EXHIBIT 10.12
Dated__________________________________1999
(1) INVU, Inc.
- AND -
(2) VERTICAL INVESTMENTS LIMITED and
XXXX XXXXX XXXXXXX
- AND -
(3) XXXXX XXXXXX, XXXX XXXXXXXX and XXXX X'XXXXXXXX
- AND -
(4) INVU SERVICES LIMITED
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INVESTMENT AGREEMENT
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THIS AGREEMENT is made the day of , 1999.
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BETWEEN:
(1) INVU, INC. a company organized and existing under the laws of the state of
Colorado (whose shares trade on the NASD OTC Bulletin Board) whose
principal place of business is at The Beren, Xxxxxxxxx Xxxx Xxxx, Xxxxx
Xxxx, Xxxxxxxxx, Xxxxxxxxxxxxxxxx, XX0 0XX ("Company")
(2) XXXX XXXXX XXXXXXX of 00 Xxxxxxxxx Xxxx Xxxxxxxx Xxxxxxxxx Xxxx Xxxx XX0
0XX and VERTICAL INVESTMENTS LIMITED (Company number: 71185) a company
registered in Jersey whose registered office is at Xxxxx Xxxxx, Xxx Xxxx,
Xx. Xxxxxx, Xxxxxx, Xxxxxxx Xxxxxxx XX0 (collectively, the "Investor");
(3) XXXXX XXXXXX 0 Xxxxxxx Xxxxx, Xxxxx, Xxxxxxxxxxxxxx, XX00 0XX, XXXX
XXXXXXXX 00 Xxxxxx Xxxx, Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, XX0 0XX and XXXX
X'XXXXXXXX 00 Xxxxxx, Xxxxxx, Xxxxxxxxxxx, XX0 0XX (the "Executive
Directors");
(4) INVU SERVICES LIMITED (a company registered in England and Wales under
number 3319922, whose registered office is at x/x XxXxxxxx, Xxxxxxxxxx and
Xxxx, City Tower, Level 4, 00 Xxxxxxxxxx Xxxxxx, Xxxxxx, XX0X 0XX (the
"Guarantor").
IT IS AGREED AS FOLLOWS:-
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement the following expressions shall, except where
the context requires otherwise, have the meanings shown next to
them:-
"Articles" the Articles of Incorporation of the Company.
"Board" the board of directors of the Company or a
duly constituted committee thereof.
"Completion" the date and time when the actions referred
to in Clause 2.1 and conditions required by
Clause 2.3 are taken and satisfied.
"Initial Public
Offering" the admission of any shares of Common Stock
of the Company or granting of permission of
any shares of Common Stock of the Company to
be dealt with on the Official List of London
Stock Exchange Limited or any other U.K.
recognized investment exchange as defined by
section 207 of Financial Services Xxx 0000,
including the admission of such shares on the
main board of The Nasdaq National Market of
The Nasdaq Stock Exchange, Inc.
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"Investor Director" the director to be appointed by the Investor
under the terms of Clauses 2.2 and 4.
"Lenders" collectively, Zalcany Limited, Tomuro
Limited, Mustardseed Estates Limited, Xxx
Xxxxxxxx and Xxxxxxx Xxxxxx
"Loan" the loan in the aggregate principal amount
of (pound)400,000 (approximately US
$650,000) made to the Guarantor by the
Lenders pursuant to an agreement dated
February 2, 1999.
"Loan Stock" together Loan Stock A and Loan Stock B.
"Loan Stock A" the US$600,000 interest bearing convertible
loan stock 1999 - 2002 created by Loan Stock
"A" Instrument.
"Loan Stock B" the US$400,000 interest bearing convertible
loan stock 1999 - 2002 created by Loan Stock
"B" Instrument.
"Loan Stock "A" the loan stock instrument in the form set out
Instrument" in Schedule 1.
"Loan Stock "B" the loan stock instrument in the form set out
Instrument" in Schedule 2.
"Loan Stock together the Loan Stock "A" Instrument and
Instruments" the Loan Stock "B" Instrument.
"Montague" Montague Limited
"Parties" the parties to this Agreement.
"Transferred the 425,000 shares of Common Stock, no par
Shares" value, of the Company which are to be trans-
ferred to Montague by the Lenders upon
redemption of the Loan pursuant to Section
2.1.2. hereof.
"Warranties" the agreements, obligations, warranties,
representations, covenants and undertakings
of the Executive Directors contained in this
Agreement, including without limitation all
such matters contained and set out in
Schedule 4.
1.2 References to statutes or statutory provisions shall be
construed as including references to any statutory
modification, consolidation, re-enactment or amendment
(whether before or after the date hereof) for the time being
in force, all statutory
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instruments or orders made pursuant thereto or any statutory
provisions of which they are consolidations, re-enactments,
modifications or amendments.
1.3 Except where the context otherwise requires words denoting the
singular include the plural and vice versa; words denoting any
gender include all genders; words denoting the whole include
any part thereof.
1.4 References to Clauses, Sub-Clauses or Schedules are references
to Clauses or SubClauses of or schedules to this Agreement.
1.5 Clause headings are for ease of reference only and do not
affect the construction of this Agreement.
