Exhibit 2C
COMMON STOCK PURCHASE AGREEMENT
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This Common Stock Purchase Agreement (the "Agreement") is made and entered into
as of the 8th day of January, 2003, between UgoMedia Interactive Corporation,
Inc., a Nevada corporation ("Buyer"), 4137639 Canada Inc., a Canadian
corporation which is a wholly-owned subsidiary of Buyer ("Sub"), and Sciax
Technology Inc., a Canadian corporation ("Seller").
RECITALS
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The Buyer desires to acquire all issued and outstanding shares of common stock
of Seller, and the Seller wishes to have all issued and outstanding shares of
common stock of Seller acquired by the Buyer, on the terms and conditions set
forth in this Agreement by way of an exchange of shares and certain additional
consideration from Seller (the "Exchange").
The board of directors of the Buyer and the Seller have determined that it is in
the best interest of the parties for the Buyer to acquire all issued and
outstanding shares of common stock of the Seller pursuant to an exchangeable
share transaction.
NOW, THEREFORE, in consideration of the terms, conditions, agreements and
covenants contained herein (the receipt and sufficiency of which are
acknowledged by each party), and in reliance upon the representations and
warranties contained in this Agreement, the parties hereto agree as follows:
I. RECITALS; TRUE AND CORRECT
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1.1 The above stated recitals are true and correct and are incorporated into
this Agreement.
II. PURCHASE AND SALE
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2.1 Purchase and Sale. Subject to all the terms and conditions of this
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Agreement, at the Closing, the Seller agrees to receive from the Buyer and Sub,
and Buyer and Sub agree to issue to the shareholders of the Seller (a
"Shareholder") 4,775,000 Shares of Voting Preferred Stock of the Buyer
("Preferred Shares") and 19,100,000 Exchangeable Shares of Sub ("Exchangeable
Shares") (collectively the "Share Consideration") in exchange for the transfer
of 21,100,000 shares of the Common Stock of the Seller ("Seller's Shares") to
the Buyer plus the additional consideration set forth below. Each Seller's Share
that is issued and outstanding immediately before the Closing, other than shares
with respect to which the right to dissent has been exercised, shall entitle the
holder thereof to receive 0.226303317 (calculated as 21,100,00 divided into
4,775,000) Preferred Shares and 0.90521327 (calculated as 21,100,00 divided into
19,100,000) Exchangeable Share.
2.2 Other Consideration. Subject to all the terms and conditions of this
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Agreement, the Seller agrees to pay to the Buyer the following additional
consideration:
(a) US$100,000 cash ("Cash Consideration"), which may be used to satisfy
debts and obligations of the Buyer. The Buyer acknowledges that a
portion of the Cash Consideration in the amount of US$25,000 has been
paid by Seller prior to the date of this Agreement and the remaining
non-refundable US$75,000 shall be paid by Seller on the date of
execution of this Agreement in funds immediately available by wire
transfer to an account or accounts designated by Buyer in writing.
(b) Two (2) promissory notes issued on Closing from the Seller in favour
of the Buyer in the aggregate amount of US$350,000 ("Loan
Consideration") which may be used to satisfy debts and obligations of
Buyer. The Seller shall execute two (2) promissory notes, each in the
amount of US$175,000 (the "Notes"), bearing interest at the rate of 6%
simple interest per annum. The Notes shall be repaid on the first
anniversary of the Closing Date, subject to prepayment in whole or in
part at any time without premium or penalty. In addition to standard
language, the Note shall have the following terms and conditions:
[i] The Notes may assigned and used to pay debts or other
obligations of Buyer, and thereafter any payments due on the
Notes shall be paid directly to such assignee[s].
[ii] Holders of the Notes shall have the option at any time prior
to the due date so long as there is no default to convert all
unpaid principal and accrued interest into common shares of stock
of Buyer ("Buyer Common Stock") at the rate of US$.20 per share.
This option may be exercised in whole or in part at any time
prior to repayment of the Notes. If there is a default in the
Notes, then Holders of the Notes shall have the option at any
time the Notes are in default to convert all unpaid principal and
accrued interest into shares of stock of Buyer at the lower of
(i) $.020 per share; and (ii) the average trading price of the
Buyer Common Stock for the twenty (20) day period immediately
prior to the date of the option exercise notice from the Holders.
This option may be exercised in whole or in part at any time the
Notes are in default. Further, to the extent any shares are
acquired under this option, the owners of these shares if the
option is exercised collectively shall have a one time right to
require that Buyer register the shares for resale within 90 days
of such request on a registration statement filed with the
Securities Exchange Commission ("SEC") and kept effective until
all such shares are resold, all at Buyer's expense.
2.3 Closing. The parties shall hold the Closing on the earlier of : (i) March
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31, 2003 or (ii) no later than the fifth business day (or such other date
as the parties hereto may agree) following the business day on which the
last of the conditions set forth in Articles VII and VIII hereof is
fulfilled or waived (the "Closing Date"), at 11:00 A.M., local time, at the
offices of Buyer, or at such other time and place as the parties may agree
upon.
2.4 Name Change. Immediately following the Closing, Buyer shall change its name
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to SCIAX Corporation (the "Name Change"). Buyer undertakes to obtain the
necessary shareholder consent for Closing. The Schedule 14C shall be filed with
the SEC following Closing.
2.5 Employment Agreements. Seller and Buyer have agreed that, as a condition of
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Closing, Buyer shall enter into employment agreements with each of Xxxxx Xxxxxxx
and Xxxxxxx Xxxxxxxxx pursuant to which, among other things, each will be issued
1,000,000 shares of Buyer Common Stock (the "Employment Shares"). It is agreed
as a condition to this transaction that the employment agreements contain the
following terms:
(a) with respect to Xxxxx Xxxxxxx, no more than 250,000 shares each shall
be issued under a registration statement filed on Form S-8 following
the closing of this transaction. The remaining 750,000 Employment
Shares shall be restricted and shall bear a restrictive legend stating
they must only be resold under a registration statement or under a
Rule 144 exemption; and
(b) with respect to Xxxxxxx Xxxxxxxxx, no more than 500,000 shares each
shall be issued under a registration statement filed on Form S-8
following the closing of this transaction. The remaining 500,000
Employment Shares shall be restricted and shall bear a restrictive
legend stating they must only be resold under a registration statement
or under a Rule 144 exemption
The owners of Employment Shares not registered by Form S-8, if the option is
exercised collectively, shall have a one time right to require that Buyer
register the shares for resale within 90 days of such request on a registration
statement filed with the SEC and kept effective until all such shares are
resold, all at Buyer's expense. Buyer represents and warrants that the
registered Employment Shares shall be freely trading stock upon the filing of a
registration statement filed on Form S-8, which it covenants to deliver at
Closing for registration with the SEC. Buyer agrees to obtain any necessary
approvals from the SEC or other securities regulatory body for such
registration, to take effect only upon the execution of such employment
agreements effective as of Closing.
2.6 Preferred Shares. The Preferred Shares shall have only one right or
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preference: Each share shall be entitled to 4 votes upon any matter that the
shareholders of Buyer have the right to vote.
2.7 Exchangeable Share Documentation.
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(a) It is intended by the parties hereto that the Exchangeable Shares will
be generally received by resident Canadian Shareholders without
recognition of any gain or loss pursuant to the Income Tax Act
(Canada) (the "Canadian Tax Act"); provided however that Buyer makes
no representation or warranty to this regard and assumes no liability
for such tax planning initiatives by the Seller or the Shareholders.
(b) Prior to the Closing, Sub shall reorganize the capital of the Sub by
filing articles of amendment (the "Reorganization") under the CBCA to
create an additional class of shares as Exchangeable Shares, having
the rights and preferences specified in Schedule 2.7 and any other
standard rights normally set forth in exchangeable share transactions,
as reasonably determined by the Seller.
(c) The parties will also enter into a support agreement, exchange trust
agreement and any other documentation standard to exchangeable share
transactions.
(d) Buyer and Sub acknowledge that the exchangeable share documentation is
necessary for tax reasons for the Shareholders and agree to accept the
terms of such documents, provided such are reasonable and have no or
minimal impact on the Buyer and Sub or their shareholders and do not
in any way adversely affect the ability of Buyer or Sub to close this
Agreement.
(e) The parties acknowledge that the Exchangeable Share arrangement has
not been fully reviewed by SCIAX's tax advisors. In the SCIAX's tax
advisors determine that the payment of consideration for sale of
Seller's Shares requires or recommends amendment or restructuring, the
parties agree to make such amendments to this Agreement and take such
further steps as are required to effect such change.
