Exhibit 4.3
XXXXX.XXX INC.
AND
ZAQ INTERACTIVE
SOLUTIONS INC.
AND
ZAQ INC.
November 27, 2002
233
ASSET PURCHASE AGREEMENT
ENTERED INTO AT THE CITY OF MONTREAL, PROVINCE OF QUEBEC ON THE 27 DAY OF NOVEMBER, 2002
| BY AND BETWEEN: |
ZAQ INTERACTIVE SOLUTIONS INC., a corporation duly
incorporated according to the laws of Canada, herein
represented by Xxxx Xxxxxx, its duly authorized
representative, as he so declares |
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(hereinafter referred to as "ZAQ") |
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| AND: |
ZAQ INC., a corporation duly incorporated according to the
laws of Canada, herein represented by Xxxx Xxxxxx, its duly
authorized representative, as he so declares |
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(hereinafter referred to as "ZAQ Parent") |
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| AND: |
XXXXX.XXX INC., a corporation duly incorporated according to
the laws of Canada, herein represented by Xxx Xxxxx, its
duly authorized representative, as he so declares |
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(hereinafter referred to as the "Purchaser") |
WHEREAS ZAQ is carrying on a
business known as the “FocusIn division” which recruits publishers that offer
their advertising inventory in a revenue share model and sells on-line advertising space
to clients and advertisers on the Internet;
WHEREAS ZAQ’s principal
business is the development, marketing and sale of a technology platform designed to give
advertisers and their agencies the ability to maximize mass-direct relationship marketing
activities through on-line media;
WHEREAS ZAQ Parent owns all of the
Intellectual Property related to ZAQ’s business known as the “FocusIn division” which
it has licensed to ZAQ;
WHEREAS ZAQ Parent owns all of the
goodwill related to ZAQ’s business known as the “FocusIn division”,
including but not limited to the exclusive right to represent itself as carrying on the
business known as the “FocusIn division”;
WHEREAS the Purchaser carries on a
related business operating as a provider of meta-search and on-line direct marketing
services;
WHEREAS the Purchaser wishes to
purchase, as a going concern, the Purchased Assets (as this term is herein after defined)
from ZAQ and ZAQ Parent (hereinafter collectively referred to as the “Vendors”)
and the Vendors wish to sell, assign and transfer the Purchased Assets to the Purchaser,
the whole upon the terms and conditions hereinafter set forth.
234
ARTICLE 1
INTERPRETATION
Where
used herein or in any amendments hereto or in any communication required or permitted to
be given hereunder, the following capitalized terms shall have the following meanings,
respectively, unless the context otherwise requires:
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(a) |
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“Accounts
Receivable” means the accounts receivable of ZAQ relating to the FocusIn
division generated on and after the Effective Date and set forth on Schedule 00
hereto and include amounts not yet billed for active campaigns and the work in
progress relating to such campaigns which will be billed in December. |
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(b) |
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“Affiliate” has
the meaning ascribed thereto in the Canada Business Corporations Act. |
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(c) |
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“Agreement” means
this Asset Purchase Agreement and all instruments supplemental hereto or in
amendment or confirmation hereof; “herein”, “hereof”, “hereto”,
“hereunder” and similar expressions mean and refer to this Agreement
and not to any particular Article, Section or other subdivision. |
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(d) |
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“Authorization” means,
with respect to any person, any order, permit, approval, waiver, licence or
similar authorization of any governmental entity having jurisdiction over the
person. |
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(e) |
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“Capital
Assets” means the equipment, machines, computers, servers, hardware,
software, furniture, fixtures and other assets set forth on Schedule 1.1(e)
hereto. |
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(f) |
|
“Closing” means
the completion of the transaction of purchase and sale contemplated in this
Agreement. |
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(g) |
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“Consents” means
the consents of a contracting party to the assignment of the Contracts if
required by the terms of such Contracts. |
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(h) |
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“Contracts” means
all agreements, understandings and commitments (whether written or oral) to
which the FocusIn division of the Vendors is a party or by which the FocusIn
division of the Vendors may be bound including (i) customer, supplier and
member contracts set forth in Schedule 1.10 (ii) unfilled purchase orders
(iii) forward commitments for services, supplies or materials entered into
in the ordinary course and (iv) restrictive agreements and negative
covenant agreements which the Vendors has with any of its employees, past or
present. |
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(i) |
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“Effective
Date” means November 1, 2002. |
235
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(j) |
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“Employees” means
the employees of the Purchased Business who have accepted employment with the
Purchaser commencing on the Effective Date. |
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(k) |
|
“Financial
Statements” means the internal financial statements of ZAQ relating to the
Purchased Business as at its year ended December 31, 2001, consisting of a
Balance Sheet, and one Statement of Loss & Deficit, as well as its internal
statements for the ten month period ended October 31, 2002, a copy of which are
annexed hereto as Schedule 1.10. |
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(l) |
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“GAAP” means,
at any time, accounting principles generally accepted in Canada, at the
relevant time applied on a consistent basis. |
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(m) |
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“Intellectual
Property” means all industrial and intellectual property rights of the
Vendors relating to the Purchased Business, including, without limitation, the
technology, all patents, patent applications, patent rights, trademarks,
trademark applications, trade names (including “FocusIn”), service
marks, service xxxx applications, design marks, design xxxx applications
copyrights, copyright registrations, source codes, research and development,
know-how, trade secrets, technology, inventions, confidential information and
all related documentation and material pertaining thereto. |
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(n) |
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“ITA” means
the Income Tax Act (Canada). |
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(o) |
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“Parties” means
the Vendors and the Purchaser. |
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(p) |
|
“Permitted
Liens” shall mean the security interests over the Purchased Assets set
forth on Schedule 1.10 hereto. |
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(q) |
|
“Purchased
Business” means the business of the Vendors known as the FocusIn division,
presently and previously carried on by the Vendors, consisting of the marketing
and distribution of advertising space on the Internet and includes the
Intellectual Property relating to the Purchased Business. |
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(r) |
|
“Taxes” means
all amounts payable on account of income, corporate, capital, goods and
services, excise, sales or any other type of taxes, governmental charges,
levies, assessments or reassessments, including interest and penalties thereon. |
Any
reference in this Agreement to gender includes all genders and words importing the
singular number only shall include the plural and vice versa.
