SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 20, 1998
DIGITAL DATA NETWORKS, INC.
(Exact name of registrant as specified in its charter)
Washington 0-27704 91-1426372
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification Number)
3102 Maple Avenue, Suite 230
Dallas, Texas 75201
(Address of principal executive offices)
(214) 969-7200
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. Acquisition or Disposition of Assets.
Pursuant to an Asset Purchase Agreement (the "Agreement") dated
September 20, 1998, Digital Data Networks, Inc.'s (the "Registrant" or the
"Company") wholly owned subsidiary, DDN Digital Data Networks (Canada), Inc.
("DDN Canada") sold all of its assets to Pro Net Communications, Inc. ("Pro
Net"). Principals in Pro Net include Peter Ciccone, the Company's former Chief
Operating Officer, and Stephen Willey, a former board member of the Company.
The purchase price of the assets was approximately $11,000, which was
applied to shareholder loans owed to Messrs. Ciccone and Willey by DDN Canada,
totaling approximately $114,000. In addition, the Company agreed to pay Pro Net
cash of approximately $20,000, and Pro Net assumed liabilities of DDN Canada,
and Messrs. Ciccone and Willey agreed to release DDN Canada and the Company
from, among other things, shareholder loans owed. Further, Messrs. Ciccone and
Willey agreed to pledge their shares of the Company's common stock, a total of
77,000 shares, as security for the performance of Pro Net's obligations with
respect to assumed liabilities, for a period of ninety (90) days from the
closing date.
ITEM 7. Financial Statements and Exhibits.
(a) Not applicable
(b) Included herewith is pro forma condensed consolidated
balance sheet as of June 30, 1998 presented on the basis
as if the Company's disposition of DDN Canada operations
had occurred on June 30, 1998, and condensed consolidated
statements of operations for the year ended December 31,
1997 and the six months ended June 30, 1998, presented on
the basis as if the Company's disposition of DDN Canada
operations had occurred at the beginning of the period
presented. These pro forma operating results do not
include the gain on disposition of discontinued operations
and may not be indicative of results to be expected in the
future.
The accompanying pro forma financial information gives
effect to the disposition of the DDN Canada business. This
business represented the Company's Internet services
segment and its disposition is required by generally
accepted accounting principles to be presented as
discontinued operations.
The pro forma financial information included herein should
be read in conjunction with the Company's audited, annual
financial statements included in the Company's December
31, 1997 Annual Report on Form 10-KSB and its unaudited
interim financial statements included in the Company's
June 30, 1998 Quarterly Report on Form 10-QSB.
(c) The following exhibit is furnished herewith in accordance
with the provisions of Item 601 of Regulation SB:
2.1 Asset Purchase Agreement dated September 20, 1998
between DDN Digital Data Networks (Canada), Inc., Pro
Net Communications, Inc., Digital Data Networks,
Inc., Peter Ciccone and Stephen Willey.
2
<PAGE>
Digital Data Networks, Inc.
Pro Forma Condensed Consolidated Balance Sheet
June 30, 1998
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
Actual Adjustments Pro Forma
------ ----------- ---------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 281 $ (27) (a,b) $ 254
Trade accounts receivable, net 109 (69) (a) 40
Prepaid expenses and other current assets 154 (14) (a) 140
------------ ---------- ---------
Total current assets 544 (110) 434
Equipment, net 211 (55) (a) 156
Other assets 222 - 222
------------ ---------- ---------
Total assets $ 977 $ (165) $ 812
============ ========== =========
Current liabilities
Accounts payable and accrued liabilities $ 386 $ (107) (a) $ 279
Current portion of long-term debt 22 - 22
Unearned income 52 (32) (a) 20
------------ ---------- ---------
Total current liabilities 460 (139) 321
Long-term obligations
Long-term debt, less current portion 157 - 157
Due to shareholders 114 (114) (a) -
------------ ---------- ---------
Total liabilities 731 (253) 478
------------ ---------- ---------
Stockholders' equity
Common stock, net of Treasury stock 13,369 - 13,369
Accumulated deficit (13,128) 93 (a) (13,035)
Cumulative foreign currency translation adjustment 5 (5) (a) -
------------ ---------- ---------
Total stockholders' equity 246 88 334
------------ ---------- ---------
Total liabilities and stockholders' equity $ 977 $ (165) $ 812
============ ========== =========
</TABLE>
(a) To record sale of all DDN Canada assets, the Purchaser's assumption of
liabilities and release of indebtedness due to stockholders, who are
acquiring the business, and to record resulting gain on disposition of
discontinued operations.
