Exhibit 2.4
INDEMNIFICATION AGREEMENT
BETWEEN
MicroAccel, Inc. (the "Company"),
Xxxxxxx X. Xxxxxxx (aka Xxxxx Xxxxx) ("Xxxxxxx"), and
Xxxx Xxxxxx ("Xxxxxx")
DATED: February 11, 2002
TABLE OF CONTENTS
1 INTERPRETATION. . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . 1
1.2 Schedules. . . . . . . . . . . . . . . . . . . . . 4
1.3 Division, Headings, Index. . . . . . . . . . . . . 4
1.4 Gender and Number. . . . . . . . . . . . . . . . . 4
1.5 Currency . . . . . . . . . . . . . . . . . . . . . 4
2 JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF THE
VENDORS WITH RESPECT TO NLR AND ITS SUBSIDIARIES . . . 5
2.1 Corporate Status and Authority . . . . . . . . . . 5
2.2 Share Capital. . . . . . . . . . . . . . . . . . . 5
2.3 Assets . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Business Operations. . . . . . . . . . . . . . . . 7
2.5 Financial. . . . . . . . . . . . . . . . . . . . . 8
2.6 Insurance. . . . . . . . . . . . . . . . . . . . . 10
2.7 Tax Matters. . . . . . . . . . . . . . . . . . . . 11
2.8 Employee Matters . . . . . . . . . . . . . . . . . 12
2.9 Litigation and Claims. . . . . . . . . . . . . . . 12
2.10 Contracts and Commitments . . . . . . . . . . . . 13
2.11 Contingency and Environmental Liabilities . . . . 14
2.12 Effect of this Transaction . . . . . . . . . . . . 14
3 COVENANTS OF THE VENDORS. . . . . . . . . . . . . . . . 15
3.1 Access to the Business . . . . . . . . . . . . . . 15
3.2 Delivery of Books and Records. . . . . . . . . . . 16
3.3 Conduct Prior to Closing . . . . . . . . . . . . . 16
3.4 Joint and Several. . . . . . . . . . . . . . . . . 16
3.5 Vendors' Taxes . . . . . . . . . . . . . . . . . . 16
3.6 Payment to Vendors . . . . . . . . . . . . . . . . 17
4 LIABILITY FOR CLAIMS. . . . . . . . . . . . . . . . . . 17
4.1 Claims . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Subrogation. . . . . . . . . . . . . . . . . . . . 17
4.3 Insurance. . . . . . . . . . . . . . . . . . . . . 18
4.4 Time Limitations . . . . . . . . . . . . . . . . . 18
5 GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . 18
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5.1 Governing Law and Arbitration. . . . . . . . . . . 18
5.2 Entire Agreement . . . . . . . . . . . . . . . . . 18
5.3 Assignment . . . . . . . . . . . . . . . . . . . . 19
5.4 Non-Waiver . . . . . . . . . . . . . . . . . . . . 19
5.5 Indemnification in Respect of Brokers or Agents. . 19
5.6 Expenses . . . . . . . . . . . . . . . . . . . . . 19
5.7 Notices. . . . . . . . . . . . . . . . . . . . . . 19
5.8 Time of the Essence. . . . . . . . . . . . . . . . 20
5.9 Severability . . . . . . . . . . . . . . . . . . . 20
5.10 Counterparts . . . . . . . . . . . . . . . . . . . 21
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INDEMNIFICATION AGREEMENT
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THIS AGREEMENT is dated as of this 11th day of February, 2002 between
MicroAccel, Inc., a company incorporated under the laws of the State of Utah
(the "Company"), Xxxxxxx X. Xxxxxxx (aka Xxxxx Xxxxx), businessman of West
Vancouver, British Columbia ("Woodman"), and Xxxx Xxxxxx, businessman of North
Vancouver, British Columbia ("Xxxxxx").
WHEREAS:
X. Xxxxxxx and Xxxxxx are each officers, directors and shareholders of Network
Lifestyle Radio Corp., a company incorporated under the laws of the State
of Delaware ("NLR");
X. Xxxxxxx and Xxxxxx have entered into Share Exchange Agreements to exchange
all of the shares that each of them owns in the capital stock of NLR with
shares of the common stock of the Company;
C. NLR and its Subsidiaries (as defined below), are in the business of
selling, on a retail basis, health and wellness products using a direct
marketing network of sales representatives; and
X. Xxxxxxx and Xxxxxx have agreed to provide certain representations,
warranties and covenants and to indemnify the Company with respect to the
business of NLR and its Subsidiaries;
NOW THEREFORE, in consideration of the mutual covenants and agreements contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:
1 INTERPRETATION
1.1 Definitions: In this Agreement and in any schedules and amendments, the
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following terms shall have the meanings set forth below unless the context
otherwise requires:
(a) "Agreement" means this Agreement including the Schedules attached as
the same may be amended or supplemented from time to time;
(b) "Assets" means all of NLR's and its Subsidiaries' rights in the
Intangible Assets, the Land and Buildings, the Material Contracts and
all other leases and contracts, the Other Operating and Fixed Assets
and all other fixed assets and equipment used in connection with the
Business, all licenses and other rights required in order for the
Company to operate the Business, the Insurance Policies, all existing
and prospective customer lists, lists of suppliers, employee
contracts, promotional material, websites and electronic commerce
sites, price lists, the Books and Records and other information
relating to the day to day carrying on of the Business;
(c) "Books and Records" means all files, ledgers, correspondence, lists,
manuals, reports, texts, notes, memoranda, invoices, receipts,
accounts, financial statements, financial working papers, computer
discs, tapes or other means of electronic storage, and all other
records or documents of any nature or kind whatsoever belonging to the
Company in connection with the Business;
(d) "Business" means the business of selling nutritional products,
personal skin care, oral hygiene and toxic-free household products
through a direct marketing program of home-based sales
representatives;
(e) "Business Day" means any day except Saturday, Sunday or any statutory
holiday in the State of Washington;
(f) "Charter Documents" means articles of incorporation, certificate of
incorporation, memorandum of association, articles of association,
by-laws or any similar constating document of a corporate or other
legal entity;
(g) "Claim" means any claim by the Company against the Vendors for any
breach of representation, warranty, covenant or other agreement or
obligation of the Vendors pursuant to this Agreement;
(h) "Closing" means the completion of the sale and purchase of the NLR
Shares as provided in the Share Exchange Agreements;
(i) "Closing Date" means February 11, 2002 or such earlier or later date
as the parties may agree to in writing;
(j) "Encumbrances" means and includes, whether or not registered or
recorded, any and all:
(i) mortgages, assignments of rent, liens, licences, leases, charges,
security interests, hypothecs, and pledges whether fixed or
floating against property (whether real, personal, mixed,
tangible or intangible), or conditional sales contracts or title
retention agreements or equipment trusts or financing leases
relating thereto, or any subordination to any right or claim of
others in respect thereof;
(ii) claims, interests and estates against or in proper (whether real,
personal, mixed, tangible or intangible) including easements,
rights-of-way servitudes or other similar rights in property
granted to or reserved or taken by any person or any governmental
