable securities laws in respect of trades in the InfoCast Exchange
Stock. Each Selling Shareholder understands that there is no assurance that any
exemption from registration under the U.S. Securities Act or any exemption from
the prospectus requirements of the Securities Act will be available and that,
even if available, such exemption may not allow any Selling Shareholder to
transfer all or any portion of the Exchangeable Shares or the InfoCast Exchange
Stock under the circumstances, in the amounts or at the times such Selling
Shareholder might propose.
(c) Each Selling Shareholder is acquiring the Exchangeable Shares
and the InfoCast Exchange Stock for such Selling Shareholder's own account for
investment only, and not with the current intention of making a public
distribution thereof.
(d) Each Selling Shareholder represents that by reason of its
business or financial experience, each Selling Shareholder has the capacity to
protect its own interests in connection with the transactions contemplated in
this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser hereby represents and warrants to the Company and the
Selling Shareholders as follows:
Section 5.1 Organization, Good Standing and Qualification of the Purchaser
(a) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of Ontario and is duly qualified to conduct
business and in corporate and tax good standing under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties requires such qualification. The Purchaser has all requisite
corporate power and authority to own and operate its properties and assets, to
execute, deliver and perform its obligations under this Agreement, and to carry
on its business as presently conducted and as presently proposed to be
conducted.
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Section 5.2 Capitalization
The authorized capital of the Purchaser consists of (a) an unlimited
number of common shares, 10,000,000 of which are issued and outstanding and
owned beneficially and of record by InfoCast, and (b) an unlimited number of
Exchangeable Shares, none of which are issued and outstanding as of the date
hereof and, after giving effect to the issuance of the Exchangeable Shares in
accordance with Section 2.02(b) on the Closing Date, 1,500,000 of which shall be
issued and outstanding. All issued and outstanding common shares of the
Purchaser have been, and on the Closing Date, all of the Exchangeable Shares
will be, duly authorized and validly issued in full compliance with all
applicable securities laws and other applicable Requirement of Laws, and are
fully paid and non-assessable.
Section 5.3 Authority; Binding Nature of Agreements
The Purchaser has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement and
each of the other Transaction Documents to which it is a party, and the
execution, delivery and performance by the Purchaser of this Agreement and each
of such other Transaction Documents have been duly authorized by all necessary
action on the part of the Purchaser, its shareholders, board of directors and
officers. Each of this Agreement and such other Transaction Documents
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and to general principles of equity (regardless of whether
such enforcement is sought in a proceeding in equity or at law).
Section 5.4 Non-Contravention; Consents
(a) Neither the execution and delivery of this Agreement or any
other Transaction Document to which the Purchaser is a party, nor the
consummation or performance of any of the Transactions, will directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in a
violation of (i) any of the provisions of
the Purchaser's articles of incorporation or
bylaws, or (ii) any resolution adopted by
the Purchaser's stockholders, the
Purchaser's board of directors or any
committee of the Purchaser's board of
directors;
(ii) contravene, conflict with or result in a
violation of, or give any Governmental
Authority or other Person the right to
challenge any of the Transactions or to
exercise any remedy or obtain any relief
under, any Requirement of Law or any Order
to which the Purchaser or any of the assets
owned or used by the Purchaser is subject;
or
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(iii) contravene, conflict with or result in a
violation or breach of, or result in a
default under, any provision of any of
Contract to which the Purchaser is a party;
(b) The Purchaser was, is and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any Person in
connection with the execution and delivery of any of this Agreement or any of
the other Transaction Documents or the consummation or performance of any of the
Transactions.
Section 5.5 Proceedings; Orders
(a) There is no pending Proceeding, and, to the Knowledge of the
Purchaser, no Person has threatened to commence any Proceeding that challenges,
or that may have the effect of preventing, delaying, making illegal or otherwise
interfering with, any of the Transactions.
(b) No event has occurred, and no claim, dispute or other condition
or circumstance exists, that might directly or indirectly give rise to or serve
as a basis for the commencement of any Proceeding of the type described in
Section 5.05(a).
(c) There is no proposed Order that, if issued or otherwise put into
effect may have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
Section 5.6 Sale of Exchangeable Shares Valid
Assuming the accuracy of the representations and warranties of the
Company and the Selling Shareholders contained in Section 4.08, the offer and
sale of the Exchangeable Shares and the issuance of the InfoCast Exchange Stock
upon the exchange thereof in accordance with the Share Exchange Agreement will
be exempt from the registration requirements of the U.S. Securities Act and will
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws. The issuance of the Exchangeable Shares to
the Selling Shareholders is exempt from the prospectus requirements of the
Ontario Act. Neither the Purchaser nor any agent on behalf of the Purchaser has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Exchangeable Shares or the InfoCast
Exchange Stock to any person or persons so as to bring the offer or sale of the
Exchangeable Shares or the InfoCast Exchange Stock to the Selling Shareholders
within the registration provisions of the U.S. Securities Act or any state
securities laws.
Section 5.7 Investment Representations
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(a) The Purchaser understands that none of the Purchased Shares has
been registered under the U.S. Securities Act. The Purchaser also understands
that the Purchased Shares are being offered and sold pursuant to an exemption
from registration contained in the U.S. Securities Act and upon an exemption
from the prospectus requirements of the Ontario Act based in part upon the
Purchaser's representations contained in this Agreement.
(b) The directors of the Purchaser have substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that they are capable of evaluating the
merits and risks of its investment in the Company on behalf of the Purchaser and
have the capacity to protect the Purchaser=s interests. The Purchaser must bear
the economic risk of this investment indefinitely unless the Purchased Shares
are registered pursuant to the U.S. Securities Act or qualified for distribution
by prospectus in Canada, or an exemption from registration or prospectus
requirements is available. The Purchaser understands that there is no assurance
that any exemption from registration under the U.S. Securities Act or from the
prospectus requirements of Canadian securities legislation will be available and
that, even if available, such exemption may not allow Purchaser to transfer all
or any portion of the Purchased Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
(c) The Purchaser is acquiring the Purchased Shares for the
Purchaser's own account for investment only, and not with the current intention
of making a public distribution thereof.
(d) The Purchaser represents that by reason of its, or of its
management's business or financial experience, the Purchaser has the capacity to
protect its own interests in connection with the transactions contemplated in
this Agreement. Purchaser is not a corporation, partnership or other entity
specifically formed for the purpose of consummating this transaction.
(e) The Purchaser acknowledges that it is an accredited investor as
that term is defined in Rule 50 1(a) of Regulation D, promulgated pursuant to
the Securities Act.
