EXHIBIT 10.1
THIS SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT is dated for reference the 15th
day of September, 1999.
AMONG:
SINO-CITY, GAS, INC., a corporation incorporated under the laws of the
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State of Delaware,
(the "Parent")
AND:
592337 B.C. LTD., a corporation incorporated under the laws of the
----------------
Province of British Columbia,
(the "Purchaser")
AND:
PRESTO COMMUNICATIONS CORP., a corporation incorporated under the laws
---------------------------
of the Province of British Columbia,
(the "Corporation");
AND:
ALL OF THE SHAREHOLDERS OF THE CORPORATION as more particularly
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described on Schedule "A" attached hereto,
(Individually a "Group 1 Shareholder or Group 2 Shareholder" and
collectively the "Shareholders").
WHEREAS:
A. the Group 1 Shareholders own collectively approximately 46% of the
issued and outstanding shares of the Corporation (the "Group 1
Corporation Shares") and the Group 2 Shareholders own the remaining
issued and outstanding shares of the Corporation (the "Group 2
Corporation Shares") (collectively the "Corporation Shares");
B. the Parent owns all of the issued and outstanding shares in the
capital stock of the Purchaser;
C. the Purchaser desires to purchase all of the Group 1 Corporation's
Shares and the Group 1 Shareholders desire to sell all of the Group l
Corporation's Shares to the Purchaser on the terms and conditions
hereinafter set forth;
D. the Parent desires to purchase all of the Group 2 Corporation Shares
and the Group 2 Shareholders desires to sell all of the Group 2
Corporation Shares to the Parent on the terms and conditions
hereinafter set forth;
E. the respective boards of directors of the Purchaser, Parent and
Corporation each deem it advisable and in the best interests of their
respective shareholders to combine their respective businesses by the
Purchaser and the Parent acquiring all of the shares in the capital
stock of the Corporation pursuant to the terms of this Agreement; and
F. the respective boards of directors of the Purchaser, Parent and
Corporation have approved and adopted this Agreement with respect to
the transfer of the Canadian Corporation Stock as a plan of
reorganization under section 36S(a)(1) of the Internal Revenue Code of
1956, as amended (the "Code"), and as a transfer of shares pursuant to
section S5 of the Income Tax Act (Canada) (the "Tax Act").
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the foregoing
premises, the mutual representations, warranties, covenants and agreements
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I: DEFINITIONS
1.01 Definitions. The following terms, as used herein, have the
following meanings:
"AFFILIATE" means, with respect to any Person, any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with such
other Person.
"AGREEMENT" means this Share Exchange and Share Purchase Agreement by and among
the Purchaser, Parent, Corporation and Shareholders.
"APPLICABLE LAW" means, with respect to any Person, any United States (whether
federal, territorial, state or local), Canadian (whether federal, territorial,
provincial, municipal or local) or foreign statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement, all as in effect as of the Closing, of
any Governmental Authority applicable to such Person or any of its Affiliates or
any of their respective properties, assets, officers, directors, employees,
consultants or agents (in connection with such officer's, director's,
employee's, consultant's or agent's activities on behalf of such Person or any
of its Affiliates).
"ASSOCIATE" means with respect to any Person (a) any other Person of which such
Person is an officer or partner or is, directly or indirectly, the beneficial
owner of ten percent (10(degree)/0) or more of any class of equity securities
issued by such other Person, (b) any trust or other estate in which such Person
has a ten percent (10%) or more beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity, and (c) any relative or
spouse of such Person, or any relative of such spouse who has the same home as
such Person or who is a director or officer of such Person or any Affiliate
thereof.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which
commercial banks in Vancouver, British Columbia are authorized or required by
law to close.
"BUYING GROUP" means the Purchaser and the Parent.
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"BUYING GROUP BUSINESS" means the business as heretofore or currently. conducted
by the Buying Group.
"BUYING GROUP CONTRACTS" means all contracts, agreements, options, leases,
licences, sales and purchase orders, commitments and other instruments of any
kind, whether written or oral, to which either the Purchaser or the Parent is a
party on the Closing Date.
"CORPORATION'S BALANCE SHEET" means the consolidated balance sheet of the
Corporation dated April 30, 1999.
"CORPORATION BUSINESS" means the business as heretofore or currently conducted
by the Corporation and the Subsidiary.
"CORPORATION CONTRACTS" means all contracts, agreements, options, leases,
licences, sales and purchase orders, commitments and other instruments of any
kind, whether written or oral, to which the Corporation, the Subsidiary or any
Shareholder on behalf of the Corporation is a party on the Closing Date.
"CORPORATION PERMITTED LIENS" means, with respect to the Corporation or the
Subsidiary, (i) Liens for Tares or governmental assessments, charges or claims
the payment of which is not yet due, or for Tares the validity of which is being
contested in good faith by appropriate proceedings; (ii) statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, material men and other
similar Persons and other Liens imposed by Applicable Law incurred in the
ordinary course of business for sums not yet delinquent or being contested in
good faith; (iii) Liens relating to deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security or to secure the performance of leases, trade
contracts or other similar agreements (iv) Liens and Corporation Encumbrances
specifically identified in the Corporation's Balance Sheet included in the
Corporation Financials; (v) Liens securing executory obligations under any lease
that constitute an "operating lease" under Canadian GAAP and (vi) other Liens
set forth on Schedule "E" hereto; provided, however, that, with respect to each
of clauses (i) through (v), to the extent that any such encumbrance or Lien
arose prior to the date of the Corporation's Balance Sheet included in the
Corporation's Financials and relates to, or secures the payment of, a Liability
that is required to be accrued under Canadian GAAP, such encumbrance or Lien
shall not be a Corporation Permitted Lien unless adequate accruals for such
Liability have been established therefor on such Corporation's Balance Sheet in
conformity with Canadian GAAP.
"CORPORATION PREMISES" means those premises that have been occupied or used, or
are occupied or used, by the Corporation in connection with the Corporation
Business.
"EXCHANGE AND VOTING AGREEMENT" means the agreement in substantially the form
set out in Schedule "B" hereto to be entered into by the Parent, Purchaser and
the Trustee.
"EXCHANGEABLE NON-VOTING SHARES" means those 3,101,000 Class "A" exchangeable,
non-voting, participating common shares without par value in the capital stock
of the Purchaser, having those rights and terms set forth in the Srcfianc,7_e
and Voting Agreement and the Exchangeable Share Provisions, which will be issued
to the Shareholders in consideration for the purchase and sale of the Group 1
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Corporation Shares and allocated between the Shareholders as set out in Schedule
"A" hereto.
"EXCHANGEABLE SHARE PROVISIONS" means those rights, restrictions, terms and
provisions pertaining to the Exchangeable Non-Voting Shares, as set forth in
Schedule "G" hereto, and as summarized in section 3.03 hereof.
"GOVERNMENTAL AUTHORITY" means any United States (whether federal, territorial,
state, municipal or local), Canadian (whether federal, territorial, provincial,
municipal or local) or foreign government, governmental authority,
quasi-governmental authority, instrumentality, court, government or
self-regulatory organization, commission, tribunal or organization or any
regulatory, administrative or other agency, or any political or other
subdivision, department or branch of any of the foregoing.
"GROUP 1 SHAREHOLDERS" means those shareholders of the Corporation described in
Schedule A attached hereto.
"GROUP 2 SHAREHOLDERS" means those shareholders of the Corporation described in
Schedule A attached hereto.
"GST" means all goods and services tares, sales taxes levied by the federal
government of Canada, value added taxes or multi-stage taxes and all provincial
sales taxes integrated with such federal taxes, assessed, rated or charged upon
the Corporation.
"INTERIM PERIOD" means the period from and including the date of this Agreement
to and including the Closing Date.
"LIABILITY" means, with respect to any Person, any liability or obligation of
such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated,
secured or unsecured, joint or several, due or to become due, vested or
unvested, determined, determinable or otherwise and whether or not the same is
required to be accrued on the financial statements of such Person.
"LIEN" means, with respect to any asset, any mortgage, assignment, trust or
deemed trust (whether contractual, statutory or otherwise arising), title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance or charge of any kind in respect of such assets.
"MATERIAL ADVERSE EFFECT" means a change in, or effect on, the operations,
affairs, prospects, financial condition, results of operations, assets,
Liabilities, reserves or any other aspect of a party to this Agreement or to its
business that results in a material adverse effect on, or a material adverse
change in, any such aspect of the party or to its business.
"PARENT'S BALANCE SHEET" means the balance sheet of the Parent dated April 30,
1997.
"PARENT COMMON SHARES" means 5,101,000 common shares in the capital of the
Parent to be issued to the Trustee pursuant to paragraph 2.05 hereof, in
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consideration of subscription proceeds from the Trustee of S0.0001 per share,
having those rights and terms as set forth in the Exchange and Voting Agreement.
"PARENT SHARES" means 5,599,000 common shares in the capital of the Parent to be
issued to the Group 2 Shareholders.
"PERSON" includes an individual, body corporate, partnership, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"SEC" means the United States Securities and Exchange Commission.
"SHAREHOLDERS" means collectively the Group 1 Shareholders and the Group 2
Shareholders.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation as to which
more than 10% of the outstanding shares haying ordinary voting rights or power
(and excluding shares having voting rights only upon the occurrence of a
contingency unless and until such contingency occurs and such rights may be
exercised) is owned or controlled, directly or indirectly, by such Person and/or
by one or more of such Person's Subsidiaries, and (ii) any partnership, joint
venture or other similar relationship between such Person (or any Subsidiary
thereof) and any other Person (whether pursuant to a written agreement or
otherwise).
