1373224 ONTARIO LIMITED
September 10, 1999
Canadian Imperial Bank of Commerce
Special Loans, Head Office
Risk Management Division
Commerce Court West
Toronto, Ontario
Attention: Gerry Soucie, General Manager
Dear Sirs:
1. Offer
1.1 Irrevocable Offer to Purchase Assets
Upon and subject to the terms and conditions set forth herein,
1373224 Ontario Limited (the "Purchaser") hereby offers (hereinafter referred to
as the "Offer") to purchase from the Receiver (as hereinafter defined), all of
the right, title and interest of GalaVu Entertainment Inc. ("GalaVu") in and to
the undertaking and all of the property and assets of the Purchased Business (as
hereinafter defined) of every kind and description and wheresoever situated,
other than the Excluded Assets (the "Purchased Assets").
1.2 Bank Acting as Recipient of this Offer
This Offer is delivered to Canadian Imperial Bank of Commerce (the "Bank"), as
the primary secured creditor of GalaVu. This Offer shall be irrevocable for
acceptance by the Bank until the close of business (5:00 p.m.) on Friday,
September 10, 1999, and irrevocable for acceptance by the Receiver until the
Time of Closing (as hereinafter defined) after which, unless accepted in writing
by the Receiver, this offer shall be revoked and shall then be null and void.
1.3 Acceptance Adopts this Offer
The valid acceptance by the Receiver of this offer shall constitute
an agreement between the Receiver and the Purchaser and the Bank shall have no
liabilities, obligations and duties hereunder save as may be specifically
provided herein.
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2. Interpretation
2.1 Definition
In this Offer, unless the subject matter or context is inconsistent
therewith, the following terms shall have the following meanings:
"Accepted Assets" has the meaning ascribed to that term in section
4.9 hereof;
"Accounts Receivable" means all debts, accounts and claims for
monetary amounts which are, or are accruing, due or owing to GalaVu,
on the Closing Date, excluding all cash of GalaVu on deposit with
the Bank;
"Agreement" means the agreement arising out of the acceptance of
this Offer and all amendments made thereto by written agreement
executed by each of the parties hereto;
"BIA" means the Bankruptcy and Insolvency Act (Canada);
"Business Day" means a day other than a Saturday, Sunday or
statutory holiday in Ontario;
"Claims" means all losses, damages, expenses, liabilities (whether
accrued, actual, contingent, latent or otherwise), claims and
demands of whatever nature and kind including, without limitation,
all legal fees and costs on a solicitor and client basis;
"Closing Date" means September 13, 1999 or such other date as may be
agreed to in writing between the Vendor and the Purchaser;
"Encumbrance" means any encumbrance, lien, charge, hypothec, pledge,
mortgage, title retention agreement, or security interest of any
nature;
"Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended, or any similar Federal statute, and the rules and
regulations of the SEC promulgated thereunder, all as the same shall
be in effect at the time;
"Excluded Assets" mean GalaVu's right, title or interest in or to
the items described in Schedule "F" attached hereto or as otherwise
excluded pursuant to the Offer or which may be designated as
Excluded Assets by notice from the Purchaser to the Vendor within 45
days after the Closing Date;
"Inventory" means all inventories of GalaVu wheresoever situated
including, without limiting the generality of the foregoing, all
finished goods, work in progress and raw materials;
"Occupancy and Indemnity Agreement" means the occupancy and
indemnity agreement in substantially the form attached hereto as
Schedule "G";
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"Permitted Encumbrances" means the interest of the lessor in
machinery, equipment and vehicles leased by GalaVu for use in the
Purchased Business;
"Purchased Assets" has the meaning set out in sections 1. 1 and 3.
1;
"Purchased Business" means the business currently carried on by
GalaVu and which includes providing pay for view movies in motels
and hotels and software and hardware development;
"Receiver" means that person appointed by a Court of competent
jurisdiction as the receiver or receiver and manager of the
property, assets and undertaking of GalaVu, including an interim
receiver appointed pursuant to Section 47 of the BIA, in its
capacity as receiver or interim receiver and not in any personal
capacity.
"SEC" shall mean the Securities and Exchange Commission, or any
other federal agency then administering the Securities Act;
"Securities Act" shall mean the Securities Act of 1993, as amended,
or any similar Federal statute, and the rules and regulations of the
SEC promulgated thereunder, all as the same shall be in effect at
the time;
"Shares" means the common shares in the capital of Networks North
Inc. ("Networks") to be delivered to the Vendor pursuant to section
3.2(iii);
"Time of Closing" means 2:00 p.m. (Toronto time) on the Closing
Date, or such other time on the Closing Date as the Vendor and the
Purchaser may mutually determine; and
"Vendor" means the Receiver.
