Investment Agreement - Maptuit Corp. and ZixIt Corp.
FINAL DRAFT
INVESTMENT AGREEMENT
BETWEEN
MAPTUIT CORPORATION
- AND -
ZIXIT CORPORATION
STIKEMAN ELLIOTT
COMMERCE COURT WEST,
SUITE 5300,
TORONTO, ONTARIO
MSL 1B9
CANADA
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TABLE OF CONTENTS
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1. INTERPRETATION.........................................1
2. SUBSCRIPTIONS FOR SHARES...............................6
3. REPRESENTATIONS AND WARRANTIES.........................7
4. COVENANTS OF THE CORPORATION..........................22
5. CLOSINGS AND CONDITIONS PRECEDENT TO CLOSINGS.........25
6. PUBLIC ANNOUNCEMENTS..................................27
7. NOTICES...............................................27
8. GENERAL PROVISIONS....................................29
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THIS AGREEMENT dated and effective the 6(th) day of December, 2000.
BETWEEN:
MAPTUIT CORPORATION, a corporation incorporated under the laws of
the Province of Ontario,
(hereinafter called the "Corporation")
- and -
ZIXIT CORPORATION, a corporation incorporated under the laws of
Texas, USA,
(hereinafter called the "Investor")
WITNESSES THAT WHEREAS:
A. terms defined in Section 1 hereof are used in these recitals with their
defined meanings;
B. the Corporation is engaged in the business of providing wireline and
wireless Internet service for mapping, direction and location-based
services to its customers; and
C. the Investor wishes to invest an aggregate of $3,000,000 in the
Corporation upon and subject to the terms and conditions hereinafter set
forth.
NOW THEREFORE in consideration of the mutual covenants and agreements
contained herein and for good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by each of the parties), the
parties hereto covenant and agree each with the others as follows:
1. INTERPRETATION
1.1 Definitions. Where used in this Agreement, the following words and phrases
have the following meanings:
(a) "Affiliate" has the meaning set forth in Section 1(1) of the OBCA
and is deemed to include a family trust;
(b) "Agreement" means this Agreement and all amendments made hereto by
written agreement between the Corporation and the Investor;
(c) "Articles" means the articles of incorporation of the Corporation,
as amended, a true copy of which is attached hereto as Schedule
"A";
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(d) "Assets" means the undertaking, property and rights of the
Corporation as a going concern, of every kind and description and
wheresoever situated;
(e) "Balance Sheet" means the balance sheet of the Corporation as at
the Balance Sheet Date;
(f) "Balance Sheet Date" means October 31, 2000;
(g) "Business" means the Corporation's business of providing wireline
and wireless Internet service for mapping, direction and
location-based services to its customers;
(h) "Business Day" means a day other than a Saturday, Sunday or
statutory holiday in Toronto, Ontario;
(i) "Business Plan" means the Maptuit.com Business Plan dated December
n, 2000 provided to the Investor;
(j) "OBCA" means the Business Corporations Act (Ontario), as amended;
(k) "Common Shares" means any of the common shares in the capital of
the Corporation having the rights and privileges described in the
Articles;
(l) "Closing" means the closing of the Subscription referred to in
Section 2 hereof and the concurrent execution and delivery of the
Transaction Documents;
(m) "Closing Date" means the date hereof;
(n) "Confidential Information" means any information, whether or not
reduced to writing, including but not limited to a formula,
pattern, compilation, programme, method, technique or process, or
information contained or embodied in a product, device or
mechanism and any research, analysis or plan related to the
Business or any other business opportunity considered by the
Corporation or a Subsidiary, which is used, or may be used, in the
Corporation's or any Subsidiaries' trade or business, including
but not limited to the Business, is of value to the Corporation or
a Subsidiary and is not generally known by competitors or other
participants in that trade or business;
(o) "Constating Documents" means the Articles and the by-laws of the
Corporation, together with any amendments thereto or replacements
thereof;
(p) "Conversion Shares" means the maximum number of Common Shares
issuable to the Investor upon conversion of the Subscribed Shares
in accordance with the rights, privileges, restrictions and
conditions applicable thereto;
(q) "Corporation" means Maptuit Corporation (formerly, Maptuit.com
Inc.), its successors and permitted assigns;
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(r) "Damages" has the meaning set forth in Section 4.3 hereof;
(s) "Environmental Laws" means any applicable federal, provincial,
state, municipal, and local laws, statutes, ordinances, by-laws,
regulations and orders, directives and decisions, approvals of any
Governmental Authority related to environmental, health,
occupational safety and product liability matters, in effect from
time to time;
(t) "Financial Statements" means the unaudited Balance Sheet, income
statement and statement of changes in financial position of the
Corporation, each for the eleven- month period ended on the
Balance Sheet Date, copies of which are attached hereto as
Schedule "B";
(u) "Founders" means, collectively, William Tapscott, Robert Tapscott,
Richard Turek Jr., Ronald Blewitt and Max Stevens-Guille;
(v) "Governmental Authority" means all applicable federal, provincial
or state and municipal agencies, ministries, departments, boards,
bureaus, commissions, inspectors and officials;
(w) "Governmental Charges" means all Taxes, customs, duties, rates,
levies, assessments, reassessments and other charges, together
with all penalties, interest and fines with respect thereto,
payable to any Governmental Authority, or other foreign government
or Governmental Authority;
(x) "Governmental Regulations" means all laws, statutes, regulations,
codes, by-laws, orders, covenants, judgments, ordinances, decrees,
treaties, directives, guidelines, restrictions, policies or plans
(whether domestic, foreign or international) of all Governmental
Authorities having jurisdiction over the matter and/or person then
being referred to;
(y) "Incentive Compensation Plan" means a duly approved incentive
compensation plan, director and employee stock option plan, share
purchase plan or profit sharing plan or similar arrangement with
or for directors, officers, senior management, employees or
shareholders of the Corporation or of the Subsidiary, as may, from
time to time, be adopted by the Board of Directors of the
Corporation;
(z) "Intellectual Property" means all intellectual property and
industrial property of the Corporation and the Subsidiary of every
nature, including all patents and applications therefor,
inventions, trade-marks, trade names, copyrights, Software,
industrial designs (whether registered or unregistered),
topographies, trade secrets, confidential information, know-how,
show-how, concepts, data, and information used in or required for
the full, complete and proper carrying on of the Business;
(aa) "Investor" means ZixIt Corporation or its successors or permitted
assigns;
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(bb) "Investor's Solicitors" means Stikeman Elliott, Toronto, Ontario;
(cc) "Material Contracts" means, (i) every agreement, contract or
obligation requiring payment by or to the Corporation or the
Subsidiary of an amount in any one year in the aggregate of
$25,000; (ii) every agreement or contract which has any material
direct or indirect effect (by license, assignment or otherwise) on
the Assets, Intellectual Property or Business of the Corporation;
and (iii) every agreement or contract with any directors,
officers, shareholders, consultants or key employees of the
Corporation or the Subsidiary; including the agreements listed in
Schedule "D" hereto but excluding employment contracts;
(dd) "Preferred Shares" means any of the Class A Preference Shares in
the capital of the Corporation having the rights, privileges,
restrictions and conditions set forth in the Articles;
(ee) "Proprietary Rights Agreement" means the proprietary rights
agreement, in the form attached hereto as Schedule "K", entered
into between the Corporation and each of the Founders;
(ff) "Registration Rights Agreement" means the amended and restated
registration rights agreement between the Corporation, the
Investor and certain other securityholders of the Corporation
dated as of the date hereof;
(gg) "Securityholders' Agreement" means the amended and restated
securityholders' agreement made among the Corporation, the
Investor and the other securityholders of the Corporation dated
March 8, 2000, as amended and restated on September 27, 2000 and
the date hereof, in the form of Schedule "C" attached hereto;
(hh) "Shares" means shares of any class in the capital stock of the
Corporation;
(ii) "Software" means the computer programs, including object code,
source code, manuals and other written material, developed and/or
owned by the Corporation or the Subsidiary necessary for the
Corporation to carry on its Business;
(jj) "Subscribed Shares" means the 1,800 Preferred Shares subscribed
for by the Investor as set forth in Section 2.1 hereof;
(kk) "Subscription Funds" means $3,000,000 to be received by the
Corporation from the Investor pursuant to the purchase and sale of
the Subscribed Shares;
(ll) "Subscription Price" means the consideration payable by the
Investor, as set forth in Section 2.1 hereof, pursuant to the
purchase and sale of the Subscribed Shares;
(mm) "subsidiary" has the meaning set forth in section 1(1) of the
OBCA;
(nn) "Subsidiary" means Maptuit USA, Inc.;
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(oo) "Taxes" means, in relation to any person, any and all taxes
(including any and all fines, interest and penalties in respect
thereof) of any nature imposed, levied, withheld or assessed on or
with respect to the income, profits or gains or the capital of
such person (including, without limitation, any federal or state
income or sales taxes, corporation capital tax, customs or excise
duties or municipal license fees, and any taxes and other
deductions required to be withheld from any payment made to any
person) by Canada or any province thereof, the United States of
America or any state thereof or any political subdivision or
taxing authority thereof or therein, or by any other country or
any political subdivision or taxing authority thereof or therein;
(pp) "Time of Closing" means 11:00 a.m. (Toronto time) on the Closing
Date or such other time on the Closing Date as the parties may
mutually agree upon in writing; and
(qq) "Transaction Documents" means, collectively, this Agreement, the
Registration Rights Agreement and the Securityholders' Agreement.
