EXHIBIT 10.61
February 25, 2004
Mr. Xxxxx XxxXxxxxx
Chairman and Chief Executive Officer
IVP Technology Corporation
Xxxxx 000, 0000 Xxxxxxxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Dear Xx. XxxXxxxxx
BINDING LETTER OF INTENT AND AGREEMENT
The intent of this letter ("letter") is to summarize the result of a recent
meeting between representatives of 1607590 Ontario Limited of the first part,
and IVP Technology Corporation, and ActiveCore Technologies Limited
(collectively "IVP") of the second part, with regard to the offer by the party
of the first part to acquire certain assets and liabilities of IVP's cellular
phone game and ring tone development group, SilverBirch Studios, and the on-line
web portal presence known as Xxxxxxxxxxx.xxx collectively known as the ("Games
Division").
Based on our review of the SilverBirch Studios and Recess Games technology and
business model we wish to enter into a binding Purchase and Sales agreement with
regard to the acquisition of the assets, including staff, and other elements of
the Games Division. The effect will be to make the Games Division an integral
part of 1607590 Ontario Limited.
Therefore, the principal purpose of this Letter of Intent is to document the
terms, in general, under which the transaction will take place subject to review
by IVP's auditors and legal counsel and mutual agreement as provided herein on
the overall components of the asset/liability sale.
It is understood by both parties that in the preparation of legal agreements
that will give effect to this transaction, certain arrangements to maximize the
tax benefit or other benefits to both parties may need to be undertaken. Each of
IVP and 1607590 Ontario Limited will undertake to accommodate each other's
requirements to the fullest extent possible provided however that neither
company will knowingly fail to comply with any regulation or statute in either
Canada or the U.S.
PRINCIPLE TERMS AND CONDITIONS
The principle terms and conditions for the proposed purchase of 100% of the
assets and assumption of certain tied liabilities of the Xxxxxx Division of IVP
are as follows:
o 1607590 Ontario Limited shall pay to IVP the cash sum of CDN$1,000,000 plus
adjustments (see below) which shall be represented by a promissory note,
payable in instalments of CAD $100,000 per month with the first payment due
on March 31, 2005 and on the last day of each month thereafter until paid
in full. The note will bear interest at the rate of 12% per annum on the
principal outstanding, interest shall be computed on a simple interest
basis, and interest shall be paid on a monthly basis commencing on March
31, 2004, and shall be payable on the last day of each month. If payments
of interest or principal are not received as required a penalty for late
payment shall be incurred as provided below;
o As security for the note 1607590 Ontario Limited shall enter into a first
position convertible debenture in favour of IVP Technology whereby IVP will
become a mezzanine lender (subordinate) in event that 1607590 Ontario
Limited is successful in attracting other senior debt from an unrelated
party which shall be equal to at least 50% of the outstanding note in
favour of IVP. The said debenture shall contain a conversion privilege on
convertible debt: On or after the first anniversary of the issue date of
the said debenture, upon giving thirty (30) days written notice to 1607590
Ontario Limited at any time prior to the full repayment of principal and
interest, the holder of the convertible debt shall be able to convert the
principal and accrued interest outstanding to equity in 1607590 Ontario
Limited based on a conversion rate equal to the most recent, at that time,
equity raised by 1607590 Ontario Limited;
o Penalties for late payment of interest: If an interest payment is not made
on the due date for such payment of interest then a penalty fee equal to
20% of the interest payment shall be added to the interest payment due and
the combined interest payment and the penalty fee shall be added to the
principal outstanding for the calculation of the interest due for the next
payment;
o Penalty for late payment of principal: if a principal repayment is not made
on the scheduled payment date then the entire outstanding balance of the
note plus any accrued interest shall be changed to reflect an 18% interest
rate until the payments of principal and interest are caught up to the
scheduled payments, provided that once all payments are brought up to date
the interest rate shall revert to the original 12% rate;
o IVP Technology will receive a 5% equity interest in 1607590 Ontario Limited
at the same share purchase rate as the founder(s) with participation rights
on any increased equity raised with the intention that IVP shall be
permitted to maintain its 5% equity interest through acquisition of further
equity at then current rates.