(b) To record payment of cash to Purchaser.
3
<PAGE>
Digital Data Networks, Inc.
Pro Forma Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share information)
(unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1997 Six Months Ended June 30, 1998
---------------------------- ------------------------------
Pro Forma Pro Forma
Actual Adjustments Pro Forma Actual Adjustments Pro Forma
---------- ----------- --------- ---------- ----------- ---------
(a) (a)
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 889 $ (365) $ 524 $ 455 $ (167) $ 288
---------- ----------- --------- ---------- ----------- ---------
Expenses:
Direct operating costs 477 (28) 449 116 (36) 80
Salaries and related 740 (117) 623 243 (36) 207
Marketing, general and administrative 783 (242) 541 251 (122) 129
Financing, legal and other consulting 348 (199) 149 80 (6) 74
Product development costs 103 (103) - - - -
Write-off of goodwill 343 (343) - - - -
Provision for notes receivable reserve 1,048 1,048
---------- ----------- --------- ---------- ----------- ---------
Total Expenses 3,842 (1,032) 2,810 690 (200) 490
Other Income, net 31 31 21 1 20
---------- ----------- --------- ---------- ----------- ---------
Loss from continuing operations (2,922) 667 (2,255) (214) 34 (182)
Loss from discontinued operations (667) (b) (34) (b)
---------- ----------- --------- ---------- ----------- ---------
Net loss $(2,922) $ - $ (2,255) $ (214) $ - $ (182)
========== =========== ========= ========== =========== =========
Loss from continuing operations per
share $ (1.25) $ (0.97) $ (0.09) $ (0.08)
========== ========= ========== =========
Net loss per share $ (1.25) $ (0.97) $ (0.09) $ (0.08)
========== ========= ========== =========
Weighted average shares outstanding 2,335,000 2,335,000 2,329,000 2,329,000
========== ========= ========== =========
</TABLE>
(a) To reclassify operating results of DDN Canada from continuing operations to
a net one-line item presentation of loss from discontinued operations. This
statement of operations does not include the gain on disposition of
discontinued operations.
(b) In accordance with SEC requirements for presentation of pro forma financial
information, the loss from discontinued operations is not included in the
pro forma results of operations.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DIGITAL DATA NETWORKS, INC.
Date: October 5, 1998 By: /s/ Donald B. Scott, Jr.
--------------------------
Donald B. Scott, Jr., President
Date: October 5, 1998 By: /s/ Richard J. Boeglin
------------------------
Richard J. Boeglin, Vice President,Finance
and Operations (Principal Financial and
Accounting Officer)
5
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT dated for reference the 20th day of September, 1998.
