EXHIBIT 10.15
SHARE PURCHASE AGREEMENT
THIS AGREEMENT MADE EFFECTIVE AS OF THE 10th DAY OF JUNE, 1997 (the "Effective
Date").
BETWEEN:
XXXX XXXXXX
000 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxx,
X0X 0X0
("Crooks")
AND:
XXXXX XXXXX
#000, 000 - 0000 Xxxx Xxxxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
("Xxxxx")
AND:
PHONE LINE INTERNATIONAL (PLI) INC., a corporation incorporated under
the laws of Canada having a place of business at 000 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxx, X0X 0X0;
("Phone Line")
AND:
DATAWAVE SYSTEMS INC., a company incorporated under the laws of
British Columbia having a place of business at 000 Xxxx 0xx Xxxxxx,
Xxxxxxxxx, X.X., X0X 0X0;
(the "Purchaser")
WHEREAS:
A. The authorized share capital of Phone Line consists of an unlimited number
of common shares without par value of which 1,000 common shares (the "Phone Line
Shares") are issued and outstanding;
X. Xxxxxx and Xxxxx (the "Vendors") are the registered and beneficial owners of
the Phone Line Shares as follows:
Crooks as to 750 Phone Line Shares
Xxxxx as to 250 Phone Line Shares
---
Total: 1,000 Phone Line Shares
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C. The Vendors and the Purchaser entered into a letter of intent dated April
16, 1997, amended by letter dated May 7, 1997, (collectively the "Letter of
Intent"), pursuant to which the parties expressed their mutual interest in the
Purchaser acquiring Phone Line from the Vendors;
D. The Vendors have agreed to sell the Phone Line Shares to the Purchaser and
the Purchaser has agreed to purchase the Phone Line Shares from the Vendors on
the terms and conditions set forth in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants
and agreements herein contained, the parties hereto do covenant and agree (the
"Agreement") each with the other as follows:
1. REPRESENTATIONS AND WARRANTIES
1.1 In order to induce the Purchaser to enter into this Agreement and complete
its transactions contemplated hereunder, Crooks represents and warrants to the
Purchaser that:
(a) Phone Line was and remains duly incorporated under the laws of Canada
and Phone Line:
(i) is a "private issuer" as that term is defined in the Securities
Act, S.B.C. 1996 c.418 as amended (the "Securities Act"); and
(ii) is in good standing with respect to the filing of annual returns
with the Director of Corporations;
(b) the authorized and issued share capital of Phone Line is as set forth
in paragraphs A and B of the recitals to this Agreement;
(c) the Phone Line Shares are validly issued and outstanding fully paid
and non-assessable common shares of Phone Line and Crooks' Phone Line
Shares are registered in the name of, and beneficially owned by,
Crooks as set forth in paragraph B of the recitals to this Agreement
free and clear of all voting restrictions, trade restrictions, liens,
charges or encumbrances of any kind whatsoever;
(d) except for the Phone Line Shares, there are no documents, instruments
or other writings of any kind whatsoever which constitute a "security"
of Phone Line as that term is defined in the Securities Act and,
except as is provided for by operation of this Agreement, there are no
options, agreements or rights of any kind whatsoever to acquire all or
any part of Crooks' Phone Line Shares or any interest in them from
him;
(e) the Articles and By-laws of Phone Line have not been altered since the
incorporation of Phone Line;
(f) all of the material transactions of Phone Line have been promptly and
properly recorded or filed in or with the books or records of Phone
Line and the minute books of Phone Line contain all records of the
meetings and proceedings of Phone Line's shareholders and directors
since its incorporation;
(g) Phone Line holds all licences and permits that are required for
carrying on its business in the manner in which such business has been
carried on;
(h) Phone Line is the registered and beneficial owner of all of the
properties and assets (collectively the "Assets") listed on Schedule
"A" to this Agreement, except as noted therein, and such Assets
represent all of the property and assets used by Phone Line and which
are necessary or useful in the conduct of its business;
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(i) Phone Line has the corporate power to own the Assets owned by it and
carry on the business carried on by it and Phone Line is duly
qualified to carry on business in all jurisdictions in which it
carries on business;
(j) Phone Line has good and marketable title to the Assets free and clear
of all liens, charges and encumbrances of any kind whatsoever save and
except those specified as "Permitted Encumbrances" on Schedule "A" to
this Agreement;
(k) all machinery and equipment of any kind whatsoever comprised in the
Assets are in reasonable operating condition and in a state of
reasonable maintenance and repair taking into account their age and
use;
(l) Phone Line maintains insurance against loss of, or damage to, the
Assets (with the exception of its vending machines) by all insurable
risks on a replacement cost basis and reasonable insurance with
respect to public liability for a business of its size, and all of the
policies in respect of such coverage are in good standing in all
respects and not in default in any respects;
(m) the unaudited financial statements of Phone Line for its fiscal years
ended October 31, 1995 and 1996 and the unaudited financial statements
of Phone Line for the interim five month period ended March 31, 1997
of its current fiscal year (collectively the "Phone Line Financial
Statements"), a copy of which appear as Schedule "B" to this
Agreement, are true and correct in every material respect and present
fairly and accurately the financial position and results of the
operations of Phone Line for the periods then ended and the Phone Line
Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis;
(n) the books and records of Phone Line disclose all material financial
transactions of Phone Line since March 31, 1997 and such transactions
have been fairly and accurately recorded;
(o) except as disclosed in the Phone Line Financial Statements:
(i) no dividends or other distributions of any kind whatsoever on any
shares in the capital of Phone Line have been made, declared or
authorized;
(ii) Phone Line is not indebted to Crooks, except as set forth on
Schedule "C", such amount (the "Crooks Phone Line Payment") to be
paid as provided for therein;
(iii) none of the Vendors or any other officer, director or employee
of Phone Line is indebted or under obligation to Phone Line on
any account whatsoever; and
(iv) Phone Line has not guaranteed or agreed to guarantee any debt,
liability or other obligation of any kind whatsoever of any
person, firm or corporation of any kind whatsoever;
(p) to the best of his knowledge, there are no material liabilities of
Phone Line, whether direct, indirect, absolute, contingent or
otherwise which are not disclosed or reflected in the Phone Line
Financial Statements except those incurred in the ordinary course of
business of Phone Line since March 31, 1997 which are recorded in the
books and records of Phone Line;
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(q) the inventory shown on the Phone Line Financial Statements or recorded
in the books and records of Phone Line has been valued at the lesser
of cost or net realizable value and not more than 10% of the
inventory is obsolete or unsaleable in the ordinary course of the
business of Phone Line;
(r) to the best of his knowledge, the accounts receivable of Phone Line
shown on the Phone Line Financial Statements or recorded in the books
and records of Phone Line are bona fide, good and collectible without
set-off or counterclaim;
(s) since March 31, 1997:
(i) there has not been any material adverse change of any kind
whatsoever in the financial position or condition of Phone Line
or any damage, loss or other change of any kind whatsoever in