2.2 Headings
The division of this Offer into articles and sections and the
insertion of headings are for convenience of reference only and will not affect
the construction or interpretation of this Offer or of the Agreement. The terms
"hereof", "hereunder" and similar expressions refer to this Offer and Agreement
and not to any particular article, 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 articles and sections
are to articles and sections of this Offer and Agreement.
2.3 Number, Gender and Persons
In this Agreement, words importing the singular number only shall
include the plural and vice versa, words importing gender shall include all
genders and words importing persons shall include individuals, corporations,
partnerships, associations, trusts, unincorporated organizations, governmental
bodies and other legal or business entities of any kind whatsoever.
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2.4 Entire Agreement
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral. There are
no conditions, covenants, agreements, representations, warranties or other
provisions, express or implied, collateral, statutory or otherwise, relating to
the subject matter hereof except as herein provided.
2.5 Time of Essence
Time shall be of the essence of this Agreement.
2.6 Applicable Law
This Agreement shall be construed, interpreted and enforced in
accordance with, and the respective rights and obligations of the parties shall
be governed by, the laws of the Province of Ontario and the federal laws of
Canada applicable therein, and each party irrevocably and unconditionally
submits to the non-exclusive jurisdiction of the courts of such province and all
courts competent to hear appeals therefrom.
2.7 Successors and Assigns
This Agreement shall enure to the benefit of and shall be binding on
and enforceable by the parties and, where the context so permits, their
respective successors and permitted assigns. Except as explicitly provided
herein, neither the Vendor nor the Purchaser may assign any of its rights or
obligations hereunder without the prior written consent of the other party.
2.8 Severability
If any provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
such determination shall not impair or affect the validity, legality or
enforceability of the remaining provisions hereof, and each provision is hereby
declared to be separate, severable and distinct.
2.9 Amendments and Waivers
No amendment or waiver of any provision of this Agreement shall be
binding on either party unless consented to in writing by such party. No waiver
of any provisions of this Agreement shall constitute a waiver of any other
provision of this Agreement nor shall any waiver constitute a continuing waiver
unless otherwise provided.
2.10 Currency
Unless otherwise expressly stated herein, all references to dollar
amounts in this Agreement are to Canadian dollars.
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3. Purchase and Sale
3.1 Purchased Assets
Without limiting the generality of the provisions of Section 1.1
hereof, the Purchased Assets include the right, title and interest of GalaVu and
the Receiver, if any, in and to the following:
(a) all leasehold improvements at all of GalaVu's premises to which
GalaVu is entitled;
(b) all machinery and equipment and all vehicles, tools, spare parts,
handling equipment, furniture, fixtures, furnishings, supplies and
accessories relating to or used in the Purchased Business;
(c) all leases of machinery and equipment relating to or used in the
Purchased Business in respect of which GalaVu is lessee;
(d) the Inventory;
(e) all prepaid expenses and security deposits, including any amounts
paid or held by supplier(s) of cable television, but excluding all
security deposits held by any of GalaVu's landlords;
(f) all new and unused production, shipping and packaging supplies
relating to or used in the Purchased Business;
(g) all Accounts Receivable, including all coins and bills or other
medium of exchange wherever located;
(h) all Accepted Assets to which GalaVu is a party;
(i) all licences, registrations, permits and quotas required to carry on
the Purchased Business in its usual and ordinary course;
(j) all copyrights, registered trade-marks, trade-mark licences, trade
names, and patents; all unregistered trade-marks, trade-mark
licenses, trade names, logos and all patent applications,
trade-marks registration applications owned, used or made by GalaVu
in connection with the Purchased Business including, without
limitation, the right to use the name "GalaVu";
(k) all computer equipment, operating system software, tools and
utilities, application software and databases including, without
limitation, those providing accounting, inventory, as well as any
other management information systems of the Purchased Business,
including without limitation, all source code and object code,
system documentation, instruction and use manuals and any other
written material pertaining to the foregoing, and all intellectual
property rights applicable thereto,
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including, without limitation, all copyrights, licences and
proprietary information relating thereto;
(l) the goodwill of the Purchased Business including, without limiting
the generality of the foregoing:
(i) the exclusive right in favour of the Purchaser to represent
itself as carrying on the Purchased Business in continuation
of and in succession to GalaVu; and
(ii) all records of sales, customer lists and supplier lists of or
used in connection with the Purchased Business, including,
without limiting the generality of the foregoing, inventory
records, customers' inventory records, if any, accounts
receivable records, records pertaining to customers'
requirements, customer contracts, customer invoices,
suppliers' invoices and expense invoices; and
(m) all shares in the capital of GalaVu Entertainment Corp., GalaVu
International Corp., and any other shares owned by GalaVu;
(n) all other property and assets owned by GalaVu or to which it is
entitled in connection with the Purchased Business, but excluding
the Excluded Assets.