The
division of this Agreement into Articles and Sections and the insertion of headings are
for convenient reference only and are not to affect its interpretation.
All
references in this Agreement to dollars, unless otherwise specifically indicated, are
expressed in Canadian dollars.
236
All
accounting terms not specifically defined in this Agreement shall be interpreted in
accordance with GAAP.
| 1.6 |
|
Incorporation
of Schedules. |
The
schedules attached to this Agreement shall, for all purposes of this Agreement, form an
integral part hereof.
ARTICLE 2
PURCHASED ASSETS
Subject
to the terms and conditions of this Agreement, the Vendors agree to sell, assign and
transfer to the Purchaser and the Purchaser agrees to purchase from the Vendors on the
Effective Date, as a going concern, the undertaking and all the rights, title and interest
in and to the property and assets, whether immovable or movable, tangible or intangible,
held for use or used in the Purchased Business (other than the Excluded Assets) of every
kind and description, wheresoever situated (the “Purchased Assets”), including,
without limitation:
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(a) |
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the
Intellectual Property; |
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(b) |
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the
Capital Assets (hardware & software); |
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(c) |
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the
Accounts Receivable; |
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(e) |
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the
full benefit of all third party rights and licenses used by the Vendors or
necessary in the conduct of the Purchased Business, to the extent assignable; |
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(f) |
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all
goodwill related to the Purchased Business, including but not limited to the
exclusive right to the Purchaser to represent itself as carrying on the
Purchased Business in continuation of and in succession to the Vendors. |
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The
Purchased Assets shall not include any of: |
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(a) |
|
the
minute books and corporate records of the Vendors; and |
237
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(b) |
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the
assets solely related to any other business carried on by the Vendors other
than the Purchased Business including without limitation all of the assets of
the Vendors related to the ZEGO business carried on by the Vendors; |
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(c) |
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Any
accounts receivable related to the Purchased Business but not listed on
Schedule 0; |
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(d) |
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Any
cash on hand or in financial institutions or otherwise related to the Purchased
Business; |
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(e) |
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Any
tax credits or refunds to which the Vendors may be entitled related to the
operation of the Purchased Business by the Vendors prior to the Effective
Date. |
ZAQ
Parent and the Purchaser shall jointly execute an election under Section 167 of the Excise
Tax Act (Canada) and Section 75 of An Act Respecting the Quebec Sales Tax on the forms
prescribed for such purposes along with any documentation necessary or desirable in order
to effect the transfer of the Purchased Assets owned by ZAQ Parent without payment of any
Goods and Services Tax or Quebec Sales Tax. ZAQ Parent and Purchaser shall file the
election forms referred to above, along with any documentation necessary or desirable to
give effect to such, with Revenue Canada and the Ministère du Revenu du
Québec, respectively, together with the Goods and Services Tax and Quebec Sales Tax
returns for the reporting period in which the transactions contemplated herein are
consummated. The parties acknowledge that the Purchased Assets herein transferred by ZAQ
shall be subject to Goods and Services Tax and Quebec Sales Tax and have allocated the
Purchase Price amongst the Purchased Assets in the manner indicated in Section 3.2 hereof.
ARTICLE 3
PURCHASE PRICE
| 3.1 |
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Purchase
Price and Payment. |
The
aggregate purchase price (the “Purchase Price”) payable by the Purchaser to the
Vendors for all of the Purchased Assets shall be an amount equal to Two Million Twenty
Thousand Dollars ($2,020,000), plus applicable taxes of $14,123.50 and subject to
adjustment in the manner set forth below.
The
Purchase Price shall be paid by the Purchaser to the Vendors as follows:
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(a) |
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a
certified cheque payable to the Vendors in an amount of $1,248,299.40, |
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(b) |
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a
certified cheque payable to the Caisse Populaire Xxxxxxxxxx de la Maison de
Radio-Canada in an amount of $443,604.87; |
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(c) |
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a
certified cheque payable to Xxxxx Xxxxxxx Inc. in an amount of $242,219.18; |
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(d) |
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a
certified cheque payable to Spiegel Xxxxxx in trust in the amount of $100,000
in order to cover certain liabilities which will be assumed by the Purchaser
which amount should be held in trust until receipt of a joint notice from the Vendors and
the Purchaser indicating how to release such funds. |
238
The
Vendors shall remain responsible for and shall pay in a timely manner those accounts
payable and liabilities of the Vendors and certain other liabilities related to the
Employees, to the extent not being paid by the Purchaser in accordance with other
provisions of this Agreement, which are set forth on Schedule 3.3, in the respective
amounts sets forth on such Schedule;
The
Purchase Price shall be increased by an amount of Five Hundred Five Thousand Dollars
($505,000) plus applicable taxes less the amounts required, if any, to fix or reconfigure
the Purchased Assets, any overdue accounts payable of the Vendors relating to the
Purchased Business which arose prior to the Effective Date, and the cost of any equipment
which the Purchaser is required to purchase should the Purchased Assets be insufficient to
carry on the operations of the Purchased Business at a system operating level consistent
with the system performance prior to the Closing (the “Increase”). To secure the
Purchaser’s potential obligation to pay such additional amount, the full amount of
the Increase shall be deposited on Closing in trust with Spiegel Xxxxxx (the “Escrow
Agent”) to be held in an interest bearing account until the earlier of (i) sixty days
following the Closing, namely January 27, 2003; or (ii) upon receipt of a written notice
that Purchaser is satisfied with the condition and functionality of the Purchased Assets;
(such period herein referred to as the “Escrow Period”).