circumstances materially affecting the business or Assets of
Phone Line or the right or capacity of Phone Line to carry on its
business;
(ii) Phone Line has not waived or surrendered any right of any kind
whatsoever of material value;
(iii) except as permitted under this Agreement, Phone Line has not
discharged, satisfied or paid any lien, charge or encumbrance of
any kind whatsoever or obligation or liability of any kind
whatsoever other than current liabilities in the ordinary course
of its business;
(iv) the business of Phone Line has been carried on in the ordinary
course;
(v) other than the three new vending machines acquired since March
31, 1997, no new machinery or equipment of any kind whatsoever
has been ordered by, or installed or assembled on the premises
of, Phone Line; and
(vi) no capital expenditures exceeding in the aggregate $20,000 have
been authorized or made by Phone Line;
(t) the directors, officers and key employees of Phone Line and all of
their compensation arrangements with Phone Line, whether as directors,
officers or employees of, or as independent contractors or consultants
to, Phone Line, are as listed on Schedule "C" to this Agreement;
(u) except as may be approved by the Purchaser, no payments of any kind
whatsoever have been made or authorized by Phone Line since March 31,
1997, or will be made or authorized, to or on behalf of the Vendors or
any one of them or to or on behalf of any of the directors, officers
or key employees of Phone Line except in accordance with those
compensation arrangements specified on Schedule "C" to this Agreement
or except as contemplated by this Agreement;
(v) there are no pensions, profit sharing, group insurance or similar
plans or other deferred compensation plans of any kind whatsoever
affecting Phone Line other than those specified on Schedule "C" to
this Agreement;
(w) Phone Line is not now, and has never been, a party to any collective
agreement with any labour union or other association of employees of
any kind whatsoever;
(x) the contracts and agreements included on Schedules "A" and "C" to this
Agreement and those additional contracts and agreements specified on
Schedule "D" to this Agreement (collectively the "Material Contracts")
constitute all of the material contracts and agreements of Phone Line;
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(y) to the best of his knowledge, except as is noted on the appropriate
Schedule to this Agreement, the Material Contracts are in good
standing in all respects and not in default in any respect;
(z) except as is noted on the appropriate Schedule to this Agreement, all
of the Supply Material Contracts can be terminated by Phone Line on
not more than one month's notice;
(aa) all tax returns and reports of Phone Line required by law to have been
filed have been filed and are substantially true, complete and correct
and all taxes and other government charges of any kind whatsoever of
Phone Line have been paid or accrued in the Phone Line Financial
Statements;
(bb) Phone Line has been assessed for federal income tax for all of its
full or partial fiscal years to and including its fiscal year ended
October 31, 1996;
(cc) Phone Line has been and will be until the completion of this Agreement
a Canadian-controlled private corporation within the meaning of the
Tax Act;
(dd) to the best of his knowledge, Phone Line has not:
(i) made any election under Section 85 of the Income Tax Act, R.S.C.
1952 C-148 as amended (the "Tax Act") with respect to the
acquisition or disposition of any property;
(ii) acquired any property from a person with whom Phone Line was not
dealing with at arm's length for proceeds greater than the fair
market value thereof; or
(iii) disposed of anything to a person with whom Phone Line was not
dealing with at arm's length for proceeds less than the fair
market value thereof;
(iv) other than an election made by Crooks pursuant to Section 85 of
the Tax Act, an unsigned and dated copy of which has been
provided to the Purchaser by Crooks;
(ee) to the best of his knowledge, Phone Line has made all elections
required to have been made under the Tax Act in connection with any
distributions made by it and all such elections were true and correct
and made in the prescribed form and within the prescribed time period;
(ff) adequate provision has been made for taxes payable by Phone Line for
the current period for which tax returns are not yet required to be
filed and there are no agreements, waivers or other arrangements of
any kind whatsoever providing for an extension of time with respect to
the filing of any tax return by, or payment of, any tax or
governmental charge of any kind whatsoever by Phone Line;
(gg) he is not aware of any contingent tax liabilities of Phone Line of any
kind whatsoever or any grounds which would prompt a reassessment of
Phone Line including aggressive treatment of income and expenses in
earlier tax returns filed;
(hh) there are no amounts outstanding and unpaid for which Phone Line has
previously claimed a deduction under the Tax Act;
(ii) Crooks is not a non-resident of Canada within the meaning of the Tax
Act;
(jj) Phone Line has made all collections, deductions, remittances and
payments of any kind whatsoever and filed all reports and returns
required by it to be made or filed under the provisions
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of all applicable statutes requiring the making of collections,
deductions, remittances or payments of any kind whatsoever in those
jurisdictions in which Phone Line carries on business;
(kk) Phone Line is a "Canadian" within the meaning of the Investment Canada
Act, R.S.C. 1985 C-28, as amended (the "Investment Canada Act");
(ll) to the best of his knowledge, there are no actions, suits, judgments,
investigations or proceedings of any kind whatsoever outstanding,
pending or threatened against or affecting him or Phone Line at law or
in equity or before or by any Federal, Provincial, State, Municipal or
other governmental department, commission, board, bureau or agency of
any kind whatsoever and there is no basis therefor;
(mm) to the best of his knowledge, Phone Line is not in breach of any law,
ordinance, statute, regulation, by-law, order or decree of any kind
whatsoever;
(nn) Crooks and Phone Line have good and sufficient right and authority to
enter into this Agreement and complete their respective transactions
contemplated under this Agreement on the terms and conditions set
forth herein;
(oo) to the best of his knowledge, the execution and delivery of this
Agreement, the performance of his and Phone Line's obligations under
this Agreement and the completion of their respective transactions
contemplated under this Agreement will not:
(i) conflict with, or result in the breach of or the acceleration of
any indebtedness under, or constitute default under, the Articles
or By-laws of Phone Line or any indenture, mortgage, agreement,
lease, licence or other instrument of any kind whatsoever to
which Phone Line or Crooks is a party or by which either of them
is bound, or any judgment or order of any kind whatsoever of any
Court or administrative body of any kind whatsoever by which
either of them is bound; or
(ii) result in the violation of any law or regulation of any kind
whatsoever by Crooks or by Phone Line;
(pp) neither Phone Line nor Crooks or either of them has incurred any
liability for brokers' or finder's fees of any kind whatsoever with
respect to this Agreement or any transaction contemplated under this
Agreement; and
(qq) the representations and warranties of Crooks contained in this
Agreement disclose all material facts specifically relating to the
transactions involving Crooks and Phone Line contemplated under this
Agreement which materially and adversely affect, or in the future may
materially and adversely affect, their respective abilities to perform
their respective obligations under this Agreement.