o On closing, 1607590 Ontario Limited will assume all liabilities for
employees severance and vacation pay and liabilities for leases as shown in
Schedules herein;
o 1607590 Ontario Limited shall pay to IVP a royalty based on 2% of the gross
revenues of 1607590 Ontario Limited payable on a quarterly basis, for the
period from March 1, 2004 to February 29, 2008. Payments are to be made
within 30 days following each calendar quarter. The total royalties payable
to IVP will be capped to a maximum of CAD 1,300,000;
o 1607590 Ontario Limited shall provide IVP with a non-exclusive right to use
any games created by the games division, for use in IVP's direct marketing
and advertising operations on the basis of a royalty equal to normal
commercial terms less 10% provided that 1607590 Ontario Limited is not
otherwise contractually prohibited by a third party from entering into such
an agreement on any particular game;
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o 1607590 Ontario Limited and IVP will enter into a Five year mutual
non-compete agreement prohibiting 1607590 Ontario Limited: from providing
healthcare services; developing and selling healthcare IT products and
enterprise middleware technology; development and sales of enterprise
mobile applications that compete with IVP's enterprise mobile applications,
and development of enterprise software for direct marketing and dedicated
list management. IVP will be prohibited from: development and sales of cell
phone games, cell phone ring tones, and consumer middle-xxxx and consumer
web-sites that would compete with 1607590 Ontario Limited. Notwithstanding
the above, 1607590 Ontario Limited may sell or license its games and those
obtained from third parties for distribution in the direct marketing and
list software field, on the basis of IVP having a right of first refusal on
any proposed contracts provided the terms, capabilities and deliverables
offered by IVP are similar;
o IVP will cause its shares held by any employee of 1607590 Ontario Limited
to become unrestricted as soon as practicable or as soon as it files its
next SB2 filing following closing of this transaction;
o 1607590 Ontario Limited will indemnify Xxxxx XxxXxxxxx and Xxxxx Xxxxxxxx
for payments owing on any leases transferred or assigned to 1607590 Ontario
Limited any loss resulting from lessors realizing on any equipment leases
assumed by 1607590 Ontario Limited;
o On or before closing all payments owing to transferred employees will be
brought current; and
o Both parties agree that they may enter into agreements for web promotion
with Marketing Online, currently based out of Poland.
The principle assets and liabilities of the Games Division to be transferred to
1602801 Ontario Limited shall consist of:
o The IP for all IVP games;
o The IP for the website known as the xxxxxxxxxxxx.xxx;
o The IP for the web portal known as Xxxxxxxxxxx.xxx;
o The IP for the web site known as Xxxxxxxxxxxxxxxxxx.xxx;
o The contract for development and distribution of the Zorro product with
Zorro Productions, Inc.;
o The Tira Wireless and all other games and ring tone distribution contracts,
subject to accounting cut-off which shall be the close of business February
29, 2004;
o Subject to the approval of Ignition Entertainment Limited, the assignment
of the rights to convert the Ignition game products as indicated in the
contract;
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o The liabilities for all "transferred" SilverBirch Studios employees
including vacation pay and severance entitlements as a "successor
employer";
o Equipment used by the games development staff with the relevant servers
together with assumption of the equipment leases; and
Ontario and the financial regulations of the United States of America. As IVP is
a public corporation traded on a recognized stock market in the United States
and is a reporting entity within the United States of America, in case of
difference in the regulatory treatment of financial, securities and accounting
matters, the laws and regulations of the U.S. shall apply.
ALL NOTICES under this Letter should be sent to:
IVP Technology Corporation at: Xxxxx X. XxxXxxxxx
Chairman and CEO
0000 Xxxxxxxxx Xxxxxxxxx Xxxx Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Voice - 000-000-0000
Fax - 000-000-0000
1607590 Ontario Limited Xxxxx Xxxxx
Chairman and CEO
0000 Xxxxxxxxxx Xxxx Xxxxxx Xxxxxx
Xxxxx 00
Xxxxxxxxxxx, Xxxxxxx X0X 0X0
Voice - 000-000-0000
Fax - 000-000-0000
GUARANTEES
Payments in respect of certain of the assets to be purchased and sold have been
guaranteed by Xxxxx Xxxxxxxx and Xxxxx XxxXxxxxx. If releases of such guarantees
cannot be obtained by closing, the Purchaser shall provide its indemnity to them
and shall undertake to obtain release of such guarantees as soon as possible
thereafter.