3.2 Purchase Price
The purchase price payable to the Vendor for the Purchased Assets
(the "Purchase Price"), shall be paid to the Vendor at the Time of Closing and
shall consist of (i) the sum of $1,200,000; (ii) the note of the Purchaser, in
the form attached as Schedule "A" (the "Note") secured by a general security
interest in all of the Purchaser's present and after-acquired assets, property
and undertaking in the form attached as Schedule "B" (the "GSA") and a guarantee
from Networks of the obligations of the Purchaser, recourse for which is limited
to a pledge of all of the shares of the Purchaser, in the form of the guarantee
and pledge agreement attached as Schedule "C" hereto (each of the foregoing
being collectively hereinafter referred to as the "Security"); and (iii) 100,000
Shares, issued from the treasury of Networks.
(a) At or prior to the delivery of this Offer, the Purchaser shall have
delivered to Blake, Cassels & Graydon (the "Escrow Agent"), (i) a
certified cheque payable to the Escrow Agent, in trust, in the
amount of $1,200,000, (ii) the Note, (iii) a certificate executed by
the Chief Executive Officer of Networks certifying that the 100,000
Shares referred to in paragraph 3.2(iii) have been validly issued
pursuant to duly authorized resolutions of the board of directors of
Networks as fully paid and non-assessable shares in the capital of
Networks free of any lien, encumbrance, or security interest, and
that the issuance and allotment thereof pursuant to paragraph
3.2(iii) hereof has been registered in the books and records of
Networks, and (iv) the Security (items (i), (ii), (iii), and (iv)
being collectively referred to as the "Escrow Funds").
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(b) The Escrow Agent shall hold the cash portion of the Escrow Funds in
an interest bearing account or instrument pending the Time of
Closing, to be distributed in accordance with the terms hereof.
(c) Upon receipt by the Escrow Agent of a certificate executed and
delivered by both the Vendor and the Purchaser, substantially in the
form of the certificate attached as Schedule "D" hereto, certifying
that the conditions of closing set out in section 5 hereof have been
satisfied or waived, the Escrow Agent shall, at the Time of Closing,
without further instructions: (i) pay the amount of the Purchase
Price to the Vendor on account of the Purchase Price including the
delivery of the Note, and the Security; and (ii) pay to the
Purchaser any interest earned upon the cash portion of the Escrow
Funds prior to the Time of Closing.
(d) Upon receipt by the Escrow Agent, at any time following the Time of
Closing of a certificate delivered by the Vendor and the Purchaser,
substantially in the form of the certificate attached as Schedule
"E" hereto, certifying that the conditions of closing set out in
section 5 hereof have not been satisfied or waived, the Escrow Agent
shall forthwith return the Escrow Funds, and any interest earned
upon the cash portion thereof, to the Purchaser, without setoff or
deduction.
(e) In the event that following the Time of Closing, the Escrow Agent
has not received either of the certificates referred to in
paragraphs 3.2(c) or 3.2(d) hereof, the Escrow Agent shall forthwith
make an application to a Judge of the Ontario Superior Court of
Justice, in Toronto, for an Interpleader Order, and shall name both
the Vendor and the Purchaser as respondents to such application and
serve them with notice of all steps and proceedings in connection
therewith.
3.3 Taxes
(a) The Purchaser will be liable for and pay as required by law, in
addition to the Purchase Price, all taxes, duties and fees
whatsoever which are required to be paid by a purchaser in
connection with the transaction contemplated herein, together with
all duties, registration fees or other charges properly payable by
the Purchaser upon or in connection with the conveyance or transfer
of the Purchased Assets, including, without limitation, all taxes
payable pursuant to the Excise Tax Act (Canada), An act respecting
the Quebec sales tax and amending various fiscal legislation,
Ontario retail sales tax and any other tax, duty, levy or fee
payable in any other jurisdiction. Notwithstanding the foregoing,
the Purchaser may provide the Vendor with suitable exemption
certificates indicating the Purchaser's entitlement to an exemption
or exemptions from any tax, which exemption certificates, if in form
and substance acceptable to the Vendor, acting reasonably, will be
accepted by the Vendor in lieu of the Purchaser's obligations
insofar as such tax is concerned. The Purchaser will indemnify and
hold the Vendor, and its employees, officers, directors and agents,
harmless against liability, claim, expense, costs, penalty or loss
suffered by the Vendor by virtue of the Purchaser's failure to pay
any such taxes, duties and fees, whether arising from a reassessment
or otherwise, or by virtue of the Vendor's acceptance of a
certificate of
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exemption; or by virtue of the making of the joint GST and QST
elections referred to in paragraph (b) of this section and will
provide the Vendor with evidence of all payments made hereunder.