BETWEEN:
DDN DIGITAL DATA NETWORKS (CANADA), INC. (Incorporate Number
471304), a company incorporated under the laws of British
Columbia and having its registered office at suite 218 - 470
Granville Street, Vancouver, BC, V6E lV5 (after this called
the "Vendor")
AND:
PRO NET COMMUNICATIONS, INC. (Incorporation Number 548470),
has its registered office at 3323 - 1396 Richards Street,
Vancouver, BC, V6B 3G6
(after this called the "Purchaser")
AND:
DIGITAL DATA NETWORKS, INC., a corporation formed under the
laws of Washington, with an office at 3102 Maple Avenue, Suite
230, Dallas, Texas, 75201 (after this called the "Principal")
AND:
PETER CICCONE, Businessman of 2546 Panorama Drive, North
Vancouver, BC, V7G IV5 (after this called "Ciccone")
AND:
STEPHEN WILLEY, Businessman of 220 - 7525 King George Highway,
Surrey, BC, V3W 5A8
(after this called "Willey")
(Ciccone and Willey referred to collectively after this as the
"Shareholders")
<PAGE>
-2-
RECITALS
A. The Vendor carries on the business of providing access to the Internet
and other related services under the name and style of Pro Net Communications at
350 1122 Mainland Street, Vancouver, BC (hereinafter called the "Business").
B. The Vendor has agreed to sell and the Purchaser has agreed to purchase
the Business and certain assets used in connection with the Business.
C. The Principal, the sole shareholder of the Vendor, and as such. has a
substantial proprietary and financial interest in the proposed sale.
D. The Shareholders are, indirectly, the principals of the Purchaser and
hold shares in the capital of the Vendor which are to be used to secure certain
obligations of the Purchaser pursuant to this Agreement.
THEREFORE, this Agreement witnesses that in consideration of the
agreements set forth after this the parties agree as follows:
PART I
Interpretation
--------------
Definitions
- -----------
1.01 Unless the context requires otherwise the terms defined in this Section
have for all purposes of this Agreement the following meanings:
Adjustment Date - "Adjustment Date" means that date referred to in
Section 3.03. Closing Date - "Closing Date" means that date referred
to in Section 5.01.
Dollar - "Dollar" or "$" or any reference to currency means the
medium of exchange authorized by law in Canada.
Purchase Price - "Purchase Price" means that amount calculated in
accordance with Part III.
Shareholder Loans - "Shareholder Loans" means the loans owed by the
Vendor to the Shareholders totaling $162,699.73 as at March 31, 1998.
Shares - "Shares" means the aggregate 77,000 class A common shares in
the capital of the Principal owned by the Shareholders.
<PAGE>
-3-
All captions contained in this Agreement are for convenience only and
do not constitute a part of this Agreement. Whenever required the singular will
be deemed to include the plural and vice versa. Whenever required, the masculine
gender will include the feminine and vice versa.
Proper Law
- ----------
1.02 This Agreement is governed by and to be interpreted in accordance with
the laws of the province of British Columbia.
Entire Agreement
- ----------------
1.03 This Agreement contains the whole agreement between the parties and
there are no terms, conditions or collateral arrangements, express, implied or
statutory, other than those expressly set forth in this Agreement.
Severability
- ------------
1.04 If any provision of this Agreement is found to be unreasonable or
unenforceable, or both, by a court of competent jurisdiction, then such
provision will be deemed to be severed from this Agreement and the remainder of
this Agreement will not be affected and shall remain in full force and effect to
the extent permitted by law.
Time of Essence
- ---------------
1.05 Time is of the essence of this Agreement.
Arbitration
- -----------
1.06 In the event of a dispute among the parties, such dispute shall be
settled by a single arbitrator agreed upon by all interested parties or, in the
event that agreement cannot be reached, by three (3) arbitrators appointed in
accordance with the provisions of the Commercial Arbitration Act (British
Columbia).
Further Documentation
- ---------------------
1.07 The parties to this Agreement shall sign such further and other papers
and documents and will cause such meetings to be held and do and cause to be
done such further and other acts or things as may be necessary or desirable from
time to time in order to give full effect to this Agreement and each and every
part of it.
<PAGE>
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Waiver
- ------
1.08 The waiver on the part of any party to this Agreement relating to the
strict compliance of any term or condition of this Agreement will not in itself
constitute a waiver of the rights of the respective party in the event of a
subsequent breach of any term or condition of this Agreement by the other party.
Binding on Assigns
- ------------------
1.09 This Agreement enures to the benefit of and is binding upon the parties
to this Agreement, their heirs, administrators, successors and assigns.