body or authority;
(iii) any option, or other right to acquire, or acquire any interest
in, any property; and
(iv) other encumbrances of whatsoever nature and kind against property
(whether real, personal, mixed, tangible or intangible);
(k) "Exchange Shares" means Shares issued by the Company in exchange for
NLR Shares pursuant to the Share Exchange Agreements;
(l) "Financial Statements" means audited consolidated financial statements
of NLR at January 31, 2001 and January 31, 2000, a copy of which is
incorporated as Schedule F;
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(m) "Insurance Policies" means those insurance policies described in
Schedule I;
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(n) "Intangible Assets" means those registered and unregistered names,
trade names, trademarks, designs, copyrights, patents and similar
rights specifically including but not limited to the Trade Names and
any proprietary software as described in Schedule E;
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(o) "Interim Financial Statements" means the unaudited interim financial
statements of NLR for the period ended October 31, 2001, a copy of
which is incorporated as Schedule G;
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(p) "Knowledge," "to the knowledge of," "aware of" or similar knowledge
qualification means, to the knowledge of Woodman and Xxxxxx, or any of
them, (i) such individual is actually aware of some fact or other
matter, and (ii) without any obligation to conduct any inquiry or
investigation, a prudent individual could be reasonably expected to
discover or otherwise become aware in the course of serving as an
executive officer and/or director of NLR or its Subsidiaries;
(q) "Land and Buildings" means those interests in real property described
in Schedule D;
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(r) "Material Contracts" means those contracts described in Schedule K and
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Subsection 2.11 of this Agreement;
(s) "NLR Shares" means the shares of common stock, $0.001 par value, of
NLR that are owned by each of Woodman and Xxxxxx and exchanged
pursuant to the Share Exchange Agreements;
(t) "Other Operating and Fixed Assets" means those operating and fixed
assets described in Schedule C;
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(u) "Person" means an individual, a corporation, a partnership, a trust,
an unincorporated organization or a government agency or
instrumentality;
(v) "Place of Closing" means the offices of Xxxxxx & Whitney LLP, 0000 0xx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx or such other place as the
parties may agree;
(w) "Shares" means shares of common stock, $0.001 par value, of the
Company;
(x) "Share Exchange Agreements" means those Share Exchange Agreements
dated for reference December 31, 2001 as entered into by each of
Woodman and Xxxxxx, respectively, with the Company;
(y) "Subsidiaries" means XXXX.XX, Inc., a company incorporated under the
laws of the State of Nevada and Network Lifestyle Radio (Canada)
Corp., a company incorporated under the laws of Canada;
(z) "Time of Closing" means the time at which the Closing takes place,
which shall be 10:00 am, at the Place of Closing on the Closing Date
or such other time as the parties may agree upon;
(aa) "Trade Name" means Network Lifestyle Radio and XXXX.XX;
(bb) "Vendors" means Woodman and Xxxxxx, collectively;
1.2 Schedules: The following are the schedules delivered concurrently with, and
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incorporated in, this Agreement:
SCHEDULE DESCRIPTION REFERENCE
A Authorized and Issued Share Capital of NLR and 2.2(a)
its Subsidiaries
B Accounts Payable and Loans Outstanding 2.5(e),(h)
C List of Operating and Fixed Assets 2.3(c),(i)
D List of Land and Buildings 2.3(g)
E List of Intangible Assets 2.3(h)
F Financial Statements 2.5(a)
G Interim Financial Statements 2.5(b)
H List of Bank Accounts 2.6(b)
I List of Insurance Policies 2.7(a),(b),(c)
J List of Employees and Employee Benefit Plans 2.9(a),(c)
K List of Material Contracts 2.11(a)
1.3 Division, Headings, Index: The division of this Agreement into sections,
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subsections and paragraphs and the insertion of headings and any index
provided are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.4 Gender and Number: Unless the context otherwise requires, words importing
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the singular include the plural and vice versa and words importing gender
include both genders.
1.5 Currency: All dollar amounts referred to in this Agreement are stated in
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United States of America currency, unless otherwise expressly stated.
2 JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF THE VENDORS WITH
RESPECT TO NLR AND ITS SUBSIDIARIES
The Vendors jointly and severally represent and warrant to the Company, subject
to and qualified by those matters set forth in the Schedules to this Agreement,
as follows and acknowledge that the Company is relying upon such representations
and warranties in connection with the exchange of the NLR Shares with the
Exchange Shares pursuant to the Share Exchange Agreements:
2.1 Corporate Status and Authority:
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(a) Corporate Status: Each of NLR and its Subsidiaries have been duly
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organized and is validly subsisting under the laws of the State of
Delaware, the State of Nevada and Canada, respectively, and have all
requisite power and capacity to own or lease the Assets and to carry
on the Business. NLR and its Subsidiaries are duly qualified and
licensed to carry on their business in all jurisdictions in which the
nature of their business or the properties and assets owned or leased
by them make such qualification and licensing necessary and where the
failure to be so qualified and licensed would have a material adverse
effect on the Business or the Assets;
(b) Amendments to Charter: NLR and its Subsidiaries have not made any
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amendments to their Charter Documents other than those expressly
reflected in their corporate records; and
(c) Corporate Records: The corporate records and minute books of NLR and
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its Subsidiaries accurately reflect all material proceedings of its
respective directors and shareholders, and include complete and
accurate minutes of all meetings of its directors and shareholders,
copies of all resolutions passed, up-to-date and accurate shareholder
and director registers, transfer registers and any other corporate
registers required to be maintained by NLR and its Subsidiaries. All
meetings of shareholders and directors were duly called and held and
all resolutions, whether passed at meetings, or in writing, are valid
and effectual in all cases where the matters dealt with at such
meetings or in such resolutions could have a material effect on NLR
and/or its Subsidiaries as the case may be.
