Exhibit 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made August 31, 1998
BETWEEN:
COLUMBUS ENTERTAINMENT INC., a company having an office at 0000 - 00xx Xxxxxx,
Xxxxx Xxxxxx, Xxxxxxxxxx 00000, X.X.X.
("Vendor")
AND:
ON-LINE FILM SERVICES INC., a company having an office at 208 - 0000 Xxxxxxxx
Xx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0
("Purchaser")
WHEREAS Vendor has developed and is the owner of all rights, title and interest
in the Work as hereinafter defined;
AND WHEREAS Purchaser desires to purchase the ownership interest in the Work, in
order to use it in its business operations in Alberta and generate profits from
such exploitation in the field of production of commercials.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
representations and covenants herein, the parties agree as follows:
1. DEFINITIONS
1.1 In this Agreement, the following terms shall have the following meanings:
"Affiliate" has the meaning ascribed thereto by the Canada Business Corporations
Act.
"Xxxx of Sale" means the xxxx of sale of the Purchased Work to be delivered at
Closing to Purchaser, as set out in Schedule "B".
"Closing" means the completion of the purchase and sale of the Purchased Work
contemplated herein.
"Closing Date" means the date hereof, or such later date as agreed upon by the
parties.
"Columbus Suite Services" has the meaning given to that term in the Management
Agreement.
"Derivative" means a subsequent version of the Program, or software otherwise
derived in any manner in whole or in part from the Program, and any Program
improvements, enhancements, modifications or updates thereto.
"Dollar" and "$" means dollars in United States currency.
"End Users" means production companies, their producers and executive, and all
production personnel and executives in the film and television industry who
subscribe to Columbus Suite Services, as defined in the Management Agreement.
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"External Valuation" means the independent Program valuation prepared by Xxxxx &
Xxxxx Inc. of Vancouver, British Columbia, Canada.
"Field of Use" means the particular applications and fields of use of the
Program with respect to which Purchaser is purchasing the Work, which is all
aspects of the production of commercials.
"Management Agreement" means the agreement entered into between Manager and
Purchaser. appointing Manager as the exclusive supplier of marketing and other
services to Purchaser with respect to the Columbus Suite Services provided to
End Users.
"Manager" means the corporation, all of the issued and outstanding shares of
which are beneficially owned by Vendor, which has entered into the Management
Agreement with Purchaser.
"Ownership Territory" means the territory throughout which Purchaser is
acquiring ownership of the Purchased Work, which is the whole of the world.
"Person" means any person, corporation or partnership.
"Program" means the computer application software described in Schedule "A".
"Program Design Specifications" means those Program specifications and the
technical information which enable any person reasonably skilled in software
design, analysis or programming to use, operate, maintain, support and further
develop the Program.
"Promissory Note" means the non-contingent promissory note issued by Purchaser
(as maker) to Vendor (or holder) as part consideration of the Purchase Price, in
the form set forth in Schedule "C".
"Purchase Price" means the price set forth in Section 4 which Purchaser shall
pay to Vendor subject to the terms and conditions hereof, to purchase the
Purchased Work.
"Purchased Work" means the Vendor's entire beneficial and legal interest in the
Work, solely for the Field of Use, throughout the Ownership Territory.
"Service Territory" means the area throughout which Manager has been appointed
the exclusive supplier of services to Purchaser, as defined and pursuant to the
Management Agreement.
"Source Code" means the human readable, high level language version of the
Program capable, upon compilation, of being translated into machine executable
object code.
"Work" means:
(a) the Program, and all its Derivatives;
(b) all trade-secrets, know-how, patents and copyrights in the Program, and all
intellectual property registrations and applications relating to the Program and
all its Derivatives;
(c) all Program Design Specifications, Source Code, user manuals, and training
and marketing materials in support of the Program and all its Derivatives;
(d) Vendor's business plan for the development, marketing, distribution and
exploitation of the Program and all its Derivatives to earn revenue; and
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(e) all rights with respect to the development, licensing, sale, support,
maintenance, distribution, supply or exploitation of the Program and all its
Derivatives.