Schedules
- ---------
1.10 The Schedules to this Agreement form part hereof.
PART II
Purchase and Sale
-----------------
2.01 At the closing, the Vendor shall sell and the Purchaser shall purchase
certain of the assets of the Business as a going concern, including, but without
limiting the generality of the foregoing, the following:
(1) the interest of the Vendor in all customer contracts relating
to the Business and all amounts due thereunder, including, but
without limiting the generality of the foregoing, all
contracts listed in Schedule "A", which Purchaser agrees to
update within one week of closing;
(hereinafter called the "Customer Contracts")
(2) all equipment, furnishings and supplies used or to be used in
connection with the Business including, but without limiting
the generality of the foregoing, those items listed in
Schedule "B", which Purchaser agrees to update within a week
of closing;
(after this referred to as the "Equipment")
(3) the exclusive right to the Purchaser to carrying on the
Business in continuation and succession to the Vendor, the
right to all trademarks and trade names associated with the
Business including, but without limiting the generality of the
foregoing, the name "Pro Net Communications", all lists of
customers and other information relating to the day-to-day
carrying on of the Business, all phone and telecopier numbers,
all Internet related rights and privileges including, without
limitation, domain names, IP addresses, e mail addresses, WEB
addresses, routing
<PAGE>
-5-
information and all necessary licenses and authorities and
any other rights use in connection with the Business;
(4) all of the Vendor's interest in the premises leased by it at
350 - 1122 Mainland Street, Vancouver, British Columbia,
together with all of the Vendor's right title and interest in
any and all improvements, structures and fixtures now
constructed and completed or under construction with respect
to and situated on said premises.
(hereinafter referred to as the "Leasehold")
(all of the above after this collectively referred to as the
Business Assets)
PART III
Purchase Price
--------------
Price and Allocation
- --------------------
3.01 The purchase price for the Business Assets, is $ 16,781.00 allocated as
follows:
(1) for the Equipment, the sum of $16,780.00; and
(2) for all of the other Business Assets, the sum of $1.00.
Adjustments
- -----------
3.02 The Purchaser will assume and pay all rent associated with the
Leasehold and all employee's salaries, taxes, rates, local improvements and
assessments and other charges accruing on and after the Closing Date and payment
in respect of such charges shall be made by adjusting the amount payable to the
Vendor on the Closing Date pursuant to Section 3.03. All prepaid expenses
relating to the Business Assets paid by the Vendor will become the property of
the Purchaser without adjustment.
Payment of Purchase Price
- -------------------------
3.05 The purchase price, together with the Provincial sales tax payable in
connection with this transaction, shall be paid as follows:
(1) prior to the Closing Date, the Purchaser shall acquire the
Shareholder Loans, or some portion thereof which is not less
than the Purchase Price, and on the Closing Date, the Purchase
price shall be paid by way of a credit in favour of the Vendor
against the amount then due under the Shareholder Loans; and
<PAGE>
-6-
(2) on the Closing Date, the Purchaser shall assume the
obligations of the Vendor under the Customer Contracts and
certain liabilities of the Vendor as set out in Schedule "C"
(collectively, the "Assumed Liabilities").
Security for Assumption of Obligations
- --------------------------------------
3.06 In consideration of the Principal and the Vendor entering into this
Agreement the Shareholders agree, subject to the terms of this Agreement, to
pledge the Shares as security for the performance by the Vendor of its
obligation to indemnify the Vendor and the Principal with respect to the assumed
liabilities. The terms of such security shall be in accordance with the escrow
agreement (the "Escrow Agreement") set out in Schedule "D".
Consulting Fee
- --------------
3.07 In consideration of this Agreement, the Principal agrees to pay the
Purchaser a consulting fee of THIRTY THOUSAND ($30,000.00) DOLLARS payable as
follows:
(1) FIFTEEN THOUSAND ($15,000.00) DOLLARS on the Closing Date; and
(2) FIFTEEN THOUSAND ($15,000.00) DOLLARS by way of cheque
dated thirty (30) days after the Closing Date and delivered
on the Closing Date.
