Exhibit 10.48
TRAVELBYUS-IT INCORPORATED
AND
TRAVELBYUS-GALAXSEA INCORPORATED
PURCHASE OF ASSETS
OF
INTERNATIONAL TOURS, INC.
AND
GALAXSEA CRUISES AND TOURS, INC.
AND
PURCHASE OF SHARES OF
I. T. CRUISE, INC.
October 13, 1999
THIS AGREEMENT is made as of the 13/th/ day of October 1999.
A M O N G:
INTERNATIONAL TOURS, INC., a corporation incorporated
under the laws of the State of Oklahoma
("International Tours")
OF THE FIRST PART
- AND -
GALAXSEA CRUISES AND TOURS, INC., a corporation
incorporated under the laws of the State of Oklahoma
("GalaxSea")
OF THE SECOND PART
("International Tours" and "GalaxSea" sometimes
individually referred as a "Vendor" and collectively
as the "Vendors")
- AND -
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION,
a corporation incorporated under the laws of the
State of Delaware
("NAGE")
OF THE THIRD PART
- AND -
XXXXXXXXXX.XXX LTD., a corporation incorporated under
the laws of the Province of Ontario
("Travelbyus")
OF THE FOURTH PART
- AND -
TRAVELBYUS-IT INCORPORATED, a corporation incorporated under the laws
of the State of Delaware
("Travelbyus-IT")
-2-
OF THE FIFTH PART
- AND -
TRAVELBYUS-GALAXSEA INCORPORATED, a corporation
incorporated under the laws of the State of
Delaware
("Travelbyus-GalaxSea")
OF THE SIXTH PART
WHEREAS International Tours is engaged in the marketing of leisure travel
programs to its network of affiliated retail travel agencies and all business
ancillary thereto (the "International Tours Business"), I.T. Cruise, Inc. ("IT
Cruise"), is engaged in the marketing of cruise programs and promotions to
retail travel agencies affiliated with International Tours and all business
ancillary thereto (the "IT Cruise Business") and GalaxSea is engaged in the
marketing of cruise programs and promotions to retail travel agencies affiliated
with GalaxSea and all business ancillary thereto (the "GalaxSea Business");
AND WHEREAS the Vendors have agreed to sell to Travelbyus-IT and Travelbyus-
GalaxSea (collectively, the "Purchaser") and the Purchaser has agreed to
purchase from the Vendors certain property, assets and undertaking of the
Vendors relating to the Purchased Business (as hereinafter defined), all upon
and subject to the terms and conditions hereof and NAGE has agreed to sell to
Travelbyus-IT and Travelbyus-IT has agreed to purchase from NAGE, all of the
issued and outstanding shares of IT Cruise, all on and subject to the terms and
conditions hereof;
AND WHEREAS NAGE has a direct interest in GalaxSea and will benefit from the
sale of the GalaxSea Assets (as herein defined) and receipt of the GalaxSea
Purchase Price (as herein defined) and has accordingly agreed to provide certain
covenants, agreements, representations and warranties and indemnities in favour
of the Purchaser and Travelbyus as hereinafter provided;
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective
covenants, agreements, representations, warranties and indemnities of the
parties herein contained and for other good and valuable consideration (the
receipt and sufficiency of which are acknowledged by each party), the parties
hereto hereby covenant and agree as follows:
-3-
ARTICLE 1 - INTERPRETATION
1.1 Defined Terms
For the purposes of this Agreement, unless the context otherwise requires, the
following terms shall have the meanings set out below and grammatical variations
of such terms shall have corresponding meanings:
(1) "Accounts Receivable" means all accounts receivable and trade accounts
receivable accruing after the Effective Date;
(a) "Affiliate" has the meaning set out in the OBCA;
(b) "Associate" has the meaning set out in the OBCA;
(c) "Assumed Liabilities" has the meaning set out in section 4.1;
(d) "Business Day" means any day, other than a Saturday or a Sunday, on
which the principal chartered banks located in Toronto, Canada are
open for business during normal banking hours;
(e) "Claim" has the meaning set out in section 11.3;
(f) "Clearance/Mailing Obligation" means the obligation of NAGE and
International Tours to:
(i) forthwith prepare an information circular in prescribed form
outlining the terms and conditions of the sale of the Purchased
Shares and the GalaxSea Assets, providing requisite disclosure
as to the business and affairs of the Purchaser and Travelbyus
and describing the written consent resolution of International
Tours as majority shareholder (the "Information Circular");
(ii) file forthwith after its prompt preparation the Information
Circular with the SEC;
(iii) expeditiously and diligently clear any and all deficiencies
raised by the SEC; and
(iv) within 10 days after either; (a) clearance of the Information
Circular by the SEC; or (b) 10 days after the SEC has duly
received the Information Circular and has taken no action, to
mail the Information Circular (as revised or amended, if
applicable) to shareholders of NAGE in accordance with
requisite securities and corporate law and to advise the
Purchaser and Travelbyus in writing of the mailing date and the
date which will therefore be the Escrow Release Date;
-4-
(g) "Closing" means, as the case may be: (i) the consummation of the
purchase and sale of the International Tours Assets effective as of
the Effective Date commencing as of the Time of Closing on the Closing
Date; and (ii) the consummation in escrow (pursuant to the Closing
Escrow Agreement) of the purchase and sale of the Purchased Shares and
the GalaxSea Assets effective as of the Effective Date, commencing as
of the Escrow Release Date;
(h) "Closing Date" means October 13, 1999 or such other date as the
Vendors, NAGE, the Purchaser and Travelbyus may mutually determine;
(i) "Closing Escrow Agreement" means the Closing Escrow Agreement to be
entered into by the Parties and GPM on Closing with respect to the
Purchased Shares and the GalaxSea Assets;
(j) "Contract" means any agreement, indenture, contract, lease, deed of
trust, licence, option, instrument or other commitment, whether
written or oral;
(k) "Date Data" means any data or input which includes an indicate of or
reference to date;
(l) "Direct Claim" has the meaning set out in section 11.3;
(m) "Effective Date" means October 1, 1999;
(n) "Employee Plans" means all pension, retirement, disability, medical,
dental or other health insurance plans, life insurance or other death
benefit plans, any stock option, bonus or other incentive plans,
vacation benefit plans, severance plans or other employee benefit
plans or arrangements to which the applicable company is a party or by
which the applicable company is bound or with respect to which
payments or contributions the applicable company may otherwise have
any liability;
(o) "Encumbrance" means any encumbrance, lien, charge, hypothec, pledge,
mortgage, title retention agreement, security interest of any nature,
adverse claim, exception, reservation, easement, right of occupation,
any matter capable of registration against title, option, right of
pre-emption, privilege or any Contract to create any of the foregoing;
(p) "Escrow Agent" means Montreal Trust Company of Canada;
(q) "Escrow Release Date" means the earlier of (i) the date upon which the
escrow pursuant to the Closing Escrow Agreement is released as a
result of NAGE's and International Tour's fulfilment of the
Clearance/Mailing Obligation, whereupon Closing of the purchase and
sale of the Purchased Shares shall be deemed to have occurred as of
the Time of Closing on the Closing Date and whereupon Closing of the
purchase and sale of the
-5-
Galaxy Assets shall be deemed to have occurred as of the Effective
Date; and (ii) March 31, 2000;
(r) "Excluded Assets" has the meaning set out in section 2.2;
(s) "Excluded Liabilities" has the meaning set out in section 4.2;
(t) "GalaxSea Assets" means the following property and assets used in
connection with or otherwise relating to the GalaxSea Business,
including for greater certainty and without limitation, those owned,
leased and/or operated by GalaxSea West;
(i) Equipment. The machinery, equipment, fixtures, furniture,
furnishings, parts, and other fixed assets of or relating to
or used in the operation of the GalaxSea Business as described
in Schedule 1.1(t)(i);
(ii) Prepaid Expenses. The prepaid expenses and the benefits
thereof relating to the GalaxSea Business as described in
Schedule 1.1(t)(ii);
(iii) Agreements and Contracts. The rights under leases of personal
and real property (whether as lessee or lessor), orders or
contracts for the provision of goods or services (whether as
buyer or seller), distribution, associate, supplier, franchise
and agency agreements and all other Contracts of or relating
to the GalaxSea Business, described in Schedule 1.1(t)(iii)
and all Accounts Receivable with respect thereto;
(iv) Licences. All of the Licences described in Schedule 1.1(t)(iv)
and all Accounts Receivable with respect thereto;
(v) Intellectual Property. All trade or brand names, business
names, trade marks, trade xxxx registrations and applications,
service marks, service xxxx registrations and applications,
copyrights, copyright registrations and applications, patents,
internet domain names and registrations, 1-800 telephone
numbers, patent registrations and applications and other
patent rights (including any patents issued on such
applications or rights), trade secrets, proprietary
manufacturing information and know-how, equipment and parts
lists and descriptions, instructions manuals, inventions,
inventors' notes, research data, unpatented blue prints,
drawings and designs, formulae, processes, technology and
other intellectual property, together with all rights under
licences, registered user agreements, technology transfer
agreements and other agreements or instruments relating to any
of the foregoing (collectively, the "Intellectual Property"),
including without limitation, the trademarks, business names,
design marks,
-6-
copyrights, patents, licences and agreements described in
Schedule 1.1(t)(v);
(vi) Computer Software. The computer software, including all rights
under licences and other agreements or instruments relating
thereto set out in Schedule 1.1(t)(vi);
(vii) Books and Records. All books and records (other than minute
books and related corporate records and those required by law
to be retained by GalaxSea, copies of which will be made
available to the Purchaser and Travelbyus, provided that the
minute books and related corporate records of GalaxSea West
will be provided to Travelbyus-GalaxSea on Closing) including
without limitation, customer lists, sales records, price lists
and catalogues, sales literature, vouchers, advertising and
related material, employee manuals, (but not personnel
records), supply records, inventory records and correspondence
files (together with, in the case of any such information that
is stored electronically, the media on which the same is
stored);
(viii) Goodwill. All goodwill, together with the exclusive right for
the Purchaser to represent itself as carrying on the GalaxSea
Business in succession to GalaxSea and GalaxSea West and the
right to use any words indicating that the GalaxSea Business
is so carried on, including the Purchaser's right to use the
name "GalaxSea", or any variation thereof, as part of the name
or style under which the GalaxSea Business or any part thereof
is carried on by the Purchaser; and
(ix) Shares. All of the issued and outstanding shares (the
"GalaxSea West Shares") in the capital of GalaxSea West
Corporation ("GalaxSea West").
(u) "GalaxSea Business" has the meaning set out in the preambles to this
Agreement;
(v) "GalaxSea Financial Statements" means the unaudited financial
statements of GalaxSea as at the year ended December 31, 1998 and for
the six months ending June 30, 1999;
(w) "GalaxSea Purchase Price" has the meaning set out in section 2.1(b);
(x) "GalaxSea Transferred Employees" means the employees listed on
Schedule 1.1(x);
(y) "Governmental Authority" means any government, regulatory authority,
governmental department, agency, commission, board, tribunal, crown
corporation or court or other law, rule or regulation-making entity
having or
-7-
purporting to have jurisdiction on behalf of any nation or province or
state or other subdivision thereof or any municipality, district or
other subdivision thereof;
(z) "GPM" means Glast, Xxxxxxxx & Xxxxxx, PC;
(aa) "Holdback" means the US$100,000 to be placed in escrow pursuant to the
Representation and Warranty Escrow Agreement;
(bb) "Indemnified Party" has the meaning set out in section 11.3;
(cc) "Indemnifying Party" has the meaning set out in section 11.3;
(dd) "Information Circular" has the meaning set out in the definition of
Clearance/Mailing Obligation;
(ee) "Intellectual Property" has the meaning set out in subsection
1.1(t)(v);
(ff) "International Tours Assets" means the following property and assets
used in connection with or otherwise relating to the International
Tours Business;
(i) Equipment. The machinery, equipment, fixtures, furniture,
furnishings, parts, and other fixed assets of or relating to or
used in the operation of the International Tours Business
described in Schedule 1.1(ff)(i);
(ii) Prepaid Expenses. The prepaid expenses and benefits thereof
relating to the International Tours Business described in
Schedule 1.1(ff)(ii);
(iii) Agreements and Contracts. The rights under leases of personal
and real property (whether as lessee or lessor), orders or
contracts for the provision of goods or services (whether as
buyer or seller), distribution, associate, supplier, franchise,
and agency agreements and all other Contracts, of or relating
to the International Tours Business described in Schedule
1.1(ff)(iii) and all Accounts Receivable with respect thereto;
(iv) Licences. All of the Licences described in Schedule 1.1(ff)(iv)
and all Accounts Receivable with respect thereto;
(v) Intellectual Property. All Intellectual Property including
without limitation, the trademarks, business names, design
marks, copyrights, patents, licences and agreements described
in Schedule 1.1(ff)(v);
-8-
(vi) Computer Software. The computer software, including all rights
under licences and other agreements or instruments relating
thereto set out in Schedule 1.1(ff)(vi);
(vii) Books and Records. All books and records (other than minute
books and related corporate records and those required by law
to be retained by International Tours, copies of which will be
made available to the Purchaser and Travelbyus), including
without limitation, customer lists, sales records, price lists
and catalogues, sales literature, vouchers, advertising and
related material, sales records, employee manuals, (but not
personnel records), supply records, inventory records and
correspondence files (together with, in the case of any such
information that is stored electronically, the media on which
the same is stored); and
(viii) Goodwill. All goodwill, together with the exclusive right for
the Purchaser to represent itself as carrying on the
International Tours Business in succession to International
Tours and the right to use any words indicating that the
International Tours Business is so carried on, including the
Purchaser's right to use the name "International Tours", or
any variation thereof, as part of the name or style under
which the International Tours Business or any part thereof is
carried on by the Purchaser;
(gg) "International Tours Business" has the meaning set out in the
preambles to this Agreement;
(hh) "International Tours Financial Statements" means the unaudited
financial statements of International Tours as at the year ended
December 31, 1998 and for the six months ended June 30, 1999;
(ii) "International Tours Purchase Price" has the meaning set out in
section 2.1(a);
(jj) "International Tours Stock Component" has the meaning set out in
section 2.1(a);
(kk) "International Tours Transferred Employees" means the employees who
are listed in Schedule 1.1(kk);
(ll) "IT Cruise Assets" means all property and assets of IT Cruise,
including for greater certainty and without limitation, the following:
(i) Equipment. The machinery, equipment, fixtures, furniture,
furnishings, parts, and other fixed assets of or relating to or
used in the operation of the IT Cruise Business described in
Schedule 1.1(ll)(i);
-9-
(ii) Prepaid Expenses. The prepaid expenses and the benefits
thereof relating to IT Cruise described in Schedule
1.1(ll)(ii);
(iii) Agreements and Contracts. The rights under leases of personal
and real property (whether as lessee or lessor), orders or
contracts for the provision of goods or services (whether as
buyer or seller), distribution, associate, supplier, franchise
and agency agreements and all other Contracts of or relating
to IT Cruise, described in Schedule 1.1(ll)(iii) and all
Accounts Receivable with respect thereto;
(iv) Licences. All of the Licences described in Schedule
1.1(ll)(iv) and all Accounts Receivable with respect thereto;
(v) Intellectual Property. All Intellectual Property including
without limitation, the trademarks, business names, design
marks, copyrights, patents, licences and agreements described
in Schedule 1.1(ll)(v);
(vi) Computer Software. The computer software, including all rights
under licences and other agreements or instruments relating
thereto set out in Schedule 1.1(ll)(vi);
(vii) Books and Records. All books and records (including minute
books and related corporate records) including without
limitation, customer lists, sales records, price lists and
catalogues, sales literature, vouchers, advertising and
related material, sales records, employee manuals, (but not
personnel records), supply records, inventory records and
correspondence files (together with, in the case of any such
information that is stored electronically, the media on which
the same is stored); and
(viii) Goodwill. All goodwill;
(mm) "IT Cruise Business" has the meaning set out in the preambles to this
Agreement;
(nn) "IT Cruise Purchase Price" has the meaning set out in section 2.3;
(oo) "IT Cruise Cash Component" has the meaning set out in section 2.3;
(pp) "IT Cruise Financial Statements" means the unaudited financial
statements of IT Cruise as at the year ended December 31, 1998 and for
the six months ended June 30, 1999;
(qq) "IT Cruise Stock Component" has the meaning set out in section 2.3;
(rr) Intentionally Deleted;
-10-
(ss) "Leased Premises" has the meaning set out in section 6.1(h);
(tt) "Licences" means all licences, permits, approvals, consents,
certificates, registrations and authorizations (whether
governmental, regulatory or otherwise;
(uu) "LOI" means the letter agreement executed as of March 30, 1999
between the Vendors, IT Cruise, NAGE and Xxxxxxxxxxxxxx.xxx Inc., as
amended April 7, 1999 and assigned to Travelbyus on July 23, 1999;
(vv) "Losses" means, in respect of any matter, all claims, demands,
proceedings, losses, damages, liabilities, deficiencies, costs and
expenses (including without limitation, all legal and other
professional fees and disbursements, interest, penalties and amounts
paid in settlement) arising directly or indirectly as a consequence
of such matter;
(ww) "Management Agreement" means the interim management agreement to be
entered into by GalaxSea, NAGE, IT Cruise, Travelbyus and the
Purchaser on Closing, which agreement shall be effective as of the
Effective Date;
(xx) "OBCA" means the Business Corporations Act, Ontario;
(yy) "Other Amounts" has the meaning set out in section 11.1(d);
(zz) "Parties" means collectively, the Vendors, NAGE, Travelbyus and the
Purchaser and "Party" means any one of them;
(aaa) "Purchased Assets" means collectively the International Tours Assets
and the GalaxSea Assets;
(bbb) "Purchased Business" means collectively, the International Tours
Business and the GalaxSea Business;
(ccc) "Purchased Shares" means all of the issued and outstanding shares in
the capital of IT Cruise;
(ddd) "Purchaser" has the meaning set out in the preambles to this
Agreement;
(eee) "Representation and Warranty Escrow Agreement" means the
representation and warranty escrow agreement to be entered into by
the Parties and the Escrow Agent with respect to the Holdback;
(fff) "SEC" means the Securities and Exchange Commission;
(ggg) "Taxes" means and includes without limitation, all taxes, duties,
fees, premiums, assessments, imposts, levies and other charges of
any kind whatsoever imposed by any Governmental Authority, together
with all interest, penalties, fines, additions to tax or other
additional amounts
-11-
imposed in respect thereof, including without limitation, those
levied on or measured by or referred to as income, gross receipts,
profits, capital transfer, land transfer, sales, goods and services,
use, value-added, excise, stamp, withholding, business, franchising,
property, payroll, employment, health, social services, education
and social security taxes, all surtaxes, all customs duties and
import and export taxes, all license, franchise and registration
fees and all employment insurance, health insurance and United
States and other government pension plan premiums;
(hhh) "Third Party" has the meaning set out in section 11.3;
(iii) "Third Party Claim" has the meaning set out in section 11.3;
(jjj) "Time of Closing" means 10:00 a.m. (Toronto time) on the Closing
Date, or such other time on the Closing Date as the Parties may
mutually determine;
(kkk) "Travelbyus Financial Statements" means the audited financial
statements of Travelbyus as at the year ended December 31, 1998;
(lll) "TSE" means The Toronto Stock Exchange; and
(mmm) "WSE" means the Winnipeg Stock Exchange.