2.2 Share Capital:
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(a) Share Capital: Schedule A to this Agreement accurately sets out the
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authorized and issued share capital of each of NLR and its
Subsidiaries and the list of shareholders as at the date set out in
the schedule. The shares shown as constituting the issued share
capital of NLR and its Subsidiaries have been duly issued and are
outstanding and are fully paid and non-assessable;
(b) Rights to Acquire Securities: Except as disclosed in Schedule A, no
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person has any agreement, option, right or privilege (whether by law,
pre-emptive, or contractual), or any interest capable of becoming an
agreement, including convertible securities, warrants, or convertible
obligations of any nature, for the purchase, subscription, allotment
or issuance of any of the unissued shares of NLR or its Subsidiaries;
(c) Final Shareholder List: Schedule A to this Agreement accurately sets
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out the list of shareholders of NLR that will be effective at the Time
of Closing; and
(d) Compliance with Laws: All issued and outstanding shares of NLR have
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been issued and transferred in compliance with all law, rules and
regulations regarding the issuance, distribution and trading of shares
and securities in each jurisdiction that NLR has issued and/or
distributed its shares or any of its shareholders has traded its
shares since inception.
2.3 Assets:
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(a) Ownership: NLR and its Subsidiaries have good and marketable title to
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all of the Assets free and clear of all Encumbrances;
(b) Leased Assets: Except as set forth on Schedule D, there are no leases,
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agreements to lease, tenancy arrangements or licences to which NLR and
its Subsidiaries are a party which have a capitalized value in excess
of $5,000.
(c) Condition of Assets: To the best of the knowledge of the Vendors, all
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fixed assets and equipment owned or used by NLR and its Subsidiaries
in the conduct of the Business all, of which is listed in Schedule C,
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have been properly maintained and are in good working order and
contain no defects which could adversely affect the operation of the
Business to any material degree;
(d) Rights to Assets: Except as set out in Schedule D, no present or
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former director, officer or shareholder of NLR or its Subsidiaries or
any person not dealing at arm's length with any of the foregoing owns
directly or indirectly or has any agreement, option or commitment to
acquire or lease, any property, asset, right or license used by the
Business;
(e) Zoning: All real property at which NLR and its Subsidiaries carry
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on the Business is zoned to permit the particular activity carried out
on such property, except for such matters as would not materially
adversely affect the Business;
(f) Rents and Taxes: All rents, operating costs, property taxes
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(whether municipal, school, general and special taxes, rates,
assessments, local improvements charges or frontage taxes), business
taxes, development cost charges, other subdivision charges and costs
and other levies which are chargeable against the Land and Buildings
leased by NLR and its Subsidiaries have been paid in fill unless the
same are not due and payable;
(g) Land and Buildings: The list the Land and Buildings set out in
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Schedule D accurately reflects all interests of NLR and its
Subsidiaries in real property used in the conduct of the Business. The
Vendors represent that all agreements with respect to NLR and its
Subsidiaries' interests in the Land and Buildings are in force and
effect and without amendment thereto, and the interests in the Land
and Buildings are free and clear of all Encumbrances which would have
a material adverse effect on NLR, the Subsidiaries or the Business. To
the best of the knowledge of the Vendors, neither asbestos nor urea
formaldehyde foam is now used in any of the buildings listed in
Schedule D;
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(h) Intangible Assets: The list the Intangible Assets set out in
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Schedule E accurately reflects all registered and unregistered names,
trade names, trademarks, designs, copyrights, patents and similar
rights specifically including but not limited to the Trade Names and
any proprietary software used in connection with the Business and/or
owned or held by NLR and its Subsidiaries on the date hereof free of
Encumbrances which would have a material adverse effect on NLR, the
Subsidiaries or the Business; and
(i) Other Operating and Fixed Assets: The list the Other Operating and
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Fixed Assets set out in Schedule C accurately reflects all operating
and fixed assets owned or held by NLR and its Subsidiaries having an
original capital cost of $5,000 or more which are not disclosed
elsewhere in this Subsection 2.3. Except for sales and purchases in
the ordinary course of business since November 1, 2001, NLR and its
Subsidiaries own such assets on the date hereof free of Encumbrances
which would have a material adverse effect on NLR, its Subsidiaries or
the Business.
2.4 Business Operations:
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(a) Operating Authorities: NLR and its Subsidiaries have acquired, and
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currently hold, all permits, licenses, consents, authorizations,
approvals, privileges, waivers, exemptions, orders, certificates,
rulings, agreements and other concessions granted by or entered into
with any governmental or regulatory authority required in connection
with the Assets or the Business, that are material to the Assets or
the Business and all of the foregoing are in good standing and are
being complied with in all material respects;
(b) Compliance with Laws: NLR and its Subsidiaries are operating and
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using the Assets, and are conducting the Business, in compliance with
all applicable laws and regulations of each jurisdiction in which the
Assets are located or in which they conduct the Business, except for
such non-compliance as would not materially adversely affect the
Business or Assets; and
(c) Jurisdictions in which Business is Carried On: NLR and its
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Subsidiaries do not carry on the Business or own or Lease any Assets
in any jurisdiction other than in British Columbia, which would
require registration or licensing in such jurisdiction, the failure of
which would have a material adverse effect on the Business or Assets.
