EXHIBIT 3.23
Agreement In Principle
iaNett International Systems Ltd.
(Formerly called WSI Interactive Corporation)
000 - 000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
Telephone: (000) 000-0000
Fax: (000) 000-0000
November 21, 2001
To: Data Fortress Technologies Ltd., Connect West Networks Ltd., Pacific
Ram Distribution Corp., Xxxxxxx Xxxxx, XX Xxxxx, Xxxxxx Xxxxxxx, Xxxx
Xxxxx, Xxxx Xxxxxx and others (the "Shareholders")
Dear Sirs:
Re: Re: Acquisition of the Shares of Data Fortress Technologies Ltd.,
Connect West Networks Ltd., and Pacific Ram Distribution Corp. ("Data
Fortress Group")
This letter agreement ("Agreement") will set out the terms upon which iaNett
International Systems Ltd., ("INE") has agreed to purchase from the Data
Fortress Group all of the shares which will be issued and outstanding shares in
the capital of Data Fortress Technologies Ltd., Connect West Networks Ltd., and
Pacific Ram Distribution Corp., ("Data Fortress Group") at the closing of such
purchase ("Data Fortress Acquisition"). The purchase is subject to the Share
Exchange Agreement referred to herein and will be organized through a holding
company that will acquire the issued and outstanding shares of Data Fortress
Technologies Ltd., Connect West Networks Ltd., and Pacific Ram Distribution
Corp. The shareholdings of the holding company (name reserved "Data Fortress
Group Ltd.") will be organized to preserve the relative interests (1(e)(g) and
(i) below) of the individual shareholders of the individual companies referred
to herein as the Data Fortress Group.
The Data Fortress Group is a related mix of companies all incorporated under the
laws of British Columbia. The current consolidated business provides colocation
and managed server hosting services, augmented by the related companies that
provide wholesale complimentary equipment sales, complimentary contract IT
networking services and the installation and operation of a redundant 3.2
kilometer fiber optic ring ("data loop") in downtown Vancouver, connecting the
Data Fortress data center to the Internet backbone at Harbour Centre.
65
The Shareholders own controlling interests of all of the issued and outstanding
shares of the Data Fortress Group (the "Data Fortress Group Shares"), and can
provide assurance that other minority shareholders will not seek any remedy in a
proposed transaction.
1. Representations and Warranties of the Data Fortress Group: The Data
Fortress Group represents and warrants to INE as follows:
(a) Data Fortress Technologies Ltd. is a company incorporated under the
laws of British Columbia and is in good standing with respect to the
filing of annual reports with the Registrar of Companies, and is a
private issuer;
(b) Connect West Networks Ltd. is a company incorporated under the laws of
British Columbia and is in good standing with respect to the filing of
annual reports with the Registrar of Companies, and is a private
issuer;
(c) Pacific Ram Distribution Corp. is a company incorporated under the
laws of British Columbia and is in good standing with respect to the
filing of annual reports with the Registrar of Companies, and is a
private issuer;
(d) The authorized capital of Data Fortress Technologies Ltd. is
20,000,000 common shares without par value of which there are
10,000,000 common shares outstanding all of which are fully paid and
non-assessable (the "Data Fortress Outstanding Shares");
(e) The Data Fortress Outstanding Shares are beneficially owned by and
registered as to
o 2,370,000, common shares, 23.7%, Xxxxxxx Xxxxx,
o 2,370,000,common shares, 23.7%, XX Xxxxx,
o 2,360,000,common shares, 23.6%, Xxxxxx Xxxxxxx,
o 900,000, common shares, 9%, Xxxx Xxxxxx, and
o 2,000,000,common shares, 20.0% others;
(f) The authorized capital of Connect West Networks Ltd. is 4 common
shares without par value of which there are 4 common shares
outstanding all of which are fully paid and non-assessable (the
"Connect West Outstanding Shares");
(g) The Connect West Shares are beneficially owned by and registered as to
o __1_____,common shares, 25.0%, Xxxxxxx Xxxxx,
o __1_____,common shares, 25.0%, XX Xxxxx,
o __1_____,common shares, 25.0%, Xxxxxx Xxxxxxx,
o __1_____,common shares, 25% Xxxx Xxxxxx, and
(h) The authorized capital of Pacific Ram Distribution Corp. is 10,000
common shares without par value of which there are 50 common shares
outstanding all of which are fully paid and non-assessable (the
"Pacific Ram Outstanding Shares");
(i) The Pacific Ram Outstanding Shares are beneficially owned by and
registered as to
o ___17____,common shares, 34.0%, Xxxxxxx Xxxxx,
o ___17____,common shares, 34.0%, XX Xxxxx,
o ___16____,common shares, 32.0%, Xxxx Xxxxx;
66
(j) no one has entered into an agreement with the Data Fortress Group to
acquire any securities of the Data Fortress Group, except the
following persons (the "Debenture Holders") who have been granted a
conversion option by Data Fortress Technologies Ltd. The debenture
holders will convert this debt instrument to shares of the holding
company when organized.