"SUPPORT AGREEMENT" means that agreement between the Parent and the Purchaser,
in the form attached hereto as Schedule "H" hereto, whereby the Parent agrees to
make certain payments and deliveries to enable the Purchaser to comply with the
Exchangeable Share Provisions.
"TAX" means all taxes imposed of any nature including any United States (whether
federal, territorial, state or local), Canadian (whether federal, territorial,
provincial or local) or foreign income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax or employer health tax), capital tax, real
or personal property tax or ad valorem tax, sales or use tar, excise tax, stamp
tax or duty, any withholding or back up withholding tax, value added tax, GST,
severance tax, prohibited tax, premiums tax, occupation tax, customs and import
duties, together with any interest or any penalty, addition to tax or additional
amount imposed by any Governmental Authority responsible for the imposition of
any such tax or in respect of or pursuant to any United States (whether federal,
territorial, state or local), Canadian (whether federal, territorial, provincial
or local) or other Applicable Law.
"TAX RETURN" means all returns, reports, forms or other information required to
be filed with respect to any Tar.
"TRUSTEE" means the trustee or successor trustee designated under the Exchange
and Voting Agreement.
"33 ACT" means the United States Securities Act of 1933 and all amendments
thereto.
"34 ACT" means the United States Securities Act of 193=1 and all amendments
thereto.
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1.02 Currency Used. All references herein to dollars or the use of the
symbol "S" shall be deemed to refer to United States dollars unless such
reference is prefaced by "CDN" in which case the reference will be to Canadian
dollars.
1.03 Canadian Generally Accepted Accounting Principles. Where the
Canadian Institute of Chartered Accountants or any successor thereto includes a
statement in its handbook or any successor thereto on a method or alternative
methods of accounting or on a standard or standards of auditing, such statement
shall be regarded as the only generally accepted accounting principle or
principles or generally accepted auditing standard or standards ("Canadian
GAAP") applicable to the circumstances that it covers, and references herein to
"generally accepted accounting principles" shall be interpreted accordingly. All
accounting and financial terms used herein with respect to the Corporation,
unless specifically provided to the contrary, shall be interpreted and applied
in accordance with Canadian GAAP.
1.04 American Generally Accepted Accounting Principles. Where the
American Institute of Certified Public Accountants or any successor thereto
includes a statement in its handbook or any successor thereto on a method or
alternative methods of accounting or on a standard or standards of auditing,
such statement shall be regarded as the only generally accepted accounting
principle or principles or generally accepted auditing standard or standards
("American GAAP") applicable to the circumstances that it covers, and references
herein to "generally accepted accounting principles" shall be interpreted
accordingly. All accounting and financial terms used herein with respect to the
Parent, unless specifically provided to the contrary, shall be interpreted and
applied in accordance with American GAAP.
ARTICLE II: PURCHASE, SALE AND SUBSCRIPTION
2.01 Purchase of Corporation Shares. On the terms and subject to the
conditions set forth herein, the Sf7areholders hereby agree to sell, transfer,
convey, assign and deliver to the Purchaser, free and clear of all Corporation
Share Encumbrances (as defined in paragraph 3.01.1), and the Purchaser hereby
agrees to purchase, acquire and accept from the Shareholders, all of the
Corporation Shares held by the Shareholders. .At Closing, the Shareholders will
deliver to the Purchaser certificates evidencing all of the Corporation Shares
duly endorsed for transfer and such other instruments as have been reasonably
requested by the Purchaser to transfer full legal and beneficial ownership of
the Corporation Shares to the Purchaser, free and clear of all Corporation Share
Encumbrances and the Corporation agrees to enter the Purchaser or the
Purchaser's nominee on the books of the Corporation as the holder of the
Corporation Shares and to issue one or more replacement share certificates
representing the Corporation Shares to the Purchaser or the Purchaser's nominee.
The Purchaser shall pay the purchase price for the Corporation Shares in
accordance with the terms of Sections 2.04 of this Agreement.
2.02 Subscription of Parent Common Shares. The Parent agrees to grant
to each Group 1 Shareholder:
(a) such number of voting rights in the Parent as is equivalent to the
number of Exchangeable Non-Voting Shares held by each Group 1
Shareholder, as if each Group 1 Shareholder held an equivalent number
of Parent Common Shares, and, subject to the remaining terms of this
Agreement, which voting rights will be exercisable by the Group 1
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Shareholders through their holding Exchangeable Non-Voting Shares in
accordance with the Exchange and Voting Agreement; and
(b) the rights to exchange their Exchangeable Non-Voting Shares for Parent
Common Shares, such rights to be exercised in accordance with the
terms of the Exchange and Voting Agreement.
To ensure that the Purchaser and the Parent has sufficient common shares
available to issue in exchange for Exchangeable Non-Voting Shares, and as
security for its covenant to do so, the Parent agrees to issue the Parent Common
Shares to the Trustee, at or shortly following Closing, at the purchase price of
50.0001 per share; such Parent Common Shares to be held in accordance with the
Exchange and Voting agreement.
2.03 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Maitland &
Company on such date as the parties hereto may mutually agree in writing (the
"Closing Date").
2.04 Payment of Purchase Price. At Closing the Purchaser will deliver
to the Group 1 Shareholders certificates representing the Exchangeable
Non-Voting Shares, all such Exchangeable Non-Voting Shares to be issued as fully
paid and non-assessable, and registered in the names of the Shareholders and in
the denominations set forth in Schedule "A" hereto. At Closing the Parent will
issue the Parent Shares to the Group 2 Shareholders as set forth in Schedule "A"
hereto such Parent Shares to be issued as fully paid and non-assessable, and
registered in the names of the Group 2 Shareholders and in the denominations set
forth in Schedule "A" hereto. On or shortly following the Closing, the Parent
will issue the Parent Common Shares to the Trustee, such Parent Common Shares to
be issued as fully paid and non-assessable, and registered in the name of the
Trustee in such denominations as the Trustee may request.
ARTICLE III: REPRESENTATIONS AND
WARRANTIES OF SHAREHOLDERS
As an inducement to the Buying Group to enter into this Agreement and to
consummate the transactions provided for herein, each Shareholder, as to
himself, herself or itself and as to such of the Corporation Shares owned by
him, her or it (and not as to any other Shareholder or to any of the Corporation
Shares owned by any other Shareholder) represents and warrants to the Buying
Group as follows and confirms that the Purchaser and the Parent are relying upon
the accuracy of each of such representations and warranties in connection with
the purchase of the Corporation Shares and the completion of the transactions
set out herein:
3.01 Representations Regarding tire Corporation Shares.
3.01.1 Each Shareholder has good and marketable title to his
respective holdings in the Corporation Shares, free and clear of any and all
covenants, conditions, restrictions, voting trust arrangements, rights of first
refusal, options, Liens and adverse claims and rights whatsoever (collectively,
the "Corporation Share Encumbrances"), and on the Closing Date, the Shareholders
will deliver to the Purchaser or the Parent as the case may be, good and
marketable title to the Corporation Shares free and clear of any and all
Corporation Share Encumbrances;
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3.01.2 Each Group 2 Shareholder has the full right, power and
authority to enter into this Agreement and each Group 2 Shareholder has the full
right, power and authority to transfer, convey and sell to the Parent at the
Closing his respective holdings of the Corporation Shares sold to the Parent by
the Group 2 Shareholders hereunder, and upon consummation of the purchase, the
Parent will acquire from the Group 2 Shareholders good and marketable title to
the Corporation Shares sold to the Parent by the Group 2 Shareholders, free and
clear of all Corporation Share Encumbrances; and
3.01.3 Each Group 1 Shareholder has the full right, power and
authority to enter into this Agreement and each Group 1 Shareholder has the full
right, power and authority to transfer, convey and sell to the Purchaser at the
Closing his respective holdings of the Corporation Shares sold to the Purchaser
by the Group 1 Shareholders hereunder, and upon consummation of the purchase,
the Purchaser will acquire from the Group I Shareholders good and marketable
title to the Corporation Shares sold to the Purchaser by the Group 1
Shareholders, free and clear of all Corporation Share Encumbrances; and
3.01.4 No Shareholder is a parry to, subject to or bound by any
agreement, judgment, order, writ, prohibition, injunction or decree of any court
or other Governmental Authority that would prevent the execution or delivery to
the Purchaser of this Agreement by any Shareholder, the transfer, conveyance and
sale of the Corporation Shares sold by Shareholder to the Purchaser pursuant to
the terms hereof, or the consummation of the transactions under this Agreement
in accordance with the terms of this Agreement.
3.02 Authorization. The execution, delivery and performance of this
Agreement, and the consummation of the transactions provided for herein, by each
Shareholder are within the respective powers of each Shareholder and have been
duly authorized by all necessary action on the part of each Shareholder,
respectively. This Agreement has been duly and validly executed by each
Shareholder and constitutes a legal, valid and binding agreement of each
Shareholder, respectively, enforceable against each Shareholder in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and
subject to general principles of equity.
3.03 Non-Contravention. The execution, delivery and performance of
this Agreement, and the consummation of the transactions provided for herein, by
each Shareholder, do not (a) contravene or conflict with or constitute a
material violation of any provision of any Applicable Law binding upon or
applicable to any Shareholder or the Corporation Shares or (b) result in the
creation or imposition of any Lien.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
As an inducement to the Buying Group to enter into this Agreement and to
consummate the transactions provided for herein, the Corporation, represents and
warrants to the Buying Group as follows:
4.01 Existence acrd Power. The Corporation is a corporation duly
incorporated, organized and validly existing under the laws of the Province of
British Columbia and has all corporate power and all governmental licences,
authorizations, permits, consents and approvals required to carry on the
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Corporation Business as now conducted and to own and operate the Corporation
Business as now owned and operated. The Corporation is not required to be
qualified to conduct business in any jurisdiction where the failure to be so
qualified, whether individually or in the aggregate, would have a Material
Adverse Effect. No Corporation proceedings have been taken or authorized by the
Corporation or any Shareholder or, to the knowledge of the Corporation, by any
other Person, with respect to the bankruptcy, insolvency, liquidation,
dissolution or winding-up of the Corporation or with respect to any
amalgamation, merger, consolidation, arrangement or reorganization relating to
the Corporation.
