EXHIBIT 2.3
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION MADE EFFECTIVE AS OF 14 MAY 1999 (the
"Effective Date").
BETWEEN: XXXXXX XXXXXXXX ("Xx. Xxxxxxxx"), of
0000 Xxxxxxxxxx Xxx, Xxxxxx, Xxxxxx, 00000
XXXXXX XXXXXXXX ("Xx. Xxxxxxxx"), of
0000 Xxxxxxxxxx Xxx, Xxxxxx, Xxxxxx, 00000
WILLIAM GALINE ("Mr. Galine"), of
0000 Xxxxxxxxx Xxxxxx, Xxxx, Xxxxxx, 00000
(individually, a "Shareholder" and collectively, the "Shareholders");
AND: XXXXXXXXXX.XXX INC., a corporation incorporated under
the laws of the State of Nevada having a place of business at
000 Xxxxxx Xxxxxx, Xxxx, Xxxxxx, X.X.X., 00000
("Pawnbroker");
AND: DIGITAL SIGN CORPORATION, a company incorporated under
the laws of the State of Delaware having a place of business at
688 - 6 Ishikawa, Kanagawa, Japan, 252 0815
(the "Acquiror");
WHEREAS:
A. The authorized share capital of Pawnbroker consists of 25,000 common shares
without par value of which only 1,000 common shares (the "Pawnbroker Shares")
are issued and outstanding;
B. The Shareholders are the registered and beneficial owners of the Pawnbroker
Shares as follows:
Xx. Xxxxxxxx as to 255 Pawnbroker Shares
Xx. Xxxxxxxx as to 255 Pawnbroker Shares
Mr. Galine as to 490 Pawnbroker Shares
-------------------------
Total: 1,000 Pawnbroker Shares
=========================
C. The Shareholders have agreed to transfer the Pawnbroker Shares to the
Acquiror and the Acquiror has agreed to acquire the Pawnbroker Shares from the
Shareholders in exchange for voting common shares of the Acquiror, in a share
exchange which is intended to qualify as a "reorganization" within section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, for U.S. federal
income tax purposes, on the following terms and conditions;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants
and agreements herein contained, the parties hereto do covenant and agree (the
"Agreement") as follows:
1. SHARE EXCHANGE
1.1 Subject to the terms and conditions of this Agreement, the Shareholders
agree to transfer all of the Pawnbroker Shares to the Acquiror, and the Acquiror
agrees to acquire all of the Pawnbroker Shares, in exchange for 4,800,000 voting
common shares of the Acquiror (the "Digital Shares") with an aggregate value of
US$1,500,000 (at the deemed price of US$0.3125 per Digital Share).
1.2 The Digital Shares shall be issued by the Acquiror to the Shareholders as
follows:
Xx. Xxxxxxxx as to 1,224,000 Digital Shares
Xx. Xxxxxxxx as to 1,224,000 Digital Shares
Mr. Galine as to 2,352,000 Digital Shares
-------------------------
Total: 4,800,000 Digital Shares
=========================
1.3 The issuance of the Digital Shares has not been approved or disapproved by
the United States Securities and Exchange Commission, any state securities
agency, or any foreign securities agency, and the Acquiror is not registered
under the United States Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx").
1.4 The transactions contemplated under this Agreement shall be completed (the
"Completion") at the offices of the Acquiror's solicitors, Messrs. Xxxxxxx &
Xxxxxx, 2100 - 1111 West Georgia Street, Vancouver, British Columbia, or at such
other place as may be agreed between the parties, at 11:00 o'clock a.m. local
time in Vancouver, B.C., or at such other time as may be agreed between the
parties, (the "Time of Closing") on 16 June 1999, or on such other date as may
be agreed between the parties, (the "Closing Date").
2. CONDITIONS PRECEDENT
2.1 The Acquiror's obligation to carry out the terms of this Agreement and to
complete its transactions contemplated under this Agreement is subject to the
fulfilment to the satisfaction of the Acquiror of each of the following
conditions that:
(a) on or before 16 June 1999, the Acquiror shall have been able to
complete the Acquiror's Investigation (defined below) with results to
its reasonable satisfaction;
(b) at the Time of Closing, the solicitors for the Shareholders shall
provide an opinion dated as of the Closing Date, substantially in the
form of Schedule A to this Agreement (the "Pawnbroker Solicitor
Opinion");
(c) as of the Time of Closing, the Shareholders and Pawnbroker shall have
complied with all of their respective covenants and agreements
contained in this Agreement;
(d) as of the Time of Closing, the representations and warranties of the
Shareholders and of any one of them contained in this Agreement or
contained in any certificates or documents delivered by them or any
one of them pursuant to this Agreement shall be
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completely true as if such representations and warranties had been
made as of the Time of Closing; and
(e) the Directors and, if required, the shareholders of the Acquiror shall
have approved this Agreement and all the transactions of the Acquiror
contemplated hereunder.
The conditions set forth above are for the exclusive benefit of the Acquiror and
may be waived by the Acquiror in whole or in part at any time at or before the
Time of Closing.
2.2 The Shareholder's respective obligations to carry out the terms of this
Agreement and to complete their respective transactions contemplated under this
Agreement are subject to the fulfilment to their satisfaction of each of the
following conditions that:
(a) on or before 16 June 1999, the Acquiror shall have restructured or
otherwise altered its share capital so that the Acquiror's authorized
capital is sufficient to permit issuance of the Digital Shares, and so
that upon issuance of the Digital Shares the Acquiror's issued share
capital will be 12,011,346 common shares (excluding the Acquiror's
common shares to be issued in the course of the Financing defined
below);
(b) at the Time of Closing, the solicitors for the Acquiror shall provide
an opinion dated as of the Closing Date, substantially in the form of
Schedule B to this Agreement (the "Digital Solicitor Opinion");
(c) as of the Time of Closing, the Acquiror shall have complied with all
of its covenants and agreements contained in this Agreement; and
(d) at the Time of Closing, the representations and warranties of the
Acquiror contained in this Agreement or contained in any certificates
or documents delivered by it pursuant to this Agreement shall be
completely true as if such representations and warranties had been
made by the Acquiror as of the Time of Closing.
The conditions set forth above are for the exclusive benefit of each of the
Shareholders and may be waived by each of them in whole or in part at or before
the Time of Closing.
2.3 The parties acknowledge and agree each with the other that this Agreement
and all of the transactions contemplated under this Agreement are subject to
receipt of any regulatory approvals that may be required under Applicable Laws.
If any such approvals are required but are not obtained by the Closing Date,
then this Agreement shall terminate and be of no further force and effect.
3. COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS
3.1 The Shareholders and Pawnbroker jointly and severally covenant and agree
with the Acquiror that the Shareholders and Pawnbroker shall:
(a) from and including the Effective Date through to and including the
Time of Closing, permit the Acquiror, through its directors, officers,
employees and authorized agents and representatives, at the Acquiror's
own cost, full access to Pawnbroker's books, records and property
including, without limitation, all of the assets, contracts and minute
books of Pawnbroker, so as to permit the Acquiror to make such
investigation (the "Acquiror's Investigation") of Pawnbroker as the
Acquiror considers advisable;
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(b) provide to the Acquiror all such further documents, instruments and
materials and do all such acts and things as may be required by the
Acquiror to obtain any regulatory approvals that may be required under
Applicable Laws;
(c) from and including the Effective Date through to and including the
Time of Closing, do all such acts and things that may be necessary to
ensure that all of the representations and warranties of the
Shareholders, Pawnbroker or any one of them contained in this
Agreement or any certificates or documents delivered by them or any
one of them pursuant to this Agreement remain true and correct;
(d) from and including the Effective Date through to and including the
Time of Closing, preserve and protect all of the goodwill, assets,
business and undertaking of Pawnbroker and, without limiting the
generality of the foregoing, carry on the business of Pawnbroker in a
reasonable and prudent manner; and
(e) from and including the Effective Date through to and including the
Time of Closing, keep confidential all discussions and communications
(including all information communicated therein) between the parties,
and all written and printed materials of any kind whatsoever exchanged
by the parties, except only any information or material that:
(i) was in the public domain at the time of disclosure to a
party (the "Recipient");
(ii) was already in the possession of the Recipient prior to
disclosure, as demonstrated by the Recipient through
tangible evidence;
(iii) subsequently enters the public domain through no fault of
the Recipient or any officer, director, employee or agent of
the Recipient; or
(iv) is required to be disclosed by law or by a court or
regulatory authority of competent jurisdiction;
and, if so requested by the Acquiror, the Shareholders and Pawnbroker
shall arrange for any director, officer, employee, authorized agent or
representative of Pawnbroker to enter into and the Shareholders
themselves shall enter into a non-disclosure agreement with the
Acquiror in a form acceptable to the Acquiror acting reasonably.
3.2 The Shareholders and Pawnbroker jointly and severally covenant and agree
with the Acquiror that, from and including the Effective Date through to and
including the Time of Closing, the Shareholders and Pawnbroker shall:
(a) not do any act or thing that would render any representation or
warranty of the Shareholders, Pawnbroker or any one of them contained
in this Agreement or any certificates or documents delivered by them
or any one of them pursuant to this Agreement untrue or incorrect; and
(b) not sell, encumber or dispose of, or negotiate with any other person
in respect of a sale, encumbrance or disposition of, any of the
Pawnbroker Shares or any goodwill, assets, business or undertaking of
Pawnbroker, other than a sale of part of the assets of Pawnbroker in
the ordinary course of Pawnbroker's business.
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3.3 The Shareholders and Pawnbroker jointly and severally acknowledge to and
agree with the Acquiror that the Acquiror's Investigation shall in no way limit
or otherwise adversely affect the rights of the Acquiror as provided for
hereunder in respect of the representations and warranties of the Shareholders
and Pawnbroker or any of them contained in this Agreement or in any certificates
or documents delivered by them or any of them pursuant to this Agreement.
3.4 The Acquiror covenants and agrees with the Shareholders and with Pawnbroker
that the Acquiror shall:
(a) use its reasonable best efforts to obtain any regulatory approvals for
this Agreement and the transactions contemplated hereunder required by
Applicable Laws on or before the Closing Date;
(b) from and including the Effective Date through to and including the
Time of Closing, do all such acts and things that may be necessary to
ensure that all of the representations and warranties of the Acquiror
contained in this Agreement or in any certificates or documents
delivered by it pursuant to this Agreement remain true and correct;
(c) from and including the Effective Date through to and including the
Time of Closing, subject to its legal reporting obligations, keep
confidential all discussions and communications (including all
information communicated therein) between the parties, and all written
and printed materials of any kind whatsoever exchanged by the parties,
except only any information or material that:
(i) was in the public domain at the time of disclosure to a
party (the "Recipient");
(ii) was already in the possession of the Recipient prior to
disclosure, as demonstrated by the Recipient through
tangible evidence;
(iii) subsequently enters the public domain through no fault of
the Recipient or any officer, director, employee or agent of
the Recipient; or
(iv) is required to be disclosed by law or by a court or
regulatory authority of competent jurisdiction;
and, if so requested by the Shareholders or by Pawnbroker, the
Acquiror shall arrange for any director, officer, employee, authorized
agent or representative of the Acquiror to enter into, and the
Acquiror itself shall enter into, a non-disclosure agreement with the
Shareholders and Pawnbroker in a form acceptable to the Shareholders
and Pawnbroker acting reasonably;
(d) on Closing, appoint Xx. Xxxxxxxx as a Director and President of the
Acquiror, with responsibilities that will include assisting in the
assembly of a new Board of Directors of the Acquiror; and
(e) following the Closing Date, the Acquiror will use its reasonable best
efforts to undertake a financing (the "Financing") to raise
US$3,000,000 for working capital purposes.
3.5 The Acquiror covenants and agrees with the Shareholders and with Pawnbroker
that, from and including the Effective Date through to and including the Time of
Closing, the Acquiror shall
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not do any act or thing that would render any representation or warranty of the
Acquiror contained in this Agreement or any certificates or documents delivered
by it pursuant to this Agreement untrue or incorrect.
3.6 At the request of any or all of the Shareholders, the Acquiror covenants to
execute and deliver to each Shareholder, for filing, such form of election that
may be specified in applicable income tax legislation for election of proceeds
of disposition that is equal to or less than the fair market value of the number
of Digital Shares issuable to that Shareholder under this Agreement and that is
equal to or greater than the cost amount to that Shareholder of the Pawnbroker
Shares exchanged by that Shareholder, for the purposes of lawfully reducing the
amount of income tax payable in respect of the Shareholder's exchange of
Pawnbroker Shares.