2. WARRANTY OF OWNERSHIP
2.1 Vendor represents and warrants that;
(a) it is the sole legal and beneficial owner of, and has good and marketable
title to, the Purchased Work including, without limitation, any and all
copyright, know-how, trade secrets and patents relating to the Program, free and
clear of all liens, charges and encumbrances;
(b) the Program has been acquired or developed by Vendor;
(c) to its knowledge, the Purchased Work does not and will not infringe upon or
violate any intellectual property right of any person;
(d) to its knowledge there are no claims made or actions pending or threatened
regarding the ownership of, or infringement of any third party rights by, the
Purchased Work;
(e) any third party software incorporated into or used in connection with the
Purchased Work by Vendor is licensed to Vendor at no additional cost to
Purchaser; and
(f) to its knowledge there are no material programming errors or defects in the
Program, and in the event that any programming errors or defects are discovered
in the Program or any Derivative, Vendor will correct all such programming
errors or defects.
3. SALE AND PURCHASE
3.1 Vendor agrees to sell, convey, assign and transfer to Purchaser in Calgary,
Alberta, and Purchaser agrees to buy, the Purchased Work at Closing, for the
full Purchase Price of $3,950,000.
4. PAYMENT OF PURCHASE PRICE
4.1 Purchaser agrees to make payment of the Purchase Price to Vendor as follows:
(a) payment to the Vendor of the cash portion of the Purchase Price, namely
$200,000.00 by certified check, in two installments;
(i) $100,000.00 on September 30, 1998, and
(ii) $100,000.00 on Xxxxx 00, 0000,
(x) the issuance and delivery to the Vendor on September 30, 1998 of 250,000
shares of the common stock of the Purchaser, which shall be issued as fully paid
and non-assessable stock at $ 1.00 per share for a total of $250,000, such stock
being free and clear of all encumbrances of every nature and kind whatsoever;
and
(c) with respect to the balance of the Purchase Price, delivery to Vendor of the
Promissory Note on September 30, 1998, which shall provide for the payment of
the principal amount of $3,500,000, payable in accordance with its terms.
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5. VENDORS USE OF FUNDS
5.1 Vendor shall not be required to apply the funds received by it from
Purchaser towards any specific use provided that Vendor will expend reasonable
funds as necessary to support, maintain and enhance the Purchased Work to ensure
that it is, and remains throughout the term of the Management Agreement,
compatible with the software programs commercialized and exploited by Vendor in
the feature film industry.
6. TAXES
6.1 Purchaser shall be responsible for and shall pay all sales, ad valorem and
excise tax payable with respect to the purchase of the Purchased Work. Vendor
agrees to co-operate with Purchaser in facilitating its applications for
waivers, exemptions, refunds and tax credits with respect to such payments.
7. VALUATION REPRESENTATIONS
7.1 Purchaser acknowledges that Vendor has assisted in providing information for
the External Valuation and that Purchaser has reviewed the External Valuation,
which appraises the value of the Work as it applies to the Field of Use in the
order of approximately $7,000,000, and on which External Valuation Purchaser has
relied in part in agreeing to enter into this Agreement.
7.2 Vendor represents and warrants that to the best of its knowledge, as of the
Closing Date:
(a) no data or information provided by it for use in the External Valuation
contains any material error, and
(b) Vendor has no information or reason to believe that any assumption used in
the preparation of the External Valuation is not reasonable or accurate in all
material respects.
8. PROGRAM SUPPORT
8.1 Throughout the term of the Management Agreement, Vendor shall forward to
Purchaser copies of the updated Source Code and Program Design Specifications
from time to time, as Derivatives are produced as a result of Vendor's
maintenance, support and enhancement of
the Work.