(b) Notwithstanding the foregoing, the Vendor and Purchaser shall
jointly make the elections provided for under subsection 167(1.1) of
the Excise Tax Act (Canada) and under section 75 of the Act
respecting Quebec sales tax so that no GST or QST will be payable in
respect of the transactions contemplated herein. The Vendor and
Purchaser shall jointly complete the election forms (form GST-44 and
QST form VD-75) in respect of such elections and the Purchaser shall
file such elections with its GST or QST return, as appropriate, for
the first reporting period in which the GST and QST would, in the
absence of such elections, become payable in connection with the
transactions contemplated herein.
(c) The foregoing provisions of this section 3.3 shall apply mutatis
mutandis to all other applicable federal, provincial and territorial
taxation legislation, with the intent that the Vendor and the
Purchaser shall cooperate fully so as to minimize the taxes
applicable to or payable in connection with the acquisition by the
Purchaser of the Purchased Assets.
3.4 Allocation of Purchase Price
The Purchaser shall be entitled to allocate the Purchase Price among
the Purchased Assets as the Purchaser may determine.
3.5 Repurchase of Accounts Receivable
(a) The Purchaser covenants that following the Closing Date, it will use
its commercially reasonable best efforts to collect the Accounts
Receivable. In the event that 90 days following the Closing Date
(the "Adjustment Date"), the Purchaser shall have collected less
than $1,200,000 in respect of the Accounts Receivable pertaining to
the period ending August 31, 1999 (the "Pre-September Accounts
Receivable"), the Purchaser shall have the right, at the Purchaser's
option, to require the Vendor to pay to the Purchaser the amount of
the deficiency between $1,200,000 and the amount collected by the
Purchaser, and upon payment thereof, the Purchaser shall transfer,
sell and assign to the Vendor all of the Purchaser's right, title
and interest in and to the uncollected Pre-September Accounts
Receivable, together with, or if impractical, the rights of access
to, all books, records and documents evidencing or relating to such
Pre-September Accounts Receivable. Upon the completion of the said
assignment, the Vendor shall be entitled to receive all amounts
subsequently collected in respect of the Pre-September Accounts
Receivable and the Purchaser shall hold any amounts received by it
separate and apart from its other property and subject to a trust in
favour of the Vendor. In the event that the amount collected by the
Purchaser as of the Adjustment Date in respect of the Pre-September
Accounts Receivable, exceeds $1,200,000, the Purchaser shall
forthwith pay such excess amount to the
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Vendor and shall hold such excess amount separate and apart from its
other property and subject to a trust in favour of the Vendor.
(b) The Purchaser agrees to pay to the Vendor as soon as possible
following the Closing Date and in any event by the Adjustment Date,
(i) an amount equal to all expenses paid by GalaVu through its
accounts with CIBC prior to the Closing Date and which relate to the
operations of the Company from September 1, 1999 onwards, other than
payments relating to employees and, other than pre-paid expenses
recorded in the balance sheet of GalaVu as of August 31, 1999 and
(ii) an amount equal to the payments, if any, made by GalaVu through
its accounts with CIBC for film royalties payable for the months of
July and August, 1999.
(c) Any payment required to be made by the Vendor to the Purchaser on
the Adjustment Date in respect of uncollected Pre-September Accounts
Receivable shall be made without set-off, discount, holdback or
deduction except for payments, if any, required to be made by the
Purchaser to the Vendor under paragraph 3.3, this paragraph 3.5 or
in respect of paragraph 4.8 or the Occupancy and Indemnity
Agreement. Similarly, payments required to be made by the Purchaser
to the Vendor under paragraph 3.3, this paragraph 3.5 and under 4.8
or the Occupancy and Indemnity Agreement shall be made without
set-off, discount, holdback or deduction other than amounts payable
by the Vendor to the Purchaser under this paragraph.
(d) Notwithstanding anything to the contrary or the acceptance of this
Offer by the Receiver, the Bank shall be liable to the Purchaser in
respect of the Vendor's obligations to the Purchaser contained in
this paragraph 3.5.
3.6 Right to Audit
The Vendor may, at its own expense, audit the books and records and
financial statements and accounts of the Purchaser in order to confirm the
amount collected by the Purchaser in respect of the Accounts Receivable.
4. Representations, Warranties and Covenants
4.1 Receiver's Representations and Warranties
By acceptance of this Offer the Receiver represents and warrants to
the Purchaser and hereby acknowledges and confirms that the Purchaser is relying
on such representations and warranties in connection with the purchase by it of
the Purchased Assets that:
(a) the Receiver has been duly appointed as receiver or interim receiver
of the property, assets and undertakings of GalaVu pursuant to s. 47
of the B1A with the full right, power and authority to enter into
this Agreement, perform its obligations hereunder and convey all the
right, title and interest of the Receiver in and to the Purchased
Assets;
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(b) the Receiver is not, and as at the Time of Closing, the Receiver
will not be, a non-resident of Canada within the meaning of Section
116 of the Income Tax Act (Canada);
(c) the Receiver has not done any act to encumber or dispose of the
Purchased Assets; and
(d) GalaVu Entertainment Inc. is registered for purposes of Part IX of
the Excise Tax Act (Canada) and Title I of the Act respecting the
Quebec sales tax.
