THIS SHARE EXCHANGE AND FINANCE AGREEMENT is made the 16th day of December,
0000,
XXXXX:
INFORETECH GOLF TECHNOLOGY 2000 INC.,
a British Columbia non-reporting company
having an office and place of business at
Xxxxx 000, 0000 - 000xx Xxxxxx, Xxxxxx,
Xxxxxxx Xxxxxxxx, X0X 0X0
(herein referred to as "Inforetech")
OF THE FIRST PART
AND:
XXXXXX XXXXXX, XX., Businessman,
of 2385 - 000X Xxxxxx, Xxxxx Xxxx,
Xxxxxxx Xxxxxxxx
OF THE SECOND PART
AND:
XXXX XXXXXX, Businesswoman,
of 0000 - 000X Xxxxxx, Xxxxx Xxxx,
Xxxxxxx Xxxxxxxx
OF THE THIRD PART
AND:
XXXXX XXXXXX, Businessman,
of 00000 Xxxxxxx Xxxxx, Xxxxxx,
Xxxxxxx Xxxxxxxx, X0X 0X0
OF THE FOURTH PART
AND:
XXXXXX X. XXXXXX, XX., Businessman,
of 00000-00X Xxxxxx, Xxxxxxx,
Xxxxxxx Xxxxxxxx, X0X 0X0
OF THE FIFTH PART
AND:
XXXXX XXXXXX, Businessman,
of #1 - 00000 Xxxxxx Xxxxx, Xxxxx Xxxx
Xxxxxxx Xxxxxxxx
OF THE SIXTH PART
AND:
XXXXX XXXXXX, Businesswoman
of 0000 000X Xxxxxx, Xxxxxx
Xxxxxxx Xxxxxxxx
OF THE SEVENTH PART
(Xxxxxx Xxxxxx, Xx., Xxxx Xxxxxx, Xxxxxx Xxxxxx, Xx., Xxxxx Xxxxxx,
Xxxxx Xxxxxx, and Xxxxx Xxxxxx are herein together referred to as the
"Founders")
AND:
DIVERSIFIED MARKETING SERVICES, INC.,
a Nevada public company having a registered
office at 000 X. Xxxxxxxx Xxxxxx, Xxxxxx Xxxx,
Xxxxxx and a business office at Xxxxx 0000,
0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx, X.X.,
X0X 0X0
(herein referred to as "Diversified")
OF THE EIGHTH PART
AND:
XXXXXX CAPITAL CORP.,
a British Columbia non-reporting company
having an office and place of business at
Xxxxx 0000, 000 Xxxx Xxxxxxx Xxxxxx,
Xxxxxxxxx, X.X., X0X 0X0
(herein referred to as "Xxxxxx")
OF THE NINTH PART
WHEREAS:
A. The Founders are the owners of 7,095,750 Class "A" Shares (the "Founders
Shares");
X. Xxxxxx and Inforetech entered into a letter of intent on September 16th,
1999, pursuant to which Xxxxxx lent Inforetech $1,500,000;
C. The parties have agreed to replace and supersede the letter of intent with
this Agreement;
D. Pursuant to an offering in or about January 1999, Inforetech sold $525,000
of 10% Convertible Notes (the "Notes") to residents of Washington State.
The holders of the Notes received Class C Shares to facilitate voting
rights granted to them and have the right to convert the Notes into Units
of Inforetech at a price of $1.00 per Unit. The Noteholders, or Unitholders
in the case of those Noteholders who have converted, are listed in Schedule
"A" hereto;
E. Pursuant to an offering in or about June 1999, Inforetech sold 225,000
Units at a price of $1.00 per Unit to residents of Washington State. The
holders of such Units are listed in Schedule "A" hereto;
F. Inforetech has certain non-interest bearing loans outstanding in an
aggregate amount of $491,000 and has agreed to grant such lenders the right
to convert such loans into Class A shares at a conversion price of $1.00
per Class "A" share. The lenders thereunder are listed in Schedule "A"
hereto;
G. Inforetech has agreed to grant certain persons the right to receive shares,
units or options for services rendered, or to be rendered to Inforetech;
all of which are described in Schedule "A" hereto;
H. The Xxxxxx Loan grants Xxxxxx the right to convert such indebtedness into
Class A shares at a price of $1.00 per Class "A" share;
I. The parties are desirous of exchanging the Founders Shares, and requesting
the parties listed in Schedule "A", who are not Founders, to exchange all
the issued and outstanding shares of Inforetech and all rights to receive
Inforetech shares into shares in the capital stock of Diversified, or
shares that are convertible into shares in the capital stock of
Diversified;
J. In order to effect the share exchange contemplated herein and to ensure an
efficient cross border corporate structure is achieved the parties have
agreed to create a new British Columbia subsidiary of Diversified, with
certain classes of preferred shares and to enter into Put and Call
Agreements, all in accordance with the terms and conditions herein
contained.