1.2 Legislation. Any reference to a provision in any legislation is a reference
to that provision as now enacted, and as amended, re-enacted or replaced from
time to time, and in the event of such amendment, re-enactment or replacement
any reference to that provision shall be read as referring to such amended,
re-enacted or replaced provision.
1.3 Headings. The division of this Agreement into Sections and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The terms "this Agreement",
"hereof", "hereunder" and similar expressions refer to this Agreement and not to
any particular Section or other portion hereof and include any agreement
supplemental hereto. Unless something in the subject matter or context is
inconsistent therewith, references herein to Sections and Paragraphs are to
Sections and Paragraphs of this Agreement.
1.4 Extended Meanings. In this Agreement words importing the singular number
only shall include the plural and vice versa, words importing the masculine
gender shall include the feminine and neuter genders and vice versa and words
importing persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
1.5 Accounting Principles. Wherever in this Agreement reference is made to a
calculation to be made in accordance with generally accepted accounting
principles (referred to herein as "GAAP"), such reference shall be deemed to be
to the generally accepted accounting principles of the Canadian Institute of
Chartered Accountants or in such other statement by such other entity as may be
approved by a significant segment of the accounting profession in Canada,
applicable as at the date on which such calculation is made or required to be
made in accordance with GAAP.
1.6 Currency. All references to currency herein are to lawful money of the
United States of America.
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1.7 Schedules. The following are the Schedules annexed hereto and incorporated
by reference and deemed to be part hereof:
Schedule A - Articles
Schedule B - Financial Statements
Schedule C - Form of Securityholders' Agreement
Schedule D - Material Contracts
Schedule E - Non-Arm's Length Contracts
Schedule F - Pre-Closing Capitalization
Schedule G - Post-Closing Capitalization
Schedule H - Liabilities
Schedule I - Founder Agreements
Schedule J - Intellectual Property
Schedule K - Form of Proprietary Rights Agreement
Schedule L - Employment Contracts/Consulting Agreements
2. SUBSCRIPTIONS FOR SHARES
2.1 Subscription. Subject to the terms and conditions of this Agreement, the
Investor agrees to subscribe for and purchase from the Corporation, and the
Corporation agrees to allot and issue to the Investor, the Subscribed Shares for
an aggregate subscription price of $3,000,000 (the "Subscription Price").
Furthermore, the Investor agrees to invest an additional $2,000,000 (the
"Additional Investment") in the Corporation prior to March 30, 2001, subject to
the following: (i) the valuation of the Corporation for the Additional
Investment, shall be that negotiated between the Corporation and the Investor or
that established in one or more arms-length series of connected investment
transactions that result in aggregate proceeds to the Corporation of at least
$2,000,000; and (ii) the Additional Investment may be made, in the Investor's
sole discretion, in cash or the Investor's common stock (valued at the time of
the Additional Investment based on the 10-day weighted average closing price of
the Investor's common stock immediately prior to such investment); if the
Additional Investment is made in the form of the Investor's common stock, the
shares will be privately issued and the Corporation may request that they be
publicly registered under the U.S. Securities Act of 1933, as amended, upon the
later of (x) three months following the date of issuance or (y) June 30, 2001.
The Additional Investment shall be made pursuant to a separate investment
agreement containing customary representations, warranties, and covenants.
2.2 Payment of Subscription Price. At the Closing, the Investor shall deliver to
the Corporation payment by way of wire transfer, a certified cheque, bank draft
or solicitor's trust cheque representing the Subscription Price payable to the
Corporation as set out in Section 2.1 as payment in full for the Subscribed
Shares being issued on the Closing Date.
2.3 Use of Subscription Funds. The Subscription Funds shall be applied by the
Corporation to fund working capital requirements, hire additional personnel,
marketing, sales and for research and development.
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Any material variation of the use of the Subscription Funds set out
above shall require the prior written consent of the Investor, such consent not
to be unreasonably withheld.
3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Corporation. The Corporation
represents and warrants to and in favour of the Investor as follows:
(a) Incorporation and Registration. Each of the Corporation and the
Subsidiary is a corporation duly incorporated and validly existing
under the laws of its jurisdiction of incorporation and has all
necessary corporate power, authority and capacity to own its
property and assets and to carry on its business as currently
conducted. Neither the nature of its activities or business nor
the location or character of the property owned, operated or
leased by the Corporation or the Subsidiary requires the
Corporation or the Subsidiary to be registered, licensed or
otherwise qualified as a foreign corporation or to be in good
standing in any jurisdiction other than the Province of Ontario in
the case of the Corporation and the State of Colorado and
Massachusetts in the case of the Subsidiary, in each case where it
is duly registered, licensed or otherwise qualified and in good
standing for such purpose.
(b) Subsidiaries. The Corporation has no subsidiary other than the
Subsidiary nor any interest in any body corporate, partnership,
joint venture or other entity and it is not a party to any
agreement, option or commitment to acquire any shares or
securities of any body corporate, partnership, trust, joint
venture or other entity. The Corporation beneficially owns,
directly or indirectly, all of the issued and outstanding shares
in the capital of the Subsidiary free and clear of all mortgages,
liens, charges, pledges, security interests, encumbrances, claims
or demands of any kind whatsoever, all of such shares have been
fully authorized and validly issued and are outstanding as fully
paid and non-assessable shares and no person has any right,
agreement or option, present or future, contingent or absolute, or
any right capable of becoming a right, agreement or option, for
the purchase from the Corporation of any interest in any of such
shares or for the issue or allotment of any unissued shares in the
capital of the Subsidiary or any other security convertible into
or exchangeable for such shares.
(c) Constating Documents. The Corporation has delivered to the
Investor herewith a true copy of the Constating Documents of the
Corporation and the Subsidiary certified by an officer of the
Corporation, including any and all amendments thereto and such
Constating Documents as so amended are in full force and effect
and no amendments are being made to the same, except as may be
otherwise contemplated in this Agreement.
(d) Corporate Records and Minute Books. The Corporation has made
available to the Investor, the corporate records and minute books
of the Corporation and the Subsidiary. The minute books include
complete and accurate minutes of all meetings of the directors or
shareholders of the Corporation and the Subsidiary, as
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applicable, held to date or resolutions passed by the directors or
shareholders on consent, since the date of incorporation. The
share certificate book, register of shareholders, register of
transfers and register of directors of the Corporation and the
Subsidiary are complete and accurate.
(e) Books and Records. The Corporation has made available to the
Investor all financial books and records of the Corporation and
the Subsidiary. Such books and records fairly and correctly set
out and disclose in all material respects the financial position
of the Corporation and the Subsidiary and all material financial
transactions relating to the Corporation and the Subsidiary have
been accurately recorded in such financial books and records.
(f) Bankruptcy, etc. No bankruptcy, insolvency or receivership
proceedings have been instituted or are pending against the
Corporation or the Subsidiary and each of the Corporation and the
Subsidiary is able to pay its debts as they become due in the
usual course of its business.