1.2 In order to induce the Purchaser to enter into this Agreement and complete
its transactions contemplated hereunder, Xxxxx represents and warrants to the
Purchaser that:
(a) Phone Line was and remains duly incorporated under the laws of Canada
and Phone Line:
(i) is a "private issuer" as that term is defined in the Securities
Act, S.B.C. 1996 c.418 as amended (the "Securities Act"'); and
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(ii) is in good standing with respect to the filing of annual returns
with the Director of Corporations;
(b) the authorized and issued share capital of Phone Line is as set forth
in paragraphs A and B of the recitals to this Agreement;
(c) Lloyd's Phone Line Shares are validly issued and outstanding fully
paid and non-assessable common shares of Phone Line registered in the
name of, and beneficially owned by, Xxxxx as set forth in paragraph B
of the recitals to this Agreement free and clear of all voting
restrictions, trade restrictions, liens, charges or encumbrances of
any kind whatsoever;
(d) except as is provided for by operation of this Agreement, there are no
options, agreements or rights of any kind whatsoever to acquire all or
any part of Lloyd's Phone Line Shares or any interest in them from
him;
(e) except as disclosed in the Phone Line Financial Statements:
(i) no dividends or other distributions of any kind whatsoever on
Lloyd's Phone Line Shares have been made, declared or authorized;
(ii) Phone Line is not indebted to Xxxxx, except as set forth on
Schedule "C", such amount (the "Xxxxx Phone Line Payments") to be
paid as provided for therein;
(iii) Xxxxx is not indebted or under obligation to Phone Line on any
account whatsoever; and
(iv) Phone Line has not guaranteed or agreed to guarantee any debt,
liability or other obligation of any kind whatsoever on behalf of
Xxxxx;
(f) no payments of any kind whatsoever have been made or authorized by
Phone Line since March 31, 1997, or will be made or authorized, to or
on behalf of Xxxxx except in accordance with those compensation
arrangements specified on Schedule "C" to this Agreement or except as
contemplated by this Agreement;
(g) Xxxxx is not a non-resident of Canada within the meaning of the Tax
Act;
(h) to the best of his knowledge, there are no actions, suits, judgments,
investigations or proceedings of any kind whatsoever outstanding,
pending or threatened against or affecting Xxxxx or Phone Line at law
or in equity or before or by any Federal, Provincial, State, Municipal
or other governmental department, commission, board, bureau or agency
of any kind whatsoever and there is no basis therefor;
(i) to the best of his knowledge, Phone Line is not in breach of any law,
ordinance, statute, regulation, by-law, order or decree of any kind
whatsoever;
(j) he has good and sufficient right and authority to enter into this
Agreement and complete his transactions contemplated under this
Agreement on the terms and conditions set forth herein;
(k) to the best of his knowledge, the execution and delivery of this
Agreement, the performance of his obligations under this Agreement and
the completion of his transactions contemplated under this Agreement
will not:
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(i) conflict with, or result in the breach of or the acceleration of
any indebtedness under, or constitute default under, the Articles
or By-laws of Phone Line or any indenture, mortgage, agreement,
lease, licence or other instrument of any kind whatsoever to
which Phone Line or Xxxxx is a party or by which either of them
is bound, or any judgment or order of any kind whatsoever of any
Court or administrative body of any kind whatsoever by which
either of them is bound; or
(ii) result in the violation of any law or regulation of any kind
whatsoever by either Xxxxx or by Phone Line;
(l) Xxxxx has not incurred any liability for brokers' or finder's fees of
any kind whatsoever with respect to this Agreement or any transaction
contemplated under this Agreement; and
(m) the representations and warranties of Xxxxx contained in this
Agreement disclose all material facts specifically relating to the
transactions involving Xxxxx contemplated under this Agreement which
materially and adversely affect, or in the future may materially and
adversely affect, his ability to perform his obligations under this
Agreement.
1.3 The representations and warranties of the Vendors contained in this
Agreement shall be true at the Time of Closing as though they were made at the
Time of Closing and the Vendors' liability in respect thereof shall survive the
completion of the transactions contemplated under this Agreement and remain in
effect for the benefit of the Purchaser for a period of two years thereafter.