2.8 OSC Order. If necessary, Buyer shall, within thirty (30) days of the
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Closing Date, use its best efforts to cause its legal counsel to apply to the
OSC for a ruling pursuant to subsection 74(1) of the Securities Act (Ontario) to
permit the distribution of the Share Consideration to holders of Exchangeable
Shares outside Ontario without a prospectus being filed under the Securities Act
(Ontario), and Buyer
shall use its best efforts to obtain such ruling within ninety (90) days after
such application is made. In the event that despite Buyer's best efforts as
aforesaid, a ruling pursuant to subsection 74(1) of the Securities Act (Ontario)
to permit the distribution of the Share Consideration to holders of Exchangeable
Shares without a prospectus is not obtained on or before July 31, 2003, the
parties hereto acknowledge and agree that the trust pursuant to the exchange
trust agreement described above shall be terminated and common shares of the
Buyer shall thereupon be transferred to the Shareholders in exchange for the
surrender to the Sub for cancellation of all Exchangeable Shares and Preferred
Shares, all as will be set forth in the exchange trust agreement.
2.9 Pre-Closing Actions. The parties acknowledge that this Agreement is being
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executed prior to the negotiation and discussion of all matters relating to such
exchangeable share transaction and prior to the negotiation and discussion of
the schedules to this Agreement and documents to be delivered thereto. As well,
all of the representations and warranties may not be complete or true as of the
date of signing of the Agreement. The parties agree to work together in good
faith in finalizing the documentation and resolving such issues prior to
Closing, which may involve an amendment to this Agreement to reflect such
issues. All schedules and material documentation must be presented to the other
party for review as soon as possible following execution of this Agreement. In
the event the parties have used all reasonable efforts and are unable to
negotiate in good faith and finalize this transaction by March 31, 2003 (or such
other date as the parties may agree), this Agreement shall terminate without
liability to the other parties.
2.10 Amalgamation. Immediately following the Closing, Seller and Sub undertake
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to amalgamate pursuant to the provisions of Section 181 of the Canada Business
Corporations Act ("CBCA") and continue as the amalgamated corporation (the
"Amalgamated Corporation"). The Seller and Sub shall jointly file articles of
amalgamation with the Director under the CBCA, which terms shall be agreed by
the parties and which shall maintain the conditions and terms of the
Exchangeable Shares. The parties hereto shall also determine the terms of the
post-amalgamation organization of the Amalgamated Corporation, including those
terms relating to the original directors, officers and bylaws.
2.11 No Reverse Split. Subsequent to the Closing Date and for a period of 18
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months thereafter, Buyer shall not undertake a reverse split or similar action
with respect to its stock.
2.12 Responsibilities and Obligations. Seller and Buyer shall be responsible to
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effect and pay for those actions set forth in Schedule 2.12 applicable to each.
2.13 Intellectual Property Agreements. The parties agree to discuss and
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determine appropriate documentation to be delivered at Closing allowing the
intellectual property of the Seller and/or Xxx Xxxxx to be returned to the Xxx
Xxxxx in the event of the bankruptcy or insolvency of the Buyer following the
Closing, provided the parties hereto are not adversely affected.
III. CONDUCT OF BUSINESS PENDING CLOSING
Seller and Buyer covenant that between the date hereof and the date of the
Closing:
3.1 Access to Seller. Seller shall (a) give to Buyer and to Buyer's
counsel, accountants and other representatives reasonable access, during normal
business hours, throughout the period prior to the Closing Date (as defined in
Section 6.1), to all of the books, contracts, commitments and other records of
Seller and shall furnish Buyer during such period with all information
concerning Seller that Buyer may reasonably request; and (b) afford to Buyer and
to Buyer's representatives, agents, employees and
independent contractors reasonable access, during normal business hours, to the
properties of Seller, in order to conduct inspections at Buyer's expense to
determine that Seller is operating in compliance with all applicable federal,
state, local and foreign statutes, rules and regulations, and all material
building, fire and zoning laws or regulations and that the assets of Seller are
substantially in the condition and of the capacities represented and warranted
in this Agreement; provided, however, that in every instance described in (a)
and (b), Buyer shall make arrangements with Seller reasonably in advance and
shall use its best efforts to avoid interruption and to minimize interference
with the normal business and operations of Seller. Any such investigation or
inspection by Buyer shall not be deemed a waiver of, or otherwise limit, the
representations, warranties or covenants of Seller contained herein.
3.2 Conduct of Business. During the period from the date hereof to the
Closing Date, Seller shall and shall use reasonable efforts, to the extent such
efforts are within Seller's control, to cause its business to be operated in the
usual and ordinary course of business and in material compliance with the terms
of this Agreement.
3.3 Exclusivity to Buyer. Until either the exchange agreement is terminated
or the exchange closed, Seller agrees not to solicit any other inquiries,
proposals or offers to purchase or otherwise acquire, in a exchange transaction
or another type of transaction, the business of Seller or the shares of capital
stock of Seller. Any person inquiring as to the availability of the business or
shares of capital stock of Seller or making an offer therefor shall be told that
Seller is bound by the provisions of this Agreement. Seller as well as its
officers, directors, representatives or agents further agree to advise Buyer
promptly of any such inquiry or offer.
3.4 Access to Buyer. Buyer shall (a) give to Seller and to Seller's
counsel, accountants and other representatives reasonable access, during normal
business hours, throughout the period prior to the Closing Date, to all of the
books, contracts, commitments and other records of Buyer and shall furnish
Seller during such period with all information concerning Buyer that Seller may
reasonably request; and (b) afford to Seller and to Seller's representatives,
agents, employees and independent contractors reasonable access, during normal
business hours, to the properties of Buyer in order to conduct inspections at
Seller's expense to determine that Buyer is operating in compliance with all
applicable federal, state, local and foreign statutes, rules and regulations,
and all material building, fire and zoning laws or regulations and that the
assets of Buyer are substantially in the condition and of the capacities
represented and warranted in this Agreement; provided, however, that in every
instance described in (a) and (b), Seller shall make arrangements with Buyer
reasonably in advance and shall use its best efforts to avoid interruption and
to minimize interference with the normal business and operations of Buyer. Any
such investigation or inspection by Seller shall not be deemed a waiver of, or
otherwise limit, the representations, warranties or covenants of Buyer contained
herein.
3.5 Conduct of Business. During the period from the date hereof to the
Closing Date, the business of Buyer shall be operated by Buyer in the usual and
ordinary course of such business and in material compliance with the terms of
this Agreement.
3.6 Exclusivity to Buyer. Until either this Agreement is terminated or the
exchange closed, Buyer agrees not to solicit any other inquiries, proposals or
offers to enter into exchange or business combination negotiations with other
parties. Any person inquiring as to the availability of the Buyer for such
purposes or the making an offer therefor shall be told that Buyer is bound by
the provisions of this Agreement. Buyer as well as its officers, directors,
representatives or agents further agree to advise Seller promptly of any such
inquiry or offer.
3.7 Approval. As promptly as reasonably practicable following the date of
this Agreement, Seller shall take all action reasonably necessary in accordance
with the laws of Canada and its Articles of Incorporation and Bylaws to secure
the required approval and adoption of this Agreement.
3.8 Mutual Cooperation. The initial press release relating to this
Agreement shall be a joint press release. Thereafter, each of the Seller and the
Buyer agree to provide 24 hour pre-notification to the other party of any news
releases or regulatory filings which the party proposes to issue or file and
shall agree to consider any reasonable recommendation or suggestion of the other
party with respect thereto. Buyer shall be permitted to make announcements of
Seller's newsworthy activities provided the consent of the Seller is obtained,
which consent shall not be reasonably withheld. Each party shall also provide
the other party with notice a reasonable time in advance of, and shall permit a
representative of the other party to review or participate in, any
communications, meetings, or correspondence relating to investor relations
matters, including matters relating to public offering activities which are
expected to take place following Closing.
IV. REPRESENTATIONS AND WARRANTIES OF Seller
Seller represents and warrants to Buyer as follows, with the knowledge and
understanding that Buyer is relying materially upon such representations and
warranties:
4.1 Organization and Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Canada. Seller has all
requisite corporate power to carry on its business as it is now being conducted
and is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification is necessary under
applicable law, except where the failure to qualify (individually or in the
aggregate) does not have any material adverse effect on the assets, business or
financial condition of Seller, and all states in which Seller is qualified to do
business as of the date hereof, are listed in the information in Schedule 4.1.
The copies of the Articles of Incorporation and Bylaws of Seller, as amended to
date, delivered to Buyer, are true and complete copies of these documents as now
in effect. Except as otherwise set forth in the information Schedule 4.1, Seller
does not own any interest in any other corporation, business trust or similar
entity. The minute book of Seller contains accurate records of all meetings of
its respective Board of Directors and shareholders since its incorporation.
4.2 Capitalization. The authorized capital stock of Seller is 21,100,000
common shares of which 21,100,000 are issued and outstanding. All of such shares
of capital stock are duly authorized, validly issued and outstanding, fully paid
and nonassessable, and were not issued in violation of the preemptive rights of
any person. There are no subscriptions, options, warrants, rights or calls or
other commitments or agreements to which Seller is a party or by which it is
bound, calling for any issuance, transfer, sale or other disposition of any
class of securities of Seller, except as set forth in Schedule 4.2. There are no
outstanding securities convertible or exchangeable, actually or contingently,
into shares of common stock or any other securities of Seller. Seller has no
subsidiaries except as set forth in Schedule 4.2.
