SHARE PURCHASE AGREEMENT
AMONG
VIRTUAL PERFORMANCE SYSTEMS INC.
THE SELLING SHAREHOLDERS NAMED HEREIN
AND
INFOCAST CANADA LIMITED
DATED AS OF JANUARY 29, 1999
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
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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
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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
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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
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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
(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).
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"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
"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.
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"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 xxxx
(whether registered or unregistered), service xxxx 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.
6
"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.
7
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 Xxxx
& Berlis, Suite 1800 BCE Place, Bay Wellington Tower, P.O. Box 754, 000 Xxx
Xxxxxx, Xxxxxxx, Xxxxxxx, Xxxxxx 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").
8
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
9
(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.
10
(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.
12
(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 xxxx, 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:
15
(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.
16
(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.
17
(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.
18
(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.
19
(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.
20
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.
21
(f) With the exception of Zipco Inc. and Xxxxxx Xxxxxx (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 Xxxxxx
Xxxxxx, respectively, in respect of the 375,000 and 202,000 Purchased Shares
being sold by Zipco Inc. and Xxxxxx Xxxxxx, 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.
22
(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.
23
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
24
(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
25
(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.
26
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;
27
(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;
28
(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;
29
(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:
30
(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.
31
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.
32
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.
33
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.
34
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.
35
(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%.
36
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
37
(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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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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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.
0 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
Attention: A. T. Xxxxxxx
Telecopier: (000) 000-0000
with a copy to: Xxxxx & Co.
00 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxx Xxxxx
Telecopier: (000) 000-0000
39
if to the Selling Shareholders: Shareholders of Virtual Performance Systems Inc.
c/o Boyle & Co.
00 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxx Xxxxx
Telecopier: (000) 000-0000
if to the Purchaser: InfoCast Canada Limited
0 Xxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxx X0X 0X0
Attention: A.T. Xxxxxxx
Telecopier: (000) 000-0000
with a copy to: M. Xxxxx X. Xxxxx
Xxxx & Berlis
000 Xxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxx X0X 0X0
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, Xxxx & 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
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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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 XXXXXX XXXXXXX, in trust
Witness X.X. XXXXX XXXXXX, in trust
Witness XXXX XXXXXX
Witness XXXXXXX XXXX
Witness XXX XXXXXXX
42
Witness XXXXXX XXXXXX
EASTCAN MEDIA GROUP LTD.
Per:
Authorized Signatory
XXXXXXX 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