9. PRE-CLOSING CONDITIONS
9.1 It is a condition precedent to Purchaser's obligation to complete the
purchase contemplated herein that Vendor shall have, prior to the Closing Date:
(a) allowed Purchaser to review all existing certificates of registration and
documents of title, if any, with respect to the Program;
(b) allowed Purchaser to review the Program's operation and use;
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(c) maintained the Work in the ordinary course of business as would reasonably
be expected of a careful and prudent owner, and shall not have entered into any
other agreement affecting any rights
or interest in the Purchased Work, other than in the ordinary course of
business, without Purchaser's prior written consent;
(d) maintained all registrations and applications for intellectual property
protection for the Program, if any, in good standing; and
(e) provided to Purchaser a copy of the Vendor's business plan with respect to
the Program,
and that Purchaser shall be reasonably satisfied with respect thereto.
9.2 It is a condition precedent to Purchaser's obligation to complete the
purchase contemplated herein that Purchaser shall, prior to the Closing Date,
have obtained the External Valuation, and be reasonably satisfied with respect
to the External Valuation, the viability of the Vendor's operations and business
plan as related to the Purchased Work, and the compatibility of the Program with
Purchaser's "Casting Network" business.
9.3 It is a condition precedent to Closing that the Facilities Management
Agreement, and the Guarantee relating thereto, shall have been executed and
delivered by the parties thereto.
10. TRANSFER OF TITLE AND POSSESSION
10.1 Vendor acknowledges and agrees that on Closing, Vendor shall deliver to
Purchaser the executed Xxxx of Sale and shall assign and convey to Purchaser
free and clear of all liens, charges and encumbrances, and Purchaser shall
thereupon acquire and own all rights, title and interest existing in and to the
Purchased Work. Vendor covenants that it shall not thereafter, directly or
indirectly, contest such ownership in any manner whatsoever, or apply for any
form of intellectual property protection relating to the Purchased Work in the
Ownership Territory without notice to and written consent of Purchaser.
10.2 The Purchaser hereby directs the Vendor to and the Vendor hereby agrees to
make delivery of the Source Code and Program Design Specifications, and
possession of the Purchased Work, to the Purchaser in Alberta, Canada as
follows:
Xxxxx 000,
0000 00xx Xx., X. X.
Xxxxxxx, Xxxxxxx,
X0X 0X0
11. INTELLECTUAL PROPERTY RIGHTS
11.1 Vendor represents, warrants and acknowledges that any and all of the trade
secrets, copyrights, patents and other intellectual property rights applying to
or incorporated in the Purchased Work shall, upon the Closing, vest in and
become the sole property of Purchaser in the Ownership Territory except as may
result from any incapacity of Purchaser; and Vendor shall not, directly or
indirectly, at any time after the Closing in any way dispute any such rights.
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11.2 In the event that Derivatives are created or developed after the Closing
Date during the term of the Management Agreement, Vendor acknowledges and agrees
that the same shall, to the extent that they apply to the Purchased Work, be
deemed to be part of the Program and shall also belong to Purchaser.
11.3 Vendor shall not after the Closing Date use, develop or distribute, or
permit any Affiliate to so use, develop or distribute in the Ownership
Territory, the Purchased Work or any software which incorporates the Program,
with respect to the Field of Use, except pursuant to the terms of the Management
Agreement or any other agreement to which Purchaser is a party.
11.4 Purchaser acknowledges that it is acquiring only the Purchased Work, and
that Vendor and its licensees shall own and have the right to exploit the Work
outside the Field of Use without infringing Purchaser's rights hereunder.