4.3 Authority. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by Seller in
accordance therewith (and assuming due execution and delivery by the other
parties hereto), the valid and binding obligation of Seller, enforceable in
accordance with their respective terms, subject to general principles of equity
and bankruptcy or other laws relating to or affecting the rights of creditors
generally.
4.4 Properties. Except as set forth on the information in Schedule 4.4
concerning Seller, Seller has good title to all of the Assets which it purports
to own as reflected on the balance sheet included in the Financial Statements
(as hereinafter defined), or thereafter acquired. Seller has a valid leasehold
interest in all material property of which it is the lessee and each such lease
is valid, binding and enforceable against Seller, as the case may be, and, to
the knowledge of Seller, the other parties thereto in accordance with its terms.
Neither Seller nor the other parties thereto are in material default in the
performance of any material provisions thereunder. Neither the whole nor any
material portion of the Assets of Seller is subject to any governmental decree
or order to be sold or is being condemned, expropriated or otherwise taken by
any public authority with or without payment of compensation therefor, nor, to
the knowledge of Seller, any such condemnation, expropriation or taking been
proposed. None of the assets of Seller is subject to any restriction which would
prevent continuation of the use currently made thereof or materially adversely
affect the value thereof.
4.5 Contracts Listed; No Default. All contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral, connected with or relating in any respect to present or
proposed future operations of Seller (except employment or other agreements
terminable at will and other agreements which, in the aggregate, are not
material to the business, properties or prospects of Seller and except
governmental licenses, permits, authorizations, approvals and other matters
referred to in Section 4.17) are listed and described in the information in
Schedule 4.5 concerning Seller. Seller is the holder of, or party to, all of the
Seller Contracts. To the knowledge of Seller, the Seller Contracts are valid,
binding and enforceable by the signatory thereto against the other parties
thereto in accordance with their terms. Neither Seller nor any signatory thereto
is in default or breach of any material provision of the Seller Contracts.
Seller's operation of its business has been, is, and will, between the date
hereof and the Closing Date, continue to be, consistent with the material terms
and conditions of the Seller Contracts.
4.6 Litigation. Except as disclosed in the information in Schedule 4.6
concerning Seller, there is no claim, action, proceeding or investigation
pending or, to the knowledge of Seller, threatened against or affecting Seller
before or by any court, arbitrator or governmental agency or authority which, in
the reasonable judgment of Seller, could have any materially adverse effect on
Seller. There are no decrees, injunctions or orders of any court, governmental
department, agency or arbitration outstanding against Seller.
4.7 Taxes. For purposes of this Agreement, (A) "Tax" (and, with correlative
meaning, "Taxes") shall mean any federal, state, local or foreign income,
alternative or add-on minimum, business, employment, franchise, occupancy,
payroll, property, sales, transfer, use, value added, withholding or other tax,
levy, impost, fee, imposition, assessment or similar charge, together with any
related addition to tax, interest, penalty or fine thereon; and (B) "Returns"
shall mean all returns (including, without limitation, information returns and
other material information), reports and forms relating to Taxes or to any
benefit plans.
Seller has duly filed all Returns required by any law or regulation to be filed
by it, except for extensions duly obtained. All such Returns were, when filed,
and to the knowledge of Seller are, accurate and complete in all material
respects and were prepared in conformity with applicable laws and regulations in
all material respects. Seller has paid or will pay in full or has adequately
reserved against all Taxes otherwise assessed against it through the Closing
Date, and the assessment of any material amount of additional Taxes in excess of
those paid and reported is not reasonably expected.
Seller is not a party to any pending action or proceeding by any governmental
authority for the assessment of any Tax, and no claim for assessment or
collection of any Tax has been asserted against
Seller that has not been paid. There are no Tax liens upon the assets (other
than the lien of property taxes not yet due and payable) of Seller. There is no
valid basis, to the knowledge of Seller, except as set forth in Schedule 4.7,
for any assessment, deficiency, notice, 30-day letter or similar intention to
assess any Tax to be issued to Seller by any governmental authority.
4.8 Compliance with Laws and Regulations. To its knowledge, Seller is in
compliance, in all material respects, with all laws, rules, regulations, orders
and requirements (federal, state and local) applicable to it in all
jurisdictions where the business of Seller is currently conducted or to which
Seller is currently subject which has a material impact on Seller, including,
without limitation, all applicable civil rights and equal opportunity employment
laws and regulations, and all state and federal antitrust and fair trade
practice laws and the Federal Occupational Health and Safety Act and all similar
Canadian laws, rules and regulations. Seller knows of no assertion by any party
that Seller is in violation of any such laws, rules, regulations, orders,
restrictions or requirements with respect to its current operations, and no
notice in that regard has been received by Seller. To the knowledge of Seller,
there is not presently pending any proceeding, hearing or investigation with
respect to the adoption of amendments or modifications to existing laws, rules,
regulations, orders, restrictions or requirements which, if adopted, would
materially adversely affect the current operations of Seller.
4.9 Compliance with Laws. (a) To its knowledge, the business, operations,
property and assets of Seller (and, to the knowledge of Seller, the business of
any sub-tenant or licensee which is occupying or has occupied any space on any
premises of Seller and the activities of which could result in any material
adverse liability to Seller) (i) conform with and are in compliance in all
material respects with all, and are not in material violation of any applicable
Canadian, US, province, state and local laws, rules and regulations, including,
but not limited to, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended (including the 1986 Amendments thereto and the
Superfund Amendments and Reauthorization Act) ("CERCLA"), and the Resource
Conservation and Recovery Act ("RCRA"), as well as any other laws, rules or
regulations relating to tax, product liability, controlled substances, product
registration, environmental protection, hazardous or toxic waste, employment, or
occupational safety matters whether US or Canadian; and (ii) have been conducted
and operated in a manner such that, to Seller's knowledge, Seller has
foreseeable potential liabilities for environmental clean-up under CERCLA, RCRA
or under any other law, rule, regulation or common or civil law doctrine or
similar laws, rules and regulations in Canada.
(b) To its knowledge, no predecessor-in-title to any real property now or
previously owned or operated by Seller, nor any predecessor operator thereof
conducted its business or operated such property in violation of CERCLA and RCRA
or any other applicable federal, state and local laws, rules and regulations
relating to environmental protection or hazardous or toxic waste matters or
similar laws, rules and regulations in Canada.
(c) Except as disclosed in the information in Schedule 4.9 concerning
Seller, no suit, action, claim, proceeding, nor investigation, review or inquiry
by any court or Canadian, US, state, county, municipal or local governmental
department, commission, board, bureau, agency or instrumentality, including,
without limitation, any state or local health department (all of the foregoing
collectively referred to as "Governmental Entity") concerning any such possible
violations by Seller is pending or, to the knowledge of Seller, threatened,
including, but not limited to, matters relating to diagnostic tests and products
and product liability, environmental protection, hazardous or toxic waste,
controlled substances, employment, occupational safety or tax matters. Seller
does not know of any reasonable basis or ground for any such suit, claim,
investigation, inquiry or proceeding. For purposes of this Section 4.9, the term
"inquiry" includes, without limitation, all pending regulatory issues (whether
before federal, state, local or inter-governmental regulatory authorities)
concerning any regulated product, including, without limitation, any diagnostic
drugs and products.
4.10 Information. Seller has furnished and will continue to furnish Buyer
all information and financial statements as Buyer may reasonably request.
4.11 Condition of Assets. The equipment, fixtures and other personal
property of Seller, taken as a whole, is in good operating condition and repair
(ordinary wear and tear excepted) for the conduct of the business of Seller as
is contemplated to be conducted.
4.12 No Breaches. To its knowledge, the making and performance of this
Agreement and the other agreements contemplated hereby by Seller will not (i)
conflict with or violate the Articles of Incorporation or the Bylaws of Seller;
(ii) violate any material laws, ordinances, rules or regulations, or any order,
writ, injunction or decree to which Seller is a party or by which Seller or any
of its respective assets, businesses, or operations may be bound or affected; or
(iii) result in any breach or termination of, or constitute a default under, or
constitute an event which, with notice or lapse of time, or both, would become a
default under, or result in the creation of any encumbrance upon any asset of
Seller under, or create any rights of termination, cancellation or acceleration
in any person under, any Seller Contract.
4.13 Employees. None of the employees of Seller is represented by any labor
union or collective bargaining unit and, to the knowledge of Seller, no
discussions are taking place with respect to such representation.