(g) Due Authorization, etc. The Corporation has all necessary
corporate power, authority and capacity to enter into the
Transaction Documents and to do all such acts and things as are
required to be done, observed or performed by it, in accordance
with the terms of the Transaction Documents. The Corporation has
taken all necessary action to authorize the execution, delivery
and performance of the Transaction Documents and to observe the
provisions of each in accordance with their terms. No
authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority or regulatory body or
other person including the shareholders of the Corporation is
required for the due execution, delivery or performance by the
Corporation of any of the Transaction Documents except for
authorizations, approvals, actions, notices or filings which have
been duly obtained or made and are in full force and effect.
(h) Absence of Conflicting Agreements. Neither the Corporation nor the
Subsidiary is a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, obligation, instrument,
shareholders agreement, constating document provision, resolution
of directors or shareholders, statute, regulation, order,
judgment, decree, license, permit, law or rule which would be
violated, contravened, breached by or under which default would
occur or a lien, claim, restriction or encumbrance would be
created as a result of the execution and delivery of any of the
Transaction Documents or the carrying out of the Corporation's
obligations hereunder or thereunder.
(i) Enforceability of Obligations. When executed and delivered, the
Transaction Documents will constitute valid and legally binding
obligations enforceable against the Corporation in accordance with
their respective terms subject, however, to limitations with
respect to enforcement imposed by law in connection with
bankruptcy or similar proceedings and to the extent that equitable
remedies such as
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specific performance and injunction are in the discretion of the
court from which they are sought.
(j) Valid Allotment and Issue. Upon receipt of the Subscription Price
by the Corporation on the Closing Date, the Subscribed Shares will
be duly and validly created, authorized, allotted and issued as
fully paid and non-assessable, in compliance with all securities
laws; the Investor will be the registered owner of the Subscribed
Shares and, except as provided in the Transaction Documents, will
be free and clear of all pre-emptive rights, mortgages, liens,
charges, security interests, adverse claims, pledges and demands
whatsoever arising by reason of the acts or omissions of the
Corporation.
(k) Pre-Closing Capital Stock. The capital stock of the Corporation is
as set forth in Schedule "F" hereto. All of the issued Shares have
been duly and validly issued in compliance with applicable
securities laws and are outstanding as fully paid and non
assessable shares in the capital stock of the Corporation. The
legal and beneficial owners of the issued and outstanding Shares
are set forth therein. To the best of the Corporation's knowledge,
each shareholder holds title to its respective Shares, free and
clear of all agreements, mortgages, pledges, charges, hypothecs,
claims, liens, security interests, encumbrances and rights of
other persons, except as disclosed in the Transaction Documents,
and such Shares constitute all of the issued and outstanding
Shares of the Corporation.
(l) Post-Closing Capital Stock. After giving effect to the
transactions contemplated for the Closing Date, the capital stock
of the Corporation shall be as set forth in Schedule "G" hereto.
All of the issued Shares shall have been duly and validly issued
in compliance with applicable securities laws and will be
outstanding as fully paid and non-assessable shares in the capital
stock of the Corporation.
(m) Convertible Securities. Other than as set out in Schedule "E", no
person, other than pursuant to this Agreement, the
Securityholders' Agreement and the Registration Rights Agreement
and the obligations hereunder and thereunder and other than the
granting of stock options to employees, has any agreement,
contract, option or any right or privilege capable of becoming an
agreement or option, including convertible securities, warrants,
options or other convertible obligations or other rights to
purchase, of any nature, binding upon, or which at any time in the
future may become binding upon, the Corporation:
(i) for the subscription, allotment, issue, purchase or
acquisition by any means of any unissued Shares;
(ii) for the subscription, allotment, issue, purchase or
acquisition by any means of any other debt or equity
securities of the Corporation, whether issued or unissued;
(iii) for the conversion of any instruments or securities of the
Corporation; or
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(iv) for the registration or offer to purchase (public or
private) of any Shares or any other debt or equity
securities of the Corporation.
(n) No Shareholders/Voting Agreement. There are no shareholders'
agreement or other agreements governing the voting, holding or
sale of Shares of the Corporation or the management of the affairs
of the Corporation, other than the Securityholders' Agreement.
(o) No Dividends/Redemption. etc. No dividends have been declared or
paid on or in respect of any Shares and no other distribution on
any Shares or other securities has been made by the Corporation
since the Balance Sheet Date. The Corporation has not redeemed,
purchased or otherwise acquired or agreed to acquire any of its
Shares since the Balance Sheet Date.
(p) Financial Statements. The Financial Statements have been prepared
in accordance with GAAP and present fairly:
(i) all of the assets, liabilities and financial position of
the Corporation as at the Balance Sheet Date (other than
certain equipment listed as assets on balance sheet which
is leased by the Corporation); and
(ii) the sales, earnings, results of operations and cash flows
and changes in financial position of the Corporation for
the six-month period ended as at the Balance Sheet Date.
(q) Absence of Changes. Since the Balance Sheet Date and except for
the transactions contemplated by this Agreement, there has not
been:
(i) any change in the condition, operations or prospects of the
business, assets or financial condition of the Corporation
or the Subsidiary which has been, or in the aggregate would
be, materially adverse to the Business, Assets, properties
or future prospects of the Corporation and the Subsidiary,
taken as a whole; or
(ii) any damage, destruction, loss, labour trouble, threat of
litigation, governmental investigation or other event,
development or condition of any character (whether or not
covered by insurance) materially or adversely affecting the
Business, Assets, properties or future prospects of the
Corporation and the Subsidiary, taken as a whole.
(r) Absence of Unusual Transactions. Since the Balance Sheet Date and
except for the transactions contemplated by this Agreement and the
agreements listed in Schedule "I", neither the Corporation nor the
Subsidiary has:
(i) transferred, assigned, sold or otherwise disposed of any of
the assets shown or reflected in the Balance Sheet or
cancelled any debts,
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entitlements or claims except, in each case, in the
ordinary and usual course of business and which, in the
aggregate, exceed $10,000;
(ii) incurred or assumed any obligation or liability (fixed or
contingent), except those listed in Schedule "H" and except
unsecured current obligations and liabilities incurred in
the ordinary and usual course of business which do not in
the aggregate exceed $10,000;
(iii) except as set out in Schedule "E", issued or sold any
Shares or any warrants, bonds, debentures or other
securities of the Corporation or the Subsidiary or issued,
granted or delivered any right, option or other commitment
for the issuance of any such securities (other than stock
options granted to employees) or reduced or increased the
stated capital of any class of Shares;
(iv) discharged or satisfied any lien or encumbrance, or paid
any obligation or liability (fixed or contingent) other
than liabilities included in the Balance Sheet and
liabilities incurred since the Balance Sheet Date in the
ordinary and usual course of business or as contemplated
elsewhere in this Agreement;
(v) directly or indirectly, declared or made any payment of any
dividend or other distribution in respect of any Shares or
purchased, redeemed or otherwise acquired any such Shares
thereof or effected any subdivision, consolidation or
reclassification of any such Shares;
(vi) suffered an operating loss or any extraordinary loss,
waived or omitted to take any action in respect of any
rights of substantial value, or entered into any commitment
or transaction not in the ordinary and usual course of
business where such loss, rights, commitment or transaction
is or would be material in relation to the Business,
Assets, properties or future prospects of the Corporation
and the Subsidiary, taken as a whole;
(vii) granted any bonuses, whether monetary or otherwise, or made
any general wage or salary increases in respect of
personnel which it employs which do not, in the aggregate,
exceed $10,000 or changed the terms of employment in
respect of any personnel except in the usual and normal
course of business and consistent with past practice;
(viii) mortgaged, pledged, subjected to lien, granted a security
interest in or otherwise encumbered any of the Assets or
its property, whether tangible or intangible;
(ix) purchased, leased or otherwise acquired any fixed asset or
piece of mobile equipment exceeding, in the aggregate,
$10,000;
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(x) removed any auditor or director or terminated any officer
or other senior employee, whether of the Corporation or the
Subsidiary;
(xi) compromised or settled any litigation, proceeding or other
governmental action relating to the Business, the
Corporation or the Subsidiary; or
(xii) authorized, agreed or otherwise become committed to do any
of the foregoing.
