CANCABLE INC. CANCABLE HOLDING CORP. SECURITIES PURCHASE AGREEMENT December 31, 2005
EXHIBIT
10.1
CANCABLE
INC.
CANCABLE
HOLDING CORP.
December
31, 2005
TABLE
OF CONTENTS
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Page
No.
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1. Agreement
to Issue and Acquire.
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1
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2. Fees
and Option.
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1
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3. Closing,
Delivery and Payment.
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2
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3.1
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Closing.
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2
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3.2
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Delivery.
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2
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4. Representations
and Warranties of the Company.
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3
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4.1
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Organization,
Good Standing and Qualification.
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3
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4.2
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Subsidiaries.
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3
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4.3
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Capitalization;
Voting Rights.
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4
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4.4
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Authorization;
Binding Obligations.
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5
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4.5
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Liabilities.
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5
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4.6
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Agreements;
Action.
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5
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4.7
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Obligations
to Related Parties.
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7
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4.8
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Changes.
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8
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4.9
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Title
to Properties and Assets; Liens, Etc.
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9
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4.10
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Intellectual
Property.
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10
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4.11
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Compliance
with Other Instruments.
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10
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4.12
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Litigation.
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11
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4.13
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Tax
Returns and Payments.
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11
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4.14
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Employees.
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12
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4.15
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Registration
Rights and Voting Rights.
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13
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4.16
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Compliance
with Laws; Permits.
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13
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4.17
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Environmental
and Safety Laws.
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13
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4.18
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Valid
Offering.
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14
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4.19
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Full
Disclosure.
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14
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4.20
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Insurance.
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14
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4.21
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Financial
Statements.
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14
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4.22
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Dilution.
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15
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4.23
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Patriot
Act.
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15
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4.24
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ERISA.
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15
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4.25
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Bank
Accounts.
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16
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5. Representations
and Warranties of the Purchaser.
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16
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5.1
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No
Shorting.
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16
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5.2
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Requisite
Power and Authority.
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16
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5.3
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Investment
Representations.
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17
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5.4
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Purchaser
Bears Economic Risk.
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18
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5.5
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Acquisition
for Own Account.
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18
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5.6
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Purchaser
Can Protect Its Interest.
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18
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5.7
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Legends.
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18
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-i-
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6. Covenants
of the Company.
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19
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6.1
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Stop-Orders.
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19
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6.2
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Use
of Funds.
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19
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6.3
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Access
to Facilities.
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19
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6.4
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Taxes.
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20
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6.5
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Insurance.
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21
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6.6
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Intellectual
Property.
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22
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6.7
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Properties.
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22
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6.8
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Confidentiality.
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23
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6.9
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Required
Approvals.
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23
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6.10
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Opinion.
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24
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6.11
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Margin
Stock.
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25
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6.12
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Financing
Right of First Refusal.
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25
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6.13
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Account
Agreements.
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26
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7. Covenants
of the Purchaser.
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26
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7.1
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Confidentiality.
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26
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7.2
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Non-Public
Information.
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27
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7.3
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Limitation
on Acquisition of Common Stock of the Company.
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27
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8. Covenants
of the Company and Purchaser Regarding Indemnification.
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27
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8.1
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Company
Indemnification.
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27
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8.2
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Purchaser’s
Indemnification.
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27
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8.3
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Offering
Restrictions.
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28
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9. Miscellaneous.
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28
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9.1
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Governing
Law.
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28
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9.2
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Survival.
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29
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9.3
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Successors.
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29
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9.4
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Entire
Agreement; Maximum Interest.
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29
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9.5
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Severability.
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29
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9.6
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Amendment
and Waiver.
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29
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9.7
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Delays
or Omissions.
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30
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9.8
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Notices.
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30
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9.9
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Attorneys’
Fees.
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31
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9.10
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Titles
and Subtitles.
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31
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9.11
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Facsimile
Signatures; Counterparts.
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31
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9.12
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Broker’s
Fees.
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31
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9.13
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Construction.
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32
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9.14
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Currency
Indemnity.
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32
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Exhibit
“A” FORM OF NOTE
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34
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Exhibit
“B” FORM OF OPTION
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35
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Exhibit
“C” FORM OF TAX OPINION
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36
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Exhibit
“D” FORM OF OPINION
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37
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Exhibit
“E” FORM OF ESCROW AGREEMENT
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38
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-ii-
THIS
SECURITIES PURCHASE AGREEMENT
(this
“Agreement”)
is
made and entered into as of December 31, 2005, by and among CANCABLE
INC.
an
Ontario Corporation, (the “Company”)
and
CANCABLE
HOLDING CORP.,
a
Delaware corporation (“Cancable
Parent”),
and
LAURUS
MASTER FUND, LTD.,
a
Cayman Islands company (the “Purchaser”).
RECITALS:
WHEREAS,
the
Company has authorized the sale to the Purchaser of a Secured Term Note in
the
aggregate principal amount of Six Million Eight Hundred Sixty-Five Thousand
Dollars in lawful money of the United States (USD6,865,000) (as amended,
modified or supplemented from time to time, the “Note”);
WHEREAS,
Cancable Parent wishes to issue an option (as amended, modified or supplemented
from time to time, the “Option”)
to the
Purchaser to purchase up to 49% of the common stock of Cancable Parent (subject
to adjustment as set forth therein), in connection with Purchaser’s purchase of
the Note;
WHEREAS,
Purchaser desires to acquire the Note and the Option on the terms and conditions
set forth herein; and
WHEREAS,
the
Company desires to issue the Note and Cancable Parent desires to issue and
sell
the Option to Purchaser on the terms and conditions set forth
herein.
AGREEMENT:
NOW,
THEREFORE,
in
consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
| 1. |
Agreement
to Issue and Acquire.
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Pursuant
to the terms and conditions set forth in this Agreement, on the Closing Date
(as
defined in Section 3),
the
Company shall issue to the Purchaser, and the Purchaser shall acquire from
the
Company the Note. The offer and issuance of the Note purchased on the Closing
Date shall be known as the “Offering”.
A form
of the Note is annexed hereto as Exhibit “A”. The Note will mature on the
Maturity Date (as defined in the Note). Collectively, the Note and the Option
are referred to as the “Securities”.
| 2. |
Fees
and Option.
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On
the
Closing Date:
-1-
| (a) |
Cancable
Parent will issue and deliver to the Purchaser the Option. The Option
must
be delivered on the Closing Date. A form of the Option is annexed
hereto
as Exhibit B. All the representations, covenants, warranties,
undertakings, and indemnification, and other rights made or granted
to or
for the benefit of the Purchaser by the Company are hereby also made
and
granted in respect of the Option and shares of the Company’s Common Stock
issuable upon exercise of the Option (the “Option
Shares”).
|
| (b) |
Subject
to the terms of Section 2(d)
below, the Company shall pay to Laurus Capital Management, LLC, the
manager of the Purchaser, a closing payment in an amount equal to
three
and one-half percent (3.50%) of the aggregate principal amount of
the
Note. The foregoing fee is referred to herein as the “Closing
Payment”.
|
| (c) |
The
Company shall reimburse the Purchaser for its reasonable expenses
(including legal fees and expenses) incurred in connection with the
preparation and negotiation of this Agreement and the Related Agreements
(as hereinafter defined), and expenses incurred in connection with
the
Purchaser’s due diligence review of the Company and its Subsidiaries (as
defined in Section 6.5)
and all related matters. Amounts required to be paid under this Section
2(c)
will be paid on the Closing Date and shall be USD15,000 (plus any
amounts
charged by the Purchaser’s local Canadian counsel and/or related to
registration and filing expenses in connection with the granting
and
perfection of the Purchaser’s security interests) for such expenses
referred to in this Section 2(c).
|
| (d) |
The
Closing Payment and the expenses referred to in the preceding clause
(c)
shall be paid at Closing (as defined below) out of funds held pursuant
to
the Escrow Agreement (as defined below) and a disbursement letter
(the
“Disbursement
Letter”).
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| 3. |
Closing,
Delivery and Payment.
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| 3.1 |
Closing.
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Subject
to the terms and conditions herein, the closing of the transactions contemplated
hereby (the “Closing”),
shall
take place on the date hereof, at such time or place as the Company and
Purchaser may mutually agree (such date is hereinafter referred to as the
“Closing
Date”).
The
Company acknowledges that the Purchaser’s obligation to fund the purchase price
for the Note is conditioned upon the Company’s satisfaction of the items and
matters contained in the closing checklist to be supplied by the Purchaser
to
the Company.
| 3.2 |
Delivery.
|
Pursuant
to the Escrow Agreement, at the Closing on the Closing Date, the Company and
Cancable Parent will deliver to the Purchaser, among other things, the Note
and
the Option and the Purchaser will deliver to the Company, among other things,
the amounts set forth in the Disbursement Letter, by certified funds or wire
transfer.