1.4 In order to induce the Vendors to enter into this Agreement and complete
their respective transactions contemplated hereunder, the Purchaser represents
and warrants to the Vendors that:
(a) the Purchaser was and remains duly incorporated under the laws of
British Columbia and:
(i) the Purchaser is a "reporting issuer" as that term is defined in
the Securities Act;
(ii) the Purchaser is in good standing with respect to the filing of
annual reports with the B.C. Registrar of Companies; and
(iii) the Purchaser's common shares are listed and, as of the
Effective Date, posted for trading on the Vancouver Stock
Exchange;
(b) as of the Effective Date:
(i) the authorized share capital of the Purchaser consisted of
100,000,000 common shares without par value of which 22,386,526
common shares were issued and outstanding;
(ii) there are no commitments, plans or arrangements of any kind
whatsoever to issue shares of the Purchaser, nor are there any
outstanding options, warrants, convertible securities or other
rights of any kind whatsoever calling for the issuance of any of
the unissued shares of the Purchaser, save and except as
disclosed in the notes to the Purchaser's Financial Statements;
(c) the Purchaser holds all licences and permits that are required for
carrying on its business in the manner in which such business has been
carried on;
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(d) the audited financial statements of the Purchaser for its fiscal years
ended March 31, 1996 and March 31, 1997 (collectively the "Purchaser's
Financial Statements"), a copy of which appear as Schedule "E" to this
Agreement, are true and correct in every material respect and present
fairly and accurately the financial position and results of the
operations of the Purchaser for the periods then ended and the
Purchaser's Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis;
(e) the books and records of the Purchaser disclose all material financial
transactions of the Purchaser since March 31, 1997 and such
transactions have been fairly and accurately recorded;
(f) except as disclosed in the Purchaser's Financial Statements, the
Purchaser has not guaranteed or agreed to guarantee any debt,
liability or other obligation of any kind whatsoever of any person,
firm or corporation of any kind whatsoever;
(g) since March 31, 1997 there has not been any material adverse change of
any kind whatsoever in the financial position or condition of the
Purchaser or any damage, loss or other change of any kind whatsoever
in circumstances materially affecting the business or assets of the
Purchaser or the right or capacity of the Purchaser to carry on its
business;
(h) there are no liabilities of the Purchaser, whether direct, indirect,
absolute, contingent or otherwise which are not disclosed or reflected
in the Purchaser's Financial Statements except those incurred in the
ordinary course of business of the Purchaser since March 31, 1997
which are recorded in the books and records of the Purchaser;
(i) all tax returns and reports of the Purchaser required by law to have
been filed have been filed and are substantially true, complete and
correct and all taxes and other government charges of any kind
whatsoever have been paid or accrued in the Purchaser's Financial
Statements;
(j) the Purchaser has been assessed for federal and provincial income tax
for all full or partial fiscal years to and including its fiscal year
ended March 31, 1996;
(k) adequate provision has been made for taxes payable by the Purchaser
for the current period for which tax returns are not yet required to
be filed and there are no agreements, waivers or other arrangements of
any kind whatsoever providing for an extension of time with respect to
the filing of any tax return by, or payment of, any tax or
governmental charge of any kind whatsoever by the Purchaser;
(l) it is not aware of any contingent tax liabilities of any kind
whatsoever or any grounds which would prompt a reassessment including
aggressive treatment of income and expenses in earlier tax returns
filed;
(m) there are no amounts outstanding and unpaid for which the Purchaser
has previously claimed a deduction under the Tax Act;
(n) the Purchaser has made all collections, deductions, remittances and
payments of any kind whatsoever and filed all reports and returns
required by it to be made or filed under the provisions of all
applicable statutes requiring the making of collections, deductions,
remittances or payments of any kind whatsoever in those jurisdictions
in which it carries on business;
(o) the Purchaser is a "Canadian" within the meaning of the Investment
Canada Act;
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(p) to the best of its knowledge, there are no actions, suits, judgments,
investigations or proceedings of any kind whatsoever outstanding,
pending or threatened against or affecting the Purchaser at law or in
equity or before or by any Federal, Provincial, State, Municipal or
other governmental department, commission, board, bureau or agency of
any kind whatsoever and there is no basis therefor;
(q) to the best of its knowledge, the Purchaser is not in breach of any
law, ordinance, statute, regulation, by-law, order or decree of any
kind whatsoever;
(r) the Purchaser has good and sufficient right and authority to enter
into this Agreement and complete its transactions contemplated under
this Agreement on the terms and conditions set forth herein;
(s) to the best of its knowledge, the execution and delivery of this
Agreement, the performance of its obligations under this Agreement and
the completion of its transactions contemplated under this Agreement
will not:
(i) conflict with, or result in the breach of or the acceleration of
any indebtedness under, or constitute default under, the
Memorandum or Articles of the Purchaser or any indenture,
mortgage, agreement, lease, licence or other instrument of any
kind whatsoever to which the Purchaser is a party or by which it
is bound, or any judgment or order of any kind whatsoever of any
Court or administrative body of any kind whatsoever by which the
Purchaser is bound;
(ii) result in the violation of any law or regulation of any kind
whatsoever by the Purchaser;
(t) the Purchaser has not incurred any liability for broker's or finder's
fees of any kind whatsoever with respect to this Agreement or any
transaction contemplated under this Agreement; and
(u) the representations and warranties of the Purchaser contained in this
Agreement disclose all material facts specifically relating to the
transactions involving the Purchaser contemplated in this Agreement
which materially and adversely affect, or in the future may materially
and adversely affect, the Purchaser or the Purchaser's ability to
perform its obligations under this Agreement.
1.5 The representations and warranties of the Purchaser contained in this
Agreement shall be true at the Time of Closing as though they were made at the
Time of Closing and the Purchaser's liability in respect thereof shall survive
the completion of the transactions contemplated under this Agreement and remain
in effect for the benefit of the Vendors for a period of two years thereafter.
2. PURCHASE AND SALE
2.1 Subject to the terms and conditions of this Agreement, the Vendors each
agree to sell their Phone Line Shares to the Purchaser, and the Purchaser agrees
with each of the Vendors to purchase their Phone Line Shares, on the Closing
Date, but effective as of the Effective Date, for the following purchase price
(the "Purchase Price"):
(a) $543,750 payable to Crooks for his 750 Phone Line Shares ("Crooks'
Phone Line Shares");
(b) $48,500 payable to Xxxxx for 100 of his Phone Line Shares represented
by share certificate no. C- 3 (''Lloyd's Qualifying Phone Line
Shares"); and
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(c) $72,750 payable to Xxxxx for 150 of his Phone Line Shares represented
by share certificates nos. C-5 and C-7 ("Lloyd's Non-Qualifying Phone
Line Shares").