(s) Extent of Liabilities. The Corporation has no liabilities (whether
accrued, absolute, contingent or otherwise) of any kind except as
disclosed in Schedule "H" and except for liabilities incurred in
the ordinary course of business since the Balance Sheet Date,
which are consistent with past practice, and which would require
the expenditure or payment by the Corporation in excess of
$10,000, none of which has been, or in the aggregate would be,
materially adverse to the Business, Assets, properties or future
prospects of the Corporation and the Subsidiary, taken as a whole.
(t) Non-Arm's Length Agreements. No director or officer, former
director or officer, shareholder or employee of the Corporation or
any other person not dealing at arm's length with the Corporation
is a party or is otherwise bound by any agreement, contract or
obligation between such person and the Corporation except as
disclosed in Schedule "E".
(u) No Guarantees. Neither the Corporation nor the Subsidiary is bound
by any agreement, assurance, bond, undertaking or guarantee under
or pursuant to which it has guaranteed or endorsed the debts,
obligations or liabilities of any other person.
(v) Assets. The Corporation has good and marketable title to all of
the Assets (except Assets under lease, as to which the Corporation
has good leasehold title), free and clear of any and all claims,
liens, encumbrances and security interests whatsoever. No person,
partnership, firm, corporation or other entity other than the
Corporation owns or has any right in or to any property or Assets,
which are necessary for or are used by the Corporation in the
conduct of the Business.
(w) Governmental Charges. Each of the Corporation and the Subsidiary
has paid all Governmental Charges other than Charges which are not
yet due and deducted and remitted (except to the extent that
remittances are not yet due) to the relevant governmental
authority or entity all Taxes, unemployment insurance
contributions, pension plan contributions and any deductions or
other amounts which it is required by statute or contract to
collect and remit to any Governmental Authority or other entities
entitled to receive payment of such deduction with respect to all
officers, employees, and service providers of the Corporation and
the Subsidiary.
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(x) Payment of Taxes. In this Section, a reference to the Corporation
shall include a reference to every predecessor of the Corporation
and a reference to the Subsidiary shall include a reference to
every predecessor of the Subsidiary. As of the date of this
Agreement, each of the Corporation and the Subsidiary has duly and
in a timely manner filed all tax returns and reports required by
law to have been filed by it (except for such tax returns and
reports with respect to which the failure to timely file would not
have a material adverse effect), has duly and correctly reported
all income and other amounts required to be reported and has paid
all Taxes to the extent that such Taxes have been assessed by the
relevant taxation authority. Each of the Corporation and the
Subsidiary has duly and in a timely manner paid all instalments of
taxes required to be paid by it and has made full provision on its
books for all Taxes that are not yet due, that will become due and
which relate to periods ending immediately prior to the date of
this Agreement. There are no actions, suits, proceedings,
investigations, audits or claims now pending or threatened or, the
best of the Corporation's knowledge, contemplated against the
Corporation or the Subsidiary in respect of any Taxes and there
are no matters under discussion with any taxation or other
Governmental Authority relating to any such matters.
(y) Directors, Officers, Key Employees and Service Providers. The
following persons are all of the directors, officers, key
employees and key service providers of the Corporation:
<TABLE>
<CAPTION>
Name Title/Office
---- ------------
<S> <C>
Robert Tapscott Senior Vice President, Strategy and
Director
William Tapscott Secretary
Max Edward Peter Stevens-Guille Treasurer and Director
Jeffrey Papows President, Chief Executive Officer and
Director
Donald Tapscott Director and Chairman
Gregory Wolfond Director
Aris Kekedjian Director
Peter Schwartz Director
</TABLE>
and, without restricting any other representation in this
Agreement, each of the Founders has entered into the Proprietary
Rights Agreement.
(z) Employment Matters.
(i) No employee or consultant of the Corporation or the
Subsidiary has breached any agreement such that the
Corporation or the Subsidiary, if it had knowledge thereof,
would be liable to other parties to the breached agreement
for employing or continuing to employ the employee.
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<PAGE> 16
(ii) Neither the Corporation nor the Subsidiary is party to a
collective bargaining agreement. To the best of the
Corporation's knowledge there are no union organizing
efforts being made at the Corporation or the Subsidiary.
(iii) Except under the agreements disclosed in Schedule L, there
are no policies or plans regarding incentive compensation,
stock options, or other terms or conditions of employment
or terms or conditions upon which employees or consultants
or any individual employee or consultant may elect to be
terminated and receive pay in lieu of notice or similar
termination compensation (whether in lump sum or
otherwise), which are binding upon the Corporation or the
Subsidiary, as applicable.
(iv) Each of the Corporation and the Subsidiary is operating in
full compliance with all laws relating to employees,
including employment standards, human rights, occupational
health and safety, all pay equity and employment equity
legislation and there have been no complaints against the
Corporation or the Subsidiary under such laws.
(v) There are no complaints or threatened complaints against
the Corporation or the Subsidiary before any employment
standards branch or tribunal or human rights commission or
tribunal, nor, any occurrence which might lead to a
complaint under any human rights legislation, employment
standards legislation, health and safety legislation,
workers' compensation legislation or pay equity
legislation.
(vi) There are no outstanding decisions or settlements or
pending settlements under employment standards, human
rights legislation, health and safety legislation, workers'
compensation legislation, payment equity legislation or
labour relations legislation which place any obligation
upon the Corporation or the Subsidiary to do or refrain
from doing any act or place a financial obligation on the
Corporation or the Subsidiary.
(vii) There are no outstanding orders or charges against the
Corporation or the Subsidiary under the Workplace Safety
and Insurance Act (Ontario) or any other applicable health
and safety legislation in any other jurisdiction in which
the Business is conducted.
(viii) All levies, assessments and penalties made against the
Corporation or the Subsidiary pursuant to the Workplace
Safety and Insurance Act (Ontario) or any other applicable
workers' compensation legislation in any other jurisdiction
in which the Business is conducted, have been paid by the
Corporation, and neither the Corporation nor the Subsidiary
has been reassessed under any such legislation during the
past 5 years.
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<PAGE> 17
(aa) Patents, Trade Marks and Copyrights. All patents, trade marks,
trade names, brand names, trade designs, service marks and
copyrights and all licenses and similar rights and property which
are necessary or incidental to the conduct of the Business as the
same is presently being carried on are valid and subsisting and
held by the Corporation or the Subsidiary with good and marketable
title and are in good standing free and clear of all security
interests, claims, liens, objections and infringements of every
nature and kind and all registrations therefor have been kept
renewed and are in full force and effect.
(bb) Intellectual Property.
(i) Schedule "J" sets forth a complete and correct list and
brief description of all Intellectual Property which has
been registered by or on behalf of the Corporation and the
Subsidiary or for which applications for registration have
been filed by the Corporation and the Subsidiary or are
intended to be filed or used in the carrying on of the
Business and no service marks, trade names, trade-marks,
patents, whether domestic or foreign, or industrial designs
other than the Intellectual Property are used in whole or
in part by the Corporation or the Subsidiary.
(ii) The Corporation or the Subsidiary is the sole and exclusive
registered owner of all right, title and interest in and to
the Intellectual Property (with no breaks in the chain of
title thereof) and has the sole and exclusive right to use,
sell, license, prepare derivative works for, or dispose of,
and has the right to bring actions for the infringement or
misappropriation of, the Intellectual Property.
(iii) The Intellectual Property owned by the Corporation and the
Subsidiary is in full force and effect and the Corporation
or the Subsidiary, as the case may be, has used the
Intellectual Property in such manner as to preserve its
rights therein, including proper notices indicating
ownership of and/or rights to use the Intellectual
Property, to the extent reasonably necessary for the
protection of the Intellectual Property.
(iv) All directors, officers and employees having access to or
knowledge of the Intellectual Property that is of a
confidential nature and that is necessary or otherwise used
for or in connection with the conduct or operation or
proposed conduct or operation of the Business have entered
into non- disclosure agreements with the Corporation.