-2-
| 4. |
Representations
and Warranties of the Company.
|
Each
of
the Company and Cancable Parent hereby represents and warrants to the Purchaser
as follows (it being acknowledged and agreed that each representation and
warranty made hereunder gives effect to the acquisition of all of the issued
and
outstanding shares of the Company by Cancable Parent and, to the extent
applicable thereto, each representation and warranty made hereunder shall be
deemed to make reference to the transactions contemplated by this Agreement
and
all Related Agreements).
| 4.1 |
Organization,
Good Standing and Qualification.
|
Each
of
the Company, Cancable Parent, and each of their respective Subsidiaries is
a
corporation, partnership or limited liability company, as the case may be,
duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Each of the Company, Cancable Parent, and each
of
their respective Subsidiaries has the power (corporate and otherwise) and
authority to own and operate its properties and assets, to execute and deliver
(i) this Agreement, (ii) the Note and the Option, (iii) the Escrow Agreement
dated as of the date hereof among the Company, the Purchaser and the escrow
agent referred to therein, substantially in the form of Exhibit D hereto (as
amended, modified or supplemented from time to time, the “Escrow
Agreement”),
(iv)
the Guarantee dated the date hereof executed by Creative Vistas, Inc., Cancable
Parent, Cancable, Inc., Creative Vistas Acquisition Corp., A.C. Technical
Systems Ltd. and Iview Digital Video Solutions Inc. (collectively, the
“Guarantors”)
in
favour of the Purchaser, (the “Guarantee”)
(v)
the Master Security Agreement dated the date hereof granted by the Company
and
the Guarantors in favour of the Purchaser, (the “Master
Security Agreement”)
and
(vi) the Share Pledge Agreement dated the date hereof granted by the Company,
Creative Vistas, Inc., Cancable Parent and Creative Vistas Acquisition Corp.
in
favour of the Purchaser (the “Share
Pledge Agreement”)
and
(vii) of all other agreements related to this Agreement and the Note and
referred to herein (the preceding clauses (ii) through (vii), collectively,
the
“Related
Agreements”),
to
issue and sell the Note, to issue and sell the Option and the Option Shares,
and
to carry out the provisions of this Agreement and the Related Agreements and
to
carry on its business as presently conducted. Each of the Company, Cancable
Parent, and each of their respective Subsidiaries is duly qualified and is
authorized to do business and is in good standing as a foreign corporation,
partnership or limited liability company, as the case may be, in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so has not, or could not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on
the business, assets, liabilities, condition (financial or otherwise),
properties, operations or prospects of the Company, Cancable Parent, and their
respective Subsidiaries, taken as a whole (a “Material
Adverse Effect”).
| 4.2 |
Subsidiaries.
|
Each
direct and indirect Subsidiary of each of the Company, Cancable Parent, the
direct owner of such Subsidiary and its percentage ownership thereof, is set
forth on Schedule 4.2. For the purpose of this Agreement, a “Subsidiary”
of
any
person or entity means (i) a corporation or other entity whose shares of stock
or other ownership interests having ordinary voting power (other than stock
or
other ownership interests having such power only by reason of the happening
of a
contingency) to elect a majority of the directors of such corporation, or other
persons or entities performing similar functions for such person or entity,
are
owned, directly or indirectly, by such person or entity or (ii) a corporation
or
other entity in which such person or entity owns, directly or indirectly, more
than 50% of the equity interests at such time.
-3-
| 4.3 |
Capitalization;
Voting Rights.
|
| (a) |
The
authorized capital stock of the Company as of the date hereof consists
of
an unlimited number of common shares, of which 31,816,716 shares
are
issued and outstanding, and an unlimited number of Class A convertible,
retractable, cumulative, voting preference shares, of which 0 shares
are
issued and outstanding. The authorized capital stock of Cancable
Parent
consists of 1,000 shares of Common Stock, USD0.01 par value per share,
of
which 51 shares of Common Stock are issued and outstanding. The
authorized, issued and outstanding capital stock of each Subsidiary
of the
Company and of Cancable Parent is set forth on Schedule
4.3(a).
|
| (b) |
Except
as disclosed on Schedule 4.3(b), other than: (i) the shares reserved
for
issuance under the Company’s stock option plans; (ii) shares which may be
granted pursuant to this Agreement and the Related Agreements, and
(iii)
those shares issued or reserved for issuance to the Purchaser, there
are
no outstanding options, warrants, rights (including conversion or
pre-emptive rights and rights of first refusal), proxy or stockholder
agreements, or arrangements or agreements of any kind for the purchase
or
acquisition from the Company of any of its securities. Except as
disclosed
on Schedule 4.3(b), neither the offer, issuance or sale of any of
the Note
or the Option, or the issuance of any of the Option Shares, nor the
consummation of any transaction contemplated hereby will result in
a
change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained
in
or affecting any such securities.
|
| (c) |
All
issued and outstanding shares of the Company’s common stock (the
“Company
Common Stock”):
(i) have been duly authorized and validly issued and are fully paid
and
non-assessable; and (ii) were issued in compliance with all applicable
provincial and federal laws concerning the issuance of securities.
All
issued and outstanding shares of the Cancable Parent’s common stock (the
“Cancable
Parent Common Stock”):
(i) have been duly authorized and validly issued and are fully paid
and
non-assessable; and (ii) were issued in compliance with all applicable
state and federal laws concerning the issuance of
securities.
|
| (d) |
The
rights, preferences, privileges and restrictions of the shares of
the
Company Common Stock are as stated in the Company’s Certificate of
Incorporation (the “Company
Charter”).
The rights, preferences, privileges and restrictions of the shares
of the
Cancable Parent Common Stock are as stated in the Cancable Parent’s
Certificate of Incorporation (the “Cancable
Parent Charter”).
The Option Shares have been duly and validly reserved for issuance.
When
issued in compliance with the provisions of this Agreement, the Company’s
Charter and/or the Cancable Parent’s Charter, as applicable, the
Securities will be validly issued, fully paid and non-assessable,
and will
be free of any liens or encumbrances; provided, however, that the
Securities may be subject to restrictions on transfer under state,
provincial and/or federal securities laws as set forth herein or
as
otherwise required by such laws at the time a transfer is proposed
or
pursuant to the terms of the Securities or of related shareholder
or
similar agreements entered into by the
Purchaser.
|
-4-
| 4.4 |
Authorization;
Binding Obligations.
|
All
corporate, partnership or limited liability company, as the case may be, action
on the part of the Company, Cancable Parent, and each of their respective
Subsidiaries (including their respective officers and directors) necessary
for
the authorization of this Agreement and the Related Agreements, the performance
of all obligations of the Company and its Subsidiaries hereunder and under
the
other Related Agreements at the Closing and, the authorization, sale, issuance
and delivery of the Note and the Option has been taken or will be taken prior
to
the Closing. This Agreement and the Related Agreements, when executed and
delivered and to the extent it is a party thereto, will be valid and binding
obligations of each of the Company, Cancable Parent, and each of their
respective Subsidiaries, enforceable against each such person in accordance
with
their terms, except:
| (a) |
as
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors’
rights; and
|
| (b) |
general
principles of equity that restrict the availability of equitable
or legal
remedies.
|
The
sale
of the Note is not and will not be subject to any pre-emptive rights or rights
of first refusal that have not been properly waived or complied with. The
issuance of the Option and the subsequent exercise of the Option for the Option
Shares are not and will not be subject to any pre-emptive rights or rights
of
first refusal that have not been properly waived or complied with.
| 4.5 |
Liabilities.
|
Neither
the Company, Cancable Parent, nor any of their respective Subsidiaries has
any
contingent liabilities, except current liabilities incurred in the ordinary
course of business, liabilities disclosed in the Cancable Financial Statements
(as defined below) and/or the consolidated balance sheet of the Company as
at
November 30, 2005 and liabilities set forth on Schedule 4.5.
| 4.6 |
Agreements;
Action.
|
Except
as
set forth on Schedule 4.6:
-5-
| (a) |
other
than those among the Company, Cancable Parent and any one or more
of their
respective Subsidiaries, there are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders,
writs or
decrees to which the Company, Cancable Parent, or any of their respective
Subsidiaries is a party or by which it is bound which may involve:
(i) obligations (contingent or otherwise) of, or payments to, the
Company, Cancable Parent, or any of their respective Subsidiaries
in
excess of USD100,000 (other than obligations of, or payments to,
the
Company, Cancable Parent, or any of their respective Subsidiaries
(1) to
the Purchaser and (2) arising from purchase or sale agreements entered
into in the ordinary course of business); or (ii) the transfer or
license
of any patent, copyright, trade secret or other proprietary right
to or
from the Company, Cancable Parent (other than licenses arising from
the
purchase of “off the shelf” or other standard products); or (iii)
provisions restricting the development, manufacture or distribution
of the
Company, Cancable Parent, or any of their respective Subsidiaries’
products or services; or (iv) indemnification by the Company, Cancable
Parent, or any of their respective Subsidiaries with respect to
infringements of proprietary
rights.
|
| (b) |
Since
November 30, 2004 (the “Balance
Sheet Date”),
neither the Company, Cancable Parent, nor any of their respective
Subsidiaries has: (i) declared or paid any dividends, or authorized
or
made any distribution upon or with respect to any class or series
of its
capital stock; (ii) incurred any indebtedness for money borrowed
or any
other liabilities (other than ordinary course obligations) individually
in
excess of USD100,000 or, in the case of indebtedness and/or liabilities
individually less than USD100,000, in excess of USD200,000 in the
aggregate; (iii) made any loans or advances to any person not in
excess,
individually or in the aggregate, of USD100,000, other than ordinary
course advances for travel expenses; or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of
business.
|
| (c) |
For
the purposes of subsections (a)
and (b)
above, all indebtedness, liabilities, agreements, understandings,
instruments, contracts and proposed transactions involving the same
person
or entity (including persons or entities the Company, Cancable Parent,
or
any of their respective Subsidiaries has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such
subsections.
|
| (d) |
The
Company makes and keep books, records, and accounts, that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions
of
the Company’s assets. The Company maintains internal control over
financial reporting (“Financial
Reporting Controls”)
designed by, or under the supervision of, the Company’s principal
executive and principal financial officers, and effected by the Company’s
board of directors, management, and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with Canadian generally accepted accounting principles (“GAAP”),
including that:
|
-6-
| (i) |
transactions
are executed in accordance with management’s general or specific
authorization;
|
| (ii) |
unauthorized
acquisition, use, or disposition of the Company’s assets that could have a
material effect on the financial statements are prevented or timely
detected;
|
| (iii) |
transactions
are recorded as necessary to permit preparation of financial statements
in
accordance with GAAP, and that the Company’s receipts and expenditures are
being made only in accordance with authorizations of the Company’s
management and board of directors;
|
| (iv) |
transactions
are recorded as necessary to maintain accountability for assets;
and
|
| (v) |
the
recorded accountability for assets is compared with the existing
assets at
reasonable intervals, and appropriate action is taken with respect
to any
differences.