2.5 Financial:
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(a) Financial Statements: The Financial Statements attached hereto as
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Schedule F present fairly in all material respects the financial
position of NLR and its Subsidiaries as at the respective dates of the
said statements and the results of their operations for the 12-month
period then ended in accordance with generally accepted accounting
principles in the United States applied on a consistent basis.
(b) Interim Financial Statements: The Interim Financial Statements
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attached hereto as Schedule G present fairly in all material respects
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the financial position of NLR and its Subsidiaries as at the
respective dates of the said statements and the results of their
operations for the period then ended in accordance with generally
accepted accounting principles in the United States applied on a
consistent basis.
(c) No Material Change: Since November 1, 2001 and up to the date
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hereof there has been no material adverse change in the nature or
condition of the Assets or the Business, financial or otherwise,
except changes occurring in the ordinary course of its business and as
a result of the transactions contemplated in the Share Exchange
Agreements, nor has there been any development or threatened or
probable development of which the Vendors are aware, which materially
and adversely affects the Assets or the Business. Since November 1,
2001, the Business has been carried on in the ordinary course as it
had previously been carried on. In addition, save as set out in
Schedules A and B, since November 1, 2001 and up to the date hereof,
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NLR and its Subsidiaries have not:
(i) issued any shares, units or other securities;
(ii) incurred any liability or obligation (absolute or contingent)
save current liabilities incurred in the ordinary course of
business which as to their nature and amount are consistent with
the Business as carried on;
(iii) discharged or satisfied any Encumbrance or paid any obligation
or liability (absolute or contingent), except for current
liabilities incurred in the ordinary course of business and
except for regularly scheduled payments of term debt and lease
payments;
(iv) declared, paid, authorized or made any dividend, payment or
distribution of any kind or nature to its shareholders or
partners in their capacity as such or redeemed or purchased or
otherwise acquired any of its capital stock or agreed to do so;
(v) subjected any of the Assets to any Encumbrances;
(vi) sold or transferred any of the Assets or cancelled or released
any debts or claims, except, in each case, in the ordinary course
of business;
(vii) waived any rights of material value;
(viii) entered into any transaction or into any contracts or
agreements or modifications or cancellations thereof, other than
in the ordinary course of business;
(ix) made or authorized any payment to officers, directors or
employees in their capacity as such except in the ordinary course
of business and at rates of salary, bonus or other remuneration
consistent with remuneration of previous years;
(x) used any funds other than in the ordinary course of business as
theretofore carried on; and
(xi) made any capital expenditures greater than $5,000 or entered into
any lease with a capitalized value greater than $5,000;
(c) Books and Records: The Books and Records fairly and correctly set out
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and disclose in all material respects the financial position of NLR
and its Subsidiaries and all material financial transactions of NLR
and its Subsidiaries have been accurately recorded in the Books and
Records;
(d) Liabilities: NLR and its Subsidiaries do not have any debts or
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liabilities (whether accrued, contingent, absolute or otherwise and
whether or not determined or determinable), including liabilities
which arise hereafter based on events which have occurred up to the
date hereof, and including liabilities relating to income and other
taxes except:
(i) liabilities disclosed on, reflected in or provided for in the
Financial Statements;
(ii) other liabilities disclosed in this Agreement;
(iii) liabilities incurred in the ordinary course of its businesses
since November 1, 2001; or
(iv) liabilities incurred as a result of the transactions contemplated
in the Share Exchange Agreements.
(e) Current Liabilities: Notwithstanding paragraph 2.5(d) above, NLR
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and its Subsidiaries will not have accounts or trade payables or any
other current liabilities, including any sales tax or commissions
payable, which exceed $50,000 at the Closing Date as otherwise
disclosed in Schedule B.
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(f) Receivables: All accounts receivable recorded on the books of NLR
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and its Subsidiaries are due and payable and no right of set off or
counterclaim exists with respect to those accounts save and except for
Goods and Services Taxes;
(g) Accountants: NLR and its Subsidiaries have not had any material
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disagreement or dispute with their auditors or accountants over the
accounting or tax treatment of their financial information during this
period or for the period ended January 31, 2001; and
(h) Shareholder and Related Party Loans: At the Time of Closing, NLR
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and its Subsidiaries will not be indebted, directly or indirectly, to
any of the NLR Shareholders, any present or former director, officer,
shareholder, partner or employee of NLR or its Subsidiaries or any
person not dealing at arms length with any of the foregoing and none
of such persons is indebted to NLR or its Subsidiaries, except for
matters arising out of normal relations between employee and employer
or consulting arrangements, and as otherwise disclosed in Schedule B.
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Banking:
(a) Loans and Credit Facilities: Except as otherwise disclosed in the
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Financial Statements, the Interim Financial Statements, and this
Agreement, NLR and its Subsidiaries have not entered into, or
otherwise arranged for, any loans, operating lines of credit or other
credit facilities (including interest rate or currency swaps, hedging
contracts, forward loan or rate agreements or other financial
instruments), and do not have outstanding any bonds, debentures,
mortgages, notes or other similar indebtedness and NLR and its
Subsidiaries are not obligated to create or issue any bonds,
debentures, mortgages, notes or other similar indebtedness;
(b) Bank Facilities: Schedule H contains a complete and accurate listing
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showing the name of each bank, trust company or similar financial
institution in which NLR and its Subsidiaries have an account, safety
deposit box or other banking facility, including the names of all
persons authorized to transact business in respect of such accounts;
(c) Guarantees/Indemnities: NLR and its Subsidiaries have not
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guaranteed or indemnified, or agreed to guarantee or indemnify, or
agreed to any other like commitment, in respect of any debt, liability
or other obligation of any person, except for matters arising out of
normal relations between employer and employee or consulting
arrangements.