Section 5.8 Consents
All consents, approvals, orders, or authorizations of, or
registration, qualification, designation, declaration or filing with any
governmental or banking authority required on the part of Purchaser in
connection with the consummation of the transactions contemplated in this
Agreement have been or shall have been obtained prior to and shall be effective
as of the Closing.
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ARTICLE VI
PRE-CLOSING COVENANTS OF THE COMPANY
AND THE SELLING SHAREHOLDERS
Section 6.1 Access and Investigation
The Company shall ensure that, at all times during the Pre-Closing
Period:
(a) The Company and its Representatives provide the Purchaser and
its Representatives with free and complete access to the Company's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company;
(b) The Company and its Representatives provide the Purchaser and
its Representatives with such copies of existing books, records, Tax Returns,
work papers and other documents and information relating to the Company as the
Purchaser may request in good faith; and
(c) The Company and its Representatives compile and provide the
Purchaser and its Representations with such additional financial, operating and
other data and information regarding the Company as the Purchaser may request in
good faith.
Section 6.2 Operation of Business
The Company and the Selling Shareholders shall ensure that, during
the Pre-Closing Period:
(a) The Company conducts its operations exclusively in the Ordinary
Course of Business and in the same manner as such operations have been conducted
prior to the date of this Agreement;
(b) The Company preserves intact its current business organization,
keeps available the services of its current officers and employees and maintains
its relations and good will with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with the Company;
(c) The Company's officers confer regularly with the Purchaser
concerning operational matters and otherwise report regularly to the Purchaser
concerning the status of the Company's business, condition, assets, liabilities,
operations, financial performance and prospects;
(d) The Company immediately notifies the Purchaser of any inquiry,
proposal or offer from any Person relating to any Acquisition Transaction;
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(e) The Company and its officers use their Best Efforts to cause the
Company to operate profitably and to maximize its net income;
(f) The Company does not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares in its capital,
and does not repurchase, redeem or otherwise reacquire any such shares or other
securities (except as expressly contemplated by this Agreement);
(g) The Company does not sell or otherwise issue any shares or any
other securities;
(h) The Company does not amend its articles of incorporation or
bylaws, and does not effect or become a party to any Acquisition Transaction,
reclassification of shares, share split, reverse share split or similar
transaction;
(i) The Company does not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) The Company does not enter into or permit any of the assets
owned or used by the Company to become subject to any Lien;
(k) The Company does not incur, assume or otherwise become subject
to any Liability, except for current liabilities (of the type required to be
reflected in the "liabilities" column of a balance sheet prepared in accordance
with GAAP) incurred in the Ordinary Course of Business;
(l) The Company does not establish or adopt any employee benefit
plan, and does not pay any bonus or make any profit sharing or similar payment
to, or increase the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors, officers or
employees;
(m) The Company does not change any of its methods of accounting or
accounting practices in any respect;
(n) The Company does not make any Tax election;
(o) The Company does not commence any Proceeding;
(p) The Company does not enter into any transaction or take any
other action of the type referred to in Section 4.23;
(q) The Company does not enter into any transaction or take any
other action outside the Ordinary Course of Business;
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(r) The Company does not enter into any transaction or take any
other action that might cause or constitute a Breach of any representation or
warranty made by the Company or any of the Selling Shareholders in this
Agreement or in any other Transaction Document; and
(s) The Company does not agree, commit or offer (in writing or
otherwise), and does not attempt, to take any of the actions described in
clauses (g) through (t) of this Section 6.02.
Section 6.3 Filings and Consents
The Company and the Selling Shareholders shall ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable Requirement of Law, Order or Material Contract, or otherwise) by
the Company or any of the Selling Shareholders in connection with the execution
and delivery of any of the Transaction Documents or in connection with the
consummation or performance of any of the Transactions (including each of the
filings and notices identified in Schedule 4.05) is made or given as soon as
possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
Requirement of Law, Order or Material Contract, or otherwise) by the Company or
any of the Selling Shareholders in connection with the execution and delivery of
any of the Transactional Documents or in connection with the consummation or
performance of any of the Transactions (including each of the Consents
identified in Schedule 4.05) is obtained as soon as possible after the date of
this Agreement and remains in full force and effect through the Closing Date;
(c) The Company promptly delivers to the Purchaser a copy of each
filing made, each notice given and each Consent obtained by the Company or any
Selling Shareholders during the Pre-Closing Period; and
(d) during the Pre-Closing Period, the Company and its
Representatives cooperate with the Purchaser and with the Purchaser's
Representatives, and prepare and make available such documents and take such
other actions as the Purchaser may request in good faith, in connection with any
filing, notice or Consent that the Purchaser is required or elects to make, give
or obtain.
Section 6.4 Notification of Events or Conditions
During the Pre-Closing Period, the Company and the Selling
Shareholders shall promptly notify the Purchaser in writing of:
(a) the discovery by the Company or any of the Selling Shareholders
of any event, condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or constitutes a Breach of
any representation or warranty made by the Company or any of the Selling
Shareholders in this Agreement;
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(b) any event, condition, fact or circumstance that occurs, arises
or exists after the date of this Agreement and that would cause or constitute a
Breach of any representation or warranty made by the Company or any of the
Selling Shareholders in this Agreement if (A) such representation or warranty
had been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(c) any Breach of any covenant or obligation of the Company or any
of the Selling Shareholders; and
(d) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Section 12 impossible
or unlikely.
Section 6.5 No Negotiation
The Company and the Selling Shareholders shall ensure that, during
the Pre-Closing Period, neither the Company nor any of the Company's
Representatives directly or indirectly:
(a) solicits or encourages the initiation of any inquiry, proposal
or offer from any Person (other than the Purchaser) relating to any Acquisition
Transaction;
(b) participates in any discussions or negotiations with, or
provides any non public information to, any Person (other than the Purchaser)
relating to any Acquisition Transaction; or
(c) considers the merits of any unsolicited inquiry, proposal or
offer from any Person (other than the Purchaser) relating to any Acquisition
Transaction.
Section 6.6 Best Efforts
During the Pre-Closing Period, the Company and the Selling
Shareholders shall use their respective Best Efforts to cause the conditions set
forth in Articles VIII and Article IX to be satisfied on a timely basis, and
shall not take any action or omit to take any action, the taking or omission of
which would or could reasonably be expected to result in any of the
representations and warranties set forth in this Agreement or any of the other
Transaction Documents becoming untrue, in any of the conditions of Closing set
forth in Article VIII or Article IX not being satisfied or in the business of
the Company becoming materially less valuable.