Mutual Release
- --------------
3.08 In consideration of this Agreement, the Vendor, the Principal and the
Shareholders agree to execute mutual releases attached hereto as Schedule E (the
"Releases").
PART IV
Warranties and Representations
------------------------------
Representations of the Vendor
- -----------------------------
4.01 The Vendor and the Principal represent and warrant to the Purchaser
that:
<PAGE>
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(1) the Vendor is a corporation duly organized, existing and in good
standing under the laws of British Columbia and has the power to enter
into and to carry out the transactions contemplated by this Agreement,
all of which have been validly authorized by all necessary corporate
proceedings;
(2) the Vendor has good marketable title to the Business assets free and
clear of all liens, mortgages, encumbrances, equities and claims or
every kind and nature. The Vendor is not aware of any pending or
contemplated expropriation or condemnation proceedings which would in
any way affect the Lands. The Vendor has not used nor is the registered
owner of any trademark in connection with the Business;
(3) to the best of Vendor's and Principal's knowledge, the Vendor is not a
party to any collective agreement relating to the Business with any
labour union or other association of employees. No labour union or
other association of employees has threatened or given notice of any
impending strike, grievance, protest or attempt to organize any of the
employees of the Vendor;
(4) there are no actions, suits, legal or administrative proceedings or
investigations, private or public, pending or threatened which might
materially and adversely affect the Business or the Vendor's ability to
carry out its obligations under this contract, in whole or in part;
(5) the Vendor has the right, power, legal capacity and authority to enter
into, and perform its obligations under this Agreement, and no
approvals or consents of any persons are required in connection with
this Agreement. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not result in or constitute:
(i) any default or event that, with notice or lapse of time or
both, would be a default, breach or violation of the articles
of incorporation or bylaws of the Vendor or any lease,
license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust, or other
agreement, instrument, or arrangement to which the Vendor is a
party or by which it is bound; or
(ii) the creation or imposition of any lien, charge or encumbrance
on any of the Lands;
(6) to the best of Vendor's and Principal's knowledge, within the times and
in the manner provided by law, the Vendor has filed all federal,
provincial and local tax returns required by law and has paid all
taxes, assessments and penalties due and payable;
<PAGE>
-8-
(7) to the best of Vendor's and Principal's knowledge, the Vendor has no
indebtedness to any person, partnership or corporation which might by
operation of law or otherwise, constitute a lien, charge or encumbrance
upon any of the Business Assets after the Closing Date;
(8) to the best of Vendor's and Principal's knowledge, the Vendor is not in
default under any of the contracts of the Business and all Customer
Contracts are set out in Schedule "A";
(9) to the best of Vendor's and Principal's knowledge, the Vendor has all
licenses and permits required for the Business. The Vendor is not aware
of having done anything to in any way jeopardize the holding or the
transferability of any such license or permit and all such licenses are
fully transferable;
(10) to the best of Vendor's and Principal's knowledge, the Vendor has no
employment contracts or commitments relating to the Business which
cannot be terminated on thirty (30) days' notice and the Vendor has
established no pension, deferred compensation or profit sharing or
other similar plans for which the Purchaser will be liable;
(11) to the best of Vendor's and Principal's knowledge, there are no
actions, suits, legal or administrative proceedings or investigations,
private or public, pending or threatened which might materially and
adversely effect the Business or the Vendor's ability to carry out its
obligations under this contract, in whole or in part;
(12) to the best of Vendor's and Principal's knowledge, all outstanding
commitments by or on behalf of the Vendor for the purchase or sale of
Inventory have been made in accordance with established price lists of
the Vendor or its suppliers or if otherwise then in accordance with the
Vendor's normal business custom in varying from the established lists.