Provided
the Escrow Agent does not receive a notice from the Purchaser within the Escrow Period
indicating its dissatisfaction with the condition of the Purchased Assets, then the Escrow
Agent shall automatically release the funds then held in escrow plus the interest accrued
thereon to the Vendors upon the expiry of the Escrow Period. Upon release of the funds by
the Escrow Agent, the Purchaser shall forward its payment to ZAQ representing the
remainder of the sales taxes owing on such amount, namely $75,876.25.
Ten
(10) working days after having sent a notice to the Vendors stating that the Purchaser
intends to direct the Escrow Agent to return to it from the funds held in escrow and
setting out the underlying reasons for such return and to the extent that the Vendors have
not corrected the situation to the satisfaction of the Purchaser acting reasonably, it is
understood that the Purchaser shall have the right to send a written notice to the Escrow
Agent (with a copy to the Vendors) directing the Escrow Agent to return to the Purchaser
the amount necessaryfrom the funds held in escrow in order to pay:
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(i) |
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any
reasonable costs to fix or reconfigure the Purchased Assets; |
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(ii) |
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any
overdue accounts payable of the Vendors relating to the Purchased Business
which arose prior to the Effective Date; and |
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(iii) |
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the
cost of any equipment which the Purchaser is required to purchase should the
Purchased Assets be insufficient to carry on the operations of the Purchased
Business at a system operating level consistent with the system performance
prior to the Closing as determined at the expiry of the Reconfiguration Period
(as defined below). |
The
parties acknowledge and agree that the Escrow Agent shall not be responsible for any loss
unless its actions constitute gross negligence or an abuse of trust wilfully and
intentionally committed.
239
The
Vendors and the Purchaser agree to allocate the Purchase Price amongst the assets and
between the Vendors as follows and to execute and file all tax returns and prepare all
financial statements, returns and other instruments on the basis of such allocations:
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(a) |
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for
the Intellectual Property of the Purchased Business, the sum of $395,000; |
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(b) |
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for
the goodwill of the Purchased Business, the sum of $1,075,000; |
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(c) |
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for
the Brand name and access to publisher network the sum of $456,000; |
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(d) |
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for
the Capital Assets, the sum of $49,000 plus GST and QST ($7,362.25); and |
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(e) |
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for
the Customer List, the sum of $550,000 plus GST and QST ($82,637.50). |
| 3.3 |
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Non-Assumption
of Liabilities. |
The
Purchaser does not hereby assume nor agree to assume any liabilities or obligations of the
Vendors whatsoever arising from the operations of the Purchased Business prior to the
Effective Date including those listed on Schedule 3.3, of any nature or kind, known or
unknown, accrued, actual, fixed or contingent. However, to the extent that the parties may
agree that the Purchaser shall assume, pay and discharge certain specific liabilities of
the Vendors relating to the Employees, then the amount of such liabilities shall be
deducted from the cash payable to the Vendors at Closing and the Purchaser shall be
responsible for such payment to the complete exoneration of the Vendors.
240
The
Purchaser agrees that the Purchase Price shall be increased by an amount of $200,000 in
the event that the gross sales of the Purchased Business for the calendar year terminating
December 31, 2002 are at least $3,400,000. Such increase, if any, shall be paid on March
15, 2003.
As
the Effective Date of this transaction is November 1, 2002, the Vendors and the Purchaser
shall adjust amongst themselves for such items as expenses, salaries & fringe
benefits, bonuses, related to the Purchased Business which arose after the Effective Date
but prior to Closing and are set forth in Schedule 3.4. Such adjustment, if any, shall be
paid as soon as possible but no later than 10 days after the Closing.
ARTICLE 4
REPRESENTATIONS AND
WARRANTIES OF THE VENDORS
| 4.1 |
|
Representations
and Warranties of the Vendors. |
ZAQ
and ZAQ Parent, solidarily represent and warrant as follows to Purchaser and acknowledge
and confirm that the Purchaser is relying upon such representations and warranties in
connection with the purchase by the Purchaser of the Purchased Assets:
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(a) |
|
Incorporation
and Qualification. ZAQ and ZAQ Parent are companies incorporated, organized and
existing under the laws of their respective jurisdictions of incorporation and
have the corporate power to own and operate their respective property, carry on
their business and enter into and perform their obligations under this
Agreement. |
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(b) |
|
Validity
of Agreement. The execution, delivery and performance by the Vendors of this
Agreement, have been duly authorized by all necessary corporate action on the
part of the Vendors and do not (or would not with the giving of notice, the
lapse of time or the happening of any other event or condition) result in a
breach or a violation of, or conflict with the terms or provisions of the
constating documents or by-laws of either of the Vendors and will not result in
the violation of any law. |
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(c) |
|
Execution
and Binding Obligation. This Agreement has been duly executed and delivered by,
and constitutes a legal, valid and binding obligation of the Vendors,
enforceable against the Vendors in accordance with its terms subject only to
any limitation under applicable laws relating to (i) bankruptcy,
winding-up, insolvency, reorganization, arrangement and other similar laws of
general application affecting the enforcement of creditors’ rights, and
(ii) the discretion that a court may exercise in the granting of equitable
remedies such as specific performance and injunction. |
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(d) |
|
No
Other Agreements to Purchase. Except for the Purchaser’s right under this
Agreement, no person has any written or oral agreement, option understanding or
commitment or any right or privilege capable of becoming such for the purchase
or acquisition from either of the Vendors of any of the Purchased Assets. |
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(e) |
|
Subsidiaries
and Investments. The Vendors do not own, directly or indirectly, any equity or
ownership or participation interest in any corporation, partnership, joint
venture, legal person or other entity or enterprise involved in the Purchased