Section 6.7 Confidentiality
The Company and the Selling Shareholders shall ensure that, during
the Pre-Closing Period:
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(a) the Company and its Representatives keep strictly confidential
the existence and terms of this Agreement;
(b) neither the Company nor any of its Representatives issues or
disseminates any press release or other publicity or otherwise makes any
disclosure of any nature (to any of the Company's suppliers, customers,
landlords, creditors or employees or to any other Person) regarding any of the
Transactions, except to employees of the Company involved in the consummation of
the Transactions or to the extent that the Company is required by law to make
any such disclosure regarding the Transactions; and
(c) if the Company is required by law to make any disclosure
regarding the Transactions, the Company advises the Purchaser, at least five
business days before making such disclosure, of the nature and content of the
intended disclosure.
ARTICLE VII
PRE-CLOSING COVENANTS OF THE PURCHASER
Section 7.1 Filings and Consents
The Purchaser shall ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable Requirement of Law or Order) by the Purchaser in connection with
the execution and delivery of any of the Transaction Documents or in connection
with the consummation or performance of any of the Transactions is made or given
as soon as possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
Requirement of Law or Order) by the Purchaser in connection with the execution
and delivery of any of the Transaction Documents or in connection with the
consummation or performance of any of the Transactions is obtained as soon as
possible after the date of this Agreement and remains in full force and effect
through the Closing Date;
(c) the Purchaser promptly delivers to the Company a copy of each
filing made, each notice given and each Consent referred to in this Section 7.01
obtained by the Purchaser during the Pre-Closing Period; and
(d) during the Pre-Closing Period, the Purchaser and its
Representatives cooperate with the Company, the Selling Shareholders and their
respective Representatives, and prepare and make available such documents and
take such other actions as the Company or any of the Selling Shareholder may
request in good faith, in connection with any filing, notice or Consent that the
Company or the Selling Shareholders is required or elects to make, give or
obtain.
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ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS AT CLOSING
The Purchaser's obligation to purchase the Purchased Shares and to
take the other actions required to be taken by the Purchaser at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
Section 8.1 Representations and Warranties; Performance of Obligations
The representations and warranties of the Company and the Selling
Shareholders contained in this Agreement and in each of the other Transaction
Documents shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date and the Company shall have performed
in all material respects all obligations herein required to be performed or
observed by it on or prior to the Closing.
Section 8.2 Consents, Permits, Waivers and Approvals
The Company, the Selling Shareholders, the Purchaser and InfoCast
shall have obtained any and all consents, permits, waivers and approvals
necessary or appropriate for consummation of the transactions contemplated
hereunder (except for such as may be properly obtained subsequent to the
Closing).
Section 8.3 Delivery of Certificates Evidencing Purchased Shares
The Selling Shareholders shall have delivered to the Purchaser
certificates representing 100% of the Purchased Shares, duly endorsed for
transfer.
Section 8.4 Compliance Certificate
The Company shall have delivered to the Purchaser a certificate,
executed by the President of the Company, dated the Closing Date, setting forth
the Company's representation and warranty that (i) each of the representations
and warranties made by the Company and each of the Selling Shareholders in this
Agreement was accurate in all material respects as of the date of this
Agreement, (ii) each of the representations and warranties made by the Company
and each of the Selling Shareholders in this Agreement and in each of the other
Transaction Documents is accurate in all material respects as of the Closing,
and (iii) each of the covenants and obligations that the Company and each of the
Selling Shareholders is required to have complied with or performed pursuant to
this Agreement at or prior to the Closing has been duly complied with and
performed in all material respects.
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Section 8.5 Corporate Documents
The Company shall have delivered to the Purchaser or its counsel,
copies of all corporate documents of the Company as the Purchaser shall
reasonably request.
Section 8.6 Share Exchange Agreement
Each of the Selling Shareholders shall have duly executed and
delivered to the Purchaser and InfoCast the Share Exchange Agreement.
Section 8.7 Proceedings and Documents
All corporate and other proceedings in connection with the
transactions contemplated at the Closing hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchaser and its counsel, and the Purchaser and its
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
Section 8.8 Releases
Each of the Selling Shareholders shall have delivered to the
Purchaser releases satisfactory to the Purchaser.
ARTICLE IX
CONDITIONS TO THE SELLING
STOCKHOLDER'S OBLIGATIONS AT CLOSING
The Selling Shareholders' obligation to sell, assign, transfer and
deliver the Purchased Shares to the Purchaser and the Selling Shareholders'
obligation to take the other actions required to be taken on their part at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions:
Section 9.1 Representations and Warranties; Performance of Obligations
The representations and warranties of the Purchaser contained in
this Agreement and in each of the other Transaction documents shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date and the Purchaser shall have performed in all material respects
all obligations herein required to be performed or observed by it on or prior to
the Closing.
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Section 9.2 Consents, Permits, Waivers and Approvals
The Company, the Selling Shareholders, the Purchaser and InfoCast
shall have obtained any and all consents, permits, waivers and approvals
necessary or appropriate for consummation of the transactions contemplated
hereunder (except for such as may be properly obtained subsequent to the
Closing).
Section 9.3 Delivery of Certificates Evidencing Exchangeable Shares
The Purchaser shall, subject to Section 4.24(f), have delivered to
the Selling Shareholders certificates representing the Exchangeable Shares
specified in Section 2.02(b), bearing such legends as counsel may advise are
necessary or desirable.
Section 9.4 Compliance Certificate
The Purchaser shall have delivered to the Company and each of the
Selling Shareholders a certificate, executed by the President of the Purchaser,
dated the Closing Date, setting forth the Purchaser's representation and
warranty that (i) each of the representations and warranties made by the
Purchaser in this Agreement was accurate in all material respects as of the date
of this Agreement, (ii) each of the representations and warranties made by the
Purchaser in this Agreement and in each of the other Transaction Documents is
accurate in all material respects as of the Closing, and (iii) each of the
covenants and obligations that the Purchaser is required to have complied with
or performed pursuant to this Agreement at or prior to the Closing has been duly
complied with and performed in all material respects.
Section 9.5 Corporate Documents
The Company shall have delivered to the Selling Shareholders or its
counsel, copies of all corporate documents of the Company as the Purchaser shall
reasonably request.
Section 9.6 Share Exchange Agreement
Each of the Purchaser and InfoCast shall have duly executed and
delivered to each Selling Shareholder the Share Exchange Agreement.
Section 9.7 Proceedings and Documents
All corporate and other proceedings in connection with the
transactions contemplated at the Closing hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Company, the Selling Shareholders and their respective
counsel, and the Company, the Selling Shareholders and their respective counsel
shall have received all such counterpart originals or certified or other copies
of such documents as they may reasonably request.
