Exhibit 10.1
THIS AGREEMENT made as of the 25th day of April, 2003
B E T W E E N :
DVOD NETWORKS INC.,
a corporation incorporated under the laws of the Province of
Ontario,
herein called the "Purchaser"
- and -
CHELL GROUP CORPORATION,
a corporation incorporated under the laws of New York,
herein called the "Vendor"
THIS AGREEMENT WITNESSETH that, in consideration of the mutual
covenants herein contained and subject to the terms and conditions hereinafter
set out, the parties hereto agree as follows:
SECTION 1
INTERPRETATION
1.01 DEFINITIONS
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith:
(a) "Agreement" means this agreement to, inter alia, purchase and sell
shares of GalaVu Entertainment Network Inc. (the "Corporation"),
and the expressions "above", "below", "herein", "hereunder",
"hereof", and similar expressions refer to this Agreement.
(b) "Ancillary Agreements" means all additional documents contemplated
in the Agreement, including those agreed to by the parties hereto
and delivered in connection with the Agreement.
(c) "Assets" means the Assets of the Corporation, which are more
particularly described in Schedule 8 attached hereto.
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(d) the "Business" means the business presently and heretofore carried
on by the Corporation together with all goodwill associated with
such activity.
(e) "Closing Date" means the 25th day of April, 2003, or such other
date as may be mutually agreed to by the parties.
(f) "Disclosure Letter" means a letter from the Vendor to the
Purchaser disclosing information required by this agreement dated
the 25th day of April, 2003 and attached hereto as Schedule 12.
(g) "Effective Date Financial Statements" has the meaning attributed
to it in section 4.02.
(h) "Effective Date" means the close of business on the 31st day of
March, 2003.
(i) "Long-Term Contract" means a contract binding the Corporation,
obligating it to spend in excess of Ten Thousand Dollars
($10,000.00) per year, and which cannot be terminated on
three-months notice or less.
(j) "Financial Statements" means the internally prepared financial
statements of the Corporation as at year-end, August 31, 2002 and
at January 31, 2003, which statements are attached hereto as
Schedule 1. For greater certainty, the statements include a
balance sheet and income statement only and do not include a
statement of cash flow or notes to the financial statements.
(k) "Purchased Shares" means all of the issued and outstanding shares
in the capital of the Corporation owned by the Vendor.
(l) "Time of Closing" means the time on the Closing Date when the
closing of the purchase and sale herein provided for shall be
completed.
1.02 CANADIAN DOLLARS
All dollar amounts referred to in this Agreement are in Canadian funds.
1.03 EXTENDED MEANINGS
In this Agreement, words importing the singular number include the
plural and vice versa and words importing the masculine gender include the
feminine and neuter genders.
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1.04 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof, except as specifically set forth herein. No supplement,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
1.05 HEADINGS
Section headings are not to be considered part of this Agreement and
are included solely for convenience of reference and are not intended to be full
or accurate descriptions of the contents thereof.
1.06 SCHEDULES
The following are the schedules attached to and incorporated in this
Agreement by reference and are deemed to be a part hereof:
Schedule 1...............Financial Statements
Schedule 2...............List of Contracts
Schedule 3...............List of Employment Agreements, Pension
or Profit Sharing Plan and/or Union Agreement
Schedule 4...............Intellectual Property
Schedule 5...............List of Leases
Schedule 6...............Intentionally Deleted
Schedule 7...............List of Insurance Coverage
Schedule 8...............List of Assets
Schedule 9...............Indemnity Agreement
Schedule 10..............Litigation
Schedule 11..............Agreements Regarding Federal and Provincial
Taxes
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SECTION 2
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE VENDOR
2.01 REPRESENTATIONS, WARRANTIES AND COVENANTS
The Vendor hereby represents and warrants to the Purchaser as follows
in this section and acknowledges that the Purchaser is relying on these
representations and warranties in entering into this Agreement. Notwithstanding
the above, it is specifically agreed that the Vendor has made such
representations and warranties based on statements made and information provided
to it by Brad Schroeder ("Schroeder"), acting in his capacity as an officer of
the Corporation. In the event that Schroeder was aware, after due inquiry, of
the inaccuracy of any of the representations and warranties given by the Vendor
and related to GalaVu hereunder, the Vendor shall not be liable to the Purchaser
for any such breach of any representation or warranty:
(a) PURCHASED SHARES
The Vendor beneficially owns the Purchased Shares and at the Time of
Closing, the Purchased Shares, the Business and the Assets of the Business
shall, except with respect to any statutory liens for unpaid taxes or required
withholdings (including without limiting the foregoing, unpaid goods and
services taxes and retail sales taxes), be free of all mortgages, charges, liens
and other encumbrances (other than any encumbrances specifically assumed and
agreed in writing by the Purchaser) and no person, firm or corporation has or
shall have any agreement or option or right capable of becoming an agreement for
the purchase from the Vendor of any of the Purchased Shares or the Business or
Assets of the Business except as provided herein, and the Vendor is and will be
entitled to sell and assign the Purchased Shares as provided in this Agreement.
(b) CANADIAN RESIDENCE
The Vendor is a non-resident of Canada for the purposes of Part 1 of
the Income Tax Act (Canada) as amended.
(c) DUE INCORPORATION AND CAPITALIZATION
(i) The Corporation is a corporation validly existing and in
good standing under the OBCA with the corporate power and
authority to conduct the Business, to own and lease its
respective properties and assets, to enter into this
Agreement and the Ancillary Agreements to which it is a
party or is to become a party pursuant to the terms hereof
and to perform its obligations hereunder and thereunder.
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(ii) The Corporation has been duly incorporated and organized
under the laws of the Province of Ontario and its authorized
capital consists of unlimited common shares of which only
one hundred (100) common shares (and no more) have been
issued and are presently outstanding as fully paid and
non-assessable;
(iii) There are no preferred or preference shares of the
Corporation either authorized or issued;
(iv) There are no outstanding subscriptions, options, rights,
warrants or other agreements or commitments obligating the
Corporation to sell or issue any additional shares of any
class or any securities convertible into any shares of any
class except such subscriptions, options, rights, warrants,
agreements or commitments as may hereafter be consented to
in writing by the Purchaser pursuant to this Agreement;
(v) The Vendor is validly existing and in good standing under
the jurisdiction of its incorporation, with the corporate
power and authority to conduct its business and to own the
Purchased Shares.
(vi) Except as contained in the minute book of the Corporation,
the Articles of Incorporation incorporating the Corporation
have not been amended and the Corporation has not authorized
delivery or delivered to the Ministry of Consumer and
Commercial Relations any application for Articles of
Amendment as of the date hereof, and the Corporation is
up-to-date in all filings with the Ministry of Consumer and
Commercial Relations, the Ontario Ministry of Revenue, and
Revenue Canada (Taxation).