(v) All employees of, and service providers to, the Corporation
or the Subsidiary who are engaged to or could, in the
course of their employment or engagement or otherwise,
invent or develop intellectual property have entered into
proprietary rights or similar agreements with the
Corporation or the Subsidiary, pursuant to which the
employee or service provider, as the case may be, assigns
to the Corporation or the Subsidiary all
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<PAGE> 18
Intellectual Property, technical information and other
information developed and/or worked on by the consultant
while employed or engaged with the Corporation or the
Subsidiary.
(vi) No past or present director, officer, employee or service
provider of the Corporation or the Subsidiary is in
violation of any term of any non- disclosure, proprietary
rights or similar agreement between the Corporation or the
Subsidiary and such person.
(vii) None of the Founders is in violation or breach of any terms
and conditions of the Proprietary Rights Agreement or
Section 6 of the Securityholders' Agreement or has
previously violated or breached any of the terms or
conditions of such agreements.
(viii) There are no claims of adverse ownership, invalidity or
other opposition to or conflict with any Intellectual
Property nor of any pending or threatened suit, proceeding,
claim, demand, action or investigation of any nature or
kind against the Corporation or the Subsidiary relating to
the Intellectual Property.
(ix) There is no activity in which the Corporation or the
Subsidiary is engaged, or any product which the Corporation
or the Subsidiary manufactures or sells or any process,
method, packaging or material that it employs in carrying
on the Business which breaches, violates, infringes or
interferes with any intellectual property rights of any
third party or requires payment for the use of any patent,
trade name, trade secret, trade mark, copyright or other
intellectual property right of another person.
(x) The execution, delivery and performance of the Transaction
Documents will not breach, violate or conflict with any
instrument or agreement governing any Intellectual Property
right owned, used by or licensed to the Corporation or the
Subsidiary, will not cause the forfeiture or termination of
any Intellectual Property right owned, used by or licensed
to the Corporation or the Subsidiary or in any way exclude
the right of the Corporation or the Subsidiary to use,
sell, license or dispose of or to bring any action for the
infringement or any Intellectual Property right owned, used
by or licensed to the Corporation or the Subsidiary (or
portion thereof).
(cc) Protection of Data Processing and Storage. The data processing
system used by the Corporation and the Subsidiary adequately meets
the data processing needs of the business and operations of the
Corporation and the Subsidiary as presently conducted. The
Corporation has taken all appropriate action by instruction,
agreement or otherwise with its employees or other persons
permitted access to system application programs and data files
used in the data processing system to protect against unauthorized
access, use, copying, modification, theft and
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<PAGE> 19
destruction of such programs and files. The data processing and
data storage facilities of the Corporation and the Subsidiary are
adequate and properly protected.
(dd) Environmental Matters. In this Section 3.1(dd), a reference to the
Corporation shall include a reference to every predecessor of the
Corporation and a reference to the Subsidiary shall include a
reference to every predecessor of the Subsidiary. All operations
of the Corporation and the Subsidiary conducted on any real
property, leased or owned by the Corporation or the Subsidiary and
such properties themselves while occupied by the Corporation and
the Subsidiary, have been and are in compliance in all material
respects with all Environmental Laws. There has been no release by
the Corporation or the Subsidiary of any hazardous substance as
defined by the Environmental Laws which is now present in, on or
under any real property, leased or owned by the Corporation or the
Subsidiary (including underlying soils and substrata, surface
water and groundwater) at levels which exceed decommissioning or
remediation standards under any Environmental Laws or standards
published or administered by those Governmental Authorities
responsible for establishing or applying such standards. All
environmental approvals required to be held by the Corporation or
the Subsidiary have been obtained, are valid and in full force and
effect, have been and are being complied with, and there have been
and are no proceedings commenced or threatened to revoke or amend
any such environmental approvals. Neither the Corporation nor any
of its operations has been or is now the subject of any remedial
order under any Environmental Laws, nor has any investigation or
evaluation been commenced as to whether any such remedial order is
necessary or of any threat of any such remedial order or any
circumstances which could result in the issuance of any such
remedial order.
(ee) Material Contracts. As at the date of this Agreement, all of the
Material Contracts of the Corporation and the Subsidiary are as
set out in Schedule "D" hereto, executed copies of which have been
delivered to the Investor, all such material contracts can be
fulfilled and performed in all material respects by the
Corporation and the Subsidiary in the normal course of business
dealings and are in good standing and no event of default has
occurred and is continuing and no event has occurred which, with
the giving of notice, the passing of time or both, would
constitute an event of default under any Material Contract.
(ff) No Rights to Acquire Interest. Except for the Material Contracts
and except as otherwise set out in this Agreement, there is no
agreement, option, understanding or commitment, or any right or
privilege capable of becoming an agreement, for the purchase or
acquisition of any interest in the Business or the Assets from the
Corporation or the Subsidiary.
(gg) No Other Obligations. Other than the Material Contracts, there are
no agreements of the Corporation or the Subsidiary, whether
written or oral, which:
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<PAGE> 20
(i) commit the Corporation or the Subsidiary to capital
expenditures or involve liabilities, other than the
purchase of inventory in the ordinary course of business,
in excess of $25,000;
(ii) involve partnerships, joint ventures, granting of marketing
rights by or licensing of Intellectual Property of the
Corporation or the Subsidiary;
(iii) cannot be readily fulfilled or performed in all material
respects by the Corporation or the Subsidiary in the normal
course of business; or
(iv) are not on arm's length terms or are in any way otherwise
than in the ordinary and normal course of business, other
than those disclosed in Schedule "E".
(hh) No Fees. Neither the Corporation nor the Subsidiary is a party to
or bound by any contract or commitment to pay any royalty, license
fee or management fee except for the Material Contracts.
(ii) No Powers of Attorney. There are no outstanding powers of attorney
or other authorizations granted by the Corporation or the
Subsidiary to any third party to bind the Corporation or the
Subsidiary to any contract, agreement, liability or obligation.
(jj) Absence of Litigation, etc. There is not now in progress, pending
or, threatened or, to the best of the Corporation's knowledge,
contemplated against the Corporation or the Subsidiary, any
litigation, action, suit, investigation, claim, complaint or other
proceeding, including appeals and applications for review, by or
before any court, tribunal, government agency, commission, board,
bureau, agency or instrumentality, domestic or foreign, which
could materially and adversely affect the Corporation or the
Subsidiary, the Assets or the Business or the Corporation's
present or prospective ability to perform its obligations under
any of the Transaction Documents.
(kk) Compliance with Laws. The Business has been, and is now being,
conducted and all of the properties and assets of any and every
nature and kind whatsoever owned or leased by the Corporation and
the Subsidiary have been, and are now being, used in compliance
with all applicable Governmental Regulations of all Governmental
Authorities having jurisdiction over the Corporation and the
Subsidiary and no notices have been received that the Business is
not being conducted or that any of such properties and assets are
not being used in compliance with all applicable Governmental
Regulations of all Governmental Authorities having jurisdiction
over the Corporation and the Subsidiary;
(ll) Governmental Consents. No consent, approval or authorization of,
or declaration or filing with, any Governmental Authority on the
part of the Corporation or the Subsidiary is required for the
valid execution and delivery of this Agreement, the
18
<PAGE> 21
consummation of the transactions contemplated hereby, the valid
offer, issue, sale and delivery of the Subscribed Shares pursuant
to this Agreement, or the valid issue and delivery of Common
Shares issuable upon conversion of the Subscribed Shares. Except
for consents, approvals, filings or notices that will be timely
given or timely made at or prior to the Time of Closing, neither
the Corporation nor the Subsidiary is required to obtain any
consent, approval or authorization of, or to make any declaration
or filing with, any Governmental Authority as a condition to the
valid execution, delivery or performance of any of the Transaction
Documents or the consummation of the transactions contemplated
thereby;
(mm) Transactions with Affiliates. Except as set forth in Schedule "E"
hereto, neither the Corporation nor the Subsidiary has any
agreements, understandings and obligations involving any business
entities in which a Founder may have a material interest. Except
as set forth in Schedule "E" hereto, there exists no potential
material complications relating to any agreement previously
effected with prior employees, prior consultants or other
entities;
(nn) Insurance. The Corporation has and will carry insurance covering
its properties and business adequate and customary for the type
and scope of its properties and the Business. The Corporation has
not suffered the cancellation of any of its insurance, nor has the
Corporation been denied insurance which it has applied for or
requested;
(oo) Authorizations. There are no material governmental authorizations
or permits which are, in any manner, necessary for the Corporation
or the Subsidiary to conduct the Business as presently or
previously conducted or for the ownership and use of the Assets in
compliance with applicable Laws.