4.02 Authorization. The execution, delivery and performance by the
Corporation of this Agreement and the consummation thereby of the transactions
provided for herein are within the Corporation's powers and have been duly
authorized by all necessary action on its part. This Agreement has been duly and
validly executed by the Corporation and constitutes a legal, valid and binding
agreement of the Corporation enforceable against it in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and
subject to general principles of equity.
4.03 Capital Stock.
4.03.1 The authorized capital stock of the Corporation consists solely
of unlimited number of common shares without par value, of which 600 common
shares are issued and outstanding and are held by the Shareholders (the
"Corporation Shares").
4.03.2 All such issued and outstanding Corporation Shares have been
duly and validly authorized and issued and are validly outstanding, fully paid
and non-assessable. The Corporation Shares represent all of the issued and
outstanding shares of the Corporation. The Corporation does not hold any of the
issued and outstanding Corporation Shares in the treasury of the Corporation,
and there are not outstanding (i) any options, warrants, rights of first refusal
or other rights to purchase any shares of the Corporation except as disclosed in
Schedule "H" hereto, (ii) any securities convertible into or exchangeable for
such shares or (iii) any other commitments of any kind for the issuance of
additional shares of the Corporation or options, warrants or other securities of
the Corporation.
4.04 Subsidiaries. The Corporation owns all of the issued and
outstanding share capital of 1166330 Ontario Inc (the "Subsidiary" and
"Subsidiary Shares"). All such issued and outstanding Subsidiary Shares have
been duly and validly authorized and issued and are validly outstanding, fully
paid and non-assessable. The Subsidiary Shares represent all of the issued and
outstanding shares of the Subsidiary. There are not outstanding (i) any options,
warrants, rights of first refusal or other rights to purchase any shares of the
Subsidiary except as disclosed in Schedule "H") hereto, (ii) any securities
convertible into or exchangeable for such shares or (iii) any other commitments
of any kind for the issuance of additional shares of the Subsidiary or options,
warrants or other securities of the Subsidiary.
4.05 Governmental Authorization. The execution, delivery and
performance by the Corporation of this A- cement requires no action by, consent
or approval of, or filing with, any Governmental Authority other than as
expressly referred to in this Agreement.
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4.06 Not-Contravention. The execution, delivery and performance of
this Agreement by the Corporation, and the consummation by it of the
transactions provided for herein, do not and will not (a) contravene or conflict
with the articles or bylaws of the Corporation; (b) contravene or conflict with
or constitute a material violation of any provision of any Applicable Law
binding upon or applicable to the Corporation, the Corporation Business or the
Corporation Shares and would not, individually or in the aggregate have a
Material Adverse Effect; (c) constitute a default under or give rise to any
right of termination, cancellation or acceleration of, or to a loss of any
benefit to which the Corporation is entitled, under any Corporation Contract to
which the Corporation is a party or any permit or similar authorization relating
to the Corporation, the Corporation Business or the Corporation Shares by which
the Corporation, the Corporation Business or the Corporation Shares may be bound
or affected; or (d) result in the creation or imposition of any Lien.
4.07 Financial Statements: Undisclosed Liabilities.
4.07.1 Attached hereto as Schedule "C" are true and complete copies of
the Corporation's Balance Sheet as of April 30,1999 and the related consolidated
statements of loss and deficit and cash flows from April 1, 1999 (the date of
incorporation) to April 30, 1999 (collectively, the "Corporation's Financials").
4.07.2 The Corporation's Financials: (i) have been prepared on a
consistent basis and are based on the books and records of the Corporation and
the Subsidiary on a consolidated basis in accordance with Canadian GAAP and
present fairly the financial position, results of operations and statements of
changes in the Corporation's financial position as of the dates indicated or the
periods indicated; (ii) contain and reflect all necessary adjustments and
accruals for a fair presentation of its financial position and the results of
its operations for the periods covered by said financial statements; (iii)
contain and reflect adequate provisions for all reasonably anticipated
Liabilities (including Taxes) with respect to the periods then ended and all
prior periods; and (iv) with respect to the Corporation Contracts and
commitments for the sale of goods or the provision of services by the
Corporation, contain and reflect adequate reserves for all reasonably
anticipated material losses and costs and expenses in excess of expected
receipts.
4.07.3 To the best of the knowledge of the Corporation, there are no
Liabilities of the Corporation and the Subsidiary other than: (i) any
Liabilities accrued as Liabilities on the Corporation's Balance Sheet; (ii)
Liabilities incurred since the date o [the Corporation's Balance Sheet that do
not, and could not, individually or in the aggregate have a Material Adverse
Effect; and (iii) other Liabilities disclosed in this Agreement or in any
schedules attached hereto.
4.08 Absence of Certain Changes. Since April30, 1999, the Corporation
Business has been conducted in the ordinary course, and there has not been:
(a) any event, occurrence, state of circumstances, or facts or change in
the Corporation, the Subsidiary or in the Corporation Business that
has had, or which the Corporation, after reasonable inquiry, expect to
have, either individually or in the aggregate, a Material Adverse
Effect;
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(b) (i) any change in any Liabilities of the Corporation or the Subsidiary
that has had, or which the Corporation may, after reasonable inquiry,
expect to have, a Material Adverse Effect or (ii) any incurrence,
assumption or guarantee of any indebtedness for borrowed money by the
Corporation in connection with the Corporation Business or otherwise;
(c) any (i) payments by the Corporation or the Subsidiary in respect of
any indebtedness of the Corporation or the Subsidiary for borrowed
money or in satisfaction of any Liabilities of the Corporation or the
Subsidiary related to the Corporation Business, other than in the
ordinary course of business or the guarantee by the Corporation or the
Subsidiary of any of the indebtedness of any other Person or (ii)
creation, assumption or sufferance of (whether by action or omission)
the existence of any Lien on any assets reflected on the Corporation's
Balance Sheet, other than Corporation Permitted Liens;
(d) any transaction or commitment made, or any Contract entered into, by
the Corporation or the Subsidiary, or any waiver, amendment,
termination or cancellation of any of the Corporation Contracts by the
Corporation or the Subsidiary, or any relinquishment of any rights
thereunder by the Corporation or of any other right or debt owed to
the Corporation or the Subsidiary, other than, in each such case,
actions taken in the ordinary course of business consistent with past
practice;
(e) any (i) grant of any severance, continuation or termination pay to any
director, officer, stockholder or employee of the Corporation or any
Affiliate of the Corporation, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to
any such existing agreement) with any director, officer, stockholder
or employee of the Corporation or any Affiliate of the Corporation,
(iii) increase in benefits payable or potentially payable under any
severance, continuation or termination pay policies or employment
agreements with any director, officer, stockholder or employee of the
Corporation or any Affiliate of the Corporation, (iv) increase in
compensation; bonus or other benefits payable or potentially payable
to directors, officers, stockholders or employees of the Corporation
or any Affiliate of the Corporation other than in the normal course of
business, (v) change in the terms of any bonus, pension, insurance,
health or other benefit plan of the Corporation or (vi) representation
of the Corporation to any employee or former employee of the
Corporation that the Purchaser promised to continue any Corporation
benefit plan after the Closing Date,
(f) any change by the Corporation in its accounting principles, methods or
practices or in the manner it keeps its books and records;
(g) any distribution, dividend, bonus, management fee or other payment by
the Corporation to any officer, director, stockholder or Affiliate of
the Corporation or any of their respective Affiliates or Associates;
or
(h) any (i) material single capital expenditure or commitment, or any
group of related capital expenditures or commitments, or (ii) sale,
11
assignment, transfer, lease or other disposition of or agreement to
sell, assign, transfer, lease or otherwise dispose of any asset or
property other than in the ordinary course of business.
4.09 Properties; Corporation Material Leases; Tangible Assets.
4.09.1 The Corporation does not own any real property.
4.09.2 The Corporation and the Subsidiary hold title to each of their
properties and assets tree and clear of all Liens, adverse claims, easements,
rights of way, servitudes, zoning or building restrictions or any other rights
of others or other adverse interests of any hind, including leases, chattel
mortgages, conditional sales contracts, collateral security arrangements and
other title or interest retention arrangements (collectively, "Corporation
Encumbrances"), except Corporation Permitted Liens.
4.09.3 All tangible properties and assets reflected on the
Corporation's Balance Sheet are in all material respects fit for the purposes
for which they are used and are in good operating condition and repair and are
adequate for the uses to which they are put, and no material properties or
assets necessary for the conduct of the Corporation Business in substantially
the same manner as the Corporation Business has heretofore been conducted are in
need of replacement, maintenance or repair except for routine replacement,
maintenance and repair.
4.10 Affiliates. Other than as disclosed herein, there are no
Corporation Contracts which have been entered into within the past five years or
are currently in force and effect between the Corporation and any Shareholder,
or any Affiliate or Associate of any Shareholder. The Corporation is not
indebted to any Shareholder.
4.11 Litigation. There are no material proceedings pending or, to the
knowledge of the Corporation, threatened against or affecting the Corporation,
the Subsidiary or the Corporation Business or that seeks to prevent, enjoin,
alter or delay the transactions contemplated by this Agreement and (ii) there is
no existing order, judgment or decree of any Governmental Authority naming the
Corporation or the Subsidiary as an affected party which has not been paid or
discharged in full.