(vii) The Vendor has the capacity, power and authority to execute,
deliver, and perform its obligations under this Agreement
and the Ancillary Agreements to be executed and delivered by
it in connection with the transactions contemplated hereby
and thereby. The Vendor has taken all corporate or other
action necessary to authorize the execution and delivery of
this Agreement and such other Ancillary Agreements. This
Agreement creates, and, when such other Ancillary Agreements
are executed and delivered, such other Ancillary Agreements
shall create, legal, valid, and binding obligations of the
Vendor, enforceable against the Vendor in accordance with
their respective terms. The Vendor has executed and
delivered this Agreement after having obtained such
independent legal and other professional advice as the
Vendor deemed necessary or appropriate, on a fully informed
basis, and without duress or coercion.
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(viii) Neither the execution and delivery by the Vendor of this
Agreement and of the Ancillary Agreements to be executed and
delivered by the Vendor connection with the transactions
contemplated hereby or thereby, nor the consummation by the
Vendor of the transactions contemplated hereby or thereby,
will result in a breach or violation of any of the terms or
provisions of, or constitute a default under (whether after
notice or lapse of time or both):
(i) any statute, rule or regulation applicable to the
Corporation or the Vendor, as the case may be; or
(ii) the constating documents, by-laws or resolutions of the
Corporation or the Vendor, as the case may be, which
are in effect at the date hereof.
(ix) Neither Corporation nor the Vendor is subject to, or a party
to, any charter or by-law restriction, any law, any claim,
any shareholders agreement, voting trust, contract or
instrument, any encumbrance or any other restriction of any
kind or character which would prevent the consummation of
the transactions contemplated by this Agreement or
compliance with the terms, conditions and provisions of this
Agreement and the Ancillary Agreements, or the continued
operation of the Business after the date hereof on
substantially the same basis as heretofore operated, or
which would restrict the ability of the Purchaser to acquire
any of the Purchased Shares, except for the approval of the
board of directors and shareholders of the Corporation to
the transfer of the Purchased Shares to the Purchaser.
(x) Except for such distributions and dividends as are reflected
in the Financial Statements, since the Effective Date
Financial Statements, the Corporation, has not, directly or
indirectly, declared, paid or otherwise become obligated to
make any dividend or other distribution on any of its
securities, redeemed, purchased or otherwise acquired any of
its securities of any class or agreed to do any of the
foregoing.
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(d) BUSINESS
(i) The Corporation has the corporate power to own its property
and to carry on the Business.
(ii) The Corporation is duly qualified to do business and is in
good standing in each jurisdiction in which the nature of
the Business or the property owned or leased by it makes
such qualification necessary.
(e) REMUNERATION OF OFFICERS, ETC
Except in respect of amounts owing with respect to contracted personal
services as described in the Disclosure Letter or employment services arising in
the ordinary course, both of which are set out on the Effective Date Financial
Statements, there are no outstanding payments owing by the Corporation to its
officers, directors, shareholders or employees or to any person or company not
dealing at arm's length as such term is defined in the Income Tax Act (Canada)
with it.
(f) CONTRACTS
The Corporation has no outstanding Long Term Contracts or other
contracts except as are disclosed in Schedules 2, 3, 4, 5 and 7 hereto.
(g) CONTRACTS
(i) Schedule 2 contains a list of all written or oral material
contracts, agreements, leases, client contracts, commission
agreements, purchase orders, instruments, commitments,
understandings and collective bargaining agreements, to
which the Corporation is a party or which the Corporation
has assumed, other than those described in other schedules.
Except with respect to late payments on contractual
arrangements, which late payments are described in Schedule
2, the Corporation is not in breach or violation of, or in
default under, nor is there a valid basis for a claim that
it is in breach or violation of, or default under, any
agreement and no event has occurred including the execution
of this Agreement and the completion of this Agreement,
which, with the lapse of time or the giving of notice, or
both, would constitute such a breach, violation or default
by the Corporation thereunder. To the knowledge of the
Vendor, no other party is in breach or violation of, or in
default under, any such agreement.
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(ii) Except as set forth on Schedule 2 the Corporation is not a
party to any material written:
(A) franchise or distributorship agreement;
(B) contract or commitment obligating the Corporation to
sell or supply products or to perform services other
than those which were entered into in the ordinary
course of business consistent with past practice;
(C) contract or commitment limiting or restraining the
Corporation from engaging or competing in any lines of
business with any person, firm, corporation, or other
entity;
(D) contract relating to the Corporation not made in the
ordinary course of business (excluding this Agreement)
consistent with the past practices of the Corporation;
(E) representative or sales agency contract or commitment;
(F) contract or commitment for the borrowing of money or
other agreement or arrangement for a line of credit;
(G) contract or commitment for the employment of any
officer, individual employee or agent;
(H) contract with an unexpired term of one (1) year or
more;
(I) continuing contract or commitment for the purchase of
materials, supplies, equipment or services;
(J) bonus, pension, profit sharing, deferred compensation,
retirement, hospitalization, insurance or similar plan
or practice, formal or informal, in effect with respect
to employees or others;
(K) contract or commitment for the purchase of any fixed or
capital Assets, other than contracts or commitments
involving an aggregate expenditure of not more than
$5,000.00;
(L) contract or commitment for the sale of any fixed or
capital Assets having a value in excess of $5,000.00;
(M) management agreement;
(N) contract or commitment to make any gift of any of its
property other than donations in the ordinary and usual
course;
(O) guarantee or other similar obligation; or
(P) contract, agreement or other instrument which
materially adversely affects its business or condition
or any of its Assets or properties or is materially
burdensome to it.
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(h) EMPLOYMENT AND PENSION AGREEMENTS
Save and except as set forth in Schedule 3 hereto, the Corporation is
not a party to any written employment or pension agreement or profit-sharing
plan or union agreement nor or there any written or unwritten bonus arrangements
with employees. Details of the employment arrangements for all employees were
delivered to the Purchaser in the Disclosure Letter.
(i) LEASES
(i) Schedule 5 lists and briefly describes all leases, subleases
or agreements pursuant to which the Corporation is lessee or
lessor (whether by assignment or otherwise) or holds,
manages or operates any property real or personal, owned by
any third party or pursuant to which any property owned by
the Corporation is held, operated or managed by a third
party.
(ii) The Corporation is the holder of all the leasehold estates
purported to be granted by the real property instruments
described in Schedule 5 (including leasehold estates
assigned to it) and is the owner, subject to landlord and
tenant laws, of all fixtures, improvements, equipment,
machinery, and other personal property on those leasehold
estates free and clear of all mortgages, security interests,
pledges, liens, conditional sales agreements, encumbrances,
claims, restrictions or charges of any kind or character
except as provided in such leases. Each of the aforesaid
real property and personal property leases is in full force
and effect and constitutes the legal, valid and binding
obligation of the respective parties thereto (including any
assignees thereof), enforceable in accordance with its terms
and grants the leasehold estate it purports to grant. The
Corporation has in all material respects performed all the
obligations required to be performed by each to date under
such leases and agreements, subject to any accounts payables
showing on the Effective Date Financial Statements.