2.2 The Purchase Price shall be paid by the Purchaser to the Vendors as
follows:
(a) by the payment of $290,000 (the "Cash Payment"), of which $10,000 has
already been paid to Crooks by way of deposit, in exchange for 419 of
the Phone Line Shares (362 of Crooks' Phone Line Shares and 57 of
Lloyd's Qualifying Phone Line Shares) as follows:
Xxxx Xxxxxx as to $262,500 (less $10,000 deposit)
Xxxxx Xxxxx as to $ 27,500
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Total Cash Payment: $290,000
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(b) by the issuance (the "Share Payment") to each of the Purchasers, pro
rata in accordance with their respective Purchase Price balances
(being $281,250 in respect of Crooks and $93,750 in respect of Xxxxx)
and in exchange for the remaining 581 Phone Line Shares (388 of
Crooks' Phone Line Shares and 193 of Lloyd's Phone Line Shares) (the
"Remaining Phone Line Shares") on December 10, 1997, of that number of
common shares of the Purchaser (the "Purchaser's Shares") as is
determined by dividing the remainder of the Purchase Price (the
"Remainder of the Purchase Price"), being $375,000, by the Market
Price of the Purchaser's common shares. Market Price will be
determined in accordance with the following formula:
(i) first, the weighted average trading price (the "WATP") of the
Purchaser's common shares will be determined for each of the last
20 trading days in the month of November, 1997 (the "Trading
Period");
(ii) second, a simple average (the "Average") of the WATPs will be
determined by adding up the 20 WATPs determined for the 20
trading days of the Trading Period and by dividing the resultant
sum by 20; and
(iii) third, the Average will be discounted by 20% to
obtain the Market Price.
In the event that the Purchaser's common shares do not trade on one or
more of the trading days during the Trading Period, the Trading Period
will be extended backwards until it consists of 20 trading days on
which the Purchaser's common shares did trade. Notwithstanding the
foregoing formula, in no case will the Purchaser be obliged to issued
more than a total of 1,750,000 Purchaser's Shares. In the event of a
subdivision, consolidation or other reorganization of the Purchaser's
share capital prior to the Share Payment, the Share Payment will be
adjusted on the same basis as the other common shares of the Company.
2.3 The parties acknowledge and agree that the Purchaser's Shares will be
issued pursuant to the exemptions provided by operation of ss. 45(2)(28) and ss.
74(2)(25) of the B.C. Securities Act and ss. 35(1)(16) and ss. 72(1)(j) of the
Ontario Securities Act. The parties further acknowledge and agree that the
Purchaser's Shares will be subject to the trade restrictions imposed by
operation of ss. 142(2)(b) of the Rules to the B.C. Securities Act and ss. 72(5)
of the Ontario Securities Act and that the certificates issued for the
Purchaser's Shares will bear a legend to that effect.
2.4 Notwithstanding subparagraph 2.2(b), the Purchaser shall have the right to
pay the Remainder of the Purchase Price in cash instead of issuing the
Purchaser's Shares. In such case, however, the Purchaser will be required to pay
a premium of 10%, being $37,500, in addition to the amount of the Remainder of
the Purchaser Price. The payment will be made on December 10, 1997 ($309,375 to
Crooks and $23,100 to Xxxxx in respect of
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the remaining 43 of Lloyd's Qualifying Phone Line Shares) except in respect of
Lloyd's 150 Non-Qualifying Phone Line Shares for which payment of $80,025 will
be delivered on December 10, 1997 to Xxxxxxx & Xxxxxx together with an
irrevocable direction to pay it to Xxxxx on January 2, 1998 at which time it
will be due and owing and paid to Xxxxx.
2.5 On or before the Time of Closing, the Purchaser and the Vendors shall have
entered into an escrow agreement (the "Escrow Agreement") in a form and with an
escrow agent acceptable to all three parties which will provide that the
Remaining Phone Line Shares will be held by the escrow agent in escrow to be
released to the Purchaser upon the Remainder of the Purchase Price being paid to
the Vendors. The Escrow Agreement will also provide that the expenses of the
escrow agent will be borne by the Vendors.
3. COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS
3.1 The Vendors and Phone Line jointly and severally covenant and agree with
the Purchaser that the Vendors and Phone Line shall:
(a) from and including the Effective Date through to and including the
Time of Closing, permit the Purchaser, through its directors,
officers, employees and authorized agents and representatives
(collectively the "Purchaser's Representatives") at its own cost, full
access to Phone Line's books, records and property including, without
limitation, all of the Assets, contracts and minute books of Phone
Line, so as to permit the Purchaser to make such investigation (the
"Purchaser's Investigation") of Phone Line as the Purchaser deems
necessary;
(b) on or before the 31st day of August, 1997, provide to the Purchaser
all such further documents, instruments and materials and do all such
acts and things as may be reasonably required by the Purchaser to
obtain Regulatory Approval including, but not limited to, providing to
the Purchaser (at the Purchaser's expense provided the Purchaser
agrees to the choice of valuator and the valuator's quoted cost of the
valuation) a valuation opinion of Phone Line in a form and by a party
acceptable to the VSE so as to permit the Purchaser's Shares to be
issued as "trading shares" as that term is defined in VSE Policy No.
19;
(c) from and including the Effective Date through to and including the
Time of Closing, do all such acts and things necessary to ensure that
all of the representations and warranties of the Vendors or any one of
them contained in this Agreement or any certificates or documents
delivered by them or any one of them pursuant to this Agreement remain
true and correct;
(d) from and including the Effective Date through to and including the
Time of Closing, preserve and protect the goodwill, Assets, business
and undertaking of Phone Line and, without limiting the generality of
the foregoing, carry on the business of Phone Line in a reasonable and
prudent manner; and
(e) from and including the Effective Date through to and including the
Time of Closing, keep confidential all discussions and communications
(including all information communicated therein) between the parties,
and all written and printed materials of any kind whatsoever exchanged
by the parties, and, if so requested by the Purchaser, the Vendors and
Phone Line shall arrange for any director, officer, employee,
authorized agent or representative of Phone Line to enter into and the
Vendors themselves shall enter into a non-disclosure agreement with
the Purchaser in a form acceptable to the Purchaser acting reasonably.