NOW THEREFORE WITNESSETH that in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties hereto covenant and agree
as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Definitions
1.01 In this Agreement, including the recitals hereto, the following words and
phrases shall have the following meanings:
(a) "Affiliate" means a person who controls, is controlled by, or is under
common control with another person. The term "control" (including the
terms "controlled", "controlled by" and "under common control with")
means the possession, directly or indirectly, through one or more
intermediaries, whether through the ownership of voting securities, by
contract or otherwise, the power to direct or cause the direction of
another person;
(b) "Class A share(s)" means Class "A" Voting Common Shares without par
value in the capital of Inforetech;
(c) "Class B share(s)" means Class "B" Voting Common Shares without par
value in the capital of Inforetech;
(d) "Class C share(s)" means Class "C" Voting Common Shares without par
value in the capital of Inforetech;
(e) "Class A Preferred Shares" means a class of shares in the capital
stock of Holdco, to be created prior to Closing, which shares shall
have the following rights and restrictions:
(i) be entitled to dividends out of the assets of Holdco in an amount
equal to the dividends paid on a single common share of
Diversified; and
(ii) be redeemable at the holder's option for an amount equal to the
value of a single common share of Diversified (from time to time)
and would be entitled to a preference on liquidation in like
amount but would be entitled to no more in the event of a
liquidation;
(f) "Class B Preferred Shares" means a class of shares in the capital
stock of Holdco, to be created prior to Closing, which shares shall
have rights and restrictions exactly the same as those of the Class A
Preferred Shares except that each Class B Preferred Share will
participate pro rata (without preference or limit) with the common
shares of Holdco on a liquidation;
(g) "Closing" means the completion of the transactions contemplated by
this Agreement;
(h) "Completion Date" means January 17th, 2000 or such other date as may
be agreed upon in writing by the parties;
(i) "Company Act" means the Company Act (British Columbia), as amended
from time to time;
(j) "Diversified Financial Statements" means the audited financial
statements of Diversified for the years ended December 31st, 1996,
1997, and 1998 and the period ended February 28th, 1999 and the
unaudited financial statements as of September 30th, 1999; copies of
which are attached hereto as Schedule "B";
(k) "Diversified Option Plan" means a plan for the granting of options on
common shares of Diversified to be implemented at or immediately
following Closing and pursuant to which Diversified shall issue
options to acquire common shares of Diversified to those parties, and
in the denominations and for the option exercise price, described in
Schedule C hereto;
(l) "Diversified Shares" means common shares of Diversified issuable to
the Class "A" shareholders of Inforetech, at Closing or the Class A or
B Preferred Shares being Put to or Called by Diversified; and
(m) "Diversified Warrants" means warrants for common shares of Diversified
to be issued to existing Warrantholders, by Diversified, substantially
in the form of warrant, mutatis mutandis, previously delivered to such
Warrantholder by Inforetech;
(n) "Exchange Act" means the Securities Exchange Act of 1934 of the United
States of America;
(o) "Financial Statements" means the audited financial statements of
Inforetech prepared as at July 31st, 1999 which are attached to this
Agreement as Schedule "D";
(p) "Holdco" means a British Columbia non-reporting company to be formed
by Diversified, prior to Closing, to facilitate the transactions
contemplated herein;
(q) "Inforetech Shares" means all shares in the capital of Inforetech that
as of Closing will be issued and outstanding;
(r) "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, of the United States of America;
(s) "Market Maker" means a securities broker or dealer registered under
the Exchange Act and a member of the National Association of
Securities Dealers. Inc., that, directly or indirectly, submits
quotations to buy or sell, at a quoted price or otherwise, common
stock of Diversified for publication in the over-the-counter
Electronic Bulletin Board operated by the National Association of
Securities Dealers, Inc.;
(t) "Market Price" means the weighted average trading price of the shares
of Diversified on the NASD:OTC Electronic Bulletin Board over 30
trading days prior to the date of at which such price is to be
determined;
(u) "Material Adverse Effect" as use din this Agreement shall mean any
change or effect that, individually or when taken together with all
other such changes or effects, would be reasonably likely to be
materially adverse to the assets, liabilities, financial condition,
results of operations or current or future business of a party and its
subsidiaries, if any, taken as a whole;
(v) "Xxxxxx Loan" means the agreement of Xxxxxx to advance up to
$1,500,000 described in preamble B hereto and evidenced by a Loan
Agreement dated October 27th, 1999;
(w) "Noteholders" means those parties who hold Notes issued by Inforetech
that are convertible into Units.