4.14 Financial Statements. Seller has furnished Buyer Sellers' financial
statements (the "Financial Statements") for the following periods: The financial
years ended August 31, 2000, August 31, 2001 and August 31, 2002 and interim
financial statements for the quarter periods ending November 31, 2002 and
February 28, 2003. The Financial Statements, when submitted to Buyer for
inclusion in the SEC filings, will have been prepared in accordance with
Regulation S-X of the SEC and, in particular, Rules 1-02 and 3-05 promulgated
thereunder. The Financial Statements present fairly, in all respects, the
consolidated financial position and results of operations of Seller as of the
dates and periods indicated, prepared in accordance with generally accepted
accounting principles applicable in Canada consistently applied ("GAAP").
Without limiting the generality of the foregoing, (i) there is no basis for any
assertion against Seller as of the date of the Financial Statements of any debt,
liability or obligation of any nature not fully reflected or reserved against in
the Financial Statements; and (ii) there are no assets of Seller as of the date
of the Financial Statements, the value of which is overstated in the Financial
Statements. Except as disclosed in the Financial Statements, Seller has no known
contingent liabilities (including liabilities for Taxes), forward or long-term
commitments or unrealized or anticipated losses from unfavorable commitments
other than in the ordinary course of business. Seller is not a party to any
contract or agreement for the forward purchase or sale of any foreign currency
that is material to Seller taken as a whole.
4.15 Absence of Certain Changes or Events. Since the date of the last
financial statement furnished to Buyer, there has not been:
(a) Any material adverse change in the financial condition,
properties, assets, liabilities or business of Seller;
(b) Any material damage, destruction or loss of any material
properties of Seller, whether or not covered by insurance;
(c) Any material change in the manner in which the business of Seller
has been conducted;
(d) Any material change in the treatment and protection of trade
secrets or other confidential information of Seller;
(e) Any material change in the business or contractual relationship of
Seller with any customer or supplier which might reasonably be expected to
materially and adversely affect the business or prospects of Seller;
(f) Any agreement by Seller, whether written or oral, to do any of the
foregoing; and
(g) Any occurrence not included in paragraphs (a) through (f) of this
Section 4.16 which has resulted, or which Seller has reason to believe, in its
reasonable judgment, might be expected to result, in a material adverse change
in the business or prospects of Seller.
4.16 Governmental Licenses, Permits, Etc. To its knowledge, Seller has all
governmental licenses, permits, authorizations and approvals necessary for the
conduct of its business as currently conducted ("Licenses and Permits"). The
information in Schedule 4.16 concerning Seller includes a list of all Licenses
and Permits. All Licenses and Permits are in full force and effect, and no
proceedings for the suspension or cancellation of any thereof is pending or
threatened.
4.17 Employee Agreements. (a) For purposes of this Agreement, the following
definitions apply:
(1) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any regulations promulgated thereunder or similar laws, rules
and regulations in Canada.
(2) "Multi-employer Plan" means a plan, as defined in ERISA Section
3(37) or similar laws, rules and regulations in Canada, to which Seller
contributes or is required to contribute.
(3) "Employee Plan" means any pension, retirement, profit sharing,
deferred compensation, vacation, bonus, incentive, medical, vision, dental,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA other than a Multi-employer Plan or similar laws, rules
and regulations in Canada to which Seller contributes, sponsors, maintains or
otherwise is bound to with regard to any benefits on behalf of the employees of
Seller.
(4) "Employee Pension Plan" means any Employee Plan for the provision
of retirement income to employees or which results in the deferral of income by
employees extending to the termination of covered employment or beyond as
defined in Section 3(2) of ERISA or similar laws, rules and regulations in
Canada.
(5) "Employee Welfare Plan" means any Employee Plan other than an
Employee Pension Plan.
(6) "Compensation Arrangement" means any plan or compensation
arrangement other than an Employee Plan, whether written or unwritten, which
provides to employees of Seller, former employees, officers, directors or
shareholders of Seller any compensation or other benefits, whether deferred or
not, in excess of base salary or wages, including, but not limited to, any bonus
or incentive plan, stock rights plan, deferred compensation arrangement, life
insurance, stock purchase plan, severance pay plan and any other employee fringe
benefit plan.
(b) The information in Schedule 4.17 concerning Seller lists, all (1)
employment agreements and collective bargaining agreements to which Seller is a
party; (2) compensation arrangements of Seller with any officer, director or
employee; (3) Employee Welfare Plans; (4) Employee Pension Plans; and (5)
consulting agreements under which Seller has or may have any monetary
obligations to employees or consultants of Seller or their beneficiaries or
legal representatives or under which any such persons may have any rights.
Seller has previously made available to Buyer true and complete copies of all of
the foregoing employment contracts, collective bargaining agreements, Employee
Plans and Compensation Arrangements, including descriptions of any unwritten
contracts, agreements, Compensation Arrangements or Employee Plans, as amended
to date. In addition, with respect to any Employee Plan which continues after
the Closing Date, Seller has previously delivered or made available to Buyer (1)
any related trust agreements, master trust agreements, annuity contracts or
insurance contracts; (2) certified copies of all Board of Directors' resolutions
adopting such plans and trust documents and amendments thereto; (3) current
investment management agreements; (4) custodial agreements; (5) fiduciary
liability insurance policies; (6) indemnification agreements; (7) the most
recent determination letter (and underlying application thereof and
correspondence and supplemental material related thereto) issued by the Internal
Revenue Service with respect to the qualification of each Employee Plan under
the provisions of Section 401(a) of the Code; (8) copies of all "advisory
opinion letters," "private letter rulings," "no action letters," and any similar
correspondence (and the underlying applications therefor and correspondence and
supplemental material related thereto) that was issued by any governmental or
quasigovernmental agency with respect to the last plan year; (9) Annual Reports
(Form 5500 Series) and Schedules A and B thereto for the last plan year; (10)
all actuarial reports prepared for the last plan year; (11) all certified
Financial Statements for the last plan year; and (12) all current Summary Plan
Descriptions, Summaries of Material Modifications and Summary Annual Reports.
All documents delivered by Seller to Buyer as photocopies faithfully reproduce
the originals thereof, such originals are authentic and were, to the extent
execution was required, duly executed.
(c) Except as otherwise disclosed in the information in Schedule 4.17
concerning Seller:
(1) It is not a party to and has, in effect or to become effective
after the date of this Agreement, any bonus, cash or deferred compensation,
severance, medical, health or hospitalization, pension, profit sharing or
thrift, retirement, stock option, employee stock ownership, life or group
insurance, death benefit, welfare, incentive, vacation, sick leave, cafeteria,
so-called "golden parachute" payment, disability or trust agreement or
arrangement.
4.18 Brokers. Seller has not made any agreement or taken any action with
any person or taken any action which would cause any person to be entitled to
any agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
4.19 Business Locations. Seller does not nor does it own or lease any real
or personal property in any location except as set forth on the information in
the Schedule 4.19 concerning Seller. Seller does not have a place of business
(including, without limitation, Seller's executive offices or place where
Seller's books and records are kept) except as otherwise set forth on the
information in Schedule 4.19 concerning Seller.
4.20 Intellectual Property. The information in Schedule 4.20 concerning
Seller lists all of the Intellectual Property (as hereinafter defined) used by
Seller which constitutes a material patent, trade name, trademark, service xxxx
or application for any of the foregoing. "Intellectual Property" means all of
Seller's right, title and interest in and to all patents, trade names, assumed
names, trademarks, service marks, and proprietary names, copyrights (including
any registration and pending applications for any such registration for any of
them), together with all the goodwill relating thereto and all other
intellectual property of Seller. Other than as disclosed in the information in
Schedule 4.20 concerning Seller, Seller does not have any licenses granted by or
to it or other agreements to which it is a party, relating in whole or in part
to any Intellectual Property, whether owned by Seller or otherwise. All of the
patents, trademark registrations and copyrights listed in the information in
Schedule 4.20 concerning Seller that are owned by Seller are valid and in full
force and effect. To the knowledge of Seller, it is not infringing upon, or
otherwise violating, the rights of any third party with respect to any
Intellectual Property. No proceedings have been instituted against or claims
received by Seller, nor to its knowledge are any proceedings threatened alleging
any such violation, nor does Seller know of any valid basis for any such
proceeding or claim. To the knowledge of Seller, there is no infringement or
other adverse claims against any of the Intellectual Property owned or used by
Seller. To the knowledge of Seller, its use of software does not violate or
otherwise infringe the rights of any third party.
4.21 Warranties. The information in Schedule 4.21 concerning Seller sets
forth a true and complete list of the forms of all express warranties and
guaranties made by Seller to third parties with respect to any services rendered
by Seller.
4.22 Suppliers. Except as set forth in the information in Schedule 4.22
concerning Seller, Seller knows and has no reason to believe that, either as a
result of the transactions contemplated hereby or for any other reason
(exclusive of expiration of a contract upon the passage of time), any present
material supplier of Seller will not continue to conduct business with Seller
after the Closing Date in substantially the same manner as it has conducted
business prior thereto.