Reliance on Written Agreement
- -----------------------------
4.02 It is understood and agreed that the Vendor has not made and does not
make any representations or warranties as to the physical condition, income,
expense, operation or any other matter or thing affecting or -related to the
Business or the Business Assets except as specifically set forth in this
Agreement, including the Schedules hereto, and no other representations have
been made or relied upon by the Purchaser in entering into this Agreement.
Representations of the Purchaser
- --------------------------------
4.03 The Purchaser represents and warrants to the Vendor that:
(1) the Purchaser is a corporation duly organized, existing and in
good standing under the laws of British Columbia and has the
power to enter into and to carry out the
<PAGE>
-9-
transactions contemplated by the Agreement, all of which have
been validly authorized by all necessary corporate
proceedings;
(2) the Purchaser has the right, power, legal capacity and
authority to enter into, and perform its obligations under
this Agreement, and no approvals or consents of any persons
are required in connection with this Agreement. The execution
of the agreement and the consummation of the transactions
contemplated hereby will not result in or constitute:
(i) any default or event that, with notice or lapse of
time or both, would be a default, breach or violation
of the articles of incorporation or by-laws of the
Purchaser or any lease, license, promissory note,
conditional sale contract, commitment, indenture,
mortgage, deed of trust, or other agreement,
instrument, or arrangement to which the Purchaser is
a party or by which it is bound; or
(ii) the creation or imposition of any lien, charge or
encumbrance on any of the Lands; and
(3) there are no actions, suits, legal or administrative
proceedings or investigations, private or public, pending or
threatened, which might materially and adversely affect
Purchaser's ability to carry out its obligations under this
contract, in whole or in part;
(4) the Purchaser shall use its best efforts to satisfy each and
every term and condition of this Agreement and to do whatever
is reasonably necessary or appropriate to further the
consummation of the transactions contemplated by this
Agreement.
Survival of Representations
- ---------------------------
4.04 The representations and warranties and continuing obligations of the
Vendor and the Principal and the Purchaser contained in this Agreement and in
any certificates or documents delivered in connection with the transactions
contemplated by this Agreement shall be true at and as of the Closing Date as
though such representations, warranties and agreements were made at and as of
the Closing Date and shall survive the Closing Date, the purchase and sale
contemplated by this Agreement and any reorganization or amalgamation of the
parties to this Agreement and shall continue in full force and effect for a
period of one year from the Closing Date, except to the extent expressly waived
in writing.
<PAGE>
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PART V
Closing
-------
Closing Date
- ------------
5.01 The closing of the sale and purchase pursuant to this Agreement will
take place at 10 o'clock in the forenoon on June 30, 1998, or at such other date
and time as may be mutually agreed upon in writing by the parties and shall be
held at the offices of at the offices of Norton Stewart or at such other
mutually agreeable place convenient to all parties.
Risk
- ----
5.02 The Business Assets are at the risk of the Vendor up to the Closing
Date and the Vendor shall maintain to that date reasonable fire, extended
coverage and public liability insurance covering the Business Assets and with
respect to injury to persons and property.
Conduct Pending Closing
- -----------------------
5.03 The Vendor agrees that pending the Closing Date:
(1) the Vendor's business will be conducted only in the ordinary
course except as otherwise required to carry out the terms of
this Agreement;
(2) the Vendor will not dispose of any of the Business Assets or
enter into any contract except in the ordinary course of
business;
(3) the Vendor will endeavour to preserve the goodwill of
suppliers and customers and others having business relations
with the Vendor relating to the Business;
(4) the Vendor will maintain the level of Inventory at a level
consistent with the operation of the Business for the previous
fiscal year; and
(5) the Vendor will endeavour to preserve the organization of the
Business intact and keep available the services of present
employees, subject to voluntary resignations and dismissals in
accordance with proper business practice.