(x) "Permitted Encumbrances" means the security debts and debt instruments
listed on the attached Schedule "E";
(y) "Person" includes a firm, corporation or other entity;
(z) "Rule 144" means Rule 144 of the Securities Act;
(aa) "Securities Act" means the Securities Act of 1933 of the United States
of America;
(bb) Convertible Notes" means notes for an aggregate amount of $525,000
that were issued to residents of Washington State pursuant to an
offering in or about January 1999;
(cc) "Units" means a Unit issued by Inforetech that consists of one Class
"A" share and a warrant to purchase a further Class "A" share for a
period of two (2) years from the date of issuance of the Units at a
price of $2.00 per Class "A" share;
(dd) "Vindemiola Loans" means certain non-interest bearing loans by
Vindemiola Limited, and RCS Financial Group Inc.;
(ee) "Warrantholder" means the holder of a warrant to purchase Class "A"
shares.
Captions and Section Numbers
1.02 The headings and section references in this Agreement are for convenience
of reference only and do not form a part of this Agreement and are not intended
to interpret, define or limit the scope, extent or intent of this Agreement or
any provision thereof.
Extended Meanings
1.03 The words "hereof", "herein", "hereunder" and similar expressions used in
any clause, paragraph or section of this Agreement shall relate to the whole of
this Agreement and not to that clause, paragraph or section only, unless
otherwise expressly provided.
Number and Gender
1.04 Whenever the singular or masculine or neuter is used in this Agreement, the
same shall be construed to mean the plural or feminine or body corporate where
the context of this Agreement or the parties hereto so require.
Section References
1.05 Any reference to a particular "article", "section", "subsection" or other
subdivision is to the particular article, section or other subdivision of this
Agreement.
Governing Law
1.06 This Agreement and all matters arising hereunder shall be governed by,
construed and enforced in accordance with the laws of the Province of British
Columbia and all disputes arising under this Agreement shall be referred to the
Courts of the Province of British Columbia.
Currency
1.07 All sums of money referred to herein or to be paid or calculated pursuant
to this Agreement are in the lawful currency of the United States of America
unless otherwise expressly stated.
Schedules
1.08 The schedules attached hereto are hereby incorporated into this Agreement
and form a part hereof. All terms defined in this Agreement shall have the same
meaning in such schedules. The schedules to this Agreement are as follows:
Schedule "A" - List of Class "A" Shareholders, Noteholders, Warrantholders
Options and parties with a right to subscribe for Class "A" shares;
Schedule "B" - Diversified Financial Statements
Schedule "C" - Options to be granted by Diversified to Directors, Officers
and employees of Inforetech
Schedule "D" - Financial Statements
Schedule "E" - Permitted Encumbrances
ARTICLE 2
SHARE EXCHANGE AND RESTRUCTURE OF INFORETECH AND DIVERSIFIED
Share Exchange
2.01 The parties have agreed that in order to effect the share exchange between
the existing shareholders of Inforetech and Diversified and to ensure an
efficient cross-border corporate structure is achieved the following matters
shall be completed as part of the overall transaction:
(a) Diversified shall, forthwith, incorporate Holdco, which company shall
have an authorized capital of 50,000,000 shares, consisting of:
(i) 10,000,000 common shares without par value;
(ii) 20,000,000 Class "A" Preferred Shares; and
(iii) 20,000,000 Class "B" Preferred Shares;
(b) Diversified shall take such steps as may be necessary to:
(i) forthwith create a class of Non-participating Voting shares
(the "NP Shares") with each such share having the same voting
rights as the Diversified common shares, and shall issue such
number of NP Shares as are necessary to facilitate the
transactions herein contemplated;
(ii) obtain approval of its shareholders and the appropriate Nevada
government agency to change its corporate name to "Inforetech
Inc.", or such similar name as may be agreed to by the parties;
and
(iii) restructure its issued capital, without a commensurate decrease
in its authorized capital, such that the existing shareholders
of Diversified shall own no more than 6,200,000 common shares.