4.23 Accounts Receivable. The accounts receivable reflected on the balance
sheets included in the Financial Statements, or thereafter acquired by Seller,
consists, in the aggregate in all material respects, of items which are
collectible in the ordinary and usual course of business.
4.24 Governmental Approvals. To its knowledge, other than as set forth
herein, no authorization, license, permit, franchise, approval, order or consent
of, and no registration, declaration or filing by Seller with, any governmental
authority, federal, state or local, is required in connection with Seller's
execution, delivery and performance of this Agreement.
4.25 No Omissions or Untrue Statements. None of the information relating to
Seller supplied or to be supplied in writing by it specifically for inclusion in
SEC filings, at the respective times that the filings are made contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.26 Information concerning Seller Complete. Seller shall promptly provide
to Buyer notice concerning any of the information concerning Seller furnished
hereunder if events occur prior to the Closing Date that would have been
required to be disclosed had they existed at the time of executing this
Agreement. The information provided to Buyer concerning Seller, as supplemented
prior to the Closing Date, will contain a true, correct and complete list and
description of all items required to be set forth therein. The information
provided to Buyer concerning Seller, as supplemented prior to the Closing Date,
is expressly incorporated herein by reference. Notwithstanding the foregoing,
any such supplement to the information in furnished by Seller following the date
hereof shall not in any way affect Buyer's right not to consummate the
transactions contemplated hereby as set forth herein.
V. REPRESENTATIONS AND WARRANTIES OF Buyer
Buyer represents and warrants to Seller as follows, with the knowledge and
understanding that Seller is relying materially on such representations and
warranties:
5.1 Organization and Standing of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Nevada, and has the corporate power to carry on its business as now conducted
and to own its assets and it not required to qualify to transact business as a
foreign corporation in any state or other jurisdiction. The copies of the
Articles of Incorporation and Bylaws of Buyer, delivered to Seller, are true and
complete copies of those documents as now in effect. Buyer does not own any
capital stock in any other corporation, business trust or similar entity, and is
not engaged in a partnership, joint venture or similar arrangement with any
person or entity. The minute books of Buyer contain accurate records of all
meetings of its incorporator, shareholders and Board of Directors since its date
of incorporation.
5.2 Buyer's Authority. Buyer's Board of Directors has approved and adopted
this Agreement and the Exchange.
5.3 Due Execution. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by Buyer in
accordance herewith (and assuming due execution and delivery by the other
parties hereto), the valid and binding obligations of Buyer, enforceable in
accordance with their respective terms, subject to general principles of equity
and bankruptcy or other laws relating to or affecting the rights of creditors
generally.
5.4 No Breaches. To its knowledge, the making and performance of this
Agreement (including, without limitation, the issuance of the Preferred Shares
and Exchangeable Shares) by Buyer and Sub will not (i) conflict with the
Articles of Incorporation or the Bylaws of Buyer or Sub; (ii) violate any order,
writ, injunction, or decree applicable to Buyer of Sub; or (iii) result in any
breach or termination of, or constitute a default under, or constitute an event
which, with notice or lapse of time, or both, would become a default under, or
result in the creation of any encumbrance upon any asset of Buyer under, or
create any rights of termination, cancellation or acceleration in any person
under, any agreement, arrangement or commitment, or violate any provisions of
any laws, ordinances, rules or regulations or any order, writ, injunction or
decree to which Buyer or Sub is a party or by which Buyer or Sub or any of its
assets may be bound.
5.5 Capitalization. The authorized capital stock of Buyer is comprised of
50,000,000 shares of common stock at a par value of US$0.001 per share and
5,000,000 shares of preferred stock at a par value of US$0.001, of which there
are currently 9,634,666 issued and outstanding shares of common stock. After
certain actions contemplated in Section 7.4, prior to the close of this
Agreement, Buyer will have 6,000,000 shares of common stock issued and
outstanding. There are currently outstanding warrants to acquire 395,000
additional shares of common stock of the Buyer as further described in Buyer's
SEC filings, which shall remain issued, outstanding and unaffected by the
Exchange. Except for the shares to be issued under the terms of this Agreement
and the warrants, and except as set forht in Section 2.2 and 2.5 of this
Agreement, there are no agreements, commitments, obligations, options, warrants
or similar rights, oral or written, known to Buyer or its affiliates under which
additional shares of Buyer Common Stock or Preferred Shares are required to be
issued after the Closing (other than the potential issue set forth in Schedule
5.13). All of the outstanding Buyer Common Stock is duly authorized, validly
issued, fully paid and nonassessable, and was not issued in violation of the
preemptive rights of any person. The Stock Consideration to be issued upon
effectiveness of the Exchange, when issued in accordance with the terms of this
Agreement shall be duly authorized, validly issued, fully paid and
non-assessable, including the authorization of the Converted Shares.
5.6 Business. Buyer, since its formation, has engaged in no business other
than as set forth in Buyer's SEC filings.
5.7 Governmental Approval; Consents. To its knowledge, except for the
reports filed by Buyer, as a reporting company, under the Exchange Act, the
filing of Buyer's SEC filings under the Securities Act and the Investment Canada
Act approval no authorization, license, permit, franchise, approval, order or
consent of, and no registration, declaration or filing by Buyer with, any
governmental authority, federal, state or local, is required in connection with
Buyer's execution, delivery and performance of this Agreement. No consents of
any other parties are required to be received by or on the part of Buyer to
enable Buyer to enter into and carry out this Agreement.
5.8 Financial Statements. To its knowledge, the financial statements of
Buyer as set forth in Buyer's SEC filings (the "Buyer Financial Statements")
present fairly, in all material respects, the financial position of Buyer as of
the respective dates and the results of its operations for the periods covered
in accordance with GAAP applicable to the United States. Without limiting the
generality of the foregoing, (i) except as set forth in Schedule 5.13 and as
follows, there is no basis for any assertion against Buyer as of the date of
said balance sheets of any material debt, liability or obligation of any nature
not fully reflected or reserved against in such balance sheets or in the notes
thereto: Buyer is obligated to pay an aggregate of US$450,000 to its two
principal shareholders as repayment of advances and payment for services
rendered or to be rendered; and (ii) there are no assets of Buyer, the value of
which (in the reasonable judgment of Buyer) is materially overstated in said
balance sheets. Except as disclosed therein, Buyer has no known material
contingent liabilities (including liabilities for taxes), unusual forward or
long-term commitments or unrealized or anticipated losses from unfavorable
commitments. Buyer is not a party to any contract or agreement for the forward
purchase or sale of any foreign currency.
5.9 Adverse Developments. Except as expressly provided or set forth in, or
required by, this Agreement, or as set forth in the Buyer Financial Statements,
since the last date of its financial information in Buyer's SEC filings, there
have been no materially adverse changes in the assets, liabilities, properties,
operations or financial condition of Buyer, and no event has occurred other than
in the ordinary and usual course of business or as set forth in Buyer's SEC
filings or in the Buyer Financial Statements which could be reasonably expected
to have a materially adverse effect upon Buyer, and Buyer does not know of any
development or threatened development of a nature that will, or which could be
reasonably expected to, have a materially adverse effect upon Buyer's operations
or future prospects. The parties recognize that Buyer is essentially dormant,
conducts no operations and has no significant assets.
5.10 Contracts Listed. All material contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral, connected with or relating in any respect to the present
operations of Buyer are, with the exception of this Agreement, described in
Buyer's SEC filings.
5.11; No Default. All of the contracts, agreements, leases, commitments and
understandings, written or oral, and any other contract, agreement, lease,
commitment or understanding, written or oral, binding upon Buyer referred to in
section 5.10 above, are listed in Buyer's SEC filings. To the knowledge of
Buyer, the Buyer Contracts are valid, binding and enforceable by Buyer against
the other parties thereto in accordance with their terms. Neither Buyer nor, to
the knowledge of Buyer, any of the other parties thereto is in default or breach
of any material provision of the Buyer Contracts. Buyer has furnished Seller
with a true and complete copy of each Buyer Contract, as amended.
5.12 Taxes. Buyer has duly filed all Returns required by any law or
regulation to be filed by it except for extensions duly obtained. All such
Returns were, when filed, and to the best of Buyer's knowledge are, accurate and
complete in all material respects and were prepared in conformity with
applicable laws and regulations. Buyer has paid or will pay in full or has
adequately reserved against all Taxes otherwise assessed against it through the
Closing Date, and the assessment of any material amount of additional Taxes in
excess of those paid and reported is not reasonably expected.
Buyer is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against Buyer that has not
been paid. There are no Tax liens upon the assets of Buyer (other than the lien
of personal property taxes not yet due and payable). There is no valid basis, to
the best of Buyer's knowledge, except as set forth in the Buyer Disclosure
Schedule, for any assessment, deficiency, notice, 30-day letter or similar
intention to assess any Tax to be issued to Buyer by any governmental authority.