|
| 4.7 |
Obligations
to Related Parties.
|
Except
as
set forth on Schedule 4.7, there are no obligations of the Company, Cancable
Parent, or any of their respective Subsidiaries to officers, directors,
stockholders or employees of the Company, Cancable Parent, or any of their
respective Subsidiaries other than:
| (a) |
for
payment of salary for services rendered and for bonus
payments;
|
| (b) |
reimbursement
for reasonable expenses incurred on behalf of the Company, Cancable
Parent, and their respective
Subsidiaries;
|
| (c) |
for
other standard employee benefits made generally available to all
employees
(including stock option agreements outstanding under any stock option
plan
approved by the Board of Directors of the Company, Cancable Parent,
and
each of their Subsidiary, as applicable);
and
|
| (d) |
obligations
listed in the Company’s, Cancable Parent’s, and each of their respective
Subsidiaries’ Financial Statements.
|
Except
as
described above or set forth on Schedule 4.7, to the best of the Company’s and
Cancable Parent’s knowledge, none of the officers, directors, key employees or
stockholders of the Company, Cancable Parent, or any of their respective
Subsidiaries or any members of their immediate families, are indebted to the
Company, Cancable Parent, or any of their respective Subsidiaries, individually
or in the aggregate, in excess of USD50,000 or have any direct or indirect
ownership interest in any firm or corporation with which the Company, Cancable
Parent, or any of their respective Subsidiaries is affiliated or with which
the
Company, Cancable Parent, or any of their respective Subsidiaries has a business
relationship, or any firm or corporation which competes with the Company,
Cancable Parent, or any of their respective Subsidiaries, other than passive
investments in publicly traded companies (representing less than two percent
(2%) of such company) which may compete with the Company, Cancable Parent,
or
any of their respective Subsidiaries. Except as described above, no officer,
director or stockholder, or any member of their immediate families, is, directly
or indirectly, interested in any material contract with the Company, Cancable
Parent, or any of their respective Subsidiaries and no agreements,
understandings or proposed transactions are contemplated between the Company,
Cancable Parent, or any of their respective Subsidiaries and any such person.
Except as set forth on Schedule 4.7, neither the Company, Cancable Parent,
nor
any of their respective Subsidiaries is a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
-7-
| 4.8 |
Changes.
|
Since
the
Balance Sheet Date, except as disclosed in any Schedule to this Agreement or
to
any of the Related Agreements, there has not been:
| (a) |
any
change in the business, assets, liabilities, condition (financial
or
otherwise), properties, operations or prospects of the Company, Cancable
Parent, or any of their respective Subsidiaries, which individually
or in
the aggregate has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse
Effect;
|
| (b) |
any
resignation or termination (constructive or otherwise) of any officer,
key
employee or group of employees of the Company, Cancable Parent, or
any of
their respective Subsidiaries;
|
| (c) |
any
material change, except in the ordinary course of business, in the
contingent obligations of the Company, Cancable Parent, or any of
their
respective Subsidiaries by way of guaranty, endorsement, indemnity,
warranty or otherwise;
|
| (d) |
any
damage, destruction or loss, whether or not covered by insurance,
has had,
or could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect;
|
| (e) |
any
waiver by the Company, Cancable Parent, or any of their respective
Subsidiaries of a valuable right or of a material debt owed to
it;
|
| (f) |
any
direct or indirect loans made by the Company, Cancable Parent, or
any of
their respective Subsidiaries to any stockholder, employee, officer
or
director of the Company, Cancable Parent, or any of their respective
Subsidiaries, other than advances made in the ordinary course of
business;
|
-8-
| (g) |
any
material increase in any compensation arrangement or agreement with
any
key employee, officer, director or stockholder of the Company, Cancable
Parent or any of their respective Subsidiaries;
|
| (h) |
any
declaration or payment of any dividend or other distribution of the
assets
of the Company, Cancable Parent or any of their respective
Subsidiaries;
|
| (i) |
any
labor organization activity related to the Company, Cancable Parent
or any
of their respective Subsidiaries;
|
| (j) |
any
debt, obligation or liability incurred, assumed or guaranteed by
the
Company, Cancable Parent or any of their respective Subsidiaries
in excess
of a principal amount of USD300,000 in the aggregate, except those
for
immaterial amounts and for current liabilities incurred in the ordinary
course of business;
|
| (k) |
any
sale, assignment or transfer of any material patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the
Company,
Cancable Parent or any of their respective Subsidiaries other than
in the
ordinary course of business;
|
| (l) |
any
change in any material agreement to which the Company, Cancable Parent
or
any of their respective Subsidiaries is a party or by which either
the
Company, Cancable Parent or any of their respective Subsidiaries
is bound
which either individually or in the aggregate has had, or could reasonably
be expected to have, individually or in the aggregate, a Material
Adverse
Effect;
|
| (m) |
any
other event or condition of any character that, either individually
or in
the aggregate, has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
or
|
| (n) |
any
arrangement or commitment by the Company, Cancable Parent or any
of their
respective Subsidiaries to do any of the acts described in subsection
(a)
through (m)
above.
|
| 4.9 |
Title
to Properties and Assets; Liens, Etc.
|
Except
as
set forth on Schedule 4.9, each of the Company, Cancable Parent and each of
their respective Subsidiaries has good and marketable title to its properties
and assets, and good title to its leasehold estates, in each case subject to
no
mortgage, pledge, lien, lease, encumbrance or charge, other than:
| (a) |
those
resulting from taxes which have not yet become
delinquent;
|
| (b) |
minor
liens and encumbrances which do not materially detract from the value
of
the property subject thereto or materially impair the operations
of the
Company, Cancable Parent or any of their respective Subsidiaries;
and
|
| (c) |
those
that have otherwise arisen in the ordinary course of
business.
|
-9-
All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company, Cancable Parent and their respective Subsidiaries
are in operating condition and repair and are reasonably fit and usable for
the
purposes for which they are being used. Except as set forth on Schedule 4.9,
the
Company, Cancable Parent and their respective Subsidiaries are in material
compliance with all material terms of each lease to which it is a party or
is
otherwise bound.
| 4.10 |
Intellectual
Property.
|
| (a) |
Each
of the Company, Cancable Parent and each of their respective Subsidiaries
owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes necessary
for its
business as now conducted and to the Company’s knowledge, as presently
proposed to be conducted (the “Intellectual
Property”),
without any known infringement of the rights of others. Except as
set
forth on Schedule 4.10(a), there are no outstanding options, licenses
or agreements of any kind relating to the foregoing proprietary rights,
nor is the Company, Cancable Parent or any of their respective
Subsidiaries bound by or a party to any options, licenses or agreements
of
any kind with respect to the patents, trademarks, service marks,
trade
names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other
than
such licenses or agreements arising from the purchase of “off the shelf”
or standard products.
|
| (b) |
Neither
the Company, Cancable Parent nor any of their respective Subsidiaries
has
received any communications alleging that any of the Company, Cancable
Parent or any of their respective Subsidiaries has violated any of
the
patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity,
nor is
the Company, Cancable Parent or any of their respective Subsidiaries
aware
of any basis therefor.
|
| (c) |
The
Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, Cancable
Parent
or any of their respective Subsidiaries, except for inventions, trade
secrets or proprietary information that have been rightfully assigned
to
the Company, Cancable Parent or any of their respective
Subsidiaries.
|
| 4.11 |
Compliance
with Other Instruments.
|
Neither
the Company, Cancable Parent nor any of their respective Subsidiaries is in
violation or default of (x) any term of its Charter or Bylaws, or (y) of any
provision of any indebtedness, mortgage, indenture, contract, agreement or
instrument to which it is party or by which it is bound or of any judgment,
decree, order or writ, which violation or default, in the case of this clause
(y), has had, or could reasonably be expected to have, either individually
or in
the aggregate, a Material Adverse Effect. The execution, delivery and
performance of and compliance with this Agreement and the Related Agreements
to
which it is a party, and the issuance and sale of the Note by the Company and
the other Securities by the Company and Cancable Parent each pursuant hereto
and
thereto, will not, with or without the passage of time or giving of notice,
result in any such violation, or be in conflict with or constitute a default
under any such term or provision, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of
the
Company, Cancable Parent or any of their respective Subsidiaries or the
suspension, revocation, impairment, forfeiture or non-renewal of any permit,
license, authorization or approval applicable to the Company, its business
or
operations or any of its assets or properties that could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse
Effect.