1.6 References to any Party shall (where the context so admits)
include his personal representatives his estate or trustees in
bankruptcy.
1.7 Words denoting an obligation on a Party to do an act matter or
thing include an obligation to procure that it be done and
words placing a Party under a restriction include an
obligation not to permit infringement of the restriction.
2. INVESTMENT
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2.1 In consideration of the Investor advancing an aggregate of
US$1,000,000 to the Company pursuant to the Loan Stock
Instruments the Company will:
2.1.1 on the signing hereof, execute the Loan Stock Instruments to
create the Loan Stock and the Company shall issue to the
Investor the Loan Stock and shall enter the Investor's name in
the register to be maintained by the Company in relation
thereto and shall issue the certificates in respect thereof;
2.1.2 immediately following the signing of this Agreement redeem the
Loan; and
2.1.3 cause Montague to transfer to and register in the name of the
Investor, 225,000 of the Transferred Shares.
2.2 Mr. Xxxxxx Xxxxxxx has previously been appointed as a member
of the Board by the existing members of the Board. The parties
hereby acknowledge that Mr. Xxxxxx Xxxxxxx is the first
Investor Director.
3. WARRANTIES AND REPRESENTATIONS
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The Executive Directors acknowledge that the Investor has
entered into this Agreement in full reliance on the material
representations made to the Investor by the Company and the
Executive Directors, and the Executive Directors jointly and
severally warrant to the Investor, contracting for themselves
and as trustees for the Company that:
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3.1 The written information supplied by the Company, the Company's
solicitors and the Executive Directors to the Investor in
connection with the negotiation of this Agreement are true and
remain true and accurate in all material respects and the
Executive Directors do not know of anything which make such
information given to the Investor misleading or which
materially adversely affects the financial or trading
prospects of the Company or any of its subsidiaries.
3.2 The Executive Directors have full power and authority to enter
into and perform this Agreement which constitutes, or when
executed will constitute, binding obligations on them.
3.3 The information in Schedule 3 relating to the Company is
accurate.
3.4 The Warranties are true and accurate and will continue to be
so on each day up to and including the day of Completion with
reference to the facts and circumstances from time to time
applying.
3.5 Each of the Executive Directors shall promptly disclose in
writing to the Investor any material event or circumstance
which arises, or becomes known to him, prior to Completion and
is inconsistent with the Warranties, or which would result in
the Warranties not being true and accurate in all material
respects at Completion, or which is likely to be reasonably
material to be known by an investor in the Company.
3.6 Each of the Warranties is without prejudice to any other
Warranty and, except where expressly stated otherwise, no
clause governs or limits the extent or application of any
other clause.
3.7 The rights and remedies of the Investor in respect of a breach
of the Warranties shall not be affected by Completion, by
investigations made by or on behalf of the Investor into the
affairs of the Company, by the Investor rescinding, or failing
to rescind, this Agreement, or failing to exercise or delaying
the exercise of any right or remedy under this Agreement.
4. INVESTOR DIRECTOR
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4.1 The Investor shall be entitled to demand and the Company and
the Executive Directors agree to on such demand (i) appoint
one person nominated by the Investor as a director of the
Company to act as the Investor Director and (ii) remove from
office any person so nominated and appointed and (subject to
such removal) to appoint another person nominated by Investor
and reasonably satisfactory to the Executive Directors acting
reasonably in his place.
4.2 The Investor's right under Clause 4.1 to appoint the Investor
Director will continue until such time as there are no monies
outstanding in respect of the loans granted pursuant to the
Loan Stock Instruments; or following conversion thereunder.
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4.3 Investor recognizes that the Board has a fiduciary duty to the
Company and the other shareholders of the Company.
4.4 The Company and the Executive Directors in their capacity as
directors and shareholders agree to procure that neither the
Company nor any of its subsidiaries shall carry out any of the
following acts without the Investor Director's prior written
consent, which consent shall not be unreasonably withheld:
4.4.1 any variation in the number of authorized or issued share
capital of the Company, except pursuant to any outstanding
warrants and options of the Company existing on the date
hereof and listed in Schedule 4 at Clause 2.3.1 or the
creation or the granting of any options or other rights to
subscribe for, or convert into shares, or the variation of the
rights of any shares;
4.4.2 the declaration or distribution of any dividend or other
payment out of the distributable profits on the Common Stock
during the period that the Investor holds Loan Stock;
4.4.3 the commencement of any voluntary winding up action;
4.4.4 the appointment or termination by the Company of the
employment of any employee whose salary is to be or is in
excess of (pound)50,000 per annum or any variation of the
remuneration or other benefits of any such employee;
4.4.5 the incurring of any borrowing or any other indebtedness or
liability in the nature of borrowing in excess of twice the
aggregate paid up or credited as paid up share capital and the
total of the amount standing to the credit of the reserves of
the Company and its subsidiaries including the share premium
account and the capital redemption reserve fund other than
pursuant to the existing banking facility agreements ("the
Facility Agreements") of the Company;
4.4.6 any capital expenditure of an aggregate amount greater than
(pound)50,000 in any one fiscal year;
4.4.7 any material change in the nature of the business or in any
material contracts;
4.4.8 the payment of any kind in settlement or reduction of any
liability of the Company or any subsidiary other than under
the Loan Stock Instruments and other than in the normal course
of trading or pursuant to the terms of the Facility Agreements
or interest payments on any other borrowings or indebtedness
permitted under Section 4.4.5 hereof;
4.4.9 the grant of any security in any material assets of the
Company or any subsidiary to a third party, except liens that
may arise by operation of law;
4.4.10 any acquisition, merger, consolidation or sale of, with or to
any other entity; or
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4.4.11 agree to do any of the foregoing.