Business. |
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(f) |
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No
Consents. No consent, approval, or authorization of, or declaration, filing or
registration with, any governmental or regulatory authorities, or any other
person or entity whatsoever is required to be made or obtained for the valid
execution, delivery and performance of this Agreement and the transactions and
other agreements contemplated hereby. |
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(g) |
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No
Breach. Neither the execution and delivery of this Agreement or any other
agreement contemplated hereby by the Vendors nor the performance of the
transactions contemplated hereby or thereby by the Vendors: |
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(i) |
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conflict
with or contravene any of the terms and provisions of the constating
documents or by-laws of either of the Vendors; |
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(ii) |
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conflict
with, result in a breach of, constitute a default or an event of default
(or an event that might, with the passage of time or the giving of notice
or any of them, constitute a default or an event of default) under the
terms of, or result in (or give any person or entity the right to cause)
the termination of, or result in the loss of any right under any Contract; |
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(iii) |
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violate
any law or regulation of Canada, the Province of Quebec or any other
relevant jurisdiction, nor any municipal by-law or ordinance governing the
Vendors or the Purchased Assets, nor any judgment or order to which either
of the Vendors is subject or by which his or its assets may be bound or
affected; |
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(iv) |
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result
in the creation or imposition of any lien, hypothec, mortgage, charge,
security interest, adverse claim, encumbrance, limitation, restriction or
demand whatsoever on the Purchased Assets. |
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(h) |
|
Financial
Books and Records. The financial books and records of the Vendors fairly,
completely and correctly set out and disclose, in accordance with GAAP, the
assets, liabilities, revenues, expenses and financial position of the Vendors
with respect to the Purchased Business. |
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(i) |
|
Financial
Statements. The Financial Statements have been prepared from the books and
records of the Vendors in accordance with GAAP applied on a basis consistent
with those of previous years and present fairly: |
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(i) |
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the
assets, liabilities, whether accrued, absolute, contingent or otherwise, and
the financial condition of the Purchased Business as at the respective
dates thereof; and |
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(ii) |
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the
sales, earnings and results of the operations of the Purchased Business
during the respective periods covered by the Financial Statements. |
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(j) |
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Tax
Matters. The Vendors have duly and timely filed all tax returns and reports
required to be filed by them in all applicable jurisdictions that are required
to be filed by the Vendors on or before the Effective Date and have paid all
Taxes due and payable by them on or before the Effective Date; all such tax
returns properly reflect and do not in any respect understate the taxable
income or liability for Taxes of the Vendors in the relevant fiscal or calendar
year. |
242
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The
Vendors withheld and will withhold from each payment made or to be made after the
Effective Date to any of their officers, former officers, directors, former Directors,
employees and former employees the amount of all Taxes, including but not limited to
income tax, and other deductions required to be withheld therefrom and has remitted the
same to the proper tax or other receiving officers within the time required under any
applicable legislation. |
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Other
than federal and provincial audits and assessments for the 2000 and 2001 fiscal years of
the Vendors, no audits of any tax return nor reassessments of any Taxes by any
governmental authority have occurred in the five (5) years prior to Closing, nor are any
such audits pending nor, to the knowledge of the Vendors, threatened. |
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There
are no actions, suits, proceedings, investigations or claims now pending or to the
knowledge of the Vendors, threatened, against the Vendors in respect of Taxes, nor are
there any outstanding reassessments or written inquiries from any governmental authority
or any matters under audit, examination or discussion with any governmental authority
relating to Taxes. No audits of any such tax return nor reassessments of any Taxes
reflected thereon by any governmental authority have occurred in the five (5) years prior
to Closing nor are any such audits pending nor, to the knowledge of the Vendors
threatened. |
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(k) |
|
Customers.
The relationships of ZAQ with each of its customers and members of the
Purchased Business are good commercial working relationships. During the twelve
(12) month period preceding the Effective Date, no material customer or member
has cancelled or otherwise terminated its relationship with ZAQ nor materially
reduced its purchases, nor threatened to do any of the foregoing. |
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(l) |
|
Accounts
Receivable. The Accounts Receivable are valid and genuine and have arisen
solely from bona fide sales and deliveries of goods and services in the
ordinary course of business consistent with past practice. Such accounts
receivable are not subject to valid defences, set-offs or counter-claims. Those
Accounts Receivable not yet billed for the month of November have not been
billed by either of the Vendors. Neither of the Vendors have received any
prepayments or advances from any members or customers of the Purchased Business
for goods or services not yet rendered and to the extent that the Vendors
should receive any payments relating to the Accounts Receivable herein
transferred to the Purchaser, such amounts shall be immediately remitted to the
Purchaser. |
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(m) |
|
Compliance
with Law. The Vendors are conducting (and, within the past five (5) years, has
conducted) its business in compliance with all applicable laws, ordinances,
rules and regulations, including those of any administrative boards or agencies
or other public authorities having jurisdiction, save and except for any
non-compliance which does not have a material adverse effect on the Vendors or
their respective operations, condition (financial or otherwise), assets or
prospects. |
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(n) |
|
Licenses.