Conditions Precedent to the Obligations of the Purchaser
- --------------------------------------------------------
5.04 The obligation of the Purchaser and Shareholders to complete the
transactions contemplated by this Agreement is subject to the fulfillment of
each of the following conditions at the times stipulated:
<PAGE>
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(1) that the representations and warranties of each of the Vendor
and the Principal contained in this Agreement are true and
correct in all material respects at the Closing Date except as
may in writing be disclosed to and approved by the Purchaser
and the Shareholders;
(2) that neither of the Vendor nor the principal has breached any
term of this Agreement and that each of them has performed all
its obligations under this Agreement at the times required;
(3) that prior to the Closing Date, neither the principal nor the
Vendor has taken any action adversely affecting the Business
Assets so as to materially reduce the value of the Business to
the Purchaser; and
(4) that no substantial damage to the Business Assets by fire,
negligence or otherwise has occurred prior to the Closing Date
which in the opinion of the Purchaser will materially and
adversely affect the operation of the Business.
The parties to this Agreement agree that the foregoing conditions are
inserted for the exclusive benefit of the Purchaser and the Principals and that
the contract is capable of being performed without fulfillment of any or all of
the condition precedents and that the conditions may be unilaterally waived in
whole or in part by them at any time.
Conditions Precedent to the Obligations of the Vendor
- -----------------------------------------------------
5.05 The obligations of the Vendor and Principal to complete the
transactions contemplated by this Agreement is subject to the fulfillment of
each of the following conditions at the times stipulated:
(1) that the representations and warranties of each of the
Purchaser and the Shareholders contained in this Agreement are
true and correct in all material respects at the Closing Date
except as may in writing be disclosed to and approved by the
Vendor; and
(2) that neither the Purchaser nor the Shareholders has breached
any term of this Agreement and that each of them has performed
all its obligations under this Agreement at the times
required.
The foregoing conditions are inserted for the exclusive benefit of the
Vendor and Principal and may be waived in whole or in part by them any time.
<PAGE>
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Transactions of the Vendor at Closing
- -------------------------------------
5.06 At the closing, the Vendor and Principal shall cause to be executed and
delivered to the Purchaser:
(1) all deeds, bills of sale, transfers and assignments with full
covenants of warranty as are necessary to effectively vest
good and marketable title to the Business Assets in the
Purchaser or its nominee free and clear of all liens,
mortgages, encumbrances, equities or claims of every nature
and kind whatsoever;
(2) free and vacant possession of the Business Assets except as
provided for in this Agreement and subject to the rights of
tenants and possession;
(3) a certified copy of a resolution of the directors of the
Vendor duly passed authorizing the execution and
implementation of this Agreement;
(4) a certified copy of a special resolution of the Vendor duly
passed approving the sale of the Business Assets;
(5) the Escrow Agreement;
(6) the appropriate Release;
(7) a certified cheque in the amount of FIFTEEN THOUSAND
($15,000.00) DOLLARS payable to Norton Stewart in trust as the
first installment of the consulting fee;
(8) a post-dated cheque payable to the Purchaser in the amount of
FIFTEEN THOUSAND ($15,000.00) DOLLARS dated the thirtieth
(30th) day following the Closing Date for the second
installment of the consulting fee.
(9) an election pursuant to section 167(l) of the Excise Tax Act
(Canada) with respect to the sale of the Business Assets.
Transactions of the Purchaser at Closing
- ----------------------------------------
5.07 At the closing, the Purchaser shall execute and deliver to the Vendor:
(1) an election pursuant to section 167(l) of the Excise Tax Act
(Canada) with respect to the sale of the Business Assets;
<PAGE>
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Transactions of the Shareholders at Closing
- -------------------------------------------
5.09 At the closing, the Shareholders shall:
(1) deliver to Norton Stewart the Shares together with an
irrevocable Stock Power of Attorney signed off in blank in a
form sufficient to permit the Vendor to deal with them as it
sees fit upon release (collectively the "Escrowed Documents");
(2) execute and deliver the Escrow Agreement; and
(3) execute and deliver to the Vendor, the appropriate Release;
Post-Closing Agreements
- -----------------------
5.09 The Vendor shall deliver promptly to the Purchaser any amounts relating
to Accounts Receivable collected by the Vendor after the Closing Date. The
Vendor will deliver to the Purchaser's promptly after the Closing Date such of
the records of the Business as may be necessary or desirable in order to carry
it on.