(k) The directors and officers of the consolidated Data Fortress Group are
as follows:
Name of Directors and Officers Position Held
===================================================================
Xxxxxxx Xxxxx Director,President & CEO
-------------------------------------------------------------------
XX Xxxxx Director
-------------------------------------------------------------------
Xxxxxx Xxxxxxx Director, Chief Technical Officer
-------------------------------------------------------------------
Xxxx Xxxxxx Director
-------------------------------------------------------------------
(l) The financial year end of Data Fortress Technologies Ltd., Pacific Ram
Distribution Corp., and Connect West Networks Ltd is March 31 and the
most recent annual financial statements are for the fiscal year ended
March 31, 2001 and the most recent interim financial statements are
for the period ended August 31, 2001 (together the "Data Fortress
Financial Statements");
(m) These Financial Statements are true and correct in every material
respect and present fairly and accurately the financial position and
results of the operations for the periods then ended. The Data
Fortress Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis;
(n) There has been no adverse financial change in the financial position
of the Data Fortress Group since the end of the period contained in
the Data Fortress Group Financial Statements, other than those
disclosed by Management;
(o) As at August 31, 2001 there is an outstanding Bank loan of $255,000
bearing interest at prime + 1%, collaterized by a general security
agreement ("gsa") over the assets of Pacific Ram Distribution
including inventories and receivables;
(p) Book value of assets, both current and fixed on a consolidated basis
as at August 31, 2001 unaudited, is approximately $938,000;
(q) Book value of liabilities, short and long term as at August 31, 2001
is approximately $639,000 including $266,000 of shareholder loans;
(r) Other than this Agreement, the Data Fortress Group has not entered
into any agreement to sell any Outstanding Shares;
(s) Premises are maintained at:
(t)
o 135-12830 Xxxxx Place, Richmond - Pacific Ram Distribution Ltd.
o XX-0000 Xxxxxxx Xxxxxx, Xxxxxxxxx - Data Fortress Technologies Ltd.
o XX-0000 Xxxxxxx Xxxxxx, Xxxxxxxxx - Connect West Networks Ltd.
67
(u) There are no undisclosed actions, suits or proceedings, pending or
threatened against or affecting Data Fortress Group, and any of its
principals, at law or in equity, or before or by any federal,
provincial, municipal or other governmental department, commission,
board, bureau or agency, domestic or foreign, and the shareholders are
not aware of any existing ground on which any such action, suit or
proceeding might be commenced with any reasonable likelihood of
success.
2. Representations and Warranties of INE: INE represents and warrants to the
Data Fortress Group as follows:
(a) it is a company incorporated under the laws of British Columbia and is
in good standing with respect to the filing of annual reports with the
Registrar of Companies;
(b) it is a reporting issuer and its common shares are listed for trading
on the Canadian Venture Exchange (the "Exchange"); and the OTC BB in
the United States as a foreign issuer;
(c) it is an exchange issuer as that term is defined in the Securities Act
(British Columbia);
(d) it is a Tier 2 Issuer, as that term is defined in the policies of the
Exchange;
(e) it currently has 5,813,851 issued and outstanding shares all of which
are duly issued, fully paid and non-assessable;
(f) it currently has 1,781,000 pre-consolidation share purchase warrants
expiring June 2, 2002, priced at $0.91;
(g) the stock option plan is currently being amended to have a re-priced
allotment outstanding of 1,000,000 options that will be exercisable to
purchase common shares in the capital of INE at the price of $0.10 per
share. These outstanding stock options have varying expiring dates up
to 2006 with attached vesting schedules. The outstanding share
purchase warrants referred to in (f) of 178,100 post consolidation
priced at $9.10 will be repriced to market less 20%. Outstanding
Performance shares, 300,000, will be converted to escrow shares;
(h) Other than described in 2(f) and 2(g) there are not outstanding rights
or options to purchase shares of INE;
(i) the audited financial statements of INE for the fiscal year ended June
30, 2000 and the unaudited financial statements for the nine month
period March 31, 2001 (collectively the "INE Financial Statements")
are true and correct in every material respect and present fairly and
accurately the financial position and results of the operations for
the periods then ended and the INE Financial Statements have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis;