4. REPRESENTATIONS AND WARRANTIES
4.1 In order to induce the Acquiror to enter into this Agreement and complete
its transactions contemplated hereunder, the Shareholders and Pawnbroker jointly
and severally represent and warrant to the Acquiror that:
(a) Pawnbroker was and remains duly incorporated and validly existing
under the laws of the State of Nevada and Pawnbroker:
(i) is not subject to the reporting requirements of section 13
or section 15 of the Exchange Act;
(ii) has the power, authority and capacity to enter into this
Agreement and carry out its terms; and
(iii) is in good standing with respect to the filing of annual
reports required under the laws of Nevada;
(b) the authorized and issued share capital of Pawnbroker is as set forth
in paragraphs A and B of the recitals to this Agreement;
(c) the Pawnbroker Shares are and will on the Closing Date immediately
prior to Completion be validly issued and outstanding fully paid and
non-assessable common shares of Pawnbroker registered in the names of,
and legally and beneficially owned by, the Shareholders as set forth
in paragraph B of the recitals to this Agreement, free and clear of
all voting restrictions, trade restrictions, liens, charges or
encumbrances of any kind whatsoever;
(d) except for the Pawnbroker Shares, there are no documents, instruments
or other writings of any kind whatsoever which constitute a "security"
of Pawnbroker as that term is defined in the United States Securities
Act of 1933, as amended (the "Securities Act") and, except as is
provided for by operation of this Agreement, there are no options,
agreements or rights of any kind whatsoever to acquire all or any part
of the Pawnbroker Shares or any interest in them from the Shareholders
or any one of them, or to acquire any other shares of Pawnbroker from
Pawnbroker;
(e) the constating documents of Pawnbroker have not been altered since the
incorporation of Pawnbroker;
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(f) all of the material transactions of Pawnbroker have been promptly and
properly recorded or filed in or with the books or records of
Pawnbroker and the minute books of Pawnbroker contain all records of
the meetings and proceedings of Pawnbroker's shareholders and
directors since its incorporation;
(g) Pawnbroker holds all licences and permits that are required for
carrying on its business in the manner in which such business has been
carried on;
(h) Pawnbroker is the registered and beneficial owner of all of the
properties and assets used by Pawnbroker and which are necessary or
useful in the conduct of its business (collectively the "Assets"),
including without limitation the domain names "Xxxxxxxxxx.xxx" and
"Xxxxxxxxxxx.xxx" (the "Domain Names") and the other assets listed on
Schedule C to this Agreement;
(i) Pawnbroker has the corporate power to own the Assets and to carry on
the business carried on by it, and Pawnbroker is duly qualified to
carry on business in all jurisdictions in which it carries on
business;
(j) Pawnbroker has good and marketable exclusive title to the Assets free
and clear of all liens, charges and encumbrances of any kind
whatsoever save and except those specified as "Permitted Encumbrances"
on Schedule C to this Agreement, and in particular:
(i) Pawnbroker is the sole and exclusive legal and beneficial
owner of the Domain Names, free and clear of all
encumbrances whatsoever, and is not a party to or bound by
any contract or any other obligation whatsoever that limits
or impairs its ability to sell, transfer, assign or convey,
or that otherwise affects, the Domain Names;
(ii) Pawnbroker is the registered owner of the Domain Names, and
all fees or other costs associated with maintaining the
registration of the Domain Names have been paid as of 1
January 1999 and the registration of the Domain Names is in
good standing with Network Solutions, Inc.; and
(iii) no other person has been granted any interest in or right to
use all or any portion of the Domain Names;
(k) no third party privacy or intellectual property rights, including
without limitation, copyright, trade secret or patent rights, were
violated in the creation, compilation or acquisition of the Assets by
Pawnbroker or by any party through whom Pawnbroker acquired title and,
to the knowledge of the Shareholders and Pawnbroker, the use of the
Domain Names by Pawnbroker does not infringe upon or induce or
contribute to the infringement of any intellectual property rights,
domestic or foreign, of any other person;
(l) each item of machinery and equipment of any kind whatsoever comprised
in the Assets is in reasonable operating condition and in a state of
reasonable maintenance and repair taking into account its age and use;
(m) all of the bank accounts and safety deposit boxes of Pawnbroker are
listed on Schedule C to this Agreement;
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(n) the books and records of Pawnbroker (collectively the "Pawnbroker
Records"), full access to which has been provided by Pawnbroker to the
Acquiror, are true and correct in every material respect and present
fairly and accurately the financial position and results of the
operations of Pawnbroker for the periods indicated, and have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis;
(o) the Pawnbroker Records disclose all material financial transactions of
Pawnbroker since Pawnbroker's incorporation on 22 April 1999 and such
transactions have been fairly and accurately recorded;
(p) except as disclosed in the Pawnbroker Records:
(i) no dividends or other distributions of any kind whatsoever
on any shares in the capital of Pawnbroker have been made,
declared or authorized;
(ii) Pawnbroker is not indebted to the Shareholders or any one of
them;
(iii) none of the Shareholders or any other officer, director or
employee of Pawnbroker is indebted or under obligation to
Pawnbroker on any account whatsoever; and
(iv) Pawnbroker has not guaranteed or agreed to guarantee any
debt, liability or other obligation of any kind whatsoever
of any person, firm or corporation of any kind whatsoever;
(q) the total debt of Pawnbroker to all creditors does not exceed
US$275,000, and there are no material liabilities of Pawnbroker,
whether direct, indirect, absolute, contingent or otherwise, which are
not disclosed or reflected in the Pawnbroker Records;
(r) any accounts receivable of Pawnbroker shown in the Pawnbroker Records
are bona fide, good and collectible without setoff or counterclaim;
(s) since Pawnbroker's incorporation:
(i) there has not been any material adverse change of any kind
whatsoever in the financial position or condition of
Pawnbroker or any damage, loss or other change of any kind
whatsoever in circumstances materially affecting the
business or Assets of Pawnbroker or the right or capacity of
Pawnbroker to carry on its business;
(ii) Pawnbroker has not waived or surrendered any right of any
kind whatsoever of material value;
(iii) except as permitted under this Agreement, Pawnbroker has not
discharged, satisfied or paid any lien, charge or
encumbrance of any kind whatsoever or obligation or
liability of any kind whatsoever other than current
liabilities in the ordinary course of its business;
(iv) the business of Pawnbroker has been carried on in the
ordinary course; and
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(v) no new machinery or equipment of any kind whatsoever has
been ordered by, or installed or assembled on the premises
of, Pawnbroker;
(t) the directors, officers, key employees and independent contractors and
consultants of Pawnbroker and all of their compensation arrangements
with Pawnbroker, whether as directors, officers or employees of, or as
independent contractors or consultants to, Pawnbroker, are as listed
on Schedule D to this Agreement;
(u) no payments of any kind whatsoever have been made or authorized by
Pawnbroker to or on behalf of the Shareholders or any one of them or
to or on behalf of any of the directors, officers, key employees,
independent contractors or consultants of Pawnbroker except in
accordance with those compensation arrangements specified on Schedule
D to this Agreement or except as contemplated by this Agreement;
(v) there are no pensions, profit sharing, group insurance or similar
plans or other deferred compensation plans of any kind whatsoever
affecting Pawnbroker other than those specified on Schedule D to this
Agreement;
(w) Pawnbroker is not now, and has never been, a party to any collective
agreement with any labour union or other association of employees of
any kind whatsoever, no collective bargaining agent has been certified
in respect of Pawnbroker and there is no application pending for
certification of a collective bargaining agent in respect of
Pawnbroker;
(x) the contracts and agreements included on Schedule D to this Agreement
and those additional contracts and agreements specified on Schedule E
to this Agreement (collectively the "Material Contracts") constitute
all of the material contracts and agreements of Pawnbroker;
(y) except as is noted on the appropriate Schedule to this Agreement, the
Material Contracts are in good standing in all respects and not in
default in any respect;
(z) Pawnbroker has not licensed, leased, transferred, disposed of or
encumbered any of the Assets in any way, or permitted any third party
access to any of the Assets the value of which may be compromised by
such access, including in particular the source code to any computer
software or any trade secret information included in the Assets,
except only in accordance with the terms of the Material Contracts;
(aa) all tax returns and reports of Pawnbroker required by law to have been