5. COSTS AND FEES
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The Company will pay all reasonable expenses incurred by the Investor
in relation to this Agreement (including reasonable solicitor's fees
and expenses incurred in connection with completing this transaction)
and any subsequent variation of the terms of this Agreement and in
particular the Loan Stock Instruments and shall pay all reasonable
fees, costs and expenses (including VAT where applicable) of all
professional advisers of the Investor in connection with the
transactions contemplated by this Agreement and any agreements referred
to herein. Such fees and expenses will be paid within 28 days of
completion of this Agreement.
6. NOTICES
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6.1 Any notice or other communication to be given under this
Agreement shall be in writing and shall be delivered
personally or sent by first class pre-paid post telex or
facsimile transmission. The addresses for service of the
Parties shall be the addresses stated at the beginning of this
Agreement, except that the address for service for Guarantor
shall be The Beren, Xxxxxxxxx Xxxx Xxxx, Xxxxx Xxxx,
Xxxxxxxxx, Xxxxxxxxxxxxxxxx XX0 0XX (provided that any Party
may by written notice served in accordance with this Clause
substitute another address in England which shall then
become that Party's address for service).
6.2 All notices and other communications shall be deemed to have
been served as follows:-
(a) if personally delivered at the time of delivery;
(b) if posted at the expiration of 48 hours after the
envelope containing the same was delivered into the
custody of the postal authorities; and
(c) if communicated by telex or facsimile transmission
when a successful transmission report is received.
6.3 In proving such service it shall be sufficient to prove that
personal delivery was made or that the envelope containing
such notice or other communication was properly addressed and
delivered into the custody of the postal authorities as a
pre-paid first class letter or that the telex transmission was
made and the recipient's "answerback" received the same
transmission or that the facsimile transmission was made
evidenced by the relevant activity report.
6.4 The deemed service provisions set out in Clause 6.2 do not
apply to a notice served by post, if there is a national or
local suspension, curtailment or disruption of postal services
which affect the collection of such notice or if that notice
cannot reasonably be expected to be delivered within 48 hours
of posting, in which case the notice shall be served when
actually delivered.
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7. POST-COMPLETION COVENANTS
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7.1 The Company covenants on behalf of itself and its subsidiaries
(and all references in this Section 7 to the "Company" shall
be deemed to include its subsidiaries) that following
Completion and so long as the Loan Stock is outstanding and
has not been converted into Common Stock:
7.1.1 The Company will promptly deliver notice to Investor, but in
any event within ten (10) days after the discovery of any
material adverse litigation, event or other circumstance
affecting the Company, and what actions the Company has taken
and/or proposes to take with respect thereto.
7.1.2 The Company will promptly pay and discharge, or cause to be
paid and discharged, when due and payable, all lawful taxes,
assessments, and governmental charges or levies imposed upon
the income, profits, property, or business of the Company;
provided, however, that any such tax, assessment, charge, or
levy need not be paid if the validity thereof shall currently
be contested in good faith by appropriate proceedings and if
the Company shall have set aside on its books adequate
reserves with respect thereto, and provided, further, that the
Company will pay all such taxes, assessments, charges, or
levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid
when due, or in conformance with customary trade terms, all
other indebtedness incident to operations of the Company.
7.1.3 The Company will keep its properties in good repair, working
order, and condition, reasonable wear and tear excepted and
from time to time make all necessary and proper repairs,
renewals, replacements, additions, and improvements thereto;
and the Company will at all times comply with each provision
of all leases to which it is a party or under which it
occupies property if the breach of such provision would have a
material adverse effect.
7.1.4 To the extent and in the manner customary for companies in
similar businesses similarly situated, the Company will keep
its assets which are of an insurable character insured by
financially sound and reputable insurers against casualty loss
or damage in reasonable and adequate amounts, and the Company
will maintain, with financially sound and reputable insurers,
insurance against other hazards, risks, and liability to
persons and property.
7.1.5 The Company will keep true records and books of account in
which full, true, and correct entries will be made of all
dealing or transactions in relation to its business and
affairs in accordance with generally accepted accounting
principles as applied in the United States on a consistent
basis.
7.1.6 Except as otherwise provided in Section 6 of Schedule 4
attached hereto, the Company shall duly observe and conform to
all requirements of governmental authorities relating to the
conduct of its business or to its property or assets.
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7.1.7 The Company (this Clause 7.1.7 not applying to its
subsidiaries) will, from time to time, in accordance with the
laws of the state of its incorporation, use its best efforts
to cause an increase in the authorized amount of Common Stock
prior to such time as the failure to do so would cause the
number of shares of Common Stock remaining authorized and
unissued to be insufficient to permit conversion of the
outstanding Loan Stock.