1.2 Currency
Unless otherwise indicated, all dollar amounts in this Agreement are expressed
in United States funds.
1.3 Sections and Headings
The division of this Agreement into Articles, sections and subsections and the
insertion of headings are for convenience of reference only and shall not affect
the interpretation of this Agreement. Unless otherwise indicated, any reference
in this Agreement to an Article, section, subsection or Schedule refers to the
specified Article, section or subsection of or Schedule to this Agreement.
1.4 Number, Gender and Persons
In this Agreement, words importing the singular number only shall include the
plural and vice versa, words importing gender and words importing persons shall
include individuals, corporations, partnerships, associations, trusts,
unincorporated organizations, governmental bodies and other legal or business
entities of any kind whatsoever.
-12-
1.5 Accounting Principles
Any reference in this Agreement to generally accepted accounting principles
refers to generally accepted accounting principles that have been established in
the United States of America, including those approved from time to time by the
Financial Accounting Standards Board or any successor body thereto.
1.6 Entire Agreement
This Agreement together with the documents contemplated herein constitute the
entire agreement between the Parties with respect to the subject matter hereof
and supersede all prior agreements, understandings, negotiations and
discussions, whether written or oral including for greater certainty and without
limitation, the LOI. There are no conditions, covenants, agreements,
representations, warranties or other provisions, express or implied, collateral,
statutory or otherwise, relating to the subject matter hereof except as herein
provided.
1.7 Time of Essence
Time shall be the essence of this Agreement.
1.8 Applicable Law
This Agreement shall be construed, interpreted and enforced in accordance with,
and the respective rights and obligations of the Parties shall be governed by,
the laws of the State of Texas and each Party irrevocably and unconditionally
submits to the non-exclusive jurisdiction of the state and federal courts
located in Dallas County, Texas and all courts competent to hear appeals
therefrom.
1.9 Successors and Assigns
This Agreement shall enure to the benefit of and shall be binding on and
enforceable by the Parties and, where the context so permits, their respective
successors and permitted assigns. No Party may assign any of its rights or
obligations hereunder without the prior written consent of the other Parties.
1.10 Amendments and Waivers
No amendment or waiver of any provision of this Agreement shall be binding on
any Party unless consented to in writing by such Party. No waiver of any
provision of this Agreement shall constitute a waiver of any other provision nor
shall any waiver constitute a continuing waiver unless otherwise provided.
1.11 Schedules
The following Schedules are attached to and form part of this Agreement:
Schedule 1.1(t)(i) - Equipment etc. of the GalaxSea Business
Schedule 1.1(t)(ii) - Prepaid Expenses of the GalaxSea Business
-13-
Schedule 1.1(t)(iii) - Agreements and Contracts of the GalaxSea Business
Schedule 1.1(t)(iv) - Licenses of the GalaxSea Business
Schedule 1.1(t)(v) - Intellectual Property of the GalaxSea Business
Schedule 1.1(t)(vi) - Computer Software of the GalaxSea Business
Schedule 1.1(ff)(i) - Equipment etc. of the International Tours Business
Schedule 1.1(ff)(ii) - Prepaid Expenses of the International Tours Business
Schedule 1.1(ff)(iii) - Agreements and Contracts of the International Tours
Business
Schedule 1.1(ff)(iv) - Licences of the International Tours Business
Schedule 1.1(ff)(v) - Intellectual Property of the International Tours
Business
Schedule 1.1(ff)(vi) - Computer Software of the International Tours Business
Schedule 1.1(kk) - International Tours Transferred Employees
Schedule 1.1(ll)(i) - Equipment etc. of IT Cruise
Schedule 1.1(ll)(ii) - Prepaid Expenses of IT Cruise
Schedule 1.1(ll)(iii) - Agreements and Contracts of IT Cruise
Schedule 1.1(ll)(iv) - Licences of IT Cruise
Schedule 1.1(ll)(v) - Intellectual Property of IT Cruise
Schedule 1.1(ll)(vi) - Computer Software of IT Cruise
Schedule 1.1(x) - GalaxSea Transferred Employees
Schedule 2.2(a)(i) - Prepaid Fees, etc. of the GalaxSea Business
Schedule 2.2(a)(ii) - Prepaid Fees, etc. of the International Tours
Business
Schedule 3.3 - Allocation of Purchase Price among Purchased Assets
Schedule 6.1(a) - Jurisdictions in which International Tours is
authorized to carry on business
Schedule 6.1(d)(i)(A) - Third Party Contractual Consents for the
International Tours Business
Schedule 6.1(f) - Location of the International Tours Assets
Schedule 6.1(p)(i) - International Tours Financial Statements
Schedule 6.1(p)(iii) - Competing Business of the International Tours
Business
Schedule 6.1(r) - Legal and Regulatory Proceedings
Schedule 6.1(s) - Customers of the International Tours Business
Schedule 6.1(t) - Suppliers of the International Tours Business
Schedule 6.1(u) - Employee Plans and Collective Agreements of the
International Tours Business
Schedule 6.2(a) - Jurisdictions in which IT Cruise is authorized to
carry on business
Schedule 6.2(h) - Location of IT Cruise Assets
Schedule 6.2(j) - Authorized and Issued Capital of IT Cruise
Schedule 6.2(n) - Third Party Consents of IT Cruise
Schedule 6.2(r) - IT Cruise Financial Statements
Schedule 6.2(v) - Tax Disclosure of IT Cruise
Schedule 6.2(x) - Bank Accounts of IT Cruise
Schedule 6.2(aa)(iii) - Competing Business of the IT Cruise Business
Schedule 6.2(ac) - Customers of IT Cruise
Schedule 6.2(ad) - Suppliers of IT Cruise
Schedule 6.3(a) - Jurisdictions in which GalaxSea is authorized to
carry on business
Schedule 6.3(cc) - Bank Accounts of GalaxSea West
-14-
Schedule 6.3(d)(i)(A) - Third Party Contractual Consents for the GalaxSea
Business
Schedule 6.3(e) - Location of the GalaxSea Assets
Schedule 6.3(o)(i) - GalaxSea Financial Statements
Schedule 6.3(o)(iii) - Competing Business of the GalaxSea Business
Schedule 6.3(r) - Customers of the GalaxSea Business
Schedule 6.3(s) - Suppliers of the GalaxSea Business
Schedule 6.3(t) - Employee Plans and Collective Agreements of the
GalaxSea Business
Schedule 7.1(f) - Travelbyus Financial Statements
Schedule 10.1(d) - Third Party Contractual Consents for IT Cruise
Schedule 11 - Service Marks
Schedule 12 - Disclosures Regarding International Tours Customers
Schedule 13 - Disclosures Regarding International Tours Suppliers
Schedule 14 - Disclosures Regarding GalaxSea Suppliers
Schedule 15 - Disclosures Regarding Accounts Payable
ARTICLE 2 - PURCHASE AND SALE
2.1 Purchase and Sale of Purchased Assets
-------------------------------------
Subject to the terms and conditions of this Agreement:
(a) International Tours shall convey, sell, assign and transfer to
Travelbyus-IT and Travelbyus IT shall purchase from International
Tours, effective as of the Effective Date commencing on the Time of
Closing on the Closing Date, the International Tours Assets, free and
clear of any and all Encumbrances, in exchange for the sum of
US$666,666 (the "International Tours Cash Component") and 333,333
common shares in the capital of Travelbyus(the "International Tours
Stock Component"); provided that on Closing the International Tours
Stock Component shall be placed in escrow pursuant to the Closing
Escrow Agreement, to be released on the terms and conditions therein
contained (the "International Tours Purchase Price"); and
(b) GalaxSea shall convey, sell, assign and transfer to Travelbyus-
GalaxSea and Travelbyus-GalaxSea shall purchase from GalaxSea
effective as of the Effective Date commencing on the Escrow Release
Date pursuant to the Closing Escrow Agreement, the GalaxSea Assets,
free and clear of any and all Encumbrances, in exchange for the sum of
US$285,000 (the "GalaxSea Purchase Price");
2.2 Excluded Assets
For greater certainty, and without limitation, the Purchased Assets shall not
include any of the following property and assets of the Vendors (collectively,
the "Excluded Assets"):
-15-
(a) Cash. Save and except in respect of the prepaid fees, commissions and
royalties identified on Schedules 2.2(a)(i) and 2.2(a)(ii), (which
amounts will be paid on Closing to the Purchaser) all cash on hand or
in banks or other depositions of the Vendors as of the Effective Date;
(b) Accounts Receivable. All Accounts Receivable due or accruing due to
the Vendors in connection with the International Tours Business and
the GalaxSea Business for the period arising prior to the Effective
Date including without limitation, pro-rated, accrued vendor
productivity bonuses;
(c) Inter-company Debt. All indebtedness of NAGE or IT Cruise and any of
their Associates or Affiliates to any of the Vendors or IT Cruise
and/or all indebtedness of any of the Vendors or IT Cruise and their
Associates or Affiliates to any of the Vendors, IT Cruise or NAGE as
of the Effective Date; and
(d) Income Taxes. All income tax or payroll tax instalments paid by either
of the Vendors and the right to receive any refund of income taxes
paid by either of the Vendors as of the Effective Date.
2.3 Purchase and Sale of Purchased Shares
Subject to the terms and conditions of this Agreement, NAGE shall convey, sell,
assign and transfer to Travelbyus-IT and Travelbyus-IT shall purchase from NAGE,
effective as of the Effective Date commencing on the Escrow Release Date, the
Purchased Shares, free and clear of any and all Encumbrances, in exchange for
(the "IT Cruise Purchase Price") US$1,048,334 (the "IT Cruise Cash Component")
and 666,667 common shares in the capital of Travelbyus (the "IT Cruise Stock
Component").
ARTICLE 3 - PURCHASE
3.1 Purchase Price
The Purchase Price shall be satisfied by the payment of the International Tours
Purchase Price, the GalaxSea Purchase Price and the IT Cruise Purchase Price.
3.2 Payment of Purchase Price
At the Time of Closing, the Purchaser shall satisfy and pay the Purchase Price
to the Vendors and NAGE as follows:
(a) Travelbyus-IT shall deliver to International Tours a certified cheque
or bank draft representing the International Tours Cash Component less
US$83,333 previously advanced as and by way of a deposit pursuant to
the LOI and less US$33,333 on account of the Holdback;
-16-
(b) Travelbyus-GalaxSea shall deliver to GalaxSea a certified cheque
representing the GalaxSea Purchase Price less the sum of US$35,000
previously advanced as and by way of a deposit pursuant to the LOI and
less US$33,333 on account of the Holdback;
(c) Travelbyus-IT shall deliver to NAGE a certified cheque or bank draft
representing the IT Cruise Cash Component less US$131,667 previously
advanced as and by way of a deposit pursuant to the LOI and less
US$33,334 on account of the Holdback;
(d) Travelbyus-IT shall deliver to International Tours share certificates
representing the International Tours Stock Component and International
Tours shall forthwith deposit such share certificates with the Escrow
Agent pursuant to the Closing Escrow Agreement;
(e) Travelbyus-IT shall deliver to NAGE share certificates representing
the IT Cruise Stock Component and NAGE shall forthwith deposit such
share certificates with the Escrow Agent pursuant to the Closing
Escrow Agreement;
(f) the Purchaser shall deliver to the applicable Vendor a certified
cheque or bank draft in the amount of the prepaid deposits listed on
Schedules 1.1(t)(ii) and 1.1(ff)(ii) against delivery to the Purchaser
by the Vendors of a certified cheque or bank draft in the amount of
the prepaid fees listed on Schedules 2.2(a)(i) and 2.2(a)(ii); and
(g) In addition to payment of the Purchase Price, the Purchaser shall
deliver to GalaxSea, International Tours IT Cruise and NAGE, as
applicable, certified cheques or bank drafts in an amount equal to
payment made by any of them after September 30, 1999 for expenses
accruing and paid after September 30, 1999 relating to the
International Tours Business, the GalaxSea Business and the IT Cruise
Business.
3.3 Allocation of Purchase Price
Each of the Vendors and the Purchaser covenant and agree to allocate the
Purchase Price among the Purchased Assets in accordance with the terms and
conditions of this Agreement and specifically Schedule 3.3 and to report the
sale and purchase of the Purchased Assets for all federal, state and local tax
purposes in a manner consistent with such allocation. Travelbyus does hereby
covenant and agree that it is the understanding of Travelbyus that the general
accepted practice in the Province of Ontario, consistent with requisite
securities laws, rules and policies published by the Ontario Securities
Commission and various telephone conversations between counsel to Travelbyus and
the Ontario Securities Commission, is that securities issued outside of the
Province of Ontario (i.e. to non-residents of Ontario) will have a 90 day
restriction on their tradeability, subject always to requisite and applicable
rules relative to the holding and sale of stock by insiders of public companies
such as Travelbyus.
-17-
3.4 Transfer Taxes
The Purchaser shall be liable for and shall pay all federal and state sales
taxes (including any retail sales taxes) and all other taxes, duties, fees or
other like charges of any jurisdiction properly payable in connection with the
transfer of the Purchased Assets by the Vendors to the Purchaser.
3.5 Payment of Accounts Payable
Each Vendor hereby covenants and agrees to be responsible for and pay upon
demand by the creditor (unless payment has previously been made by suh Vendor or
is disputed in good faith by such Vendor) all debts, liabilities and obligations
in respect of or relating to the Purchased Business and the Purchased Assets of
such Vendor (exclusive of the Assumed Liabilities) up to and including the
Effective Date save and except as set forth on Schedule 15. At the request of
the Purchaser, the applicable Vendor shall provide written evidence of payment
of accounts payable. To the extent that there is a dispute with any particular
customer and/or supplier with respect to the validity of a particular account
payable (or a portion thereof), the applicable Vendor shall provide notice to
the Purchaser and Travelbyus together with particular details of such dispute
and the applicable Vendor and the Purchaser shall attempt to resolve the dispute
with the supplier, bearing in mind that such supplier may be a valued supplier
of the Purchased Business.
ARTICLE 4 - ASSUMPTION OF LIABILITIES
4.1 Assumption of Certain Liabilities by the Purchaser
Subject to the provisions of this Agreement, as part of the consummation of the
purchase and sale of the Purchased Assets, the Purchaser shall only assume and
pay in the normal course as they fall due and discharge, perform and fulfil, the
obligations and liabilities of each Vendor (the "Assumed Liabilities") in
respect of the Contracts described in Schedules 1.1(t)(iii) and 1.1(ff)(iii),
the Licences described in Schedules 1.1(t)(iv) and 1.1(ff)(iv) and the
employment obligations in respect of the GalaxSea Transferred Employees and the
International Tours Transferred Employees. For greater certainty and without
limitation, Travelbyus-IT shall assume the Assumed Liabilities with respect to
the International Tours Business, with effect as of the Effective Date, as of
the Time of Closing on the Closing Date and Travelbyus-GalaxSea shall assume the
Assumed Liabilities with respect to the GalaxSea Business, with effect as of the
Effective Date, as of the Escrow Release Date.
4.2 Non-Assumption of Excluded Liabilities
For greater certainty and without limitation, the Purchaser shall only be liable
for the Assumed Liabilities and the Purchaser is not assuming and shall not be
liable or responsible for any other debt, liability or obligation of the Vendors
incurred in connection with the Purchased Business or any other business (the
"Excluded Liabilities").
-18-
ARTICLE 5 - CLOSING DATE AND TRANSFER OF POSSESSION
5.1 Closing Date and Place of Closing
Closing shall occur on the Closing Date at the offices of Xxxxxxx Xxxxx &
Xxxxxxxxx, Suite 2100, 00 Xxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx, X0X 0X0 or at such
other place as the Parties may agree upon as the place of Closing.
5.2 Transfer and Delivery of Purchased Assets
Subject to compliance with the terms and conditions hereof: (i) the transfer of
possession of the GalaxSea Assets shall be deemed to take effect as of the
Effective Date, commencing at midnight on the Escrow Release Date; and (ii) the
transfer of possession of the International Tours Assets shall be deemed to take
effect as of midnight on the Closing Date as of the Effective Date.