(j) LITIGATION
Save and except as described in Schedule 10 there are no actions, suits
or proceedings (whether or not purportedly on behalf of the Corporation) pending
or threatened against or affecting the Corporation at law or in equity or before
or by any federal, provincial, municipal or other governmental department,
commission, board, bureau, agency, Court or instrumentality, domestic or
foreign, which action, suit or proceeding involves the possibility of any
judgment against or liability of the Corporation. The Vendor is not aware of any
existing ground on which any such action, suit or proceeding might be commenced
with any reasonable likelihood of success.
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(k) BANKING
The Corporation's bank accounts are listed in the Disclosure Letter,
and it has no other bankers or financing arrangements in place.
(l) LIABILITIES
Except as disclosed in the Financial Statements, the Effective Date
Financial Statements, the Schedules hereto, the Disclosure Letter and those
accruing in the ordinary course of business from the Effective Date to the
Closing Date, there are no liabilities of the Corporation.
(m) TAXES
Save and except as disclosed in the Schedules hereto, the Disclosure
Letter, and on the Effective Date Financial Statements and those accruing but
not yet due in the ordinary course of business between the Effective Date and
the Closing Date, the Corporation has paid all taxes exigible from it or for the
collection of which they are responsible under the laws of Canada or any other
jurisdiction, in the case of taxes on income, in respect of all fiscal years
ended prior to the Time of Closing for which such taxes were due and payable.
(n) LICENSES AND PERMITS
(i) To the best of knowledge of the Vendor, the Corporation
holds all licenses, permits and authorizations from all
regulatory authorities having jurisdiction necessary to
enable it to carry on the Business.
(ii) No Authorization of any governmental entity is required to
be obtained by the Vendor or the Corporation for the
execution and delivery of this Agreement and the Ancillary
Agreements or the consummation of the transactions
contemplated hereby and thereby.
(o) NO CHANGE IN THE TITLE TO ASSETS
The Corporation has good and marketable title to all Assets of the
Corporation free of all liens, charges or encumbrances, and which Assets are
more particularly described in Schedule 8.
(p) RECORDS AND DATA
(i) All information, records and data furnished to the
Purchaser, its representatives and counsel pursuant to this
Agreement are, to the best of the Vendor's knowledge and
belief, accurate in all material respects;
(ii) The books and records of the Corporation fairly and
correctly set out and disclose in all material respects, in
accordance with generally accepted accounting principles,
the financial position of the Corporation as at the date
hereof and all material financial transactions have been
accurately recorded in such books and records; and
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(iii) To the knowledge of the Vendor, the corporate records of the
Corporation are complete and accurate, and all corporate
proceedings and actions reflected therein have been
conducted or taken in compliance with all applicable laws
and with the articles and by-laws of the Corporation and
without limiting the generality of the foregoing, (i) the
minute books contain complete and accurate minutes of all
meetings and written resolutions of the directors and
shareholders held since the date of incorporation of the
Corporation, and all such meetings and resolutions were duly
called and held or passed, as the case may be; (ii) all acts
and proceedings of the Shareholders, directors and officers
of the corporation have been duly approved or ratified by
the directors or the shareholders in compliance with
applicable laws; (iii) the share certificate books, register
of shareholders and register of transfers are complete and
accurate, and all such transfers have been duly completed
and approved and any exigible tax payable in connection with
the transfer of any of their securities has been duly paid;
and (iv) the registers of directors and officers are
complete and accurate and all former and present directors
and officers were duly elected or appointed as the case may
be.
(q) GUARANTEES
The Corporation will not, as of the Closing Date be a party to any
agreement of guarantee, indemnification or assumption of the obligations of a
third party, or other like commitment, including endorsements or other
contingent liabilities.
(r) INSURANCE
(i) The Corporation has its properties adequately insured at
replacement cost value against loss or damage by insurable
hazards or risks to the extent that such properties are
usually insured by companies operating properties of similar
nature. All such insurance is part of a blanket insurance
policy for all of the Vendor's companies and will have to be
replaced by the Purchaser on the Closing Date.
(ii) Annexed hereto as Schedule 7 is a true and complete list of
all insurance policies maintained by the Corporation on its
properties, Assets, businesses or personnel as of the date
hereof and true and complete copies of the most recent
inspection reports, if any, received from insurance
underwriters as to the condition of such properties and
Assets; to the best of knowledge of the Vendor, the
Corporation is not in default with respect to any of the
provisions contained in any such insurance policy and
neither has it failed to give any notice or present any
claim under any such insurance policy in due and timely
fashion.
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(s) INTELLECTUAL PROPERTY
Schedule 4 attached hereto lists and contains a description of:
(A) all patents, patent application and registrations,
trade marks, trade mark applications and registrations,
copyrights, copyright applications and registrations,
trade names and industrial designs, domestic or
foreign, owned or used by the Corporation relating to
the operation of the Business;
(B) all trade secrets, know-how, inventions and other
intellectual property owned or used by the Corporation
relating to the Business, and
(C) all material computer systems and application software,
including without limitation all documentation relating
thereto and the latest revisions of all related object
and source codes therefore, owned or used by the
Corporation relating to the Business,
(all of the foregoing being hereinafter collectively called the "Intellectual
Property")
(ii) The Corporation has good and valid title to all of the
Intellectual Property, free and clear of any and all liens,
charges or encumbrances, except in the case of any
Intellectual Property licensed to the Corporation as
disclosed in Schedule 4. Complete and correct copies of all
agreements whereby any rights in any of the Intellectual
Property have been granted or licensed to the Corporation
have been provided to the Purchaser. No royalty or other fee
is required to be paid by the Corporation to any other
person in respect of the use of any of the Intellectual
Property except as provided in such agreements delivered to
the Purchaser and, except in the case of any Intellectual
Property licensed to the Corporation as disclosed in
Schedule 4. The Corporation has protected its rights in the
Intellectual Property in the manner and to the extent
described in Schedule 4. Except as indicated in Schedule 4,
the Corporation has the exclusive right to use all of the
Intellectual Property and has not granted any license or
other rights to any other person in respect of the
Intellectual Property. Complete and correct copies of all
agreements whereby any rights in any of the Intellectual
Property have been granted or licensed by the Corporation to
any other person have been provided to the Purchaser.
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(iii) Except as disclosed in Schedule 4 there are no restrictions
on the ability of the Corporation or any successor to or
assignee from the Corporation to use and exploit all rights
in the Intellectual Property. For greater certainty, the
Corporation currently shares an accounting license with the
Vendor and it affiliates and will need to acquire its own
NVision software to continue use of the current accounting
system. All statements contained in all application for
registration of the Intellectual Property were true and
correct as of the date of such applications. Each of the
trade marks and trade names included in the Intellectual
Property is in use.
(iv) The conduct of the Business and the use of Intellectual
Property does not infringe, and the Corporation has not
received any notice, complaint, threat or claim alleging
infringement of, any patent, trade mark, trade name,
copyright, industrial design, trade secret or other
Intellectual Property or propriety right of any other
person, and the conduct of the Business does not include any
activity which may constitute passing off.