filed have been filed and are substantially true, complete and correct
and all taxes and other government charges of any kind whatsoever of
Pawnbroker have been paid or accrued in the Pawnbroker Records;
(bb) Pawnbroker has not:
(i) made any election under any applicable tax legislation with
respect to the acquisition or disposition of any property at
other than fair market value;
(ii) acquired any property from a person with whom Pawnbroker was
not dealing with at arm's length for proceeds greater than
the fair market value thereof; or
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(iii) disposed of anything to a person with whom Pawnbroker was
not dealing with at arm's length for proceeds less than the
fair market value thereof;
(cc) Pawnbroker has made all elections required to have been made under any
applicable tax legislation in connection with any distributions made
by it and all such elections were true and correct and filed in the
prescribed form and within the prescribed time period;
(dd) adequate provision has been made for taxes payable by Pawnbroker for
the current period for which tax returns are not yet required to be
filed and there are no agreements, waivers or other arrangements of
any kind whatsoever providing for an extension of time with respect to
the filing of any tax return by, or payment of, any tax or
governmental charge of any kind whatsoever by Pawnbroker;
(ee) Pawnbroker does not have any contingent tax liabilities of any kind
whatsoever, and there are no grounds which would prompt a reassessment
of Pawnbroker, including for aggressive treatment of income or
expenses in earlier tax returns filed;
(ff) there are no amounts outstanding and unpaid for which Pawnbroker has
previously claimed a deduction under any applicable tax legislation;
(gg) Pawnbroker has made all collections, deductions, remittances and
payments of any kind whatsoever and filed all reports and returns
required by it to be made or filed under the provisions of all
applicable statutes requiring the making of collections, deductions,
remittances or payments of any kind whatsoever in those jurisdictions
in which Pawnbroker carries on business;
(hh) there are no actions, suits, judgements, investigations or proceedings
of any kind whatsoever outstanding, pending or threatened against or
affecting the Shareholders or any one of them or Pawnbroker at law or
in equity or before or by any federal, provincial, state, municipal or
other governmental department, commission, board, bureau or agency of
any kind whatsoever and there is no basis therefor;
(ii) to the best of their knowledge, Pawnbroker is not in breach of any
law, ordinance, statute, regulation, by-law, order or decree of any
kind whatsoever;
(jj) the Shareholders and Pawnbroker have good and sufficient power,
authority and capacity to enter into this Agreement and complete their
respective transactions contemplated under this Agreement on the terms
and conditions set forth herein;
(kk) the execution and delivery of this Agreement, the performance of their
respective obligations under this Agreement and the Completion will
not:
(i) conflict with, or result in the breach of or the
acceleration of any indebtedness under, or constitute
default under, any of the constating documents of Pawnbroker
or any of the terms of any indenture, mortgage, agreement,
lease, licence or other instrument of any kind whatsoever to
which Pawnbroker, the Shareholders or any one of them is a
party or by which any one of them is bound, or any judgement
or order of any kind whatsoever of any court or
administrative body of any kind whatsoever by which any one
of them is bound; nor
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(ii) result in the violation of any law or regulation of any kind
whatsoever by any of the Shareholders or by Pawnbroker;
(ll) neither Pawnbroker nor the Shareholders or any one of them has
incurred any liability for agency, brokerage, referral or finder's
fees, commissions or compensation of any kind whatsoever with respect
to this Agreement or any transaction contemplated under this
Agreement; and
(mm) the representations and warranties of the Shareholders and Pawnbroker
contained in this Agreement disclose all material facts specifically
relating to the transactions involving the Shareholders and Pawnbroker
contemplated under this Agreement which materially and adversely
affect, or in the future may materially and adversely affect, their
respective abilities to perform their respective obligations under
this Agreement or the value of the Pawnbroker Shares or the Assets.
4.2 Each of the Shareholders covenants, represents and warrants to the Acquiror
that:
(a) he or she has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an
investment in the Digital Shares and he or she is able to bear the
economic risk of loss of his or her entire investment;
(b) the Acquiror has provided to him or her the opportunity to ask
questions and receive answers concerning the terms and conditions of
the offering and he or she has had access to such information
concerning the Acquiror as he or she has considered necessary or
appropriate in connection with the investment decision to acquire the
Digital Shares;
(c) he or she is acquiring the Digital Shares for his or her own account,
for investment purposes only and not with a view to any resale,
distribution or other disposition of the Digital Shares in violation
of the United States securities laws;
(d) he or she understands that the Digital Shares have not been and will
not be registered under the Securities Act or the securities laws of
any state of the United States or other jurisdiction and that the sale
contemplated hereby is being made in reliance on an exemption from
such registration requirements;
(e) he or she satisfies one or more of the categories indicated below
(each Shareholder must initial at least one applicable line):
--- Category 1. An organization described in Section 501(c)(3) of the
United States Internal Revenue Code, a corporation, a Massachusetts or
similar business trust or partnership, not formed for the specific
purpose of acquiring the Digital Shares, with total assets in excess
of US$5,000,000;
--- Category 2. A natural person whose individual net worth, or joint
net worth with that person's spouse, at the date hereof exceeds
US$1,000,000;
--- Category 3. A natural person who had an individual income in
excess of US$200,000 in each of the two most recent years or joint
income with that person's spouse in excess of US$300,000 in each of
those years and has a reasonable expectation of reaching the same
income level in the current year;
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--- Category 4. A trust that (a) has total assets in excess of
US$5,000,000, (b) was not formed for the specific purpose of acquiring
the Digital Shares and (c) is directed in its purchases of securities
by a person who has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits
and risks of an investment in the Securities;
--- Category 5. An investment company registered under the Investment
Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act;
--- Category 6. A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958;
--- Category 7. A private business development company as defined in
Section 202(a)(22) of the Investment Advisors Acts of 1940; or
--- Category 8. An entity in which all of the equity owners satisfy
the requirements of one or more of the foregoing categories.
(f) he or she has not purchased the Digital Shares as a result of any form
of general solicitation or general advertising, including
advertisements, articles, notices or other communications published in
any newspaper, magazine or similar media or broadcast over radio, or
television, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising;
(g) if he or she decides to offer, sell or otherwise transfer any of the
Digital Shares, he or she will not offer, sell or otherwise transfer
any of such Digital Shares directly or indirectly, unless:
(i) the sale is to the Acquiror;
(ii) the sale is made pursuant to the exemption from the
registration requirements under the Securities Act provided
by Rule 144 thereunder and in accordance with any applicable
state securities or "Blue Sky" laws; or
(iii) the Digital Shares are sold in a transaction that does not
require registration under the Securities Act or any
applicable state laws and regulations governing the offer
and sale of securities, and he or she has prior to such sale
furnished to the Acquiror an opinion of counsel reasonably
satisfactory to the Acquiror;
(h) the certificates representing the Digital Shares will bear a legend
stating that such shares have not been registered under the Securities
Act or the securities laws of any state of the United States and may
not be offered for sale or sold unless registered under the Securities
Act and the securities laws of all applicable states of the United
States or an exemption from such registration requirements is
available;
(i) he or she understands and agrees that there may be material tax
consequences to a Shareholder in respect of an acquisition or
disposition of the Digital Shares, and that the Acquiror gives no
opinion and makes no representation with respect to the tax
12
consequences to the Shareholder under United States, state, local or
foreign tax law in respect of the Shareholder's acquisition or
disposition of the Digital Shares; and
(j) he or she consents to the Acquiror making a notation on its records or
giving instructions to any transfer agent of the Acquiror in order to
implement the restrictions on transfer set forth and described herein.