2.6 Insurance:
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(a) List of Policies: Schedule I contains a complete and accurate
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listing of all insurance policies of NLR and its Subsidiaries relating
to the Assets and the Business, including all property damage, general
liability, motor vehicle, director and officer liability and life
policies;
(b) Good Standing: Each of the insurance policies listed in Schedule I
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is in good standing, all premiums required to be paid by NLR and its
Subsidiaries have been properly paid, there have been no
misrepresentations or failures to disclose material facts and there
has been no refusal to renew any of the policies and the Vendors have
no knowledge of any facts which might render any of the policies
invalid, unenforceable or non-renewable; and
(c) Outstanding Claims: No threatened or actual claims against any of
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the policies described in Schedule I have been made in the last two
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years.
2.7 Tax Matters:
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(a) Filings: Each of NLR and its Subsidiaries has duly and timely filed
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all returns, elections and designations required to be filed by it
with any taxation authority or if not filed on a timely basis, all
fees, penalties, interest and other amounts payable as a result
thereof have been paid. No such returns, elections or designations
contain any material misstatement or omit any material statements that
should have been included and each return, election and designation,
including accompanying schedules and statements is true, correct and
complete in all material respects;
(b) Payment: As of the date of the Interim Financial Statements, NLR and
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its Subsidiaries have paid in full all amounts (including but not
limited to sales, capital, use and consumption taxes and taxes
measured on income and all installments of taxes) owing to all
federal, state and municipal taxation authorities due and payable by
it and, other than taxes incurred in the ordinary course of business,
NLR has not incurred any material taxes to the Business or Assets;
(c) Extensions: There are no agreements, waivers or other arrangements
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with any taxation authority providing for an extension of time with
respect to the filing of any return, election or designation by, or
any payment of any amount by or governmental charge against NLR or its
Subsidiaries, nor with respect to the issuance of any assessment or
reassessment;
(d) Adverse Proceedings: To the best of the knowledge of the Vendors,
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there are no actions, suits, proceedings, investigations or claims by
any governmental authority pending or threatened against NLR or its
Subsidiaries relating to taxes, governmental charges or assessments.
There are also no matters under discussion with any governmental
authority relating to taxes, governmental charges or assessments
asserted or to be asserted by such authority;
(e) Deductions/Remittances: Each of NLR and its Subsidiaries has withheld
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and remitted all amounts required to be withheld by it including
without limitation, income tax, Social Security Plan contributions and
Employment Insurance premiums and has paid such amounts including any
penalties or interest due to the appropriate authority on a timely
basis and in the form required under the appropriate legislation;
(f) Acquisitions: Neither NLR nor its Subsidiaries has acquired property
------------
from, or disposed of property to, any person, firm or corporation with
whom either NLR or its Subsidiaries does not deal at arm's length
since February 1, 2001; and
(g) Other Jurisdictions: Neither NLR nor its Subsidiaries has filed or is
--------------------
currently required to file any returns, elections or designations with
any taxation authority located in any jurisdiction other than the
State of Delaware and the State of Nevada.
2.8 Employee Matters:
-----------------
(a) List of Employees: The list of employees set out in Schedule J is a
------------------- ----------
comprehensive list of the employees and commissioned sales people of
NLR and its Subsidiaries as at November 1, 2001 and includes an
accurate description of, the compensation, and/or commission
structure, position, job classification, date of hire and age. There
have been no material variations to this list since December 1, 2001
except such changes as occur in the ordinary course of business;
(b) Employment Contracts: Except a set out in Schedule J, NLR and its
--------------------- ----------
Subsidiaries are not a party to any oral or written consulting
contract, management contract, labour services contract or similar
agreement for the services of a particular individual and none of the
employees of NLR and its Subsidiaries are employed on other than an
indefinite hiring basis terminable on reasonable notice according to
law without further liability to NLR and its Subsidiaries;
(c) Benefit Plans: NLR and its Subsidiaries do not have any benefit,
--------------
bonus, profit-sharing, retirement income, termination or severance,
dental, medical, disability, health or other plan, program, policy or
other arrangement in place for the benefit or advantage of the
salaried employees of NLR and its Subsidiaries as at November 1, 2001
and there have been no material variations to this list since that
date other than in the ordinary course of business;
(d) Pension Plans: NLR and its Subsidiaries do not have nor have they ever
-------------
had a pension plan for any of its directors, officers, employees or
affiliates thereof; and
(e) Employer Associations: Neither NLR nor its Subsidiaries is a member of
---------------------
any employer, management, industry or other trade or business
association under which NLR or its Subsidiaries is obligated to
contribute to any employee or contractor employee benefit fund,
including any pension plans, health benefit plans or other similar
employee entitlements.
2.9 Litigation and Claims:
-----------------------
(a) Adverse Proceedings: There are no outstanding actions, claims,
--------------------
demands, lawsuits, prosecutions or governmental investigations by or
against NLR and its Subsidiaries, and there is no other adverse
proceeding which is to the knowledge of the Vendors pending or
threatened by, against, or relating to NLR and its Subsidiaries, the
Assets, or the Business. The Vendors are not aware of any basis for
any other action, claim, demand, lawsuit, investigation or other
adverse proceeding which, if pursued would have a significant
likelihood of having a material adverse effect on NLR and its
Subsidiaries;
(b) Compliance Directives: There are no outstanding compliance directives
----------------------
or work orders of which the Vendors are aware relating to the Assets,
or the Business, from any police, fire department, sanitation or
health authorities, environmental agencies, or from any other federal,
state or municipal authority, department or agency, nor do the Vendors
have notice that there are any matters under formal consideration by
any such authorities relating to NLR and its Subsidiaries;
(c) Notice of Default/Claims: Except as expressly disclosed in this
--------------------------
Agreement, NLR and its Subsidiaries have not received any notice of
any default, violation or termination of any Material Contracts,
Leases or other contracts entered into by NLR and its Subsidiaries
which will, or is likely to, result in such a default, violation or
termination which will have a material adverse effect on NLR or the
Subsidiaries;
(d) No Seizure: There is no appropriation, expropriation or seizure of any
----------
of the Assets that is pending or, which to the knowledge of the
Vendors have been threatened against NLR and its Subsidiaries; and
(e) Trademark and Patent Infringement: The conduct of the Business by NLR
----------------------------------
and its Subsidiaries does not infringe upon any patent, trademark or
other proprietary right, domestic or foreign, of any person in respect
of which there is any significant likelihood that it would have a
material adverse effect on the Assets or the Business.