4.12 Material Contracts. All Corporation Contracts are legal, valid
and binding obligations of the Corporation or the Subsidiary and each other
Person who is a party thereto, enforceable against the Corporation or the
Subsidiary and each such Person in accordance with its terms, and none are
subject to any material default thereunder.
4.13 Required Consents. There are no governmental or other
registrations, filings, applications, notices, transfers, consents, approvals,
orders, qualifications or waivers required under Applicable Law or otherwise
required to be obtained or made with any Governmental Authority to be obtained
by the Corporation, the Subsidiary or any Shareholder by virtue of the execution
and delivery of this Agreement and the consummation of the transactions provided
for herein for any reason; nor are there any Corporation Contracts with respect
to which the consent of the other party or patties thereto must be obtained by
the Corporation, the Subsidiary or any Shareholder by virtue of the execution
and delivery of this Agreement and the consummation of the transactions provided
for herein (the "Required Consents").
12
4.14 Corporation Intellectual Property.
4.14.1 Schedule "F" sets forth a complete and correct list of each
patent, patent application and invention, trademark, tradename, trademark or
tradename registration or application, copyright or copyright registration or
application for copyright registration, and each licence or licensing agreement,
for any of the foregoing relating to the Corporation Business as conducted by
the Corporation, the Subsidiary or held by the Corporation (the "Corporation
Intellectual Property Rights"). Corporation Intellectual Property Rights also
include any trade secrets that are material to the conduct of the Corporation
Business in the manner that the Corporation Business has heretofore been
conducted.
4.14.2 Neither the Corporation nor the Subsidiary has during the three
years preceding the date of this Agreement been a party to any proceeding, nor
to the knowledge of the Corporation, is any proceeding threatened as to which
there is a reasonable possibility of a determination adverse to the Corporation
or the Subsidiary, involving a claim of infringement by any Person (including
any Governmental Authority) of any Corporation Intellectual Property Right. No
Corporation Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by the
Corporation or the Subsidiary or restricting the licensing thereof by the
Corporation or the Subsidiary to any Person. The Corporation has no knowledge
that would cause such Person to believe that the use of the Corporation
Intellectual Property Rights or the conduct of the Corporation Business
conflicts with, infringes upon or violates any patent, patent licence, patent
application, trademark, tradename, trademark or tradename registration,
copyright, copyright registration, service xxxx, brand xxxx or brand name or any
pending application relating thereto,, or any trade secret, know-how, programs
or processes, or any similar rights, of any Person.
4.14.3 To the knowledge of the Corporation, the Corporation and/or the
Subsidiary own the entire right, title and interest in, to and under, or has
acquired an exclusive licence to use, any and all patents, trademarks, trade
names, brand names and copyrights that are material to the conduct of the
Corporation Business in the manner that the Corporation Business has heretofore,
been conducted. The Corporation Intellectual Property Rights are in full force
and effect and have not been used or enforced or failed to be used or enforced
in a manner that would result in the abandonment, cancellation or
unenforceability of any of the Corporation Intellectual Property Rights. All
registrations and filings necessary to preserve the rights of the Corporation in
and to the Corporation Intellectual Property Rights have been made.
4.15 Tax Matters.
4.15.1 The Corporation has prepared and filed all Tax Returns on time
with all appropriate Governmental Authorities which were required to be filed on
or prior to the Closing Date. Each such Tax Return was correct and complete.
True copies of all Tax Returns prepared and filed by the Corporation during the
past three years and that the Purchaser has requested have been given to the
Purchaser on or before the date of this Agreement.
4.15.2 The Corporation has paid all Taxes due and payable by it and
has paid all assessments and reassessments it has received in respect of Taxes.
13
4.15.3 The Corporation has withheld from each payment made to any of
its present or former employees, officers and directors, and to all persons who
are non-residents of Canada for the purposes of the Income Tar Act (Canada) all
amounts required by Applicable Law and has remitted such withheld amounts within
the prescribed periods to the appropriate Governmental Authority. The
Corporation has remitted all Canada Pension Plan contributions, employment
insurance premiums, employer health taxes and other Taxes payable by it in
respect of its employees and has remitted such amounts to the proper
Governmental Authority within the time required by Applicable Law. The
Corporation has charged, collected and remitted on a timely basis all Taxes as
required by Applicable Law on any sale, supply or delivery whatsoever, made by
the Corporation.
4.15.4 The Corporation Business is the only business ever conducted by
the Corporation. The non-capital losses (as defined in the Tax Act and any
applicable provincial taxing statute) were incurred by the Corporation only in
carrying on the Corporation Business. The Corporation is not prevented by virtue
of any amalgamation or dissolution from carrying back against income earned by
it prior to the Closing Date, any losses incurred by it after the Closing Date.
4.15.5 Corporation has paid all Taxes imposed by applicable
legislation in the province of British Columbia on the acquisition of its
tangible personal property. as defined in applicable legislation III the
province of British Columbia, and none of its tangible personal property has
been transferred at any time on a tax-exempt basis under applicable legislation
of the Province of British Columbia or any predecessor legislation thereof. The
foregoing is accurate, mutatis mutandis, with respect to all sales or transfer
Taxes imposed under comparable legislation of other provinces.
4.16 Securities Legislation. The Corporation is a private issuer
within the meaning of the Securities Act (British Columbia) and the sale of the
Corporation Shares by the Shareholders to the Purchaser is made in compliance
with the exempt takeover-bid provisions of such Act.
4.17 Full Disclosure. The information contained in the documents,
certificates and written statements (including this Agreement and the schedules
and exhibits hereto) furnished to the Purchaser by or on behalf of the
Corporation with respect to the Corporation or the Subsidiary (including the
Corporation Business and the results of operations, financial condition and
prospects of the Corporation) for use in connection with this Agreement or the
transactions contemplated by this Agreement is true and complete in all material
respects and does not, to the best of the knowledge of the Corporation after
conducting an inquiry which a reasonably prudent person would make under the
circumstances, omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. There is no fact known to the Corporation the Corporation that
has not been disclosed to the Purchaser by the Corporation in writing that has
had a material Adverse Effect on or, so far as the Corporation can now foresee,
could be reasonably likely to have a Material Adverse Effect on the Corporation
or the Subsidiary (including the Corporation Business and the results of
operations, financial condition or prospects of the Corporation or the
Subsidiary).
14
ARTICLE V: REPRESENTATIONS AND
WARRANTIES OF THE BUYING GROUP
As an inducement to the Corporation and each Shareholder to enter into this
Agreement and to consummate the transactions provided for herein, the Purchaser
and the Parent, jointly and severally, represent and warrant to the Corporation
and each Shareholder that:
5.01 Existence and Power. Each of the Purchaser and the Parent is a
corporation duly incorporated, organized and validly existing under the laws of
the Province of British Columbia and the State of Delaware respectively and each
has all corporate power and all governmental licences, authorizations, permits,
consents and approvals required to carry on the Buying Group Business as now
conducted and to own and operate their respective businesses as now owned and
operated. The Purchaser and the Parent are not required to be qualified to
conduct business in any jurisdiction where the failure to be so qualified,
whether individually or in the aggregate, would have a Material Adverse Effect.
No proceedings have been taken or authorized by the Purchaser or the Parent or,
to the knowledge of the Purchaser or the Parent, by any other Person, with
respect to the bankruptcy, insolvency, liquidation, dissolution or winding-up of
the Purchaser or the Parent or with respect to any amalgamation, merger,
consolidation, arrangement or reorganization relating to the Purchaser or the
Parent.
5.02 Authorization. The execution, delivery and performance by each of
the Purchaser and the Parent of this Agreement and the consummation thereby of
the transactions provided for herein are within the powers of the Purchaser and
the Parent and have been duly authorized by all necessary action on their part.
This Agreement has been duly and validly executed by each of the Purchaser and
the Parent and constitutes a legal, valid and binding agreement of the Purchaser
and the Parent enforceable against them in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights and subject to general principles of
equity.
5.03 Capital Stock of the Purchaser.
5.03.1 The authorized capital stock of the Purchaser consists of
10,000 common shares no par value of which one common share is issued and
outstanding on the date hereof to and in the name of the Parent and 20,000,000
Exchangeable Non-Voting Shares with no par value of which no shares are issued
and outstanding. Each Exchangeable Non-Voting Share shall:
(a) be non-voting as to matters concerning the Purchaser (such that all
voting share Purchaser will be and remain held by the Parent);
however, as stated above in paragraph 2.03, the holder of Exchangeable
Non-Voting Shares will be entitled to voting rights in the Parent as
is equivalent to the number of Exchangeable Non-Voting Shares held by
each Shareholder as if each Shareholder held an equivalent number of
Parent Common Shares;
(b) entitle the holder thereof (the "Holder") to dividend rights equal,
after conversion into Canadian dollars based on the Canadian(U.S.
exchange rate in effect on the record date thereof, to the per share
dividend rights of Parent Common Shares;
15
(c) entitle the Holder, on a liquidation of the Purchaser, to receive in
exchange for each Exchangeable Non-Voting Share one Parent Common
Shares for a period ending on the twenty-fifth anniversary Z S Lay j .