3.2 The Vendors and Phone Line jointly and severally covenant and agree with
the Purchaser that, from and including the Effective Date through to and
including the Time of Closing, the Vendors and Phone Line shall :
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(a) not do any such act or thing that would render any representation or
warranty of the Vendors or any one of them contained in this Agreement
or any certificates or documents delivered by them or any one of them
pursuant to this Agreement untrue or incorrect; and
(b) not negotiate with any other person in respect of a purchase and sale
of any of the Phone Line Shares or any part of the Assets, other than
a sale of part of the Assets in the ordinary course of Phone Line's
business.
3.3 The Vendors jointly and severally acknowledge to and agree with the
Purchaser that the Purchaser's Investigation shall in no way limit or otherwise
adversely affect the rights of the Purchaser as provided for hereunder in
respect of the representations and warranties of the Vendors contained in this
Agreement or any certificates or documents delivered by them pursuant to this
Agreement.
3.4 The Purchaser covenants and agrees with the Vendors and with Phone Line
that the Purchaser shall:
(a) from and including the Effective Date through to and including the
Time of Closing, permit the Vendors themselves and through their
authorized agents and representatives (collectively the "Vendors'
Representatives") at their own cost, full access to the Purchaser's
property, books and records including, without limitation, all of the
assets, contracts and minute books of the Purchaser, so as to permit
the Vendors' Representatives to make such investigation (the "Vendors'
Investigation") of the Purchaser as the Vendors deem necessary;
(b) use its best efforts to obtain Regulatory Approval for this Agreement
and the transactions contemplated hereunder on or before the 30th day
of September, 1997;
(c) from and including the Effective Date through to and including the
Time of Closing, do all such acts and things necessary to ensure that
all of the representations and warranties of the Purchaser contained
in this Agreement or any certificates or documents delivered by it
pursuant to this Agreement remain true and correct; and
(d) from and including the Effective Date through to and including the
Time of Closing and subject to its obligations as a reporting issuer
listed on a stock exchange, keep confidential all discussions and
communications (including all information communicated therein)
between the parties, and all written and printed materials of any kind
whatsoever exchanged by the parties, and, if so requested by the
Vendors or by Phone Line, the Purchaser shall arrange for any of the
Purchaser's Representatives to enter into, and the Purchaser itself
shall enter into, a non-disclosure agreement with the Vendors and
Phone Line in a form acceptable to the Vendors and Phone Line acting
reasonably.
3.5 The Purchaser covenants and agrees with the Vendors and with Phone Line
that, from and including the Effective Date through to and including the Time of
Closing, the Purchaser shall not do any such act or thing that would render any
representation or warranty of the Purchaser contained in this Agreement or any
certificates or documents delivered by it pursuant to this Agreement untrue or
incorrect.
3.6 The Purchaser acknowledges to and agrees with the Vendors that the Vendors'
Investigation shall in no way limit or otherwise adversely affect the rights of
the Vendors as provided for hereunder in respect of the representations and
warranties of the Purchaser contained in this Agreement or any certificates or
documents delivered by it pursuant to this Agreement.
3.7 At the request of any or all of the Vendors, the Purchaser covenants to
execute and deliver to each Vendor, for filing, the form of election specified
in section 85 of the Tax Act and in so electing will elect as "proceeds of
disposition" of that Vendor an amount specified by that Vendor that is equal to
or less than the fair market value of
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that number of the Purchaser's Shares issuable to that Vendor under this
Agreement and that is equal to or greater than the "cost amount" to that Vendor
of the Phone Line Shares sold by that Vendor as that amount is calculated and
determined for the purposes of the Tax Act.
4. EMPLOYMENT, CONSULTING AND NON-COMPETITION
4.1 The Employment/Consulting Agreement and Non-Competition Agreement will each
provide that each of the Vendors will not, without the prior written consent of
the Purchaser (given by a director or officer of the Purchaser other than one of
the Vendors), during the term of this Agreement and during the two year period
immediately following the closing of this Agreement, within Canada (the
"Prohibited Area"):
(a) directly or indirectly engage in or become financially interested in,
either individually or as a partner, shareholder, agent, manager,
owner, advisor or financial backer of any person, persons, firm,
association, venture, entity or corporation of any kind whatsoever
that carries on a business the same as, or is similar to, the business
carried on by the Purchaser or any of its subsidiaries as such
business was during the term of this Agreement (collectively the
"Prohibited Businesses" );
(b) directly or indirectly engage in or become financially interested in
any business that will compete with the Prohibited Businesses of the
Purchaser or of its subsidiaries, or of their respective successors or
assigns; or
(c) divert or attempt to divert any business of, or any customers of the
Purchaser or of any of its subsidiaries, to any other competitive
establishment, by direct or indirect inducement or otherwise.
This obligation shall survive the closing of this Agreement.
4.2 The Purchaser will, prior to the Closing Date, extend offers to the
following employees and consultants of Phone Line on the following terms:
(a) to Xxxxxx Royal, an offer of employment at an annual salary of
$29,000, such employment to be in Vancouver and to be for a period of
at least six months from the Closing Date, and, if she accepts the
offer, the Purchaser will pay her reasonable moving expenses;
(b) to Xxxxxx Xxxxxxx, an offer of employment at an annual salary of
$40,000, such employment to be in Ottawa and to be for a period of at
least six months from the Closing Date; and
(c) to Xxxxxxxx Xxxxxx, an offer to continue her current contract of
employment with additional compensation to be in the form of stock
options of the Purchaser.