(c) Those Founders who have the ability to transfer all or a part of their
Founders Shares and utilize the CDN.$500,000 lifetime capital gains
exemption under the Income Tax Act of Canada shall exchange such
portion of their Founders Shares, on a one for one basis, for units
(the "Holdco Units"), each unit consisting of a NP Share and a Class
A Preferred Share. The value of the Founders Shares shall be based
upon their fair market value as determined by an independent valuators
report being prepared by Xxxxx & Xxxxx or such other valuators as may
be acceptable to the parties (the "Valuation Report"); and
(d) The Founders Shares not transferred under section 2.01(b) shall be
exchanged by the Founders, on a one for one basis, for units (the
"Holdco B Units"), each Unit consisting of a NP Share and a Class "B"
Preferred Share;
(e) At Closing, the Founders and Diversified shall enter into Put and Call
Agreements. The Put Agreement shall grant the Founders the right to
put a Unit to Diversified in exchange for one common share of
Diversified, as such common shares are constituted after the
restructure of Diversified set out in (b) above. The Call Agreement
shall grant Diversified the right to call for a Holdco A or B Unit in
exchange for one common share of Diversified. The Call right will not
be exercisable unless and until the shareholder's redemption privilege
in respect of a particular redeemable preferred share has been
exercised;
(f) The special rights and restrictions on the Class A and B Preferred
Shares will contain appropriate anti-dilution provisions.
2.02 Inforetech and the Founders shall use their best efforts to obtain the
agreement of all those persons, other than the Founders, set out in Schedule "A"
hereto to exchange, at the Closing, their Class A shares, warrants, options or
rights to receive Class "A" shares of Inforetech into shares, warrants, options
or rights for common shares of Diversified. Inforetech shall, if the Inforetech
security holders to whom such offers to exchange are made include persons who
are not "accredited investors" as defined under Regulation D promulgated under
the Securities Act, prepare an offering memorandum to qualify the proposed share
exchange, with residents of the United States, under Rule 506 promulgated under
Regulation D of the Securities Act.
2.03 Diversified agrees, at or immediately after Closing, to create a stock
option plan for the current Directors, Officers and employees of Inforetech and
to grant such persons options to purchase common shares of Diversified in the
amounts and at the exercise prices set out in Schedule "C" hereto and in
accordance with option agreements in a form acceptable to Diversified and the
Founders.
ARTICLE 3
FINANCING OF DIVERSIFIED
The Initial Financing
3.01 Contemporaneous with the Closing of the acquisition of all the Founders
Shares by Diversified, Xxxxxx will cause to be completed a private placement
(the "First Private Placement") of shares of Diversified, in accordance with
exemptions from the registration requirements under the Securities Act and
applicable state securities laws, to raise a minimum of $1,500,000 at a price of
not less than $4.00 per share.
Trading of the shares issued on the First Private Placement will be
restricted and the share certificates therefore shall bear a restrictive legend
in accordance with Rule 144.
Use of Proceeds
3.02 Funds received by Diversified on the First Private Placement shall be
advanced to Inforetech, as an intercompany loan, and shall be utilized by
Inforetech to repay, or if not sufficient to repay, to reduce, the principal
plus accumulated interest on the Xxxxxx Loan.
Release of Xxxxxx Loan and Security
3.03 Upon payment of the Xxxxxx Loan, Xxxxxx shall provide a release of all
security granted by Inforetech in regard thereto.
3.04 At the Closing, in consideration of Xxxxxx indentifying investors in the
First Private Placement and introducing Diversified to Inforetech, Diversified
shall pay to Xxxxxx $50,000 and shall issue to Xxxxxx 100,000 shares in the
capital of Diversified at a deemed price equivalent to the price per share at
which shares were issued on the First Private Placement. Such shares shall be
restricted from trading and the share certificates therefore shall bear a
restrictive legend in accordance with Rule 144.
The Second Financing
3.05 On, or before, January 31, 2000, Xxxxxx will either subscribe for, or cause
to be completed, in compliance with the Securities Act and the laws of each
jurisdiction in which such securities are offered or sold, a private placement
to raise a minimum of $1,650,000 by issuance of not more than 400,000 common
shares of Diversified.
Trading of the shares issued on the Second Private Placement will be
restricted and the share certificates therefore shall bear a restrictive legend
in accordance with Rule 144.
Use of Proceeds of Second Financing
3.06 Upon completion of the Second Private Placement, the parties agree that
Diversified shall advance to Inforetech, as an intercompany loan, the sum of
$500,000; which funds shall be utilized by Inforetech to repay a portion of the
indebtedness of Inforetech due to Xxxxxx Xxxxxx, Xx. Further, within 120 days
of closing of the Second Private Placement, Diversified shall advance a further
$500,000 to Inforetech, as an intercompany loan, with such funds being utilized
to further reduce the indebtedness of Inforetech due to Xxxxxx Xxxxxx, Xx.