(pp) Disclosure of Information. The Corporation has made available to
the Investor and the Investor's Solicitors all documents and
information pertaining to or affecting the Business insofar as
such documents and information are known to the Corporation and
pertain to the Business and the Corporation has not withheld from
the Investor or the Investor's Solicitors or other professional
advisers any material documents or information reasonably required
to make not misleading those documents and that information made
available by the Corporation to the Investor.
(qq) No Untrue Statements. None of the foregoing representations,
warranties and statements of fact contains any untrue statement of
material fact or omits to state any material fact necessary to
make any such representation, warranty or statement not misleading
to a prospective investor seeking full information concerning the
matters which are subject of such representations, warranties and
statements.
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<PAGE> 22
(rr) Resale Restrictions. The resale restrictions pertaining to the
shares held by other shareholders in the Company are at least as
restrictive as the resale restrictions described in paragraph
3.2(f) below pertaining to the Subscribed Shares.
(ss) Life Insurance. The Corporation has obtained key-person life
insurance on each of the Founders in the amount of $1,000,000 with
the loss payee designated as the Corporation.
(tt) Employment Agreements. The Corporation or the Subsidiary has
entered into employment agreements which include devotion of time
and confidentiality provisions consistent with the terms and
conditions of the Proprietary Rights Agreement with each of the
Founders and other consultants to the Corporation other than
William Tapscott and Max Stevens-Guille.
(uu) Tax Indemnities. The Corporation has entered into agreements with
William Tapscott and Max Stevens-Guille which provide that such
persons shall indemnify the Corporation for any Governmental
Charges or Taxes assessed as a result of such persons being
considered employees of the Corporation by any relevant taxation
authority.
3.2 Representations, Warranties and Covenants of the Investor. The Investor
represents and warrants to and in favour of the Corporation as follows:
(a) Authority. The Investor has all necessary power, authority and
capacity to enter into this Agreement and, upon satisfaction or
waiver of the condition precedents set forth in Section 5.2
herein, to do all such acts and things as are required to be done,
observed or performed by it, in accordance with the terms of this
Agreement.
(b) Enforceability of Obligations. When executed and delivered, this
Agreement will constitute a valid and legally binding obligation
enforceable against the Investor in accordance with its terms
subject, however, to limitations with respect to enforcement
imposed by law in connection with bankruptcy or similar
proceedings and to the extent that equitable remedies such as
specific performance and injunction are in the discretion of the
court from which they are sought.
(c) Residence and Purchasing as Principal. The Investor is resident in
the State of Texas, U.S.A. and the Investor is purchasing the
Subscribed Shares as principal for such Investor's own account and
not for the benefit of, or on behalf of, any other person.
(d) No Advertisement. To the best of the Investor's knowledge, the
offer and sale of the Subscribed Shares is not being accompanied
by an advertisement.
(e) Exemptions from Securities Legislation. The Investor acknowledges
that, as the sale of the Subscribed Shares to the Investor is
being completed pursuant to
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<PAGE> 23
exemptions from the prospectus requirements of applicable
securities legislation in Canada, except as set forth in paragraph
4.1(i) the civil remedies provided for in such legislation are not
available to the Investor, and the Investor may not receive
information that it would be entitled to under such legislation if
no prospectus exemption was available and that the Corporation is
relieved of certain obligations which would otherwise apply under
applicable securities legislation.
(f) Resale Restrictions. The Investor understands the restrictions on
resale of the Subscribed Shares imposed by applicable securities
laws and that the certificates representing the Subscribed Shares
will bear legends denoting certain resale restrictions. The
Investor shall comply with all applicable resale restrictions. No
prospectus has been filed with respect to the Subscribed Shares or
this Agreement with any securities regulatory authority. The
Investor understands that the Subscribed Shares cannot be sold or
otherwise distributed in the absence of an exemption from the
registration and prospectus requirements of applicable provincial
securities laws.
(g) No Market. There is no public market for the Subscribed Shares,
and there is no certainty that such a market will ever develop.
There can be no assurance that the Investor will be able to sell
or dispose of the Subscribed Shares.
(h) Purchasing as Principal. The Investor is purchasing the Subscribed
Shares as principal for its own account and not for the benefit of
any other person.
(i) Primary Purpose. The Investor has not been created nor is it being
used primarily to permit the purchase of the Subscribed Shares
without a prospectus in reliance on an exemption from the
prospectus requirements of applicable securities legislation.
(j) Sophisticated Purchaser. The Investor is capable of assessing the
proposed investment as a result of the Investor's financial or
investment experience or as a result of advice received from a
registered person other than the Investor or an affiliate thereof,
and is able to bear the economic loss of its investment. The
Investor has such knowledge in financial and business affairs as
to be capable of evaluating the merits and risks of its investment
and is able to bear the economic risk of loss of its investment.
(k) Reliance on FOFI. The Investor acknowledges that the Business Plan
includes forecast statements of operations and financial results,
projections and forward- looking statements. The Investor
acknowledges that since forecasted, projected and forward-looking
information is based on assumptions regarding future events,
actual results will vary and the variations may be material.
3.3 Meaning of "To the best of the Corporation's knowledge". For the purposes of
the representations and warranties contained in Section 3.1, whenever "to the
best of the
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<PAGE> 24
Corporation's knowledge" is used, it means to the best of the knowledge of the
party or parties referred to after making such diligent inquiry as may be
reasonable under the circumstances.
3.4 Reliance. The Corporation acknowledges that the Investor is relying on the
representations and warranties set forth in Section 3.1 of this Agreement in
advancing the Subscription Funds on the Closing Date, and agrees that such
representations will be true, accurate and correct as of the Time of Closing on
the Closing Date.
3.5 Survival of Representations and Warranties. All representations and
warranties made herein will survive the delivery of this Agreement to the
parties hereto and the completion of the transactions contemplated hereby and,
notwithstanding such completion, will continue in full force and effect for the
benefit of the parties to which such representations and warranties are made
provided, however, that all representations and warranties shall terminate, and
no claim may be made or action commenced in respect of a breach thereof, after
the second anniversary of the Closing Date, other than representations and
warranties contained in Sections 3.1(w) and (x) which shall terminate on the
sixth anniversary of the Closing Date. No investigation at any time made by or
on behalf of any party hereto shall diminish in any respect whatsoever its
rights to rely on the representations and warranties set forth in this
Agreement. All statements contained in any certificate or other instrument
delivered by or on behalf of the Corporation under or pursuant to this Agreement
will constitute representations and warranties made by the Corporation
thereunder.
4. COVENANTS OF THE CORPORATION
4.1 Covenants of the Corporation. The Corporation covenants and agrees with the
Investor that:
(a) The Corporation shall comply, and the Corporation shall cause the
Subsidiary to comply, with all laws, rules, regulations and
orders, the non-compliance with which could materially and
adversely affect the Business or the performance by the
Corporation of its obligations under this Agreement or any other
agreement with the Investor, as the case may be.
(b) The Corporation will diligently observe and perform or cause to be
observed and performed all covenants to be observed or performed
under the Transaction Documents and under any other agreement
between the Corporation and the Investor, as the case may be.
(c) At any reasonable time and from time to time upon reasonable prior
notice, the Corporation shall permit a representative of the
Investor, at the reasonable expense of the Corporation, to examine
and make copies of any abstracts from its records and books of
account and to visit and inspect the Corporation and the
Subsidiary and to discuss the affairs, finances and accounts of
the Corporation and the Subsidiary with any of the directors,
officers or senior management personnel of the Corporation and the
Subsidiary.
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<PAGE> 25
(d) The Corporation shall, and shall cause the Subsidiary to, do all
things necessary to obtain, promptly renew and maintain in good
standing from time to time, all approvals, leases, licenses,
permits and consents as are required to own, develop and operate
the Business, Assets, property and undertaking and perform its
obligations under this Agreement and all other agreements between
the Corporation and the Investor, as the case may be.