of the Closing Date; and
(d) entitle the Holder, at his election from time to time for a period
ending on the twenty-fifth anniversary of the Closing Date, upon 30
days' written notice given by such Holder to the Purchaser, to require
the Purchaser to redeem any or all Exchangeable Non-Voting Shares and
to exchange therefor, on a share for share basis, Parent Common Shares
(the "Right of Retraction"),
5.03.2 The Parent and the Purchaser shall be entitled to deduct and
withhold from the consideration otherwise payable to any Holder of Exchangeable
Non-Voting Shares, including any dividend payments in respect of the
Exchangeable Non-Voting Shares, such amount as the Parent or the Purchaser is
required or permitted to deduct and withhold with respect to such payment under
the United States Internal Revenue Code, the Income Tax Act (Canada) or any
provision of state, provincial, local or foreign tax law. The Parent and the
Purchaser shall not initially withhold any United States Tax on dividends paid
on the Exchangeable Non-Voting Shares. However, if any United States taxing
authority determines that the Parent or the Purchaser is liable for United
States withholding Tax on dividends paid to the Holders on the Exchangeable
Non-Voting Shares, the Purchaser shall be entitled to reduce the amount of any
future dividends to be paid to the Holders by such withholding obligation. To
the extent that amounts are so withheld, such withheld amounts shall be treated
for all purposes hereof as having been paid to the Holder of Exchangeable Non- ,
Shares in respect of which such deduction and withholding was made; provided,
however, that such withheld amounts are actually remitted to the appropriate
taxing authority. To the extent that the amount so required or permitted to be
deducted or withheld from any payment to a Holder exceeds the cash portion of
the consideration otherwise payable to the Holders, the Parent upon at least ten
(10) days' prior written notice to such Holder, is hereby authorized to sell or
otherwise dispose of at fair market value such portion of such non-cash
consideration otherwise payable to the Holder as is necessary to provide
sufficient funds to the Parent in order to enable it to comply with such
deduction or withholding requirement and the Parent shall give an accounting to
the Holder with respect thereof and any balance of such proceeds of sale.
5.03.3 There are not outstanding (i) any options, warrants, rights of
first refusal or other rights to purchase any shares of the Purchaser, (ii) any
securities convertible into or exchangeable for such shares or (iii) any other
commitments of any kind for the issuance of additional shares of the Purchaser
or options, warrants or other securities of the Purchaser.
5.04 Capital Stock of the Parent.
5.04.1 The authorized capital stock of the Parent consists solely of
50,000,000 common shares, $.000l par value per share ("Parent Common Shares") of
which 5,071,600 Parent Common Shares are issued and outstanding on the date
hereof and 20,000,000 Preferred Shares, S.00001par value per share of which no
shares are issued and outstanding.
5.04.2 There are not outstanding (i) any options, warrants, rights of
first refusal or other rights to purchase any shares of the Parent, (ii) any
securities convertible into or exchangeable for such shares or (iii) any other
16
commitments of any kind for the issuance of additional shares of the Parent or
options, warrants or other securities of the Parent.
5.05 General Provisions of the Capital of tire Purchaser acid the
Parent.
5.05.1 All of the issued and outstanding shares in the respective
capital stocks of the Purchaser and the Parent have been duly and validly
authorized and issued and are validly outstanding, fully paid and nonassessable.
The Purchaser does not hold any of the issued and outstanding shares in the
treasury of the Purchaser or the Parent, the Parent does not hold any of the
issued and outstanding shares in the treasury of the Parent and there are not
outstanding (i) any options, warrants, rights of first refusal or other rights
to purchase any shares of the Purchaser or the Parent, (ii) any securities
convertible into or exchangeable for such shares or (iii) any other commitments
of any kind for the issuance of additional shares of the Purchaser or Parent or
options, warrants or other securities of the Purchaser or Parent other than as
disclosed in Article x.03.1 herein.
5.05.2 All of the Exchangeable Non-Voting Shares, the Parent Common
Shares and the Parent Shares which will be issued hereunder will be fully paid
and non-assessable, subject, if applicable, to such terms and provisions as set
forth in the Exchange and Voting Agreement, and the Purchaser and Parent's
articles of incorporation and the Directors Resolutions relating to the issuance
of the Parent Common Shares and Parent Shares, as applicable, and all such
shares will be issued free and clear of all Liens, charges, encumbrances and
trading restrictions other than as may be imposed by Applicable Law.
5.06 Subsidiaries. The Purchase has no Subsidiaries and the Parent has
two Subsidiaries being the Purchaser and a dormant company called Sino-City Gas
(Asia) Ltd.
5.07 Governmental Authorization. The execution, delivery and
performance by the Buying Group of this Agreement requires no action by, consent
or approval of, or filing with, any Governmental Authority other than as
expressly referred to in this Agreement.
5.08 Non-Contravention. The execution, delivery and performance of
this Agreement by the Buying Group, and the consummation by it of the
transactions provided for herein, do not and will not (a) contravene or conflict
with the respective articles or bylaws of the Buying Group; (b) contravene or
conflict with or constitute a material violation of any provision of any
Applicable Law binding upon or applicable to the Buying Group, the Buying Group
Business or the outstanding shares in their respective capital stocks and would
not, individually or in the aggregate have a Material Adverse Effect; (c)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to which the
Purchaser or the Parent are entitled, under any Buying Group Contract to which
the Purchaser or the Parent is-a party or any Permit or similar authorization
relating to the Purchaser or Parent, the Buying Group Business or the
outstanding shares in their respective capital stocks may be bound or affected;
or (d) result in the creation or imposition of any Lien.
5.09 Financial Statements: Undisclosed Liabilities.
5.09.1 Attached hereto as Schedule "D" are true and complete copies of
the Parent's Balance Sheet, as of December 31, 1996, and the related statements
of operations, stockholders' equity (deficit) and cash flows for the year then
17
ended which statements are under the name Call Online, Inc. a prior name of the
Parent. (collectively, the "Parent's Financials").
5.09.2 The Parent's Financials: (i) have been prepared on a consistent
basis and are based on the books and records of the Parent in accordance with
American GAAP and present fairly the financial position, results of operations
and statements of changes in the Parent's financial position as of the dates
indicated or the periods indicated; (ii) contain and reflect all necessary
adjustments and accruals for a fair presentation of its financial position and
the results of its operations for the periods covered by said financial
statements; (iii) contain and reflect adequate provisions for all reasonably
anticipated liabilities (including Tares) with respect to the periods then ended
and all prior periods; and (iv) with respect to Buying Group Contracts and
commitments for the sale of goods or the provision of services by the Parent,
contain and reflect adequate reserves for all reasonably anticipated material
losses and costs and expenses in excess of expected receipts.
5.09.3 To the best of the knowledge of the Buying Group, there are no
Liabilities of the Buying Group other than: (i) any Liabilities accrued as
Liabilities on the Parent's Balance Sheet; (ii) Liabilities incurred since the
date of the Parent's Balance Sheet that do not, and could not, individually or
in the aggregate have a Material Adverse Effect; (iii) other Liabilities
disclosed in this Agreement or in any schedules attached hereto; and (iv) the
Tax on reserves.
5.10 Absence of Certain Changes. Since December 31, 1996, the Buying
Group Business has been conducted in the ordinary course, and there has not
been:
(a) any event, occurrence, state of circumstances, or facts or change in
the Purchaser or the Parent or in the Buying Group Business that has
had, or which the Purchaser or the Parent, expect to have, either
individually or in the aggregate, a Material Adverse Effect;
(b) (i) any change in any Liabilities of the Purchaser or the Parent that
has had, or which the Purchaser or the Parent expect to have, a
Material Adverse Effect or (ii) any incurrence, assumption or
guarantee of any indebtedness for borrowed money by the Purchaser or
the Parent in connection with the Buying Group Business or otherwise;
(c) any (i) payments by the Purchaser or Parent in respect of any
indebtedness of the Purchaser or Parent for borrowed money or in
satisfaction of any Liabilities of the Purchaser or Parent related to
the Buying Group Business, other than in the ordinary course of
business or the guarantee by the Purchaser or the Parent of any of the
indebtedness of any other Person or (ii) creation, assumption or
sufferance of (whether by action or omission) the existence of any
Lien on any assets reflected on the Parent's Balance Sheet, other than
Buying Group Permitted Liens;
(d) any transaction or commitment made, or any Contract entered into, by
the Buy no Group, any waiver, amendment, termination or cancellation
of any Contract by the Buying Group, or any relinquishment of any
rights thereunder by the Buying Group or of any other right or debt
owed to the Buying Group, other than, in each such case, actions taken
in the ordinary course of business consistent with past practice;
18
(e) any (i) grant of any severance, continuation or termination pay to any
director, officer, stockholder or employee of the Buying Group or any
Affiliate of the Buying Group, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to
any such existing agreement) with any director, officer, stockholder
or employee of the Buying Group or any Affiliate of the Buying Group,
(iii) increase in benefits payable or potentially payable under any
severance, continuation or termination pay policies or employment
agreements with any director, officer, stockholder or employee of the
Buying Group or any Affiliate of the Buying Group, (iv) increase in
compensation, bonus or other benefits payable or potentially payable
to directors, officers, stockholders or employees of the Buying Group
or any Affiliate of the Buying Group, (v) change in the terms of any
bonus, pension, insurance, health or other benefit plan of the Buying
Group or (vi) representation of the Buying Group to any employee or
former employee of the Buying Group that the Buying Group promised to
continue any benefit plan after the Closing Date,
(f) any change by the Buying Group in its accounting principles, methods
or practices or in the manner it keeps its books and records;
(g) any distribution, dividend, bonus, management fee or other payment by
the Buying Group to any of their respective officers, directors,
stockholders or Affiliates of the Buying Group or any of their
respective Affiliates or Associates; and
(h) any (i) material single capital expenditure or commitment, or any
group of related capital expenditures or commitments by either the
Purchaser or the Parent or (ii) material sale, assignment, transfer,
lease or other disposition of or agreement to sell, assign, transfer,
lease or otherwise dispose of any asset or property by either of the
Purchaser or the Parent other than in the ordinary course of business.
5.11 Properties; Material Leases; Tangible Assets. Neither the
Purchaser nor the Parent own or lease any real property or material assets.