(v) To the best of the Vendor's knowledge, the computer systems,
including hardware and software are free from viruses and
the Corporation has taken, and will continue to take, all
steps and implement all procedures necessary to ensure, so
far as reasonably possible, that such systems are free from
viruses and will remain so until Closing Time.
(t) TAX RETURNS
Except in respect of income tax filings for the August 31, 2002 year
end, the Corporation has duly and timely filed all tax returns required to be
filed by it, and has except as disclosed on the Effective Date Financial
Statements, the Schedules hereto and the Disclosure Letter and those accruing
but not yet due in the ordinary course of business between the Effective Date
and the Closing Date, paid all taxes shown to be due and payable on such
returns, and has paid all assessments and re-assessments, and all other taxes,
charges, penalties, interest and fines due and payable by it on or before the
date hereof and which are claimed by any governmental authority to be due and
owing and adequate provision has been made on the books of the Corporation for
taxes payable for the current period for which tax returns are not yet required
to be filed; there are no agreements, waivers or other arrangements providing
for any extension of time with respect to the filing of any tax by or payment of
any tax, governmental charge or deficiency against the Corporation, and to the
best of the Vendor's knowledge and belief there are no actions, suits,
proceedings, investigations or claims now threatened or pending against the
Corporation with respect to taxes, governmental charges or assessments, or any
other matters under discussion with any governmental authority relating to
taxes, governmental charges or assessments asserted by any such authority; the
Corporation has withheld from payments made to any of its respective officers,
directors, former directors and employees, the amount of all taxes, including
but not limited to income tax, and other deductions required to be withheld
therefrom and has paid the same to the proper tax or other receiving officers
within the time required under any applicable tax legislation.
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(u) CARRYING ON BUSINESS TO CLOSING
The Vendor shall cause the Business to be carried on in the ordinary
course between the date of execution and delivery of the Agreement and the
Closing Date and undertake to notify the Purchaser of any event or occurrence
during such period which might reasonably be considered to have a materially
adverse effect on the Business or the Corporation.
(v) REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING DATE
All representations and warranties contained in this Section 2 shall be
true on and as of the Closing Date with the same effect as if made on and as of
such date except due to changes in circumstances between the date hereof and the
Time of Closing of which the Vendor shall have advised the Purchaser in writing
at or before the Time of Closing, excepting any changes arising in the ordinary
course of business.
(w) REPRESENTATIONS, WARRANTIES & COVENANTS SURVIVING CLOSING DATE
The representations, warranties and covenants of the Vendor contained
in Section 2 hereof, shall survive the Closing Date and notwithstanding the
closing of the transaction herein provided for, shall continue in full force and
effect for a period of twenty seven (27) months from the Time of Closing, except
(i) with respect to Tax Matters which shall survive until all periods of
re-assessment shall have expired with no appeal filed or if an appeal is filed,
until a final determination of the said appeal (In this Agreement Tax Matters
shall be understood to mean: income taxes, both Federal and Provincial, sales
tax, Goods and Services Tax, Employer Health Tax, duties and excise tax) and
(ii) any claim for indemnification based on a breach of Sections 2.01 (a) or
2.01 (c) (i), (ii), (iii), (iv) and (vi) or on fraud, which shall have no
restriction and shall survive indefinitely).
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(x) SUBSIDIARIES AND INVESTMENTS.
(a) The Corporation has no subsidiaries.
(b) The Corporation does not have any agreements of any nature
to establish or acquire any subsidiary or to acquire or
lease any other business operations and the Corporation has
not made or agreed to make any loan to or investment in any
other Person. Neither the Corporation nor the Vendor is a
party to any joint venture or other similar agreement or
arrangement that involves any sharing of profits of the
Business or the operation of an enterprise that is similar
to or competitive with the Business.
(y) FINANCIAL MATTERS.
Subject to Section 1.01(j), the Financial Statements properly reflect
all properties, assets and liabilities of the Corporation as a whole as of the
dates of such Financial Statements. The Financial Statements fairly present the
results of operation and the financial position of the Corporation as of the
respective dates thereof in conformity with GAAP consistently applied with the
principles and procedures employed in prior periods.
(z) UNDISCLOSED LIABILITIES.
Except as set forth in this Agreement, the Financial Statements, the
Effective Date Financial Statements or the Vendor Disclosure Letter, there are
no liabilities or obligations (which would exceed $10,000 in the aggregate),
secured or unsecured (whether absolute, accrued, contingent, or otherwise, and
whether due or to become due), of a nature required by GAAP to be reflected in a
balance sheet of the Corporation except such liabilities and obligations that
have arisen or been incurred in the ordinary course of business since the
Effective Date Financial Statements and except for any liabilities that may have
arisen as a result of the assignments of indebtedness owed by the Corporation
pursuant to Sections 5.01 (k) or (r).
(aa) ENVIRONMENTAL COMPLIANCE.
Except as set forth in the Vendor Disclosure Letter, the Corporation,
nor, to the knowledge of the Vendor, any prior owner, user, controller, or
occupant, nor any tenant, subtenant, prior tenant, or prior subtenant has ever
used Hazardous Materials on, from, or affecting the assets of the Corporation or
any facility, site, area, or property owned or leased by the Corporation, in any
manner that materially violates any Canadian law, regulation, governmental
restriction, order, judgment, or decree governing the use, storage, treatment,
transportation, manufacture, handling, production, or disposal of Hazardous
Materials. "Hazardous Materials" include any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or related materials defined under applicable Canadian federal and
provincial environmental laws. The term "material" includes asbestos,
polychlorinated biphenyls, kerosene, and fuel oil. The term "release" means any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing into the environment. The term
"environment" means any surface or groundwater water supply, land, surface, or
subsurface strata or the ambient air.
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(bb) BROKER'S OR FINDER'S FEES.
The Corporation has not authorized any person to act as broker or
finder or in any other similar capacity in connection with the transactions
contemplated by this Agreement in any manner that may or will impose liability
on the Purchaser, the Corporation or the Business.
(cc) BANK ACCOUNTS AND POWERS OF ATTORNEY.
The Vendors Disclosure Letter contains an accurate list showing (i) the
name of each bank in which the Corporation has an account or safe deposit box
and the names of all persons authorized to draw thereon or to have access
thereto; and (ii) the names of any persons holding powers of attorney from the
Corporation and a summary statement of the terms thereof.
(dd) FULL AND FINAL DISCLOSURE.
The information contained in the documents, certificates and written
statements (including this Agreement and the schedules and exhibits hereto)
furnished to the Purchaser by or on behalf of the Corporation with respect to
the Corporation (including the Business and the results of operations, financial
condition and prospects of the Corporation) for use in connection with this
Agreement or the transactions contemplated by this Agreement is true and
complete in all material respects and does not, to the best of the knowledge of
the Vendor after conducting an inquiry which a reasonably prudent person would
make under the circumstances, omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to the Corporation or the
Vendor that has not been disclosed to the Purchaser by the Corporation or the
Vendor in writing that would be reasonably likely to cause the Purchaser not to
enter into this Agreement and the transactions contemplated herein had such fact
been disclosed to the Purchaser.