The Vendors own or hold all licenses, permits, approvals, consents, exemptions,
authorizations and similar rights and privileges which are necessary or
desirable to the ownership of their assets and the operation of the Purchased
Business and a description of each is contained in the attached
Schedule 4.10. The Vendors are in compliance with and have performed their
obligations under all such licenses, permits, approvals, consents, exemptions,
authorizations and similar rights and privileges. |
243
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(o) |
|
Intellectual
Property. All of the Intellectual Property is owned by the Vendors with good
and valid title thereto. There are no royalties, fees or other payments payable
by the Vendors to any person by reason of the ownership, use, licence, sale or
disposition of products of the Intellectual Property. The manufacture,
marketing, license, sale or use of any product presently licensed or sold or
proposed to be licensed or sold will not infringe the intellectual property
rights of any other party and no such infringement has been alleged. There is
no pending or, to the knowledge of the Vendors, threatened claim or litigation
contesting the validity, ownership, registration or right to use, sell or
dispose of any of the Intellectual Property or any product currently sold or
proposed to be sold by the Vendors, nor to the knowledge of the Vendors, is
there any basis for any such claim, nor have the Vendors received any notice
that the use, license or disposition of any of their products conflicts or will
conflict with the intellectual property rights of any other party, nor is
there, to the knowledge of the Vendors, any basis for any such assertion. The
Vendors have taken all reasonable steps necessary to safeguard and maintain
their proprietary rights in all Intellectual Property. The Vendors are not a
party to any agreement which would prevent either of them from distributing or
marketing their products anywhere in the world, free of restriction. To the
knowledge of the Vendors, no person or entity is infringing upon nor has any
person or entity misappropriated any Intellectual Property of the Vendors. The
Vendors have never made or threatened any claim against any other person or
entity alleging infringement of any of the Vendors’ Intellectual Property. |
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(p) |
|
Capital
Assets. The Capital Assets are in good operating condition, ordinary wear and
tear excepted, subject to normal repairs in the ordinary course of business. |
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(q) |
|
Lease.
Neither of the Vendors is a party to any lease or agreement in the nature of a
lease of any property required for the operation of the Purchased Business,
save and except for the lease of office space in Toronto and leases for
bandwidths and hosting in Toronto and NewYork, true and complete copies of
which leases have been delivered to Purchaser and portions of which will be
subleased to the Purchaser on a temporary basis. Neither the Vendors, nor to
the knowledge of the Vendors, any other party thereto, is in default under the
terms of such leases (and no event has occurred which is, or following any
grace period or required notice, would become such a default). |
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(r) |
|
Employees.
The Employees represent all material employees of the Purchased Business and
descriptions of their job titles, full or part-time status, ages, start dates,
current annual compensation, including bonuses, cars and other perquisites and
benefit plans and notice, severance or termination obligations have been
provided to the Purchaser. There are no existing or, to the knowledge of the
Vendors, any threatened representation elections, labour strikes, labour
disputes, grievances, complaints, arbitration or administrative proceedings,
controversies or other labour troubles involving or affecting the Employees.
All vacation pay, sick pay, bonuses, commissions, severance or termination
benefits, sick leave or disability benefits and other emoluments or similar
items through the Effective Date have been either paid to the Employees or set
out in Schedule 3.3. |
244
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(s) |
|
Title.
Save and except for the Permitted Liens, the Vendors possess and have good and
marketable title to the Purchased Assets, free and clear of any and all mortgages,
hypothecs, liens (legal or contractual), pledges, charges, security interests,
encumbrances, actions, claims or demands of any nature whatsoever or howsoever arising.
With respect to the Purchased Assets and the Purchased Business, the Vendors are not
party to any lease, conditional sales contract, capital lease, hire purchase agreement or
other title retention agreement. The Purchased Assets constitute all of the assets which
are necessary or advisable for the proper conduct of the Purchased Business, in its
entirety. |
| |
(t) |
|
Acquisition
from Xxxxxxxxx.xxx. Certain of the Purchased Assets were acquired by way of the
enforcement of rights pursuant to Section 65 of the Personal Property Security Act
(Ontario) (“PPSA”) against Xxxxxxxxx.xxx Inc. With respect to the exercise of
this security, ZAQ and ZAQ Parent solidarily represent that: |
| |
|
(i) |
|
No
secured creditor had a prior security interest in the collateral acquired from
Xxxxxxxxx.xxx inc. and now forming part of the Purchased Assets; |
| |
|
(ii) |
|
The
notice sent pursuant to Section 65 of the PPSA dated September 7, 2001 was
forwarded on such date to all parties required pursuant to the PPSA including
the secured creditors which were listed on the schedule to the notice; |
| |
|
(iii) |
|
The
time period set forth in Section 65(6) of the PPSA expired on October 17, 2001; |
| |
|
(iv) |
|
Within
such time period, no written objections were received by either of the Vendors
with respect to the notice. |
| |
(u) |
|
Litigation.
There are no actions, suits or proceedings (legal or arbitral, civil or criminal or
administrative) or governmental proceedings or investigations, whether or not purportedly
on behalf of the Vendors, outstanding, pending or threatened against either of the
Vendors or any of their properties or assets or any of their officers, directors, agents,
representatives or employees with respect to which the Vendors or the Purchaser may be
affected, at law or in equity, or before or by any federal, provincial, municipal or
other governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. The Vendors are not aware of any existing facts or circumstances
which could reasonably form the basis upon which any such action, suit, proceedings or
investigations might be commenced with any reasonable likelihood of success. The Vendors
have not been a party to any other action, proceeding, suit or investigation during the
past five (5) years. There is presently no outstanding judgement, decree or order of any
governmental authority against or affecting the Vendors or any of their properties or
assets, or any of the transactions contemplated by this Agreement or any other agreement
contemplated hereby. The Vendors do not have pending any action, proceeding,
investigation or suit against any third party. |
245
| |
(v) |
|
Agreements
and Contracts. The Vendors are not a party to any contract of any nature or kind
whatsoever with respect to the Purchased Assets or the Purchased Business, except for the
agreements disclosed on any Schedule to this Agreement; and the Vendors are not in
default or breach in any material respects of any contracts, agreements, indentures or
other instruments, written or oral, to which it is a party with respect to the Purchased
Assets or the Purchased Business except for payments to members of the FocusIn network
which are late but shall be paid within 2 days of the Closing. There exists no state of
facts which after notice or lapse of time or both would constitute such a default or
breach, and all such contracts, agreements, indentures or other instruments are now in
good standing and full force and effect and the Vendors are entitled to all benefits
thereunder. |
| |
(w) |
|
Full
Disclosure. Neither this Agreement nor any certificate or other document delivered to
the Purchaser pursuant to the transactions contemplated hereby contains an untrue
statement of a material fact or omits to state a material fact necessary to make the
statements made, in light of the circumstances in which they are made, not misleading. |
| |
The
Vendors have no information or knowledge of any relevant fact which has not been
disclosed to the Purchaser which, if known to him or it, might reasonably be expected to
deter the Purchaser from completing the transaction of purchase and sale herein
contemplated. |
| 4.2 |
|
Residence
of the Vendors |
Neither
of the Vendors is a non-resident of Canada within the meaning of the ITA.