(j) since March 31, 2001, there has been no adverse financial change in the
financial position of INE other than the filing of a Proposal under the
Bank Registry and Insolvency Act on July 4, 2001 (the "Proposal") and
the write down of all deferred development costs and investments made by
INE;
68
(k) it has four directors, the names of which are as follows: Marcus New,
Xxxx Xxxxxxx, Xxxxxx X. Xxxxxx and Xxxxx Xxxxxx; and
(l) it has two officers, the names of which are as follows: Xxxx Xxxxxxx,
President and CEO and Xxxxxx X. Xxxxxx, CFO;
(m) At the closing of the Data Fortress Acquisition INE will file the
appropriate notice required by National Policy 51 of a change in year
end to coincide with The Data Fortress Group;
(n) There are no undisclosed actions, suits or proceedings, pending or
threatened against or affecting INE, and any of its directors, at law
or in equity, or before or by any federal, provincial, municipal or
other governmental department, commission, board, bureau or agency,
domestic or foreign, and the directors are not aware of any existing
ground on which any such action, suit or proceeding might be commenced
with any reasonable likelihood of success.
3. Purchase and Sale Of the Data Fortress Group Shares: INE will purchase all
of the common shares in the capital of the Data Fortress Group, the holding
company which are outstanding as at the Closing (previously defined as the
"Data Fortress Acquisition") based on the following deemed values;
o Pacific Ram Distribution Corp. $1,000,000
o Data Fortress Technologies Ltd. $1,000,000
o Connect West Networks Ltd. $1,000,000
The above values have been negotiated between the parties as to amount with
the subject that Connect West Networks Ltd. before Closing signs an
agreement with Xxxxx Xxxxxx University ("SFU") that provides for $10,000
per month cash flow after direct costs per the pending 10-year contract. If
at the time of Closing this agreement with SFU is not finalized then the
Closing will be amended to not include the value attributed to Connect West
Networks Ltd. In consideration INE will issue and deliver 30 million common
shares in the capital of INE at a deemed price of $0.10 per common share
where such share issuance will not result in there being less than 20% of
the total issued and outstanding being in the "public float" as defined by
the Exchange, or 20 million common shares in the capital of INE at a deemed
price of $0.10 per common share as the case may be. The directors of INE
and the directors of The Data Fortress Group agree to be bound by this
determination of an acquisition value for the transaction as contemplated
herein, subject to approval by the Exchange and shareholders of INE. The
common shares to be issued (the Escrow Shares"), will be allocated to the
Data Fortress Group Ltd. ("the holding company") based on the guidelines as
dictated by the Exchange policy 5.4 The shareholdings of the holding
company will be issued in proportion to the number of common shares in the
capital that each shareholder owns of the separate companies at the Closing
and based on the attributed valuation of same (see 1(e) (g) (i)), pursuant
to the Share Exchange Agreement referred to herein.
69
4. Terms of Escrow Shares: It is acknowledged and agreed by each of the Data
Fortress Group shareholders, pursuant to Policy 5.4 of the Exchange that
upon completion of the transaction, all Principal's securities will be
required to enter into an escrow agreement in a form acceptable to the
Exchange and will be required to deposit their Escrow Shares into escrow
with the transfer agent of INE. The Exchange may also impose escrow
requirements on securities held by any other shareholder.
5. Advance of Funds By INE: The Data Fortress Group acknowledges that INE will
advance a total of $25,000 to the Data Fortress Group as of the date of
this Agreement and INE acknowledges that The Data Fortress Group will
provide promissory notes in that amount.
6. Securities For Debt: Prior to, or concurrent with, the closing of the
September 18, 2001 announced private placement, INE will cause the
settlement of all of the debt owed by INE to its creditors as of July 4,
2001 as approved by the Proposal being executed by the trustee "KPMG" and
approved by the court order of August 22, 2001, and entered into the
registry August 24, 2001. The implementation of the Proposal shall result
in the issuance of not more than 5,470,000 shares to the creditors of INE.
The closing of the transaction will be conditional upon the trustee under
the Proposal having issued a "Certificate of Compliance" with the Proposal.
7. Change of Company Name: At the Closing, ("Data Fortress Acquisition") INE
will change its name to Data Fortress Group Ltd., subject to regulatory and
shareholder approvals.