4.3 The representations and warranties of the Shareholders and Pawnbroker
contained in this Agreement shall be true at the Time of Closing as though they
were made at the Time of Closing and they shall survive the Completion and
remain in full force and effect thereafter for the benefit of the Acquiror. \
4.4 In order to induce the Shareholders to enter into this Agreement and
complete their respective transactions contemplated hereunder, the Acquiror
represents and warrants to the Shareholders that:
(a) the Acquiror was and remains duly incorporated and validly existing
under the laws of the State of Delaware, and the Acquiror is in good
standing with respect to the filing of annual reports required under
the laws of Delaware;
(b) as of the Effective Date, the authorized share capital of the Acquiror
consists of 20,000,000 preferred shares having a par value of one-one
thousandth of a cent (US$0.00001) each, of which none are issued and
outstanding, and 50,000,000 common shares having a par value of
one-one thousandth of a cent (US$0.00001) each, of which 38,499,000
shares (the "Outstanding Shares") are issued and outstanding;
(c) prior to the Closing Date, the Acquiror will effect a 5.2:1 rollback
of the Outstanding Shares so that on the Closing Date the Acquiror
will have 7,211,346 common shares issued and outstanding
(d) there are no commitments, plans or arrangements of any kind whatsoever
to issue shares of the Acquiror, nor are there any outstanding
options, warrants, convertible securities or other rights of any kind
whatsoever calling for the issuance of any of the unissued shares of
the Acquiror, other than as contemplated in respect of the Financing;
(e) the Digital Shares to be issued on Completion will be, when issued,
validly issued as fully paid and non-assessable;
(f) the Acquiror has good and sufficient power, authority and capacity to
enter into this Agreement and complete its transactions contemplated
under this Agreement on the terms and conditions set forth herein; and
(g) the execution and delivery of this Agreement, the performance of its
obligations under this Agreement and the Completion will not:
(i) conflict with, or result in the breach of or the
acceleration of any indebtedness under, or constitute
default under, the constating documents of the Acquiror or
the terms of any indenture, mortgage, agreement, lease,
licence or other instrument of any kind whatsoever to which
the Acquiror is a party or by which
13
it is bound, or any judgment or order of any kind whatsoever
of any Court or administrative body of any kind whatsoever
by which the Acquiror is bound; nor
(ii) result in the violation of any law or regulation of any kind
whatsoever by the Acquiror.
(h) the Certificate of Incorporation of the Acquiror is that filed on 13
February 1998 with the Secretary of State of Delaware and there are no
other documents amending such certificate which have been filed or
contemplated except the Certificate of Designation reducing the number
of issued and outstanding common shares of the Acquiror to 7,011,346
immediately before the Closing Date;
(i) all of the material transactions of the Acquiror have been promptly
and properly recorded or filed in or with the books or records of the
Acquiror and the minute books of the Acquiror contain all records of
the meetings and proceedings of the Acquiror's shareholders and
directors since its incorporation;
(j) the Acquiror holds all licences and permits that are required for
carrying on its business in the manner in which such business has been
carried on;
(k) the Acquiror has the corporate power to own the Assets and to carry on
the business carried on by it, and the Acquiror is duly qualified to
carry on business in all jurisdictions in which it carries on
business;
(l) the Acquiror has not assigned or contracted or promised to assign this
Agreement, the Assets or the Domain Names or any of its related
intellectual property rights to any third party;
(m) the books and records of the Acquiror (collectively the "Acquiror
Records"), shown to the Shareholders are true and correct in every
material respect and present fairly and accurately the financial
position and results of the operations of the Acquiror for the periods
indicated, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis;
(n) the Acquiror Records disclose all material financial transactions of
the Acquiror since the Acquiror's incorporation on 13 February 1998
and such transactions have been fairly and accurately recorded;
(o) except as disclosed in the Acquiror Records:
(i) no dividends or other distributions of any kind whatsoever
on any shares in the capital of the Acquiror have been made,
declared or authorized;
(ii) the Acquiror is not indebted to anyone; and
(iii) the Acquiror has not guaranteed or agreed to guarantee any
debt, liability or other obligation of any kind whatsoever
of any person, firm or corporation of any kind whatsoever;
14
(p) there are no material liabilities of the Acquiror, whether direct,
indirect, absolute, contingent or otherwise, which are not disclosed
or reflected in the Acquiror Records;
(q) any accounts receivable of the Acquiror shown in the Acquiror Records
are bona fide, good and collectible without setoff or counterclaim;
(r) since the Acquiror's incorporation:
(i) there has not been any material adverse change of any kind
whatsoever in the financial position or condition of the
Acquiror or any damage, loss or other change of any kind
whatsoever in circumstances materially affecting the
business or assets of the Acquiror or the right or capacity
of the Acquiror to carry on its business;
(ii) the Acquiror has not waived or surrendered any right of any
kind whatsoever of material value; and
(iii) except as permitted under this Agreement, the Acquiror has
not discharged, satisfied or paid any lien, charge or
encumbrance of any kind whatsoever or obligation or
liability of any kind whatsoever other than current
liabilities in the ordinary course of its business;
(s) the directors, officers, key employees and independent contractors and
consultants of the Acquiror and all of their compensation arrangements
with the Acquiror, whether as directors, officers or employees of, or
as independent contractors or consultants to, the Acquiror, are as
listed on Schedule F to this Agreement;
(t) there are no material contracts between the Acquiror and third parties
except this Agreement;
(u) all tax returns and reports of the Acquiror required by law to have
been filed have been filed and are substantially true, complete and
correct and all taxes and other government charges of any kind
whatsoever of the Acquiror have been paid or accrued in the Acquiror
Records;
(v) the Acquiror has made all elections required to have been made under
any applicable tax legislation in connection with any distributions
made by it and all such elections were true and correct and filed in
the prescribed form and within the prescribed time period;
(w) adequate provision has been made for taxes payable by the Acquiror for
the current period for which tax returns are not yet required to be
filed and there are no agreements, waivers or other arrangements of
any kind whatsoever providing for an extension of time with respect to
the filing of any tax return by, or payment of, any tax or
governmental charge of any kind whatsoever by the Acquiror;
(x) the Acquiror does not have any contingent tax liabilities of any kind
whatsoever, and there are no grounds which would prompt a reassessment
of the Acquiror, including for aggressive treatment of income or
expenses in earlier tax returns filed;
15
(y) there are no actions, suits, judgements, investigations or proceedings
of any kind whatsoever outstanding, pending or threatened against or
affecting the Acquiror at law or in equity or before or by any
federal, provincial, state, municipal or other governmental
department, commission, board, bureau or agency of any kind whatsoever
and there is no basis therefor;
(z) to the best of its knowledge, the Acquiror is not in breach of any
law, ordinance, statute, regulation, by-law, order or decree of any
kind whatsoever;
(aa) the Acquiror has incurred no liability for agency, brokerage, referral
or finder's fees, commissions or compensation of any kind whatsoever
with respect to this Agreement or any transaction contemplated under
this Agreement; and
(bb) the representations and warranties of the Acquiror contained in this
Agreement disclose all material facts specifically relating to the
transactions involving the Acquiror contemplated under this Agreement
which materially and adversely affect, or in the future may materially
and adversely affect, the Acquiror's ability to perform its
obligations under this Agreement.