(ee) INDEMNIFICATION IN FAVOUR OF THE PURCHASER.
The Vendor shall indemnify and save the Purchaser harmless of and from
any claim or loss suffered by, imposed upon or asserted against the Purchaser as
a result of, in respect of, connected with or arising out of, under or pursuant
to:
17
(a) any failure of the Vendor to perform or fulfill any covenant
of the Vendor under this Agreement or any Ancillary
Agreement; and
(b) any breach or inaccuracy of any representation or warranty
given by the Vendor contained in this Agreement or in any
Ancillary Agreement; and
(c) any action, claim or proceeding initiated by a shareholder
of the Vendor in respect of the transactions contemplated by
this Agreement.
SECTION 3
REPRESENTATIONS, WARRANTIES & COVENANTS OF PURCHASER
3.01 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
The Purchaser represents, warrants and covenants as provided in this
Section 3:
(a) EXECUTION AND DELIVERY OF AGREEMENT
The execution and delivery of this Agreement by the Purchaser and the
consummation of the transactions contemplated hereby do not constitute a breach
or a default under the terms of the charter, by-laws or other constating
documents of the Purchaser, nor under any agreement to which the Purchaser is a
party or by which it is bound, and upon closing will be duly and validly
authorized by all necessary corporate action and will be legally binding upon
the Purchaser in accordance with its terms.
(b) DOCUMENTS AND INFORMATION
Until immediately after the Time of Closing, all documents and
information received by the Purchaser from the Vendor and the Corporation, and
their respective auditors and solicitors, shall be treated by the Purchaser as
confidential information and will not be disclosed to others by the Purchaser,
except to its solicitors, auditors and bankers, provide that they have agreed to
be bound by the confidentiality obligations contained herein.
(c) NON-RESIDENT
The Purchaser is not a non-resident of Canada for the purposes of Part
1 of the Income Tax Act (Canada) as amended.
SECTION 4
PURCHASE OF SHARES
4.01 PURCHASE PRICE FOR PURCHASED SHARES
Based upon the representations, warranties, undertakings and covenants
set forth in Sections 2 and 3, the Purchaser shall purchase and the Vendor shall
sell to the Purchaser the Purchased Shares for One Dollar ($1.00).
18
4.02 EFFECTIVE DATE FINANCIAL STATEMENTS
(a) Effective Date Financial Statements shall mean the financial
statements for the Corporation as at the Effective Date, which statements shall
be internally prepared by the Corporation in accordance with Generally Accepted
Accounting Principles, subject to the limitations in subsection 1.01(i), and
consistent with previous years Financial Statements.
(b) In the event that a matter arises with respect to the Effective
Date Financial Statements which the parties can not agree upon, then this matter
shall be referred to an independent accountant agreeable to both parties and the
determination of such accountant shall be final and biding on the parties
hereto.
4.03 DELIVERY OF SHARES
Subject to the fulfillment of all the terms and conditions hereof
(unless waived as herein provided), at the Time of Closing, the Vendor shall
deliver to the Purchaser a certificate or certificates representing all the
Purchased Shares, duly endorsed for transfer, and will cause the transfer of
such shares to be duly and regularly recorded on the books of the Corporation in
the name of the Purchaser. All such share certificates shall be fully
transferable on the books of the Corporation and endorsed for transfer or in a
manner satisfactory to counsel for the Purchaser. The delivery of such shares
shall be against receipt in full of the consideration specified in Section 4
hereof.
SECTION 5
COMPLETION OF PURCHASE
5.01 PURCHASER'S CONDITIONS
The obligation of the Purchaser to complete the purchase of the
Purchased Shares contemplated herein, is subject to the fulfillment of each of
the following conditions at or before the Time of Closing (or such other date as
may be provided) unless waived in writing by the Purchaser:
(a) The Vendor shall have executed, delivered and performed all
agreements on its part to be performed hereunder; all representations and
warranties contained in Section 2 shall be true at the Time of Closing, without
any changes permitted under this Section, except such changes as may have been
approved in writing by the Purchaser; and at the Time of Closing the Purchaser
shall have been furnished with a certificate from the Vendor to the effect that
such representations and warranties are true without changes as aforesaid.
19
(b) No litigation or proceeding shall be pending or threaten to
restrain, set aside or invalidate the transaction contemplated by, or to obtain
substantial damages in respect of, this Agreement or the Vendor's ownership of
the Purchased Shares, or operation of the Business.
(c) The Vendor shall have delivered to the Purchaser resignations of
all directors and officers of the Corporation, and shall have caused the
election of a director or directors designated by the Purchaser.
(d) All necessary steps and corporate proceedings, as approved by
counsel for the Purchaser, shall have been taken to permit the Purchased Shares
to be duly and regularly transferred to the Purchaser.
(e) The Purchaser shall have received an opinion of counsel for the
Vendor in a form satisfactory to counsel for the Purchaser including matters
such as:
i) the due incorporation and organization of the Corporation;
ii) the authorized and issued capital of the Corporation;
iii) all the issued and outstanding shares of the Corporation
having been duly issued and allotted as fully paid and
non-assessable;
iv) confirming that there is nothing in the corporate charter
documents prohibiting the Corporation from owning its Assets
and conduct its business;
v) all necessary corporate action and proceedings have been
taken to permit the due and valid transfer at the Time of
Closing from the Vendor to the Purchaser of the Purchased
Shares; and
vi) the obligations of the Vendor in the Share Purchase
Agreement and any ancillary agreements are legal, valid and
binding obligations of the Vendor enforceable against the
Vendor in accordance with its terms.
(f) There shall be no loans outstanding between the Corporation and the
Vendor or persons with whom the Corporation or the Vendor is not dealing at
arm's length;
(g) There shall have been no substantial damage by fire or other hazard
to the physical Assets of the Corporation. In the event such damage has
occurred, the Purchaser shall have the option of completing the transaction
contemplated herein and directing the Vendor to cause the Corporation to accept
the proceeds of the Insurance policies covering such fire or loss or of
rescinding this Agreement.
20
(h) The Vendor shall have delivered to the Purchaser an Indemnity
Agreement in the form attached as Schedule 9.
(i) There shall have been no change in the legal and beneficial
ownership of the material Assets owned by the Corporation since the execution of
this agreement excluding inventory sold or substituted and account receivables
collected in the ordinary course of business.
(j) The Purchaser shall have confirmed in writing that the Vendor may
continue to use the occupied space at 14 Meteor Drive currently used by the
Corporation for seven (7) months rent-free. It is understood that if the Vendor
vacates such premises and give 30 days' notice to the Corporation, the
Corporation will also be required to vacate the premises without any
compensation for any remaining rent free period.