3.07 The parties acknowledge that the Founders anticipate that Inforetech will
require cash injections of approximately $500,000 in each of January, February
and March of 2000 to fund its business development. Accordingly, if the Second
Financing is not completed in a timely manner, Xxxxxx agrees to assist
Inforetech, including making further loans to Inforetech, to obtain interim
funding to meet its cash flow requirements.
Further it is the intention of the parties that Xxxxxx will continue, after
Closing, to act in an advisory capacity to Inforetech and Diversified and in
such capacity will assist in raising the necessary funds, from time to time, to
finance the on going development of the business of Inforetech. Such assistance
shall include, but not necessarily be limited to:
(a) introductions to potential Market Makers;
(b) introduction to Brokers and Broker Dealers in the United States;
and
(c) introduction to accredited private and institutional investors.
ARTICLE 4
MANAGEMENT REMUNERATION
4.01 Xxxxxx, Inforetech and Diversified agree that after the Closing the parties
shall review the existing compensation of the management of Inforetech and shall
use their best efforts to agree upon appropriate compensation for senior
management (including but not limited to Xxxxxx X. Xxxxxx, Xx. and Xxxxxx
Xxxxxx, Xx.). In the event the parties and senior management cannot agree on
appropriate compensation, the matter shall be referred to a mutually acceptable
third party and failing such agreement to arbitration under the provisions of
the Commercial Arbitration Act of British Columbia.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF THE FOUNDERS AND INFORETECH
Representations and Warranties
5.01 The Founders and Inforetech jointly and severally represent and warrant to
Diversified and Xxxxxx, with the intent that Diversified and Xxxxxx will rely
thereon in entering into this Agreement and in concluding the transactions
contemplated hereby, that, to the best of their knowledge, information and
belief:
(a) Inforetech is duly incorporated and validly exists in good standing
with respect to the filing of annual returns under the Company Act,
has the necessary corporate power, authority and capacity to own its
property and assets and to carry on its business as presently
conducted and is duly licensed to carry on business in all
jurisdictions in which it presently carries on business. Inforetech
has covenanted to continue under the provisions of the Canada Business
Corporations Act and is in the process of completing all necessary
steps to become a Canadian federal company prior to Closing;
(b) Inforetech is not a "reporting company" under the Company Act or a
"reporting issuer" under the Securities Act (British Columbia);
(c) subject to the patent limitations expressed below, Inforetech owns and
possesses and has good and marketable title to all of its properties
and assets, both real and personal, including those properties and
assets described in the Financial Statements or acquired since the
date of the Financial Statements, free and clear of all liens, charges
and encumbrances, save and except the Permitted Encumbrances, and
Inforetech is not in default under any Permitted Encumbrance.
Inforetech has filed for patent protection in regard to several unique
aspects of Inforetech's "Informer 2000" technology, however the
parties are aware of other competing technology in the industry and
accordingly, neither the Founders nor Inforetech warrant the validity
of any existing patents or the availability of patent protection for
the technology. Inforetech is the transferee of the technology which
is subject to a royalty interest and exclusive licences in favor of
the transferor for applications other than golf. Further, Inforetech
believes that if necessary it can acquire (but does not currently
have) a conditional licence from Optimal Recreation Solutions, LLP,
and its affiliates ("ORS") whereby Inforetech would become a licencee
of ORS's domestic and international patents for their competing
technology for "Golf Distance Measuring System and Method" if such
patents are upheld;
(d) none of Inforetech's properties or assets are in the possession of or
under the control of any other Person;
(e) the Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with Inforetech's prior fiscal periods. The Financial Statements
present fairly the financial position of Inforetech as at the date
thereof and fairly state Inforetech's income and deficit for the
period covered thereby;
(f) except to the extent reflected or reserved against in the Financial
Statements or incurred subsequent to the date thereof in the ordinary
and usual course of the business of Inforetech not exceeding $25,000,
in the aggregate, Inforetech does not have any outstanding
indebtedness or any liabilities or obligations (whether accrued,
contingent or otherwise);
(g) except for the transactions referred to or contemplated herein, or in
a Schedule hereto, since the date of the balance sheet included in the
Financial Statements there has not been:
(i) any changes in the condition or operations of the business,
assets or financial position of Inforetech which are,
individually or in the aggregate, materially adverse; or
(ii) any damage, destruction or loss or other event, development or
condition, of any character (whether or not covered by
insurance) which is not generally known or which has not been