(e) The Corporation shall give notice to the Investor forthwith of the
occurrence of any material litigation, proceeding or dispute
affecting the Corporation or the Subsidiary and from time to time
shall provide the Investor with all reasonable information
requested by the Investor concerning the status of any such
litigation, proceeding or dispute.
(f) The Corporation shall forthwith give notice to the Investor of any
fact which, with the giving of notice, lapse of time or otherwise
may constitute an event of default under any Material Contract or
other obligation of the Corporation which might have a material
adverse effect on the Corporation, the Business or Assets.
(g) On the Closing, the Corporation shall file all documents and take
all proceedings required to be taken by it to permit the
Subscribed Shares to be distributed to the Investor in compliance
with applicable securities legislation in Canada.
(h) The Corporation shall forthwith give notice to the Investor of any
fact which, with the giving of notice, lapse of time or otherwise
constitute a breach of the obligations of or an event of default
by, a Founder under the Proprietary Rights Agreement or Section 6
of the Securityholders' Agreement. In the event of such breach or
default, the Corporation shall take all necessary action to
enforce the rights of the Corporation under the Proprietary Rights
Agreement or Section 6 of the Securityholders' Agreement.
(i) The Corporation hereby grants to the Investor the contractual
rights of action summarized in the Business Plan.
4.2 Survival of Corporation's Covenants. The covenants of the Corporation set
forth in Section 4.l will survive the completion of the transactions
contemplated by this Agreement and will continue in full force and effect for
the benefit of the Investor for so long as the Investor remains a shareholder of
the Corporation.
4.3 Indemnity. The Corporation shall indemnify and save the Investor and the
director, officers and employees of the Investor harmless of and from any loss,
liability, claim, damage or expense (whether or not involving a third-party
claim) including reasonable legal expenses (collectively, "Damages") suffered
by, imposed upon or asserted against any of the Investor or such other person as
a result of, in respect of, connected with, or arising out of, under, or
pursuant to:
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<PAGE> 26
(a) Any failure of a Founder to perform or fulfil any covenant or
obligation of such Founder in the Proprietary Rights Agreement or
Article 6 of the Securityholders' Agreement, or any violation or
breach by a Founder of terms and conditions of the Proprietary
Rights Agreement whether arising as of the date hereof or
thereafter;
(b) Any inaccuracy of any representation or warranty given by the
Corporation contained in Section 3.1(y) or Section 3.1(bb)(vi) or
(vii) of this Agreement; and
(c) Any failure by the Corporation to perform or fulfil the covenant
of the Corporation contained in Section 4.1(h) of this Agreement.
4.4 Limitations on Indemnity.
(a) If the Investor or one of its directors, officers or employees
(the "Indemnified Party") shall become aware of any claim, demand,
proceeding or other matter (a "Claim") in respect of which the
Corporation (the "Indemnifying Party") agreed to indemnify the
Indemnified Party pursuant to Section 4.3, the Indemnified Party
shall promptly give written notice thereof to the Indemnifying
Party. Such notice shall specify with reasonable particularity (to
the extent that the information is available) the factual basis
for the Claim and the amount of the Claim, if known. If, through
the fault of the Indemnified Party, the Indemnifying Party does
not receive notice of any Claim in time to contest effectively the
determination of any liability susceptible of being contested, the
Indemnifying Party shall be entitled to set off against the amount
claimed by the Indemnified Party the amount of any Damages
incurred by the Indemnifying Party resulting from the Indemnified
Party's failure to give such notice on a timely basis.
(b) Following receipt of notice from the Indemnified Party of the
Claim, the Indemnifying Party shall have 30 days to make such
investigation of the Claim as is considered necessary or
desirable. For the purpose of such investigation, the Indemnified
Party shall make available to the Indemnifying Party the
information relied upon by the Indemnified Party to substantiate
the Claim, together with all such other information as the
Indemnifying Party may reasonably request and as is reasonably
available to the Indemnified Party. If both parties agree at or
prior to the expiration of such 30-day period (or any mutually
agreed upon extension thereof) to the validity and amount of such
Claim, the Indemnifying Party shall immediately pay to the
Indemnified Party the full agreed upon amount of the Claim,
failing which the matter shall be referred to binding arbitration
in such manner as the parties may agree or shall be determined by
a court of competent jurisdiction.
(c) No Claim shall be made pursuant to Section 4.3 until the aggregate
Damages suffered or incurred by all Indemnified Parties exceed
$300,000, at which time the Indemnified Parties may make Claims in
respect of all such Damages, including the first $300,000.
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<PAGE> 27
(d) The maximum liability of the Corporation pursuant to Section 4.3
shall not exceed $3,000,000.
5. CLOSINGS AND CONDITIONS PRECEDENT TO CLOSINGS
5.1 Closing Arrangements. Subject to the terms and conditions herein, the
transactions contemplated herein shall be closed on the Closing Date at the Time
of Closing at the offices of the Corporation's Solicitors, 1 First Canadian
Place, Suite 4400, Toronto, Ontario, or at such other place or places as may be
mutually agreed upon by the Investor and the Corporation.
5.2 Conditions Precedent of Investor to Closing. The Investor's obligation to
subscribe for and purchase the Subscribed Shares on the Closing Date is
conditional on and subject to the satisfaction of the following conditions
precedent:
(a) the board of directors of the Corporation shall have approved and
authorized the form, execution and delivery of the Transaction
Documents and the allotment and issuance of the Subscribed Shares,
the Acceleration Services Shares and the reservation of the
Conversion Shares;
(b) the Corporation shall have fully performed, observed and complied
with all of the covenants and agreements to be performed, observed
or complied with in all material respects by them on or before the
Closing Date;
(c) the Investor shall be furnished with such certificates, affidavits
or statutory declarations of the Corporation, the officers of the
Corporation, and legal opinions of the solicitors of the
Corporation as reasonably required and as the Investor or the
Investor's Solicitors may reasonably think necessary in order to
establish that the terms, covenants and conditions contained in
this Agreement to have been performed or complied with in all
material respects by the Corporation at or prior to the Time of
Closing have been performed and complied with;
(d) the Corporation shall have reconstituted the Board of Directors of
the Corporation to appoint the Investor Nominee, initially being
Ronald A. Woessner, in accordance with the Securityholders'
Agreement and the Corporation shall have entered into an indemnity
agreement with the Investor nominee in a form satisfactory to the
Investor;
(e) each of the Investor and the Investor's Solicitors shall be
satisfied, acting reasonably, with the documentation, opinions and
other certificates and instruments required to be delivered
pursuant to this paragraph.
5.3 Waiver or Termination by Investor. The conditions contained in Section 5.2
hereof are inserted for the exclusive benefit of the Investor and may be waived
in whole or in part by the Investor in writing at any time. The Corporation
acknowledges that the waiver by the Investor, as the case may be, of any
condition or any part of any condition shall constitute a waiver only of such
condition or such part of such condition, as the case may be, and shall not
constitute a waiver of any covenant, agreement, representation or warranty made
by the Corporation herein
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that corresponds or is related to such condition or such part of such condition,
as the case may be. If any of the conditions contained in Section 5.2 hereof are
not fulfilled or complied with as herein provided by the Time of Closing, the
Investor may, at its option, terminate this Agreement by notice in writing to
the Corporation and in such event the Investor shall be released from all
obligations hereunder.
5.4 Conditions Precedent of the Corporation to Closing. The Corporation's
obligation to accept the subscription of the Investor and issue the Subscribed
Shares on the Closing Date is conditional on and subject to the Investor having
tendered its Subscription Price hereunder and the representations and warranties
of the Investor set forth in Section 3.2 being true and correct in all material
respects at the Time of Closing on the Closing Date with the same force and
effect as if made at and as of such time.
5.5 Waiver or Termination by the Corporation. The conditions contained in
Section 5.4 hereof are inserted for the exclusive benefit of the Corporation and
may be waived in whole or in part by the Corporation in writing at any time. If
the conditions contained in Section 5.4 hereof are not fulfilled or complied
with as herein provided, the Corporation may, at or prior to the Time of
Closing, rescind this Agreement by notice in writing to the Investor and in such
event the Corporation shall be released from all obligations hereunder save and
except for the obligations set forth in Section 6.1.