ARTICLE 5
CONDITIONS OF CLOSING
| 5.1 |
|
Conditions
for the Benefit of the Purchaser. |
The
purchase and sale of the Purchased Assets is subject to the following conditions to be
fulfilled or performed at or prior to Closing, which conditions are for the exclusive
benefit of the Purchaser and may be waived, in whole or in part, by the Purchaser in its
sole discretion:
| |
(a) |
|
Deliveries.
The Vendors shall deliver or cause to be delivered to Purchaser the following in form
and substance satisfactory to Purchaser, acting reasonably: |
| |
|
(i) |
|
certified
copies of all resolutions of the shareholders and the boards of directors of
the Vendors approving the entering into and completion of the transactions
contemplated by this Agreement; |
| |
|
(ii) |
|
certificates
of status, compliance, good standing or like certificate with respect to each
of the Vendors issued by appropriate government officials of its respective
jurisdiction of incorporation; |
| |
|
(iii) |
|
a
legal opinion issued by counsel to the Vendors. |
246
| |
(b) |
|
No
Legal Action. No action or proceeding shall be pending or threatened by any
person in any jurisdiction, to enjoin, restrict or prohibit any of the
transactions contemplated by this Agreement or the right of the Purchaser to
conduct the Purchased Business after Closing on substantially the same basis as
heretofore operated. |
| |
(c) |
|
Consents.
All Consents and Authorizations necessary or desirable for the good and valid
transfer of the Purchased Business and the Purchased Assets to the Purchases shall have
been obtained. |
| |
(d) |
|
Publisher
Tags. All publisher tags that enable the distribution of advertising programs for the
Purchased Business must be transferred to Purchaser by way of a transfer of the domains
listed in Schedule 1.1(e) to the Purchaser. |
| |
(e) |
|
Sub-leases.
The Vendors and the Purchaser shall have negotiated and signed co-tenancy agreements
terminable on thirty (30) days notice for (i) office space in Toronto; (ii) hosting of
equipment in Toronto and New York; and (iii) bandwidth for providers in Toronto and New
York. |
| |
(f) |
|
Software
Licenses. Purchaser shall have received proof that all software licenses used by the
Purchased Business are up to date and fully paid. |
| |
(g) |
|
Removal
of Trade Name. The Vendors, concurrently with the execution of this Agreement, shall
file the necessary forms with the Inspector General of Financial Institutions to remove
the trade name which contain the words “FocusIn” or anything similar thereto or
confusing therewith. |
ARTICLE 6
COVENANTS POST-CLOSING
| 6.1 |
|
Covenants
for the Benefit of the Purchaser. |
The
Vendors have agreed to undertake the following covenants after the completion of the
transactions contemplated herein:
| |
(a) |
|
ZAQ
shall carry out a reconfiguration of the Purchased Assets, at its own cost and
expense, during the period that is 45 days following the Closing (the “Reconfiguration
Period”) to ensure that the Purchased Assets are sufficient to carry on
the operation of the Purchased Business and to remove any operations,
information, data, space or references to the other businesses carried on by
ZAQ. ZAQ shall respect the terms of the technology transfer detailed in
Schedule 6.1(a). ZAQ shall reimburse Purchaser for the cost of any bandwidth
that is used by ZAQ with respect to the Purchased Assets during the
Reconfiguration Period. |
| |
(b) |
|
ZAQ
shall train and provide technical support to employees of the Purchaser in
order for them to carry out the operations of the Purchased Business, the whole
as detailed in the attached Training and Support Plan entitled Schedule 6.1(b),
and support the hardware and software environments at no extra cost to the
Purchaser. |
| |
(c) |
|
All
accounts payable relating to the Purchased Business prior to the Effective Date
shall be paid promptly and any payables or accrued liabilities over 45 days
should be reviewed and discussed with the Xxxxxxxxx. |
000
| |
(x) |
|
A
list of all unpaid accounts receivable relating to the Purchased Business which
arose prior to the Effective Date shall be sent to the Purchaser every thirty
(30) days until payment for such accounts has been received by ZAQ. |
| |
(e) |
|
The
Vendors shall pay all overdue amounts owing to the members of the FocusIn
network within two (2) days of Closing and undertake to pay amounts owing to
such members for the month of October no later than December 10, 2002. |
| |
(f) |
|
The
Vendors shall immediately remit to the Purchaser any amounts collected and
related to accounts receivable arising from activities after the Effective
Date. |
| |
(g) |
|
The
Vendors shall redirect all of the Employees email to email addresses to be
supplied by Purchaser which shall end in “@xxxxx.xxx”. |
| 6.2 |
|
Covenants
for the Benefit of the Vendors. |
The
Purchaser has agreed to undertake the following covenants after the completion of the
transactions contemplated herein:
| |
(a) |
|
The
Purchaser will immediately remit to the Vendors any amounts collected and
related to accounts receivable arising from activities prior to the Effective
Date and will lend assistance, to the extent necessary, in order to help the
Vendors collect their accounts receivable relating to the Purchased Business. |
| |
(b) |
|
The
Purchaser will make the Contracts available to the Vendors’ auditors to
the extent that they require same for their audit procedures in order to
complete the annual audit of the Vendors’ financial statements for the
fiscal year 2002. |
| |
(c) |
|
During
the Reconfiguration Period, the Purchaser will operate the equipment and system
according to the Vendors instructions, it being understood that the Vendors
shall not be held responsible nor liable for any and all claims, demands,
losses, liabilities, damages, causes of action, proceedings, judgments,
recoveries, deficiences, costs or expenses resulting from the negligence of the
Purchaser. |
| |
(d) |
|
Purchaser
shall redirect the Vendors’ traffic related to its other businesses that
may arrive through the xxxxxxx.xxx.xxxxxxxxx.xxx url for a period of four
months in order to allow the Vendors the appropriate time to transfer its
member information for its other businesses. However, Vendors shall reimburse
Purchaser for the cost of any bandwidth that is used by them during such time
as a result of such traffic. |
Each
of the Vendors acknowledges and agrees that the confidential information relating to the
Purchased Business is extremely valuable and must be kept confidential to protect the
legitimate business interests of the Purchaser. As such, unless otherwise required by law
or expressly authorized in writing by the Purchaser, neither of the Vendors may directly
or indirectly, in any capacity whatsoever, divulge, disclose or communicate to any person,
entity, firm or any other third party, or utilize for its personal benefit or for the
benefit of any other, any confidential information relating to the Purchased Business.