4.2 Survival of the Receiver's Representations, Warranties and Covenants
(a) The representations and warranties of the Vendor set forth in
Section 4.1 will survive the completion of the sale and purchase of
the Purchased Assets herein provided for and, notwithstanding such
completion, will continue in full force and effect for the benefit
of the Purchaser for a period of two years from the date of this
Agreement;
(b) The covenants of the Vendor set forth in this Agreement will survive
the completion of the sale and purchase of the Purchased Assets
herein provided for and, notwithstanding such completion, will
continue in full force and effect for the benefit of the Purchaser
for a period of two years from the date of this Agreement; and
(c) The Purchaser acknowledges that, in entering into this Agreement,
the Receiver is acting solely in its capacity as receiver of the
property, assets and undertaking of GalaVu and any liability of the
Receiver to the Purchaser is limited to the amount of the Purchase
Price received by the Receiver.
4.3 Purchaser's Representations and Warranties
The Purchaser represents and warrants to the Vendor and hereby
acknowledges and confirms that the Vendor is relying on such representations and
warranties in connection with the sale by it of the Purchased Assets that:
(a) the Purchaser is a corporation duly incorporated, organized and
subsisting under the laws of the Province of Ontario;
(b) the Purchaser has good and sufficient power, authority and right to
enter into and deliver this Agreement and to complete the
transactions to be completed by the Purchaser contemplated hereunder
and the Purchaser has taken all necessary corporate action to
authorize the entering into and performance of this Agreement;
(c) this Agreement constitutes a valid and legally binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with
its terms subject to applicable bankruptcy, insolvency,
reorganization and other laws of general application limiting the
enforcement of creditors' rights generally and to the fact
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that specific performance is an equitable remedy available only in
the discretion of the court;
(d) At the Time of Closing, the Shares:
(i) are validly issued pursuant to duly authorized resolutions of
the board of directors of Networks as fully paid and
non-assessable shares in the capital of Networks free of any
lien, charge, encumbrance, security interest or adverse claim;
(ii) are listed on the NASDAQ ("NASDAQ"); and
(iii) are restricted securities within the meaning of Rule 144
promulgated under the Securities Act and may not be sold
pursuant to Rule 144 for at least 12 months and thereafter may
be sold only pursuant to Rule 144 or to a registration
statement filed under the Securities Act or other applicable
exemption under the Securities Act;
(e) Purchaser has previously delivered or caused to be delivered to
Vendor, complete and correct copies of all reports, statements and
registration statements (including annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
proxy statements) filed by Networks with the SEC since August 31,
1998 (the "Networks SEC Documents").
(f) Networks is not a reporting issuer for the purposes of Canadian
provincial securities legislation;
(g) The Purchaser is registered for purposes of Part IX of the Excise
Tax Act (Canada) and Title I of the Act respecting the Quebec sales
tax.
(h) The Purchaser is acquiring hereunder all or substantially all of the
property that can reasonably be regarded as being necessary for it
to carry on the business of GalaVu as a business.
4.4 The Purchaser covenants that it will use reasonable efforts, for a period of
twelve months from the Closing Date, to cooperate with the Receiver, to provide
such access to books and records relating to the Purchased Business and to such
employees who may have become employees of the Purchaser but who may have
knowledge of such books and records relating to the Purchased Business as may be
reasonably required by the Receiver in order to fulfil its obligations as
Receiver, at no expense to the Vendor within the first 90 days following the
Date of Closing.
4.5 Survival of Purchaser's Representations, Warranties and Covenants
(a) The representations and warranties of the Purchaser set forth in
Section 4.3 will survive the completion of the sale and purchase of
the Purchased Assets herein provided for and, notwithstanding such
completion, will continue in full force and
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effect for the benefit of the Vendor for a period of two years from
the date of this Agreement; and
(b) The covenants and indemnifications of the Purchaser set forth in
this Agreement will survive the completion of the sale and purchase
of the Purchased Assets herein provided for and, notwithstanding
such completion, will continue in full force and effect for the
benefit of the Vendor for a period of two years from the date of
this Agreement.