5.12 Affiliates. There are no contracts between either the Parent or
Purchaser and any of its shareholders, or any Affiliate or Associate of any of
its shareholders. There is no indebtedness of either the Parent or the Purchaser
to any of its shareholders, or to any Affiliate or Associate of any of its
shareholders.
5.13 Litigation. There is no proceeding pending or, to the knowledge
of the Buying Group, threatened against or affecting the Buying Group or the
Buying Group Business or that seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement, and there is no existing order,
judgment or decree of any Governmental Authority naming either the Purchaser or
the Parent as an affected party which has not been paid or discharged in full.
5.14 Material Contracts. The Buying Group is not party to any Buying
Group Contract other than as specified herein.
5.15 Compliance with Applicable Laws. The operation of the Buying
Group Business (i) has not violated or infringed, except for violations or
infringements that have been cured and the prior existence of which could not,
19
individually or in the aggregate, reasonably be expected to have an adverse
effect on either the Purchaser or the Parent and (ii) does not in any material
respect violate or infringe any Applicable Law, the terms of any Permit or any
order, writ, injunction or decree of any Governmental Authority including but
not limited to, the 33 Act, the 34 Act, the Rules and Regulations of the SEC, or
the Securities Laws and Regulations of any state. The Parent is not an
investment company as defined in, or otherwise subject to regulation under, the
Investment Company Act of 1940. The Parent is required to file reports pursuant
to Section 12(g) of the 34 Act and is now and as of the Closing Date will be
current in its filings.
5.16 Buying Group Employment Agreements; and Employee Benefits.
5.16.1 There are no employment, consulting, severance pay,
continuation pay, termination pay, indemnification agreements, collective
agreements, employee benefit plans or other similar agreements of any nature
whatsoever affecting either the Purchaser or the Parent.
5.16.2 The Buying Group and its Affiliates have complied and are
currently complying, in respect of all employees of the Buying Group and its
Affiliates, with all Applicable Laws respecting employment and employment
practices and the protection of the health and safety of employees, except for
such instances which are not, in the aggregate, material.
5.17 Intellectual Property. The Buying Group has no interest in any
patent, patent application and invention, trademark, trade name, trademark or
trade name registration or application, copyright or copyright registration or
application for copyright registration.
5.18 Tax Matters.
5.18.1 Except as disclosed in the Parent's Financials, the Purchaser
and the Parent have prepared and filed all Tax Returns on time with all
appropriate Governmental Authorities which were required to be filed on or prior
to the Closing Date. Each such Tax Return was correct and complete.
5.18.2 The Purchaser is not a registrant for the purposes of the goods
and services tax provided for under the Tax Act.
5.18.3 The Purchaser is a taxable Canadian Corporation, as that term
is defined in the Tax Act.
5.18.4 The Purchaser has paid all applicable sales and retail taxes in
the Province of British Columbia, and none of its tangible personal property has
been transferred at any time on a tax-exempt basis under applicable legislation
in the Province of British Columbia. The foregoing is accurate, mutatis
mutandis, with respect to all sales or transfer Taxes imposed under comparable
legislation of other provinces.
5.18.5 The Purchaser has never acquired or had the use of any of its
assets from a Person (a "Related Person") with whom the Purchaser was not
dealing at arm's length, within the meaning of the Tax Act. The Purchaser has
never disposed of any asset to a Related Person for proceeds less than the fair
market value of that asset. The Purchaser is not a party to or bound by any
20
agreement with, is not indebted to, and no amount is owing to the Purchaser by
any Related Person, not dealing at arm's length, within the meaning of the Tax
Act, with the Purchaser.
5.18.6 For the purposes of the Tax Act the Purchaser and the Group 1
Shareholders hereby covenant and agree to elect jointly under Subsection 85(1)
of the Tax Act, by completing and filing with the Department of National Revenue
the prescribed form T2057 within the prescribed time for the purposes of the Tax
Act with respect to the sale by the Group 1 Shareholders to the Purchaser of the
Group 1 Corporation Shares and further agree to transfer the Group 1 Corporation
Shares at an agreed amount equal to the adjusted cost base of the Group 1
Corporation Shares to the Group 1 Shareholders for purposes of the Tax Act or
such grater amount determined by the Group 1 Shareholders (the "Elected
Amount").
5.18.7 If at any time after the Closing Date the Group 1 Shareholders
determine that either:
(a) it is necessary or desirable to change the Elected Amount; or
(b) the Tax Act deems the Elected Amount to be an amount which is
different than the amount agreed upon between the Group 1 Shareholder
and the Purchaser,
then the Group 1 Shareholder and the Purchaser shall do all things reasonably
necessary to reflect such change including, for example, filing an amended
election pursuant to subsection 85(1) of the Tax Act.
5.19 Issuance of Shares.
5.19.1 The issuance of the Parent Common Shares and the Parent Shares
by the Parent, and the terms and provisions of the Parent Common Shares and
Parent Shares, will not violate any provisions of the Parent's articles or
bylaws or any Applicable Law, nor will the voting rights attached to the Parent
Common Shares and the Parent Shares derogate from any rights under Applicable
Law.
5.19.2 The issuance of the Exchangeable Non-Voting Shares by the
Purchaser, and the terms and provisions of the Exchangeable Non-Voting Shares,
will not violate any provisions of the Purchaser's articles or bylaws or any
Applicable Law.
5.20 Full Disclosure. The information contained in the documents,
certificates and written statements (including this Agreement and the schedules
and exhibits hereto) furnished to the Shareholders by or on behalf of the Buying
Group with respect to each of the Purchaser and the Parent (including the Buying
Group Business and the respective results of operations, financial condition and
prospects of the Purchaser and the Parent) for use in connection with this
Agreement or the transactions contemplated by this Agreement is true and
complete in all material respects and does not, to the best of the knowledge of
each Shareholder after conducting an inquiry which a reasonably prudent person
would make under the circumstances, omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. There is no fact known to the Purchaser or the
Parent or any Shareholder that has not been disclosed to the Shareholders by the
21
Buying Group in writing that has had a Material Adverse Effect on or, so far as
the Buying Group can now foresee, could be reasonably likely to have a Material
Adverse Effect on the Buying Group (including the Buying Group Business and the
respective results of operations, financial condition or prospects of the Buying
Group).
ARTICLE VI: COVENANTS OF THE CORPORATION AND SHAREHOLDERS
6.01 Conduct of the Business. During the Interim Period, other than
with the express written approval of the Purchaser, the Corporation shall
conduct the Corporation Business in the ordinary course consistent with past
practice and shall use its best efforts to preserve intact the organization,
relationships with third parties and goodwill of the Corporation and keep
available the services of the present officers, employees, agents and other
personnel of the Corporation Business.
6.01.1 Without limiting in any way the importance of the foregoing,
during the Interim Period, other than with the express written approval of the
Purchaser, the Corporation shall not, and each Shareholder shall not cause the
Corporation to:
(a) adopt any material change in any method of accounting or accounting
practice used by the Corporation other than by reason of a concurrent
change in generally accepted accounting principles;
(b) amend its articles or bylaws;
(c) sell, mortgage, pledge or otherwise dispose of any substantial assets
or properties of the Corporation including the Subsidiary Shares
(d) declare, set aside or pay any management fee or dividend or make any
other distribution with respect to the capital stock of the
Corporation or otherwise make a distribution or payment to any
Shareholder;
(e) amalgamate, merge or consolidate with or agree to amalgamate, merge or
consolidate with, or purchase or agree to purchase all or
substantially all of the assets of, or otherwise acquire, any
corporation, partnership or other business organization or division
thereof;
(f) authorize for issuance, issue, sell or deliver any additional shares
of its capital stock of any class or any securities or obligations
convertible into shares of its capital stock of any class or commit to
doing any of the foregoing;
(g) split, combine or reclassify any shares of the capital stock of any
class of the Corporation or redeem or otherwise acquire, directly or
indirectly, any shares of such capital stock;
(h) incur or agree to incur any debt or guarantee any debt for borrowed
money, including any debt to any Shareholder, or to any Affiliate or
Associate of any Shareholder, except debt incurred in the ordinary
course of business consistent with past practice;
22
(i) make any loan, advance or capital contribution to or investment in any
person other than loans, advances and capital contributions to or
investments in joint ventures or other similar arrangements in which
the Corporation has an equity interest in the ordinary course of
business and travel advances made in the ordinary course of business
by the Corporation to its employees to meet business expenses expected
to be incurred by such employees;
(j) enter into any settlement with respect to any Proceeding or consent to
any order, decree or judgment relating to or arising out of any such
Proceeding;
(k) take any action to terminate, dismiss or cause the retirement of any
key employee of the Corporation or the Subsidiary;
(l) fail in any material respect to comply with any Applicable Laws; or
(m) make, or make any commitments for, capital expenditures exceeding
$25,000 for any individual commitment or $100,000 for all such
commitments taken in the aggregate.
6.01.2 During the Interim Period, other than with the express written
approval of the Purchaser, the Corporation shall:
(a) file all Canadian, United State, foreign, federal, state, provincial
and local Tax Returns required to be filed and make timely payment of
all applicable Taxes when due;
(b) promptly notify the Purchaser in writing of any action or circumstance
that results in, or could reasonably be expected to result in, a
Material Adverse Effect or the occurrence of any breach by the
Corporation, the Subsidiary or any Shareholder of any representation
or warranty, or any covenant or agreement contained in this Agreement;
and
(c) promptly notify the Purchaser in writing of the commencement of any
proceeding or the threat thereof by or against the Corporation, the
Subsidiary or any Shareholder.