8. Domain Names: By the Closing, the Data Fortress Group will permit INE to
use the domain names
o xxxxxxxxxxxx.xx
o xxxx-xxxxxxxx.xxx
o xxxx-xxxxxxxx.xx
o xxxxxxxxxxx.xxx
o xxxxxxxxxxx.xx
o xxxxxxxxxx.xxx
o xxxxxxxxxxxxxxxxxxxxxx.xxx
70
9. Directors and Officers Upon Closing: Upon the Closing, INE will cause the
number of directors of INE and The Data Fortress Group to be six with the
directors and officers of each company being the following:
10.
Name of Directors and Officers Position Held Upon Closing
============================================ ===================================
Xxxxxxx Xxxxx Director, President & CEO
-------------------------------------------- -----------------------------------
Xxxxxx Xxxxxxx Director, Chief Technical Officer
-------------------------------------------- -----------------------------------
Xxxxxx X. Xxxxxx Director, Chief Financial Officer
-------------------------------------------- -----------------------------------
XX Xxxxx Director and Chairman of the Board
-------------------------------------------- -----------------------------------
Xxxx Xxxxxx Director
-------------------------------------------- -----------------------------------
Marcus New Director
-------------------------------------------- -----------------------------------
11. Audit Committee Upon Closing: Upon the Closing INE will cause the number of
audit committee members to be three and will appoint the following persons
to the audit committee: Xxxxxx X. Xxxxxx; Xxxxxxx Xxxxx and Xxxx Xxxxxx.
12. Employment Agreements: INE acknowledges that upon the Closing, The Data
Fortress Group will have entered into employment agreements, in a form
satisfactory to each of INE and The Data Fortress Group, with Xxxxxxx
Xxxxx, Xxxxxx Xxxxxxx and Xxxxxx X. Xxxxxx that will provide for an initial
term of one year of employment (the "Employment Agreements"). Further, INE
acknowledges that The Data Fortress Group will have entered into an
employment with Xxxxx Xxxxxx, in a form satisfactory to each of INE and
Xxxxx Xxxxxx.
13. Further Terms of Employment Agreement: The Employment Agreements will
provide for an initial monthly wage of $3,000 to $5,000 per month and will
be subject to increases as agreed upon by the parties and the board of
directors of INE.
14. Adoption Of Stock Option Plan: INE will use its best efforts to cause its
shareholders to approve an incentive stock option plan.
15. Amendment Of 2000 Incentive Stock Option Plan: The existing 2000 stock
option plan is currently being amended and re-priced to reflect market
prices and the efforts of key employees, consultants and directors.
16. Conditions of The Data Fortress Group: Sections 6, 7, 8, 10, 12, 13, 14,
16, 19, 20, and 21, are conditions of The Data Fortress Group to their
obligation to sell their shares of The Data Fortress at the closing and may
be waived by The Data Fortress Group in their sole discretion.
17. Conditions of INE: Sections 15, 17, 18, 19 and 29 and the receipt of
shareholder approval set out in Section 23 are conditions of INE and may be
waived by INE in its sole discretion.
71
18. Further Conditions of INE: Provided that the representations and warranties
set out in section 1 are materially inaccurate, then such representations
and warranties are conditions of INE and may be waived by INE in its sole
discretion.
19. Further Conditions of the Data Fortress Group: Provided that the
representations and warranties set out in section 2 are materially
inaccurate, then such representations and warranties are conditions of the
Data Fortress Group and may be waived by the Data Fortress Group in its
sole discretion.
20. The Costs of The Data Fortress Acquisition: The Data Fortress Group
acknowledges that INE will pay certain required costs, such as, but not
limited to, the legal expenses, audit expenses, and any other further
related regulatory expenses on behalf of The Data Fortress Group relating
to the Data Fortress Acquisition up to the maximum ability of INE. In the
event that this Agreement does not close on account of any default of The
Data Fortress Group or INE including, but not restricted to, failure to
provide documentation in a timely fashion), there will be no obligation on
behalf of the Data Fortress Group to re-pay INE those expenses.
21. Other Costs of the Data Fortress Acquisition: INE will pay for the costs of
the sponsoring broker. On closing ("Data Fortress Acquisition") there will
be a finders fee payable of 5% of the value of the Data Fortress
Acquisition in common stock of INE to Calderan Ventures Ltd. per the
Exchange ("CDNX") policy 5.1.