(k) The Vendor shall have facilitated the assignment of the
indebtedness and security held by 488605 Ontario Limited and Ruth Margel in the
Corporation in exchange for payment from the Purchaser to them of One Hundred
and Seventy Thousand Dollars ($170,000.00) to be delivered to them on Closing by
the Purchaser.
(l) certified copies of (i) the charter documents and extracts from the
by-laws of the Vendor and the Corporation relating to the execution of
documents; (ii) all resolutions of the shareholders, the board of directors or
any duly authorized committee thereof, of the Vendor and the Corporation
approving the entering into of this Agreement and the Ancillary Agreements and
the completion of all transactions contemplated hereunder and thereunder; and
(iii) all other instruments evidencing necessary action of the Vendor and the
Corporation and of authorizations, if any, with respect to such matters.
(m) certificates of an officer of the Vendor certifying the names and
true signatures of its officers authorized to sign this Agreement and the
Ancillary Agreements to be delivered hereunder.
(n) a certificate of status, compliance, good standing or like
certificate with respect to the Corporation and the Vendor issued by appropriate
government officials of the jurisdiction of its incorporation.
21
(o) evidence that all necessary steps and proceedings as approved by
counsel for the Purchaser, acting reasonably, to permit all of the Purchased
Shares to be fully and regularly transferred to the Purchaser have been taken.
(p) duly executed resolutions of the Vendor in its capacity as a
shareholder of the Corporation, authorizing the completion of all related
transactions and the transfer of the shares thereof to the Purchaser.
(q) evidence satisfactory to the Purchaser that all encumbrances other
than permitted encumbrances have been discharged or released as of the Closing
Date.
(r) the Purchaser shall have completed an assignment of all of the
indebtedness (and security) owed by the Corporation to NTN Interactive Network
Inc. and Chell Group Corporation for $1.00 in each case, on terms satisfactory
to the Purchaser.
If any such conditions shall not be fulfilled at the Time of Closing (or such
other date as may be provided), the Purchaser may rescind this Agreement by
notice to the Vendor and in such event the Purchaser and Vendor shall be
released from all obligations hereunder.
SECTION 6
VENDOR'S CONDITIONS
6.01 Vendor's Conditions
The obligations of the Vendor to complete the transactions contemplated
by this Agreement shall be subject to the satisfaction of, or compliance with,
at or before Closing, each of the following conditions precedent (each of which
is hereby acknowledged to be inserted for the exclusive benefit of the Vendor
and may be waived by the Vendor in whole or in part):
(a) Truth and Accuracy of Representations of the Purchaser at
Closing Time - All of the representations and warranties of
the Purchaser made in or under this Agreement, including,
without limitation, the representations and warranties made
by the Purchaser shall be true and correct in all material
respects as at the Closing Date and with the same effect as
if made at and as of the Closing Date (except as such
representations and warranties may be affected by the
occurrence of events or transactions contemplated and
permitted hereby) and the Vendor shall have received a
certificate from a senior officer of the Purchaser
confirming the truth and correctness in all material
respects of such representations and warranties of the
Purchaser.
22
(b) Performance of Agreements - The Purchaser shall have
performed or complied with, in all respects, all of its
other obligations, covenants and agreements under this
Agreement.
(c) Receipt of Closing Documentation - All documentation and
assurances relating to the performance by the Purchaser of
its obligations under this Agreement shall be satisfactory
to the Vendor and their counsel, acting reasonably, and the
Vendor shall have received copies of all such documentation
or other evidence as they may reasonably request in order to
establish the consummation of the transactions contemplated
under this Agreement and the taking of all corporate
proceedings in connection with those transactions in
compliance with this Section 6, in form (as to certification
and otherwise) and substance satisfactory to the Vendor and
its counsel.
(d) Closing Documentation - The Vendor shall have received at or
before the Closing Time sufficient duly executed original
copies of the following:
(i) certificate of incumbency of the Purchaser; and
(ii) certificate of compliance of the Purchaser.
(e) Opinion of Counsel for Purchaser - The Vendor shall have
received from counsel for the Purchaser an opinion dated the
Closing Date, in form satisfactory to counsel for the
Vendor, respecting, inter alia, the matters set forth this
Agreement.
(f) No Actions Taken Restricting Sale - No action or proceeding
in Canada by law or in equity shall be pending or threatened
by any person, firm, corporation, government, governmental
authority, regulatory body or agency to enjoin, restrict or
prohibit the purchase and sale of the shares contemplated
under this Agreement.
(g) Payment of Purchase Price - The Purchaser shall have
tendered to the Vendor the certified cheques or evidence of
wire transfer for the portion of the Purchase Price and the
amount required in section 5.01(k) payable at Closing.
(h) Consents, Authorizations and Registrations - All consents,
approvals, orders and authorizations of or from governmental
or regulatory authorities required in connection with the
completion of the transactions contemplated in this
Agreement shall have been obtained on or prior to Closing.
23
SECTION 7
GENERAL
7.01 ACCESS TO PREMISES AND RECORDS
Subject to the provisions of Section 3 hereof and until the Closing
Date, the Purchaser and its counsel, accountants, appraiser and other advisors
shall have full and complete access to the premises, books, leases and other
records of the Corporation for the purpose of investigating the business and
affairs of the Corporation and at the Time of Closing, such books, leases and
other records shall be delivered to the Purchaser.
7.02 GUARANTEES OF VENDOR
It shall be a condition of closing in favour of the Vendor that
satisfactory arrangements shall have been made at the Time of Closing to release
the Vendor from any personal guarantees of the liabilities of the Corporation to
which the Corporation may be subject.
7.03 EXPENSES
Save as expressly provided for herein, each party shall be
responsible for its own legal and audit fees and other charges incurred in
connection with the purchase and sale of the Purchased Shares, the preparation
of this Agreement and all negotiations between the parties and the consummation
of the transactions contemplated hereby; and no fees or expenses in connection
with the matters contemplated in this Share Purchase Agreement shall be paid or
payable by the Corporation.
7.04 COMMISSIONS, ETC.
(a) The Vendor agrees to indemnify and save harmless the Purchaser
from and against any claims whatsoever for any commission or other remuneration
payable or alleged to be payable to any broker, agent or other intermediary who
has acted for the Vendor in connection with the sale of the Purchased Shares;
and
(b) The Purchaser agrees to indemnify and save harmless the Vendor
from and against any claims whatsoever for any commission or other remuneration
payable or alleged to be payable to any broker, agent or other intermediary who
has acted for the Purchaser in connection with the purchase and sale of the
Purchased Shares.
7.05 NO WARRANTY
The Purchaser acknowledges that it is accepting the Assets on an "as is" basis
and that no representation or warranty as to fitness or condition of the Assets
has been given to the Purchaser by the Vendor or the Corporation.
24
7.06 COVENANTS AND NON-MERGER
All covenants and agreements contained herein shall survive the
closing of the Purchase and Sale of shares herein provided for and
notwithstanding such closing shall, subject to the express limitations in
Section 2 and 3 hereof, continue and remain in full force and effect unless the
same shall have been waived by the parties hereto on or before the Closing Date.