7.1.8 The Company will not repurchase any Common Stock.
7.1.9 Except as otherwise provided in this Agreement, the Company
shall not engage in any transactions with any officer,
director, or key employee of the Company or any family member
of such persons: (i) on terms less favorable than the Company
would obtain in a transaction with an unrelated party; and
(ii) unless the prior approval of the Investor Director has
been obtained, which approval shall not be unreasonably
withheld.
8. SURVIVAL; INDEMNIFICATION
-------------------------
8.1 All statements contained in this Agreement, including the
Schedules or in any certificate or instrument delivered by or
on behalf of the parties pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the parties
hereunder. The representations and warranties made, and
indemnifications given, by the Company, the Executive
Directors and Investor in this Agreement shall survive the
date of this Agreement for a period of three years, except
that the representations and warranties in Sections 3, 4 and 7
shall survive the date of this Agreement until the expiration
of the relevant statute of limitations period.
8.2 Indemnification
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The Company hereby agrees to indemnify and hold harmless
Investor and its affiliated parties' directors, officers,
managers, members, agents and employees (each, an "Investor
Indemnified Person") from and against and to pay any losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof) ("Damages") to which such Investor
Indemnified Person may become subject as the result of any
misrepresentation, or breach of warranty or covenant made or
to be performed on the part of the Company or any Executive
Director under this Agreement (except as a direct result of
the gross negligence or willful misconduct of an Investor
Indemnified Person), and will reimburse any Investor
Indemnified Person for all expenses (including reasonable
counsel and expert fees) incurred in connection with any such
misrepresentation, breach of warranty or investigating,
preparing or defending any such action or proceeding, whether
pending or threatened, and whether or not such Investor
Indemnified Person is a party hereto. The Company, within a
reasonable time after receiving knowledge of any claims,
actions or proceedings in respect of any Damages by another
person or entity against the Investor Indemnified Person shall
(a) notify the Investor Indemnified Person in writing of the
preferences of the
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Company to assume the defense thereof, and (b) at its own
expense, retain counsel reasonably acceptable to the Investor
Indemnified Person to conduct such defense. In such defense,
the Investor Indemnified Person shall have the right to engage
separate counsel and to participate in the prosecution,
defense, compromise or settlement thereof or to conduct its
own defense in accordance with the terms of this Section 8.2.
The agreement of the Company in this Section 8.2 shall be in
addition to any liability the Company may otherwise have.
9. MISCELLANEOUS
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9.1 This Agreement may be amended only by a written document
signed by all the parties.
9.2 No failure to exercise or delay in exercising or enforcing any
right or remedy under this Agreement shall constitute a waiver
thereof and no single or partial exercise or enforcement of
any right or remedy under this Agreement shall preclude or
restrict the further exercise or enforcement of any such right
or remedy. The rights and remedies provided in this Agreement
are cumulative and not exclusive of any rights and remedies
provided by law.
9.3 The invalidity, illegality or unenforceability of any
provision of this Agreement shall not affect the continuation
in force of the remainder of this Agreement.
9.4 Subject to Section 8 and Section 9.5 hereof the provisions of
this Agreement shall continue for so long as the loans granted
pursuant to the Loan Stock Instruments remain outstanding.
9.5 All provisions of this Agreement shall so far as they are
capable of being performed continue in full force and effect
notwithstanding completion of this Agreement.
9.6 The construction, validity and performance of this Agreement
shall be governed by the laws of England and the parties
hereto shall submit to the exclusive jurisdiction of the
English courts.
9.7 Time is of the essence in the performance of this Agreement
and the Loan Stock Instruments.
10. GUARANTEE AND INDEMNITY BY GUARANTOR
------------------------------------
10.1 In consideration of the Investor entering into this Agreement
the Guarantor hereby unconditionally and irrevocably
guarantees to the Investor the due and punctual performance
and observance by the Company and the Executive Directors of
all its obligations, commitments, undertakings, warranties,
indemnities and covenants under or pursuant to this Agreement
and the Loan Stock Instruments and agrees to indemnify the
Investor against all losses, damages, costs and expenses
(including legal costs and expenses) which the Investor may
suffer or incur through or arising from any breach by the
Company and/or the Executive Directors of such obligations,
commitments, warranties, undertakings, indemnities or
covenants (except resulting
9
from the gross negligence or willful misconduct of Investor).
The Guarantor's liability as aforesaid shall not be released
or diminished by any arrangements or alterations of terms
(whether of this Agreement and/or the Loan Stock Instruments
or otherwise) or any forbearance, neglect or delay in seeking
performance of the obligations hereby imposed or any granting
of time for such performance.
10.2 If and whenever the Company and/or the Executive Directors
default for any reason whatsoever in the performance of any
obligation or liability undertaken or expressed to be under-
taken by it under or pursuant to this Agreement and/or the
Loan Stock Instruments, the Guarantor shall forthwith upon
demand unconditionally perform (or procure performance of) and
satisfy (or procure the satisfaction of) the obligation or
liability in regard to which such default has been made in the
manner prescribed by this Agreement and so that the same bene-
fits shall be conferred on the Investor as it would have
received if such obligation or liability had been duly per-
formed and satisfied by the Company and/or the Executive
Directors. The Guarantor waives any rights which it may have
to require the Investor to proceed first against or claim
payment from the Company and/or the Executive Directors to the
extent that as between the Company, the Executive Directors
and the Guarantor, the latter shall be liable as principal
debtor as if it had entered into all undertakings, agreements
and other obligations jointly and severally with the Company
and the Executive Directors.