-10-
| 4.12 |
Litigation.
|
Except
as
set forth on Schedule 4.12 hereto, there is no action, suit, proceeding or
investigation pending or, to the Company’s, or Cancable Parent’s knowledge,
currently threatened against the Company or Cancable Parent or any of their
respective Subsidiaries that prevents the Company or Cancable Parent or any
of
their respective Subsidiaries from entering into this Agreement or the other
Related Agreements, or from consummating the transactions contemplated hereby
or
thereby, or which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect or any change in
the
current equity ownership of the Company or Cancable Parent or any of their
respective Subsidiaries, nor is the Company or Cancable Parent aware that there
is any basis to assert any of the foregoing. Neither the Company, Cancable
Parent nor any of their respective Subsidiaries is a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court
or
government agency or instrumentality. There is no action, suit, proceeding
or
investigation by the Company or Cancable Parent or any of their respective
Subsidiaries currently pending or which the Company or Cancable Parent or any
of
their respective Subsidiaries intends to initiate.
| 4.13 |
Tax
Returns and Payments.
|
Except
as
set forth on Schedule 4.13, each of the Company, Cancable Parent and each of
their respective Subsidiaries has timely filed or received an extension to
file
all tax returns (federal, state and local) required to be filed by it. Except
as
set forth on Schedule 4.13, all taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by the
Company, Cancable Parent or any of their respective Subsidiaries on or before
the Closing, have been paid or will be paid prior to the time they become
delinquent unless the Company, Cancable Parent or such Subsidiary is contesting
such taxes in good faith and has allocated sufficient reserves. Except as set
forth on Schedule 4.13, neither the Company, Cancable Parent nor any of their
respective Subsidiaries has been advised:
| (a) |
that
any of its returns, federal, state, provincial or other, have been
or are
being audited as of the date hereof;
or
|
| (b) |
of
any deficiency in assessment or proposed judgment to its federal,
state,
provincial or other taxes.
|
-11-
The
Company, Cancable Parent has no knowledge of any liability of any tax to be
imposed upon its properties or assets as of the date of this Agreement for
which
a sufficient and appropriate reserve has not been made (if determined reasonable
and necessary by management of the Company and/or Cancable Parent in the
exercise of its reasonable business judgment).
| 4.14 |
Employees.
|
Except
as
set forth on Schedule 4.14, neither the Company, Cancable Parent nor any of
their respective Subsidiaries has any collective bargaining agreements with
any
of its employees. There is no labor union organizing activity pending or, to
the
Company’s, or Cancable Parent’s knowledge, threatened with respect to the
Company, Cancable Parent or any of their respective Subsidiaries. Except as
disclosed on Schedule 4.14, neither the Company, Cancable Parent nor any of
their respective Subsidiaries is a party to or bound by any currently effective
employment contract, deferred compensation arrangement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
plan or agreement. To the Company’s, and Cancable Parent’s knowledge, no
employee of the Company, or Cancable Parent or any of their respective
Subsidiaries, nor any consultant with whom the Company, Cancable Parent or
any
of their respective Subsidiaries has contracted, is in violation of any term
of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or
to
contract with, the Company, Cancable Parent or any of their respective
Subsidiaries because of the nature of the business to be conducted by the
Company, Cancable Parent or any of their respective Subsidiaries; and to the
Company’s, and Cancable Parent’s knowledge the continued employment by the
Company, Cancable Parent or any of their respective Subsidiaries of its present
employees, and the performance of the Company’s, Cancable Parent’s and their
respective Subsidiaries’ contracts with its independent contractors, will not
result in any such violation. Neither the Company, Cancable Parent nor any
of
their respective Subsidiaries is aware that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court
or
administrative agency, that would interfere with their duties to the Company,
Cancable Parent or any of their respective Subsidiaries. Neither the Company,
Cancable Parent nor any of their respective Subsidiaries has received any notice
alleging that any such violation has occurred. Except for employees who have
a
current effective employment agreement with the Company, Cancable Parent or
any
of their respective Subsidiaries, no employee of the Company, Cancable Parent
or
any of their respective Subsidiaries has been granted the right to continued
employment by the Company, Cancable Parent or any of their respective
Subsidiaries or to any material compensation following termination of employment
with the Company, Cancable Parent or any of their respective Subsidiaries (other
than as required law). Except as set forth on Schedule 4.14, the Company is
not
aware that any officer, key employee or group of employees intends to terminate
his, her or their employment with the Company, Cancable Parent or any of their
respective Subsidiaries, nor does the Company, Cancable Parent or any of their
respective Subsidiaries have a present intention to terminate the employment
of
any officer, key employee or group of employees.
-12-
| 4.15 |
Registration
Rights and Voting Rights.
|
Except
(i) in connection with this Agreement and the Related Agreements, and (ii)
as
set forth on Schedule 4.15, neither the Company, Cancable Parent nor any of
their respective Subsidiaries is presently under any obligation, and neither
the
Company, Cancable Parent nor any of their respective Subsidiaries has granted
any rights to register any of the Company’s, Cancable Parent’s or their
respective Subsidiaries’ presently outstanding securities or any of its
securities that may hereafter be issued. Except as set forth on Schedule 4.15
to
the Company’s, and Cancable Parent’s knowledge, no stockholder of the Company,
Cancable Parent or any of their respective Subsidiaries has entered into any
agreement with respect to the voting of equity securities of the Company,
Cancable Parent or any of their respective Subsidiaries.
| 4.16 |
Compliance
with Laws; Permits.
|
Neither
the Company, Cancable Parent nor any of their respective Subsidiaries is in
violation of any applicable statute, rule, regulation, order or restriction
of
any domestic or foreign government or any instrumentality or agency thereof
in
respect of the conduct of its business or the ownership of its properties which
has had, or could reasonably be expected to have, either individually or in
the
aggregate, a Material Adverse Effect. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement or any other Related Agreement and
the
issuance of any of the Securities, except such as has been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing, as will be filed in a timely manner. Each of the Company, Cancable
Parent and their respective Subsidiaries has all material franchises, permits,
licenses and any similar authority necessary for the conduct of its business
as
now being conducted by it, the lack of which could, either individually or
in
the aggregate, reasonably be expected to have a Material Adverse
Effect.
| 4.17 |
Environmental
and Safety Laws.
|
Neither
the Company, Cancable Parent nor any of their respective Subsidiaries is in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. Except as set forth on Schedule 4.17, no Hazardous
Materials (as defined below) are used or have been used, stored, or disposed
of
by the Company, Cancable Parent or any of their respective Subsidiaries or,
to
the Company’s, or Cancable Parent’s knowledge, by any other person or entity on
any property owned, leased or used by the Company, Cancable Parent or any of
their respective Subsidiaries. For the purposes of the preceding sentence,
“Hazardous
Materials”
shall
mean:
| (a) |
materials
which are listed or otherwise defined as “hazardous”
or “toxic”
under any applicable local, state, provincial, federal and/or foreign
laws
and regulations that govern the existence and/or remedy of contamination
on property, the protection of the environment from contamination,
the
control of hazardous wastes, or other activities involving hazardous
substances, including building materials;
or
|
-13-
| (b) |
any
petroleum products or nuclear
materials.
|
| 4.18 |
Valid
Offering.
|
Assuming
the accuracy of the representations and warranties of the Purchaser contained
in
this Agreement, the offer, sale and issuance of the Securities will be exempt
from the prospectus and registration requirements of the Securities
Act
(Ontario) (the “Securities
Act”)
and
from the registration requirements of the Securities
Act of 1933,
as
amended (the “US
Securities Act”),
and
will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements
of
all applicable state and provincial securities laws.
| 4.19 |
Full
Disclosure.
|
Each
of
the Company, Cancable Parent and each of their respective Subsidiaries has
provided the Purchaser with all information requested by the Purchaser in
connection with its decision to purchase the Note and the Option, including
all
information the Company, Cancable Parent and their respective Subsidiaries
believe is reasonably necessary to make such investment decision. Neither this
Agreement, the Related Agreements, the exhibits and schedules hereto and thereto
nor any other document delivered by the Company, Cancable Parent or any of
their
respective Subsidiaries to Purchaser or its attorneys or agents in connection
herewith or therewith or with the transactions contemplated hereby or thereby,
contain any untrue statement of a material fact nor omit to state a material
fact necessary in order to make the statements contained herein or therein,
in
light of the circumstances in which they are made, not misleading. Any financial
projections and other estimates provided to the Purchaser by the Company or
any
of its Subsidiaries were based on the Company’s, Cancable Parent’s and their
respective Subsidiaries’ experience in the industry and on assumptions of fact
and opinion as to future events which the Company, Cancable Parent or any of
their respective Subsidiaries, at the date of the issuance of such projections
or estimates, believed to be reasonable.
| 4.20 |
Insurance.
|
Each
of
the Company, Cancable Parent and each of their respective Subsidiaries has
general commercial, product liability, fire and casualty insurance policies
with
coverages which the Company believes are customary for companies similarly
situated to each of the Company, Cancable Parent and their respective
Subsidiaries in the same or similar business.
| 4.21 |
Financial
Statements.
|
The
Company has furnished the Purchaser with copies of: the Company’s and its
subsidiaries’ consolidated audited balance sheet, statement of retained
earnings, statement of operations and statement of cash flows for the fiscal
years ended 2004, 2003 and 2002 (collectively, the “Cancable
Financial Statements”).
Such
Cancable Financial Statements have been prepared in accordance with generally
accepted accounting principles as in effect in Canada, in each case, applied
on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the
case
of unaudited interim statements, to the extent they may not include footnotes
or
may be condensed) and fairly present in all material respects the financial
condition, the results of operations, the retained earnings and the cash flows
of Cancable and its subsidiaries, as of, and for, the periods presented in,
each
such Cancable Financial Statement.
-14-
| 4.22 |
Dilution.
|
Cancable
Parent specifically acknowledges that its obligation to issue the shares of
Cancable Parent Common Stock upon exercise of the Option is binding upon
Cancable Parent and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of Cancable Parent.
| 4.23 |
Patriot
Act.
|
The
Company certifies that, to the best of Company’s, and Cancable Parent’s
knowledge, neither the Company, Cancable Parent nor any of their respective
Subsidiaries has been designated, and is not owned or controlled, by a
“suspected
terrorist”
as
defined in Executive Order 13224. The Company hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning money laundering
and related activities. In furtherance of those efforts, the Company hereby
represents, warrants and agrees that: (i) none of the cash or property that
the
Company, Cancable Parent or any of their respective Subsidiaries will pay or
will contribute to the Purchaser has been or shall be derived from, or related
to, any activity that is deemed criminal under United States law; and (ii)
no
contribution or payment by the Company, Cancable Parent or any of their
respective Subsidiaries to the Purchaser, to the extent that they are within
the
Company’s, Cancable Parent’s and/or their respective Subsidiaries’ control shall
cause the Purchaser to be in violation of the United States Bank
Secrecy Act,
the
United States International
Money Laundering Control Act of 1986
or the
United States International
Money Laundering Abatement and Anti-Terrorist Financing Act of
2001.