4.6 "As Is, Where Is"
The Purchaser acknowledges that the Vendor is selling and the
Purchaser is purchasing the Purchased Assets on an "as is, where is" and
"without recourse" basis as they shall exist on the date of this Agreement. The
Purchaser further acknowledges that it has entered into this Agreement on the
basis that neither GalaVu nor the Receiver has guaranteed or will guarantee
title to the Purchased Assets that the Purchaser has conducted such inspections
of the condition and title to the Purchased Assets as it deems appropriate and
has satisfied itself with regard to these matters. No representation, warranty
or condition is expressed or can be implied as to title, encumbrance,
description, fitness for purpose, environmental compliance, merchantability,
condition or quality, or in respect of any other matter or thing whatsoever
concerning the Purchased Assets, or the right of the Vendor to sell or assign
same save and except as expressly provided for in this Agreement. Without
limiting the generality of the foregoing, any and all conditions, warranties or
representations expressed or implied pursuant to the Sale of Goods Act (Ontario)
do not apply hereto and have been waived by the Purchaser. The description of
the Purchased Assets contained in this Agreement is for the purpose of
identification only and no representation, warranty or condition has or will be
given by the Vendor concerning the accuracy of such description.
4.7 Third Party Consents
Until such consent is obtained nothing in this Agreement shall
constitute an assignment or attempted assignment of any rights of GalaVu which
are not assignable without the consent of another person if such written consent
has not been obtained. Upon receipt of such consent the applicable rights shall
be deemed to be assigned by this Agreement without any further formality. The
Vendor shall use its reasonable best efforts to assist the Purchaser in
obtaining the consent of any third party to any contract where such consent is
required, provided that the parties acknowledge that the Purchaser shall have
primary responsibility for obtaining such consent and shall diligently proceed
to do so.
Unless and until any such consent is obtained and an assignment of
any such rights is effected, the Vendor shall hold such rights in trust for the
sole benefit of the Purchaser and, in this regard:
(a) the Vendor shall remit to the Purchaser all proceeds and receipts
received by the Vendor in connection with such rights forthwith upon
receipt thereof; and
(b) the Vendor will take such action as may be reasonably required to
enable the Purchaser to administer such rights, including the
ability to enforce such rights.
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If, after two years from the Closing Date, the required consent
cannot be obtained in respect of any such rights, then such rights shall be
deemed to form part of the Excluded Assets.
4.8 Occupation
In order to permit the orderly removal of the Purchased Assets by
the Purchaser and to assist the Purchaser in maintaining the continuity of the
Purchased Business, the Receiver shall permit the Purchaser to have access to
all of the premises leased or occupied by GalaVu for a period not to exceed 45
days from the closing date, on the terms and conditions set out in the Occupancy
and Indemnity Agreement, to be executed and delivered prior to the Time of
Closing.
4.9 Accepted Assets
The Accepted Assets are all of the Purchased Assets other than the
Excluded Assets listed in Schedule "F" delivered by the Purchaser to the Vendor
prior to the Time of Closing.
5. Conditions
5.1 Conditions for the Benefit of the Purchaser (Time of Closing)
(a) The sale by the Vendor and the purchase by the Purchaser of the
Purchased Assets are subject to the following conditions, which are
for the exclusive benefit of the Purchaser and which are to be
performed or complied with at or prior to the Time of Closing:
(i) the representations and warranties of the Vendor set forth in
Section.4.1 will be true and correct at the Time of Closing
with the same force and effect as if made at and as of such
time;
(ii) the Vendor will have performed or complied with all of the
terms, covenants and conditions of this Agreement to be
performed or complied with by it at or prior to the Time of
Closing;
(iii) the Receiver shall have obtained an order of the Ontario
Superior Court of Justice in substantially the form set out in
Schedule "H" hereto, approving the transactions contemplated
herein, and vesting in the Purchaser the right, title and
interest of GalaVu and the Receiver, if any, in and to the
Purchased Assets, free and clear of the right, title and
interest of any other person other than Permitted Encumbrances
(the "Vesting Order");
(iv) no order shall have been made in favour of, and no action or
proceeding in Canada shall have been commenced by, any person,
firm, company, government, governmental agency, regulatory
body or agency to enjoin, restrict or prohibit the purchase
and sale of the Purchased Assets, in whole or in part,
contemplated hereby or to stay the Vesting Order; and
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(v) the Receiver and the Purchaser shall have entered into the
Occupancy and Indemnity Agreement.
(b) In case any term or covenant of the Vendor or condition to be
performed or complied with for the benefit of the Purchaser at or
prior to the Time of Closing has not been performed or complied with
at or prior to the Time of Closing, the Purchaser, without limiting
any other right that the Purchaser has, may at its sole option,
either:
(i) rescind this Agreement by notice to the Vendor, and in such
event the Purchaser will be released from all obligations
hereunder and require that the Vendor immediately execute and
deliver to the Purchaser the certificate in the form attached
hereto as Schedule "E"; or
(ii) waive compliance with any such terms, covenant or condition in
whole or in part on such terms as may be agreed upon without
prejudice to any of its rights of rescission in the event of
non-performance of any other term, covenant or condition in
whole or in part; and, if the Purchaser rescinds this
Agreement pursuant to Section 5. 1 (b)(i), the Vendor will
also be released from all obligations hereunder.