5.3 Further Assurances
From time to time subsequent to Closing and both before and after the Escrow
Release Date, each of the Vendors and NAGE shall at all times, promptly execute
and deliver all such documents, including without limitation, all such
additional conveyances, transfers, consents and other assurances and shall do
all such other acts and things as the Purchaser and Travelbyus, acting
reasonably, may from time to time request be executed or done in order to better
evidence, perfect or effectuate any provision of this Agreement or of any
agreement or other document executed pursuant to this Agreement or any of the
respective obligations intended to be created hereby or thereby.
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties relating to the International Tours Business
and International Tours
International Tours represents and warrants to Travelbyus-IT and Travelbyus as
follows, and acknowledges that Travelbyus-IT and Travelbyus are relying on such
representations and warranties in connection with the purchase of the
International Tours Assets:
(a) Organization. International Tours is a corporation duly incorporated
and organized and validly existing under the laws of the State of
Oklahoma and has the corporate power to own or lease the International
Tours' Assets, to carry on the International Tours Business and to
enter into this Agreement and to perform its obligations hereunder.
International Tours is duly qualified as a corporation to do business
in each jurisdiction in which the nature of the International Tours
Business or the International Tours Assets makes such qualification
necessary and as set out in Schedule 6.1(a), except where the failure
to be so qualified would not have a material adverse effect on the
International Tours Business or the International Tours Assets.
-19-
(b) Authorization. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder have been duly
authorized by all necessary corporate action on the part of
International Tours. This Agreement has been duly authorized, executed
and delivered by International Tours and is a legal, valid and binding
obligation of International Tours, enforceable against International
Tours in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency and other laws affecting the rights
of creditors generally and except that equitable remedies may be
granted only in the discretion of a court of competent jurisdiction.
(c) No Other Agreements to Purchase. No person other than Travelbyus-IT or
Travelbyus has any written or oral agreement or option or any right or
privilege (whether by law, pre-emptive or contractual) capable of
becoming an agreement or option for the purchase or acquisition from
International Tours of any of the International Tours Assets.
(d) No Violation. The execution and delivery of this Agreement by
International Tours and the consummation of the transactions herein
provided for will not result in:
(i) the breach or violation of any of the provisions of, or
constitute a default under, or conflict with or cause the
acceleration of any obligation of International Tours under:
(A) any Contract to which International Tours is a party or by
which International Tours is or its properties or assets are
bound, following receipt of the consents to assignment
contemplated hereby in Schedule 6.1(d)(i)(A);
(B) any provision of the Articles of Incorporation (and any
amendments thereto) or by-laws or resolutions of the board
of directors (or any committee thereof) or shareholders of
International Tours;
(C) any judgment, decree, order or award of any court,
governmental body or arbitration body having jurisdiction
over International Tours;
(D) any Licence or authorization held by International Tours or
necessary for the operation of the International Tours
Business; or
(E) any applicable law, statute, ordinance, regulation or rule
applicable to International Tours, the International Tours
Business or any of the International Tours Assets; or
(ii) the creation or imposition of any Encumbrance against the
International Tours Business or any of the International Tours Assets.
-20-
Except as set forth on Schedule 12 or 13, International Tours has no
reason to believe that consents to the assignment of the Contracts
which are to be procured post-Closing, as identified on Schedule
6.1(d)(i)(A) will not be duly received, but makes no guarantees or
assurances in this regard.
(e) Acts of Bankruptcy. International Tours is not insolvent, has not
proposed a compromise or arrangement to its creditors generally, has
not taken any proceeding with respect to a compromise or arrangement,
has not taken any proceeding to have itself declared bankrupt or
wound-up, has not taken any proceeding to have a receiver appointed of
any part of its assets and at present, no encumbrancer or receiver has
taken possession of any of its property and no execution or distress
is enforceable or levied upon any of its property and no petition for
a receiving order in bankruptcy is filed against it.
(f) Sufficiency of International Tours Assets. The International Tours
Assets are sufficient to carry on the International Tours Business.
Any equipment, computers and other tangible assets comprising the
International Tours Assets are in good operating condition and are in
a state of good repair and maintenance. All tangible assets of the
International Tours Business are situated at the locations set out in
Schedule 6.1(f).
(g) Title to Personal Property. The International Tours Assets are
owned beneficially and, where appropriate, of record by International
Tours with good and marketable title thereto, free and clear of all
Encumbrances. No person has any written or oral agreement, option,
understanding or commitment or any right or privilege capable of
becoming an agreement, for the purchase from International Tours of
any of the International Tours Assets and there has been no
assignment, subletting or granting of any licence (of occupation or
otherwise) of or in respect of any of the International Tours Assets.
International Tours does not own any real property or any shares in
the capital of IT Cruise.
(h) Leased Property. International Tours is not a party to any lease or
agreement to lease in respect of any real property, whether as lessor
or lessee, other than the right that has been granted by NAGE to
occupy a portion of the premises leased by NAGE and located at 00000
Xxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx (the "Leased Premises").
International Tours has the right to occupy and use a portion of the
Leased Premises, subject to the rights of GalaxSea and IT Cruise to
occupy a portion of the Leased Premises and the right of NAGE to
occupy the remainder of the Leased Premises.
(i) Intellectual Property. Schedule 1.1(ff)(v) sets out all registered or
pending or unregistered Intellectual Property (including particulars
of registration or application for registration) and all licences,
registered user
-21-
agreements and other Contracts that comprise or relate to the
Intellectual Property of International Tours. The Intellectual
Property of International Tours comprises all registered and
unregistered, trade or brand names, business names, trade marks,
service marks, copyrights, patents, trade secrets, know-how,
inventions, designs and other industrial or intellectual property
necessary to conduct the International Tours Business. International
Tours is the beneficial and, where applicable, the registered owner of
its Intellectual Property, free and clear of all Encumbrances, and is
not a party to or bound by any Contract or any other obligation
whatsoever that limits or impairs its ability to sell, transfer,
assign or convey, or that otherwise affects, its Intellectual
Property. Save as provided for in Schedule 1.1(ff)(v), no person has
been granted any interest in or right to use all or any portion of the
Intellectual Property. The conduct of the International Tours Business
does not infringe upon the industrial or intellectual property rights,
domestic or foreign, of any other person, nor has International Tours
received any notice that the conduct of the International Tours
Business, including the use of its Intellectual Property, infringes
upon or breaches any industrial or intellectual property rights of any
other person, and International Tours, after due inquiry, has no
knowledge of any infringement or violation of any of its rights in its
Intellectual Property. International Tours is not aware of any state
of facts that casts doubt on the validity of enforceability of any of
its Intellectual Property. International Tours has provided to
Travelbyus-IT and Travelbyus a true and complete copy of all
agreements, instruments and amendments thereto that comprise or relate
to its Intellectual Property.
(j) Insurance. International Tours has the International Tours Assets and
the International Tours Business insured against loss or damage on a
replacement cost basis and such insurance coverage will be continued
in full force and effect to and including the Closing Date.
International Tours is not in default with respect to any of the
provisions contained in any such insurance policy and has not failed
to give any notice or to present any claim under such insurance
policy, in a due and timely fashion.
(k) Agreements and Commitments. Except as described in Schedule
1.1(ff)(iii), International Tours is not a party to or bound by any
Contract relating to the International Tours Business or the
International Tours Assets. There is no oral agreement or Contract
relating to the International Tours Business or the International
Tours Assets which is material to the International Tours Business
which has not been disclosed in writing to Travelbyus-IT and
Travelbyus. International Tours has performed all of the obligations
required to be performed by it and is entitled to all benefits under,
and is not in default or alleged to be in default in respect of, any
Contract relating to the International Tours Business or the
International Tours Assets to which it is a party or by which it is
bound; all such Contracts are in good standing and in full force and
effect, and no event, condition or occurrence exists that, after
notice or lapse of time or both, would constitute a default under any
of the
-22-
foregoing, except as set forth on Schedule 1.1(ff)(iii). International
Tours has made available to Travelbyus-IT and Travelbyus a true and
complete copy of each Contract listed or described in Schedule
1.1(ff)(iii) and all amendments, variations, extensions and
modifications thereto. There is no requirement under any Contract
relating to the International Tours Business or the International
Tours Assets to which International Tours is a party or by which it is
bound and which constitute part of the International Tours Assets to
give any notice to, or to obtain the consent or approval of, any party
to such Contract relating to the consummation of the transactions
contemplated by this Agreement, except for the notifications, consents
and approvals described in Schedule 6.1(d)(i)(A). Except as set forth
on Schedule 12 or Schedule 13, International Tours has no reason to
believe that any of the Contracts relating to the International Tours
Business or the International Tours Assets will not be renewed, in the
ordinary course of business, from and after their respective expiry
dates on similar terms and conditions, but makes no guarantees or
assurances in this regard.
(l) Compliance with Laws; Governmental Authorization. International Tours
has complied in all material respects with all laws, statutes,
ordinances, regulations, rules, judgments, decrees or orders
applicable to the International Tours Business and/or the
International Tours Assets, including without limitation, those
relating to anti-competition and anti-combines. Neither International
Tours nor any of its directors, officers, agents, employees or other
persons acting on behalf of International Tours have, directly or
indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity, made any unlawful payments on behalf of International Tours
to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns from corporate funds or
knowingly made any false or fictitious entry on the books or records
of International Tours or made any bribe, rebate, pay-off, influence
payment, kickback or other unlawful payment on behalf of International
Tours. Schedule 1.1(ff)(iv) sets out a complete and accurate list of
all Licences held by or granted to International Tours and there are
no other Licences necessary to carry on the International Tours
Business or to own or lease any of the International Tours Assets.
Each Licence is valid, subsisting and in good standing and
International Tours is not in default or in breach of any Licence and,
to the knowledge of International Tours, no proceeding is pending or
threatened to revoke or limit any Licence. International Tours has
made available a true and complete copy of each Licence and all
amendments thereto to Travelbyus-IT and Travelbyus.
(m) Regulatory Consents and Approvals. There is no requirement to make
any filing with, give any notice to or to obtain any Licence, from any
governmental or regulatory agency or authority as a condition to the
lawful consummation of the transactions contemplated by this
Agreement, except for the filings, notifications, licences, permits,
certificates,
-23-
registrations, consents and approvals that relate solely to the
identity of Travelbyus-IT or the nature of any business carried on by
Travelbyus-IT.
(n) Books and Records. The books and records of International Tours fairly
and correctly set out and disclose, in accordance with generally
accepted accounting principles, the financial position of
International Tours as at the date hereof and all material financial
transactions of International Tours relating to the International
Tours Business have been accurately recorded in such books and
records.
(o) Absence of Changes. Since June 30, 1999, the International Tours
Business has carried on only in the ordinary and normal course
consistent with past practice and there has not been; (i) any material
adverse change in the condition (financial or otherwise), assets,
liabilities, operations, earnings, business or prospects of the
International Tours Business; (ii) any damage, destruction or loss
(whether or not covered by insurance) affecting the International
Tours Assets; or (iii) any obligation or liability (whether absolute,
accrued, contingent or otherwise, and whether due or to become due)
incurred by International Tours in connection with the International
Tours Business, other than those incurred in the ordinary and normal
course of the International Tours Business and consistent with past
practice.
(p) Non-Arm's Length Transactions. With respect to the International Tours
Business:
(i) Since June 30, 1999, International Tours has not made any
payment or loan to, or borrowed any moneys from and is not
otherwise indebted to, any officer, director, employee,
shareholder or any other person not dealing at arm's length with
International Tours or any Affiliate or Associate of any of the
foregoing, except as disclosed on the International Tours
Financial Statements attached as Schedule 6.1(p)(i) and except
for usual employee reimbursements and compensation paid in the
ordinary course of the International Tours Business; and
(ii) International Tours is not party to any Contract with any
officer, director, employee, shareholder or any other person not
dealing at arm's length with International Tours or any
Affiliate or Associate of any of the foregoing.
(iii) No officer, director, employee or shareholder of International
Tours or any other person not dealing at arm's length with
International Tours and no entity that is an Affiliate or
Associate of one or more of such individuals:
(a) owns, directly or indirectly, any interest in (except for
shares representing less than 1% of the outstanding shares
of any
-24-
class or series of any publicly traded company), or is an
officer, director, employee or consultant or, any person
that is, or is engaged in business as, a competitor of the
International Tours Business (other than IT Cruise and
GalaxSea and other than as set forth on Schedule
6.1(p)(iii)) or a lessor, lessee, supplier, distributor,
sales agent or customer of the International Tours Business
(other than IT Cruise and GalaxSea);
(b) owns, directly or indirectly, in whole or in part, any
property that International Tours uses in the operation of
the International Tours Business (other than IT Cruise and
GalaxSea); or
(c) has any cause of action or other claim whatsoever against,
or owes any amount to, International Tours in connection
with the International Tours Business, except for any
liabilities reflected in the International Tours Financial
Statements and claims in the ordinary course of business,
consistent with past practice.
(d) The International Tours Financial Statements have been
prepared in accordance with generally accepted accounting
principles (except that the unaudited financial statements
do not have footnotes and are subject to year end audit
adjustment) applied on a basis consistent with that of the
preceding period and present fairly:
1. all of the assets, liabilities and financial position
of International Tours as at the dates indicated; and
2. the sales, earnings, results of operation and changes
in financial position of International Tours for all of
the dates indicated.
(q) Taxes. International Tours has duly filed on a timely basis all tax
returns required to be filed by it and has paid all Taxes that are due
and payable, and all assessments, reassessments, governmental charges,
penalties, interest and fines due and payable by it, except for those
Taxes International Tours may be contesting in good faith.
International Tours has made adequate provision for Taxes payable in
respect of the International Tours Business for the current period and
any previous period for which Tax returns are not yet required to be
filed. There are no actions, suits, proceedings, investigations or
claims pending or, to the knowledge of International Tours, threatened
against International Tours in respect of Taxes, nor are any material
matters under discussion with any Governmental Authority with regard
to Taxes asserted by any such authority. International Tours has
withheld from each payment made to
-25-
any of its past or present employees, officers or directors, and to
any non-residents of the United States, the amount of all Taxes and
other deductions required to be withheld therefrom, and has paid the
same to the proper tax or other receiving officers within the time
required under applicable legislation.
(r) Litigation. Except as described in Schedule 6.1(r), there are no
actions, claims, suits or proceedings (whether or not purportedly on
behalf of International Tours) pending or, to the knowledge of
International Tours, threatened against or affecting International
Tours at law or in equity or before or by any federal, state,
municipal or other governmental department, court, commission, board,
bureau, agency or instrumentality, domestic or foreign, or before or
by an arbitrator or arbitration board, the resolution of which is
expected to have a material adverse effect on the International Tours
Business. International Tours is not aware of any grounds on which
any such action, suit or proceeding might be commenced with any
reasonable likelihood of success.
(s) Customers. Schedule 6.1(s) sets out all of the revenue generating
customers of the International Tours Business and the basis upon which
they are a customer (i.e. franchise agreement, agency agreement,
informal agreement, etc.). There has been no termination or
cancellation of, and no material modification or change thereto except
as described on Schedule 6.1(s). International Tours is not currently
aware and has no reason to believe that the benefits of any
relationship with a material number of the customers of the
International Tours Business will not continue after Closing in
substantially the same manner as prior to the date of this Agreement.
(t) Suppliers. Schedule 6.1(t) sets out all the suppliers of the
International Tours Business (those suppliers of the International
Tours Business that account for more than 5% of revenue for calendar
1998 are marked with an "m") and, except as described on Schedule
6.1(t), there has been no termination or cancellation of, and no
material modification or change in, International Tours' relationship
with any of the material suppliers. International Tours is not
currently aware and has no reason to believe that the benefits of any
relationship with a material number of the suppliers of the
International Tours Business will not continue after Closing in the
same manner as prior to the date of this Agreement. Notwithstanding
the foregoing, Travelbyus-IT acknowledges that supplier contracts are
negotiated annually at the end of each calendar year for the next
following year.
(u) Employee Plans. There are no Employee Plans with respect to the
International Tours Business other than those listed in Schedule
6.1(u).
(v) Collective Agreements. Save and except as disclosed on Schedule
6.1(u), International Tours has not made any agreements with any
labour
-26-
union or employee association nor made commitments to or conducted
negotiations with any labour union or employee association with
respect to any future agreements and International Tours is not aware
of any current attempts to organize or to establish any labour union
or employee association. There are no material controversies pending
or threatened between any labour union or employee organization and
International Tours. There are no pending or threatened representation
questions respecting the employees of International Tours and there
are no pending arbitration proceedings arising out of or under any
union contract.
(w) Year 2000 Readiness. To the knowledge of International Tours, the
software currently utilized by International Tours in connection with
the International Tours Business in its operation and the software
developed by or on behalf of International Tours in connection with
the International Tours Business and supplied to clients of
International Tours in connection with the International Tours
Business will function without error or interruption related to Date
Data, specifically including errors or interruptions from functions
which may involve Date Data from more than one century. To the
knowledge of International Tours, the software currently utilized by
International Tours in connection with the International Tours
Business, in its operation and developed by or on behalf of
International Tours in connection with the International Tours
Business and or otherwise supplied to clients of International Tours
in connection with the International Tours Business does not contain
any routines or devices introduced by International Tours or to the
knowledge of International Tours introduced by any other person or in
any other manner that could interfere with their use (including
without limitation, time locks, keys or bombs) or interfere with,
delete or corrupt data (commonly known as "viruses").