10.3 This guarantee and indemnity is to be a continuing security to
the Investor for all obligations, commitments, warranties,
undertakings, indemnities and covenants on the part of the
Company and/or the Executive Directors under or pursuant to
this Agreement and/or the Loan Stock Instruments
notwithstanding any settlement of account or other matter or
thing whatsoever.
10.4 This guarantee and indemnity is in addition to and without
prejudice to, and not in substitution for any rights or
security which the Investor may now or hereafter have or hold
for the performance and observance of the obligations,
commitments, undertakings, covenants, indemnities and
warranties of the Company and/or the Executive Directors under
or in connection with this Agreement and/or the Loan Stock
Instruments.
10.5 In the event of Guarantor having taken or taking any security
from the Company and/or the Executive Directors in connection
with this guarantee and indemnity, the Guarantor hereby
undertakes to hold the same in trust for the Investor pending
discharge in full of all Guarantor's obligations under this
Agreement and/or the Loan Stock Instruments.
10.6 As a separate and independent stipulation, the Guarantor
agrees that any obligation expressed to be undertaken by the
Company and/or the Executive Directors under this Agreement
and/or the Loan Stock Instruments (including without limita-
tion, any moneys expressed to be payable under this Agreement
and/or the Loan Stock Instruments) which may not be enforce-
able against or recoverable from the Company and/or the
Executive Directors by reason of any legal limitation,
disability or incapacity or any other fact or circumstance
shall nevertheless be enforceable against
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or recoverable from Guarantor as though the same had been
incurred by Guarantor and Guarantor were sole or principal
obligor in respect thereof and shall be performed or paid by
Guarantor on demand.
10.7 The terms of this Section 10 shall continue for so long as the
loans granted pursuant to the Loan Stock Instruments remain
outstanding.
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SCHEDULE 1
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LOAN STOCK "A" INSTRUMENT
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SCHEDULE 2
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LOAN STOCK "B" INSTRUMENT
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SCHEDULE 3
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COMPANY DETAILS
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Date of Incorporation:
Authorized share capital:
Issued share capital:
Registered office: The Beren, Xxxxxxxxx Xxxx Xxxx, Xxxxx Xxxx,
Xxxxxxxxx, Xxxxxxxxxxxxxxxx XX0 0XX
Directors: Xxxxx Xxxxxx, Xxxx X'Xxxxxxxx, Xxxx
Xxxxxxxx, Xxxxxx Xxxxxxx, Xxx Xxxxxxxx
Secretary: Xxxx Xxxxxxxx
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SCHEDULE 4
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WARRANTIES
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All references in this Schedule 4 to the Company shall include its subsidiaries
except as clearly required to the contrary by the context.
1. ACCOUNTS
1.1 The Management Accounts
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1.1.1 The Management Accounts of the subsidiaries have been prepared
in accordance with generally accepted accounting practice in
the United Kingdom consistently applied and the Management
Accounts of the Company (excluding the subsidiaries) have been
prepared on a consolidated basis in accordance with generally
accepted accounting practice in the United States consistently
applied.
1.1.2 The Management Accounts:
(a) give a true and fair view in all material respects of
the assets and liabilities of the Company at the
Management Accounts Date and its results of
operations for the period ended on that date;
(b) are in all material respects not affected by extra-
ordinary, exceptional or non-recurring items;
(c) properly reflect in all material respects the
financial position of the Company as at the
Management Accounts Date;
(d) fully disclose, provide or reserve for in all
material respects all liabilities and capital
commitments of the Company outstanding at the
Management Accounts Date, including without
limitation all actual, contingent, unquantified or
disputed liabilities; and
(e) provide or reserve for all tax liable to be assessed
on the Company, or for which it may be accountable in
respect of the period ended on the Management
Accounts Date.
1.1.3 The term "Management Accounts" refers to the operating profit,
loss and balance sheet of INVU Services Limited and the
"Management Accounts Date" refers to June 30, 1999.
1.2 Books and records
-----------------
All the accounts, books, ledgers, financial and other records of the
Company:
(a) are in its possession;
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(b) have been fully and accurately kept;
(c) do not contain material inaccuracies;
(d) show a true and fair view of its trading transactions
and its financial, contractual and trading position.
1.3 Position since the Management Accounts Date
1.3.1 Since the Management Accounts Date:
(a) the Company has carried on its business in the
ordinary and normal course;
(b) no loans or loan capital of the Company have been
repaid;
(c) the Company has not paid or declared any dividend nor
made any payment which is a distribution for tax
purposes;
(d) there has been no change in accounting methods or
practices by the Company affecting its assets,
liabilities or business;
(e) there has been no revaluation by the Company of any
of its assets, including without limitation, writing
off notes or accounts receivable;
(f) there has been no damage, destruction or loss
(whether or not covered by insurance) adversely
affecting the properties, business or prospects of
the Company; and
(g) there has been no other event or condition of any
character which in any one case or in the aggregate
has materially adversely affected, or any event or
condition known to the Company which it is reasonable
to expect will, in any one case or in the aggregate,
materially adversely affect in the future, the
condition (financial or otherwise), assets,
liabilities, working capital, reserves, earnings,
business or prospects of the Company.