5.13 Litigation. Except as disclosed in this Agreement, Buyer's SEC filings
or Schedule 5.13, there is no claim, action, proceeding or investigation pending
or, to Buyer's knowledge, threatened against or affecting Buyer before or by any
court, arbitrator or governmental agency or authority which, in the reasonable
judgment of Buyer, could have a materially adverse effect on Buyer. There are no
decrees, injunctions or orders of any court, governmental department, agency or
arbitration outstanding against Buyer.
5.14 Compliance with Laws and Regulations. To its knowledge, Buyer is in
compliance, in all material respects, with all laws, rules, regulations, orders
and requirements (federal, state and local) applicable to it in all
jurisdictions in which the business of Buyer is currently conducted or to which
Buyer is currently subject, which may have a material impact on Buyer,
including, without limitation, all applicable civil rights and equal opportunity
employment laws and regulations, all state and federal antitrust and fair trade
practice laws and the Federal Occupational Health and Safety Act. Buyer does not
know of any assertion by any party that Buyer is in violation of any such laws,
rules, regulations, orders, restrictions or requirements with respect to its
current operations, and no notice in that regard has been received by Buyer. To
Buyer's knowledge, there is not presently pending any proceeding, hearing or
investigation with respect to the adoption of amendments or modifications of
existing laws, rules, regulations, orders, restrictions or requirements which,
if adopted, would materially adversely affect the current operations of Buyer.
5.15 Compliance with Laws. (a) To its knowledge, the business operations,
property and assets of Buyer (and to the knowledge of Buyer, the business of any
sub-tenant or license which is occupying or has occupied any space on any
premises of Buyer and the activities of which could result in any material
adverse liability to Buyer) (i) conform with and are in compliance in all
material respects with all, and are not in material violation of any applicable
federal, state and local laws, rules and regulations, including, but not limited
to, CERCLA and RCRA, as well as any other laws, rules or regulations relating to
tax, product liability, controlled substances, product registration,
environmental protection, hazardous or toxic waste, employment, or occupational
safety matters; and (ii) have been conducted and operated in a manner such that,
to Buyer's knowledge, Buyer has no foreseeable potential liabilities for
environmental clean-up under CERCLA, RCRA or under any law, rule, regulation or
common or civil law doctrine.
(b) To its knowledge, no predecessor-in-title to any real property now or
previously owned or operated by Buyer, nor any predecessor operator thereof
conducted its business or operated such property in violation of CERCLA and RCRA
or any other applicable, federal, state and local laws, rules and regulations
relating to environmental protection or hazardous or toxic waste matters.
(c) Except as disclosed Buyer's SEC filings, no suit, action, claim,
proceeding nor investigation review or inquiry by any Government Entity (as
defined in Section 4.9) concerning any such possible violations by Buyer is
pending or, to Buyer's knowledge, threatened, including, but not limited to,
matters relating to diagnostic tests and products and product liability,
environmental protection, hazardous or toxic waste, controlled substances,
employment, occupational safety or tax matters. Buyer does not know of any
reasonable basis or ground for any such suit, claim, investigation, inquiry or
proceeding.
5.16 Governmental Licenses, Permits, Etc. To its knowledge, Buyer has all
governmental licenses, permits, authorizations and approvals necessary for the
conduct of its business as currently conducted. All such licenses, permits,
authorizations and approvals are in full force and effect, and no proceedings
for the suspension or cancellation of any thereof is pending or threatened.
5.17 Brokers. Buyer has not made any agreement or taken any action with any
person or taken any action which would cause any person to be entitled to any
agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
5.18 Employee Plans. Except as listed in Buyer's SEC filings, Buyer has no
employees, consultants or agents, and Buyer has no Employee Plans or
Compensation Arrangements.
5.19 Investment Canada. The Buyer is a NAFTA investor within the meaning of
the Investment Canada Act (Canada). Buyer shall make the necessary Investment
Canada Act (Canada) notification within 30 days of the Closing.
5.20 SEC Filings. The Buyer has filed all forms, reports and documents that
are required to be filed by the Buyer with the SEC since December 31, 2000. All
such required forms, reports and documents (including such forms, reports and
documents that the Buyer may file subsequent to the date hereof) are referred to
herein as the "SEC Reports." As of their respective dates, to the Buyer's
knowledge the SEC Reports (i) complied as to form in all material respects with
the requirements of the Securities Act or the Securities Exchange Act of 1934,
as applicable, and the rules and regulations of the SEC thereunder applicable to
such SEC Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except to
the extent corrected by a subsequently filed the SEC Report that was filed
before the date of this Agreement.
VI. STOCKHOLDER APPROVAL; CLOSING DELIVERIES
--------------------------------------------
6.1 Stockholder Approval. Seller shall submit the Exchange and this Agreement
--------------------
to its shareholders for approval and adoption at the Meeting or by written
consent as soon as practicable. Subject to the Exchange and this Agreement
receiving all approvals of Seller and Seller shareholders and regulatory
approvals and the absence of 10% or more of the non-affiliated shareholders of
Seller (i) voting against the Exchange; and (ii) requesting redemption of their
shares of Seller's Shares in the manner provided under the CBCA.
6.2 Closing Deliveries of Seller. At the Closing, Seller shall deliver, or
----------------------------
cause to be delivered, to Buyer:
(a) A certificate dated as of the Closing Date, to the effect that the
representations and warranties of Seller contained in this Agreement
(and the Schedules to be provided for Closing) are true and correct in
all material respects at and as of the Closing Date and that Seller
has complied with or performed in all material respects all terms,
covenants and conditions to be complied with or performed by Seller on
or prior to the Closing Date;
(b) A certificate, dated as of the Closing Date, certifying as to the
Articles of Incorporation and Bylaws of Seller, the incumbency and
signatures of the officers of each of Seller and copies of the
directors' and shareholders' resolutions of Seller approving and
authorizing the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby;
(c) Stock certificates representing all of Seller's Shares, duly endorsed
for transfer to the Buyer or as the Buyer may otherwise direct.
(d) The Notes and any applicable security documentation;
(e) Support Agreement, duly executed by the parties thereto (the "Support
Agreement");
(f) Exchange Trust Agreement, duly executed by the parties thereto (the
Exchange Trust Agreement");
(g) The documentation required for the Amalgamation of Seller and Sub;
(h) Legal opinion of Seller's counsel opining as to due execution,
corporate authority, current shareholdings, proper share issuances and
regulatory matters; and
(h) Such other documents, at the Closing or subsequently, as may be
reasonably requested by Buyer as necessary for the implementation and
consummation of this Agreement and the transactions contemplated
hereby.
6.3 Closing Deliveries of Buyer. At the Closing, Buyer shall deliver to Seller:
---------------------------
(a) A certificate of Buyer, dated as of the Closing Date, to the effect
that the representations and warranties of Buyer contained in this
Agreement (and the Schedules to be provided for Closing) are true and
correct in all material respects and that Buyer has complied with or
performed in all material respects all terms, covenants and conditions
to be complied with or performed by Buyer on or prior to the Closing
Date;
(b) A certificate, dated as of the Closing Date, executed by the Secretary
of Buyer, certifying the Articles of Incorporation, Bylaws, incumbency
and signatures of officers of Buyer and copies of Buyer's directors'
and shareholders' resolutions approving and authorizing the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(c) A certificate, dated as of the Closing Date, executed by the Secretary
of Sub, certifying the Articles of Incorporation and articles of
amendment, bylaws, incumbency and signatures of officers of Sub and
copies of Sub's directors' and shareholders' resolutions approving and
authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(d) Books and records of Buyer and Sub;
(e) Documentation satisfactory to Seller evidencing the fact that the
signatories on all relevant bank accounts of Buyer have been changed
to signatories designated by Seller.
(f) A corporate resolution that will irrevocably instruct Pacific Stock
Transfer about the exchange ratio representing the Preferred Shares
issued as partial consideration hereunder and instructions to issue
share certificates to the Shareholders in the appropriate amounts,
including evidence of the share conditions attributable to the
Preferred Shares. No Preferred Shares shall be issued until the Buyer
shall have received a certificate for required number of Seller's
Shares.
(g) Share certificates in the appropriate amount of Exchangeable Shares
issued to the Shareholders. No Exchangeable Shares shall be issued
until the Buyer shall have received a certificate for required number
of Seller's Shares.
(h) Support Agreement, duly executed by the parties thereto;
(i) Exchange Trust Agreement, duly executed by the parties thereto;
(j) The documentation required for the Amalgamation of Seller and Sub;
(k) Resignations of any directors and officers of Seller and Sub, except
Xxxx Xxxxxxx, in favour of nominees of the Buyer effective as of the
Closing, as well as evidence of compliance with any regulatory
requirements;
(l) Resolution of the shareholders approving the name change;
(m) Employment agreement with each of Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxxxx,
and evidence of regulatory compliance with the S-8 registration as set
forth in Section 2.5 of this this Agreement;
(n) Legal opinion of Buyer's counsel opining as to due execution,
corporate authority, current shareholdings, proper share issuances and
regulatory matters; and
(o) Such other documents, at the Closing or subsequently, as may be
reasonably requested by Seller as necessary for the implementation and
consummation of this Agreement and the transactions contemplated
hereby.