The
Company shall promptly notify the Purchaser if any of these representations
ceases to be true and accurate regarding the Company, Cancable Parent or any
of
their respective Subsidiaries. The Company agrees to provide the Purchaser
any
additional information regarding the Company, Cancable Parent or any of their
respective Subsidiaries that the Purchaser deems necessary or convenient to
ensure compliance with all applicable laws concerning money laundering and
similar activities. The Company understands and agrees that if at any time
it is
discovered that any of the foregoing representations are incorrect, or if
otherwise required by applicable law or regulation related to money laundering
similar activities, the Purchaser may undertake appropriate actions to ensure
compliance with applicable law or regulation, including but not limited to
segregation and/or redemption of the Purchaser’s investment in the Company. The
Company further understands that the Purchaser may release confidential
information about the Company, Cancable Parent and their respective Subsidiaries
and, if applicable, any underlying beneficial owners, to proper authorities
if
the Purchaser, in its sole discretion, determines that it is in the best
interests of the Purchaser in light of relevant rules and regulations under
the
laws set forth in subsection (ii) above.
| 4.24 |
ERISA.
|
Based
upon the Employee
Retirement Income Security Act of 1974
(“ERISA”),
and
the regulations and published interpretations thereunder: (i) neither the
Company nor any of its Subsidiaries has engaged in any Prohibited Transactions
(as defined in Section 406 of ERISA and Section 4975 of the Internal
Revenue Code of 1986,
as
amended (the “Code”));
(ii)
each of the Company, Cancable Parent and each of their respective Subsidiaries
has met all applicable minimum funding requirements under Section 302 of ERISA
in respect of its plans; (iii) neither the Company, Cancable Parent nor any
of
their respective Subsidiaries has any knowledge of any event or occurrence
which
would cause the Pension Benefit Guaranty Corporation to institute proceedings
under Title IV of ERISA to terminate any employee benefit plan(s); (iv) neither
the Company, Cancable Parent nor any of their respective Subsidiaries has any
fiduciary responsibility for investments with respect to any plan existing
for
the benefit of persons other than the Company’s, Cancable Parent’s or such
Subsidiary’s employees; and (v) neither the Company, Cancable Parent nor any of
their respective Subsidiaries has withdrawn, completely or partially, from
any
multi-employer pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980;
which
liability is unpaid as of the date hereof.
-15-
| 4.25 |
Bank
Accounts.
|
Schedule
4.25
sets out
each bank account maintained by the Company, Cancable Parent and their
respective Subsidiaries which, in the ordinary course of business from time
to
time, may have in excess of Cdn.$50,000 on deposit.
| 5. |
Representations
and Warranties of the
Purchaser.
|
The
Purchaser hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations
and
warranties of the Company set forth in this Agreement):
| 5.1 |
No
Shorting.
|
The
Purchaser or any of its affiliates and investment partners has not, will not
and
will not cause any person or entity to directly engage in “short
sales”
of
the
Company’s Common Stock as long as the Note shall be outstanding.
| 5.2 |
Requisite
Power and Authority.
|
The
Purchaser has all necessary power and authority under all applicable provisions
of law to execute and deliver this Agreement and the Related Agreements and
to
carry out their provisions. All corporate action on Purchaser’s part required
for the lawful execution and delivery of this Agreement and the Related
Agreements have been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement and the Related Agreements will
be
valid and binding obligations of Purchaser, enforceable in accordance with
their
terms, except:
| (a) |
as
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors’
rights; and
|
| (b) |
as
limited by general principles of equity that restrict the availability
of
equitable and legal remedies.
|
-16-
| 5.3 |
Investment
Representations.
|
| (a) |
The
Purchaser is resident in the jurisdiction of the Cayman
Islands.
|
| (b) |
The
Purchaser is acquiring the Securities for investment only and not
with a
view to resale or distribution in violation of any securities
laws.
|
| (c) |
The
Purchaser is not a party to, and is not acting in concert with a
person
who is party to: (A) an agreement to transfer the Purchaser’s legal or
beneficial interest in the Securities; or (B) an agreement to grant
a
participating interest in the
Securities.
|
| (d) |
As
the Securities purchased hereunder are subject to resale restrictions
under the Securities Act, the Purchaser shall comply with all securities
laws concerning any resale of the Securities purchased hereunder
and shall
consult with his, her or its own legal advisors with respect to such
compliance.
|
| (e) |
If
required by applicable securities laws, the Purchaser will execute,
deliver, file and otherwise assist the Company in filing such reports,
undertakings and other documents with respect to the issuance of
the
Securities as may be required.
|
| (f) |
The
Purchaser is purchasing the Securities as principal for its own account
and not as a nominee or agent.
|
| (g) |
The
Purchaser is an “accredited investor” as such term is defined in Rule
45-106 of the Ontario Securities Commission (“OSC”).
|
| (h) |
The
Purchaser understands that the Securities are being offered and sold
pursuant to an exemption from prospectus and registration requirements
contained in the Securities Act based upon the Purchaser’s representations
contained in this Agreement, including, without limitation, that
the
Purchaser is an “accredited investor” as such term is defined in Rule
45-106 of the OSC.
|
| (i) |
The
Purchaser is an “accredited investor” within the meaning of Regulation D
under the Securities Act.
|
| (j) |
The
Purchaser understands that the Securities are being offered and sold
pursuant to an exemption from registration contained in the US Securities
Act based in part upon Purchaser’s representations contained in the
Agreement, including, without limitation, that the Purchaser is an
“accredited
investor”
within the meaning of Regulation D under the U.S. Securities
Act.
|
| (k) |
The
Purchaser confirms that it has received or has had full access to
all the
information it considers necessary or appropriate to make an informed
investment decision with respect to the Note and the Option to be
purchased by it under this Agreement and the Option Shares acquired
by it
upon the exercise of the Option. The Purchaser further confirms that
it
has had an opportunity to ask questions and receive answers from
the
Company regarding the Company’s, Cancable Parent’s and their respective
Subsidiaries’ business, management and financial affairs and the terms and
conditions of the Offering, the Note, the Option and the Securities
and to
obtain additional information (to the extent the Company possessed
such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Purchaser or
to which
the Purchaser had access.
|
-17-
| 5.4 |
Purchaser
Bears Economic Risk.
|
The
Purchaser has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so
that
it is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect its own interests. The Purchaser must
bear the economic risk of this investment until the Securities are sold pursuant
to: (i) an effective registration statement under the Securities Act or the
US
Securities Act; or (ii) an exemption from registration is available with respect
to such sale.
| 5.5 |
Acquisition
for Own Account.
|
The
Purchaser is acquiring the Note, the Option, and the Option Shares for the
Purchaser’s own account for investment only, and not as a nominee or agent and
not with a view towards or for resale in connection with their
distribution.
| 5.6 |
Purchaser
Can Protect Its Interest.
|
The
Purchaser represents that by reason of its, or of its management’s, business and
financial experience, the Purchaser has the capacity to evaluate the merits
and
risks of its investment in the Note, the Option and the Securities and to
protect its own interests in connection with the transactions contemplated
in
this Agreement and the Related Agreements. Further, Purchaser is aware of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Related Agreements.
| 5.7 |
Legends.
|
| (a) |
The
Note shall bear substantially the following legend:
|
“THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933,
AS
AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CANCABLE
INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”
-18-
| (b) |
The
Option Shares shall bear a legend which shall be in substantially
the
following form until such shares are covered by an effective registration
statement filed with the SEC:
|
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES
ACT OF 1933,
AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS
OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO CANCABLE HOLDING CORP. THAT SUCH
REGISTRATION IS NOT REQUIRED.”
| 6. |
Covenants
of the Company.
|
Each
of
the Company and Cancable Parent covenants and agrees with the Purchaser as
follows:
| 6.1 |
Stop-Orders.
|
The
Company will advise the Purchaser, promptly after it receives notice of issuance
by the OSC, any provincial securities commission or any other regulatory
authority of any stop order or of any order preventing or suspending any
offering of any securities of the Company, or of the suspension of the
qualification of the Common Stock of the Company for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such
purpose.
| 6.2 |
Use
of Funds.
|
The
Company agrees that it will use the proceeds of the sale of the Note to repay
certain indebtedness of the Company and for general working capital purposes.
Cancable Parent agrees that it will use the proceeds of the sale of the Option
for working capital purposes.
| 6.3 |
Access
to Facilities.
|
To
the
extent permitted by applicable securities laws and regulations, each of the
Company, Cancable Parent and each of their respective Subsidiaries will permit
any representatives designated by the Purchaser (or any successor of the
Purchaser), upon reasonable advance notice and during normal business hours,
at
such person’s expense and accompanied by a representative of the Company,
to:
| (a) |
visit
and inspect any of the properties of the Company, Cancable Parent
or any
of their respective Subsidiaries;
|
| (b) |
examine
the corporate and financial records of the Company, Cancable Parent
or any
of their respective Subsidiaries (unless such examination is not
permitted
by federal, state, provincial or local law or by contract) and make
copies
thereof or extracts therefrom; and
|
| (c) |
discuss
the affairs, finances and accounts of the Company, Cancable Parent
or any
of their respective Subsidiaries with the directors, officers and
independent accountants of the Company, Cancable Parent or any of
their
respective Subsidiaries.
|
-19-
Notwithstanding
the foregoing, neither the Company, Cancable Parent nor any of their respective
Subsidiaries will provide any material, non-public information to the Purchaser
unless the Purchaser signs a confidentiality agreement and otherwise complies
with Regulation FD, under the federal securities laws.
| 6.4 |
Taxes.
|
Each
of
the Company, Cancable Parent and each of their respective Subsidiaries will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company, Cancable
Parent and their respective Subsidiaries; provided, however, that any such
tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company, Cancable Parent and/or such Subsidiary shall have set aside on its
books adequate reserves with respect thereto, and provided, further, that the
Company, Cancable Parent and their respective Subsidiaries will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefor.