2. CORPORATE MATTERS
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2.1 Directors
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The only directors and secretary of the Company are the persons whose
names are listed in relation to the Company in Schedule 3.
2.2 Options over the Company's capital
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2.2.1 Except as required by this Agreement and as otherwise set
forth in Section 2.3.1, there are no agreements or
arrangements in force which provide for the issue, allotment,
or transfer of, or grant to any person the right (whether
conditional or otherwise) to call for the issue, or allotment
of share or loan capital of the Company.
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2.3 Shares
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2.3.1 The (i) authorized, issued and outstanding shares of capital
stock of the Company and (ii) authorized shares of capital
stock of the Company reserved for issuance upon exercise or
conversion of any outstanding options, warrants, subscriptions
or other rights or obligations to purchase or acquire any of
such shares, or upon conversion of any outstanding convertible
securities, are set forth on Schedule 2.3.1 hereto. All of
the issued and outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and non-
assessable, and have been offered, issued, sold, and delivered
by the Company in compliance with all applicable domestic and
foreign federal and state securities laws. Upon delivery in
accordance with the terms hereof, the Transferred Shares will
have been duly authorized and validly issued, and will be
fully paid and nonassessable, free of all preemptive and
similar rights. The Common Stock issuable upon conversion of
the Loan Stock has been duly reserved for issuance, and upon
issuance in accordance with the Loan Stock Instruments, will
be duly authorized and validly issued, fully paid and non-
assessable, free of all preemptive and similar rights.
2.3.2 No share or loan capital has been issued or allotted, or
agreed to be issued or allotted, by the Company since the
Management Accounts Date.
2.4 Company Articles of Incorporation and Bylaws provided to
--------------------------------------------------------
Investors; Company books and resolutions
----------------------------------------
2.4.1 Copies of the Company's Articles of Incorporation and Bylaws
are true and accurate and complete.
2.4.2 The Company's stockholders' register and other company books
have been properly kept and contain an accurate and complete
record of the matters with which they should deal.
2.4.3 There are no matters in any of the above-mentioned documents
which would restrict the Company from entering into any of the
agreements contemplated by this Agreement and the other
documents mentioned herein.
2.5 Documents filed
---------------
Except as set forth in clause 6 of this Schedule 4, all returns,
particulars, resolutions and documents required by relevant legislation
or other relevant authority to be filed have been duly filed and were
correct and the Company has complied with relevant legislation in
connection with its formation, the allotment or issue of shares,
debentures and other securities, the payment of dividends and the
conduct of its business.
17
2.6 Investigations
--------------
No investigations or enquiries by, or on behalf of, a governmental or
other body in respect of the affairs of the Company are taking place or
to the knowledge of the Existing Directors pending.
2.7 Organization of the Company
---------------------------
The Company is duly incorporated, validly existing and in good standing
under the laws of the State of Colorado. The Company has full corporate
power and authority to own, lease and operate its properties and assets
and to carry on its business as now being conducted, and is qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction (domestic, foreign or otherwise) in which property and
assets owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary.
2.8 Subsidiaries
------------
The following is a complete and accurate list of all of the
corporations, partnerships, joint ventures or other entities in which
the Company either owns capital stock or is a partner or is in some
other manner affiliated through an investment or participation in the
equity of such entity (each such wholly-owned or majority-owned entity,
a "Subsidiary"): INVU plc (Company number 3375359), INVU Services
Limited (Company number 3319922) and INVU International Holding Limited
(Company Number 03340939). The outstanding shares of such Subsidiaries
have been duly and validly authorized and issued, are fully paid and
nonassessable, and were issued pursuant to, and within the limitations
contained in, appropriate and effective permits and consents of each
governmental authority from whom any permit or consent was required by
law, and the outstanding shares owned by the Company are owned free and
clear of any claims, liens, pledges, options, charges, easements,
security interests, rights of way, encumbrance or other rights of third
parties (hereinafter referred to as "Encumbrances"). There are no
subscriptions, options, warrants, calls, commitments or other rights of
any kind outstanding for the purchase of, nor any securities
convertible or exchangeable for, any securities of the Subsidiaries.
Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the jurisdiction of its formation,
with corporate power to own its properties and conduct its business as
now being conducted and is duly qualified and in good standing to
transact business in each jurisdiction where, by virtue of its business
carried on or properties owned, it is required to be so qualified.
18
2.9 Authority
---------
2.9.1 The execution, delivery and performance of this Agreement and
the Loan Stock Instruments and the consummation of the trans-
actions contemplated hereby and thereby by the Company have
been duly authorized by all requisite corporate action, and no
other acts or other proceedings on the part of the Company or
its shareholders are necessary to authorize this Agreement and
the Loan Stock Instruments or the transactions contemplated
hereby and thereby. This Agreement and the Loan Stock
Instruments have been duly and validly executed by the Company
and (assuming the due authorization, execution and delivery of
this Agreement by Investor) constitutes the legal, valid and
binding obligation of the Company, enforceable against it in
accordance with its terms.