4.5 The representations and warranties of the Acquiror contained in this
Agreement, except for the number of outstanding shares set forth in subparagraph
4.4(b) of this Agreement, shall be true at the Time of Closing as though they
were made at the Time of Closing, and they shall survive the Completion and
remain in full force and effect thereafter for the benefit of the Shareholders.
5. INDEMNITIES
5.1 Notwithstanding the Completion of the transactions contemplated under this
Agreement or the Acquiror's Investigation, the representations, warranties and
acknowledgements of the Shareholders, Pawnbroker or any one of them contained in
this Agreement or any certificates or documents delivered by them or any one of
them pursuant to this Agreement shall survive the Completion and shall continue
in full force and effect thereafter for the benefit of the Acquiror. If any of
the representations, warranties or acknowledgements given by the Shareholders,
Pawnbroker or any one of them is found to be untrue or there is a breach of any
covenant or agreement in this Agreement on the part of the Shareholders,
Pawnbroker or any one of them, the Shareholders and Pawnbroker shall jointly and
severally indemnify and save harmless the Acquiror from and against any and all
liability, claims, debts, demands, suits, actions, penalties, fines, losses,
costs (including legal fees, disbursements and taxes as charged on a lawyer and
own client basis), damages and expenses of any kind whatsoever which may be
brought or made against the Acquiror by any person, firm or corporation of any
kind whatsoever or which may be suffered or incurred by the Acquiror, directly
or indirectly, arising out of or as a consequence of any such misrepresentation
or breach of warranty, acknowledgement, covenant or agreement. Without in any
way limiting the generality of the foregoing, this shall include any loss of any
kind whatsoever which may be suffered or incurred by the Acquiror, directly or
indirectly, arising out of any material assessment or reassessment levied upon
Pawnbroker for tax, interest and/or penalties relating to any period of business
operations up to and including the Closing Date and all claims, demands, costs
(including legal fees, disbursements and taxes as charged on a lawyer and own
client basis) and expenses of any kind whatsoever in respect of the foregoing.
5.2 Notwithstanding the Completion of the transactions contemplated under this
Agreement, the representations, warranties and acknowledgements of the Acquiror
contained in this Agreement or any certificates or documents delivered by the
Acquiror pursuant to this Agreement shall survive the
16
Completion and shall continue in full force and effect thereafter for the
benefit of the Shareholders and Pawnbroker. If any of the representations,
warranties or acknowledgements given by the Acquiror is found to be untrue or
there is a breach of any covenant or agreement in this Agreement on the part of
the Acquiror, then the Acquiror shall indemnify and save the Shareholders and
Pawnbroker harmless from and against any and all liability, claims, debts,
demands, suits, actions, penalties, fines, losses, costs (including legal fees,
disbursements and taxes as charged on a lawyer and own client basis), damages
and expenses of any kind whatsoever which may be brought or made against the
Shareholders or Pawnbroker by any person, firm or corporation of any kind
whatsoever or which may be suffered or incurred by the Shareholders or
Pawnbroker, directly or indirectly, arising out of or as a consequence of any
such misrepresentation or breach of warranty, acknowledgement, covenant or
agreement.
6. CLOSING
6.1 At the Time of Closing, the Shareholders shall deliver to the solicitors
for the Acquiror:
(a) a certified true copy of the resolutions of the directors of
Pawnbroker evidencing that the directors of the Pawnbroker have
approved this Agreement and all of the transactions of Pawnbroker
contemplated hereunder, specifically referring to:
(i) the exchange and transfer of the Pawnbroker Shares from the
Shareholders to the Acquiror as provided for in this
Agreement;
(ii) the cancellation of the share certificates (the "Old Share
Certificates") representing the Pawnbroker Shares held as
set forth in paragraph B of the recitals to this Agreement;
and
(iii) the issuance of a new share certificate (the "New Share
Certificate") representing the Pawnbroker Shares registered
in the name of the Acquiror;
(b) the Old Share Certificates;
(c) the New Share Certificate;
(d) the Pawnbroker Solicitor Opinion;
(e) a certificate of confirmation from each of the Shareholders
substantially in the form of Schedule G to this Agreement; and
(f) any other materials that are, in the opinion of the solicitors for the
Acquiror, reasonably required to complete the transactions
contemplated under this Agreement.
6.2 At the Time of Closing, the Acquiror shall deliver to the solicitors for
the Shareholders:
(a) certified true copies of the resolutions of the directors and, if
shareholder approval is required, of the shareholders of the Acquiror,
evidencing that the directors and, as applicable, the shareholders, of
the Acquiror have approved this Agreement and all of the transactions
of the Acquiror contemplated hereunder;
(b) share certificates representing the Digital Shares registered in the
names of the Shareholders as provided for in paragraph 1.2 of this
Agreement;
17
(c) the Digital Solicitor Opinion; and
(d) a certificate of confirmation signed by a director or officer of the
Acquiror substantially in the form of Schedule H to this Agreement.
7. GENERAL
7.1 Time and each of the terms and conditions of this Agreement shall be of the
essence of this Agreement and any waiver by the parties of this paragraph 7.1 or
any failure by them to exercise any of their rights under this Agreement shall
be limited to the particular instance and shall not extend to any other instance
or matter in this Agreement or otherwise affect any of their rights or remedies
under this Agreement.
7.2 The Schedules to this Agreement incorporated by reference and the recitals
to this Agreement constitute a part of this Agreement.
7.3 This Agreement constitutes the entire Agreement between the parties hereto
in respect of the matters referred to herein and there are no representations,
warranties, covenants or agreements, expressed or implied, collateral hereto
other than as expressly set forth or referred to herein.
7.4 The headings in this Agreement are for reference only and do not constitute
terms of the Agreement.
7.5 The provisions contained in this Agreement which, by their terms, require
performance by a party to this Agreement subsequent to the Closing Date of this
Agreement, shall survive the Closing Date of this Agreement.