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ARTICLE X
INDEMNIFICATION, ETC.
Section 10.1 Survival of Representations and Warranties
The representations and warranties of each party contained in this
Agreement and in each of the other Transaction Documents shall survive the
Closing for a period of one year; provided that (i) each of the representations
contained in Section 4.17, and (ii) any representation the Breach of which the
Company or any Selling Shareholder had Knowledge on or prior to the Closing and
any covenants or obligations to be performed after the Closing, shall, in each
case, survive and continue for the applicable statute of limitation period or
periods legally applicable to them.
Section 10.2 Indemnification by Selling Shareholders
(a) Each of the Selling Shareholders shall, jointly and severally,
hold harmless and indemnify the Purchaser and its officers, directors,
employees, agents and representatives (collectively, the "Purchaser-Related
Indemnities" and individually each a "Purchaser-Related Indemnitee") from and
against, and shall compensate and reimburse each of the Purchaser Indemnities
for, any Damages which are suffered or incurred by any of the Purchaser-Related
Indemnities or to which any of the Purchaser-Related Indemnities may otherwise
become subject at any time (regardless of whether or not such Damages relate to
any third party claim) and which arise from or as a direct or indirect result
of, or are directly or indirectly connected with:
(i) any Breach of any representation or warranty
made by the Company or any of the Selling
Shareholders in this Agreement or in any of
the other Transaction Documents;
(ii) any Breach of any covenant or obligation of
the Company or any of the Selling
Shareholders;
(iii) any Proceeding relating to any Breach, or
Liability or matter of the type referred to
in any of the clauses listed above
(including any Proceeding commenced by any
Purchaser-Related Indemnitee for the purpose
of enforcing any of its rights under this
Article X); or
(iv) the failure by the Company or any Selling
Shareholder to obtain any necessary consents
in connection with any Material Contracts.
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(b) Each Selling Shareholder acknowledges and agrees that, if there
is any Breach of any representation, warranty or other provision relating to the
Company or the Company's business, condition, assets, liabilities, operations,
financial performance, net income or prospects (or any aspect or portion
thereof), then the Purchaser itself shall be deemed, by virtue of its ownership
of Purchased Shares, to have incurred Damages as a result of such Breach or
Liability. Nothing contained in this Section 10.02(b) shall have the effect of
(i) limiting the circumstances under which the Purchaser may otherwise be deemed
to have incurred Damages for purposes of this Agreement, (ii) limiting the other
types of Damages that the Purchaser may be deemed to have incurred (whether in
connection with any such Breach or Liability or otherwise), or (iii) limiting
the rights of the Company under this Section 10.02.
Section 10.3 Indemnification by the Purchaser
(a) The Purchaser shall hold harmless and indemnify each Selling
Shareholder and each of their respective agents and representatives
(collectively, the "Selling Shareholder-Related Indemnities" and individually
each a "Selling Shareholder-Related Indemnitee") from and against, and shall
compensate and reimburse each of the Selling Shareholder-Related Indemnities
for, any Damages which are suffered or incurred by any of the Selling
Shareholder-Related Indemnities or to which any of the Selling
Shareholder-Related Indemnities may otherwise become subject at any time
(regardless of whether or not such Damages relate to any third party claim) and
which arise from or as a direct or indirect result of, or are directly or
indirectly connected with:
(i) any Breach of any representation or warranty
made by the Purchaser in this Agreement or
in any of the other Transaction Documents;
(ii) any Breach of any covenant or obligation of
the Purchaser; or
(iii) any Proceeding relating to any Breach, or
Liability or matter of the type referred to
in any of the clauses listed above
(including any Proceeding commenced by any
Selling Shareholder-Related Indemnitee for
the purpose of enforcing any of its rights
under this Section 10.03).
Section 10.4 Interest
Any party (the "Indemnifying Party") that is required to indemnify
any other Person (the "Indemnified Party") pursuant to this Article X with
respect to any Damages shall also be required to pay such Indemnified Party
interest on the amount of such Damages (for the period commencing as of the date
on which such Indemnified Party first incurred or otherwise became subject to
such Damages and ending on the date on which the applicable indemnification
payment is made by such party) at a rate per annum equal to 7%.
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Section 10.5 Defense of Third Party Claims
(a) In the event of the assertion or commencement by any Person of
any claim or Proceeding (whether against the Purchaser, any Selling Shareholder,
any other Indemnitee or any other Person) with respect to which any of the
Company, any Selling Shareholder or the Purchaser, as an Indemnifying Party, may
become obligated to indemnify, hold harmless, compensate or reimburse any
Indemnitee pursuant to this Article X, the Indemnified Party shall reasonably
promptly, following the Indemnified Party's actual knowledge thereof, notify
such Indemnifying Party of such claim or Proceeding. The Indemnified Party shall
have the right, at its election, to designate such Indemnifying Party to assume
the defense of such claim or Proceeding at the sole expense of one or more of
such Indemnifying Party. If the Indemnified Party so elects to designate an
Indemnifying Parties to assume the defense of any such claim or Proceeding:
(i) such Indemnifying Party shall proceed to
defend such claim or Proceeding in a
diligent manner with counsel satisfactory to
the Indemnified Party;
(ii) the Indemnifying Party shall keep the
Indemnified Party informed of all material
developments and events relating to such
claim or Proceeding;
(iii) the Indemnified Party shall have the right
to participate in the defense of such claim
or Proceeding at its sole expense, except
that in the event the defense is not being
conducted by the Indemnifying Party in a
diligent manner as recommended by the
Company's legal counsel, paragraph (b) below
shall apply; and
(iv) the Indemnifying Party shall not settle,
adjust or compromise such claim or
Proceeding without the prior written consent
of the Indemnified Party.
(b) If the Indemnified Party so proceeds with the defense of any
such claim or Proceeding on its own:
(i) all expenses incurred and relating to the
defense of such claim or Proceeding (whether
or not incurred by the Indemnified Party)
shall be borne and paid exclusively by the
Indemnifying Party;
(ii) the Indemnifying Party shall make available
to the Indemnified Party any documents and
materials in the possession or control of
the Indemnifying Party that may be necessary
to the defense of such claim or Proceeding;
(iii) the Indemnified Party shall keep the
Indemnifying Party informed of all material
developments and events relating to such
claim or Proceeding; and
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(iv) the Indemnified Party shall have the right
to settle, adjust or compromise such claim
or Proceeding with the consent of the
Indemnifying Party, provided, that the
Indemnifying Party shall not unreasonably
withhold such consent.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Tax Elections
The Selling Shareholders and the Purchaser shall elect in prescribed
form and manner to have the provisions of subsection 85(1) of the Tax Act apply
to the transfer of the Purchased Shares and the Selling Shareholders shall
through the facilities of KPMG, deliver to and file the same with Revenue
Canada, Customs, Excise and Taxation within the time prescribed in accordance
with the Tax Act. The Selling Shareholders shall pay any late filing fees or
penalties and shall provide the Purchaser with a copy of such forms as filed.