2.9.2 No registration with, consent or approval of, notice to, or
other action by, any governmental entity is required on the
part of the Company for the execution, delivery or performance
by the Company and the Executive Directors of this Agreement
and the documents referenced herein or where such
registration, consent, notice or approval is required the same
has been completed, except for filings on Form D pursuant to
the Securities Act of 1933, as amended (the "Securities Act")
in connection with the transactions contemplated hereby.
2.10 No Conflict; Consents
---------------------
Neither the execution and delivery by the Company of this Agreement or
the Loan Stock Instruments nor the consummation of the transactions
contemplated hereby or thereby nor compliance with any of the
provisions hereof or thereof will (i) conflict with or result in a
breach of any provision of its Articles of Incorporation or Bylaws,
(ii) violate, conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of
any restriction or charge on the business of the Company or Encumbrance
upon any of its properties or result in being declared void, voidable,
without further binding effect or subject to amendment or modification
any of the terms, conditions or provisions of, any note, bond,
mortgage, indenture, deed of trust, any license, franchise, permit,
lease, contract, agreement or other instrument or commitment or
obligation to which the Company or any of its properties may be bound
or affected, (iii) violate any order, writ, injunction, decree,
judgment, ruling, law, rule or regulation applicable to the Company or
any of its properties, or (iv) require any consent, approval or
authorization of, or notice to, or declaration, filing or registration
with, any person or entity, except for filings required on Form D
pursuant to the Securities Act in connection with the transactions
contemplated hereby.
19
3. TAX
---
3.1 Disputes
--------
3.1.1 No liability for taxation has arisen or accrued on the part of
the Company which remains undischarged.
3.1.2 The Company is not liable to pay any interest, penalty, fine
or sum of a similar nature in respect of tax.
3.2 Compliance with tax legislation
The Company has materially complied with all requirements imposed on it
by all relevant legislation relating to tax and in particular have
properly kept all records and documents so required to be kept, have
properly and punctually made all returns and provided all information
to the relevant tax authorities as required.
4. FINANCE
-------
4.0.1 Except for the Loan and the Existing Facilities, the Company
does not have any outstanding borrowings, overdrafts or
indebtedness of whatsoever nature.
4.0.2 The Company is not in default under any instrument or
agreement constituting any indebtedness.
5. TRADING
-------
5.1 Conduct of business in accordance with Articles of Incorpora-
-------------------------------------------------------------
tion
----
5.1.1 The Company has conducted its affairs in accordance with its
constitution from time to time in force and all other
documents to which it has been a party.
5.1.2 The Company is empowered and qualified to conduct its affairs
and carry on business in all jurisdictions in which it so
conducts.
5.2 Litigation, disputes and winding up
-----------------------------------
5.2.1 The Company nor, to the knowledge of Executive Directors, any
person for whose acts or defaults the Company may be
vicariously liable is engaged in civil or criminal litigation
or arbitration proceedings as plaintiff or defendant; there
are no such proceedings pending or, to the knowledge of the
Executive Directors, threatened, either by or against the
Company or such persons and there is nothing, to the knowledge
of the Executive Directors, which is likely to give rise to
such litigation or arbitration.
5.2.2 No order has been made, or petition presented or resolution
passed for the winding up of the Company; no distress,
execution or other process has been levied in respect
20
of the Company which remains undischarged; and there is no
unfulfilled or unsatisfied judgment or court order outstanding
against the Company.
5.3 Compliance with legislation
---------------------------
Except as otherwise provided in Section 6.1 hereof, the Company has
conducted and is conducting its business in accordance with all
applicable laws and regulations, whether in the United Kingdom or
elsewhere. The Company has not received any written notice that it is
not in compliance with all such applicable laws and regulations, except
where the failure to be in such compliance would not have a material
adverse effect.
5.4 Licenses and consents
---------------------
The Company has obtained all necessary licenses and consents for the
proper carrying on of its business and such licenses and consents are
valid and subsisting and the Company is not in breach of any of such
licenses or consents.
5.5 Intellectual Property; Infringement
-----------------------------------
5.5.1 The Company owns or possesses adequate licenses or other
rights to use all patents, copyrights, trademarks, service
marks, trade names, domain names, technology and know-how (the
"Proprietary Rights") necessary to conduct its business as
currently conducted.
5.5.2 The Company is not obliged to pay a material royalty, grant a
material license, or provide other material consideration to
any third party in connection with its Proprietary Rights.
5.5.3 The Company's use of the Proprietary Rights does not infringe
or conflict with the rights of others, and the Company has not
received any notice of any such infringement or conflict with
respect to its use of the Proprietary Rights.
5.5.4 The discoveries, inventions, products or processes of the
Company do not, to the knowledge of the Company, infringe or
conflict with any right or patent of any third party, or any
discovery, invention, product or process which is the subject
of a patent application filed by any third party, known to the
Company, which could have a material adverse effect on the
Company.