(x) Full Disclosure. Neither this Agreement nor any document to be
delivered by International Tours nor any certificate, report,
statement or other document furnished by International Tours in
connection with the negotiation of this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained
herein or therein not misleading. There has been no event,
transaction or information that has come to the attention of
International Tours that has not been disclosed to Travelbyus-IT and
Travelbyus in writing and that could reasonably be expected to have a
material adverse effect on the assets, business, earnings, prospects,
properties or condition (financial or otherwise) of the International
Tours Business and/or the International Tours Assets.
6.2 Representations and Warranties relating to the Purchased Shares, IT Cruise
and NAGE
NAGE represents and warrants to Travelbyus-IT and Travelbyus as follows, and
acknowledges that Travelbyus-IT and Travelbyus are relying on such
representations
-27-
and warranties in connection with its purchase of the Purchased Shares and its
purchase of the GalaxSea Assets including without limitation, the GalaxSea West
Shares:
(a) Organization. IT Cruise is a corporation duly incorporated and
organized and validly existing under the laws of the State of Oklahoma
and has the corporate power to own or lease its property and assets,
to carry on the IT Cruise Business. IT Cruise is duly qualified as a
corporation to do business in each jurisdiction in which the nature of
the IT Cruise Business or the IT Cruise Assets makes such
qualification necessary and as set out in Schedule 6.2(a), except
where the failure to be so qualified would not have a material adverse
effect on IT Cruise or the IT Cruise Business.
(b) Organization. NAGE is a corporation duly incorporated and validly
existing under the laws of the State of Delaware and has the corporate
power to own or lease its property, to carry on its business as now
being conducted by it, to enter into this Agreement and to perform its
obligations hereunder.
(c) Authorization. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder have been duly
authorized by all necessary corporate action on the part of NAGE save
and except as contemplated by the Clearance/Mailing Obligation. This
Agreement has been duly authorized, executed and delivered by NAGE and
is a legal, valid and binding obligation of NAGE, enforceable against
NAGE by Travelbyus-IT and Travelbyus in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency and
other laws affecting the rights of creditors generally and except that
equitable remedies may be granted only in the discretion of a court of
competent jurisdiction.
(d) No Violation. The execution and delivery of this Agreement by NAGE
and the consummation of the transactions herein provided for will not
result in:
(i) the breach or violation of any of the provisions of, or
constitute a default under, or conflict with or cause the
acceleration of any obligation of NAGE or IT Cruise, as the case
may be, under:
(A) any Contract to which NAGE or IT Cruise is a party or by
which NAGE or IT Cruise or their respective properties or
assets are bound;
(B) any provision of the Articles of Incorporation or by-laws or
resolutions of the board of directors (or any committee
thereof) or shareholders of NAGE or IT Cruise, subject to
satisfaction of the Clearance/Mailing Obligation;
-28-
(C) any judgment, decree, order or award of any court,
governmental body or arbitration body having jurisdiction
over NAGE or IT Cruise;
(D) any licence, permit, approval, consent or authorization held
by NAGE or IT Cruise or necessary to the operation of their
respective businesses; or
(E) any applicable law, statute, ordinance, regulation or rule
applicable to NAGE or IT Cruise, their respective businesses
or assets; or
(ii) the creation or imposition of any Encumbrance against the
business or the assets of NAGE, including for greater certainty
and without limitation, the Purchased Shares and/or the business
or the assets of IT Cruise including for greater certainty and
without limitation, the IT Cruise Assets and the IT Cruise
Business.
(e) Right to Sell. NAGE is the sole registered and beneficial owner of
the Purchased Shares with good and marketable title thereto free and
clear of all Encumbrances. NAGE has the exclusive right to sell,
transfer and assign the Purchased Shares to Travelbyus-IT as provided
in this Agreement subject to the Clearance/Mailing Obligation. The
Purchased Shares are not subject to the terms of any shareholders'
agreement, voting trust or voting agreement.
(f) No Other Agreements to Purchase. No person other than Travelbyus-IT
or Travelbyus has any written or oral agreement or option or any right
or privilege (whether by law, pre-emptive or contractual) capable of
becoming an agreement or option for the purchase or acquisition of the
Purchased Shares or any of the issued and outstanding shares in the
capital of IT Cruise.
(g) Acts of Bankruptcy. Neither NAGE nor IT Cruise is insolvent, has
proposed a compromise or arrangement to its creditors generally, has
taken any proceeding with respect to a compromise or arrangement, has
taken any proceeding to have itself declared bankrupt or wound-up, has
taken any proceeding to have a receiver appointed of any part of its
respective assets and at present, no encumbrancer or receiver has
taken possession of any of its respective property and no execution or
distress is enforceable or levied upon any of its respective property
and no petition for a receiving order in bankruptcy is filed against
it.
(h) Sufficiency of IT Cruise Assets. The IT Cruise Assets are sufficient
to carry on the IT Cruise Business. All equipment, computers and
other tangible assets comprising the IT Cruise Assets are in good
operating condition and are in a state of good repair and maintenance.
All tangible
-29-
assets of the IT Cruise Business are situated at the locations set out
in Schedule 6.2(h).
(i) No Litigation. There are no outstanding claims at law or in equity or
before any Governmental Authority pending or to NAGE's knowledge,
proposed or threatened, which would prevent NAGE from completing the
transaction contemplated by this Agreement.
(j) Capitalization. The authorized capital and the issued capital of IT
Cruise are as set forth in Schedule 6.2(j). All of the outstanding
shares in the capital of IT Cruise have been duly and validly issued
and are outstanding as fully paid and non-assessable shares. No
options, warrants or other rights to purchase shares or other
securities of IT Cruise and no securities or obligations convertible
into or exchangeable for shares or other securities of IT Cruise have
been authorized or agreed to be issued or are outstanding.
(k) Title to Personal Property. The IT Cruise Assets are owned
beneficially and, where appropriate, of record by IT Cruise with good
and marketable title thereto, free and clear of all Encumbrances. No
person has any written or oral agreement, option, understanding or
commitment or any right or privilege capable of becoming an agreement
for the purchase from IT Cruise of any of the IT Cruise Assets and
there has been no assignment, subletting or granting of any licence
(of occupation or otherwise) of or in respect of any of the IT Cruise
Assets. IT Cruise does not own or lease any real property.
(l) Intellectual Property. Schedule 1.1(ll)(v) sets out all registered or
pending or unregistered Intellectual Property of IT Cruise (including
particulars or registration or application for registration) and all
licences, registered user agreements and other Contracts that comprise
or relate to the Intellectual Property of IT Cruise. The Intellectual
Property of IT Cruise comprises all registered and unregistered, trade
or brand names, business names, trade marks, service marks,
copyrights, patents, trade secrets, know-how, inventions, designs and
other industrial or intellectual property necessary to conduct the IT
Cruise Business. IT Cruise is the beneficial and, where applicable,
the registered owner of its Intellectual Property, free and clear of
all Encumbrances, and is not a party to or bound by any Contract or
any other obligation whatsoever that limits or impairs its ability to
sell, transfer, assign or convey, or that otherwise affects, its
Intellectual Property, save as provided for in Schedule 1.1(ll)(v).
No person has been granted any interest in or right to use all or any
portion of the Intellectual Property of IT Cruise. The conduct of the
IT Cruise Business does not infringe upon the industrial or
intellectual property rights, domestic or foreign, of any other
person. NAGE is not aware of a claim of any infringement or breach of
any industrial or intellectual property rights of any person, nor has
NAGE received any notice that the conduct of the IT Cruise Business,
including the use of its
-30-
Intellectual Property, infringes upon or breaches any industrial or
intellectual property rights of any other person, and NAGE, after due
inquiry, has no knowledge of any infringement or violation of any of
the rights of IT Cruise in its Intellectual Property. NAGE is not
aware of any state of facts that casts doubt on the validity or
enforceability of any of the Intellectual Property of IT Cruise. NAGE
has provided to Travelbyus-IT and Travelbyus a true and complete copy
of all agreements, instruments and amendments thereto that comprise or
relate to the Intellectual Property of IT Cruise.
(m) Insurance. IT Cruise has the IT Cruise Assets and the IT Cruise
Business insured against loss or damage on a replacement cost basis
and such insurance coverage will be continued in full force and effect
to and including the Escrow Release Date. IT Cruise is not in default
with respect to any of the provisions contained in any such insurance
policy and has not failed to give any notice or to present any claim
under any such insurance policy, in a due and timely fashion.
(n) Agreements and Commitments. Except as described in Schedule
1.1(ll)(iii), IT Cruise is not a party to or bound by any Contract
relating to the IT Cruise Business or the IT Cruise Assets. There is
no oral agreement or Contract relating to the IT Cruise Business or
the IT Cruise Assets which is material to the IT Cruise Business which
has not been disclosed in writing to Travelbyus-IT and Travelbyus. IT
Cruise has performed all of the obligations required to be performed
by it and is entitled to all benefits under, and is not in default or
alleged to be in default in respect of, any Contract relating to the
IT Cruise Business or the IT Cruise Assets to which it is a party or
by which it is bound; all such Contracts are in good standing and in
full force and effect, and no event, condition or occurrence exists
that, after notice or lapse of time or both, would constitute a
default under any of the foregoing, except as set forth on Schedule
1.1(ll)(iii). NAGE has made available to Travelbyus-IT and Travelbyus
a true and complete copy of each Contract listed or described in
Schedule 1.1(ll)(iii) and all amendments, variations, extensions and
modifications thereto. There is no requirement under any Contract
relating to the IT Cruise Business or the IT Cruise Assets to which IT
Cruise is a party or by which it is bound and which constitute part of
the IT Cruise Assets to give any notice to, or to obtain the consent
or approval of, any party to such Contract relating to the
consummation of the transactions contemplated by this Agreement,
except for the notifications, consents and approvals described in
Schedule 6.2(n). Except as set forth on Schedule 12 or Schedule 13,
NAGE has no reason to believe that any of the Contracts relating to
the IT Cruise Business or the IT Cruise Assets will not be renewed in
the ordinary course of business from and after their respective expiry
dates on similar terms and conditions but makes no guarantees or
assurances in this regard.
-31-
(o) Compliance with Laws; Governmental Authorization. IT Cruise has
complied in all material respects with all laws, statutes, ordinances,
regulations, rules, judgments, decrees or orders applicable to the IT
Cruise Business and/or the IT Cruise Assets, including without
limitation, those relating to anti-combines or anti-competition.
Neither IT Cruise or NAGE nor any of their respective directors,
officers, agents, employees or other persons acting on behalf of IT
Cruise have, directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, made any unlawful payments on
behalf of IT Cruise to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns
from corporate funds or knowingly made any false or fictitious entry
on the books or records of IT Cruise or made any bribe, rebate, pay-
off, influence payment, kickback or other unlawful payment on behalf
of IT Cruise. Schedule 1.1(ll)(iv) sets out a complete and accurate
list of all Licences held by or granted to IT Cruise, and there are no
other licences, permits, approvals, consents, certificates,
registrations or authorizations necessary to carry on the IT Cruise
Business or to own or lease any of the IT Cruise Assets. Each Licence
is valid, subsisting and in good standing and IT Cruise is not in
default or in breach of any Licence and, to the knowledge of NAGE, no
proceeding is pending or threatened to revoke or limit any Licence.
NAGE has made available a true and complete copy of each Licence and
all amendments thereto to Travelbyus-IT and Travelbyus.
(p) Regulatory Consents and Approvals. There is no requirement to make
any filing with, give any notice to or to obtain any Licence or
approval of, any Governmental Authority as a condition to the lawful
consummation of the transactions contemplated by this Agreement,
except for the filings, notifications, licences, permits, certificates
that relate solely to the identity of Travelbyus-IT or the nature of
any business carried on by Travelbyus-IT.
(q) Books and Records. The books and records of IT Cruise fairly and
correctly set out and disclose, in accordance with generally accepted
accounting principles, the financial position of IT Cruise as at the
date hereof and all material financial transactions of IT Cruise
relating to the IT Cruise Business have been accurately recorded in
such books and records.
(r) IT Cruise Financial Statements. The IT Cruise Financial Statements
attached as Schedule 6.2(r) have been prepared in accordance with
generally accepted accounting principles (except that the unaudited
financial statements do not have footnotes and are subject to year end
audit adjustment) and present fairly:
(i) all of the assets, liabilities and financial position of IT
Cruise as at the dates indicated; and
-32-
(ii) the sales, earnings, results of operation and changes in
financial position of IT Cruise for all of the dates indicated.
(s) No Joint Venture Interests, etc. IT Cruise is not a partner,
beneficiary, trustee, co-tenant, joint venturer or otherwise a
participant in any partnership, trust, joint venture, co-tenancy or
other similar jointly owned business undertaking and IT Cruise has no
significant investment interests in any business owned or controlled
by any third person.
(t) Absence of Guarantees. IT Cruise has not given or agreed to give and
is not a party to or bound by any guarantee or indemnity in respect of
indebtedness or other obligations of any person or any other
commitment by which IT Cruise is, or is contingently, responsible for
such indebtedness or other obligations.
(u) Restrictive Covenants. IT Cruise is not a party to and is not bound
or affected by any commitment, agreement or document containing any
covenant expressly limiting the freedom of IT Cruise to compete in any
line of business anywhere in the world, transfer or move any of its
assets or operations or which materially or adversely affects the
business practices, operations or conditions of IT Cruise or the
continued operation of the IT Cruise Business after Closing on
substantially the same basis as the IT Cruise Business is presently
carried on.
(v) Tax Matters. IT Cruise has filed on a timely basis (within the time
and manner required by law) all federal and state income Tax returns
and election forms and the Tax returns of any other jurisdiction
required to be filed and all such returns and forms have been
completed accurately and correctly in all respects. As of the
Effective Date IT Cruise will have paid all Taxes (including for
greater certainty and without limitation, all federal, state and local
Taxes, assessments and reassessments or other imposts in respect of
income, business, assets or property) and all interest and penalties
thereon, for all previous years and all required quarterly instalments
due for the current fiscal year have been paid for which Tax returns
are not yet required to be filed. As of the Effective Date IT Cruise
will have provided adequate reserves for all Taxes for the periods
covered thereby, and such reserves are reflected in the IT Cruise
Financial Statements or in the books and records of IT Cruise. There
are no agreements, waivers or other arrangements providing for an
extension of time with respect to the filing of any Tax return by, or
payment of any Tax, governmental charge or deficiency by IT Cruise nor
are there any actions, suits, proceedings, investigations or claims
now threatened or pending against IT Cruise in respect of, or
discussions under way with any Governmental Authority relating to, any
such Tax or governmental charge or deficiency.
Except as set forth in Schedule 6.2(v), IT Cruise has not:
-33-
(i) acquired or had the use of any property from a person with whom
it was not dealing at arm's length other than at fair market
value;
(ii) disposed of any property to a person with whom it was not
dealing at arm's length for proceeds less than the fair market
value thereof; or
(iii) discontinued carrying on any business in respect of which non-
capital losses were incurred, and any non-capital losses which
IT Cruise has are not losses from property or business
investment losses;
There are no contingent Tax liabilities nor any grounds which would
prompt a reassessment. The schedules attached to the corporate income
Tax returns by IT Cruise for each taxation year reflect and disclose
all transactions to which IT Cruise was a party as required by
applicable revenue laws and all of the transactions to which IT Cruise
was a party and required by applicable revenue laws to be included
therein are reflected or disclosed in such financial statements and
schedules and the corporate income Tax returns and schedules have been
duly and accurately completed as required by such Acts.
(w) Corporate Records and Minute Books. The corporate records and minute
books of IT Cruise have been delivered or made available to
Travelbyus-IT and Travelbyus. The articles and by-laws of IT Cruise
are in full force and effect and no amendments have been made to the
same. The minute books, including the articles and by-laws of IT
Cruise include complete and accurate minutes of all meetings of the
directors or shareholders of IT Cruise, as applicable, held to date or
resolutions passed by the directors or shareholders on consent, since
the date of incorporation of IT Cruise. The share certificate book,
register of shareholders, register of transfers and register of
directors of IT Cruise are complete and accurate.
(x) Bank Accounts, etc. Schedule 6.2(x) sets forth a complete list of
every financial institution in which IT Cruise maintains any
depository account, trust account or safety deposit box and the names
of all persons authorized to draw on or who have access to such
accounts or safety deposit box.
(y) Judgments and Executions and Insolvency Proceedings. There are no
judgments or executions against IT Cruise which are outstanding and
unsatisfied. IT Cruise has not made any assignment for the benefit of
creditors nor has any receiving order been made against IT Cruise
under the provisions of any applicable bankruptcy or insolvency
legislation nor has any petition for such an order been served upon IT
Cruise.
-34-
(z) Absence of Changes. Since June 30, 1999, the IT Cruise Business has
been carried on only in the ordinary and normal course consistent with
past practice and there has not been; (i) any material adverse change
in the condition (financial or otherwise), assets, liabilities,
operations, earnings, business or prospects of the IT Cruise Business;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting the IT Cruise Assets; or (iii) any obligation or
liability (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) incurred by IT Cruise in connection with
the IT Cruise Business, other than those incurred in the ordinary and
normal course of the IT Cruise Business and consistent with past
practice.
(aa) Non-Arm's Length Transactions. With respect to the IT Cruise
Business:
(i) Since June 30, 1999, IT Cruise has not made any payment or loan
to, or borrowed any moneys from and is not otherwise indebted
to, any officer, director, employee, shareholder or any other
person not dealing at arm's length with IT Cruise or any
Affiliate or Associate of any of the foregoing, except as
disclosed on the IT Cruise Financial Statements and except for
usual employee reimbursements and compensation paid in the
ordinary course of the IT Cruise Business; and
(ii) IT Cruise is not party to any Contract with any officer,
director, employee, shareholder or any other person not dealing
at arm's length with IT Cruise or any Affiliate or Associate of
any of the foregoing.