6.02 Maintenance of Corporation Insurance Policies. On and after the
Closing Date, the Corporation shall not take or fail to take any action if such
action or inaction would adversely affect the applicability of any insurance in
effect on the date hereof that covers all or any material part of the assets of
the Corporation, the Subsidiary or the Business.
6.03 Tax Election. The Corporation shall not file an election pursuant
to subsection 256(9) of the Income Tax Act (Canada) or any equivalent provincial
provision.
ARTICLE VII: COVENANTS OF THE BUYING GROUP
7.01 Appointment of Directors acrd Officers. At Closing, the following
persons will be appointed officers and directors of the Parent so that the
directors and officers of the Parent will be:
23
Name Position
---- --------
Xxxxxxx Xxxx Director, President and Chief Executive Officer
Xxxxxx Xxxxxx Director
Xxxxxx Xxx-xxxxx XXX Director
Xxxxx Xxxx Director
Xxxxxx Xxxx Secretary
7.02 Conduct of Business. During the Interim Period, the Buying Group
will conduct the Buying Group Business in the ordinary course consistent with
past practice and shall use its best efforts to preserve intact the
organization, relationships with third parties and goodwill of the Buying Group
and keep available the services of the present officers, directors, employees,
agents and other personnel of the Buying Group Business; and without limiting in
any way the importance of the foregoing, the Buying Group shall not undertake
any of those matters referred to in sections 6.01.1 and 6.01.2, and all such
clauses thereof shall apply mutatis mutandis to the Buying Group.
7.03 Priority. Notwithstanding any term of the Purchaser's bylaws,
memorandum and articles to the contrary, the terms and provisions of this
Agreement and the Exchange and Voting Agreement shall prevail such that the
directors of the Purchaser will only authorize the exchange of the Exchangeable
Non-Voting Shares for shares in the Parent Common Shares in accordance with the
terms of the Exchange and Voting Agreement.
ARTICLE VIII: ACKNOWLEDGMENTS AND COVENANTS OF ALL PARTIES
8.01 Further Assurances. Each party hereto agrees to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be reasonably necessary or desirable (including
obtaining all required consents) in order to evidence the consummation or
implementation of the transactions provided for under this Agreement.
8.02 Certain Filings. The parties hereto shall cooperate with one
another in determining whether any action by or in respect of, or filing with,
any Governmental Authority is required or reasonably appropriate, or any action,
consent, approval or waiver from any party to any Contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the parties hereto
shall furnish information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers.
8.03 Registration. All parties acknowledge and agree that the Parent
is not a reporting issuer in the United States, and all of the Parent Common
Shares have not been registered under the 33 Act; and all parties further
acknowledge and agree that neither the Parent nor the Purchaser is a reporting
issuer in an province of Canada, and the Exchangeable Non-Voting Shares, Parent
Common Shares and Parent Shares will be subject to such resale restrictions as
imposed by the Applicable Law of the jurisdiction in which a Shareholder is
resident. The Parent further convents to file all required documentation with
the appropriate authorities to obtain reporting issuer status in the United
States as soon as practicable.
24
ARTICLE IX: CONDITIONS TO CLOSING
9.01 Conditions to Obligation of the Buying Group. The obligations of
the Buying Group to consummate the Closing are subject to the satisfaction of
each of the following conditions:
(a) (i) the Corporation and each Shareholder shall have performed and
satisfied each of their respective obligations hereunder required to
be performed and satisfied by them on or prior to the Closing Date,
(ii) each of the representations and warranties of the Corporation and
each Shareholder contained herein shall have been true and correct and
contained no misstatement or omission that would make any such
representation or warranty misleading when made and shall be true and
correct and contain no misstatement or omission that would make any
such representation or warranty misleading at and as of the Closing
with the same force and effect as if made as of the Closing, and
(iii) the Buying Group shall have received certificates signed by each
Shareholder and a duly authorized executive officer of the Corporation
to the foregoing effect and to the effect that the conditions
specified within this Section 9.01(a) have been satisfied.
(b) All Required Consents for the transactions contemplated by this
Agreement shall have been obtained without the imposition of any
conditions that are or would become applicable to the Corporation, the
Business, the Corporation Shares or the Buying Group (or any of its
Affiliates or Associates) after the Closing that would be materially
burdensome upon the Corporation, the Business, the Corporation Shares
or the Buying Group (or any of its Affiliates or Associates) or their
respective businesses substantially as such businesses have been
conducted prior to the Closing Date or as said businesses, as of the
date hereof, would be reasonably expected to be conducted after the
Closing Date. All such approvals shall be in effect, and no
proceedings shall have been instituted or threatened by any
Governmental Authority or other Person with respect thereto as to
which there is a material risk of a determination that would terminate
the effectiveness of, or otherwise materially and adversely modify the
terms of, any such approval; all applicable waiting periods with
respect to such approvals shall have expired; and all conditions and
requirements prescribed by Applicable Law or by such approvals to be
satisfied on or prior to the Closing Date shall have been satisfied to
the extent necessary such that all such approvals are, and will
remain, in full force and effect assuming continued compliance with
the terms thereof after the Closing.
(c) The transactions contemplated by this Agreement and the consummation
of the Closing shall not violate any Applicable Law. The operation of
the Business shall not have violated or infringed, or be in violation
or infringement of any Applicable Law or any order, writ, injunction
or decree of any Governmental Authority, where such violations and
infringements, individually or in aggregate, have resulted in, or
could reasonably be expected to result in a Material Adverse Effect.
25
(d) Since the date hereof, there shall not have been any event,
occurrence, development or state of circumstances or facts or change
in the Corporation, the Subsidiary or the Corporation Business,
including any damage, destruction or other casualty loss affecting the
Corporation, the Subsidiary or the Corporation Business that has had
or that may be reasonably expected to have, either alone or together
with all such events, occurrences, developments, states of
circumstances or facts or changes, a Material Adverse Effect on the
Corporation or the Subsidiary.
9.02 Conditions to Obligations of the Shareholders. The obligations of
each Shareholder to consummate the Closing are subject to the satisfaction of
each of the following conditions:
(a) (i) the Buying Group shall have performed and satisfied each of its
obligations hereunder required to be performed and satisfied by it on
or prior to the Closing Date; (ii) each of the representations and
warranties of the Buying Group contained herein shall have been true
and correct and contained no misstatement or omission that would make
any such representation or warranty misleading when made and shall be
true and correct and contain no misstatement or omission that would
make any such representation or warranty misleading at and as of the
Closing with the same force and effect as if made as of the Closing
and (iii) each Shareholder shall have received a certificate signed by
a duly authorized executive officer of the Buying Group to the
foregoing effect and to the effect that the conditions specified
within this Section 9.02(a) have been satisfied.
(b) All Required Consents for the transactions contemplated by this
Agreement shall have been obtained without the imposition of any
conditions that are or would become applicable to any Shareholder (or
any of their respective Affiliates or Associates) after the Closing
that would be materially burdensome upon any such Person. All such
approvals shall be in effect, and no Proceedings shall have been
instituted or threatened by any Governmental Authority with respect
thereto as to which there is a material risk of a determination that
would terminate the effectiveness of, or otherwise materially and
adversely modify the terms of, any such approval. All applicable
waiting periods shall have expired, and all conditions and
requirements such approvals to be satisfied on or prior to the Closing
extent necessary such that all such approvals are, and will remain, in
full force and effect assuming continued compliance with the terms
thereof after the Closing.
(c) The transactions contemplated by this Agreement and the consummation
of the Closing shall not violate any Applicable Law. No temporary
restraining order, preliminary or permanent injunction, cease and
desist order or other order issued by any court of competent
jurisdiction or any competent Governmental Authority or any other
legal restraint or prohibition preventing the transfer and exchange
contemplated hereby or the consummation of the Closing, or imposing
Damages in respect thereto, shall be in effect, and there shall be no
pending actions or proceedings by any Governmental Authority (or
determinations by any Governmental Authority) or by any other Person
challenging or seeking to materially restrict or prohibit the transfer
and exchange contemplated hereby or the consummation of the Closing.
26
(d) Since the date hereof, there shall not have been any event,
occurrence, development or state of circumstances or facts or change
in the Buying Group or the Buying Group Business, including any
damage, destruction or other casualty loss affecting the Buying Group
or the Buying Group Business that has had or that may be reasonably
expected to have, either alone or together with all such events,
occurrences, developments, states of circumstances or facts or
changes, a Material Adverse Effect on the Buying Group.
(e) Since the date hereof, there shall not have been any:
1) change in the capital structure of either the Purchaser
or the Parent, other than as to effect the creation or
issuance of the Exchangeable Non-Voting Shares, the
Parent Common Shares or the Parent Shares as
contemplated herein, or to effect the rights,
restrictions, privileges and terms of the Exchangeable
Non-Voting Shares, the Parent Common Shares or the
Parent Shares in accordance with the terms hereof; or
2) any actions, investigations, inquiries or proceedings
commenced or continued against either the Parent or the
Purchaser, or their respective officers, directors,
promoters, representatives, agents or their respective
businesses by any securities regulatory authority,
tribunal or body having jurisdiction.
(f) The Parent's Board of Directors, by proper and sufficient vote, shall
have approved this Agreement, the Exchange and Voting Agreement and
the Support Agreement, and the transactions contemplated hereby.
(g) The Parent and the Purchaser will have entered into the Exchange and
Voting Agreement and the Supporting Agreement.