2.10 Contracts and Commitments:
---------------------------
(a) Material Contracts: Schedule K contains a complete and accurate
------------------- -----------
listing of all material contracts, agreements, leases, commitments,
instruments or other dealings to which NLR and its Subsidiaries are a
party, by which either NLR and its Subsidiaries are bound or under
which NLR and its Subsidiaries are entitled to any benefits. For the
purposes of this Agreement a contract shall be material if:
(i) performance of any right or obligation by any party to such
contract involves a payment by either party of $5,000 or more and
having a term of more than one year; or
(ii) if an expenditure, receipt or transfer or other disposition of
property with a value of greater than $5,000 may arise under such
contract (other than a contract with a customer or supplier in
the ordinary course of business); or
(iii) if such contract has been entered into out of the ordinary
course of business;
(b) Good Standing: Except as disclosed herein, NLR and its Subsidiaries
--------------
are not in breach or default of any of the terms of the Material
Contracts and the Vendors are not aware of any breach or default of
any of the terms of the Material Contracts by any other party thereto,
and each such contract is in good standing and in full force and
effect without amendment thereto. To the best of the knowledge of the
Vendors, no state of facts exists, which, after notice or lapse of
time or both, would constitute such a default or breach where there is
any significant likelihood that such breach or default referred to in
this paragraph 2.11(b) would have a material adverse effect on the
Assets or the Business; and
(d) Shareholder Agreements: Except as contemplated in this Agreement and
-----------------------
the Share Exchange Agreements, there are no shareholder agreements,
unanimous shareholder agreements, voting trusts, pooling or any other
similar agreements among or between any of the NLR Shareholders, NLR
or its Subsidiaries.
2.11 Contingency and Environmental Liabilities:
--------------------------------------------
(a) Compliance: To the best of the Vendors' knowledge, NLR and its
----------
Subsidiaries are currently in compliance in all material respects with
all federal, state, provincial and municipal environmental laws and
regulations (the "Environmental Laws"). To the knowledge of the
Vendors, the existing activities of NLR and its Subsidiaries, its
prior uses and activities and the uses and activities of other
property now or previously owned or operated by NLR and its
Subsidiaries, comply and at all times have complied with all
Environmental Laws;
(b) Notice of Non-Compliance: To the knowledge of the Vendors, neither NLR
------------------------
nor its Subsidiaries, nor any prior owner or occupant of the property
now leased or operated by the Vendors, has received any notice or
other communication alleging that they are not in compliance with any
Environmental Laws, or alleging any liability under any Environmental
Laws;
(c) Hazardous Material: Neither NLR nor its Subsidiaries nor, to the best
-------------------
knowledge of the Vendors, any other person or entity has engaged in or
permitted any operations or activities upon, or any use or occupancy
of, property now or previously owned or operated by NLR and its
Subsidiaries, resulting in the storage, emission, release, discharge
or disposal of any hazardous materials on, in, under or from any
property used for or by NLR or its Subsidiaries;
(d) No Expenditures: To the knowledge of the Vendors, no expenditures will
---------------
be required in order for the Assets to comply with Environmental Laws
in connection with the current operation and continued operation of
the activities of NLR and its Subsidiaries.
2.12 Effect of this Transaction:
-----------------------------
(a) No Adverse Implications: Neither the execution and delivery of this
Agreement nor the completion and performance of the transactions
contemplated hereby will:
(i) give any person the right to terminate or cancel any contractual
or other rights with NLR and its Subsidiaries where such
termination or cancellation would have a material adverse effect
on the Assets or the Business;
(ii) violate any restriction of any nature relating to the disposition
of any of the NLR Shares;
(iii) result in the creation of any liens or encumbrances on the
Assets or in the default under any agreement giving a third party
security against the Assets or in the crystallization of any
floating charge in a debenture as general security interest in a
security agreement granted, issued or assumed by NLR or its
Subsidiaries where any of such events could have a material
adverse effect on the Assets or the Business;
(iv) violate any provision of any indenture, mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or
decree to which NLR or its Subsidiaries is a party or by which
NLR or its Subsidiaries or the Assets are bound the violation of
which could have a material adverse effect on the Assets or the
Business or impair the legality or enforceability of this
Agreement or the transactions contemplated hereby; nor
(v) be contrary to the provisions of the Charter Documents of NLR and
its Subsidiaries;
(b) Joint and Several: The obligations of the Vendors shall be joint and
-------------------
several with respect to all the representations and warranties set out
in this Section 2.
3 COVENANTS OF THE VENDORS
The Vendors covenant and agree with the Company as follows and acknowledge that
the Company is relying upon such covenants and agreements in connection with the
exchange of the NLR Shares with the Exchange Shares pursuant to the Share
Exchange Agreements:
3.1 Access to the Business: The Vendors shall forthwith make available to the
------------------------
Company and its authorized representatives and, if requested by the
Company, provide a copy to the Company of all title documents, contracts,
financial statements, minute books, share certificate books, share
registers, limited partnership agreements and records, plans, reports,
licences, orders, permits, books of account, accounting records, constating
documents and all other documents, information or data relating to NLR and
its Subsidiaries. The Vendors shall afford the Company and its authorized
representatives every reasonable opportunity to have free and unrestricted
access to the property, assets, undertaking, records and documents of NLR
and its Subsidiaries. At the request of the Company, the Vendors shall
execute or cause to be executed such consents, authorizations and
directions as may be necessary to permit any inspection of any property of
NLR and its Subsidiaries or to enable the Company or its authorized
representatives to obtain full access to all files and records relating to
any of the assets of NLR and its Subsidiaries maintained by governmental or
other public authorities. At the Company's request, the Vendors shall
co-operate with the Company in arranging any such meetings as the Company
should reasonably request with:
(a) all employees of NLR and its Subsidiaries;
(b) customers, suppliers, distributors or others who have or have had a
business relationship with NLR and its Subsidiaries; and
(c) auditors, solicitors or any other persons engaged or previously
engaged to provide services to NLR and its Subsidiaries who have
knowledge of matters relating to NLR and its Subsidiaries.