12. REPRESENTATIONS AND WARRANTIES
12.1 Vendor represents and warrants that:
(a) it has all requisite authority, right and power to enter into this
Agreement;
(b) it has requisite shareholder and director approval to enter into this
Agreement;
(c) it is a valid and subsisting corporation duly incorporated and in good
standing under the laws of the jurisdiction in which it was incorporated,
continued or amalgamated;
(d) it is duly registered and licensed to carry on business in the jurisdictions
in which it carries on business or owns property;
(e) it is not insolvent, bankrupt or in receivership and there are no bankruptcy
proceedings threatened, pending or instituted against it;
(f) to the best of its knowledge, there are no judgements outstanding or
litigation pending, actual or threatened, against it;
(g) its entering into this Agreement does not and will not constitute a breach
of any of its obligations under any other agreement to which it is a party;
(h) it has no information or reason to believe that copyright will not subsist
in the Program and in the items described in section 1(c), or in the Derivatives
delivered to the Purchaser following the Closing, and the Vendor will do nothing
to place such rights in the public domain;
(i) neither it nor any third party has any pending registrations or applications
for any intellectual property rights in the Purchased Work, except as disclosed
in writing to Purchaser;
(j) any moral rights which Vendor may have to the Purchased Work are hereby
waived;
(k) all necessary consents or licences to or for the use of any products,
proprietary information or software incorporated into the Purchased Work by
Vendor have been obtained by Vendor and shall be provided to Purchaser by Vendor
at no additional cost to Purchaser;
(l) Schedule"A" sets out a description of the Program, complete in all material
respects;
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(m) it has used and will until the Closing Date continue to use commercially
reasonable efforts to keep the Purchased Work current and marketable;
(n) no ownership interest in the Purchased Work has been sold, transferred,
assigned or optioned to any third party;
(o) it has received no notice of any infringement or piracy of the Purchased
Work by any third party;
(p) it is not a party to any non-competition agreement with respect to the
Purchased Work;
(q) the Purchased Work trade secrets and its Source Code have not been disclosed
to any person except on a confidential basis in Vendor's normal course of
business;
(r) it has no information or reason to believe that any data or information
provided by it for the External Valuation contains material errors;
(s) it has no information or reason to believe that any assumptions used in the
preparation of the External Valuation are not reasonable or accurate in all
material respects; and
(t) the Vendor has received on or before the Closing Date, the written
assignment of copyright and waiver of all moral rights which any other person
may have had in respect of the Purchased Work, or for any assignments and
waivers which the Vendor has not received by the Closing Date, the Vendor agrees
to obtain such assignments and waivers within 30 days of the Closing Date.
12.2 Neither Vendor nor its officers, directors, shareholders, employees,
attorneys, accountants or agents are providing any legal, accounting or tax
advice to Purchaser or anyone claiming through Purchaser, and Purchaser is
obtaining Purchaser's own independent advice on all such matters.
12.3 Purchaser represents and warrants that:
(a) it has all requisite capacity, authority, right and power to enter into this
Agreement;
(b) it is not insolvent, bankrupt or in receivership and there are no bankruptcy
proceedings threatened, pending or instituted against it;
(c) to the best of his knowledge, there are no judgements outstanding or
litigation pending, actual or threatened, against it; and
(d) its entering into this Agreement does not and will not constitute a breach
of any of its obligations under any other agreement to which it is a party.
12.4 All of the covenants, representations and warranties of the Vendor and the
Purchaser under this Agreement shall survive the completion of the transactions
contemplated in this Agreement and the sale, conveyance, assignment and transfer
of the Purchased Work by the Vendor to the Purchaser.
13. INDEMNITY
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13.1 Vendor shall indemnify the Purchaser for all costs and damages incurred by
the Purchaser pursuant to any action or claims by any Person for infringement of
such Person's rights, which action or claim is based upon the purchase or
exploitation of the Purchased Work by the Purchaser.
13.2 Purchaser shall indemnify and reimburse Vendor for any payments Vendor is
required to make on account of any sales, ad valorem or excise tax which may be
determined to be payable pursuant to Section 6.1, in circumstances where
Purchaser fails to remit such payments when they are determined to be due and
payable.
14. POST CLOSING OBLIGATIONS
14.1 After the Closing, Vendor shall not, directly or through a third party,
develop or supply in the Ownership Territory, for the Field of Use, any services
or products which use or incorporate the Program or any of the Purchased Work,
except as permitted by any other agreement between the parties hereto or between
Purchaser and Manager.