For this purpose the Parties shall elect amounts in respect of such Purchased
Shares equal to an amount to be determined by the Selling Shareholders in
accordance with the limits set out in the Tax Act. The Selling Shareholders and
the Purchaser shall file all necessary elections or filings under all
corresponding provincial legislation to make the transfer effective on the same
basis as contemplated under the Tax Act.
Section 11.2 Termination
This Agreement may be terminated:
(a) by the written agreement of each of the Parties;
(b) by the Purchaser, the Company or any Selling Shareholder if
there shall be in effect a non-appealable order of a court of competent
jurisdiction permanently prohibiting the consummation of the Transactions; or
(c) by the Purchaser, the Company or any Selling Shareholder if the
Closing shall not have occurred on or before February 17, 1999.
Section 11.3 Governing Law
This Agreement shall be construed in accordance with, and governed
in all respects by, the laws of the Province of Ontario.
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<PAGE>
Section 11.4 Jurisdiction; Venue
Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced in any provincial or federal court located in the
Province of Ontario, Canada. Each party to this Agreement:
(a) expressly and irrevocably consents and submits to the
jurisdiction of each provincial and federal court located in the Province of
Ontario, Canada (and each appellate court located in the Province of Ontario,
Canada) in connection with any such legal proceeding;
(b) agrees that each provincial and federal court located in the
Province of Ontario, Canada shall be deemed to be a convenient forum; and
(c) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any provincial or federal
court located in the Province of Ontario, Canada, any claim that such party is
not subject personally to the jurisdiction of such court, that such legal
proceeding has been brought in an inconvenient forum, that the venue of such
proceeding is improper or that this Agreement or the subject matter of this
Agreement may not be enforced in or by such court.
Section 11.5 Successors and Assigns
This Agreement shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of each of the
parties hereto. No Party may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of the
other Parties; provided, however, that the Purchaser may (i) assign any or all
of its rights and interests hereunder to one or more of its affiliates and (ii)
designate one or more of its affiliates to perform its obligations hereunder (in
any or both of which cases the Purchaser nonetheless shall remain responsible
for the performance of all of its obligations hereunder).
Section 11.6 Entire Agreement
This Agreement, the other Transaction Documents and the other
documents delivered pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
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<PAGE>
Section 11.7 Severability
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 11.8 Amendment and Waiver
(a) This Agreement may be amended or modified only upon the mutual
written consent of the Company, the Purchaser and each of the Selling
Shareholders.
(b) Any amendment, modification or waiver effected pursuant to this
Section 11.07 shall be binding upon the Company, Purchaser and each of the
Selling Shareholders.
Section 11.9 Notices
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the parties hereto
at the respective addresses set forth below, or as notified by such party from
time to time at least ten (10) days prior to the effectiveness of such notice:
if to the Company: Virtual Performance Systems Inc.
1 Richmond Street West
Toronto, Ontario M5H 3W4 Canada
Attention: A. T. Griffis
Telecopier: (416) 867-1360
with a copy to: Boyle & Co.
36 Lombard Street
Suite 600
Toronto, Ontario M5C 2X3
Attention: James Boyle
Telecopier: (416) 868-6620
39
<PAGE>
if to the Selling Shareholders: Shareholders of Virtual Performance Systems Inc.
c/o Boyle & Co.
36 Lombard Street
Suite 600
Toronto, Ontario M5C 2X3
Attention: James Boyle
Telecopier: (416) 868-6620
if to the Purchaser: InfoCast Canada Limited
1 Richmond Street West, Suite 901
Toronto, Canada M5H 3W4
Attention: A.T. Griffis
Telecopier: (416) 867-9320
with a copy to: M. Craig G. Brown
Aird & Berlis
181 Bay Street
Suite 1800
Toronto, Canada M5J 2T9
Section 11.10 Counterparts
This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument.
Section 11.11 Attorney=s Fees
InfoCast shall bear all reasonable legal fees and expenses incurred
by the Company's Canadian counsel, Aird & Berlis, in connection with the
negotiation and closing of the transaction contemplated hereby. If any action at
law or in equity (including arbitration) is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
Section 11.12 Delays or Omissions
No delay or omission to exercise any right, power or remedy accruing
to any party hereto, upon any breach or default of any other party hereto, shall
impair any such right, power or remedy of such party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part
40
<PAGE>
of any party of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement, must be made in writing and shall be effective only to the extent
specifically set forth in such writing.
Section 11.13 Remedies Cumulative
All remedies, either under this Agreement or by law or otherwise
afforded to any party hereto, shall be cumulative and not alternative.
Section 11.14 No Contribution
Each Selling Shareholder hereby waives, and acknowledges and agrees
that it shall not have and shall not exercise or assert or attempt to exercise
or assert, any right of contribution or right of indemnity or any other right or
remedy against the Company in connection with any indemnification obligation or
any other Liability to which such Selling Shareholder may become subject under
any of the Transactional Documents or otherwise in connection with any of the
Transactions. Each Selling Shareholder further acknowledges that the waivers,
acknowledgments and agreements of the Selling Shareholders contained in this
Section 11.14 are an essential inducement to the Purchaser in entering into this
Agreement and agreeing to consummate the Transactions.
Section 11.15 Ontario Securities Law Matters
The Purchaser hereby covenants and agrees to use its best efforts to
obtain, as promptly as practicable following the Closing Date, a discretionary
ruling of the Ontario Securities Commission granting an exemption from the
prospectus and registration requirements of the Ontario Act in connection with
any and all trades of securities contemplated by or under the terms of the
Exchangeable Shares or the Share Exchange Agreement, on such terms and in such
form as is customary for transactions of this nature. The Selling Shareholders
covenant and agree not to exercise any rights arising under the terms of the
Exchangeable Shares or the Share Exchange Agreement that would cause the
Purchaser or InfoCast to be required to effect a trade in securities that would
constitute a contravention of the Ontario Act (i) under any circumstances, until
120 days following the Closing Date; and (ii) at any time thereafter, provided
that the Purchaser agrees to make a cash payment to the holder of the
Exchangeable Shares of an amount equal to the fair market value of the InfoCast
Exchange Stock the holder would have obtained on exercise but for the provisions
of this paragraph, which amount shall be determined by good faith negotiation
or, failing agreement, by binding arbitration. This Section shall also operate
as a waiver of the rights of a holder of Exchangeable Shares under the terms
thereof such that no holder of Exchangeable Shares may exercise such rights in a
manner contrary to the covenants provided for in this Section. Each Selling
Shareholder agrees not to transfer any Exchangeable Shares to any person who
does not first agree to be bound by the provisions of this Section, and to cause
any subsequent transferee to become so bound as a condition of any subsequent
transfer.