VII. CONDITIONS TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the Closing is subject to the
following conditions, any of which may be waived by Seller in its sole
discretion:
7.1 Compliance by Buyer. Buyer shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with by Buyer prior to or on the Closing Date.
7.2 Accuracy of Buyer's Representations. Buyer's representations and
warranties contained in this Agreement (including all Schedules) or any
schedule, certificate or other instrument delivered pursuant to the provisions
hereof or in connection with the transactions contemplated hereby shall be true
and correct in all material respects at and as of the Closing Date (except for
such changes permitted by this Agreement) and shall be deemed to be made again
as of the Closing Date.
7.3 Documents. All documents and instruments delivered by Buyer to Seller
at the Closing shall be in form and substance reasonably satisfactory to Seller
and its counsel.
7.4 Capitalization. At the Closing Date, Buyer shall have issued and
outstanding 6,000,000 shares of Buyer Common Stock, 4,775,000 Preferred Shares
plus warrants for 395,000 additional shares of Buyer Common Stock. Prior to
Closing, Xxxx Xxxxxxx will have returned to treasury for no consideration
2,267,343 shares and Nevada Fund shall have returned to treasury 1,367,323
shares for no consideration.
7.5 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or, to Seller's knowledge, be threatened.
VIII. CONDITIONS TO BUYER'S OBLIGATIONS
Buyer's obligation to consummate the closing is subject to the following
conditions, any of which may be waived by Buyer in its sole discretion:
8.1 Compliance by Seller. Seller shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with prior to or on the Closing Date.
8.2 Accuracy of Seller's Representations. Seller's representations and
warranties contained in this Agreement (including the Schedules hereto) or any
schedule, certificate or other instrument delivered pursuant to the provisions
hereof or in connection with the transactions contemplated hereby shall be true
and correct in all material respects at and as of the Closing Date (except for
such changes permitted by this Agreement) and shall be deemed to be made again
as of the Closing Date.
8.3 Material Adverse Change. No material adverse change shall have occurred
subsequent to the last date of the financial statements of Seller furnished
Buyer under this Agreement in the financial position, results of operations,
assets, liabilities or prospects of Seller taken as a whole, nor shall any event
or circumstance have occurred which would result in a material adverse change in
the business, assets or condition, financial or otherwise, of Seller taken as a
whole, within reasonable discretion of Buyer.
8.4 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or, to Seller's knowledge, be threatened.
IX. INDEMNIFICATION
9.1 By Seller. Subject to Section 9.4, Seller shall indemnify, defend and
hold Buyer, its directors, officers, shareholders, attorneys, agents and
affiliates, harmless from and against any and all losses, costs, liabilities,
damages, and expenses (including legal and other expenses incident thereto) of
every kind, nature and description, including any undisclosed liabilities
(collectively, "Losses") that result from or arise out of (i) the breach of any
representation or warranty of Seller set forth in this Agreement or in any
certificate delivered to Buyer pursuant hereto; or (ii) the breach of any of the
covenants of Seller contained in or arising out of this Agreement or the
transactions contemplated hereby.
9.2 By Buyer. Subject to Section 9.4, Buyer and the Buyer pre-exchange
board of directors as of the date of signing of this agreement shall indemnify,
defend, and hold Seller its directors, officers, shareholders, attorneys, agents
and affiliates harmless from and against any and all Losses that arise out of
(i) the breach of any representation or warranty of Buyer set forth in this
Agreement or in any certificate delivered to Seller pursuant hereto; (ii) the
breach of any of the covenants of Buyer contained in or arising out of this
Agreement or the transactions contemplated hereby, (iii) any liabilities of
Buyer not disclosed herein or in its SEC filings which arise from any facts or
circumstances prior to the date of the closing of the exchange and which
occurred through no fault of Seller or its Affiliates; or (iv) any liabilities
of the Buyer resulting from the litigation matters disclosed in Schedule 5.13.
9.3 Claims Procedure. Should any claim covered by Sections 9.1 or 9.2 be
asserted against a party entitled to indemnification under this Article (the
"Indemnitee"), the Indemnitee shall promptly notify the party obligated to make
indemnification (the "Indemnitor"); provided, however, that any delay or failure
in notifying the Indemnitor shall not affect the Indemnitor's liability under
this Article if such delay or failure was not prejudicial to the Indemnitor. The
Indemnitor upon receipt of such notice shall assume the defense thereof with
counsel reasonably satisfactory to the Indemnitee and the Indemnitee shall
extend reasonable cooperation to the Indemnitor in connection with such defense.
No settlement of any such claim shall be made without the consent of the
Indemnitor and Indemnitee, such consent not to be unreasonably withheld or
delayed, nor shall any such settlement be made by the Indemnitor which does not
provide for the absolute, complete and unconditional release of the Indemnitee
from such claim. In the event that the Indemnitor shall fail, within a
reasonable time, to defend a claim, the Indemnitee shall have the right to
assume the defense thereof without prejudice to its rights to indemnification
hereunder.
9.4 Limitations on Liability. Neither Seller nor Buyer shall be liable
hereunder as a result of any misrepresentation or breach of such party's
representations, warranties or covenants contained in this Agreement unless and
until the Losses incurred by each, as the case may be, as a result of such
misrepresentations or breaches under this Agreement shall exceed, in the
aggregate, US$20,000 (in which case the party liable therefor shall be liable
for the entire amount of such claims, including the first US$20,000), except
that Seller shall have the additional right to offset against the Notes any
amounts it pays or is subject to a valid, binding, enforceable obligation to pay
as a result of Buyer or its pre-exchange board member as set forth above failure
to furnish the indemnification required under this Article IX.
X. TERMINATION
10.1 Termination Prior to Closing. (a) If the Closing has not occurred by
March 31, 2003 or such other date as mutually agreed upon by the parties (the
"Termination Date"), any of the parties hereto may terminate this Agreement at
any time thereafter by giving written notice of termination to the other
parties; provided, however, that no party may terminate this Agreement if such
party has willfully or materially breached any of the terms and conditions
hereof.
(b) Prior to the Termination Date either party to this Agreement may
terminate this Agreement following the insolvency or bankruptcy of the other, or
if any one or more of the conditions to Closing set forth in Article VI, Article
VII or Article VIII shall become incapable of fulfillment and shall not have
been waived by the party for whose benefit the condition was established, then
either party may terminate this Agreement.
10.2 Consequences of Termination. Upon termination of this Agreement
pursuant to this Article X or any other express right of termination provided
elsewhere in this Agreement, the parties shall be relieved of any further
obligation to the other. No termination of this Agreement, however, whether
pursuant to this Article X hereof or under any other express right of
termination provided elsewhere in this Agreement, shall operate to release any
party from any liability to any other party incurred before the date of such
termination or from any liability resulting from any willful misrepresentation
made in connection with this Agreement or willful breach hereof.
XI. ADDITIONAL COVENANTS
11.1 Mutual Cooperation. The parties hereto will cooperate with each other,
and will use all reasonable efforts to cause the fulfillment of the conditions
to the parties' obligations hereunder and to obtain as promptly as possible all
consents, authorizations, orders or approvals from each and every third party,
whether private or governmental, required in connection with the transactions
contemplated by this Agreement.
11.2 Changes in Representations and Warranties of Seller. Between the date
of this Agreement and the Closing Date, Seller shall not, directly or
indirectly, enter into any transaction, take any action, or by inaction permit
an event to occur, which would result in any of the representations and
warranties of Seller herein contained not being true and correct at and as of
(a) the time immediately following the occurrence of such transaction or event
or (b) the Closing Date. Seller shall promptly give written notice to Buyer upon
becoming aware of (i) any fact which, if known on the date hereof, would have
been required to be set forth or disclosed pursuant to this Agreement and (ii)
any impending or threatened breach in any material respect of any of the
representations and warranties of Seller contained in this Agreement and with
respect to the latter shall use all reasonable efforts to remedy same.
11.3 Changes in Representations and Warranties of Buyer. Between the date
of this Agreement and the Closing Date, Buyer shall not, directly or indirectly,
enter into any transaction, take any action, or by inaction permit an event to
occur, which would result in any of the representations and warranties of Buyer
herein contained not being true and correct at and as of (a) the time
immediately following the occurrence of such transaction or event or (b) the
Closing Date. Buyer shall promptly give written notice to Seller upon becoming
aware of (i) any fact which, if known on the date hereof, would have been
required to be set forth or disclosed pursuant to this Agreement and (ii) any
impending or threatened breach in any material respect of any of the
representations and warranties of Buyer contained in this Agreement and with
respect to the latter shall use all reasonable efforts to remedy same.