ARTICLE X: INDEMNIFICATION
10.01 Agreement to Indemnify.
10.01.1 Each of the Purchaser and the Parent, and their respective
Affiliates, Associates, officers, directors, shareholders, representatives and
agents (collectively, the "Purchaser Indemnitees") shall each be indemnified and
27
held harmless to the extent set forth in this Article X by each Shareholder in
respect of any and all damages incurred by any Purchaser Indemnitee as a result
of any inaccuracy or misrepresentation in or breach of any representation or
warranty made in this Agreement by such Shareholder, provided, however, that
each Shareholder shall have no obligation to indemnify the Purchaser Indemnitees
with respect to damages incurred by any Purchaser Indemnitee as a result of any
inaccuracy or misrepresentation in or breach of any representation or warranty
made in this Agreement by any other Shareholder and further a Shareholder shall
have no such obligation to indemnify a Purchaser Indemnitee hereunder unless,
and to the extent, the aggregate of all damages incurred by the Purchaser
Indemnities for all items covered by this Section 10.01(1) shall exceed 51,000
in the aggregate. Notwithstanding the foregoing, no Shareholder shall have any
obligation to indemnify the Purchaser Indemnitees in an amount that exceeds the
Purchase Price paid to Shareholder.
10.01.2 Each of the Purchaser Indemnitees shall be indemnified and
held harmless to the extent set forth in this Article X by the Corporation in
respect of any and all damages incurred by any Purchaser Indemnitee as a result
of any inaccuracy or misrepresentation in or breach of any representation,
warranty, covenant or agreement made in this Agreement by the Corporation.
10.01.3 Each Shareholder and their respective Affiliates and
Associates and each officer, director, shareholder, employer, representative and
agent of any of the foregoing (collectively, the "Shareholder Indemnitees")
shall each be indemnified and held harmless to the extent set forth in this
Article X by the Purchaser and Parent in respect of any and all damages incurred
by any Shareholder Indemnitee as a result of any inaccuracy or misrepresentation
in or breach of any representation, warranty, covenant or agreement made by the
Parent or the Purchaser in this Agreement.
10.02 Survival of Representation, Warranties and Covenants. Except as
hereinafter provided in this Section 10.02, all representations, warranties,
covenants, agreements and obligations of each Indemnifying Parry contained
herein and all claims of any Purchaser Indemnitee or Shareholder Indemnitee in
respect of any breach of any representation, warranty, covenant, agreement or
obligation of any Indemnifying Parry contained in this Agreement, shall survive
the Closing and shall expire one year following the Closing Date.
ARTICLE XI: MISCELLANEOUS
11.01 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, two Business Days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below,
(iii) if given by facsimile or telecopier, once such notice or other
communication is transmitted to the facsimile or telecopier number specified
below and the appropriate answer back or telephonic confirmation is received,
provided that such notice or other communication is promptly thereafter mailed
in accordance with the provisions of clause (ii) above or (v) if sent through an
overnight delivery service in circumstances under which such service guarantees
next day delivery, the day following being so sent:
28
If to the Corporation: Xxxxx 0000-000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx,
XX X0X 2TS
If to the Purchaser: 000-000 Xxxx Xxxxxx Xxxxxx Xxxxxxxxx, XX X0X 1112
If to the Parent: 000-000 Xxxx Xxxxxx Xxxxxx Xxxxxxxxx, XX X0X 1112
If to a Shareholder: Xxxxx 0000-000 Xxxx Xxxxxx Xxxxxx Xxxxxxx Xxxxxxxx
X0X 0X0
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
11.02 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and only
if, such amendment or waiver is in writing and signed, in the case of
an amendment, by all parties hereto, or in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant hereunder or affect in any way any
rights arising by virtue of any prior or subsequent occurrence. No
failure or delay by a party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative
and not exclusive of any rights or remedies provided by law.
11.03 Expenses. All costs and expenses incurred in connection with
this Agreement and enclosing and carrying out the transactions provided for
herein shall be paid by the party incurring such cost or expense. This Section
shall survive the termination of this Agreement.
11.04 Successors and Assigns. This Agreement shall be binding upon and
enure to the benefit, of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and permitted
assigns. No party hereto may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of each
other party, which approval shall not be unreasonably withheld.
29
11.05 Governing Law. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws in force in the Province
of British Columbia and the laws of Canada applicable therein (excluding any
conflict of laws rule or principle that might refer such interpretation to the
laws of another jurisdiction). Each party irrevocably submits to the
jurisdiction of the courts of British Columbia with respect to any matter
arising hereunder or related hereto.
11.06 Counterparts; Effectiveness. This Agreement and the documents
relating to the transactions contemplated by this Agreement may be signed in any
number of counterparts and the signatures delivered by telecopy, each of which
shall be deemed to be an original, with the same effect as if the signatures
thereto were upon the same instrument and delivered in person. This Agreement
and such documents shall become effective when each party thereto shall have
received a counterpart thereof signed by the other parties thereto. In the case
of delivery by telecopy by any party, that party shall forthwith deliver a
manually executed original to each of the other parties.
11.07 Entire Agreement. This Agreement (including the Schedules
referred to herein, which are hereby incorporated by reference) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements, understandings and negotiations, both
written and oral, between the parties with respect to the subject matter of this
Agreement. Neither this Agreement nor any provision hereof is intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
11.08 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
11.09 Severability. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
11.10 Construction. The parties hereto intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
11.11 Meaning of Include and Including. Whenever in this Agreement the
word "include" or "including" is used, it shall be deemed to mean "include,
without limitation" or "including without limitation", as the case may be, and
the language following "include" or "including" shall not be deemed to set forth
an exhaustive list.
30
11.12 Cumulative Remedies. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
11.13 Third Party Beneficiaries. Other than Indemnitees under Article
X hereof who are not parties to this Agreement, no provision of this Agreement
shall create any third party beneficiary rights in any Person, including any
employee or former employee of the Corporation or any Affiliate or Associate
thereof (including any beneficiary or dependent thereof).
11.14 Transmission by Facsimile. The patties hereto agree that this
Agreement may be transmitted by facsimile or such similar device and that the
reproduction of signatures by facsimile or such similar device will be treated
as binding as if originals and each party hereto undertakes to provide each and
every other party hereto with a copy of the Agreement bearing original
signatures forthwith upon demand.
11.15 Fees and Commissions. Except as described in this Article 11.15,
no broker, finder or other person or entity is entitled to any fee or commission
from the Buying Group or the Corporation for services rendered on behalf of the
Buying Group or the Corporation in connection with the transactions contemplated
by this .Agreement.
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
SINO-CITY G S, I C
Per:
---------------------------
(Authorized Signatory)
592337 B.C. TD.
Per:
---------------------------
(Authorized Signatory)
PRESTO COMMUNICATIONS CORP.
Per:
---------------------------
(Authorized Signatory)
DOUBLE GAIN INVESTMENTS LTD.
Per:
---------------------------
(Authorized Signatory)
LANCASTER PACIFIC LTD.
Per:
---------------------------
(Authorized Signatory)
SIGNED, SEALED AND DELIVERED
BY XXXXXXX XXXX in the presence of:
---------------------------
XXXXXXX XXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXXX XXXXX in the presence of:
---------------------------
XXXXX XXXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXXXX XXX-XXXXX XXX in the presence of:
---------------------------
XXXXXX XXX-XXXXX XXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXXX XXXXX in the presence of:
---------------------------
XXXXX XXXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXXXX XXX-XXXXX XXX in the presence of:
---------------------------
XXXXXX XXX-XXXXX XXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXXX XXXX in the presence of:
---------------------------
XXXXX XXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXXX XX in the presence of:
---------------------------
XXXXX XX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXXX XXXX in the presence of:
---------------------------
XXXXX XXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXX XXX LING in the presence of:
---------------------------
XXX XXX LING
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXX XXXX XXXX in the presence of:
---------------------------
XXXX XXXX XXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXX XXX KEUNG in the presence of:
---------------------------
XXXX XXX XXXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XX XXXXXXX in the presence of:
---------------------------
XX XXXXXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXX XXXXXX in the presence of:
---------------------------
XXXX XXXXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY TANDOOR HOLDINGS LTD in the presence of:
---------------------------
TANDOORS HOLDINGS LTD
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXXX XXXX in the presence of:
---------------------------
XXXXX XXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXX XXX LING in the presence of:
---------------------------
XXX XXX LING
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXX XXXX XXXX in the presence of:
---------------------------
XXXX XXXX XXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXX XXX KEUNG in the presence of:
---------------------------
XXXX XXX XXXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XX XXXXXXX in the presence of:
---------------------------
XX XXXXXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SIGNED, SEALED AND DELIVERED
BY XXXX XXXXXX in the presence of:
---------------------------
XXXX XXXXXX
---------------------------
Signature of Witness
---------------------------
Name of Witness
---------------------------
Address of Witness
---------------------------
SCHEDULE "A"
NAMES OF GROUP 1 SHAREHOLDERS AND THEIR SHAREHOLDINGS IN THE
CORPORATION
AND NUMBER OF EXCHANGEABLE SHARES TO BE ISSUED IN THE PURCHASER
NAME NO. OF EXCHANGEABLE SHARES
Xxxxx Xxxxx 1,733,667
Xxxxxx Xxx-xxxxx XXX 767,333
Xxxxxxx Xxxx 2,600,000
TOTAL 5,101,000
NAMES OF GROUP 2 SHAREHOLDERS AND NUMBER OF SHARES TO BE ISSUED
IN THE PARENT
NAME NO. OF PARENT SHARES
Double Gain Investments Ltd. 1,058,833
Xxxxx Xxxx 91,000
Xxxxx Xx 20,500
Xxxxx Xxxx 1,364,000
Xxx Xxx Ling 716,000
Xxxx Xxxx Xxxx 364,000
Xxxx Xxx Keung 364,000
Xx Xxxxxxx 91,000
Xxxx Xxxxxx 662,334
Lancester Pacific Investment Ltd. 750,000
Tandoor Holdings Limited 417,333
TOTAL 5,899,000