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<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement
as of the date set forth in the first paragraph hereof.
INFOCAST CANADA LIMITED
By: /s/ (signature is illegible)
--------------------------------
Name:
Title:
VIRTUAL PERFORMANCE SYSTEMS INC.
By: /s/ (signature is illegible)
--------------------------------
Name:
Title:
SELLING SHAREHOLDERS:
Witness DONALD JEFFERY, in trust
Witness J.E. BRITT DYSART, in trust
Witness DANA GILMAN
Witness WILLIAM LOVE
Witness DAN SKALING
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<PAGE>
Witness EDWARD TURNER
EASTCAN MEDIA GROUP LTD.
Per:
Authorized Signatory
GRIFFIS INTERNATIONAL LIMITED
Per:
Authorized Signatory
ADVANCED SYSTEMS COMPUTER
CONSULTANTS INC.
Per:
Authorized Signatory
VIEW MEDIA INTERNATIONAL CORPORATION
Per:
Authorized Signatory
ZIPCO INC.
Per:
Authorized Signatory
43
INFOCAST CORPORATION
Suite 902
1 Richmond Street West
Toronto, Ontario
M5H 3W4
May 18, 1999
Mr. Satish Kumeta
Suite 310
1050 Castlefield Avenue
Toronto, Ontario
M6B 1E7
Dear Sirs:
InfoCast Corporation ("InfoCast") writes to set out the terms
of the agreement between InfoCast and Satish Kumeta ("Kumeta") relating to
restructuring of Kumeta's relationships with InfoCast, InfoCast Canada
Corporation ("InfoCast Canada"), Virtual Performance Systems Inc.
("VPS") and Treetop Capital Inc. ("Treetop").
Background
1. Kumeta was a shareholder and director of VPS.
2. VPS amalgamated with its wholly owned subsidiary, Cheltenham
Technologies Corporation ("Cheltenham"). Cheltenham Technologies (Bermuda)
Corporation ("Cheltenham Bermuda") was a wholly owned subsidiary of Cheltenham
which became a wholly owned subsidiary of VPS upon completion of the
amalgamation.
3. VPS or Cheltenham Bermuda acquired from Kumeta, directly and
indirectly, or Kumeta developed for VPS or Cheltenham Bermuda, directly
or indirectly, certain intellectual property consisting of technology,
software programs, source code, programming, algorithms and
developments, whether in written form or electronic form, relating to:
(a) remote or virtual banking and transaction processing
capabilities;
(b) virtual call centre; and
(c) conversion and delivery of training and educational content.
-1-
<PAGE>
4. InfoCast Canada is a subsidiary of InfoCast.
5. InfoCast Canada acquired all the outstanding shares of VPS in
consideration of the issuance of exchangeable shares of InfoCast
Canada, exchangeable for shares of InfoCast in certain circumstances.
Kumeta received 289,742 exchangeable shares of InfoCast Canada
exchangeable for 289,742 shares of InfoCast.
6. Kumeta is a beneficial shareholder of Treetop. Treetop holds 9,000,000
shares of InfoCast. All the issued and outstanding shares of Treetop
are held by Boyle & Company, In Trust as nominee for the beneficial
owners of the Treetop shares.
7. Kumeta and InfoCast have decided to restructure Kumeta's relationship
with InfoCast, InfoCast Canada, VPS, Cheltenham Bermuda and Treetop.
Terms
In consideration of the mutual covenants and agreements
contained in this letter agreement and other valuable and good consideration,
Kumeta and InfoCast agree as follows:
8. Kumeta has resigned as officer, director and employee of InfoCast, VPS
and Cheltenham Bermuda and terminated his consulting agreements, or
arrangements with InfoCast and VPS.
9. InfoCast shall retain Kumeta as a consultant for a period of twelve
months commencing April 1, 1999 in respect of which InfoCast shall pay
Kumeta a monthly retainer of CDN$7,500 per month for six days per
month.
10. InfoCast shall pay Kumeta concurrently with the execution hereof the
sum of CDN$75,000.
11. Kumeta consents to the cancellation of stock options granted by
InfoCast to Kumeta, other than options to acquire 100,000 common shares
of InfoCast exercisable at a price of $1.00 on or before February 8,
2002, which InfoCast and Kumeta acknowledge may be subject to
regulatory approval or disapproval by the Securities Exchange
Commission (United States) in connection with InfoCast's Form 10
registration under the Securities Exchange Act (1934) (United States).
12. Kumeta acknowledges and agrees that he is the beneficial owner of
211,000 shares of Treetop which are held on his behalf by Boyle &
Company, in trust as nominee, representing an indirect beneficial
ownership in 211,000 common shares of InfoCast held by Treetop.
13. (a) InfoCast agrees to transfer and assign or cause Cheltenham
Bermuda to transfer and assign to Kumetech Consulting Ltd. all
intellectual property, including technology, software
programs, source code, programming, algorithms and
developments, whether in written form or electronic form,
relating to remote or virtual banking and
-2-
<PAGE>
transaction processing capabilities in consideration of
Kumetech Consulting Ltd. paying to InfoCast CDN$1.00.
(b) Kumeta agrees to cause Kumetech Consulting Ltd. to grant to
InfoCast a perpetual non-exclusive royalty free license to use
for its internal purposes only any such intellectual property
transferred and assigned to Kumeta Consulting Ltd.; including
any enhancements or developments of and to the intellectual
property and any enhancements or developments of an to the
intellectual property transferred to Kumetech Consulting Ltd.
14. Kumeta agrees to cause to be transferred and assigned to InfoCast,
InfoCast Canada or VPS, as InfoCast may direct, all intellectual
property, including technology, software, programs, sources code,
programming, algorithms and direction and developments and all written,
electronic or other recorded forms thereof, relating to Virtual Call
Center and conversion and delivery of training and educational content
in consideration of InfoCast entering into this agreement.