7.6 No alteration, amendment, modification or interpretation of this Agreement
or any provision of this Agreement shall be valid and binding upon the parties
hereto unless such alteration, amendment, modification or interpretation is in
written form executed by the parties directly affected by such alteration,
amendment, modification or interpretation.
7.7 Whenever the singular or masculine is used in this Agreement the same shall
be deemed to include the plural or the feminine or the body corporate as the
context may require.
7.8 The parties hereto shall execute and deliver all such further documents and
instruments and do all such acts and things as any party may, either before or
after the Closing Date, reasonably require in order to carry out the full intent
and meaning of this Agreement.
7.9 Any notice, request, demand and other communication to be given under this
Agreement shall be in writing and shall be delivered by hand to the appropriate
party at the address as first set out above or to such other addresses or by
such other means as may be designated in writing by the parties hereto in the
manner provided for in this paragraph, and shall be deemed to have been received
on the date of delivery by hand, or if delivered by e-mail or telecopy, then on
the date transmission completes.
7.10 This Agreement shall be subject to, governed by, and construed in
accordance with the laws of the State of Nevada and the federal laws of the
United States of America pertaining thereto.
18
7.11 This Agreement may be signed by the parties in as many counterparts as may
be deemed necessary, each of which so signed shall be deemed to be an original,
and all such counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of the
Effective Date:
SIGNED, SEALED & DELIVERED )
by XXXXXX XXXXXXXX in the presence of: )
)
/s/ Xxxxxx Carmate )
----------------------------------------) /s/ Xxxxxx Xxxxxxxx
Signature of Witness ) -----------------------------------
) XXXXXX XXXXXXXX
Name: Xxxxxx Carmate )
Address: 0000 Xxxxxx Xx. )
Xxxx, XX 00000 )
Occupation: Hotel Hospitality )
SIGNED, SEALED & DELIVERED )
by XXXXXX XXXXXXXX in the presence of: )
)
/s/ Xxxxxx Carmate )
----------------------------------------) /s/ Xxxxxx Xxxxxxxx
Signature of Witness ) -----------------------------------
) XXXXXX XXXXXXXX
Name: Xxxxxx Carmate )
Address: 0000 Xxxxxx Xx. )
Xxxx, XX 00000 )
Occupation: Hotel Hospitality )
SIGNED, SEALED & DELIVERED )
by WILLIAM GALINE in the presence of: )
)
/s/ Xxxx Xxxxxx )
----------------------------------------) /s/ William Galine
Signature of Witness ) -----------------------------------
) WILLIAM GALINE
Name: Xxxx Xxxxxx )
Address: 000 Xxxxxxx Xxx. )
Reno, NV )
Occupation: Attorney )
19
THE CORPORATE SEAL of )
XXXXXXXXXX.XXX INC. )
was hereunto affixed in the presence )
of its authorized signatory(ies): )
) c/s
--------------------------------------- )
Name: --------------------------------- )
Title: -------------------------------- )
)
--------------------------------------- )
Name: --------------------------------- )
Title: -------------------------------- )
THE CORPORATE SEAL of )
DIGITAL SIGN CORPORATION )
was hereunto affixed in the presence )
of its authorized signatory(ies): )
) c/s
/s/ Xxxx XxXxxx )
--------------------------------------- )
Name: Xxxx XxXxxx )
Title: President )
20
SCHEDULE A
Pawnbroker Solicitor Opinion
----------------------------
(letterhead of solicitors for the Shareholders and Pawnbroker)
--, 199--
----------------------------
x/x Xxxxxxx & Xxxxxx
Xxxxxxxxxx xxx Xxxxxxxxxx
X.X. Xxx 00000
0000-0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Attention: -----------------
Dear Sirs:
Re: Share Exchange Agreement (the "Agreement") made effective as of the 14 day
of May, 1999 between Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxxx
(collectively the "Shareholders"), Xxxxxxxxxx.xxx, Inc. ("Pawnbroker") and
Digital Sign Corporation (the "Acquiror")
We are the solicitors for the Shareholders and for Pawnbroker. We provide this
opinion pursuant to subparagraphs 2.1(c) and 6.1(f) of the Agreement. We have
also acted as counsel for Pawnbroker and the Shareholders in connection with the
negotiation, execution and completion of the Agreement.
We have considered such questions of law and examined such statutes and
regulations, corporate records, certificates and other documents and have made
such other examinations, searches and investigations as we have considered
necessary for the purpose of the opinion hereinafter expressed. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or as
photocopies.
Based on and subject to the foregoing, we are of the opinion that:
1. Pawnbroker is a company duly incorporated and validly existing under the
laws of the State of Nevada. Pawnbroker is in good standing with respect to
the filing of annual reports with the ----- Registrar of Companies for the
State of Nevada.
2. To the best of our knowledge, Pawnbroker has all requisite corporate power
and authority to conduct the business now carried on by it, and to own its
property and assets as described in the Agreement and Pawnbroker has all
requisite corporate power and authority to enter into and to perform its
obligations under the Agreement.
3. All necessary steps and corporate action and proceedings have been taken to
authorize the execution and delivery of the Agreement by Pawnbroker.
4. To the best of our knowledge, neither the execution and delivery of, nor
the performance of its obligations under the Agreement by Pawnbroker will
conflict with or constitute a breach or default under the constating
documents of Pawnbroker or any commitment, agreement or other instrument to
which Pawnbroker is a party or by which it is bound.
5. To the best of our knowledge, there are no claims, judgement, actions,
suits, litigation, proceedings or investigations, actual, pending or
threatened against Pawnbroker which might materially affect any business,
properties, assets, prospects or conditions, financial or otherwise, of
Pawnbroker or which could result in any material liability to Pawnbroker.
6. The authorized capital of Pawnbroker consists of ----- common shares of
which only 1,000 common shares (the "Pawnbroker Shares") are validly
authorized, created, allotted, issued and outstanding, and, to the best of
our knowledge, are fully paid for and non-assessable, as at the date
hereof.
7. All necessary steps and corporate action and proceedings have been taken to
effect the valid transfer of the Pawnbroker Shares to the Acquiror as
contemplated under the Agreement. The Acquiror is the registered owner of
the Pawnbroker Shares on the books and records of Pawnbroker.
The opinion expressed is subject to the qualification that enforceability of the
Agreement may be limited by applicable bankruptcy, insolvency or other laws
affecting creditors' rights generally, and that equitable remedies such as the
remedies of specific performance or injunction are in the discretion of the
court from which they are sought.
Yours truly,
-----------------------------
Per:
-----------------------------
-2-
SCHEDULE B
Digital Solicitor Opinion
-------------------------
(letterhead of solicitors for the Acquiror)
-----, 199-
----------------------------
c/o ------------------------
Attorneys at Law
----------------------------
Attention: Mr. Xxxx Xxxxxx
Dear Sirs:
Re: Share Exchange Agreement (the "Agreement") made effective as of the 14 day
of May, 1999 between Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxxx
(collectively the "Shareholders"), Xxxxxxxxxx.xxx, Inc. ("Pawnbroker") and
Digital Sign Corporation (the "Acquiror")
We are the solicitors the Acquiror. We provide this opinion pursuant to
subparagraphs2.2(b) and 6.2(c) of the Agreement. We have acted as counsel for
the Acquiror in connection with the negotiation, execution and completion of the
Agreement.