(iii) No officer, director, employee or shareholder of IT Cruise or
any other person not dealing at arm's length with IT Cruise and
no entity that is an Affiliate or Associate of one or more of
such individuals:
(a) Owns, directly or indirectly, any interest in (except for
shares representing less than 1% of the outstanding shares
of any class or series of any publicly traded company), or
is an officer, director, employee or consultant of, any
person that is, or is engaged in business as, a competitor
of the IT Cruise Business or a lessor, lessee, supplier,
distributor, sales agent or customer of the IT Cruise
Business (other than International Tours and GalaxSea and
the persons or entities set forth on Schedule
6.2(aa)(iii));
(b) Owns, directly or indirectly, in whole or in part, any
property that IT Cruise uses in the operation of the IT
Cruise Business (other than International Tours and
GalaxSea);
-35-
(c) Has any cause of action or other claim whatsoever against,
or owes any amount to, IT Cruise in connection with the IT
Cruise Business, except for any liabilities reflected in
the IT Cruise Financial Statements and claims in the
ordinary course of business, consistent with past
practice.
(ab) Litigation. Except as described in Schedule 6.1(r), there are no
actions, claims, suits or proceedings (whether or not purportedly on
behalf of IT Cruise) pending or, to the best knowledge of NAGE, after
due enquiry, threatened against or affecting IT Cruise at law or in
equity or before or by any federal, state, municipal or other
governmental department, court, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before or by an arbitrator or
arbitration board the resolution of which is expected to have a
material adverse effect on the IT Cruise Business and/or the IT Cruise
Assets. NAGE is not aware of any ground on which any such action,
suit or proceeding might be commenced with any reasonable likelihood
of success.
(ac) Customers. Schedule 6.2(ac) sets out all of the revenue generating
customers of IT Cruise and the basis upon which they are a customer
(i.e. franchise agreement, agency agreement, informal arrangement,
etc.). There has been no termination or cancellation of, and no
material modification or change in IT Cruise's relationship with any
such customer or group of customers. NAGE is currently not aware and
has no reason to believe that the benefits of any relationship with a
material number of the customers of IT Cruise will not continue after
Closing in substantially the same manner as prior to the date of this
Agreement.
(ad) Suppliers. Schedule 6.2(ad) sets out all of the suppliers of IT
Cruise (those suppliers of IT Cruise accounting for more than 5% of
revenue for calendar 1998 are marked with an "m") and, except as
described in Schedule 6.2(d), there has been no termination or
cancellation of, and no material modification or change in, IT
Cruise's relationship with any of the material suppliers. NAGE is not
currently aware and has no reason to believe that the benefits of any
relationship with a material number of the suppliers of IT Cruise will
not continue after Closing in the same manner as prior to the date of
this Agreement. Notwithstanding the foregoing, Travelbyus-IT
acknowledges that supplier contracts are negotiated annually as at the
end of each calendar year for the following year.
(ae) Permits and Licenses. IT Cruise has all necessary Licenses and other
authorizations required to carry on and conduct the IT Cruise Business
and to own, lease or operate the IT Cruise Assets at the places and in
the manner in which the IT Cruise Business is conducted. Schedule
1.1(ll)(iv) contains a full, complete and accurate list of such
Licenses and other authorizations.
(af) Employee Plans. There are no Employee Plans in force.
-36-
(ag) Collective Agreements. IT Cruise has not made any agreements with any
labour union or employee association nor made commitments to or
conducted negotiations with any labour union or employee association
with respect to any future agreements and NAGE is not aware of any
current attempts to organize or to establish any labour union or
employee association. There are no material controversies pending or
threatened between any labour union or employee organization and IT
Cruise. There are no pending or threatened representation questions
respecting the employees of IT Cruise and there are no pending
arbitration proceedings arising out of or under any union contract.
(ah) Vacation Pay, etc. All vacation pay, bonuses, commissions and other
emoluments due or payable to any employees of IT Cruise are reflected
and have been accrued in the books of account of IT Cruise.
(ai) Year 2000 Readiness. To the knowledge of NAGE the software currently
utilized by IT Cruise in its operation and the software developed by
or on behalf of IT Cruise and supplied to clients of IT Cruise will
function without error or interruption related to Date Data,
specifically including errors or interruptions from functions which
may involve Date Data from more than one century. To the knowledge of
NAGE, the software currently utilized by IT Cruise in its operation
and developed by or on behalf of IT Cruise and or otherwise supplied
to clients of IT Cruise does not contain any routines or devices
introduced by IT Cruise or to the knowledge of NAGE introduced by any
other person or in any other manner that could interfere with their
use (including without limitation, time locks, keys or bombs) or
interfere with, delete or corrupt data (commonly known as "viruses").
(aj) Full Disclosure. Neither this Agreement nor any document to be
delivered by NAGE in connection with IT Cruise or the GalaxSea Assets
nor any certificate, report, statement or other document furnished by
NAGE with respect to IT Cruise or the GalaxSea Assets in connection
with the negotiation of this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or
therein not misleading. There has been no event, transaction or
information that has come to the attention of NAGE that has not been
disclosed to Travelbyus-IT and Travelbyus in writing and that could
reasonably be expected to have a material adverse effect on the
assets, business, earnings, prospects, properties or condition
(financial or otherwise) of IT, the IT Cruise Business, the IT Cruise
Assets, the GalaxSea Assets or the GalaxSea Business.
6.3 Representations and Warranties relating to the GalaxSea Business and
GalaxSea Assets
GalaxSea and NAGE, jointly and severally, represent and warrant to Travelbyus-
GalaxSea and
-37-
Travelbyus are relying on such representations and warranties in connection with
the purchase of the GalaxSea Assets including for greater certainty and without
limitation, the GalaxSea West Shares:
(a) Organization. Each of GalaxSea and GalaxSea West is a corporation duly
incorporated and organized and validly existing under the laws of the
State of Oklahoma and the State of California, respectively, and has
the corporate power to own or lease its property and the GalaxSea
Assets, to carry on the GalaxSea Business as now being conducted by it
and, with respect to GalaxSea, to enter into this Agreement and to
perform its obligations hereunder. Each of GalaxSea and GalaxSea West
is duly qualified as a corporation to do business in each jurisdiction
in which the nature of the GalaxSea Business or the GalaxSea Assets
makes such qualification necessary and as set out in Schedule 6.3(a),
except where the failure to be so qualified would not have a material
adverse effect on the GalaxSea Business and/or the GalaxSea Assets.
(b) Authorization. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder have been
authorized by all necessary corporate action on the part of GalaxSea
save and except for the Clearance/Mailing Obligation. This Agreement
has been duly authorized, executed and delivered by GalaxSea and is a
legal, valid and binding obligation of GalaxSea, enforceable against
GalaxSea by Travelbyus-GalaxSea and Travelbyus in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency
and other laws affecting the rights of creditors generally and except
that equitable remedies may be granted only in the discretion of a
court of competent jurisdiction.
(c) No Other Agreements to Purchase. No person other than Travelbyus-
GalaxSea or Travelbyus has any written or oral agreement or option or
any right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option for the purchase or
acquisition from GalaxSea of any of the GalaxSea Assets or from
GalaxSea West of any of the issued or unissued shares in the capital
of GalaxSea West.
(d) No Violation. The execution and delivery of this Agreement by GalaxSea
and the consummation of the transactions herein provided for will not
result in:
(i) The breach or violation or any of the provisions of, or
constitute a default under, or conflict with or cause the
acceleration of any obligation of GalaxSea or GalaxSea West
under:
(A) any Contract to which GalaxSea or GalaxSea West is a party
or by which GalaxSea or GalaxSea West is or their respective
properties or assets are bound, following receipt
-38-
of the consents to assignment contemplated hereby as set out
in Schedule 6.3(d)(i)(A);
(B) any provision of the Articles of Incorporation (and any
amendments thereto) or by-laws or resolutions of the board
of directors (or any committee thereof) or shareholders of
GalaxSea or GalaxSea West;
(C) any judgment, decree, order or award of any court,
governmental body or arbitration body having jurisdiction
over GalaxSea or GalaxSea West;
(D) any licence, permit, approval, consent or authorization held
by GalaxSea or GalaxSea West or necessary to the operation
of the GalaxSea Business; or
(E) any applicable law, statute, ordinance, regulation or rule
applicable to GalaxSea, GalaxSea West, the GalaxSea Business
or any of the GalaxSea Assets; or
(ii) the creation or imposition of any Encumbrance against the
GalaxSea Business or on any of the GalaxSea Assets, including
without limitation, the GalaxSea West Shares or the assets or
business of GalaxSea West.
Except as set forth on Schedule 6.3(r) or Schedule 14 GalaxSea has no
reason to believe that consents to the assignment of the Contracts
which are to be procured post-Closing as identified on Schedule
6.3(d)(i)(A) will not be duly received but makes no guarantees or
assurances in this regard.
(e) Sufficiency of GalaxSea Assets. The GalaxSea Assets are sufficient to
carry on the GalaxSea Business. All equipment, computers and other
tangible assets comprising the GalaxSea Assets are in good operating
condition and are in a state of good repair and maintenance. All
tangible assets of the GalaxSea Business are situated at the locations
set out in Schedule 6.3(e). GalaxSea is the sole registered and
beneficial owner of the GalaxSea West Shares with good and marketable
title thereto, free and clear of all Encumbrances. GalaxSea has the
exclusive right to sell, transfer and assign the GalaxSea West Shares
to Travelbyus-GalaxSea as provided in this Agreement subject to the
Clearance/Mailing Obligation. The GalaxSea West Shares are not subject
to the terms of any shareholders' agreement, voting trust or voting
agreement. No person other than Travelbyus-GalaxSea or Travelbyus has
any written or oral agreement or option or any right or privilege
(whether by law, pre-emptive or contractual) capable of becoming an
agreement or option for the purchase or acquisition of the GalaxSea
West Shares or any of the issued and outstanding shares in the capital
of GalaxSea West.
-39-
(f) Acts of Bankruptcy. Neither GalaxSea nor GalaxSea West is insolvent,
has proposed a compromise or arrangement to its respective creditors
generally, has taken any proceeding with respect to a compromise or
arrangement, has taken any proceeding to have itself declared bankrupt
or wound-up, has taken any proceeding to have a receiver appointed of
any part of its respective assets and at present, no encumbrancer or
receiver has taken possession of any of its respective property and no
execution or distress is enforceable or levied upon any of its
respective property and no petition for a receiving order in
bankruptcy is filed against it.
(g) Title to Personal Property. The GalaxSea Assets are owned beneficially
and, where appropriate, of record by GalaxSea or GalaxSea West with
good and marketable title thereto, free and clear of all Encumbrances.
(h) Intellectual Property. Schedule 1.1(t)(v) sets out all registered or
pending or unregistered Intellectual Property of GalaxSea and GalaxSea
West (including particulars of registration or application for
registration) and all licences, registered user agreements and other
Contracts that comprise or relate to the Intellectual Property of
GalaxSea and GalaxSea West. The Intellectual Property of GalaxSea and
GalaxSea West comprises all registered and unregistered, trade or
brand names, business names, trade marks, service marks, copyrights,
patents, trade secrets, know-how, inventions, designs and other
industrial or intellectual property necessary to conduct the GalaxSea
Business. GalaxSea and/or GalaxSea West is the beneficial and, where
applicable, the registered owner of the Intellectual Property of
GalaxSea and GalaxSea West, free and clear of all Encumbrances, and is
not a party to or bound by any Contract or any other obligation
whatsoever that limits or impairs its ability to sell, transfer,
assign or convey, or that otherwise affects, the Intellectual Property
of GalaxSea and GalaxSea West. No person has been granted any interest
in or right to use all or any portion of the Intellectual Property of
GalaxSea or GalaxSea West. The conduct of the GalaxSea Business does
not infringe upon the industrial or intellectual property rights,
domestic or foreign, of any other person. GalaxSea is not aware of a
claim of any infringement or breach of any industrial or intellectual
property rights of any other person, nor has GalaxSea received any
notice that the conduct of the GalaxSea Business, including the use of
the Intellectual Property of GalaxSea or GalaxSea West, infringes upon
or breaches any industrial or intellectual property rights of any
other person, and GalaxSea, after due inquiry, has no knowledge of any
infringement or violation of any rights in the Intellectual Property
of GalaxSea or GalaxSea West. GalaxSea is not aware of any state of
facts that casts doubt on the validity or enforceability of any of the
Intellectual Property of GalaxSea or GalaxSea West. GalaxSea has
provided to Travelbyus-GalaxSea and Travelbyus a true and complete
copy of all agreements, instruments and
-40-
amendments thereto that comprise or relate to the Intellectual
Property of GalaxSea and GalaxSea West.
(i) Insurance. GalaxSea and GalaxSea West have the GalaxSea Assets and the
GalaxSea Business insured against loss or damage by all insurable
hazards or risks on a replacement cost basis and such insurance
coverage will be continued in full force and effect to and including
the Escrow Release Date. Neither GalaxSea nor GalaxSea West is in
default with respect to any of the provisions contained in any such
insurance policy and has not failed to give any notice or to present
any claim under any such insurance policy, in a due and timely
fashion.
(j) Agreements and Commitments. Except as described in Schedule
1.1(t)(iii), neither GalaxSea nor GalaxSea West is a party to or bound
by any Contract relating to the GalaxSea Business or the GalaxSea
Assets. There is no oral agreement or Contract relating to the
GalaxSea Business or the GalaxSea Assets which is material to the
GalaxSea Business which has not been disclosed in writing to
Travelbyus-GalaxSea and Travelbyus. GalaxSea and GalaxSea West have
performed all of the obligations required to be performed by them and
are entitled to all benefits under, and are not in default or alleged
to be in default in respect of, any Contract relating to the GalaxSea
Business or the GalaxSea Assets to which they are a party or by which
they are bound; all such Contracts are in good standing and in full
force and effect, and no event, condition or occurrence exists that,
after notice or lapse of time or both, would constitute a default
under any of the foregoing, except as set forth on Schedule
1.1(t)(iii). GalaxSea has made available to Travelbyus-GalaxSea and
Travelbyus a true and complete copy of each Contract listed or
described in Schedule 1.1(t)(iii) and all amendments, variations,
extensions and modifications thereto. There is no requirement under
any Contract relating to the GalaxSea Business or the GalaxSea Assets
to which GalaxSea or GalaxSea West is a party or by which they are
bound and which constitute part of the GalaxSea Assets to give any
notice to, or to obtain the consent or approval of, any party to such
Contract relating to the consummation of the transactions contemplated
by this Agreement, except for the notifications, consents and
approvals described in Schedule 6.3(d)(i)(A). Except as set forth on
Schedule 6.3(r) or Schedule 14, GalaxSea has no reason to believe that
any of the Contracts relating to the GalaxSea Business or the GalaxSea
Assets will not be renewed in the ordinary course of business from and
after their respective expiry dates on similar terms and conditions
but makes no guarantees or assurances in this regard.
(k) Compliance with Laws: Governmental Authorization. Each of GalaxSea and
GalaxSea West has complied in all material respects with all laws,
statutes, ordinances, regulations, rules, judgments, decrees or orders
applicable to the GalaxSea Business and/or the GalaxSea Assets,
including without limitation, those relating to anti-combines or anti-
-41-
competition. Neither GalaxSea nor GalaxSea West nor any of their
respective directors, officers, agents, employees or other persons
acting on behalf of GalaxSea or GalaxSea West have, directly or
indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity, made any unlawful payments on behalf of GalaxSea or GalaxSea
West to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns from corporate
funds or knowingly made any false or fictitious entry on the books or
records of GalaxSea or GalaxSea West or made any bribe, rebate, pay-
off, influence payment, kickback or other unlawful payment on behalf
of GalaxSea or GalaxSea West. Schedule 1.1(t)(iv) sets out a complete
and accurate list of all Licences held by or granted to GalaxSea and
GalaxSea West and there are no other Licences necessary to carry on
the GalaxSea Business or to own or lease any of the GalaxSea Assets.
Each Licence is valid, subsisting and in good standing and neither
GalaxSea nor GalaxSea West is in default or breach of any Licence and,
to the knowledge of GalaxSea, no proceeding is pending or threatened
to revoke or limit any Licence. GalaxSea has made available a true and
complete copy of each Licence and all amendments thereto to
Travelbyus-GalaxSea and Travelbyus. For greater certainty and without
limitation, notwithstanding the disclosure set forth in Schedule
6.3(k), to the knowledge of GalaxSea, neither GalaxSea nor GalaxSea
West is in default of any franchise legislation as GalaxSea and
GalaxSea West have discontinued selling franchise and as applicable
legislation with respect to the filing of Uniform Franchise Offering
Circulars only applies to entities that actively sell and/or market
franchises and therefore at the present time, neither GalaxSea nor
GalaxSea West must be registered in any state under applicable
franchise legislation in order to conduct the GalaxSea Business. The
notation that GalaxSea "must also obtain approvals from certain of the
fifteen states prior to selling its Marketing Associates Program in
order to confirm the program no longer constitutes a franchise" should
in no way be taken to mean that GalaxSea and/or GalaxSea West can not
carry on the GalaxSea Business as currently conducted.
(l) Regulatory Consents and Approvals. There is no requirement to make any
filing with, give any notice to or to obtain any licence, permit,
certificate, registration, authorization, consent or approval of, any
governmental or regulatory agency or authority as a condition to the
lawful consummation of the transactions contemplated by this
Agreement, except for the filings, notifications, licences, permits,
certificates, registrations, consents and approvals that relate solely
to the identity of Travelbyus-GalaxSea or the nature of any business
carried on by Travelbyus-GalaxSea.