15. (a) In consideration of the mutual covenants contained in this
Agreement InfoCast, on its own behalf and on behalf of VPS,
InfoCast Canada, Cheltenham Bermuda and Treetop, their
respective officers, directors, servants, agents, successors
and assigns, on the one hand, and Kumeta for himself and on
behalf of Advanced Systems Computer Consultants Inc. on the
other hand, hereby remise, release and forever discharge each
from the other from any and all manner of actions, causes of
action, suits, debts, duties, accounts, bonds, covenants,
warranties, contracts, claims and demands of every nature or
kind existing at the present time; and
(b) It is understood and agreed that this mutual release does not
in anyway affect each parties' obligations and liability under
this Agreement.
16. Kumeta acknowledges and agrees that other than as set out herein, he
has no and shall have not ongoing claims or other rights to any
compensation from InfoCast, InfoCast Canada, VPS or Cheltenham Bermuda
or Treetop or any of their respective officers, directors or
shareholders, any claims or rights to any assets or property of any of
InfoCast, InfoCast Canada, VPS, or Cheltenham Bermuda, including
without limitation, any intellectual property, technology, software
programs, source code, programming, algorithms or developments, whether
in written form or electronic form.
17. Kumeta acknowledges and agrees that all information concerning
InfoCast, InfoCast Canada, VPS and Cheltenham Bermuda, other than
relating to remote or virtual banking and transaction processing
capabilities as provided herein, and all information relating to the
property, business or affairs of InfoCast, VPS or Cheltenham Bermuda
disclosed to him consists of proprietary and confidential information
and trade secrets of InfoCast, InfoCast Canada, VPS and Cheltenham
Bermuda, as the case may be, and that any disclosure or use
-3-
<PAGE>
thereof by him or any other person will cause irreparable harm to
InfoCast, InfoCast Canada, VPS or Cheltenham Bermuda. Kumeta agrees
that he shall not at any time or under any circumstances, directly or
indirectly, reveal, disclose or otherwise make available or known to
any person or use or obtain any benefit from, directly or indirectly,
any confidential information which has been disclosed or otherwise
comes into his possession as a result of his prior relationships with
InfoCast, InfoCast Canada, VPS or Cheltenham Bermuda.
18. Kumeta covenants and agrees that he shall not, directly or indirectly,
either alone in conjunction with any person, in any capacity
whatsoever, carry on or be engaged in or interested in or employed by
any person or business which competes with InfoCast or VPS in the
virtual call center and/or distance learning businesses conducted or
which may be conducted by InfoCast and its subsidiary and affiliates
for a period of one year.
19. Otherwise then as provided in the foregoing sections, InfoCast
acknowledges that there are and will be no restrictions on the
activities which Kumeta may engage in from and after the date hereof.
General
20. Whenever used in this Agreement, words importing the singular number
only shall include the plural, and vice versa, and words importing the
masculine gender shall include the feminine gender.
21. Time shall in all respects be of the essence of this Agreement.
22. The insertion of headings and the division of this Agreement into
articles, sections, paragraphs, clauses or schedules are for
convenience of reference only and shall not affect or be utilized in
the construction or the interpretation hereof.
23. This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable
therein and the parties hereby attorn to the jurisdiction of the courts
of the Province of Ontario.
24. All dollar amounts expressed herein refer to lawful currency of Canada.
25. Any notice, document or other communication required or permitted by
this Agreement to be given by a party hereto shall be in writing and is
sufficiently given if delivered personally, or if sent by prepaid
ordinary mail posted in Canada, or if transmitted by any form of
telecommunication (which is tested prior to transmission, confirms to
the sender the receipt of the entire transmission by the recipient and
reproduces a complete written version of the transmission at the point
of reception) to such party addressed as set out on the face page
hereof. Notice so mailed shall be deemed to have been given on the
third business day after deposit in a post office or public letterbox.
Neither party shall mail any notice, request or
-4-
<PAGE>
other communication hereunder during any period in which Canadian
postal workers are on strike or if such strike is imminent and may
reasonably be anticipated to affect the normal delivery of mail. Notice
transmitted by a form of recorded telecommunication during normal
business hours on a business day (9:00 a.m. to 5:00 p.m. local time at
the place of receipt) shall be deemed to have been given on the day of
transmission or, in the case of notice transmitted outside of normal
business hours shall be deemed to have been given on the first Business
day after the day of transmission; [provided that immediately following
such transmission such notice is given by personal delivery]. Notice
delivered personally shall be deemed to have been given on the day it
was delivered. Any party may from time to time notify the others in the
manner provided herein of any change of address which thereafter, until
changed by like notice, shall be the address of such party for all
purposes hereof.
26. The parties agree to execute and deliver to each other such further
instruments and other written assurances and to do or cause to be done
such further acts or things as may be necessary or convenient to carry
out and give effect to the intent of this Agreement or as any of the
parties may reasonably request in order to carry out the transactions
contemplated herein.
27. This Agreement sets forth the entire agreement among the parties hereto
pertaining to the specific subject matter hereof and replaces and
supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties hereto, and there
are no warranties, representations or other agreements, whether oral or
written, express or implied, statutory or otherwise, between the
parties hereto in connection with the subject matter hereof except as
specifically set forth herein. No supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in
writing by the party to be bound thereby.
28. Each of the provisions of this Agreement (and each part of each such
provision) is severable from every other provision hereof (and every
other part thereof). In the event that any provision (or part thereof)
contained in this Agreement or the application thereof to any
circumstance shall be invalid, illegal or unenforceable, in whole or in
part, in any jurisdiction and to any extent:
(a) the validity, legality or enforceability of such provision (or
such part thereof) in any other jurisdiction and of the
remaining provisions contained in this Agreement (or the
remaining parts of such provision, as the case may be) shall
not in any way be affected or impaired thereby;
(b) the application of such provision (or such part thereof) to
circumstances other than those as to which it is held invalid,
illegal or unenforceable shall not in any way be affected or
impaired thereby;
-5-
<PAGE>
(c) such provision (or such part thereof) shall be severed from
this Agreement and ineffective to the extent of such
invalidity, illegality or unenforceability in such
jurisdiction and in such circumstances; and
(d) the remaining provisions of this Agreement (or the remaining
parts of such provision, as the case may be) shall
nevertheless remain in full force and effect.
29. This Agreement may be executed by the parties hereto in separate
counterparts or duplicates each of which when so executed and delivered
shall be an original, but all such counterparts or duplicates shall
together constitute one and the same instrument.
30. This Agreement shall be binding upon and shall enure to the benefit of
the parties hereto and their respective heirs, executors,
administrators, successors, assigns and legal representatives.
IN WITNESS WHEREOF the parties have executed this Agreement as
of the date first above written.
INFOCAST CORPORATION
By:
Signed, sealed and delivered in the presence of /s/ SATISH KUMETA
---------------------------
SATISH KUMETA
-6-
September 3, 1999
Securities and Exchange Commission
450 5th Street N.W.