248
| 6.4 |
|
Non-competition
and Non-solicitation Covenants |
Each
of the Vendors agree that for a period of five (5) years following the date hereof, it
shall not, on its own behalf or on behalf of another, either alone or in combination with
others, directly or indirectly, in any capacity whatsoever:
| |
(a) |
|
Engage
anywhere in Canada and the United States (hereinafter the “Territory”)
in the Purchased Business as conducted at such time; |
| |
(b) |
|
Have
any ownership or equity interest in any business, firm, corporation, joint
venture, partnership or other entity engaged in any aspect of the Purchased
Business in the Territory except for the ownership of 5% or less of the shares
of a public company; |
| |
(c) |
|
Render
services to, be employed by, consult with, assist, represent or act as agent
for any person or entity which is engaged in any aspect of the Purchased
Business in the Territory except if such services are not related to the
Purchased Business; |
| |
(d) |
|
Solicit
or assist any third party to solicit any of the Employees to become an officer,
director, employee, consultant or agent of the Vendors or any third party, or
otherwise entice away from the employment of the Purchaser any of its
employees; |
| |
(e) |
|
Solicit,
divert, take away or accept, or attempt to solicit, divert, take away or
accept, from the Purchaser any Purchased Business or otherwise solicit or
accept business from any of the customers of the Purchased Business for
purposes which are competitive with the Purchased Business; |
| |
(f) |
|
Fund
in any manner, or lend credit or money or any other assets or services to,
any person or entity engaged in any aspect of the Purchased Business in
the Territory; or |
| |
(g) |
|
Assist
in any manner, financial or otherwise, any person or entity to establish a
new business engaged in, or expand an existing business into engaging in, any
aspect of the Purchased Business anywhere in the Territory. |
In
the event that a Court of competent jurisdiction should determine that the provisions of
Section 6.4 are broader than necessary to adequately protect the interests of the
Purchaser, then it is the intention of the parties that such provisions be read down to
such scope as the Court should determine, such that the Vendors remain bound thereby.
In
the event that either of the Vendors breaches any of the terms contained in Sections 6.3
and 6.4, the parties acknowledge that said breach will result in immediate and irreparable
harm to the business and goodwill of the Purchaser and that damages, if any, and remedies
at law for such breach would be inadequate. In addition to any and all such remedies
available to the Purchaser, the Purchaser shall therefore be entitled to apply for and
receive from any court of competent jurisdiction an injunction to restrain any violation
of this Article and for such further relief as the court may deem just and proper.
249
ARTICLE 7
INDEMNIFICATION
7.1 The Vendors (collectively, the
“Indemnifying Party”) solidarily covenant and agree to defend, indemnify and
save harmless the Purchaser and its directors, officers and shareholders (collectively,
the “Indemnified Parties”) of and from any and all claims, demands, losses,
liabilities, damages, causes of action, proceedings, judgements, recoveries, deficiencies,
costs and expenses (including, without limitation, interest, penalties and reasonable fees
and disbursements of attorneys and other professionals and amounts paid for investigation
and defence or in settlement) (collectively the “Losses”) arising out of, under
or pursuant to:
| |
(a) |
|
All
debts, liabilities, obligations, contracts or engagements whatsoever related to
the Purchased Business, including any liabilities for Taxes, of the Vendors,
whether due or to become due, existing at the Closing or arising out of any
matter, cause, act, omission, event, condition or thing existing at or
occurring prior to the Closing, other than the Assumed Liabilities; |
| |
(b) |
|
All contingent
liabilities relating to the conduct of the Purchased Business by the Vendors
prior to the Effective Date or from the Effective Date to Closing to the extent
that same arose outside of the ordinary course of business and were not
disclosed in this Agreement or a Schedule hereto; |
| |
(c) |
|
Any
breach, falsity or inaccuracy of any representation or warranty of the Vendors
set forth herein or in any agreement, document, certificate or writing provided
to the Purchaser in connection with the transactions contemplated hereby; and |
| |
(d) |
|
Any
failure by the Vendors to fulfil or perform any covenant, undertaking or
obligation contained in this Agreement or any agreement, document, certificate
or writing provided to the Purchaser in connection with the transactions
contemplated hereby. |
7.2 Subject to the remaining
provisions of this Article, the Indemnifying Party shall satisfy any claim for indemnity
by an Indemnified Party within ten (10) days following notification of such claim by the
Indemnified Party. Without restricting its right to any other remedy, each Indemnified
Party shall be entitled to offset any amounts due or to become due it against any amounts
owing to the Vendors pursuant to this Agreement or otherwise.