disclosed to Diversified, which has or may materially and
adversely affect the business, assets, properties or future
prospects of Inforetech;
(h) all material financial transactions of Inforetech have been accurately
recorded in the books and records of Inforetech and such books and
records fairly present the financial position and the corporate
affairs of Inforetech;
(i) except for matters disclosed herein or in a Schedule hereto, since the
date of the Financial Statements, Inforetech has not:
(i) transferred, assigned, sold or otherwise disposed of any of the
assets shown in the Financial Statements or cancelled any debts
or claims except in each case in the ordinary and usual course
of business;
(ii) incurred or assumed any obligation or liability (fixed or
contingent), except unsecured current obligations and
liabilities incurred in the ordinary and normal course of
business;
(iii) declared or made, or committed itself to make, any payment of
any dividend or other distribution in respect of any of its
shares or purchased or redeemed any of its shares or split,
consolidated or reclassified any of its shares;
(iv) suffered any operating loss or any material extraordinary loss
or entered into any material commitment or transaction not in
the ordinary and usual course of business;
(v) waived or surrendered any right of substantial value;
(vi) made any gift of money or of any property or assets to any
Person;
(vii) amended or changed or taken any action to amend or change its
memorandum or articles;
(viii)increased or agreed to increase the pay of, or paid or agreed
to pay any pension, bonus, share of profits or other similar
benefit of, any director, employee or officer or former
director, employee or officer of Inforetech;
(ix) made payments of any kind to or on behalf of the Founders or
any affiliate or associate of the Founders or under any
management agreement with Inforetech save and except business
related expenses and salaries in the ordinary course of
business and at the regular rates payable to them;
(x) mortgaged, pledged, subjected to lien, granted a security
interest in or otherwise encumbered any of its assets or
property, whether tangible or intangible; or
(xi) authorized or agreed or otherwise have become committed to do
any of the foregoing;
(j) save and except as disclosed in writing to Diversified, the accounts
receivable shown in the Financial Statements or acquired subsequent to
the date thereof by Inforetech have been recorded by Inforetech in
accordance with its usual accounting practices. The reserve taken for
doubtful or bad accounts is adequate based on past experience of
Inforetech and is consistent with the accounting procedures used by
Inforetech in previous fiscal periods. There is nothing which would
indicate that such reserve is not adequate or that a higher reserve
should be taken;
(k) Inforetech does not own or possess any assets other than the assets
described in the Financial Statements;
(l) Inforetech is not party to, bound by or subject to any indenture,
mortgage, lease, agreement, instrument, judgement or decree which
would be violated or breached by, or under which default would occur
or which could be terminated, cancelled or accelerated, in whole or in
part, as a result of the execution and delivery of this Agreement or
the consummation of any of the transactions provided for herein;
(m) there is not any suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and applications for
review, in progress, pending or threatened against, or relating to
Inforetech or affecting its assets, properties or business which might
materially and adversely affect the assets, properties, business,
future prospects or financial condition of Inforetech; and there is
not presently outstanding against Inforetech any judgement, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator;
(n) Inforetech has kept the records required to be kept by the Company Act
and any other applicable corporate legislation and such records are
complete and accurate and contain all minutes of all meetings of
directors and members of Inforetech;
(o) except for permits required from the Federal Communications Commission
(the "FCC") for the Informer 2000 system, which permits cannot be
applied for until production of the system has commenced, Inforetech
holds all permits, licenses, consents and authorities issued by any
government or governmental authority, or any municipal, regional or
other authority, or any subdivision thereof, including, without
limitation, any governmental department, commission, bureau, board or
administrative agency, which are necessary or desirable in connection
with the conduct and operation of Inforetech's business and the
ownership or leasing of its assets and the conduct and operation of
Inforetech's business as the same are now owned, leased, conducted or
operated and is not in breach of or in default under any term or
condition of any thereof;
(p) Inforetech is not yet required to file a federal or provincial tax
return under applicable federal and provincial legislation, however,
Inforetech has filed, in a timely manner, all required Workers'
Compensation Board returns, and other reports and information required
to be filed with all applicable government authorities, agencies or
regulatory bodies;
(q) Inforetech has not:
(i) disposed of anything to a Person with whom it was not dealing