5. CONDITIONS PRECEDENT
5.1 The Purchaser's obligation to carry out the terms of this Agreement and to
complete its transactions contemplated under this Agreement is subject to the
fulfillment to the satisfaction of the Purchaser of each of the following
conditions that:
(a) on or before July 31, 1997, the Purchaser shall have been able to
complete the Purchaser's Investigation to its reasonable satisfaction
and the Purchaser shall be satisfied that:
(i) the revenues being generated by Phone Line from its major
contracts is as has been represented;
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(ii) the cost of telephone time to Phone Line is as has been
represented;
(b) on or before the Time of Closing, the Purchaser shall have, either
directly or indirectly through Phone Line or another subsidiary,
entered into:
(i) with Xxxxx, a written employment or consulting agreement (the
"Employment/Consulting Agreement");
(ii) with Crooks, a written non-competition agreement (the "Non-
Competition Agreement"); and
(iii) with the Vendors, the Escrow Agreement;
(c) at the Time of Closing, the directors of Phone Line shall consist of
the Purchaser's nominees;
(d) at the Time of Closing, the solicitors for Phone Line shall provide an
opinion dated as of the Closing Date, the form of which appears as
Schedule "F" to this Agreement;
(e) as of the Time of Closing, the Vendors and Phone Line shall have
complied with all of their respective covenants and agreements
contained in this Agreement; and
(f) as of the Time of Closing, the representations and warranties of the
Vendors or any one of them referred to in this Agreement or contained
in any certificates or documents delivered by them or any one of them
pursuant to this Agreement shall be completely true as if such
representations and warranties had been made by the Vendors as of the
Time of Closing.
The conditions set forth above are for the exclusive benefit of the Purchaser
and may be waived by the Purchaser in whole or in part on or before the Time of
Closing.
5.2 The Vendor's respective obligations to carry out the terms of this
Agreement and to complete their respective transactions contemplated under this
Agreement are subject to the fulfillment to their satisfaction of each of the
following conditions (except that the condition precedent in subpara. (b)(i) is
for the benefit of Xxxxx only) that:
(a) on or before the Time of Closing, the Vendors shall have been able to
complete the Vendors' Investigation to their reasonable satisfaction;
(b) on or before the Time of Closing:
(i) Xxxxx shall have entered into an Employment/Consulting Agreement
with the Purchaser; and
(ii) the Vendors shall have entered into the Escrow Agreement with the
Purchaser;
(c) at the Time of Closing, the solicitors for the Purchaser shall provide
an opinion dated as of the Closing Date, the form of which appears as
Schedule "G" to this Agreement;
(d) as of the Time of Closing, the Purchaser shall have complied with all
of its covenants and agreements contained in this Agreement; and
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(e) at the Time of Closing, the representations and warranties of the
Purchaser referred to in this Agreement or contained in any
certificates or documents delivered by it pursuant to this Agreement
shall be completely true as if such representations and warranties had
been made by the Purchaser as of the Time of Closing.
The conditions set forth above are for the exclusive benefit of each of the
Vendors (except that the condition precedent in (b)(i) is only for the benefit
of Xxxxx) and may be waived by each of them in whole or in part on or before the
Time of Closing.
5.3 The parties acknowledge and agree each with the other that this Agreement
and all of the transactions contemplated under this Agreement are subject to the
approval ("Regulatory Approval") of the Vancouver Stock Exchange ("VSE"). In the
event that Regulatory Approval is not obtained for this Agreement on the terms
contained herein on or before the 30th day of September, 1997, this Agreement
shall terminate and be of no further force and effect.
6. CLOSING
6.1 The completion of the transactions contemplated under this Agreement shall
be closed at the offices of Messrs. Xxxxxxx & Xxxxxx, P.O. Box 48800, 0000-0000
Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx at 9:00 o'clock a.m. local time
in Vancouver, B.C. (the "Time of Closing") on the tenth business day (the
"Closing Date") following the date Regulatory Approval is given.
6.2 At the Time of Closing, Crooks shall deliver to the solicitors for the
Purchaser:
(a) a certified true copy of the resolutions of the directors of Phone
Line evidencing that the directors of Phone Line have approved this
Agreement and all of the transactions of Phone Line contemplated
hereunder and the resolutions shall include specific reference to:
(i) the sale and transfer of the Phone Line Shares from the Vendors
to the Purchaser as provided for in this Agreement;
(ii) the cancellation of the share certificates (the "Old Share
Certificates") representing the Phone Line Shares held as set
forth in paragraph B of the recitals to this Agreement; and
(iii) the issuance of new share certificates (the "New
Share Certificates") representing the Phone Line Shares
registered in the name of the Purchaser or its nominee;
(b) the Old Share Certificates representing his Phone Line Shares;
(c) the New Share Certificates representing his and Lloyd's Phone Line
Shares;
(d) a signed copy of the Escrow Agreement referred to in paragraph 2.5 of
this Agreement;
(e) his Non-Competition Agreement referred to in subparagraph 5.1(b)(ii)
of this Agreement;
(f) the solicitor's opinion referred to in subparagraph 5.1 (d) of this
Agreement;
(g) a certificate of confirmation signed by Crooks in the form attached as
Schedule "H" to this Agreement; and
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(h) any other materials that are, in the opinion of the solicitors for the
Purchaser, reasonably required to complete the transactions
contemplated under this Agreement.
6.3 At the Time of Closing, Xxxxx shall deliver to the solicitors for the
Purchaser:
(a) the Old Share Certificates representing his Phone Line Shares;
(b) a signed copy of the Escrow Agreement referred to in paragraph 2.5 of
this Agreement;
(c) his Employment/Consulting Agreement referred to in subparagraph
5.1(b)(i) of this Agreement;
(d) a certificate of confirmation signed by Xxxxx in the form attached as
Schedule "I" to this Agreement; and
(e) any other materials that are, in the opinion of the solicitors for the
Purchaser, reasonably required to complete the transactions
contemplated under this Agreement.
6.4 At the Time of Closing, the Purchaser shall deliver to the solicitors for
each of the Vendors (except in respect of (e)which is delivered only to Lloyd's
solicitor):
(a) certified true copies of the resolutions of the directors evidencing
that the directors have approved this Agreement and all of the
transactions of the Purchaser contemplated hereunder;
(b) evidence that Regulatory Approval has been obtained;
(c) the Cash Payment (in the form of a bank draft, certified cheque or
solicitor's trust cheque) as provided for in subparagraph 2.2(a) of
this Agreement;
(d) a signed Escrow Agreement and, immediately following the Closing, the
Purchaser shall deliver the Remaining Phone Line Shares to the escrow
agent to be held in accordance with the terms of the Escrow Agreement;
(e) Lloyd's Employment/Consulting Agreement referred to subparagraph
5.1(b)(i) of this Agreement;
(f) the solicitor's opinion referred to in subparagraph 5.2(c) of this
Agreement; and
(g) a certificate of confirmation signed by two directors or officers of
the Purchaser in the form attached as Schedule "J" to this Agreement.