The exercise of any rights of inspection by or on behalf of the Company
under this Subsection shall not mitigate or otherwise affect the
representations and warranties of the Vendors hereunder, which shall
continue in full force and effect. In exercising its rights hereunder, the
Company shall use its reasonable commercial efforts to avoid interfering
with the Business to the extent reasonably practical consistent with the
need to complete its review of the Business and the Assets.
3.2 Delivery of Books and Records: At the Time of Closing, there shall be
---------------------------------
delivered to the Company by the Vendors all of the Books and Records. The
Company agrees that it will preserve the Books and Records so delivered to
it for so long as such Books and Records may be required to enable the
Vendors to defend any claim against NLR and its Subsidiaries which could
result in a Claim hereunder and at least until December 31, 2005. The
Company will permit the Vendors or their authorized representatives
reasonable access thereto in connection with the affairs of the Vendors.
The Company shall not be responsible or liable to the Vendors for or as a
result of any accidental loss or destruction of or damage to any such Books
or Records, unless the Company's negligence caused the loss, destruction or
damage.
3.3 Conduct Prior to Closing: Without in any way limiting any other obligations
------------------------
of the Vendors hereunder, during the period from the date hereof to the
Time of Closing:
(a) Conduct Business in the Ordinary Course: The Vendors shall cause NLR
-----------------------------------------
and its Subsidiaries to conduct its business in its ordinary and
normal course and NLR and its Subsidiaries shall not, without the
prior written consent of the Company (such consent not to be
unreasonably withheld), enter into any transaction or take any action
that, if effected after November 1, 2001 and before the date of this
Agreement, would constitute a breach of any representation, warranty,
covenant or other obligation of the Vendors contained herein. In
particular the Vendors shall cause NLR and its Subsidiaries to refrain
from entering into any contract or commitment which would, if entered
into prior to the date hereof, constitute a Material Contract or
Lease, save with the consent of the Company (such consent not to be
unreasonably withheld);
(b) Continue Insurance: The Vendors shall cause NLR and its Subsidiaries
-------------------
to continue to maintain in full force and effect all policies of
insurance or renewals thereof now in effect, shall take out, at the
expense of the Company, such additional insurance as may be reasonably
requested by the Company and shall give all notices and present all
claims under all policies of insurance in a due and timely fashion;
and
(c) Preserve Goodwill: The Vendors shall use reasonable commercial efforts
-----------------
to preserve, and cause NLR and its Subsidiaries to preserve intact the
Assets, the Business and to promote and preserve for the Company the
goodwill of suppliers, customers and others having business relations
with NLR and its Subsidiaries.
3.4 Joint and Several: The covenants and agreements of the Vendors contained in
-----------------
Section 3 shall be joint and several.
3.5 Vendors' Taxes: The Vendors are responsible for any federal, state,
---------------
provincial or other taxes which may be payable by them in connection with
the completion of the transactions contemplated in this Agreement.
3.6 Payment to Vendors
--------------------
The Vendors acknowledge and agree that, save and except for the payment of
salaries and expenses pursuant to their respective Employment Agreements as
set out on Schedules J and K, neither of the Vendors shall receive any
payment from the Company, NLR or any of its Subsidiaries for amounts owed
to the Vendors as listed in Schedule B hereto until such time as the
Company receives financing, by equity or debt, which results in the Company
receiving a minimum gross proceeds from the financing of USD$1,000,000.
4 LIABILITY FOR CLAIMS
4.1 Claims: If any person shall make any claim or demand against NLR and its
------
Subsidiaries or the Company which gives rise or may give rise to any Claim,
the Company shall promptly notify the Vendors, giving the general nature of
such claim or demand along with such further information known to the
Company as may be reasonably required to enable the Vendors, as the case
may be, to decide whether or not to assume the defence thereof. The Company
shall not be under any liability or obligation to the Vendors for any
failure to so notify them or for the sufficiency of the notice unless and
then only to the extent that the rights and remedies of the Vendors shall
have been prejudiced as a result. The Vendors shall be entitled (but not
required) to assume the defence in the name of NLR and its Subsidiaries of
any suit brought against the Company or NLR and its Subsidiaries to enforce
such claim or demand and to assert any counterclaim of NLR and its
Subsidiaries if, but only if, the Company shall be entitled to make a Claim
for the full amount of the claim or demand, and if the defence shall be
through legal counsel acceptable to the Company, acting reasonably. The
Vendors shall indemnify and save harmless the Company, NLR and its
Subsidiaries of and from all costs and expenses incurred or to be incurred
in connection with such defence. Such right shall be subject to the rights
of any insurer to defend any action. In all cases, the Company shall have
the right to retain at its own expense, additional counsel to act on its
behalf. The Vendors shall not settle or (without giving the Company a
reasonable opportunity to take carriage thereof) abandon any such claim or
demand which it has elected to defend unless they have first
unconditionally acknowledged to the Company that they will pay to the
Company the full amount of such claim or demand. The Vendors shall keep the
Company reasonably informed as to the progress thereof. The Company shall
at all times cooperate in all reasonable ways with, make all its relevant
files and records and those of NLR and its Subsidiaries available for
inspection and copying by, and make its employees and those of NLR and its
Subsidiaries reasonably available or otherwise render reasonable assistance
to, the Vendors (i) in the defence of any claim or demand for which
indemnity is sought hereunder and (ii) in any action brought by the Vendors
to assert any related claim, counterclaim or right of subrogation under
Subsection 4.2 hereof. No claim or demand may be settled or compromised by
the Company without the written consent of the Vendors, such consent not to
be unreasonably withheld.
4.2 Subrogation: The Vendors shall be subrogated to the claims and rights of
-----------
the Company and NLR and its Subsidiaries as against other Persons, and
shall be entitled to contribution from any such Person, with respect to any
Claim paid by the Vendors under this Section 4, but only after the Company
shall have received payment in full of its Claim with interest.