14.2 The Vendor shall not market in any manner, develop or sell any services or
products which are competitive with the Purchased Work in the Ownership
Territory, for the Field of Use, during the term of the Management Agreement, as
may be extended pursuant to its terms.
14.3 Each of the parties shall, as and when requested by the other, promptly
execute and deliver such further and other assurances and do or cause to be done
all such acts and things as may be reasonably necessary, to implement and give
effect to the provisions of this Agreement.
15. ASSIGNMENT
15.1 Vendor may not assign this Agreement or any of its interests herein without
the written consent of Purchaser.
16. NOTICE
16.1 Unless otherwise expressly provided in this Agreement, any notice, request,
direction, consent, waiver, extension, agreement or other communication that is
or may be given or made hereunder shall be in writing and either personally
delivered to the addressee or sent by courier, facsimile transmission or e-mail
to the addresses of the parties as set forth herein. The parties hereto may
change their respective address for notice, given in the manner aforesaid. Any
notice given by facsimile or e-mail transmission shall be deemed to have been
received on the next business day after transmission. Any notice given by
personal delivery shall be deemed to have been received on the business day on
which it is delivered and left with the recipient or a responsible officer of
the recipient at the recipient's address for notice.
17. SUCCESSORS AND ASSIGNS
17.1 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors and
permitted assigns.
18. SEVERABILITY
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18.1 Each provision of this Agreement is intended to be severable, and if any
provision hereof is found by a court of competent authority to be void,
unenforceable, illegal or invalid, then it shall be severed and shall not affect
the validity of the remainder of this Agreement.
19. TIME OF THE ESSENCE
19.1 Time shall be of the essence in this Agreement.
20. WAIVER
20.1 No waiver of any provision of this Agreement shall constitute a waiver of
any other provision nor shall any waiver of any provision of this Agreement
constitute a continuing waiver unless otherwise expressly provided.
21. ENTIRE AGREEMENT
21.1 This Agreement sets forth all of the representations, promises, agreements
and understandings among the parties hereto with respect to the purchase and
sale of the Purchased Work, and there are no representations, promises,
agreements or understandings, oral or written express or implied, other than as
set forth, referred to, or incorporated herein.
22. EXECUTION
22.1 This Agreement may be executed in counterparts and delivered by facsimile
copy by any of the parties. Each executed counterpart shall be deemed to be an
original and such counterparts shall together constitute one and the same
agreement.
Purchaser: On-Line Film Services Inc.
By:
Authorised Signatory
Date: August 31, 1998
Vendor: Columbus Entertainment Inc.
By:
Authorised Signatory
Date: August 31, 1998
SCHEDULES
A. Program Description
B. Xxxx of Sale
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C. Promissory Note
SCHEDULE "A"
Columbus Commercial Suite
Columbus Commercial Suite Software Description
Its a relational database application utilizing Filemaker Pro 4.0 as its engine
which is able to run locally or on a LAN. Its made up of a number of Filemaker
Pro database documents that function together as a separate modular application
and generate reports.,
It is software specifically designed to mirror the way production office people
work today and it utilizes some software owned and under license from Columbus
Systems Inc.
The software delivers a mechanism for creating purchase orders, call sheets,
production reports, time cards, start close paperwork, deal memos and staff and
crew lists, travel authorizations, as well as project tracking.
The Columbus suite consists of software modules specifically tailored for use by
companies and individuals producing television commercials.
The VFX module is designed specifically for Visual Effects Producers. Tracks
shots, elements, storyboards, vendors, costs, and more. The perfect solution for
generating Call Sheets and Production reports and either printing them hard copy
for signature, or saving as an Acrobat PDF file to e-mail back to the office or
studio.
It enables departmental co-ordinators to produce their cost reports for use by
the production accountant more efficiently.
DATE August 31, 1998
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