5.2 Conditions for the Benefit of the Vendor (Time of Closing)
(a) The sale by the Vendor and the purchase by the Purchaser of the
Purchased Assets are subject to the following conditions, which are
the exclusive benefit of the Vendor and which are to be performed or
complied with at or prior to the Time of Closing:
(i) the representations and warranties of the Purchaser set forth
in Section 4.3 will be true and correct at the Time of Closing
with the same force and effect as if made at any as of such
time;
(ii) the Purchaser will have performed or complied with all the
terms, covenants and conditions of this Agreement to be
performed or complied with by the Purchaser at or prior to the
Time of Closing;
(iii) no order shall have been made in favour of, and no action or
proceeding in Canada shall have been commenced by any person,
firm, company, government, governmental agency, regulatory
body or agency to enjoin, restrict or prohibit the purchase
and sale of the Purchased Assets contemplated hereby or to
stay the Vesting Order;
(iv) the Purchaser shall deliver to the Vendor a certificate
executed by the Chief Executive Officer of Networks as to the
representations and warranties contained in Section 4.3(d),
(e) and (f) , and the covenant of Networks in the form
attached as Schedule "K" hereto;
(v) the Receiver shall have obtained the Vesting Order; and
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(vi) the Purchaser and the Receiver shall have entered into the
Occupancy and Indemnity Agreement.
(b) In the case any term or covenant of the Purchaser or condition to be
performed or complied with for the benefit of the Vendor at or prior
to the Time of Closing has not been performed or complied with at or
prior to the Time of Closing, the Vendor, without limiting any other
right that the Vendor has, may at its sole option, either:
(i) rescind this Agreement by notice to the Purchaser, and in such
event the Vendor will be released from all obligations
hereunder; or
(ii) waive compliance with any such term, covenant or condition in
whole or in part on such terms as may be agreed upon without
prejudice to any of their rights or rescission in the event of
non-performance of any other term, covenant or condition in
whole or in part.
6. Closing Arrangements
6.1 Closing
(a) The sale and purchase of the Purchased Assets will be completed at
the Time of Closing at the offices of Blake, Cassels & Graydon, 23rd
Floor, Commerce Court West, Toronto, Ontario or such other place as
the Vendor and Purchaser may agree.
(b) At the Time of Closing, provided all of the conditions set out in
Sections 5.1 and 5.2 have been satisfied or waived by the party so
entitled at or prior to such Time of Closing:
(i) the Vendor will deliver to the Purchaser bill(s) of sale in
form and substance satisfactory to the Vendor and the
Purchaser acting reasonably in substantially the form attached
as Schedule "I" hereto transferring to the Purchaser the
right, title and interest of GalaVu and the Receiver, if any,
in and to the Accepted Assets, and a copy of the Vesting
Order;
(ii) the Purchaser will deliver to the Vendor the certificates
referred to in section 5.2(a)(v) hereof and attached hereto as
Schedule "J", a certified cheque or bank draft for provincial
retail sales tax (or suitable purchase exemption certificates
in respect thereof) and goods and services tax payable in
connection with the purchase of the Purchased Assets,; and
(iii) the Escrow Agent shall deliver the Escrow Funds to the Vendor
upon receipt of the executed certificate in the form of
certificate attached as Schedule "D" hereto.
6.2 Delivery of Share Certificate
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(a) The Purchaser hereby agrees to deliver to the Receiver at the time
of Closing or as soon as possible thereafter, and in any event no
later than 7 days following the Closing Date, a share certificate in
the name of the Receiver or as it may direct in writing representing
the 100,000 Shares referred to in paragraph 3.2(iii).
7. Additional Post-Closing Obligations
7.1 On or before the 45th day following the Closing Date, except as otherwise
provided in the Occupancy and Indemnity Agreement the Purchaser shall deliver to
the Vendor, a schedule, in the form attached hereto as Schedule "F", identifying
those Excluded Assets, which the Purchaser does not agree to purchase from the
Vendor (the "Excluded Assets"). Upon delivery by the Purchaser to the Vendor of
the Schedule of Excluded Assets pursuant to section 7.1 hereof, the Purchaser
shall be deemed to have disclaimed, waived and abandoned all claims, rights,
title and interest in or to the Excluded Assets and the Receiver shall have no
further obligations to the Purchaser with respect thereto.
7.2 In the event that the Purchaser does not deliver to the Vendor a schedule of
Excluded Assets in the form attached hereto as Schedule "F" within 45 days
following the Closing Date, the Purchaser will be deemed to have agreed to
purchase all of the Purchased Assets.