4.3 Insurance: The Vendors shall not be liable to the Company with respect to
---------
any liability of NLR and its Subsidiaries if and to the extent that:
(a) NLR and its Subsidiaries would have been insured against such
liability under the insurance coverage maintained by NLR and its
Subsidiaries, as the case may be, prior to the Closing; and
(b) NLR and its Subsidiaries are not insured against such liability at the
time the liability arises.
The Company shall take all steps necessary to make claims under NLR and its
Subsidiaries's insurance policies with respect to any liability of NLR and
its Subsidiaries which could be the subject of any Claim and the Vendors
shall not be liable to the Company with respect to any Claim to the extent
that they have been prejudiced by a failure to make such claim. Nothing in
this Subsection 4.3 shall effect any rights of subrogation.
4.4 Time Limitations: The Vendors will have no liability (for indemnification
-----------------
or otherwise) with respect to any representation or warranty, or covenant
or obligation to be performed and complied with prior to the Time of
Closing [other than 2.2, 2.8 and 2.12], unless on or before the second
anniversary of the Closing Date the Company notifies the Vendors of a Claim
pursuant to Section 4.1.
5 GENERAL MATTERS
5.1 Governing Law and Arbitration: This Agreement shall be governed by and
--------------------------------
construed in accordance with the laws of the State of Washington. Any
dispute arising out of or in connection with this Agreement, including any
question regarding its existence, validity or termination, shall be
referred to and finally resolved by arbitration under the rules of the
American Arbitration Association which rules are deemed to be incorporated
by reference into this clause. The number of arbitrators shall be one. The
place of arbitration shall be King County, Washington. The language of
arbitration shall be English. The parties expressly waive and forego any
right to punitive, exemplary or other similar damages unless an applicable
statute requires the award of such damages or that compensatory damages be
increased in a specified manner. This provision is not intended to apply to
any award of arbitration costs to a party to compensate for dilatory or bad
faith conduct in the arbitration pursuant to this paragraph. The prevailing
parties shall also be entitled to an award of reasonable attorney's fees.
5.2 Entire Agreement: Except as may be otherwise expressly agreed between the
-----------------
parties in writing, this Agreement and the Share Exchange Agreements and
the Schedules attached thereto and hereto constitute the entire agreements
between the parties pertaining to the subject matter and there are no oral
statements, warranties, representations or other agreements between the
parties in connection with the subject matter except as specifically set
forth or referred to herein. No amendment, waiver or termination of this
Agreement shall be binding unless executed in writing by the party or
parties to be bound thereby. No waiver of any provision of this Agreement
shall be deemed or shall constitute a waiver of any other provision nor
shall any such waiver constitute a continuing waiver unless otherwise
expressly provided.
5.3 Assignment: The Vendors will not assign their interests in this Agreement
----------
without prior written consent of the Company.
5.4 Non-Waiver: No investigations made by or on behalf of the Company at any
----------
time shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representations or warranties made herein or
pursuant hereto.
5.5 Indemnification in Respect of Brokers or Agents: The Vendors severally
----------------------------------------------------
indemnify and save harmless the Company and NLR and its Subsidiaries from
and against any claim for commission or other remuneration payable or
alleged to be payable to any broker, agent or other intermediary who claims
to be so entitled by virtue of a contract or other arrangement solely with
such Vendor.
5.6 Expenses: All costs and expenses incurred in connection with this Agreement
--------
and the transactions contemplated hereby shall be paid by the party
incurring such expense. The Company shall not bear any legal, accounting or
other costs incurred by the Vendors. The Vendors shall not bear any legal,
accounting or other costs incurred by the Company.
5.7 Notices: Any notice or other communication required or permitted to be
-------
given hereunder shall be in writing and delivered or sent by overnight
mail, overnight delivery or telefax and, if telefaxed, shall be deemed to
have been received on the next Business Day following transmittal and
acknowledgment of receipt by the recipient's telefax machine or if
delivered by hand shall be deemed to have been received at the time it is
delivered. Notices addressed to an individual shall be validly given if
left on the premises indicated below. Notice of change of address shall
also be governed by this Subsection 5.7. Notices shall be delivered or
addressed as follows:
(a) If to the Company:
MicroAccel, Inc.
0000 Xxxxx Xxxxxx XX 000
Xxxxxxx, XX 00000-0000
(b) If to the Vendors:
Xxxxxx & Xxxxxxx LLP
#3400 - 0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax (000) 000-0000
Attention: Xxxxxxx Xxx, Esq.
Any party may give written notice of change of address in the same manner,
in which event such notice shall thereafter be given to it as above
provided at such changed address.
5.8 Time of the Essence: Time shall be of the essence of this Agreement.
----------------------
5.9 Severability: If any covenant, obligation or agreement of this Agreement,
------------
or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement or the
application of such covenant, obligation or agreement to persons or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each covenant, obligation
and agreement of this Agreement shall be separately valid and enforceable
to the fullest extent permitted by the law.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
5.10 Counterparts: This Agreement may be executed in any number of counterparts,
------------
each of which when delivered shall be deemed to be an original and all of
which together shall constitute one and the same document. A signed
facsimile or telecopied copy of this Agreement shall be effectual and valid
proof of execution and delivery.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first hereinabove written.
SIGNED, SEALED AND DELIVERED by )
XXXXXXX X. XXXXXXX in the presence of: )
)
)
)
/s/ )
---------------------------------------
Witness Signature )
)
)
--------------------------------------- ) --------------------------------
Address ) XXXXXXX X. XXXXXXX
) (aka XXXXX XXXXX)
)
)
--------------------------------------- )
Occupation )
SIGNED, SEALED AND DELIVERED by
XXXX XXXXXX in the presence of: )
)
)
)
/s/ )
--------------------------------------- --------------------------------
Witness Signature ) XXXX XXXXXX
)
)
---------------------------------------
Address )
)
)
---------------------------------------
Occupation )
MICROACCEL, INC.
Per:
---------------------------------------
Xxxxxxx X. Xxxx, President and Director