We have considered such questions of law and examined such statutes and
regulations, corporate records, certificates and other documents and have made
such other examinations, searches and investigations as we have considered
necessary for the purpose of the opinion hereinafter expressed. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or as
photocopies.
Based on and subject to the foregoing, we are of the opinion that:
1. The Acquiror is a company duly incorporated and validly existing under the
laws of the State of Delaware. The Acquiror is in good standing with
respect to the filing of annual reports with the ----- Registrar of
Companies for the State of Delaware.
2. The Acquiror has all requisite corporate power and authority to enter into
and to perform its obligations under the Agreement.
3. All necessary steps and corporate action and proceedings have been taken to
authorize the execution and delivery of the Agreement by the Acquiror.
4. To the best of our knowledge, neither the execution and delivery of, nor
the performance of its obligations under the Agreement by the Acquiror will
conflict with or constitute a breach of or default under the constating
documents of the Acquiror or any commitment, agreement or other instrument
to which the Acquiror is a party or by which it is bound.
5. As at the Effective Date of the Agreement, the authorized capital of the
Acquiror consisted of common shares without par value of which 38,499,.000
were validly authorized, created, allotted, issued and outstanding, and, to
the best of our knowledge, fully paid for and non-assessable.
6. All necessary steps and corporate action and proceedings have been taken to
effect the valid issuance of the Digital Shares to the Shareholders as
contemplated under the Agreement.
The opinion expressed is subject to the qualification that enforceability of the
Agreement may be limited by applicable bankruptcy, insolvency or other laws
affecting creditors' rights generally, and that equitable remedies such as the
remedies of specific performance or injunction are in the discretion of the
court from which they are sought.
Yours truly,
----------------------------
Per:
----------------------------
-2-
SCHEDULE C
Pawnbroker Assets
-----------------
All rights, title and interest in and to all tangible and intangible property
associated with the business (the "Business") carried on at, through or in
association with either or both of the internet domain names "Xxxxxxxxxx.xxx"
and "Xxxxxxxxxxx.xxx" (the "Domain Names"), and all related internet website
development (collectively, the "Website"), including without limitation:
(i) the contractual right to maintain registration of the Domain
Names with Internic (Network Solutions Inc.);
(ii) all URL's associated with the Domain Names or the Website;
(iii) all databases, books and records relating to the Business
including, without limitation, all recorded information relating
to customers of the Business, and advertisers on and visitors to
the Website;
(iv) copyright in all graphics and text displayed at the Website;
(v) copyright in all customized (non-retail) software relating to the
Website or used in the Business;
(vi) all trade-xxxx and trade name rights that the Shareholder may
have anywhere in the world in respect of the Business, the
Website or either of the Domain Names;
(vii) all goodwill associated with the Business, the Website or either
of the Domain Names; and
(viii) all incidental furniture and fixtures used in the Business.
Permitted Encumbrances
----------------------
NIL.
SCHEDULE D
Pawnbroker Directors, Officers, Employees, Contractors and Consultants
----------------------------------------------------------------------
Name and Address Relationship Compensation Arrangement
---------------------------------------------------- -------------------------- --------------------------------------
Xxxxxx Xxxxxxxx, 0000 Xxxxxxxxxx Xxx, Xxxxxx, Director and President None.
Nevada, 89431
---------------------------------------------------- -------------------------- --------------------------------------
Xxxxxx Xxxxxxxx, 0000 Xxxxxxxxxx Xxx, Xxxxxx, Director and Vice None.
Nevada, 89431 President
---------------------------------------------------- -------------------------- --------------------------------------
William Galine, 0000 Xxxxxxxxx Xxxxxx, Xxxx, Director and Secretary None.
Nevada, 89509
---------------------------------------------------- -------------------------- --------------------------------------
SCHEDULE E
Pawnbroker Material Contracts
-----------------------------
1. (Computer Equipment Lease)
2. (Premises Lease); and
3. (Telephone Lease).
-2-
Draft #2: May 12/99: 695325
SCHEDULE F
Acquiror Directors, Officers, Employees, Contractors and Consultants
--------------------------------------------------------------------
---------------------------------------------------- -------------------------- --------------------------------------
Name and Address Relationship Compensation Arrangement
---------------------------------------------------- -------------------------- --------------------------------------
---------------- ---------------- ----------------
---------------------------------------------------- -------------------------- --------------------------------------
---------------- ---------------- ----------------
---------------------------------------------------- -------------------------- --------------------------------------
---------------- ---------------- ----------------
---------------------------------------------------- -------------------------- --------------------------------------
---------------- ---------------- ----------------
---------------------------------------------------- -------------------------- --------------------------------------
---------------- ---------------- ----------------
---------------------------------------------------- -------------------------- --------------------------------------
SCHEDULE G
Certificate of Confirmation
---------------------------
Pursuant to subparagraph 6.1(e) of the Share Exchange Agreement made effective
as of the 14 day of May, 1999 (the "Agreement") between Xxxxxx Xxxxxxxx, Xxxxxx
Xxxxxxxx and Xxxxxxx Xxxxxx (collectively the "Shareholders"), Xxxxxxxxx.xxx,
Inc. and Digital Sign Corporation (the "Acquiror"), the undersigned Shareholder
hereby confirms to the Acquiror that the representations and warranties of the
Shareholders contained in the Agreement or contained in any certificates or
documents delivered by them or any of them pursuant to the Agreement are true
and correct in every respect as of the Time of Closing of the Agreement being
11:00 o'clock a.m. local time in Vancouver, B.C. on the 16 day of June, 1999.
Dated at --------, this 16th day of June, 1999.
------------------------------------------
-31-
SCHEDULE H
Certificate of Confirmation
---------------------------
Pursuant to subparagraph 6.2(d) of the Share Exchange Agreement made effective
as of the 14 day of May, 1999 (the "Agreement") between Xxxxxx Xxxxxxxx, Xxxxxx
Xxxxxxxx and Xxxxxxx Xxxxxx (collectively the "Shareholders"), Xxxxxxxxx.xxx,
Inc. and Digital Sign Corporation (the "Acquiror"), the Acquiror confirms to the
Shareholders that the representations and warranties of the Acquiror contained
in the Agreement or contained in any certificates or documents delivered by it
pursuant to the Agreement are true and correct in every respect as of the Time
of Closing of the Agreement, being 11:00 o'clock a.m. local time in Vancouver,
B.C. on the 16th day of June, 1999.
Dated at Vancouver, British Columbia, this 16th day of June, 1999.
Digital Sign Corporation
Per:
---------------------------------
----------------------, Director