7.3 If a claim for indemnity by an
Indemnified Party hereunder relates to a claim or demand asserted by any third party, then
the Vendors shall have the right at their sole and only expense to dispute and contest in
the name of the Purchaser such third party claim provided, however, that (i) the Vendors
unconditionally acknowledge their liability to indemnify the Indemnified Parties with
respect thereto, (ii) the third party claim does not seek injunctive or other relief other
than monetary damages against the Purchaser; (iii) the Vendors shall act diligently and
without delay and (iv) counsel selected by the Indemnifying Party is satisfactory to the
Indemnified Parties, in their sole discretion. The Purchaser will fully cooperate with the
Vendors and their counsel in any proceedings with respect to any such claims. In the event
that the Indemnifying Party declines or otherwise fails to conduct any negotiation,
defence, contestation or other proceeding, then the Indemnified Parties shall control the
conduct thereof and the Indemnifying Party shall fully cooperate with the Indemnified
Parties and their counsel in the conduct thereof.
250
7.4 Notwithstanding the foregoing,
the maximum aggregate amount an Indemnifying Party may be called upon to indemnify for
Losses shall be equal to the Purchase Price, except where the Losses arise from fraud or
intentional misrepresentation in which case the obligations of the Indemnifying Party to
indemnify shall be unlimited.
ARTICLE 8
SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
8.1 All of the representations,
covenants and warranties of the Vendors contained in this Agreement or in any other
document, agreement or certificate delivered pursuant to this Agreement or the
transactions contemplated hereby, shall survive the execution of this Agreement and
continue in full force and effect for the following periods, save and except in the event
of fraud or intentional misrepresentation, in which case the survival period shall not be
limited:
| |
(a) |
|
With
respect to tax matters, the period ending ninety (90) days after the date upon
which the right of any taxation authority to assess or reassess for any Taxes
expires; and |
| |
(b) |
|
With
respect to all other matters, a period of two (2) years following the Effective
Date. |
251
ARTICLE 9
MISCELLANEOUS
Any
notice, direction or other communication given under this Agreement shall be in writing
and given by delivering it or sending it by facsimile or other similar form of recorded
communication addressed:
| |
000
Xx Xxxxxxx Xxxxxx Xxxx
0xx xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
|
| |
with
a copy to Spiegel Xxxxxx: |
| |
0
Xxxxx Xxxxx-Xxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
|
| |
000 Xx-Xxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxx Xxxxxx
Telephone: 000-000-0000
Facsimile: 514-282-8011
|
| |
With
a copy to Xxxxxxxxxxx Xxxxxxxxxxx Xxxxxx at: |
| |
0000
Xxxx-Xxxxxxxx Xxxx. Xxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
|
252
Any
such communication shall be deemed to have been validly and effectively given (i) if
personally delivered, on the date of such delivery if such date is a business day and such
delivery was made prior to 4:00 p.m. (Montreal time) and otherwise on the next
business day, or (ii) if transmitted by facsimile or similar means of recorded
communication on the business day following the date of transmission. Any Party may change
its address for service from time to time by notice given in accordance with the foregoing
and any subsequent notice shall be sent to such Party at its changed address.
All
costs and expenses (including the fees and disbursements of legal counsel, investment
advisers, accountants, brokers, finders, agents and consultants) incurred in connection
with this Agreement and the transactions contemplated therein shall be paid by the party
incurring such costs and expenses.
With
the prior consent of the other party, any party may issue a publicity release or other
announcement concerning this Agreement and the transactions contemplated hereunder. Such
announcements will not violate any confidentiality obligations which may exist between the
parties.
This
Agreement may only be amended, supplemented or otherwise modified by written agreement
signed by the parties hereto.
No
waiver of any of the provisions of this Agreement shall be deemed to constitute a waiver
of any other provision (whether or not similar), nor shall such waiver be binding unless
executed in writing by the party to be bound by the waiver. No failure on the part of the
Vendors or the Purchaser to exercise, and no delay in exercising any right under this
Agreement shall operate as a waiver of such right; nor shall any single or partial
exercise of any such right preclude any other or further exercise of such right or the
exercise of any other right.
This
Agreement, together with the other agreements and documents to be delivered pursuant
hereto, constitutes the entire agreement between the parties with respect to the
transactions contemplated herein and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. Each party shall
execute and deliver after the Closing such further certificates, agreements and other
documents and take such other actions as the other party may reasonably request to inform
customers, members and suppliers of the present transaction and to consummate or implement
the transactions contemplated hereby or to evidence such events or matters.
| 9.7 |
|
Successors
and Assigns. |
This
Agreement shall be binding upon and enure to the benefit of the Vendors and the Purchaser
and their respective successors and permitted assigns. Neither this Agreement nor any of
the rights or obligations under this Agreement shall be assignable or transferable by the
Vendors or the Purchaser without the prior written consent of the other.
This
Agreement shall override the Schedules annexed hereto to the extent of any inconsistency.
253
If
any provision of this Agreement shall be determined or any court of competent jurisdiction
to be illegal, invalid or unenforceable, that provision shall be severed from this
Agreement and the remaining provisions shall continue in full force and effect.
This
Agreement shall be governed by and interpreted and enforced in accordance with the laws of
Quebec.
The
Parties hereto confirm that it is their wish that this Agreement as well as other
documents relating hereto have been and shall be drawn up in English only. Les parties aux
présentes confirment leur volonté que cette convention de même que
tous les documents s’y rattachant soient rédigés en anglais seulement.
This
Agreement may be executed in any number of counterparts (including counterparts by
facsimile) and all such counterparts taken together shall be deemed to constitute one and
the same instrument.
IN
WITNESS WHEREOF the parties have executed this Asset Purchase Agreement.
|
ZAQ INTERACTIVE SOLUTIONS INC. |
|
|
|
Per: s/s Xxxx Xxxxxx |
|
Xxxx Xxxxxx |
|
|
|
ZAQ INC. |
|
|
|
Per: s/s Xxxx Xxxxxx |
|
Xxxx Xxxxxx |
|
|
|
XXXXX.XXX INC. |
|
|
|
Per: s/s Xxx Xxxxx |
|
Xxx Xxxxx |
254