at arm's length for proceeds less than the fair market value
thereof; or
(ii) discontinued carrying on any business in respect of which non-
capital losses were incurred, and any non-capital losses which
Inforetech has are not losses from property or business
investment losses;
(r) the authorized capital of Inforetech consists of 150,000,000 shares
without par value, divided into 50,000,000 Class A, 50,000,000 Class B
and 50,000,000 Class C Voting Common Shares without par value of which
8,740,000 Class "A" common shares are issued and outstanding as fully
paid and non-assessable. Except as disclosed herein or in Schedule
"A" hereto, no Person has any agreement or option, present or future,
contingent, absolute or capable of becoming an agreement or option or
which with the passage of time or the occurrence of any event could
become an agreement or option:
(i) to require Inforetech to issue any further or other shares in
its capital or any other security convertible or exchangeable
into shares in its capital or to convert or exchange any
securities into or for shares in the capital of Inforetech;
(ii) for the issue or allotment of any of the authorized but
unissued shares in the capital of Inforetech;
(iii) to require Inforetech to purchase, redeem or otherwise acquire
any of the issued and outstanding shares in the capital of
Inforetech; or
(iv) to acquire Inforetech Shares;
(t) except as described in Schedule "E", the Founders are the registered
holders and beneficial owners of the Founders Shares, free and clear
of all liens, charges and encumbrances whatsoever;
(u) the Inforetech Shares have been, or at Closing will be, duly and
validly allotted and issued and outstanding as a fully paid and non-
assessable shares in the capital of Inforetech;
(v) the Founders have good and sufficient right and authority, or will as
of the Closing have such right and authority, to enter into this
Agreement on the terms and conditions herein contained and to transfer
the legal and beneficial title to the Founders Shares to Holdco;
(w) certain of the Inforetech Shares were issued under certain exemptions
from the prospectus and registration requirements under the Securities
Act of British Columbia applicable to non-reporting "private" issuers,
or under Rule 506 promulgated under Regulation D of the Securities Act
and accordingly may be subject to trading restrictions under
applicable Securities legislation;
(x) this Agreement constitutes a valid, binding and enforceable obligation
of the Founders. On Closing, the Founders will not be a party to,
bound by or subject to any indenture, mortgage, lease, agreement,
instrument, statute, regulation, order, judgement, decree or law which
would be violated, contravened or breached by or under which any
default would occur as a result of the execution and delivery by the
Founders of this Agreement or the performance by the Founders of any
of the terms hereof; and
(y) except as disclosed herein or a schedule hereto or in the ordinary
course of business as presently carried on, at Closing Inforetech will
not be indebted to the Founders or any employees of Inforetech or any
affiliate or associate of the Founders, on any account whatsoever.
Survival
5.02 The representations and warranties contained in section 5.01 shall survive
the completion of the transactions contemplated by this Agreement and shall
continue in full force and effect for the benefit of Diversified and Xxxxxx
thereafter, notwithstanding any independent enquiry or investigation by
Diversified or Xxxxxx.
Indemnity
5.03 The Founders covenant to indemnify and hold harmless Xxxxxx and Diversified
from and against any loss, claims, damages, liability, expenses and costs,
including any payment made in good faith in settlement of any claim or potential
claim, arising from any of the representations and warranties set forth in
section 5.01 being incorrect or breached.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF XXXXXX AND DIVERSIFIED
6.01 Xxxxxx and Diversified jointly and severally represent and warrant to the
Founders and Inforetech, with the intent that the Founders and Inforetech will
rely thereon in entering into this Agreement and in concluding the transactions
contemplated hereby, that, to the best of their knowledge, information and
belief:
(a) Diversified was duly incorporated in the state of Nevada on December
12th, 1995. Diversified is a valid and subsisting corporation in good
standing under the laws of Nevada, has the necessary corporate power,
authority and capacity to own its property and assets and to carry on
its business as presently conducted and is duly licensed to carry on
business in all jurisdictions in which it presently carries on
business;
(b) Diversified is a "reporting company" under the Securities Act, and its
shares have been approved for trading through an authorized "Market
Maker" in the NASD:OTC Electronic Bulletin Board;
(c) the Diversified Financial Statements have been prepared in accordance
with generally accepted accounting principles of the United States of
America (U.S. GAP) applied on a basis consistent with Diversified's
prior fiscal periods. The Diversified Financial Statements present
fairly the financial position of Diversified as at the date thereof
and fairly state Diversified's income and deficit for the period
covered thereby;
(d) the authorized capital of Diversified consists of 50,000,000 shares of
