RESCISSION AGREEMENT
This Rescission Agreement (this "Agreement") is entered into by and among
Canmax, Inc., a Wyoming corporation ("Canmax"), Canmax Telecom, Inc., a Texas
corporation ("CTI"), USCommunication Services, Inc., Xxxxx X. Xxxxxx ("Xxxxxx"),
Xxxxx X'Xxxxxxx ("X'Xxxxxxx"), Xxxx Xxxxxxxx, in his capacity as the Trustee of
the Nationwide Transportation Products, Inc. (subsequently known as
USCommunication Services, Inc.) voting trust created under the Trust Agreement
dated May 1, 1997 and amended as of December 1, 1997 and January 30, 1998 (the
"Trustee") is executed as of this 15th day of June, 1998 to be effective as of
January 30, 1998.
R E C I T A L S
A. Trustee and X'Xxxxxxx (the "Shareholders") are the former shareholders
of USCommunication Services, Inc., a Delaware corporation ("Old USC"), which was
merged into CNMX MergerSub, Inc., a Delaware corporation and a wholly owned
subsidiary of Canmax ("USC"), which continued the historic business operations
of USC under the name "USCommunication Services, Inc."
B. Pursuant to the terms of the Agreement and Plan of Merger dated
January 30, 1998 among Canmax, Old USC and USC (the "Merger Agreement"), Old USC
was merged (the "Merger") with and into USC and the historic shareholders of Old
USC received (a) 1.5 million shares (the "Merger Shares") of common stock, no
par value per share, of Canmax (the "Canmax Common Stock"), (b) warrants to
acquire 1.5 million shares of Canmax Common Stock at an exercise price of $1.25
per share expiring January 31, 2003 (the "Class A Warrants") and (c) warrants to
acquire 1.0 million shares of Canmax Common Stock at an exercise price of $2.00
per share expiring January 31, 2005 (the "Class B Warrants"). Collectively, the
Merger Shares, the Class A Warrants and the Class B Warrants are referred to as
the "Merger Consideration."
C. Upon consummation of the Merger Agreement, Canmax, USC and Xxxxxx
executed an Employment Contract dated January 30, 1998 (the "Employment
Contract"), pursuant to which Xxxxxx was employed by USC and was granted a
warrant to acquire 1.0 million shares of Canmax Common Stock at $2.00 per share
and an additional 1.0 million shares of Canmax Common Stock at $3.00 per share,
in each case subject to certain vesting requirements (collectively, the
"Employment Warrants").
D. Upon consummation of the Merger Agreement, Canmax, USC and Xxxxxx
executed a Noncompetition Agreement dated January 30, 1998 (the "Noncompetition
Agreement"), pursuant to which Xxxxxx agreed not to compete with Canmax or USC
for a period of five years.
E. In connection with the Merger Agreement, Canmax, USC, X'Xxxxxxx and
Montreal Trust Company of Canada executed an Escrow Agreement dated as of
January 30, 1998 (the "Escrow Agreement"), pursuant to which 0.3 million of the
Merger Shares (the "Escrow Shares") were placed into an escrow secure certain
indemnification obligations of Old USC (the "Escrow Agreement").
F. Prior to the date hereof, Canmax has loaned to USC in multiple
advances approximately $724,660 (the "Reimbursable Amount") pursuant to the
terms of a series of notes, all of which are secured by a blanket lien on all of
the assets of USC created pursuant to the terms of a security agreement dated as
of January 30, 1998, which notes and security agreement the parties desire to
consolidate and restate as of the date hereof.
G. Canmax and the Shareholders desire to rescind the Merger Agreement and
all actions taken pursuant to the Merger Agreement, with the desire that all of
the parties be restored to their positions immediately preceding the date of
Merger Agreement and that the rescission of the Merger be nontaxable events to
either party and treated for tax and all other purposes as if the Merger and all
agreements executed in connection therewith had never occurred or existed.