8. Vesting Order
If there should be any appeal or motion for leave to appeal to set
aside the Vesting Order or to vary or amend its terms:
(a) the Purchaser shall have the option, in its sole discretion, to
require that the Vendor defend such appeal(s) at the Vendor's own
expense; and
(b) the Vendor shall indemnify and save the Purchaser harmless from all
reasonable legal expenses incurred by the Purchaser in responding to
any such appeals, provided that the Vendor and Purchaser hereby
agree that the Vendor shall have carriage of the response to any
such appeals, the Purchaser shall provide to the Vendor copies of
all accounts for legal expenses incurred by the Purchaser in
response to such appeals and assign to the Vendor the Purchaser's
right to have such accounts assessed.
Notwithstanding anything to the contrary or the acceptance of this
Offer by the Receiver, the Bank shall be liable to the purchaser in respect of
the Vendor's obligations to the Purchaser under this paragraph 8.
8.2 General
8.3 Further Assurances
Each of the Vendor and the Purchaser will from time to time execute
and deliver all such further documents, assignments and instruments and do all
acts and things as any other
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party may, either before or after the Closing Date, reasonably require to
effectively carry out or better evidence or perfect the full intent and meaning
of this Agreement.
8.4 Time of the Essence
Time is of the essence of this Agreement.
8.5 Cost
Each of the parties hereto will pay their respective legal and
accounting costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed pursuant hereto and any other costs and expenses whatsoever and
howsoever incurred.
8.6 Public Announcements
No press release, public announcement or other similar notice
concerning the sale and purchase of the Purchased Assets may be made prior to
the Time of Closing by either of the Vendor or the Purchaser without the prior
consent and approval of the Vendor and the Purchaser, (save as may be required
by Networks in accordance with its obligations to or under the Securities Act,
NASDAQ or the SEC), provided that the Vendor and the Bank shall have the right
to review and approve any such press release, announcement or other notice prior
to the Purchaser or Networks issuing the same to the public.
8.7 Notices
Any demand, notice or other communication to be given in connection
with this Agreement will be given in writing and will be given by personal
delivery or by electronic means of communication addressed to the recipient as
follows:
if to the Purchaser:
1373224 Ontario Limited
14 Meteor Drive
Toronto, Ontario
M9W 1A4
Attention: The President
Facsimile: (416) 675-8838
With a copy to:
Gowling, Strathy & Henderson
Suite 4900
Commerce Court West
Toronto, Ontario
M5L 1J3
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Attention: R. Douglas Kneebone and Richard Epstein
Facsimile: (416) 862-7661
if to the Receiver:
Arthur Andersen Inc.
1900-79 Wellington Street
P.O. Box 29, TD Centre
Toronto, Ontario
M5K 1B9
Attention: Brian Deazeley
Facsimile: (416) 947-7788
if to the Escrow Agent
Blake, Cassels & Graydon
Box 25
Commerce Court West
Toronto, Ontario
M5L 1A9
Attention: David J. Kee
Facsimile: (416) 863-2653
or to such other address, individual or electronic communication number as may
be designated by notice given by a party to the others. Any demand, notice or
other communication given by personal delivery will be conclusively deemed to
have been given on the day of actual delivery thereof and, if given by
electronic communication, on the day of transmittal thereof if given during the
normal business hours of the recipient and on the Business Day during which such
normal business hours next occur if not given during such hours on any day.
8.8 Capacity of Vendor
The Purchaser acknowledges that any Receiver which executes this
Agreement does so solely in its capacity as Receiver, and not in its personal
capacity.
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8.9 Rights and Obligations of the Escrow Agent
The only obligation of the Escrow Agent hereunder shall be to
disburse the Escrow Funds and interest thereon in the manner herein provided and
the Escrow Agent is expressly relieved of any obligation in respect of the
propriety of any claim made or the validity or genuineness of any document
submitted to it, provided the same shall in the Escrow Agent's reasonable
opinion be in the form provided for such documents in the schedules attached
hereto.
Yours very truly,
1373224 ONTARIO LIMITED
By:_________________________________
Name:
Title:
Networks North Inc., for valuable consideration, hereby covenants to perform,
carry out and deliver all other acts, documents, and agreements to be delivered
or performed by Networks as set forth in the foregoing offer.
Dated this day of September, 1999.
NETWORKS NORTH INC.
By:_________________________________
Name:
Title:
Blake, Cassels & Graydon confirms that it has received the Escrow Funds from the
Purchaser, and accepts the responsibilities of the Escrow Agent as set forth
above, and agrees to perform the same in accordance with their terms.
Dated this day of September, 1999.
BLAKE, CASSELS & GRAYDON
By:_________________________________
Name:
Title:
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The undersigned accepts the Offer set forth herein this 10th day of September,
1999.
CANADIAN IMPERIAL BANK OF
COMMERCE
By:_________________________________
Name: Gerry L. Soucie
Title: General Manager
The undersigned as Receiver accepts the Offer set forth herein this day of
September, 1999.
____________________________________