6.5 At the Time of Closing, the Purchaser shall cause Phone Line to make the
Crooks Phone Line Payment to Crooks and the Xxxxx Phone Line Payments then due
to Xxxxx in form of a bank draft, certified cheque or solicitors' trust cheque.
7. GENERAL
7.1 Time and each of the terms and conditions of this Agreement shall be of the
essence of this Agreement and any waiver by the parties of this paragraph 7.1 or
any failure by them to exercise any of their rights under this Agreement shall
be limited to the particular instance and shall not extend to any other instance
or matter in this Agreement or otherwise affect any of their rights or remedies
under this Agreement.
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7.2 The Schedules to this Agreement incorporated by reference and the recitals
to this Agreement constitute a part of this Agreement.
7.3 This Agreement constitutes the entire Agreement between the parties hereto
in respect of the matters referred to herein and there are no representations,
warranties, covenants or agreements, expressed or implied, collateral hereto
other than as expressly set forth or referred to herein. This Agreement replaces
the Letter of Intent.
7.4 The headings in this Agreement are for reference only and do not constitute
terms of the Agreement.
7.5 The provisions contained in this Agreement which, by their terms, require
performance by a party to this Agreement subsequent to the Closing Date of this
Agreement, shall survive the Closing Date of this Agreement.
7.6 No alteration, amendment, modification or interpretation of this Agreement
or any provision of this Agreement shall be valid and binding upon the parties
hereto unless such alteration, amendment, modification or interpretation is in
written form executed by the parties directly affected by such alteration,
amendment, modification or interpretation.
7.7 Whenever the singular or masculine is used in this Agreement the same shall
be deemed to include the plural or the feminine or the body corporate as the
context may require.
7.8 The parties hereto shall execute and deliver all such further documents and
instruments and do all such acts and things as any party may, either before or
after the Closing Date, reasonably require in order to carry out the full intent
and meaning of this Agreement.
7.9 Any notice, request, demand and other communication to be given under this
Agreement shall be in writing and shall be delivered by hand or by telecopier to
the parties at their following respective addresses:
To: Crooks or Phone Line: And to: Xxxxx & Aylen
000 Xxxxxxxx Xxxxxx 1000 - 00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxx Xxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx XXX 5Y3
Attention: Xxxx Xxxxxx Attention: Xxxxxxx X. Xxxxx
Telecopier: (000) 000-0000 Telecopier: (000) 000-0000
To: Xxxxx: And to: Xxxxx & Company
#583, 101 - 0000 Xxxx Xxxxxxxx 0000 Xxxx Xxxxx
Xxxxxxxxx, X.X. 000 Xxxxxxx Xxxxxx
X0X 0X0 Xxxxxxxxx, X.X.
Xxxxxx, X0X 0X0
Attention: Xxxxx Xxxxx
Telecopier: (000) 000-0000 Attention: Xxxxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
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To: The Purchaser: And to: Xxxxxxx & Xxxxxx
000 Xxxx 0xx Xxxxxx 2100 - 1111 West Georgia Street
Vancouver, B.C. Vancouver, B.C.
X0X 0X0 Xxxxxx X0X 0X0
Attention: Xxxxx Xxxxx Attention: Xxxxx X. Xxxxx
Telecopier: (000) 000-0000 Telecopier: (000) 000-0000
or to such other addresses as may be given in writing by the parties hereto in
the manner provided for in this paragraph, and shall be deemed to have been
received, if delivered by hand, on the date of delivery, or if delivered by
telecopier, on the date that it is sent.
7.10 This Agreement may not be assigned by any part)' hereto without the prior
written consent of all of the parties hereto, except that the Purchaser may
direct that the Phone Line Shares be acquired on its behalf by a wholly-owned
subsidiary.
7.11 This Agreement shall be subject to, governed by, and construed in
accordance with the laws of the Province of British Columbia.
This Agreement may be signed by the parties in as many counterparts as may be
deemed necessary, each of which so signed shall be deemed to be an original, and
all such counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of the
Effective Date first above written.
SIGNED, SEALED AND DELIVERED )
by XXXX XXXXXX in the presence of: )
)
/s/ Xxxxxxx Xxxxx )
---------------------------------- ) /s/ Xxxx Xxxxxx
Signature of Witness ) --------------------------------
) XXXX XXXXXX
Name: XXXXXXX XXXXX )
---------------------------- )
Address: 0000-00 Xxxxx Xx )
------------------------- )
Ottawa, Ontario )
------------------------- )
Occupation: Solicitor )
---------------------- )
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SIGNED, SEALED AND DELIVERED )
by XXXXX XXXXX in the presence of: )
)
)
/s/ Xxxxxxx X. Xxxxxxx ) /s/ Xxxxx Xxxxx
---------------------------------- ) --------------------------------
)
Signature of Witness ) XXXXX XXXXX
)
Name: XXXXXXX X. XXXXXXX )
Barrister & Solicitor )
--------------------------- )
Address: Xxxxx & Company )
------------------------- )
0000-000 Xxxxxxx Xxxxxx )
------------------------- )
Xxxxxxxxx, X.X. X0X 0X0 )
687-9444 )
------------------------- )
Occupation: )
---------------------- )
)
The CORPORATE SEAL of PHONE LINE )
INTERNATIONAL (PLI) INC. was hereunto )
affixed in the presence of: )
)
) c/s
)
------------------------------------- )
)
)
-------------------------------------
The CORPORATE SEAL of DATAWAVE )
SYSTEMS INC. was hereunto )
affixed in the presence of: )
)
) c/s
)
------------------------------------- )
)
)
-------------------------------------
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