(m) Books and Records. The books and records of GalaxSea and GalaxSea
West fairly and correctly set out and disclose, in accordance with
generally accepted accounting principles, the financial position of
-42-
GalaxSea and GalaxSea West as at the date hereof, and all material
financial transactions of GalaxSea and GalaxSea West relating to the
GalaxSea Business have been accurately recorded in such books and
records.
(n) Absence of Changes. Since June 30, 1999, the GalaxSea Business has
been carried on only in the ordinary and normal course consistent with
past practice and there has not been; (i) any material adverse change
in the condition (financial or otherwise), assets, liabilities,
operations, earnings, business or prospects of the GalaxSea Business;
(ii) any damage, destruction or loss (whether or not covered by
insurance affecting the GalaxSea Assets; or (iii) any obligation or
liability (whether absolute, accrued, contingent other otherwise, and
whether due or to become due) incurred by GalaxSea of GalaxSea West in
connection with the GalaxSea Business, other than those incurred in
the ordinary and normal course of the GalaxSea Business and consistent
with past practice.
(o) Non-Arm's Length Transactions. With respect to the GalaxSea Business:
(i) Since June 30, 1999, neither GalaxSea nor GalaxSea West has made
any payment or loan to, or borrowed any moneys from and is not
otherwise indebted to any officer, director, employee,
shareholder or any other person not dealing at arm's length with
GalaxSea or GalaxSea West or any Affiliate or Associate of any
of the foregoing, except as disclosed on the GalaxSea Financial
Statements attached as Schedule 6.3(o)(i) and except for usual
employee reimbursements and compensation paid in the ordinary
course of the GalaxSea Business; and
(ii) Neither GalaxSea nor GalaxSea West is a party to any Contract
with any officer, director, employee, shareholder or any other
person not dealing at arm's length with GalaxSea or GalaxSea
West or any Affiliate or Associate of any of the foregoing.
(iii) No officer, director, employee or shareholder of GalaxSea or
GalaxSea West or any other person not dealing at arm's length
with GalaxSea or GalaxSea West and no entity that is an
Affiliate or Associate or one or more of such individuals:
(a) owns, directly or indirectly, any interest in (except for
shares representing less than 1% of the outstanding shares
of any class or series of any publicly traded company), or
is an officer, director, employee or consultant of, any
person that is, or is engaged in business as, a competitor
of the GalaxSea Business or a lessor, lessee, supplier,
distributor, sales agent or customer of the GalaxSea
Business (other
-43-
than International Tours, IT Cruise and the persons or
entities set forth on Schedule 6.3(o)(iii));
(b) owns, directly or indirectly, in whole or in part, any
property that GalaxSea or GalaxSea West uses in the
operation of the GalaxSea Business (other than International
Tours or IT Cruise); or
(c) has any cause of action or other claim whatsoever against,
or owes any amount to, GalaxSea or GalaxSea West in
connection with the GalaxSea Business, except for any
liabilities reflected in the GalaxSea Financial Statements
and claims in the ordinary course of business.
(d) The GalaxSea Financial Statements have been prepared in
accordance with generally accepted accounting principles
(except that the unaudited financial statements do not have
financial notes and are subject to year end audit
adjustment) applied on a basis consistent with that of the
preceding period and present fairly:
(i) all of the assets, liabilities and financial position
of GalaxSea and GalaxSea West as at the dates
indicated; and
(ii) the sales, earnings, results of operation and changes
in financial position of GalaxSea and GalaxSea West for
all of the dates indicated.
(p) Taxes. GalaxSea has duly filed on a timely basis all Tax returns
required to be filed by it and has paid all Taxes that are due and
payable, and all assessments, reassessments, governmental charges,
penalties, interest and fines due and payable by it, except for those
GalaxSea may be contesting in good faith. GalaxSea has made adequate
provision for Taxes payable in respect of the GalaxSea Business for
the current period and any previous period for which Tax returns are
not yet required to be filed. There are no actions, suits,
proceedings, investigations or claims pending or, to the knowledge of
GalaxSea, threatened against GalaxSea in respect of Taxes nor are any
material matters under discussion with any Governmental Authority with
regard to Taxes asserted by any such authority. GalaxSea has withheld
from each payment made to any of its past or present employees,
officers or directors, and to any non-residents of the United States,
the amount of all Taxes and other deductions required to be withheld
therefrom, and has paid the same to the proper Tax or other receiving
officers within the time required under any applicable legislation.
-44-
(q) Litigation. Except as described in Schedule 6.1(r), there are no
actions, suits, claims or proceedings (whether or not purportedly on
behalf of GalaxSea or GalaxSea West) pending or, to the best knowledge
of GalaxSea, after due enquiry, threatened against or affecting
GalaxSea or GalaxSea West at law or in equity or before or by any
federal, state, municipal or other governmental department, court,
commission, board, bureau, agency or instrumentality, domestic or
foreign, or before or by an arbitrator or arbitration board the
resolution of which is expected to have a material adverse effect on
the GalaxSea Business and/or the GalaxSea Assets. GalaxSea is not
aware of any ground on which any such action, suit or proceeding might
be commenced with any reasonable likelihood of success.
(r) Customers. Schedule 6.3(r) sets out all of the revenue generating
customers of the GalaxSea Business and the basis upon which they are a
customer (i.e. franchise agreement, agency agreement, informal
arrangement, etc.). There has been no termination or cancellation of,
and no material modification or change in, GalaxSea's or GalaxSea
West's relationship with any such customer or group of customers,
except as described in Schedule 6.3(r). GalaxSea is not currently
aware and has no reason to believe that the benefits of any
relationship with a material number of customers of the GalaxSea
Business will not continue after Closing in substantially the same
manner as prior to the date of this Agreement.
(s) Suppliers. Schedule 6.3(s) sets out all of the material suppliers of
the GalaxSea Business (those suppliers of the GalaxSea Business
accounting for more than five percent of revenue for calendar 1998 are
marked with an "m") and, except as described on Schedule 6.3(s), there
has been no termination or cancellation of, and no material
modification or change in, GalaxSea's or GalaxSea West's relationship
with the material suppliers. GalaxSea is not currently aware and has
no reason to believe that the benefits of any relationship with a
material number of the suppliers of the GalaxSea Business will not
continue after Closing in substantially the same manner as prior to
the date of this Agreement. Notwithstanding the foregoing, Travelbyus-
GalaxSea acknowledges that supplier contracts are negotiated annually
at the end of each calendar year for the following year.
(t) Employee Plans. There are no Employee Plans with respect to the
GalaxSea Business other than those listed in Schedule 6.3(t). GalaxSea
West has no employees.
(u) Collective Agreements. Save and except as disclosed on Schedule
6.3(t), neither GalaxSea nor GalaxSea West has made any agreements
with any labour union or employee association nor made commitments to
or conducted negotiations with any labour union or employee
association with respect to any future agreements and GalaxSea is not
aware of any
-45-
current attempts to organize or to establish any labour union or
employee association. There are no material controversies pending or
threatened between any labour union or employee organization and
GalaxSea or GalaxSea West. There are no pending or threatened
representation questions respecting the employees of GalaxSea and
there are no pending arbitration proceedings arising out of or under
any union contract.
(v) Year 2000 Readiness. To the knowledge of GalaxSea, the software
currently utilized by GalaxSea or GalaxSea West in connection with the
GalaxSea Business in its operation and the software developed by or on
behalf of GalaxSea or GalaxSea West in connection with the GalaxSea
Business and supplied to clients of GalaxSea or GalaxSea West in
connection with the GalaxSea Business: will function without error or
interruption related to Date Data, specifically including errors or
interruptions from functions which may involve Date Data from more
than one century. To the knowledge of GalaxSea, the software currently
utilized by GalaxSea and GalaxSea West in connection with the GalaxSea
Business, in its operation and developed by or on behalf of GalaxSea
or GalaxSea West in connection with the GalaxSea Business and or
otherwise supplied to clients of GalaxSea or GalaxSea West in
connection with the GalaxSea Business does not contain any routines or
devices introduced by GalaxSea or GalaxSea West or to the knowledge of
GalaxSea introduced by any other person or in any other manner that
could interfere with their use (including without limitation, time
locks, keys or bombs) or interfere with, delete or corrupt data
(commonly known as "viruses").
(w) Capitalization. The authorized capital and the issued capital of
GalaxSea West consists of 1,000 shares of authorized common stock, of
which 100 shares are issued and outstanding. All of the outstanding
shares in the capital of GalaxSea West have been duly and validly
issued and are outstanding as fully paid and non-assessable shares. No
options, warrants or other rights to purchase shares or other
securities of GalaxSea West and no securities or obligations
convertible into or exchangeable for shares or other securities of
GalaxSea West have been authorized or agreed to be issued or are
outstanding.
(x) No Joint Venture Interests, etc. GalaxSea West is not a partner,
beneficiary, trustee, co-tenant, joint venturer or otherwise a
participant in any partnership, trust, joint venture, co-tenancy or
other similar jointly owned business undertaking and GalaxSea West has
no significant investment interests in any business owned or
controlled by any third person.
(y) Absence of Guarantees. GalaxSea West has not given or agreed to give
and is not a party to or bound by any guarantee or indemnity in
respect of indebtedness or other obligations of any person or any
other
-46-
commitment by which GalaxSea West is, or is contingently, responsible
for such indebtedness or other obligations.
(z) Restrictive Covenants. GalaxSea West is not a party to and is not
bound or affected by any commitment, agreement or document containing
any covenant expressly limiting the freedom of GalaxSea West to
compete in any line of business anywhere in the world, transfer or
move any of its assets or operations or which materially or adversely
affects the business practices, operations or conditions of GalaxSea
West or the continued operation of the GalaxSea Business after Closing
on substantially the same basis as the GalaxSea Business is presently
carried on.
(aa) Tax Matters. GalaxSea West has filed on a timely basis (within the
time and manner required by law) all federal and state income Tax
returns and election forms and the Tax returns of any other
jurisdiction required to be filed and all such returns and forms have
been completed accurately and correctly in all respects. As of the
Effective Date GalaxSea West will have paid all Taxes (including for
greater certainty and without limitation, all federal, state and local
Taxes, assessments and reassessments or other imposts in respect of
income, business, assets or property) and all interest and penalties
thereon, for all previous years and all required quarterly instalments
due for the current fiscal year have been paid for which Tax returns
are not yet required to be filed. As of the Effective Date GalaxSea
West will have provided adequate reserves for all Taxes for the
periods covered thereby, and such reserves are reflected in the
GalaxSea Financial Statements or in the books and records of GalaxSea
West. There are no agreements, waivers or other arrangements providing
for an extension of time with respect to the filing of any Tax return
by, or payment of any Tax, governmental charge or deficiency by
GalaxSea West nor are there any actions, suits, proceedings,
investigations or claims now threatened or pending against GalaxSea
West in respect of, or discussions under way with any Governmental
Authority relating to, any such Tax or governmental charge or
deficiency.
GalaxSea West has not:
(i) acquired or had the use of any property from a person with whom
it was not dealing at arm's length other than at fair market
value;
(ii) disposed of any property to a person with whom it was not
dealing at arm's length for proceeds less than the fair market
value thereof; or;
(iii) discontinued carrying on any business in respect of which non-
capital losses were incurred, and any non-capital losses which
GalaxSea West has are not losses from property or business
investment losses;
-47-
There are no contingent Tax liabilities nor any grounds which would
prompt a reassessment. The schedules attached to the corporate income
Tax returns by GalaxSea West for each taxation year reflect and
disclose all transactions to which GalaxSea West was a party as
required by applicable revenue laws and all of the transactions to
which GalaxSea West was a party and required by applicable revenue
laws to be included therein are reflected or disclosed in such
financial statements and schedules and the corporate income Tax
returns and schedules have been duly and accurately completed as
required by such Acts.
(bb) Corporate Records and Minute Books. The corporate records and minute
books of GalaxSea West have been delivered or made available to
Travelbyus-GalaxSea and Travelbyus. The articles and by-laws of
GalaxSea West are in full force and effect and no amendments have been
made to the same. The minute books, including the articles and by-laws
of GalaxSea West include complete and accurate minutes of all meetings
of the directors or shareholders of GalaxSea West, as applicable, held
to date or resolutions passed by the directors or shareholders on
consent, since the date of incorporation of GalaxSea West. The share
certificate book, register of shareholders, register of transfers and
register of directors of GalaxSea West are complete and accurate.
(cc) Bank Accounts, etc. Schedule 6.3(cc) sets forth a complete list of
every financial institution in which GalaxSea West maintains any
depository account, trust account or safety deposit box and the names
of all persons authorized to draw on or who have access to such
accounts or safety deposit box.
(dd) Judgments and Executions and Insolvency Proceedings. There are no
judgments or executions against GalaxSea West which are outstanding
and unsatisfied. GalaxSea West has not made any assignment for the
benefit of creditors nor has any receiving order been made against
GalaxSea West under the provisions of any applicable bankruptcy or
insolvency legislation nor has any petition for such an order been
served upon GalaxSea West.
(ee) Permits and Licenses. GalaxSea West has all necessary Licenses and
other authorizations required to carry on and conduct the GalaxSea
Business and to own, lease or operate its respective GalaxSea Assets
at the places and in the manner in which the GalaxSea Business is
conducted.
(ff) Full Disclosure. Neither this Agreement nor any document to be
delivered by GalaxSea nor any certificate, report, statement or other
document furnished by GalaxSea in connection with the negotiation of
this Agreement contains or will contain any untrue statement of a
material fact
-48-
or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading. There has been
no event, transaction or information that has come to the attention of
GalaxSea and/or NAGE that has not been disclosed to Travelbyus-
GalaxSea and Travelbyus in writing and that could reasonably be
expected to have a material adverse effect on the assets, business,
earnings, prospects, properties or condition (financial or otherwise)
of the GalaxSea Business and/or the GalaxSea Assets, including without
limitation, the GalaxSea West Shares or the assets, business,
earnings, prospects properties or condition (financial or otherwise)
of GalaxSea West.
ARTICLE 7 - REPRESENTATIONS AND WARRANTIES OF TRAVELBYUS AND THE PURCHASER
7.1 Representations and Warranties of Travelbyus and the Purchaser
Each of the Purchaser and Travelbyus, jointly and severally, represents and
warrants to the Vendors and NAGE as follows and acknowledges and confirms that
the Vendors and NAGE are relying on such representations and warranties in
connection with their sale of the Purchased Assets and the Purchased Business:
(a) Organization. Each of the Purchaser and Travelbyus is a corporation
duly incorporated and organized and validly existing under the laws of
its jurisdiction of incorporation and has the corporate power to own
or lease its property, to carry on its business as now being conducted
by it and to enter into this Agreement and to perform its obligations
hereunder. Each of the Purchaser and Travelbyus is duly qualified as
a corporation to do business in each jurisdiction in which the nature
of its business or the location of its assets make such qualification
necessary, except where the failure to be so qualified would not have
a material adverse effect on the Purchaser or Travelbyus.
(b) Authorization. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder have been duly
authorized by all necessary corporate action on the part of each of
the Purchaser and Travelbyus. This Agreement has been duly
authorized, executed and delivered by the Purchaser and Travelbyus and
is a legal, valid and binding obligation of each of the Purchaser and
Travelbyus, enforceable against the Purchaser and Travelbyus by the
Vendors and NAGE in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency and other laws
affecting the rights of creditors generally and except that equitable
remedies may only be granted in the discretion of a court of competent
jurisdiction.
(c) No Violation. The execution and delivery of this Agreement by the
Purchaser and Travelbyus and the consummation of the transactions
-49-
herein provided for will not result in the violation of, or constitute
a default under, or conflict with or cause the acceleration of any
obligation of the Purchaser or Travelbyus, as the case may be, under:
(i) any Contract to which the Purchaser or Travelbyus is a party or
by which the Purchaser or Travelbyus is bound;
(ii) any provision of the constating documents or by-laws or
resolutions of the board of directors (or any committee thereof)
or shareholders of either the Purchaser or Travelbyus;
(iii) any judgment, decree, order or award of any court, governmental
body or arbitrator having jurisdiction over the Purchaser or
Travelbyus;
(iv) any licence, permit, approval, consent or authorization held by
the Purchaser or Travelbyus or necessary to the operation of
their respective businesses; or
(v) any applicable law, statute, ordinance, regulation or rule
applicable to each of the Purchaser and Travelbyus.
(d) Authorized Capital. The authorized capital of Travelbyus consists of
an unlimited number of common shares without par value, of which as at
October 4, 1999 43,539,178 common shares have been duly issued and are
outstanding as fully paid and non-assessable as at the date hereof
together with options to officers, directors and employees to purchase
an aggregate of 2,675,000 common shares and warrants to purchase an
aggregate of 10,260,270 common shares at an exercise price of CDN$0.68
expiring on September 9, 2001.
(e) Title to Property. Travelbyus is the owner, directly and/or
indirectly, and beneficially and of record, of its leased assets and
its owned assets, with good and marketable title thereto free and
clear of any and all Encumbrances subject to a trust indenture in
favour of Montreal Trust Company of Canada dated September 9, 1999
pursuant to which an aggregate of CDN$11,950,000 principal amount of
12.5% senior secured redeemable debentures were issued.
(f) Financial Statements. The Travelbyus Financial Statements attached as
Schedule 7.1(f) have been prepared in accordance with Canadian
generally accepted accounting principles applied on a basis consistent
with that of the preceding period and present fairly:
(i) all of the assets, liabilities and financial position of
Travelbyus as at the dates indicated; and
(ii) the sales, earnings, results of operation and changes in
financial position of Travelbyus for all of the dates indicated.