22. Further Documents: The Data Fortress Group acknowledge that they will be
required to provide INE and the Exchange with certain documentation in
order to obtain approval of this Agreement and hereby promise to use their
best efforts and to provide INE and the Exchange with those documents.
23. Share Exchange Agreement: The parties will negotiate and settle the terms
of a definitive agreement (the "Share Exchange Agreement"), acting
reasonably, for the Data Fortress Acquisition and the other transactions
contemplated herein (including any amalgamation, plan of arrangement,
merger or other form of business combination involving the two companies as
contemplated hereby) for execution on or before December 31, 2001 or such
other date as may be mutually agreed upon. Upon execution, the Share
Exchange Agreement will supercede this Agreement in Principle.
The Share Exchange Agreement will contain terms and conditions as set out
in this Agreement in Principle and such other terms, conditions, covenants,
representations and warranties and indemnities, not inconsistent with this
Agreement in Principle as are normal for transactions of the nature of the
Data Fortress Acquisition.
72
24. Income Tax Deferred Basis: The share for share exchange provided for in
this Agreement is intended to occur on a tax deferred basis and INE will
sign such election forms under the Income Tax Act (Canada) as reasonably
required by the Vendors in respect of such from time to time.
25. Closing: Until the closing of the Data Fortress Acquisition, neither party
shall, without the prior written consent of the other party, enter into any
contract in respect of its business or assets, other than in the ordinary
course of business, and each party shall continue to carry on its business
and maintain its assets in the ordinary course of business, with the
exception of reasonable costs incurred in connection with the Data Fortress
Acquisition, and, without limitation, but subject to the above exceptions,
shall maintain payables and other liabilities at levels consistent with
past practice, shall not engage in any extraordinary material transactions
and shall make no distributions, dividends or special bonuses, shall not
repay any shareholders' loans, or enter into or renegotiate any employment
or consulting agreement with any senior officer, in each case without the
prior written consent of the other.
26. Non-Disclosure: From the date of the acceptance of this Agreement in
Principle, until completion of the transactions contemplated herein or the
earlier termination hereof, the parties hereto will not, directly or
indirectly, solicit, initiate, assist, facilitate, promote or encourage
proposals or offers from, entertain or enter into discussions of
negotiations with or provide information relating to the securities,
business, operations, affairs or financial condition of INE or Data
Fortress Group to any persons, entity or group in connection with the
acquisition or distribution of any securities of INE or Data Fortress
Group, or any amalgamation, merger consolidation, arrangement,
restructuring, refinancing, sale of any material assets or part thereof INE
or Data Fortress Group, unless such action, matter or transaction is part
of the transactions contemplated in this Agreement in Principle or is
satisfactory to, and is approved in writing in advance by the other party
hereto or is necessary o carry on the normal course of business.
27. Shareholder Approval: INE will use its best efforts to ensure that its
shareholders approve the Data Fortress Acquisition which the Exchange
requires that the shareholders approve before it approves the Data Fortress
Acquisition.
28. Canadian Venture Exchange Approval: This Agreement is subject to the
approval of the Exchange, which INE covenants to use its best efforts to
obtain as soon, as reasonably possible. In addition, The Data Fortress
Group covenants to use their best efforts to assist INE in obtaining such
approval.
29. Entire Agreement: This Agreement is the entire agreement between the
parties. The parties intend that this Agreement in principle will be
binding upon them terminated or superceded by the Share Exchange Agreement
referred to herein.
73
30. Execution in Counterpart And By Fax: This Agreement may be signed by fax
and in counterparts, each of which will be deemed to be an original and all
of which will together constitute an original.
Would you kindly indicate your agreement to the terms contained herein by
signing this below.
Yours truly,
iaNett International Systems Ltd.
(Formerly called WSI Interactive Corporation)
Per: /s/ Theo Sandidas
------------------------------------
Xxxx Xxxxxxx, President & CEO
We hereby agree to the terms of this Agreement:
Data Fortress Technologies Ltd.
c/s
Per:
----------------------------------------
Xxxxxxx Xxxxx, Director
Pacific Ram Distribution Corp.
C/S
Per:_______________________________
Xxxxxxx Xxxxx, Director
Connect West Networks Ltd.
C/S
Per:______________________________
Xxxxxxx Xxxxx, Director
------------------------------
Xxxxxxx Xxxxx
------------------------------
XX Xxxxx
------------------------------
Xxxxxx Xxxxxxx
------------------------------
Xxxx Xxxxx
------------------------------
Xxxx Xxxxxx