If
Company, Cancable Parent or any of their respective Subsidiaries shall be
required by law to deduct or withhold in respect of any and all present or
future taxes, levies, imposts, deductions and other governmental charges or
withholdings, and all interest, penalties and other liabilities with respect
thereto, imposed by any jurisdiction (or any political subdivision thereof)
(“Taxes”)
other
than, with respect to the Purchaser, any Taxes (including income, branch profits
or franchise taxes) imposed on or measured by its net income (“Indemnified
Taxes”)
from
or in respect of any sum payable hereunder to the Purchaser, then:
| (a) |
the
sum payable shall be increased by such additional amount (the
“Additional
Amount”)
as necessary so that after making all required deductions and withholdings
(including deductions and withholdings applicable to such Additional
Amount) the Purchaser receives an amount equal to the sum it would
have
received had no such deductions or withholdings been
made;
|
| (b) |
the
Company, Cancable Parent or such Subsidiary shall make the appropriate
deductions or withholdings and shall pay the full amount deducted
or
withheld to the relevant taxing authority or other authority in accordance
with applicable law;
|
| (c) |
within
thirty (30) days after the date of such payment, upon the Purchaser’s
request, the Company, Cancable Parent or such Subsidiary shall furnish
to
the Purchaser the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment reasonably satisfactory
to
the Purchaser;
|
-20-
| (d) |
if
the Company, Cancable Parent or such Subsidiary fails to pay amounts
in
accordance with paragraph (b)
above, the Company, Cancable Parent or such Subsidiary shall indemnify
the
Purchaser for any incremental Indemnified Taxes that is paid by the
Purchaser as a result of the failure;
|
| (e) |
the
Company will indemnify the Purchaser for the full amount of any Taxes
imposed by any jurisdiction and paid by the Purchaser with respect
to any
Additional Amount payable pursuant to paragraph (a)
above and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes
are
correctly asserted; and
|
| (f) |
the
indemnification contemplated in paragraphs (d)
and (e)
above shall be made within 30 days from the date the Purchaser makes
written demand therefor (which demand shall identify the nature and
amount
of Taxes for which indemnification is being sought and shall include
a
copy of the relevant portion of any written assessment from the
governmental authority demanding payment of such
Taxes).
|
| 6.5 |
Insurance.
|
Each
of
the Company, Cancable Parent and their respective Subsidiaries will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in similar business similarly situated
as the Company, Cancable Parent and their respective; and the Company, Cancable
Parent and their respective Subsidiaries will maintain, with financially sound
and reputable insurers, insurance against other hazards and risks and liability
to persons and property to the extent and in the manner which the Company
reasonably believes is customary for companies in similar business similarly
situated as the Company, Cancable Parent and their respective Subsidiaries
and
to the extent available on commercially reasonable terms. The Company, Cancable
Parent and each of their respective Subsidiaries will jointly and severally
bear
the full risk of loss from any loss of any nature whatsoever with respect to
the
assets pledged to the Purchaser as security for its obligations hereunder and
under the Related Agreements. At the Company’s, Cancable Parent’s and each of
their respective Subsidiaries’ joint and several cost and expense in amounts and
with carriers reasonably acceptable to Purchaser, the Company, Cancable Parent
and each of their respective Subsidiaries shall (i) keep all its insurable
properties and properties in which it has an interest insured against the
hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to the Company’s,
Cancable Parent or their respective Subsidiary’s including business interruption
insurance; (ii) maintain a bond in such amounts as is customary in the case
of
companies engaged in businesses similar to the Company’s, Cancable Parent’s or
their respective Subsidiary’s insuring against larceny, embezzlement or other
criminal misappropriation of insured’s officers and employees who may either
singly or jointly with others at any time have access to the assets or funds
of
the Company, Cancable Parent or any of their respective Subsidiaries either
directly or through governmental authority to draw upon such funds or to direct
generally the disposition of such assets; (iii) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (iv) maintain all such worker’s compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which the Company, Cancable Parent or their respective Subsidiary is engaged
in
business; and (v) furnish Purchaser with (x) copies of all policies and evidence
of the maintenance of such policies at least thirty (30) days before any
expiration date, (y) excepting the Company’s workers’ compensation policy,
endorsements to such policies naming Purchaser as “co-insured”
or
“additional
insured”
and
appropriate loss payable endorsements in form and substance satisfactory to
Purchaser, naming Purchaser as loss payee, and (z) evidence that as to Purchaser
the insurance coverage shall not be impaired or invalidated by any act or
neglect of the Company, Cancable Parent or any Subsidiary and the insurer will
provide Purchaser with at least thirty (30) days notice prior to cancellation.
So long as the Note remains outstanding, the Company, Cancable Parent and each
of their respective Subsidiary shall instruct the insurance carriers that in
the
event of any loss thereunder, the carriers shall make payment for such loss
to
the Company, Cancable Parent and/or the Subsidiary and Purchaser jointly. In
the
event that as of the date of receipt of each loss recovery upon any such
insurance, the Purchaser has not declared an event of default with respect
to
this Agreement or any of the Related Agreements, then the Company, Cancable
Parent and/or such Subsidiary shall be permitted to direct the application
of
such loss recovery proceeds toward investment in property, plant and equipment
that would comprise “Collateral”
secured
by Purchaser’s security interest pursuant to its security agreement, with any
surplus funds to be applied toward payment of the obligations of the Company
to
Purchaser. In the event that Purchaser has properly declared an event of default
with respect to this Agreement or any of the Related Agreements, then all loss
recoveries received by Purchaser upon any such insurance thereafter may be
applied to the obligations of the Company hereunder and under the Related
Agreements, in such order as the Purchaser may determine. Any surplus (following
satisfaction of all Company obligations to Purchaser) shall be paid by Purchaser
to the Company or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by the Company, Cancable Parent or their respective
Subsidiaries, as applicable, to Purchaser, on demand. Notwithstanding anything
herein or in any Related Agreement to the contrary, the Company shall obtain
customary insurance and name the Purchaser as an additional insured and loss
payee thereunder as soon as practicable following the Closing Date, and in
any
event within thirty days following the Closing Date.
-21-
| 6.6 |
Intellectual
Property.
|
Each
of
the Company, Cancable Parent and each of their respective Subsidiaries shall
maintain in full force and effect its existence, rights and franchises and
all
licenses and other rights to use Intellectual Property owned or possessed by
it
and reasonably deemed to be necessary to the conduct of its
business.
| 6.7 |
Properties.
|
Each
of
the Company, Cancable Parent and each of their respective Subsidiaries will
keep
its properties in good repair, working order and condition, reasonable wear
and
tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and each of the
Company, Cancable Parent and each of their respective Subsidiaries will at
all
times comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
-22-
| 6.8 |
Confidentiality.
|
Each
of
the Company and Cancable Parent on behalf of itself and its successors, assigns
and Affiliates, agrees to use its best efforts to maintain as confidential
all
confidential information provided to it by the Purchaser, including, but not
limited to, financial statements, certificates, reports, agreements and
information, financial results, information that may constitute material
non-public information and other information considered by the Purchaser to
be
confidential and proprietary and to use such information in compliance with
all
applicable laws, solely for the purpose of and as necessary to fulfill its
obligations under this Agreement and will not reveal it to any third party
without the express written consent of the Purchaser. Each of the Company and
Cancable Parent will take appropriate measures to prevent its agents, employees
and subcontractors from using or disclosing any such confidential information,
except as is expressly permitted under this Agreement. Each of the Company
and
Cancable Parent agrees that it will not disclose, and will not include in any
public announcement, the name of the Purchaser, unless expressly agreed to
by
the Purchaser or unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement and
upon
notice to the Purchaser. Notwithstanding the foregoing, the Company and Cancable
Parent may disclose Purchaser’s identity and the terms of this Agreement to its
current and prospective debt and equity financing sources and in its filings
with the SEC.
| 6.9 |
Required
Approvals.
|
Each
of
the Company and Cancable Parent, without the prior written consent of the
Purchaser, shall not, and shall not permit any of their respective Subsidiaries
to:
| (a) |
(i) directly
or indirectly declare or pay any dividends, other than dividends
paid to
the Company or to Cancable Parent or any of their respective wholly-owned
Subsidiaries, (ii) issue any preferred stock that is mandatorily
redeemable prior to the one year anniversary of Maturity Date (as
defined
in the Note) or (iii) redeem any of its preferred stock or other
equity
interests other than, in the case of (i), contributions to the corporate
expenses and overhead of Creative Vistas, Inc. not to exceed, when
aggregated with all dividends and distributions made to CVAS and
all
management services and analogous fees paid to CVAS, Cdn.$350,000
per
annum;
|
| (b) |
liquidate,
dissolve or effect a material reorganization (it being understood
that in
no event shall the Company dissolve, liquidate or merge with any
other
person or entity (unless the Company is the surviving
entity));
|
-23-
| (c) |
become
subject to (including, without limitation, by way of amendment to
or
modification of) any agreement or instrument which by its terms would
(under any circumstances) restrict the Company’s, Cancable Parent’s or any
of their respective Subsidiaries right to perform the provisions
of this
Agreement, any Related Agreement or any of the agreements contemplated
hereby or thereby;
|
| (d) |
materially
alter or change the scope of the business of the Company, Cancable
Parent
and their respective Subsidiaries taken as a whole (other than as
necessary or desirable to align such businesses with that of Creative
Vistas, Inc. or its Subsidiaries);
|
| (e) |
(i) create,
incur, assume or suffer to exist any indebtedness (exclusive of trade
debt
and debt incurred to finance the purchase of equipment (not in excess
of
five percent (5%) of the fair market value of the Company’s, Cancable
Parent’s and their respective Subsidiaries’ assets) whether secured or
unsecured other than (x) the Company’s indebtedness to the Purchaser, (y)
indebtedness set forth on Schedule 6.12(e) attached hereto and made
a part
hereof and any refinancings or replacements thereof on terms no less
favorable to the Purchaser than the indebtedness being refinanced
or
replaced, and (z) any debt incurred in connection with the purchase
of
assets in the ordinary course of business, or any refinancings or
replacements thereof on terms no less favorable to the Purchaser
than the
indebtedness being refinanced or replaced; (ii) cancel any debt owing
to it in excess of USD100,000 in the aggregate during any 12 month
period;
(iii) assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other
Person, except the endorsement of negotiable instruments by the Company
for deposit or collection or similar transactions in the ordinary
course
of business or guarantees of indebtedness otherwise permitted to
be
outstanding pursuant to this clause (e);
|
| (f) |
create
or acquire any Subsidiary after the date hereof unless (i) such
Subsidiary is a wholly-owned Subsidiary of the Company and (ii) such
Subsidiary becomes party to the Master Security Agreement, the Stock
Pledge Agreement and the Subsidiary Guaranty (in each case, either
by
executing a counterpart thereof or an assumption or joinder agreement
in
respect thereof) and, to the extent reasonably required by the Purchaser,
satisfies each condition of this Agreement and the Related Agreements
as
if such Subsidiary were a Subsidiary on the Closing Date;
or
|
| (g) |
issue
or sell any of the share capital in the Company and/or Cancable Parent
or
any rights, warrants or securities convertible into or exercisable
or
exchangeable for any share in the capital of the Company and/or Cancable
Parent.