5.10 The parties shall, before and after the Closing Date execute and
deliver such further documents and instruments and do all acts and things that
may be reasonably necessary to carry out the full intent and meaning of this
Agreement.
PART VI
Indemnity
---------
Indemnification of Purchaser
- ----------------------------
6.01 Except as provided in paragraph 5.02, the Vendor and Principal shall
jointly and severally indemnify the Purchaser and the Shareholders for any loss
or damage sustained by any one or more of the Purchaser or the Shareholders
before the Closing Date, directly or indirectly, by reason of a breach of any of
the Vendor's warranties and representations set forth in this Agreement. The
Vendor acknowledges that the Purchaser has entered into this Agreement relying
upon the warranties and representations and other terms and conditions of this
Agreement and that no information now known shall limit or extinguish the right
to indemnity under this Agreement. This indemnification shall continue in full
force and effect for a period of one year from the Closing Date.
<PAGE>
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Indemnification of Vendor
- -------------------------
6.02 The Purchaser shall indemnify the Vendor and the Principal for any loss
or damage sustained by the Vendor before the Closing Date, directly or
indirectly, by reason of a breach of any of the Purchaser's warranties and
representations contained in this Agreement or the Purchaser defaulting under
any contracts or liabilities listed in Schedule "A" and Schedule "C" to this
Agreement. The Purchaser acknowledges that the Vendor and the Principal have
entered into this Agreement relying upon the warranties and representations and
other terms and conditions of this Agreement and that no information now known
shall limit or extinguish the right to indemnity under this Agreement. This
indemnification shall continue in full force and effect for a period of one year
from the Closing Date.
IN WITNESS WHEREOF the parties have hereunto set their respective hands
and seals and have caused their Corporate Seals to be affixed in the presence of
their duly authorized officers, on the day and year first above written.
The corporate seal of DDN DIGITAL )
DATA NETWORKS (CANADA), INC. )
was hereunto affixed in the presence of: )
)
)
/s/ Donald B. Scott )
- ------------------------------------------)
Authorized Signatory )
)
)
- ------------------------------------------)
Authorized Signatory ) c/s
)
)
)
The corporate seal of PRO NET )
COMMUNICATIONS, INC. was )
hereunto affixed in the presence of: )
)
)
/s/ )
- ------------------------------------------)
Authorized Signatory )
)
)
- ------------------------------------------)
Authorized Signatory ) c/s
<PAGE>
-15-
The corporate seal of DIGITAL DATA )
NETWORKS, INC. was hereunto )
affixed in the presence of: )
)
)
/s/ Donald B. Scott )
- ------------------------------------------)
Authorized Signatory )
)
)
- ------------------------------------------)
Authorized Signatory ) c/s
)
)
)
SIGNED, SEALED AND DELIVERED )
by PETER CICCONE in the presence of: )
)
)
Colin McDonald )
- ------------------------------------------)
NAME )
)
3323-1396 Richards )
- ------------------------------------------)
ADDRESS )
) /s/ Peter Ciccone
Vancouver, BC V6B 3G6 ) PETER CICCONE
- ------------------------------------------)
)
)
Businessman )
- ------------------------------------------)
OCCUPATION )
<PAGE>
-16-
SIGNED, SEALED AND DELIVERED )
by STEPHEN WILLEY in the presence of: )
)
)
Paul Fraser )
NAME )
)
350-1122 Mainland )
- ------------------------------------------)
ADDRESS )
) /s/ Stephen Willey
Vancouver, BC ) STEPHEN WILLLEY
- ------------------------------------------)
)
)
Network Manager )
- ------------------------------------------)
OCCUPATION )