-50-
(g) Shares. The issued and outstanding shares in the capital of Travelbyus
form part of a class of shares that are listed and posted for trading
on the TSE, the WSE and the Frankfurt stock exchange.
(h) Regulatory Approvals. No Governmental Authorization is required on the
part of Travelbyus and/or the Purchaser in connection with the
execution, delivery and performance of this Agreement or any other
agreements to be entered into under the terms of this Agreement.
(i) Reporting Issuer Status. Travelbyus is a "reporting issuer" within the
meaning of the Securities Act (Alberta), (British Columbia),
(Manitoba), (Ontario) and (Quebec) and is not in default of any
requirement of applicable laws and no material change relating to
Travelbyus has occurred with respect to which the requisite material
change report has not been filed and no such disclosure has been made
on a confidential basis. No securities commission or similar
regulatory authority has issued any order preventing or suspending
trading in any securities of Travelbyus or prohibiting the issue and
sale of the common shares in the capital of Travelbyus and to the
knowledge of the Purchaser and Travelbyus no such proceedings for such
purposes are pending or threatened.
(j) Compliance with Laws; Governmental Authorization. Each of the
Purchaser and Travelbyus has complied in all material respects with
all laws, statutes, ordinances, regulations, rules, judgments, decrees
or orders applicable to each of the Purchaser and Travelbyus.
(k) Litigation. There are no actions, claims, suits or proceedings
(whether or not purportedly on behalf of the Purchaser or Travelbyus)
pending or, to the best knowledge of the Purchaser and Travelbyus,
after due enquiry, threatened against or affecting the Purchaser or
Travelbyus at law or in equity or before or by any federal, state,
municipal or other governmental department, court, commission, board,
bureau, agency or instrumentality, domestic or foreign, or before or
by an arbitrator or arbitration board. The Purchaser and Travelbyus
are not aware of any ground on which any such action, suit or
proceeding might be commenced with any reasonable likelihood of
success.
(l) Full Disclosure. Neither this Agreement nor any document to be
delivered by the Purchaser or Travelbyus nor any certificate, report,
statement or other document furnished by the Purchaser or Travelbyus
in connection with the negotiation of this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained
herein or therein not misleading. There has been no event, transaction
or information that has come to the attention of the Purchaser and/or
Travelbyus that has not been disclosed to the Vendors and/or NAGE in
writing and that could reasonably be expected to have a material
adverse
-51-
effect on the assets, business, earnings, prospects, properties or
condition (financial or otherwise) of the Purchaser or Travelbyus.
ARTICLE 8 - SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
8.1 Survival of Representations and Warranties of the Vendors and NAGE
The representations and warranties of the Vendors and NAGE contained in this
Agreement and in all certificates and documents delivered pursuant to or
contemplated by this Agreement shall survive Closing and shall continue in full
force and effect for the benefit of the Purchaser and Travelbyus provided
however that no Claim in respect thereof shall be valid unless it is made within
the following time periods:
(a) in the case of any Claim in respect of a representation or warranty
relating to a matter other than a matter relating to title to the
Purchased Assets or the Purchased Shares, within a period of 18 months
from Closing;
(b) in the case of any Claim in respect of a representation or warranty
relating to title of any of the Vendors or NAGE to the Purchased
Assets or the Purchased Shares and those matters set forth in sections
11.1(c), (d), (e), (f), (g), (h), (i), (j) and (k) there shall be no
time limit within which such a Claim may be made; and
(c) in the case of any Claim in respect of any representation or warranty
including fraud or fraudulent misrepresentation subject only to
applicable limitations imposed by law;
and any such Claim as aforesaid shall be made in accordance with the provisions
set forth in Article 11, and upon the expiry of the relevant limitation period
referred to in clauses (a) and (c) above, the Vendors and NAGE shall have no
further liability to the Purchaser and Travelbyus with respect to the
representations and warranties referred to in such clauses, respectively, except
in respect of Claims which have theretofor been made in accordance with the
provisions set forth above. The survival of such representations and warranties
shall continue for the applicable limitation period notwithstanding any
investigation made by or on behalf of the Purchaser and/or Travelbyus.
8.2 Survival of Representations and Warranties of the Purchaser and Travelbyus
The representations and warranties of the Purchaser and Travelbyus contained in
this Agreement and in all certificates and documents delivered pursuant to or
contemplated by this Agreement shall survive Closing and shall continue in full
force and effect for the benefit of the Vendors and NAGE provided however that
no Claim in respect thereof shall be valid unless it is made within the
following time periods:
-52-
(a) in the case of any Claim in respect of a representation or warranty
relating to a matter other than (b) or (c) below, within a period of
18 months from Closing;
(b) in the case of any claim in respect of any representation or warranty
including fraud or fraudulent misrepresentation subject only to
applicable limitations imposed by law; and
(c) in the case of any Claim in respect of those matters set forth in
sections 11.2(c), (d) and (e), there shall be no time limit within
which such a Claim may be made;
and any such claim as aforesaid shall be made in accordance with the provisions
set forth in Article 11, and upon the expiry of the relevant limitation period
referred to in clause (a) and (b) above, the Purchaser and Travelbyus shall have
no further liability to the Vendors and NAGE with respect to the representations
and warranties referred to in such clauses, respectively, except in respect of
Claims which have theretofor been made in accordance with the provisions set
forth above. The survival of such representations and warranties shall continue
for the applicable limitation period notwithstanding any investigation made by
or on behalf of the Vendors and NAGE.
ARTICLE 9 - COVENANTS
9.1 Delivery of Books and Records
At the Time of Closing there shall be delivered to the Purchaser by the Vendors
and NAGE all books and records relating to the Purchased Business, the Purchased
Assets and the Purchased Shares provided that any and all books and records
relating to the GalaxSea Assets and the Purchased Shares shall be deposited in
escrow with the Escrow Agent pursuant to the Closing Escrow Agreement. The
Purchaser agrees that it will preserve the books and records delivered to it for
a period of three years from Closing or for such longer period as is required by
any applicable law and will permit the applicable Vendor and NAGE or their
authorized representatives reasonable access thereto in connection with the
affairs of such Vendor or NAGE relating to its matters, but the Purchaser shall
not be responsible or liable to the applicable Vendor or NAGE for or as a result
of any accidental loss or destruction of or damage to any such books or records.
9.2 Change of Name
International Tours agrees to change its corporate name and the names of any of
its Associates or Affiliates except for those businesses set forth on Schedules
6.1(p)(iii) and 6.3(o)(iii) that include the words International Tours or any
derivative thereof to names that do not include such words or any part thereof
or any similar words, within 10 days after Closing. GalaxSea and NAGE jointly
and severally covenant and agree that GalaxSea shall change its corporate name
and the name of any Associates or
-53-
Affiliates [except for those businesses set forth on Schedules 6.1(p)(iii) and
6.3(o)(iii) that include the words GalaxSea or any derivative thereof to names
that do not include such words or any part thereof or any similar words, within
10 days after the Escrow Release Date.
9.3 Expenses
All costs and expenses (including fees and disbursements of legal counsel and
accountants) incurred in connection with this Agreement and the transaction
contemplated thereby shall be borne by the Party incurring such expenses.
9.4 Transferred Employees
(a) Each Vendor and NAGE hereby agree and acknowledge that save and except
for the GalaxSea Transferred Employees and the International Tours
Transferred Employees all other employees (full-time and part-time)
and all other contractors who are, or have at some point in time, been
retained by such Vendor in respect of the Purchased Business shall be
the sole responsibility of such Vendor and such Vendor shall discharge
and pay any and all liabilities, debts and obligations with respect to
such employees and contractors, including without limitation, any
severance, termination notice or payment in lieu of notice.
(b) Travelbyus-IT agrees that effective as at the Effective Date but to
take effect as of the Time of Closing on the Closing Date it shall
offer employment to the International Tours Transferred Employees on
the terms and conditions as set out in Schedule 1.1(kk). Travelbyus-IT
shall only have obligation or liability with respect to the
International Tours Transferred Employees who accept such offer of
employment Travelbyus-GalaxSea agrees that effective as at the
Effective Date but to take effect as of the Escrow Release Date, it
shall offer employment to the GalaxSea Transferred Employees on the
terms and conditions set out in Schedule 1.1(x). Travelbyus-GalaxSea
shall only have obligation or liability with respect to the GalaxSea
Transferred Employees who accept such offer of employment.
(c) The Vendors and NAGE covenant and agree not to solicit directly or
indirectly, the services of Xxxxxx Xxxxxxxx during the two year period
following Closing or while Xxxxxx Xxxxxxxx is employed by Travelbyus-
IT, its Associates or Affiliates whichever period is shorter, without
the prior written consent of Travelbyus-IT, which consent may be
unreasonably withheld.
9.5 Clearance/Mailing Obligation
NAGE, IT Cruise and GalaxSea shall do all such acts and things and shall use
their commercial efforts in good faith to fulfil the Clearance/Mailing
Obligation.
-54-
ARTICLE 10 - CONDITIONS OF CLOSING
10.1 Conditions of Closing in Favour of the Purchaser and Travelbyus
The purchase and sale of the Purchased Assets and the Purchased Shares is
subject to the following terms and conditions for the exclusive benefit of the
Purchaser and Travelbyus, to be performed or fulfilled at or prior to the Time
of Closing:
(a) Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Vendors and NAGE at
or before the Time of Closing (save and except for the
Clearance/Mailing Obligation) shall have been complied with or
performed.
(b) Receipt of Closing Documents. All instruments of conveyance and other
documentation relating to the transfer, assignment and sale of the
Purchased Assets and the Purchased Shares including without
limitation, assignments of the Contracts and the Intellectual Property
(and consents thereto where required), bills of sale and documentation
relating to the authorization and completion of the purchase and sale
of the Purchased Assets and the Purchased Shares and the taking of all
actions and proceedings (corporate or otherwise) on or prior to
Closing in connection with the performance by each of the Vendors and
NAGE of their obligations under this Agreement shall be satisfactory
to the Purchaser and Travelbyus and their counsel, acting reasonably
and the Purchaser and Travelbyus shall have received copies of all
such other documentation or other evidence as the Purchaser and
Travelbyus may reasonably request in order to establish the
consummation of the transactions contemplated hereby by each of the
Vendors and NAGE of all corporate proceedings in connection herewith
and compliance with the terms, warranties and conditions hereof in
form and substance satisfactory to the Purchaser and Travelbyus and
their counsel acting reasonably provided that the only condition with
respect to the consummation of the sale of the Purchased Shares and
the GalaxSea Assets that shall remain outstanding shall be the
Clearance/Mailing Obligation.
(c) Regulatory Consents. These shall have been obtained from all
appropriate federal, state, municipal or other governmental or
administrative bodies such Licences and authorizations as are required
to be obtained by each of the Vendors to permit the completion of the
transaction as herein contemplated in form and substance satisfactory
to the Purchaser and Travelbyus, acting reasonably.
(d) Contractual Consents. Each of the Vendors and NAGE shall have given or
obtained the notices, consents and approvals described in Schedules
6.1(d)(i)(A), 10.1(d), and 6.2(n), in each case in form and substance
satisfactory to the Purchaser and Travelbyus, acting reasonably.
-55-
(e) Employment Agreement. Xxxxxx Xxxxxxxx shall have executed an
employment agreement with Travelbyus-IT setting out the terms and
conditions of his employment, in form and substance satisfactory to
the Purchaser and Travelbyus acting reasonably.
(f) Escrow Agreements. Each of the Vendors, NAGE and GMP or the Escrow
Agent, as applicable shall have executed and delivered to the
Purchaser and Travelbyus the Closing Escrow Agreement and the
Representation and Warranty Escrow Agreement.
(g) No Action or Proceeding. No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or
prohibit the purchase and sale of the Purchased Assets and the
Purchased Shares contemplated hereby.
(h) Legal Opinion. Each of the Vendors and NAGE shall have delivered to
the Purchaser and Travelbyus a favourable opinion of counsel in form
and substance satisfactory to the Purchaser and Travelbyus and their
counsel, acting reasonably.
(i) Legal Matters. All actions, proceedings, instruments and documents
required to implement this Agreement, or instrumental thereto and NAGE
shall have been approved as to form and legality by counsel for the
Purchaser and Travelbyus, acting reasonably.
If any of the conditions precedent contained in this section 10.1 shall not
be performed or fulfilled at or prior to the Time of Closing to the
satisfaction of the Purchaser and Travelbyus, acting reasonably, the
Purchaser and Travelbyus may, by notice to the Vendors and NAGE, terminate
this Agreement and the obligations of the Vendors and NAGE as well as the
Purchaser and Travelbyus under this Agreement, other than the obligations
with respect to the payment of brokerage fees and commissions and the
obligations contained in section 12.3. Any such condition may be waived in
whole or in part by the Purchaser and Travelbyus without prejudice to any
claims they may have for breach of covenant, representation or warranty.
10.2 Conditions of Closing in Favour of the Vendors and NAGE
The sale and purchase of the Purchased Assets and the Purchased Shares of the
Vendors are subject to the following terms and conditions for the exclusive
benefit of the Vendors and NAGE, to be performed or fulfilled at or prior to the
Time of Closing:
(a) Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Purchaser and
Travelbyus at or before the Time of Closing shall have been complied
with or performed.
(b) Receipt of Closing Documents. All instruments of conveyance and other
documentation relating to the transfer, assignment and sale of the
-56-
Purchased Assets and the Purchased Shares including without
limitation, assignments of the Contracts and the Intellectual Property
(and consents thereto where required), bills of sale and documentation
relating to the authorization and completion of the purchase and sale
of the Purchased Assets and the Purchased Shares and the taking of all
actions and proceedings (corporate or otherwise) on or prior to
Closing in connection with the performance by the Purchaser and
Travelbyus of their obligations under this Agreement shall be
satisfactory to the Vendors and NAGE and their counsel, acting
reasonably and the Vendors and NAGE shall have received copies of all
such other documentation or other evidence as the Vendors and NAGE may
reasonably request in order to establish the consummation of the
transactions contemplated hereby by the Purchaser and Travelbyus, of
all corporate proceedings in connection herewith and compliance with
the terms, warranties and conditions hereof in form and substance and
satisfactory to the Vendors and NAGE and their counsel acting
reasonably.
(c) Regulatory Consents. There shall have been obtained from all
appropriate federal, state, municipal or other governmental or
administrative bodies such licences and authorizations as are required
to be obtained by the Purchaser and Travelbyus to permit the
completion of the transaction as herein contemplated, in form and
substance satisfactory to the Vendors and NAGE, acting reasonably.
(d) No Action or Proceeding. No legal or regulatory action or proceeding
shall be pending or threatened by any person to enjoin, restrict or
prohibit the purchase and sale of the Purchased Assets or the
Purchased Shares contemplated hereby.
(e) Legal Matters. All actions, proceedings, instruments and documents
required to implement this Agreement or instrumental hereto, shall
have been approved as to form and legality by counsel for the Vendors
and NAGE, acting reasonably.
(f) Legal Opinion. The Purchaser and Travelbyus shall have delivered to
the Vendors and NAGE a favourable opinion of counsel to the Purchaser
and Travelbyus in form and substance satisfactory to the Vendors and
NAGE and their counsel, acting reasonably.
(g) Employment Agreement. International Tours shall have executed an
employment agreement with Xxx Xxxxxxxx setting out the terms and
conditions of employment, in form and substance satisfactory to Xxx
Xxxxxxxx, acting reasonably.
(h) Escrow Agreements. The Purchaser, Travelbyus and GMP or the Escrow
Agent, as applicable, shall have executed and delivered to the Vendors
and NAGE the Closing Escrow Agreement and the Representation and
Warranty Escrow Agreement.