|
| 6.10 |
Opinion.
|
On
the
Closing Date, the Company will deliver to the Purchaser (i) an opinion
reasonably acceptable to the Purchaser from the Company’s external corporate
legal counsel in the form of Exhibit C hereto and (ii) an opinion reasonably
acceptable to the Purchaser from the Company’s external tax counsel addressing
issues of withholding tax in the form of Exhibit D hereto.
-24-
| 6.11 |
Margin
Stock.
|
The
Company will not permit any of the proceeds of the Note or the Option to be
used
directly or indirectly to “purchase”
or
“carry”
“margin
stock”
or
to
repay indebtedness incurred to “purchase”
or
“carry”
“margin
stock”
within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect.
| 6.12 |
Financing
Right of First Refusal.
|
| (a) |
For
a period of one hundred eighty (180) days following the Closing Date,
each
of the Company and Cancable Parent hereby grants to the Purchaser
a right
of first refusal to provide any Additional Financing (as defined
below) to
be issued by the Company, Cancable Parent and/or any of their respective
Subsidiaries, subject to the following terms and conditions. From
and
after the date hereof, prior to the incurrence of any additional
indebtedness and/or the sale or issuance of any equity interests
of the
Company, Cancable Parent or any of their respective Subsidiaries
(other
than (i) pursuant to options, warrants or other obligations to issue
shares outstanding on the date hereof as disclosed to Purchaser in
writing; (ii) pursuant to options that may be issued under any employee
incentive stock option and/or any qualified stock option plan adopted
by
the Company; or (iii) securities issued pursuant to acquisitions
or
strategic transactions the primary purpose of which is not raising
capital, so long as, in the case of this clause (iii), such shares
of
Common Stock so issued (or securities convertible into Common Stock
so
issued) are restricted and do not become freely or publicly traded
in any
respect prior to the two year anniversary of the issuance thereof)
(each,
an “Additional
Financing”),
the Company, Cancable Parent and/or any of their respective Subsidiaries,
as the case may be, shall notify the Purchaser of its intention to
enter
into such Additional Financing. In connection therewith, the Company,
Cancable Parent and/or the applicable Subsidiary thereof shall submit
a
fully executed term sheet (a “Proposed
Term Sheet”)
to the Purchaser setting forth the terms, conditions and pricing
of any
such Additional Financing (such financing to be negotiated on
“arm’s
length”
terms and the terms thereof to be negotiated in good faith) proposed
to be
entered into by the Company, Cancable Parent and/or such Subsidiary.
The
Purchaser shall have the right, but not the obligation, to deliver
its own
proposed term sheet (the “Purchaser
Term Sheet”)
setting forth the terms and conditions upon which Purchaser would
be
willing to provide such Additional Financing to the Company, Cancable
Parent and/or such Subsidiary. The Purchaser Term Sheet shall contain
terms no less favorable to the Company, Cancable Parent and /or the
Subsidiary than those outlined in Proposed Term Sheet. The Purchaser
shall
deliver such Purchaser Term Sheet within ten business days of receipt
of
each such Proposed Term Sheet. If the provisions of the Purchaser
Term
Sheet are at least as favorable to the Company, Cancable Parent and/or
such Subsidiary, as the case may be, as the provisions of the Proposed
Term Sheet, the Company, Cancable Parent and/or such Subsidiary shall
(a)
either enter into and consummate the Additional Financing transaction
outlined in the Purchaser Term Sheet or (b) choose not to consummate
such
Additional Financing, in which case the Company shall be obligated
to
comply with the provisions of this Section 6.12
with respect to any future potential
financing.
|
| (b) |
The
Company and Cancable Parent will not, and will not permit their respective
Subsidiaries to, agree, directly or indirectly, to any restriction
with
any person or entity which limits the ability of the Purchaser to
consummate an Additional Financing with the Company, Cancable Parent
or
any of their respective
Subsidiaries.
|
-25-
| 6.13 |
Account
Agreements.
|
Forthwith
following the Closing Date, the Company and Cancable Parent shall, and shall
cause their respective Subsidiaries to, enter into agreements with the Purchaser
and each bank at which an account identified in Schedule 4.25
is
maintained, affording the Purchaser sole dominion and control over the account
upon the occurrence and during the continuation of an event of default under
the
Note. The Company and Cancable Parent shall, and shall cause their respective
Subsidiaries to, enter into a comparable agreement in relation to any account
opened following the date hereof which may, in the ordinary course of business
from time to time, have in excess of $50,000 on deposit.
| 7. |
Covenants
of the Purchaser.
|
The
Purchaser covenants and agrees with the Company as follows:
| 7.1 |
Confidentiality.
|
The
Purchaser on behalf of itself and its successors, assigns and Affiliates, agrees
to use its best efforts to maintain as confidential all confidential information
provided to it by the Company, including, but not limited to, financial
statements, certificates, reports, agreements and information, financial
results, information that may constitute material non-public information and
other information considered by the Company to be confidential and proprietary
and to use such information in compliance with all applicable laws, solely
for
the purpose of and as necessary to fulfill its obligations under this Agreement
and will not reveal it to any third party without the express written consent
of
the Company. The Purchaser will take appropriate measures to prevent its agents,
employees and subcontractors from using or disclosing any such confidential
information, except as is expressly permitted under this Agreement. The
Purchaser agrees that it will not disclose, and will not include in any public
announcement, the name of the Company, unless expressly agreed to by the Company
or unless and until such disclosure is required by law or applicable regulation,
and then only to the extent of such requirement and upon notice to the
Company.
-26-
| 7.2 |
Non-Public
Information.
|
The
Purchaser agrees not to effect any sales in the shares of the Company’s Common
Stock while in possession of material, non-public information regarding the
Company if such sales would violate applicable securities law.
| 7.3 |
Limitation
on Acquisition of Common Stock of the Company.
|
Notwithstanding
anything to the contrary contained in this Agreement, any Related Agreement
or
any document, instrument or agreement entered into in connection with any other
transactions between the Purchaser and the Company, the Purchaser may not
acquire stock in the Company (including, without limitation, pursuant to a
contract to purchase, by exercising an option or warrant, by converting any
other security or instrument, by acquiring or exercising any other right to
acquire, shares of stock or other security convertible into shares of stock
in
the Company, or otherwise, and such contracts, options, warrants, conversion
or
other rights shall not be enforceable or exercisable) to the extent such stock
acquisition would cause any interest (including any original issue discount)
payable by the Company to the Purchaser not to qualify as “portfolio
interest”
within
the meaning of Section 881(c)(2) of the Code, by reason of Section 881(c)(3)
of
the Code, taking into account the constructive ownership rules under Section
871(h)(3)(C) of the Code (the “Stock
Acquisition Limitation”).
The
Stock Acquisition Limitation shall automatically become null and void without
any notice to the Company upon the earlier to occur of either (a) the Company’s
delivery to the Purchaser of a Notice of Redemption (as defined in the Note)
or
(b) the existence of an Event of Default (as defined in the Note or any other
note issued by the Company to the Purchaser).
| 8. |
Covenants
of the Company and Purchaser Regarding
Indemnification.
|
| 8.1 |
Company
Indemnification.
|
Each
of
the Company and Cancable Parent agrees to indemnify, hold harmless, reimburse
and defend the Purchaser, each of the Purchaser’s officers, directors, agents,
affiliates, control persons, and principal shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable
legal
fees) of any nature, incurred by or imposed upon the Purchaser which results,
arises out of or is based upon: (i) any misrepresentation by the Company,
Cancable Parent or any of their respective Subsidiaries or breach of any
warranty by the Company, Cancable Parent or any of their respective Subsidiaries
in this Agreement, any other Related Agreement or in any exhibits or schedules
attached hereto or thereto; or (ii) any breach or default in performance by
Company, Cancable Parent or any of their respective Subsidiaries of any covenant
or undertaking to be performed by Company, Cancable Parent or any of their
respective Subsidiaries hereunder, under any other Related Agreement or any
other agreement entered into by the Company, Cancable Parent and/or any of
their
respective Subsidiaries and Purchaser relating hereto or thereto.
| 8.2 |
Purchaser’s
Indemnification.
|
Purchaser
agrees to indemnify, hold harmless, reimburse and defend the Company and each
of
the Company’s officers, directors, agents, affiliates, control persons and
principal shareholders, at all times against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of
any
nature, incurred by or imposed upon the Company which results, arises out of
or
is based upon: (i) any misrepresentation by Purchaser or breach of any warranty
by Purchaser in this Agreement or in any exhibits or schedules attached hereto
or any Related Agreement; or (ii) any breach or default in performance by
Purchaser of any covenant or undertaking to be performed by Purchaser hereunder,
or any other agreement entered into by the Company and Purchaser relating
hereto.