11.4. Other Responsibilities. The parties shall timely perform or to cause
others to perform all actions required of them as set forth on Schedule 12.13.
XII. MISCELLANEOUS
12.1 Expenses. Buyer will pay for its counsel and accountants and all their
costs. Seller will pay for its accountants and attorneys and all their costs.
Each party shall bear their costs as set forth on Schedule B.
12.2 Survival of Representations, Warranties and Covenants. All statements
contained in this Agreement or in any certificate delivered by or on behalf of
Seller or Buyer pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations, warranties and covenants by
Seller or Buyer, as the case may be, hereunder. All representations, warranties
and covenants made by Seller and by Buyer in this Agreement, or pursuant hereto,
shall survive through the Closing Date.
12.3 Nondisclosure. Buyer will not at any time after the date of this
Agreement, without Seller' consent, divulge, furnish to or make accessible to
anyone (other than to its representatives as part of its due diligence or
corporate investigation) any knowledge or information with respect to
confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable or
not, with respect to any confidential or secret aspects (including, without
limitation, customers or suppliers) ("Confidential Information") of Seller.
Seller will not at any time after the date of this Agreement, without Buyer's
consent (except as may be required by law), use, divulge, furnish to or make
accessible to anyone any Confidential Information (other than to its
representatives as part of its due diligence or corporate investigation) with
respect to Buyer. The undertakings set forth in the preceding two paragraphs of
this Section 12.3 shall lapse if the Closing takes place as to Buyer and Seller,
but shall not lapse as to the officers and directors of Buyer, individually.
Any information, which (i) at or prior to the time of disclosure by either
of Seller or Buyer was generally available to the public through no breach of
this covenant, (ii) was available to the public on a non-confidential basis
prior to its disclosure by either of Seller or Buyer or (iii) was made available
to the public from a third party, provided that such third party did not obtain
or disseminate such information in breach of any legal obligation to Seller or
Buyer, shall not be deemed Confidential Information for purposes hereof, and the
undertakings in this covenant with respect to Confidential Information shall not
apply thereto.
12.4 Succession and Assignments; Third Party Beneficiaries. This Agreement
may not be assigned (either voluntarily or involuntarily) by any party hereto
without the express written consent of the other party. Any attempted assignment
in violation of this Section shall be void and ineffective for all purposes. In
the event of an assignment permitted by this Section, this Agreement shall be
binding upon the heirs, successors and assigns of the parties hereto. Except as
expressly set forth in this Section, there shall be no third party beneficiaries
of this Agreement.
12.5 Notices. All notices, requests, demands or other communications with
respect to this Agreement shall be in writing and shall be (i) sent by facsimile
transmission, (ii) sent by the federal postal service, registered or certified
mail, return receipt requested, or (iii) personally delivered by a nationally
recognized express overnight courier service, charges prepaid, to the addresses
specified in writing by each party.
Any such notice shall, when sent in accordance with the preceding sentence,
be deemed to have been given and received on the earliest of (i) the day
delivered to such address or sent by facsimile transmission, (ii) the fifth
(5th) business day following the date deposited with the United States Postal
Service, or (iii) twenty-four (24) hours after shipment by such courier service.
12.6 Construction. This Agreement shall be construed and enforced in accordance
with the internal laws of the Province of Ontario without giving effect to the
principles of conflicts of law thereof, except to the extent that the Securities
Act or the Exchange Act applies to Buyer's SEC filingss and the Proxy Statement.
12.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
12.8 No Implied Waiver; Remedies. No failure or delay on the part of the
parties hereto to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. All rights, powers and privileges granted herein shall be in addition
to other rights and remedies to which the parties may be entitled at law or in
equity.
12.9 Entire Agreement. This Agreement, including the Exhibits and Schedules
attached hereto, sets forth the entire understandings of the parties with
respect to the subject matter hereof, and it incorporates and merges any and all
previous communications, understandings, oral or written, as to the subject
matter hereof, and cannot be amended or changed except in writing, signed by the
parties.
12.10 Headings. The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.
12.11 Severability. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.
12.12 Public Disclosure. From and after the date hereof through the Closing
Date, Buyer shall not issue a press release or any other public announcement
with respect to the transactions contemplated hereby without the prior consent
of Seller, which consent shall not be unreasonably withheld or delayed. It is
understood by Seller that Buyer is required under the Exchange Act to make
prompt disclosure of any material transaction.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, HAVE HAD THE
OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE, AND
UNDERSTAND EACH OF THE PROVISIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
BUYER
UGOMEDIA INTERACTIVE CORPORATION INC.
By: ___________________________________________
Name: Xxxx Xxxxxxx
Title: President
Date: _________________
SUB
4137639 CANADA INC.
By: ___________________________________________
Name: Xxxx Xxxxxxx
Title: President
Date: _________________
SELLER
SCIAX TECHNOLOGIES INC.
By: ____________________________________________
Name: Xxx Xxxxx
Title: Chief Executive Officer
Date: ________________
SCHEDULE 2.7
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The rights and preferences of the Exchangeable Shares shall be as follows:
Shareholder shall have the right to exchange each Exchangeable Share for one
share of Buyer's Common Stock. The maximum number of shares that may be
requested to be exchanged each year shall be a number of shares equal to 4% of
the issued and outstanding Buyer's Common Stock on December 31 of the prior year
(or as otherwise permitted by SEC guidelines).
Upon a request in writing received by Buyer, Buyer shall immediately issue the
requested shares of Buyer's Common Stock. In the alternative, upon receipt of
such request, Buyer shall have the right to call an equal number of Exchangeable
Shares from the shareholder requesting the exchange, and if the call is
exercised, Buyer shall immediately issue to the holder of the Exchangeable
Shares the same number shares of Buyer's Common Stock as the number of
Exchangeable Shares that are being called.
As a condition precedent to the issuance of Buyer's Common Stock, the holder of
Exchangeable Shares must tender to Buyer for no additional consideration a
number of Preferred Shares of Buyer equal to 25% of the number of Exchangeable
Shares tendered or called.
The shares of Common Stock issued to the Shareholders shall be restricted and
shall bear a restrictive legend stating they must only be resold under a
registration statement or under an exemption, such as Rule 144. An opinion of
counsel will be required before transfer. In addition, the person requesting the
exchange must sign a standard Investment Letter in connection with the request
for exchange.
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SCHEDULE 2.12
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SELLER RESPONSIBILITIES: PRIOR TO THE CLOSE OF THE STOCK PURCHASE AGREEMENT
(a) The execution of definitive agreements contemplated by Agreement. (b)
Comply with all applicable legal and/or regulatory requirements.
(c) Complete of all required corporate and shareholder actions and
approvals, if any; including any approvals of all terms and conditions
of this Agreement as required under the laws of Canada
(d) Prepare and furnish to Buyer for filing all required 8-K's or other
filings and pay fees and expenses associated with such filings.
BUYER RESPONSIBILITIES PRIOR TO THE CLOSE OF THE STOCK PURCHASE AGREEMENT
1. Obtain Board of Directors Approval.
2. Draft and Sign a Definitive Exchange Agreement.
RESPONSIBILITIES OF NEW MANAGEMENT TEAM POST CLOSE OF THE STOCK PURCHASE
AGREEMENT
1. By operation of law, the surviving company shall be responsible for
all debts and obligations of Buyer prior to the date of the exchange,
except as otherwise provided in this Agreement.
2. Prepare and file the 8-K concerning exchange closing.
3. Be responsible for compiling and making all other SEC filings after
the closing, including a 14C for name change and/or election of
directors, if required, and 8-K amendments, including but not limited
to an 8-K within 75 days of closing containing all required financial
information, including audited information concerning Sciax and
pro-forma financial statements of the entity after the closing of the
Agreement.
4. All other filings which must be made under the terms of this
Agreement.
SCHEDULE 5.13
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1. Buyer is a party to the following lease:
Name of Landlord ["Landlord"]: New Boston Alliance LP
In connection with that certain lease ("Lease") dated March 21, 2002
Between the Landlord and following parties:
UgoMedia Interactive Corporation
For the following premises: 0000 Xxxxxxx Xxxxx Xxxx., Xxxxx 000, Xxxxxxxxxxxx,
Xxxxxxx
Under the terms of an agreement with its former president, its former president
was required to find a tenant for the space and assume the liabilities.
The former president has taken the space for his new company.
Buyer has attempted to secure a release from future obligations under the lease,
but has not yet obtained such release.
A copy of the lease is available upon request.
2. A former vendor of Buyer's predecessor has asserted a right to 5% of Buyer's
issued and outstanding common stock based upon the attached communication. Buyer
is currently investigating whether it has any liability to this vendor, and if
so, the extent of the liability.