-57-
If any of the conditions precedent contained in this section 10.2 shall not be
performed or fulfilled at or prior to the Time of Closing to the satisfaction of
the Vendors and NAGE acting reasonably, the Vendors and NAGE may, by notice to
the Purchaser and Travelbyus terminate this Agreement as well as the obligations
of the Vendors and NAGE and the Purchaser and Travelbyus under this Agreement
other than the obligations with respect to the payment of brokerage fees and
commissions and the obligations set forth in section 12.3. Any such condition
may be waived in whole or in part by the Vendors and NAGE without prejudice to
any claims it may have for breach of covenant, representation or warranty.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification by the Vendors and NAGE
Subject to the provisions of sections 8.1 and 11.9, each of the Vendors and NAGE
jointly and severally (except that GalaxSea and NAGE are not indemnifying with
respect to any liability relating to International Tours and International Tours
is not indemnifying with respect to any liability relating to GalaxSea or NAGE)
indemnify and save harmless Travelbyus and the Purchaser without duplication
from all Losses suffered or incurred by Travelbyus and the Purchaser as a result
of or arising directly or indirectly out of or in connection with:
(a) any breach by a Vendor and/or NAGE of or any inaccuracy of any
representation or warranty of such Vendor and/or NAGE contained in
this Agreement or in any agreement, certificate or other document
delivered pursuant hereto (provided that such Vendor and/or NAGE shall
not be required to indemnify or save harmless the Purchaser and
Travelbyus in respect of any breach or inaccuracy of any
representation or warranty unless the Purchaser and Travelbyus shall
have provided notice to the Vendors and NAGE in accordance with
section 12.1 on or prior to the expiration of the applicable time
period related to such representation and warranty as set out in
section 8.1);
(b) any breach or non-performance by a Vendor or NAGE of any covenant to
be performed by it that is contained in this Agreement or in any
agreement, certificate or other document delivered pursuant hereto;
(c) any debt, liability or obligation in respect of or arising from the
operation of the Purchased Business and/or the Purchased Assets and/or
IT Cruise of a Vendor or NAGE up to the Effective Date
-58-
(d) except to the extent Taxes are reserved for on the IT Cruise Financial
Statements or the GalaxSea Financial Statements, as the case may be,
or in the books and records of IT Cruise or GalaxSea West, as the case
may be; (i) for any and all Taxes of IT Cruise or GalaxSea West, as
the case may be, with respect to all taxation years of IT Cruise or
GalaxSea West, as the case may be, ending on or prior to the Effective
Date; (ii) all Taxes allocated to NAGE or GalaxSea, as the case may
be, pursuant hereto; and (iii) any Losses, with respect to all
taxation years of IT Cruise or GalaxSea West, as the case may be, on
or prior to the Effective Date, arising out of or incidental to the
imposition, assessment or assertion of any such Taxes, including those
incurred in connection with the assertion or defense of any claim or
assessment for such Taxes (collectively, the "Other Amounts"). If,
with respect to any Taxes, the taxation year of IT Cruise or GalaxSea
West, as the case may be, does not terminate on the Effective Date,
the notional Taxes (whether based on income, capital, sale, transfer
of ownership or provision of property or services or otherwise)
attributable to the taxation year of IT Cruise or GalaxSea West, as
the case may be, that includes the Effective Date shall be allocated
to; (i) NAGE or GalaxSea, as the case may be, for the period up to and
including the Effective Date; and (ii) Travelbyus-IT or Travelbyus-
GalaxSea, as the case may be, for the period subsequent to the
Effective Date. For the purposes of the section, Taxes for the period
up to and including the Effective Date shall be determined on the
basis of a closing of the books of IT Cruise or GalaxSea West, as the
case may be, as of the Effective Date. Any additional Taxes due up to
and including the Effective Date will be paid by NAGE or GalaxSea, as
the case may be, through an adjustment of the IT Cruise Purchase Price
or the GalaxSea Purchase Price, as the case may be. The notional Tax
calculations will be prepared based on the provisions of United States
and state income tax legislation in effect at the Effective Date as if
IT Cruise or GalaxSea West, as the case may be, had a year end on the
Effective Date. For greater certainty and without limitation, each of
Travelbyus-IT, Travelbyus-GalaxSea and NAGE shall prepare or cause to
be prepared in a manner consistent with past practice and file or
cause to be filed, all Tax Returns of NAGE or GalaxSea with respect to
periods ending on or before the Effective Date. Tax Returns shall be
subject to the review and approval of Travelbyus-IT, Travelbyus-
GalaxSea and Travelbyus provided that such review and approval of NAGE
Tax Returns shall be limited to the reporting of the GalaxSea Assets
and the GalaxSea Business and the Purchased Shares and the IT Cruise
Business. Tax Returns shall be delivered to Travelbyus-IT, Travelbyus-
GalaxSea and Travelbyus at least 30 days prior to the due date for
approval. Whenever any taxing authority sends a notice of an audit,
initiates an examination of IT Cruise or GalaxSea West, as the case
may
-59-
be or otherwise asserts a claim, makes an assessment, or disputes
the amounts of Taxes for which NAGE or GalaxSea is or may be
liable under this Agreement, Travelbyus-IT or Travelbyus-
GalaxSea, as the case may be, shall promptly notify NAGE or
GalaxSea, as the case may be, and NAGE or GalaxSea, as the case
may be, shall have the right to control, at their own cost and
expense any resulting proceedings and to determine whether and
when to settle any such claim, assessment or dispute to the
extent such proceedings or determinations affect the amount of
Taxes for which NAGE or GalaxSea, as the case may be, is liable
under this Agreement. For greater certainty and without
limitation, each of Travelbyus-IT, Travelbyus-GalaxSea, GalaxSea
and NAGE shall inform and provide the other Party with such
assistance as may reasonably be requested by either of them in
connection with the preparation of any Tax return, any audit or
other examination in connection with the preparation of any Tax
return, any audit or other examination by any taxing authority or
any judicial or administrative proceedings relating to liability
for Taxes and each will retain and provide the other Party with
any records or information which may be relevant to such Tax
Return, audit or examination, proceedings or determination;
(e) for greater certainty and without limitation, the failure by the
Vendors and/or NAGE to file Tax returns as contemplated pursuant
to section 3.3;
(f) for greater certainty and without limitation, the breach by the
Vendors and/or NAGE of the provisions of section 3.5;
(g) for greater certainty and without limitation, the failure by the
Vendors and/or NAGE to pay or satisfy any of the Excluded
Liabilities;
(h) for greater certainty and without limitation, the failure by the
Vendors and/or NAGE to fulfil their obligations as provided in
section 9.4(a);
(i) for greater certainty and without limitation, the failure by the
Vendors and/or NAGE to pay any commission or other remuneration
payable or alleged to be payable to any broker, agent or other
intermediary who purports to act or have acted for or on behalf
of the Vendors and/or NAGE;
(j) any Claim that may be brought by Hickory Travel Systems, Inc.,
its Associates and/or Affiliates, successors and assigns, arising
by reason of, from and/or under that certain agreement between
International Tours and Hickory Travel Systems, Inc. dated
February 8, 1997 and the termination thereof pursuant to a a
-60-
termination letter from Hickory Travel Systems, Inc. dated July
31, 1998; and
(k) any Claim that may be brought by Woodside Travel Trust, its
Associates and/or Affiliates, successors and assigns, arising by
reason of, from and/or under that certain agreement between WTT,
Inc. doing business as Woodside Travel Trust and International
Tours dated July 20, 1993 and the termination thereof pursuant to
a mutually agreed upon agreement dated on or about July 9, 1999.
11.2 Indemnification by Travelbyus and the Purchaser
Subject to the provisions of sections 8.2 and 11.9 the Purchaser and Travelbyus
jointly and severally indemnify and save harmless each of the Vendors and NAGE
without duplication from all Losses suffered or incurred by such Vendors and
NAGE as a result of or arising directly or indirectly out of or in connection
with:
(a) any breach by the Purchaser or Travelbyus of or any inaccuracy of any
representation or warranty contained in this Agreement or in any
agreement, instrument, certificate or other document delivered
pursuant hereto (provided that the Purchaser or Travelbyus shall not
be required to indemnify or save harmless such Vendor and NAGE in
respect of any breach or inaccuracy of any representation or warranty
unless such Vendor or NAGE, as applicable, shall have provided notice
to the Purchaser or Travelbyus in accordance with section 12.1 on or
prior to the expiration of the applicable time period related to such
representation and warranty as set out in section 8.2);
(b) any breach or non-performance by the Purchaser or Travelbyus of any
covenant to be performed by it that is contained in this Agreement or
in any agreement, certificate or other document delivered pursuant
hereto;
(c) any debt, liability or obligation in respect of or arising from the
operation of the Purchased Business and/or the Purchased Business
and/or IT Cruise after the Effective Date including without
limitation, any failure by the Purchaser to pay, satisfy, discharge,
perform or fulfill on a timely basis any of the Assumed Liabilities;
(d) for greater certainty and without limitation, the failure by the
Purchaser to file Tax returns as contemplated pursuant to section
2.3; and
(e) for greater certainty and without limitation, the failure by the
Purchaser and/or Travelbyus to pay any commission or other
remuneration payable or alleged to be payable to any broker, agent or
other intermediary who purports to act or have acted for or on behalf
of the Purchaser and/or Travelbyus.
-61-
11.3 Notice of Claim
In the event that a Party (the "Indemnified Party") shall become aware of any
claim, proceeding or other matter (a "Claim") in respect of which the other
Party (the "Indemnifying Party") agreed to indemnify the Indemnified Party
pursuant to this Agreement, the Indemnified Party shall promptly give written
notice thereof to the Indemnifying Party. Such notice shall specify whether the
Claim arises as a result of a claim by a person against the Indemnified Party (a
"Third Party Claim") or whether the Claim does not so arise (a "Direct Claim")
and shall also specify with reasonable particularity (to the extent that the
information is available) the factual basis for the Claim and the amount of the
Claim, if known. If, through the fault of the Indemnified Party, the
Indemnifying Party does not receive notice of a Claim in time to effectively
contest the determination of any liability susceptible of being contested, the
Indemnifying Party shall be entitled to set off against the amount claimed by
the Indemnified Party the amount of any Losses incurred by the Indemnifying
Party resulting from the Indemnified Party's failure to give such notice on a
timely basis.
11.4 Direct Claims
With respect to any Direct Claim, following receipt of notice from the
Indemnified Party of the Claim, the Indemnifying Party shall have 30 days to
make such investigation of the Claim as is considered necessary or desirable.
For the purpose of such investigation, the Indemnified Party shall make
available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both Parties
agree at or prior to the expiration of such 30 day period (or any mutually
agreed upon extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the full
agreed upon amount of the Claim (and for grater certainty and without
limitation, the procedures in the Representation and Warranty Agreement and
section 11.8 hereof shall be utilized.
11.5 Third Party Claims
With respect to any Third Party Claim, the Indemnifying Party shall have the
right, at its expense, to participate in or assume control of, the negotiation,
settlement or defence of the Claim and, in such event, the Indemnifying Party
shall reimburse the Indemnified Party for the Indemnified Party's out-of-pocket
expenses incurred up to the point the Indemnifying Party assumed such control.
If the Indemnifying Party elects to assume such control, the Indemnified Party
shall have the right to participate in the negotiation, settlement or defence of
such Third Party Claim and to retain counsel to act on its behalf, provided that
the fees and disbursements of such counsel shall be paid by the Indemnified
Party unless the Indemnifying Party consents to the retention of such counsel or
unless the named parties to any action or proceeding include both the
Indemnifying Party and the Indemnified Party and a representation of both the
Indemnifying Party and the Indemnified Party by the same counsel would be
inappropriate due to the actual or potential differing interests between them
(such as the availability of different defense). If the Indemnifying Party,
having elected to assume such control, thereafter fails to defend the Third
Party Claim within a
-62-
reasonable time, the Indemnified Party shall be entitled to assume such control
and the Indemnifying Party shall be bound by the results obtained by the
Indemnified Party with respect to such Third Party Claim. If any Third Party
Claim is of a nature such that the Indemnified Party is required by applicable
law to make a payment to any person (a "Third Party") with respect to the Third
Party Claim before the completion of settlement negotiations or related legal
proceedings, the Indemnified Party may make such payment with the written
consent of the Indemnifying Party and the Indemnifying Party shall, forthwith
after demand by the Indemnified Party, reimburse the Indemnified Party for such
payment. If the amount of any liability of the Indemnified Party under the Third
Party Claim in respect of which such a payment was made, as finally determined,
is less than the amount that was paid by the Indemnifying Party to the
Indemnified Party, the Indemnified Party shall, forthwith after receipt of the
difference from the Third Party, pay the amount of such difference to the
Indemnifying Party.
11.6 Settlement of Third Party Claims
If the Indemnifying Party assumes control of the defence of any Third Party
Claim, the Indemnifying Party shall have the exclusive right to contest, settle
or pay the amount claimed, provided that the Indemnifying Party shall not settle
any Third Party Claim without the written consent of the Indemnified Party,
which consent shall not be unreasonably withheld or delayed; provided however
that the liability of the Indemnifying Party shall be limited to the proposed
settlement amount if any such consent is not obtained for any reason. If the
Indemnified Party assumes control of the defence of any Third Party Claim, the
Indemnified Party shall have the exclusive right to contest, settle or pay the
amount claimed, provided that the Indemnified Party shall not settle any Third
Party Claim without the written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed; provided however that the
liability of the Indemnified Party shall be limited to the proposed settlement
amount if any such consent is not obtained for any reason.
11.7 Co-operation
The Indemnified Party and the Indemnifying Party shall co-operate fully with
each other with respect to Third Party Claims, and shall keep each other fully
advised with respect thereto (including supplying copies of all relevant
documentation as promptly as it becomes available).
11.8 Set-Off under Representation and Warranty Escrow Agreement
(a) In addition to any other rights and remedies available to Travelbyus
and the Purchaser under this Agreement or any agreement delivered
hereunder or available to Travelbyus and the Purchaser at law,
Travelbyus and the Purchaser shall, subject to a final determination
of any such Claims as set forth in (b) below, have the right to
deduct from and set-off against (and thereby reduce or extinguish
entirely) any monies owing by Travelbyus and the Purchaser to the
Vendors and NAGE hereunder the amount of any Claims which the
Purchaser and Travelbyus shall bona fide allege are owing as a result
of a breach of any of the
-63-
representations, warranties, covenants or agreements or claim for
indemnification of the Vendors and/or NAGE contained in this
Agreement or in any agreement or instrument delivered hereunder.
(b) No deduction or set-off may be made by Travelbyus and/or the
Purchaser until it is determined, either by agreement between the
Purchaser and Travelbyus and the Vendors and NAGE or by final order
or judgment of a court of competent jurisdiction, as to the
legitimacy of any Claim and the amount of damages or other relief
available as a consequence of such Claim.
(c) The provisions of this section 11.8 shall not affect any other legal
remedy available to Travelbyus or the Purchaser to enforce payment by
the Vendors and NAGE or any other Party of any amounts which they may
become liable to pay to Travelbyus or the Purchaser as a result of
their breach of any of the representations, warranties, covenants,
indemnities or agreements contained in this Agreement.
(d) Subject to a final determination of any such Claim as set forth in
(b) above, the Vendors and NAGE hereby covenant and agree to
authorize the Escrow Agent under the Representation and Warranty
Escrow Agreement to release to Travelbyus or the Purchaser (or as
directed) any monies necessary to satisfy such Claim from the
escrowed amount held by the Escrow Agent under the Representation and
Warranty Escrow Agreement and the escrowed amount shall be reduced
accordingly, all in accordance and subject to the terms of the
Representation and Warranty Escrow Agreement.
(e) The Vendors and NAGE shall be liable for any deficiency in respect of
any Claim in accordance with the terms hereof.
11.9 Exclusivity
The provisions of this Article 11 shall apply to any Claim for a breach of any
covenant, representation, warranty or other provision of this Agreement or any
agreement, certificate or other document delivered pursuant to this Agreement
(other than a Claim for specific performance or injunctive relief) with the
intent that all such Claims shall be subject to the provisions contained in this
Article 11.
ARTICLE 12 - MISCELLANEOUS
12.1 Notices
Any notice or other communication required or permitted to be given hereunder
shall be in writing and shall be delivered in person, transmitted by telecopy or
by similar means of recorded electronic communication or sent by registered
mail, charges prepaid, addressed as follows:
-64-
(a) if to the Vendors and NAGE:
00000 Xxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx
00000
U.S.A.
Attention: Xx. Xx X. Xxxxx XX
Telecopier No.: (000) 000-0000
with a copy to:
Glast, Xxxxxxxx & Xxxxxx, PC
2200 One Gallena Tower
00000 Xxxx Xxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
Telecopier No.: (000) 000-0000
(b) if to the Purchaser or Travelbyus:
204 - 0000 Xxxx Xxxxxx Xxxxxxx
Xxxxx Xxxxxx, XX X0X 0XX
Attention: Xxxx Xxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxxxxxx
Barristers and Solicitors
Scotia Plaza, Suite 2100
00 Xxxx Xxxxxx Xxxx
Xxxxxxx XX X0X 0X0
Attention: Xxxx X. Xxxxx
Telecopier No.: (000) 000-0000
Any such notice or communication shall be deemed to have been given and received
on the day on which it was delivered by overnight courier of recognized standing
or transmitted by facsimile transmission if confirmation of receipt is received
(or if such day is not a Business Day, on the next following Business Day) or,
if mailed, certified mail, return receipt requested, on the third Business Day
following the date of mailing; provided however that if at the time of mailing
or within three Business Days thereafter there is or there occurs a labour
dispute or other event that might reasonably be expected to disrupt the delivery
of documents by mail, any notice or other communication hereunder shall be
delivered or transmitted by means of recorded
-65-
electronic communication as aforesaid. Any Party may at any time change its
address for service from time to time by giving notice to the other Parties in
accordance with this section 12.1.
12.2 Public Notices
All public notices to third persons and all other publicity concerning the
transaction contemplated herein shall be jointly planned and co-ordinated by the
Vendors, NAGE, Travelbyus and the Purchaser and no Party shall act unilaterally
in this regard without the prior approval of the other Parties, such approval
not to be unreasonably withheld, except:
(a) in the case of the Purchaser or Travelbyus, for communications made
in confidence to GalaxSea Transferred Employees and International
Tours Transferred Employees affected by the transaction contemplated
hereby who shall be informed of the confidential nature of the
transaction and who agree to keep such information confidential; or
(b) where required to do so by law or by the applicable regulations or
policies of any regulatory agency of competent jurisdiction or any
stock exchange in circumstances where prior consultation with the
other Parties is not practicable.
12.4 Counterparts and Facsimile
This Agreement may be executed in counterparts, each of which shall constitute
an original and all of which taken together shall constitute one and the same
instrument.
-66-
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
INTERNATIONAL TOURS, INC.
Per: /s/ Xxx Xxxxxxxx
-------------------------------
GALAXSEA CRUISES AND TOURS, INC.
Per: /s/ Xxx X. Xxxxxx, Xx.
-------------------------------
NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION
Per: /s/ Xx X. Xxxxx XX
-------------------------------
TRAVELBYUS-IT INCORPORATED
Per: /s/ Xxxx Xxxxx
-------------------------------
TRAVELBYUS-GALAXSEA INCORPORATED
Per: /s/ Xxxx Xxxxx
-------------------------------
XXXXXXXXXX.XXX LTD.
Per: /s/ Xxxx Xxxxx
-------------------------------