7.07 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
7.08 GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the
Province of Ontario.
7.09 CLOSING
The closing of this transaction shall take place at the Time of
Closing on the Closing Date at the offices of Harris + Harris LLP, 2355 Skymark
Avenue, Suite 300, Mississauga, Ontario, L4W 4Y6 or such other time and location
as the parties hereto shall agree.
7.10 CONFIDENTIALITY
During the pendency of this agreement, and if the transaction
contemplated hereby is not completed, the Purchaser will not, and shall ensure
that any advisers or other representatives employed by it shall not, directly or
indirectly, use for its or their own purposes or communicate to any other person
any confidential information or trade secrets relating to the Corporation or to
its business which become known to the Purchaser or its advisers or other
representatives as a result of the Vendor making the same available in
connection with this transaction.
7.11 PUBLIC NOTICE
Subject to laws requiring disclosure, no press release or other
announcement concerning this transaction shall be made by the Vendor or by the
Purchaser without the prior approval of the other, such approval not to be
unreasonably withheld.
7.12 COUNTERPARTS
It is understood that this Agreement shall be equally valid and
binding if executed by facsimile or by original signature and may be executed in
several counterparts, each of which so executed shall be deemed to be an
original and such counterparts together shall constitute one and the same
instrument and notwithstanding their date of execution shall be deemed to bear
date as of the date above written.
25
7.13 NOTICES
Any notice or other instrument required or permitted to be given
under the provisions of this Agreement shall be in writing and if mailed by
prepaid first-class mail at any time other than during a general discontinuance
of postal service due to strike, lockout or otherwise, shall be deemed to have
been received three business days after the post-marked date thereof, or if
faxed, shall be deemed to have been received on the same day as dispatch and
acknowledgment of receipt by the recipient's fax machine or if delivered by hand
shall be deemed to have been received at the time it is delivered. Notice of
change of address shall also be governed by this paragraph. Notices shall be
addressed as follows:
To the Vendor:
Chell Group Corporation
14 Meteor Drive
Toronto, Ontario
M9W 1A4
Facsimile No: 416-675-8838
with a copy to:
Morrison, Brown Sosnovitich LLP
Barristers & Solicitors
1 Toronto Street
Suite 910PO Box 29
Toronto, Ontario
M5C 2V6
Facsimile No: 416-368-6068
To the Purchaser:
DVOD Network Inc.
3816A Victoria Park
Toronto, Ontario
M2H 3H7
Telephone No.: (416) 491-7454 ext 222
Facsimile No.: (416) 491-5168
Attention: Brad Schroeder
26
With a copy to:
Harris + Harris LLP
2355 Skymark Avenue
Suite 300
Mississsauga, Ontario
L4W 4Y6
Telephone No.: (905) 629-7800
Facsimile No.: (905) 629-4350
Attention: Gregory H. Harris
7.13 HEIRS, SUCCESSORS & ASSIGNS
This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
7.14 ASSIGNMENT
The Purchaser shall have the right to assign this Agreement and all
its rights hereunder to another non-Canadian resident by giving notice of
assignment to the Vendor wherein all references to the Purchaser herein shall
then be referenced to its assignee provided that it shall not release the
Purchaser from any obligations hereunder.
IN WITNESS WHEREOF this agreement has been executed by the parties
hereto.
CHELL GROUP CORPORATION
By: /s/ Stephen McDermott C.S.
-------------------------------------
Authorized Signing Officer
I have authority to bind the Corporation.
DVOD NETWORKS INC.
By: /s/ Brad Schroeder C.S.
-------------------------------------
Authorized Signing Officer
I have authority to bind the Corporation.
1
SCHEDULE 1
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Please attach year end Financial Statements and interim Financial Statements to
January 31, 2003)
SCHEDULE 2
LIST OF CONTRACTS
- --------------------------------------------------------------------------------
Please list here all of the contracts/leases with the hotels. In addition the
contracts with the studios for the non-theatrical usage of the media should be
listed.
Any other contract should also be considered.
SCHEDULE 3
LIST OF EMPLOYMENT AGREEMENTS, PENSION
OR PROFIT SHARING PLAN AND/OR UNION AGREEMENT
- --------------------------------------------------------------------------------
(Describe any pension etc. agreements. In addition, list details of the
employees, their date of hire, job position, pay and age.)
SCHEDULE 4
INTELLECTUAL PROPERTY
- --------------------------------------------------------------------------------
(Please describe all Intellectual Property of the Corporation, including any
trade marks, patents, tradenames.)
SCHEDULE 5
LIST OF LEASES
- --------------------------------------------------------------------------------
PREMISES
Describe all of the premises leased by the Corporation
OTHER LEASES
List any other leased equipment
SCHEDULE 6
intentionally deleted
- --------------------------------------------------------------------------------
SCHEDULE 7
LIST OF INSURANCE COVERAGE
- --------------------------------------------------------------------------------
SCHEDULE 8
LIST OF ASSETS
- --------------------------------------------------------------------------------
ON LOCATION AND HOTELS
- ----------------------
Describe those Assets
ASSETS IN WAREHOUSE
- -------------------
Describe the unassigned Assets
SCHEDULE 9
INDEMNITY AGREEMENT
- --------------------------------------------------------------------------------
Re: DVOD Network Inc. ("Purchaser") purchase of shares in GALAVU ENTERTAINMENT
NETWORK INC. (the "Corporation") from CHELL GROUP CORPORATION ("Vendor")
pursuant to an agreement dated April25, 2003 (the "Agreement"). All
undefined capitalized terms in this Indemnity Agreement shall have the
meaning ascribed to in the Agreement.