H. Consistent with the parties' intent to return each party to their
original position preceding the Merger, the Reimbursable Amount shall be
repayable by USC to Canmax (the repayment of which shall be secured by liens on
the assets of USC), and Xxxxxx, X'Xxxxxxx and the Trustee have agreed to
guarantee the repayment of such reimbursable amount to Canmax, as further
provided in separate Guaranties to be executed by each party.
NOW, THEREFORE, in consideration for the mutual promises and other
considerations set forth herein, the parties hereto agree as follows:
1. RESCISSION OF MERGER AGREEMENT. Canmax, Shareholders and USC hereby
rescind the Merger Agreement and, in furtherance thereof:
(a) DELIVERY OF USC SHARES. Canmax and CTI hereby agree to cause to
be delivered to X'Xxxxxxx and Trustee a stock certificate (with stock
powers duly endorsed in blank) representing all of the outstanding shares
of USC (the "USC Shares"), which USC Shares shall be allocated among
X'Xxxxxxx and the Trustee in the same proportion as the Merger
Consideration held by such parties and held by Canmax pursuant to the terms
of the Pledge Agreement (defined below). Canmax and CTI hereby jointly and
severally represent and warrant to X'Xxxxxxx and the Trustee that CTI is
the sole owner and holder of such shares and that CTI has the full power
and authority to transfer the USC Shares to X'Xxxxxxx and Trustee, free of
all liens, claims and encumbrances.
(b) TRANSFER OF MERGER CONSIDERATION. X'Xxxxxxx and Trustee hereby
agree to deliver to Canmax the stock certificate(s) representing the Merger
Shares, along with the original copies of Series A Warrant and the Series B
Warrant issued pursuant to Merger Agreement, in each case with stock powers
duly endorsed in blank. X'Xxxxxxx and the Trustee hereby represent and
warrant to Canmax that they are the sole owner and holder of the Merger
Shares, Series A Warrant and Series B Warrant held by them and have the
full power and authority to transfer all of such securities to Canmax, and
that such transfer shall be made free of all liens, claims and
encumbrances.
2. TERMINATION OF ESCROW AGREEMENT. Canmax and X'Xxxxxxx hereby agree to
execute the joint instructions attached hereto as EXHIBIT A terminating the
Escrow Agreement and directing the Escrow Agent to return all of the Escrow
Shares to Canmax for cancellation. Canmax shall bear all escrow fees and
expenses associated with the termination of the Escrow Agreement.
3. RESCISSION OF EMPLOYMENT CONTRACT AND EMPLOYMENT WARRANTS. Xxxxxx,
USC and Canmax hereby agree to rescind the Employment Contract and Employment
Warrants and any and all rights or obligations accruing thereunder, and Xxxxxx
shall deliver to Canmax the original copies of each of the Employment Warrants.
Xxxxxx represents and warrants to Canmax that he is the sole owner and holder of
the Employment Warrants and has the full power and authority to transfer to the
Employment Warrants to Canmax, and that such transfer shall be made free and
clear of all liens, claims and encumbrances.
4. RESCISSION OF NONCOMPETITION AGREEMENT. Canmax, USC and Xxxxxx hereby
agree to rescind the Noncompetition Agreement and any and all rights and
obligations accruing thereunder.
5. RETURN OF REIMBURSABLE AMOUNT; OPERATING AGREEMENT; DELIVERY AND
RELEASE OF PROPERTY; INDEMNITIES.