5.5.5 No third party (including any current or former employee of or
consultant to the Company or any academic or governmental
organization) possesses any rights to any of the Proprietary
Rights of the Company which, if exercised, could enable such
third party to develop products or services competitive with
those of the Company or could have a material adverse effect
on the Company to conduct its business as currently conducted.
21
5.6 Payments
--------
The Company has not, directly or indirectly, paid or delivered any fee,
commission or other sum of money or item or property, however
characterized, to any finder, agent, government official or other
party, in the United States or any other country, which is in any
manner related to the business or operations of the Company, which the
Company knows or has reason to believe to have been illegal under any
federal, state or local laws of the United States or any other country
having jurisdiction; and the Company has not participated, directly or
indirectly, in any boycotts or other similar practices affecting any of
its actual or potential customers and has at all times done business in
an open and ethical manner.
5.7 Dissolution; Bankruptcy
-----------------------
The Company has not taken any action nor, to the best of its knowledge,
have any other steps been taken or legal proceedings started against
the Company for its winding-up or dissolution or for it to enter into
any arrangement or composition for the benefit of creditors, nor, to
the Company's knowledge, have any steps been taken for the appointment
of a receiver, administrator, administrative receiver, trustee or
similar officer of it or any of its properties or other assets.
5.8 Year 2000 Compliance
--------------------
To the best of the Company's knowledge, none of the computer systems
owned or operated by the Company, and none of the computer systems
operated by any third party for the benefit of the Company, including
without limitation, any such mainframe computer systems, computer
networks and personal computer systems, and none of the computer-based
products or services provided by the Company to others, contains any
hardware, software or process which is incapable of recognizing and
correctly calculating dates on and after January 1, 2000, or which
would otherwise cause such computer systems, products or services to
fail to perform any of their intended functions in a proper manner in
connection with data containing any date on or after January 1, 2000
(the "Year 2000 Problem"), and, to the best of the Company's knowledge,
none of such computer systems, products or services will result in the
failure or disruption of any of the Company's business, operations,
financial reporting, tax reporting, inventory management, accounts
receivable systems, accounts payable systems, invoicing, delivery,
personnel management or records, benefits records or administration, or
any other records or systems, as a result of the Year 2000 Problem.
5.9 Third Party Year 2000 Compliance
--------------------------------
The Company believes it has taken all reasonable steps to assure that
all venders, distributors, customers, lenders and other third parties
for which a business failure or material business interruption would
have a material adverse effect on the Company ("Key Third Parties"),
have taken reasonable steps to confirm that the computer systems
operated by such Key Third Parties recognize and correctly calculate
dates on or after January 1, 2000 ("Year 2000 Compliant"), and that the
Key Third Parties have implemented reasonable procedures and
22
systems to minimize the risk that they do business with parties whose
computer systems are not Year 2000 Compliant.
6. SECURITIES LAWS
---------------
6.1 The Company's Common Stock is registered under Section 12(g) of
the U. S. Securities Exchange Act of 1934 (the "1934 Act"), and
such registration has not been terminated and the Company's
reporting obligations thereunder have not been suspended and are
in effect. As of their respective dates, all documents filed by
the Company with the U.S. Securities and Exchange Commission (the
"SEC") pursuant to the 1934 Act and the Securities Act from and
after August 31, 1998 complied in all material respects with the
requirements of said acts and the rules and regulations of the
SEC thereunder and none of said documents contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein, or necessary to be made in light
of the statements contained therein. Since August 31, 1998 the
Company has made all filings required to be made by it with the
SEC except for the Company's 8K-A for [the financials regarding
the acquisition], 10-Q for the quarter ended October 30, 1998,
10K for the fiscal year ended January 31, 1999 and 10-Q for the
quarter ended April 30, 1999. The Company believes that (A) the
Company's (i) 8K-A for [the financials regarding the
acquisition], (ii) 8-K for the change in the Company's fiscal
year, (iii) 10-Q for the quarter ended October 30, 1998 and (iv)
10K for the fiscal year ended January 31, 1999, will be each
filed with the SEC in form and substance in compliance with said
acts and rules and regulations no later than August 31, 1999, and
(B) the Company's 10-Q for the quarter ended April 30, 1999 will
be filed with the SEC in form and substance in compliance with
said acts and rules and regulations no later than September 30,
1999.
6.2 Neither the Company nor the Common Stock is listed on any
exchange or securities market, whether domestic or foreign,
except that the Common Stock is traded on the OTC.
AS WITNESS the hands of the parties the day and year first above
written
EXECUTED as a DEED and DELIVERED )
by INVU, INC. acting by two directors/director ) Director
and Secretary ) Director/Secretary
EXECUTED as a DEED and DELIVERED )
by XXXX XXXXX XXXXXXX )
in the presence of:- )
23
EXECUTED as a DEED and DELIVERED )
by VERTICAL INVESTMENTS LIMITED ) Director
acting by two directors/director and secretary ) Director/Secretary
EXECUTED as a DEED and DELIVERED )
by INVU SERVICES LIMITED ) Director
acting by two directors/director and secretary ) Director/Secretary
24