1. INDEMNITY & HOLD HARMLESS
The Vendor, hereby covenants and agrees that, notwithstanding the
closing, the delivery of any instruments of conveyance, and any liquidation or
dissolution or amalgamation of the Corporation and/or the Purchaser, and,
subject to the limitations with respect to Brad Schroeder as set out in section
2.01 of the Agreement, regardless of any investigation at any time made by or on
behalf of the Purchaser or of any information the Purchaser may have in respect
thereof, the Vendor, shall indemnify and hold harmless the Purchaser (and any
Purchaser successor) from, for and against any loss, damage, liability or
deficiency (including without limitation, attorneys' fees and other costs and
expenses incident to any suit, action, investigation or other proceeding)
arising out of or resulting from, and will pay the Purchaser on demand the full
amount of any sum which the Purchaser may pay or become obligated to pay on
account of:
(a) any inaccuracy in any representation or the breach of any warranty
made by or in respect of the Corporation or the Vendor;
(b) any federal, provincial, local or other tax of any nature arising
out of any event or state of facts occurring or existing at or
prior to the Effective Date, which are not disclosed on the
Effective Date Closing Statements of the Corporation, the Schedules
to the Agreement or the Disclosure Letter as that term is defined
in the Agreement, including, without limitation, any transfer duty
or excise and/or sales taxes
(c) any failure of the Vendor to duly perform or observe any term,
provision, covenant, agreement or condition hereunder on the part
of the Vendor to be performed or observed;
2
2. INDEMNITY & HOLD HARMLESS
The Purchaser, hereby covenants and agrees that, notwithstanding the
Closing, the delivery of any instruments of conveyance, and any liquidation or
dissolution or amalgamation of the Corporation and/or the Purchaser, and
regardless of any investigation at any time made by or on behalf of the Vendor
or of any information the Vendor may have in respect thereof, the Purchaser,
shall indemnify and hold harmless the Vendor (and any Vendor successor) from,
for and against any loss, damage, liability or deficiency (including without
limitation, attorneys' fees and other costs and expenses incident to any suit,
action, investigation or other proceeding) arising out of or resulting from, and
will pay the Vendor on demand the full amount of any sum which the Vendor may
pay or become obligated to pay on account of:
(a) any inaccuracy in any representation or the breach of any warranty
made by or in respect of the Purchaser;
(b) any failure of the Purchaser to duly perform or observe any term,
provision, covenant, agreement or condition hereunder on the part
of the Purchaser to be performed or observed;
3. COSTS & EXPENSES
In addition, the Vendor, will indemnify and hold harmless the Purchaser
(and any successor) from, for and against any costs and expenses (including
attorneys' fees) which they or any of them may suffer or sustain in seeking to
enforce the indemnification obligations of the Corporation or the Vendor.
(a) The Purchaser shall only be entitled to indemnification as provided
for in this Section as to any claim for indemnification which is
submitted to the Corporation or the Vendor not later July 1, 2005;
(b) The Purchaser shall not be entitled to any indemnification as to
any claim for indemnification for which it has received, or is
entitled to receive, payment pursuant to any of its insurance
policies. The Purchaser agrees to promptly take all reasonable
actions, in the regular course of its business, to obtain any
insurance payments to which it is entitled. In the event any
insurance payment has not been received at the time that an amount
is due the Purchaser pursuant to the provisions hereof, then the
amount so due shall be paid in full by the Vendor and the Purchaser
shall assign to the Vendor the right to receive said payment. To
the extent the Purchaser receives any payment pursuant to any of
its insurance policies as to a claim for indemnification that it
has previously received payment from the Vendor hereunder, then in
such event, the Purchaser shall promptly reimburse the Vendor to
the extent of any such duplicate payment received.
3
4. RECOVERY AND SETTLEMENT OF CLAIMS
The following additional rules shall apply to any claims (in this
subsection referred to as a "Claim") made with respect to any representation,
indemnity or confirmation referred to hereinbefore.
(a) promptly after becoming aware of any matter that may give rise to a
Claim the person or persons entitled to make the Claim (herein
referred to as the "Claimant") shall provide each of the person or
persons against whom the Claim will be or would be made (herein
referred to collectively as the "Respondent") with written notice
of the Claim, specifying with reasonable particularity (to the
extent that information is available) the relevant facts and an
approximate estimate of the potential quantum of the Claim, if such
estimate is feasible in the circumstances;
(b) in the event that the Claim relates to liability of the Claimant to
any other person (including without limitation Her Majesty or any
governmental body or agency) (hereinafter referred to as a "Third
Party Liability") which is of a nature such that the Claimant is
required by applicable law to make a payment to a third party with
respect to the Claim before the completion of the settlement
negotiations or related legal proceedings, the Claimant may make
such payment and forthwith demand reimbursement for such payment
from the Respondent in accordance with the other provisions of the
Agreement; provided that if the amount of any liability described
herein as finally determined on the completion of settlement
negotiations or related legal proceedings is less than the amount
which was paid by the Respondent in respect of the related Claim,
the Claimant shall forthwith following the final determination pay
to the Respondent the amount by which the amount of the liability
finally determined is less than the amount which was so paid by the
Respondent;
(c) the Claimant shall not negotiate, settle, compromise or pay any
Third Party Liability as to which it proposes to assert a Claim,
except with the prior consent of the Respondent (which consent
shall not be unreasonably withheld);
4
(d) the Claimant shall not cause any right to appeal in respect of any
Third Party Liability which is or might become the basis of a Claim
to terminate without giving the Respondent written notice thereof
and an opportunity to contest such Third Party Liability;
(e) with respect to any Third Party Liability, providing the Respondent
first admits the Claimant's Claim to the extent of any binding
determination or settlement in connection with such Third Party
Liability (or enters into arrangements otherwise satisfactory to
the Claimant), in any legal or administrative proceeding in
connection with the matters forming the basis of the Third Party
Liability, the following procedures will apply:
i) the Respondent will have carriage of the settlement of the
Third Party Liability and the conduct of any related legal or
administrative proceedings, but the Claimant will have the
right and shall be given the opportunity to associate with the
Respondent in the settlement of the Third Party Liability and
the conduct of related legal or administrative proceedings
(including consultation with counsel) and the Claimant shall
have the right to disagree on reasonable grounds with the
selection and retention of counsel, in which case counsel
satisfactory to both Claimant and Respondent shall be retained
by the Respondent;
ii) each of the Claimant and the Respondent will fully cooperate
with the other in all things relating to the Third Party
Liability, will keep the other fully advised with respect
thereto (including supplying copies of all relevant
documentation promptly as it becomes available) and will
designate a senior officer who will keep himself informed
about and be prepared to discuss the Third Party Liability
with his counterpart and with counsel at all reasonable times;
iii) notwithstanding subsection (i) and (ii) above but subject to
the other provisions of the Agreement, the Respondent shall
not settle the Third Party Liability or conduct any related
legal or administrative proceeding in a manner which would, in
the opinion of the Claimant, acting reasonably, have a
material adverse impact on the Claimant except with the
Claimant's prior written consent; and
5
iv) the Respondent will indemnify and hold harmless the Claimant
of and from any cost, loss, damage or expense incurred or
suffered as a result of the Respondent's settlement of the
Third Party Liability or conduct of any related legal or
administrative proceeding;
(f) a Claimant shall pursue any Claim made by that Claimant under the
Agreement with reasonable diligence and dispatch.
DATED this 25th day of April, 2003.
CHELL GROUP CORPORATION
By: /s/ Stephen McDermott C.S.
-----------------------------------------
Authorized Signing Officer
I have authority to bind the Corporation.
DVOD NETWORKS INC.
By: /s/ Brad Schroeder C.S.
-------------------------------------
Authorized Signing Officer
I have authority to bind the Corporation.
6
SCHEDULE 10
LITIGATION
- --------------------------------------------------------------------------------
(Please list all ongoing litigation, both for and against the Corporation
together with any threatened litigation.)
SCHEDULE 11
AGREEMENTS REGARDING FEDERAL AND PROVINCIAL TAXES
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SCHEDULE 12
DISCLOSURE LETTER
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SHARE PURCHASE AGREEMENT
B E T W E E N:
DVOD NETWORKS INC.
"Purchaser"
- and -
CHELL GROUP CORPORATION
"Vendor"
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