SCHEDULES
The attached schedules form part of this letter.
COUNTERPARTS
This letter may be signed in counterparts, each of which shall be read together
and all of which shall constitute one and the same letter. Counterparts may be
transmitted by facsimile transmission, and if so transmitted, shall be deemed to
have been validly sent and received.
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ARBITRATION
All matters in difference between the parties in relation to this letter and the
further agreements and documents contemplated herein shall be referred to the
arbitration of a single arbitrator, if the parties agree upon one, otherwise to
three arbitrators, one to be appointed by each party and a third to be chosen by
the first two named before they enter
o The ownership rights to the Games Division relevant Internet domains.
II. CLOSING:
Adjustments will be made effective from midnight on February 29, 2004. Costs
incurred by IVP in operating the games division until closing shall be recovered
from the Purchaser for the period commencing March 1, 2004. Adjustments shall be
paid on closing.
III. CONDITIONS:
BUSINESS OPERATIONS
The parties will co-operate after this date and prior to closing in respect to
all business matters including lease negotiations, allocation of overhead and
purchase price, business and game development and dealing with existing
employers, obtaining third party consents and releases and dealing with any
other matter necessary or desirable to complete the transactions referred to in
this letter. Each party shall be responsible for their own legal and accounting
fees.
EMPLOYMENT OF EXISTING GAMES DIVISION EMPLOYEES: 1607590 Ontario Limited will
offer employment to all existing employees of IVP's games division on no less
than their current employment terms and conditions. The employees and
consultants include: Xxxxx Xxxxx, Xxxxx Xxxxx, Xxxx Xxxxx, Xxxxx Xxxxxxx, Xxxx
Xxxxx, Xxxxx Xxxxx, Xxx Xxxxxx, Xxxxxx Xxxxxx, Xxxxxxxxx Xxxxxxx, Xxxxx
Xxxxxxxx, Xxxxxx Xxxxx and Xxxxxx Xxxxxx.
CONFIDENTIALITY: IVP and 1607590 Ontario Limited will undertake to use every
effort to maintain the confidential nature of the proposed transaction pending
mutual agreement as to any announcement.
DEFINITIVE DOCUMENTATION: It is understood that consummation of the transaction
contemplated herein will require the preparation; execution and delivery of a
purchase and sale agreement and such other documentation as may be deemed
appropriate (the "Agreement") by legal and accounting counsel for both IVP and
1607590 Ontario Limited. Vendor will be responsible for preparing first drafts
of closing documents. The parties and their respective counsel will work on a
consultative basis to draft the purchase and sale agreement and all further
required ancillary documentation containing all of the terms and conditions that
are customary in agreements pertaining to the purchase of operating divisions of
public corporations, provided that such agreements and documents shall neither
add to nor take away from any of the business items of agreement set forth in
this letter. If the parties are unable to agree with respect to the form and
content of any such agreements or documents the parties agree to resolve their
differences through binding arbitration as provided for herein,
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APPLICABLE LAW: Thus Agreement to be consummated, giving effect to the
transaction herein, shall be governed by and construed and interpreted in
accordance with the laws of upon the business of arbitration. The award and
determination of the arbitrator or arbitrators or any two of the three
arbitrators shall be binding upon the parties and their respective heirs,
executors, administrators and assigns.
Dated this /s/ 25th KB/BM day of February, 2004 at Toronto, Ontario
EXECUTED:
IVP TECHNOLOGY CORPORATION on behalf of itself,
and ActiveCore Technologies Limited
By: /s/ XXXXX X. XXXXXXXXX
-------------------------------
Xxxxx J , Chairman and CEO
1607590 ONTARIO LIMITED
By: /s/ XXXXX XXXXX
-------------------------------
Xxxxx Xxxxx, Chairman and CEO
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