Washington, D.C. 20549
Gentlemen:
We have been furnished with a copy of the response to the Form 10 for the
Changes in and Disagreements With Accountants on Accounting and Disclosure to be
filed by our former client, Infocast Corporation (formerly Grant Reserve
Corporation). We agree with the statements made in response to that Form 10
insofar as they relate to our Firm.
Very truly yours,
/s/ Jackson & Rhodes P.C.
- -------------------------
Jackson & Rhodes P.C.
List of Subsidiaries of the Company
Infocast Canada Corporation
50% Interest in Call Center Learning Solutions OnLine, Inc.
Virtual Performance Systems, Inc.
(subsidiary of Infocast Canada Corporation)
Homebase Work Solutions Inc.
(subsidiary of Infocast Canada Corporation)
[Applied Courseware Technology Inc.]
(subsidiary of Infocast Canada Corporation)
Cheltenham Technologies (Bermuda) Corporation
(subsidiary of Infocast Canada Corporation)
Cheltenham Interactive Corporation
(subsidiary of Infocast Canada Corporation)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form 10 dated
September 15, 1999 of our report, dated April 21, 1999 (except for Note 9[b]
which is as of May 13, 1999 and Note 9[d] which is as of June 25, 1999),
relating to the consolidated financial statements of InfoCast Corporation as of
March 31, 1999, December 31, 1998 and December 31, 1997 and for the three-month
period ended March 31, 1999, the year ended December 31, 1998, the 156-day
period ended December 31, 1997 and the period from July 29, 1997 to March 31,
1999.
/s/ Ernst & Young LLP
Ernst & Young LLP
Toronto, Canada
September 15, 1999
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form 10 dated
September 15, 1999 of our report, dated June 11, 1999, relating to the financial
statements of Homebase Work Solutions Ltd. as at March 31, 1999 and December 31,
1998 and for the three-month period ended March 31, 1999 and the 101-day period
ended December 31, 1998.
/s/ Ernst & Young LLP
Ernst & Young LLP
Toronto, Canada
September 15, 1999
CONSENT OF INDEPENDENT CERTIFIED GENERAL ACCOUNTANTS
THE BOARD OF DIRECTORS:
APPLIED COURSEWARE TECHNOLOGY INC.
We consent to the use in the registration statement of our reports dated August
30, 1999 accompanying the financial statements of Applied Courseware Technology
Inc. contained in such registration statements.
/s/ Boudreau Porter Hetu & Associates
.....................................
Boudreau Porter Hetu & Associates
Moncton, New Brunswick
September 14, 1999
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED GENERAL ACCOUNTANTS
THE BOARD OF DIRECTORS:
APPLIED COURSEWARE TECHNOLOGY INC.
We consent to the use in the registration statement of our reports dated March
5, 1999 accompanying the financial statements of Applied Courseware Technology
Inc. contained in such registration statements.
/s/ Boudreau Porter Hetu & Associates
.................................
Boudreau Porter Hetu & Associates
Moncton, New Brunswick
September 14, 1999
<PAGE>
September 7, 1999
CONSENT OF INDEPENDENT CERTIFIED GENERAL ACCOUNTANTS
THE BOARD OF DIRECTORS:
APPLIED COURSEWARE TECHNOLOGY INC.
We consent to the use in the registration statement of our reports dated
December 4, 1997 accompanying the financial statements of Applied Courseware
Technology Inc. contained in such registration statements.
/s/ Boudreau Porter Hetu & Associates
.................................
Boudreau Porter Hetu & Associates
Moncton, New Brunswick
September 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Infocast
Consolidated Financial Statements as of March 31, 1999 and is qualified in its
entirety by reference to such Consolidated Financial Statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,092,445
<SECURITIES> 0
<RECEIVABLES> 258,244
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,404
<PP&E> 117,098
<DEPRECIATION> (9,706)
<TOTAL-ASSETS> 4,025,076
<CURRENT-LIABILITIES> 531,964
<BONDS> 0
<COMMON> 0
0
16,672
<OTHER-SE> 3,476,440
<TOTAL-LIABILITY-AND-EQUITY> 4,025,076
<SALES> 0
<TOTAL-REVENUES> 4,478
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,064,837
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,562
<INCOME-PRETAX> (3,083,921)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,083,921)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,083,921)
<EPS-BASIC> (.27)
<EPS-DILUTED> (.27)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Infocast
Consolidated Financial Statements as of December 31, 1998 and is qualified in
its entirety by reference to such Consolidated Financial Statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 25,595
<SECURITIES> 0
<RECEIVABLES> 34,713
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,225
<PP&E> 23,045
<DEPRECIATION> (4,137)
<TOTAL-ASSETS> 143,467
<CURRENT-LIABILITIES> 640,134
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (496,667)
<TOTAL-LIABILITY-AND-EQUITY> 143,467
<SALES> 0
<TOTAL-REVENUES> 43,446
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 467,318
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (423,872)
<INCOME-TAX> 0
<INCOME-CONTINUING> (423,872)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (423,872)
<EPS-BASIC> (.55)
<EPS-DILUTED> (.55)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Infocast
Consolidated Financial Statements as of December 31, 1998 and is qualified in
its entirety by reference to such Consolidated Financial Statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 35,786
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 99
<PP&E> 12,817
<DEPRECIATION> (1,362)
<TOTAL-ASSETS> 47,365
<CURRENT-LIABILITIES> 162,673
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (115,308)
<TOTAL-LIABILITY-AND-EQUITY> 47,365
<SALES> 0
<TOTAL-REVENUES> 43,446
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 63,067
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (19,621)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,621)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,621)
<EPS-BASIC> (478.56)
<EPS-DILUTED> (478.56)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Infocast
Consolidated Financial Statements as of December 31, 1997 and is qualified in
its entirety by reference to such Consolidated Financial Statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-29-1997
<PERIOD-END> DEC-31-1997
<CASH> 301
<SECURITIES> 0
<RECEIVABLES> 16,286
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38
<PP&E> 12,405
<DEPRECIATION> (451)
<TOTAL-ASSETS> 28,604
<CURRENT-LIABILITIES> 123,063
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (94,459)
<TOTAL-LIABILITY-AND-EQUITY> 28,604
<SALES> 0
<TOTAL-REVENUES> 3,508
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 99,669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (96,161)
<INCOME-TAX> 0
<INCOME-CONTINUING> (96,161)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (96,161)
<EPS-BASIC> (2,345.40)
<EPS-DILUTED> (2,345.40)
</TABLE>