(a) X'Xxxxxxx, the Trustee and Xxxxxx acknowledge that the loans made
to USC by Canmax and/or CTI have been consolidated and are represented by
the Restated Promissory Note (the "Note") in the principal amount of
$724,660 a copy of which is attached hereto as EXHIBIT B, and that the
repayment of the Note is secured pursuant to the terms of the Restated
Security Agreement (the "Security Agreement") that has been executed by
USC, a copy of which is attached hereto as EXHIBIT C. The Parties agree as
to the means pursuant to which the principal amount of the Note was
determined based upon information available at the time, and further
covenant and agree that if additional or corrected information or
documentation becomes available, which, based upon the agreed means of
determination, would result in a
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mutually acceptable increase or decrease in the principal amount of the
Note, that (i) the parties agree to amend the Note in good faith, (ii) such
amendment will be effective as of the date of the Note, and (iii) any
adjustments to the principal amount (and any accrued interest associated
therewith) will be reflected as an adjustment to the final payment(s) under
the Note. X'Xxxxxxx and the Trustee hereby agree to guaranty the repayment
of the Promissory Note, as provided in the separate Guaranties attached
hereto as EXHIBIT D and EXHIBIT E, respectively; provided that the recourse
of Canmax or CTI pursuant to the Guaranty of the Trustee shall be limited
to the shares of USC issued to and held by the Trustee as contemplated
pursuant to the terms of this Agreement. Further, X'Xxxxxxx and the
Trustee hereby agree to execute the Pledge Agreement in the form attached
hereto as EXHIBIT F to secure their obligations under their respective
Guaranties. As additional consideration for the rescission transactions
contemplated herein and Xxxxxx'x anticipated receipt of benefits to be
derived from his employment relationship with USC, Xxxxxx hereby agrees to
execute a Guaranty in favor of CTI in the form attached hereto as
EXHIBIT G.
(b) During the sixty (60) day period following the date hereof, USC
agrees to permit Canmax, CTI or any other entity controlled by Canmax
(collectively, the "User") to use the long distance "switch" operated by
USC (the "Switch") at USC's actual cost for the same (without xxxx-up), and
User shall make payments for the services utilized within thirty (30) days
of its receipt of an invoice from USC for same; provided that if the amount
due by User to USC under this Section 5(b) exceeds at any time $90,000,
User shall pay any amount in excess of $90,000 by wire transfer within one
(1) business day of its receipt of written demand therefor; provided
further that if User fails to make the payment of such excess amount within
one (1) business day, USC may block or prohibit any further use of Switch
by User until such time as payment is received, without any notice or
liability therefor. Canmax and USC acknowledge and agree that although
Canmax has distributed a "Latin American" card bearing the USC trade name,
Canmax or its designated User shall be entitled to receive all revenues,
and shall bear all expenses, attributable to such long distance phone card.
(c) Promptly following the execution of this Agreement, (i) Canmax
and CTI shall deliver to USC all property of USC which is in their
possession, including, without limitation, all revenues received on account
of the business of USC since May 27, 1998 (along with an appropriately
detailed accounting thereof) and (ii) USC shall deliver to Canmax any
property of Canmax which is in its possession. If USC timely makes the
payment due under the Note on July 15, 1998 and is not otherwise in default
under the documents executed in connection therewith, Canmax and CTI agree
to give all consents necessary to release to USC any equipment leased by
USC from InterLott and to permit the immediate use of such equipment by
USC.
(d) USC hereby indemnifies and agrees to defend Canmax and CTI
harmless from and against all losses, claims, damages or liabilities
arising from any claims by any person or entity supplying goods, services,
inventory or equipment, or otherwise extending credit, to USC for which
Canmax or CTI has, or is alleged to have, guaranteed or otherwise assumed
responsibility for payment, or otherwise arising from the business
operations of USC.
(e) Canmax and CTI hereby indemnify USC from and against any costs
attributable to the use of the Switch by any User and any other liabilities
or damages arising therefrom and attributable to the negligent acts or
omissions of any User.
(f) Canmax and CTI agree that they shall not assert any breach
hereunder or documents executed herewith attributable to liabilities or
liens existing as of the date hereof and disclosed to Canmax.
6. RESIGNATION OF XXXXXX. Concurrent with the execution of this
Agreement, Xxxxxx and Xxxx Xxxxxxx shall resign from the Board of Directors of
Canmax.