-27-
| 8.3 |
Offering
Restrictions.
|
Neither
the Company, Cancable Parent nor any of their respective Subsidiaries will,
prior to the full repayment or conversion of the Note (together with all accrued
and unpaid interest and fees related thereto), (x) enter into any equity line
of
credit agreement or similar agreement or (y) issue, or enter into any agreement
to issue, any securities with a variable/floating conversion and/or pricing
feature which are or could be (by conversion or registration) free-trading
securities (i.e. common stock subject to a registration statement).
| 9. |
Miscellaneous.
|
| 9.1 |
Governing
Law.
|
THIS
AGREEMENT AND EACH RELATED AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND EACH RELATED
AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE
FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. BOTH PARTIES AND THE
INDIVIDUALS EXECUTING THIS AGREEMENT AND THE RELATED AGREEMENTS ON BEHALF OF
THE
COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL
BY
JURY. IN THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT
DELIVERED IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY
APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION SHALL BE DEEMED
INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT THEREWITH AND SHALL BE DEEMED
MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH
MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY
OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT OR ANY RELATED
AGREEMENT. IF ANY PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY
PROVISIONS HEREOF, THEN THE PREVAILING PARTY IN SUCH ACTION OR PROCEEDING SHALL
BE REIMBURSED BY THE OTHER PARTY FOR ITS ATTORNEYS FEES AND OTHER COSTS AND
EXPENSES INCURRED WITH THE INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH
ACTION OR PROCEEDING.
-28-
| 9.2 |
Survival.
|
The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by the Purchaser and the closing of the transactions
contemplated hereby to the extent provided therein. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company and/or Cancable Parent pursuant hereto in connection
with
the transactions contemplated hereby shall be deemed to be representations
and
warranties by the Company and/or Cancable Parent, as the case may be, hereunder
solely as of the date of such certificate or instrument.
| 9.3 |
Successors.
|
Except
as
otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, heirs, executors and
administrators of the parties hereto and shall inure to the benefit of and
be
enforceable by each person who shall be a holder of the Securities from time
to
time. Purchaser may not assign its rights hereunder to a competitor of the
Company.
| 9.4 |
Entire
Agreement; Maximum Interest.
|
This
Agreement, the Related Agreements, the exhibits and schedules hereto and thereto
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by
any
representations, warranties, covenants and agreements except as specifically
set
forth herein and therein. Nothing contained in this Agreement, any Related
Agreement or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum rate permitted by applicable
law. In the event that the rate of interest or dividends required to be paid
or
other charges hereunder exceed the maximum rate permitted by such law, any
payments in excess of such maximum shall be credited against amounts owed by
the
Company to the Purchaser and thus refunded to the Company.
| 9.5 |
Severability.
|
In
case
any provision of the Agreement shall be invalid, illegal or unenforceable,
the
validity, legality and enforceability of the remaining provisions shall not
in
any way be affected or impaired thereby.
| 9.6 |
Amendment
and Waiver.
|
| (a) |
This
Agreement may be amended or modified only upon the written consent
of the
Company, Cancable Parent and the
Purchaser.
|
| (b) |
The
obligations of the Company and Cancable Parent and the rights of
the
Purchaser under this Agreement may be waived only with the written
consent
of the Purchaser.
|
| (c) |
The
obligations of the Purchaser and the rights of the Company and Cancable
Parent under this Agreement may be waived only with the written consent
of
the Company and Cancable Parent.
|
-29-
| 9.7 |
Delays
or Omissions.
|
It
is
agreed that no delay or omission to exercise any right, power or remedy accruing
to any party, upon any breach, default or non-compliance by another party under
this Agreement or the Related Agreements, shall impair any such right, power
or
remedy, nor shall it be construed to be a waiver of any such breach, default
or
non-compliance, or any acquiescence therein, or of or in any similar breach,
default or non-compliance thereafter occurring. All remedies, either under
this
Agreement or the Related Agreements, by law or otherwise afforded to any party,
shall be cumulative and not alternative.
| 9.8 |
Notices.
|
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given:
| (a) |
upon
personal delivery to the party to be
notified;
|
| (b) |
when
sent by confirmed facsimile if sent during normal business hours
of the
recipient, if not, then on the next business
day;
|
| (c) |
three
(3) business days after having been sent by registered or certified
mail,
return receipt requested, postage prepaid;
or
|
| (d) |
one
(1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of
receipt.
|
All
communications shall be sent as follows:
If
to the
Company or Cancable Parent, to:
Cancable
Inc.
0000
Xxxxxx Xxxxxx,
Xxxxx-0-00
Xxxxxx,
Xxxxxxx, X0X 0X0
Xxxxxx
Telephone: 000.000.0000
Facsimile: 905.666.9795
Attention: Chief
Financial Officer
with
a
copy to (which shall not constitute notice):
Xxxxxx
X.
Xxxx, Esq.
Torys
LLP
000
Xxxx
Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Facsimile: (000)
000-0000
-30-
If
to the
Purchaser, to:
Laurus
Master Fund, Ltd.
c/o
M&C Corporate Services Limited
X.X.
Xxx
000 XX
Xxxxxx
House
South
Church Street
Xxxxxx
Town
Grand
Cayman, Cayman Islands
Facsimile: 000-000-0000
with
a
copy to:
Xxxx
X.
Xxxxxx, Esq.
000
Xxxxx
Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Facsimile:
000-000-0000
or
at
such other address as the Company, Cancable Parent or the Purchaser may
designate by written notice to the other parties hereto given in accordance
herewith.
| 9.9 |
Attorneys’
Fees.
|
In
the
event that any suit or action is instituted to enforce any provision in this
Agreement or any Related Agreement, the prevailing party in such dispute shall
be entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement and/or such Related Agreement, including, without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
| 9.10 |
Titles
and Subtitles.
|
The
titles of the sections and subsections of this Agreement are for convenience
of
reference only and are not to be considered in construing this
Agreement.
| 9.11 |
Facsimile
Signatures; Counterparts.
|
This
Agreement may be executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one agreement.
| 9.12 |
Broker’s
Fees.
|
Except
as
set forth on Schedule 11.12 hereof, each party hereto represents and warrants
that no agent, broker, investment banker, person or firm acting on behalf of
or
under the authority of such party hereto is or will be entitled to any broker’s
or finder’s fee or any other commission directly or indirectly in connection
with the transactions contemplated herein. Each party hereto further agrees
to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 9.12
being
untrue.
-31-
| 9.13 |
Construction.
|
Each
party acknowledges that its legal counsel participated in the preparation of
this Agreement and the Related Agreements and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Agreement or any
Related Agreement to favor any party against the other.
| 9.14 |
Currency
Indemnity.
|
If,
for
the purposes of obtaining judgment in any court in any jurisdiction with respect
to this Agreement or any of the Related Agreements, it becomes necessary to
convert into the currency of such jurisdiction (the “Judgment
Currency”)
any
amount due under this Agreement or under any of the Related Agreements in any
currency other than the Judgment Currency (the “Currency
Due”),
then
conversion shall be made at the Exchange Rate at which the Purchaser is able,
on
the relevant date, to purchase the Currency Due with the Judgment Currency
prevailing on the Business Day before the day on which judgment is given. In
the
event that there is a change in the rate of Exchange Rate prevailing between
the
Business Day before the day on which the judgment is given and the date of
receipt by the Purchaser of the amount due, Company will, on the date of receipt
by the Purchaser, pay such additional amounts, if any, or be entitled to receive
reimbursement of such amount, if any, as may be necessary to ensure that the
amount received by the Purchaser on such date is the amount in the Judgment
Currency which when converted at the rate of exchange prevailing on the date
of
receipt by the Purchaser is the amount then due under this Agreement or such
of
the Related Agreements in the Currency Due. If the amount of the Currency Due
which the Purchaser is able to purchase is less than the amount of the Currency
Due originally due to it, Company shall indemnify and save the Purchaser
harmless from and against loss or damage arising as a result of such deficiency.
The indemnity contained herein shall constitute an obligation separate and
independent from the other obligations contained in this Agreement and the
Related Agreements, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted by the Purchaser
from
time to time and shall continue in full force and effect notwithstanding any
judgment or order for a liquidated sum in respect of an amount due under this
Agreement or any of the Related Agreements or under any judgment or
order.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-32-
IN
WITNESS WHEREOF,
the
parties hereto have executed the SECURITIES
PURCHASE AGREEMENT
as of
the date set forth in the first paragraph hereof.
|
COMPANY:
|
PURCHASER:
|
|||
|
CANCABLE,
INC.
|
LAURUS
MASTER FUND, LTD.
|
|||
|
Per:
|
/s/
Xxxx Xxxxxx
|
/s/
Xxxxx Grin
|
||
|
Name:
Xxxx Xxxxxx
|
Name:
Xxxxx Grin
|
|||
|
Title:
President
|
Title:
Director
|
|||
|
CANCABLE
HOLDING CORP.
|
|
|||
|
Per:
|
/s/
Xxxxx Xxxxxxxxxx
|
|||
|
Name:
Xxxxx Xxxxxxxxxx
|
||||
|
Title:
Chairman and CEO
|
||||
-33-
Exhibit
“A”
FORM
OF NOTE
-34-
Exhibit
“B”
FORM
OF OPTION
-35-
Exhibit
“C”
FORM
OF TAX OPINION
-36-
Exhibit
“D”
FORM
OF OPINION
-37-
Exhibit
“E”
FORM
OF ESCROW AGREEMENT
-38-