5.6 Documents to be Delivered by the Corporation. At or before the Time of
Closing the Corporation shall execute, or cause to be executed, and shall
deliver, or cause to be delivered, to the Investor the following documents,
instruments and things, all in form and substance satisfactory to the Investor
and the Investor's Solicitors:
(a) this Agreement duly executed by the Corporation;
(b) a Certificate of Status for the Corporation from the Ministry of
Consumer and Commercial Relations pursuant to the OBCA dated
within two Business Days of the Closing Date;
(c) a certified copy of the Constating Documents as of the Closing
Date;
(d) to the Investor, a certified copy of the resolutions of the
directors of the Corporation approving the Transaction Documents
and the allotment and issuance of the Subscribed Shares;
(e) certificates representing the Subscribed Shares, all registered in
the name of the Investor as set out herein;
(f) a receipt to the Investor indicating receipt by the Corporation of
the Subscription Funds;
(g) an opinion of legal counsel for the Corporation in a form
acceptable to the Investor's Solicitors acting reasonably;
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(h) the Securityholders' Agreement, duly executed by the Corporation
and all other parties thereto except the Investor;
(i) a certified copy of the resolutions of the directors or
shareholders of the Corporation, as necessary, approving the
reconstitution of the board of directors of the Corporation and
the election or appointment, as the case may be, of the Investor's
nominee as provided for in the Securityholders' Agreement,
initially being Ronald A. Woessner; and
(j) all other documents and instruments requiring execution by the
Corporation as the Investor may reasonably request pursuant to the
terms and conditions of this Agreement.
5.7 Documents to be Delivered by the Investor at the Closing Date. At or before
the Time of Closing, the Investor shall execute, or cause to be executed, and
shall deliver, or cause to be delivered, to the Corporation the following
documents, instruments and things, all in form and substance satisfactory to the
Corporation:
(a) this Agreement duly executed by the Investor;
(b) payment of the Subscription Price as contemplated in Section 2.1
hereof;
(c) the Securityholders' Agreement, duly executed by the Investor; and
(d) all other documents and instruments requiring execution by the
Investor as the Corporation may reasonably request pursuant to the
terms and conditions of this Agreement.
6. PUBLIC ANNOUNCEMENTS
6.1 Disclosure by Corporation. The Corporation shall not, without the prior
consent of the Investor, make any disclosure regarding the existence, purpose,
scope, content, terms or conditions of this Agreement or other agreements
relating thereto save to the extent such disclosure comprises information
substantially already publicly available or unless it is necessary for the
Corporation to make such disclosure in order to comply with a statutory
obligation or the requirements of a competent government or statutory agency;
provided that, where practicable, a copy of any proposed announcement or
statement shall be furnished to the Investor 48 hours in advance of the proposed
date of publication. Nothing herein shall prevent disclosure of the terms of
this Agreement to a corporate party's directors, officers, employees or agents
or its financial, legal, accounting or other advisors.
7. NOTICES
7.1 Notices. Any notice, request or other communication required or permitted to
be given hereunder shall be in writing and shall be delivered in person
(including by courier) or transmitted by telecopier, addressed as follows:
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(a) to the Corporation:
133 King Street East
2(nd) Floor
Toronto, Ontario
M5C 1G6
Attention: Secretary
Tel. No: (416) 367-7301 Fax No: (416) 367-7333
with a copy to:
Davies, Ward & Beck LLP
44(th) Floor
1 First Canadian Place
Toronto, Ontario
M5X 1B1
Attention: Timothy H. Moran
Tel. No: (416) 863-5564 Fax No: (416) 863-0871
(b) to the Investor:
ZixIt Corporation
2711 N. Haskell Avenue
Suite 2850, LB 36
Dallas, Texas 75204
Attention: Chief Legal Officer
Tel. No: (214) 515-7300 Fax No: (214) 515-7385
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with a copy to:
Stikeman Elliott
Commerce Court West
Suite 5300
Toronto, Ontario M5L 1B9
Canada
Attention: Richard Clark
Tel. No: (416) 869-5546 Fax No: (416) 947-0866
Any such communication shall be deemed to have been given and received
on the day on which it was delivered or transmitted (or, it such day is not a
Business Day, on the next following Business Day).
Any party may at any time change its address for service from
time-to-time by giving notice to the other parties in accordance with the
foregoing provisions of this Section 7.1
8. GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, including all the Schedules hereto, and
the agreements and other documents to be delivered pursuant hereto, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes any and all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties and there are no
warranties, representations or other agreements among the parties in connection
with the subject matter hereof except as specifically set forth herein and
therein.
8.2 Waiver. The failure of a party in any one or more instances to insist upon
strict performance of any of the terms of this Agreement or to exercise any
right or privilege arising under it shall not preclude it from requiring by
reasonable notice that any other party duly perform its obligations or preclude
it from exercising such a right or privilege under reasonable circumstances, nor
shall waiver in any one instance of a breach be construed as an amendment of
this Agreement or waiver of any later breach.
8.3 Assignment. The Corporation shall not assign this Agreement or its interest
herein or any part hereof except with the prior written consent of the Investor.
8.4 No Partnership. Neither this Agreement, nor any provisions of this
Agreement, shall be construed as creating a partnership, joint venture or agency
relationship or as granting a franchise.
8.5 Further Assurances. Each of the parties hereto shall from time to time at
the request of any of the other parties hereto and without further
consideration, execute and deliver all such other additional assignments,
transfers, instruments, notices, releases and other documents and
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shall do all such other acts and things as may be necessary or desirable to
assure more fully the consummation of the transactions contemplated hereby.
8.6 Time. Time shall be of the essence of this Agreement.
8.7 Amendment. This Agreement may be amended or varied only by agreement in
writing signed by each of the parties. Unless the context otherwise so requires,
a reference to this Agreement shall include a reference to this Agreement as
amended or varied from time to time.
8.8 Severability. It is the intention and agreement of the parties that, if any
provision of this Agreement is held to be illegal, invalid or unenforceable in
whole or in part under present or future laws, that provision be curtailed to
the extent required for its validity under the applicable law and, as so
curtailed, shall be enforceable. Alternatively, the parties agree to substitute
for such provision another provision that is legal, valid and enforceable and
achieves the same or similar objectives. If this is not possible, the parties
agree that should any provision of this Agreement be held invalid or
unenforceable, such provision shall be ineffective only to the extent of such
invalidity or unenforceability, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
8.9 Remedies. All remedies, rights, undertakings, obligations or agreements of
the parties arising by law, this Agreement or otherwise shall be cumulative and
none thereof shall be in limitation of any other right, remedy, undertaking,
obligation or agreement of such party. Each party may follow any remedy to which
such party is entitled by law, this Agreement or otherwise concurrently or
successively at that party's option.
8.10 Governing Law and Attornment. This Agreement shall be exclusively governed
by and interpreted in accordance with the laws from time to time in force in
Ontario and the laws of Canada applicable thereto. This Agreement shall be
deemed to have been performed in the Province of Ontario and the courts of the
Province of Ontario shall have non-exclusive jurisdiction to entertain any
action arising under this Agreement. The parties hereto each hereby attorns to
the non-exclusive jurisdiction of the courts of the Province of Ontario.
8.11 Legal Costs. If any action or other proceeding is filed or commenced by any
party hereto against another with respect to the enforcement of this Agreement
or with respect of an alleged breach, default or misrepresentation of any of the
provisions of this Agreement, such party or parties shall, jointly and severally
if there is more than one, be entitled to recover, if successful, their
reasonable lawyers' fees on a solicitor and client basis and all related
reasonable disbursements, Taxes, costs and expenses incurred in that legal
action or proceeding, in addition to any other relief to which such party may be
entitled.
8.12 Benefit of Agreement. This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns.
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8.13 Counterparts. This Agreement may be executed by facsimile and in as many
counterparts as are necessary, each of which shall be deemed to be an original,
and shall be binding on each party when each party hereto has signed and
delivered one such counterpart. When a counterpart of this Agreement has been
executed by each party, all counterparts together shall constitute one
agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date first set forth above.
MAPTUIT CORPORATION
Per: /s/ WILLIAM K. TAPSCOTT
------------------------------
Per:
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ZIXIT CORPORATION
Per: /s/ RONALD A. WOESSNER
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Its: S.V.P.
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