7. CONFIDENTIALITY. Except as otherwise required by law, and in such
instance, strictly limited to the minimum disclosure requirements thereof, the
parties hereto agree to keep in strict confidence any confidential or
proprietary matters of the other until June 15, 2000. Other than the "Latin
American" cards that have been
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distributed prior to the date hereof as described in Section 5(b) above, from
and after the date hereof, no party shall use or otherwise exploit the
tradenames, trademarks, company names, fictitious names or trade dress of any
other party.
8. MUTUAL RELEASE. In consideration of the mutual covenants set forth
herein, the payment of the Reimbursable Amount and the execution of the
documents contemplated hereby, Canmax and CTI (collectively, the "Canmax
Parties"), as one party, and Xxxxxx, USC, X'Xxxxxxx and the Trustee
(collectively, the "Xxxxxx Parties"), as the other party, for themselves, their
successors and assigns do hereby release, acquit and forever discharge each and
the other, their officers, directors, stockholders, agents, representatives,
attorneys, successors and assigns from all claims, causes of action, demands,
suits, damages and warranties, known or unknown, existing or threatened, of
whatever kind or nature, whether heretofore, or hereafter accruing, whether now
known or not known to the parties for or because of any matter or thing done,
omitted, or failed to be done by such parties prior to and including the date
hereof, in any way directly or indirectly arising out of any transactions
between the parties occurring prior to the date of this Agreement; provided that
the release contained herein shall not (a) affect any of the rights or
obligations of (i) the Canmax Parties or the Xxxxxx Parties created hereunder or
under any of the agreements that are executed in connection herewith, or
(ii) the Xxxxxx Parties for any obligations or liabilities of the Canmax Parties
arising from the business operations of USC (including, without limitation any
claims by any person or entity supplying goods, services, credit, equipment or
inventory to USC for which Canmax or CTI has, or is alleged to have, guaranteed
or otherwise assumed responsibility for payment), or (b) release any party from
any damages or liability for fraud (other than arising from any representations
or warranties contained in or made at the time of the Merger Agreement, any
liabilities for which are hereby released). Each party represents that it owns
the claims which it is releasing and has not assigned any of its rights to any
other person or entity, that it is represented by legal counsel and has had the
opportunity to review the provisions of this Section 8 with legal counsel, that
they fully understand the terms and conditions of this Section 8, and that the
persons signing this agreement have the authority to execute this Agreement on
behalf of the party represented. Further, the parties hereby agree to execute
any additional documents necessary to effectuate the terms of this Section 8.
9. SECTION 1542 WAIVER. Notwithstanding Section 1542 of the California
Civil Code, if applicable, to any party hereto, which provides that "A general
release does not extend to claims which a creditor does not know or suspect to
exist in his favor at the time of executing the release, which if know by him
must have materially affected his settlement with the debtor," the general
release set forth above shall constitute a full release in accordance with its
terms. Each party knowingly and voluntarily waives the provisions of Section
1542, and acknowledges and agrees that this waiver is an essential and material
term of this Agreement.
10. FURTHER ASSURANCES. It is expressly agreed that this Agreement to
rescind the transactions described above is to be construed as a complete and
full rescission of all rights and obligations under such transactions. The
parties agree that upon the request of any of the parties, they will execute and
deliver such further documents and undertake such further actions as may be
reasonably required to effect any of the agreements contained herein.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas. Each party hereby agrees that
venue for any action arising out of this Agreement shall be proper in Dallas
County, Texas.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which, taken together, shall constitute one and the same
document.
13. EXHIBITS. All exhibits attached hereto are incorporated herein by
this reference.
14. AMENDMENTS. This Agreement may not be amended except by the written
agreement of all parties affected by such amendment.
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EXECUTED as of this 15th day of June, to be effective as of January 30, 1998.
CANMAX INC.
By:/s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx, President
CANMAX TELECOM, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx, President
USCOMMUNICATION SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx, President
/s/ Xxxx Xxxxxxxx
-------------------------------
Xxxx Xxxxxxxx, Trustee
/s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxx X'Xxxxxxx
-------------------------------
Xxxxx X'Xxxxxxx
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