common stock with a par value of $0.001 per share, of which 6,156,000
common shares are issued and outstanding as fully paid and non-
assessable. No Person has any agreement or option, present or future,
contingent, absolute or capable of becoming an agreement or option or
which with the passage of time or the occurrence of any event could
become an agreement or option:
(i) to require Diversified to issue any further or other shares in
its capital or any other security convertible or exchangeable
into shares in its capital or to convert or exchange any
securities into or for shares in the capital of Diversified;
(ii) for the issue or allotment of any of the authorized but
unissued shares in the capital of Diversified;
(iii) to require Diversified to purchase, redeem or otherwise acquire
any of the issued and outstanding shares in the capital of
Diversified; or
(iv) to acquire Diversified Shares;
(e) Diversified's shares have been duly and validly allotted and issued
and are outstanding as a fully paid and non-assessable shares in the
capital of Diversified;
(f) Xxxxxx and Diversified have good and sufficient right and authority to
enter into this Agreement on the terms and conditions herein
contained;
(g) the Diversified shares are not subject to any "hold period" or trading
restrictions under the Securities Act or the Exchange Act;
(h) this Agreement constitutes a valid, binding and enforceable obligation
of Xxxxxx and Diversified. On Closing, neither Xxxxxx or Diversified
will be a party to, bound by or subject to any indenture, mortgage,
lease, agreement, instrument, statute, regulation, order, judgement,
decree or law which would be violated, contravened or breached by or
under which any default would occur as a result of the execution and
delivery by Xxxxxx or Diversified of this Agreement or the performance
by Xxxxxx or Diversified of any of the terms hereof;
(i) at Closing, Diversified will not be indebted to any party;
(j) Diversified currently has a bank account at the Nevada State Bank;
(k) The current directors and officers of Diversified are;
Xxxxxx X. Xxxxxxx Secretary - Treasurer
Xxxxxxxx Xxxxxxxx President
(l) Diversified filed a registration statement on Form 10-SB with the
United States Securities and Exchange Commission on June 4, 1999;
(m) Since August 4, 1999, Diversified has filed all forms, reports,
statements and other documents required to be filed with:
(i) the Securities and Exchange Commission (the "SEC") including:
(A) all Annual Reports on Form 10-K;
(B) all Quarterly Reports on Form 10-Q;
(C) all proxy, information or consent solicitation statements
relating to meetings of stockholders or consents in lieu
thereof (whether annual or special );
(D) all Current Reports on Form 8-K; and
(E) all other reports, schedules, registration statements or
other documents (collectively referred to as the
"Diversified SEC Reports"); and
(ii) any applicable state or provincial securities authorities and all
forms, reports, statements and other documents required to be
filed with any other applicable federal, state, or provincial
regulatory authorities, except where the failure to file any such
forms, reports, statements or other documents would not have a
Material Adverse Effect (all such forms, reports, statements and
other documents in clauses (i) and (ii) of this Section 7.01 (aa)
being referred to herein, collectively, as the "Diversified
Reports"). The Diversified Reports, including all Diversified
Reports filed after the date of this Agreement and prior to the
Closing Date (x) were or will be prepared in accordance with the
requirements of applicable law (including, with respect to
Diversified SEC Reports, the Exchange Act, and the rules and
regulations of the SEC thereunder applicable to such Diversified
SEC Reports) and (y) did not at the time they were filed, or will
not at the time they are filed, contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are
made, not misleading.
(n) Xxxxxx and Diversified will use their reasonable best efforts to cause
Diversified Transfer Agent to deliver at Closing:
(i) a stockholders list of Diversified certified to be a true and
accurate copy thereof as of the date indicated thereon;
(ii) confirmation that the Transfer agent retains in safekeeping all
certificates that have been or should be cancelled on the
registration of transfer thereof and that all of such cancelled
certificates have on their face in conspicuous permanent ink or
perforations the word "cancelled"; and
(iii) confirmation that all stock certificates issued to date and all
unissued blank certificates are sequentially numbered and that
all of such certificates are accounted for as either cancelled
and in the possession of the Transfer Agent, outstanding, or
unissued.
(o) Diversified and Xxxxxx acknowledge that the Founders and Inforetech's
purpose in entering into this Agreement is to obtain an investment
vehicle to enhance Inforetech's opportunities to raise equity capital
to assist in the growth of its operations and represent and warrant
that they know of no reason, other than requirements of federal,
state, and provincial securities law, which would inhibit or impair
the ability of Diversified to raise equity capital by way of
additional stock sales or for a liquid market to develop in such
common stock by trading in the over the counter securities market,
free from illegal influence or manipulation. Diversified knows of no
reason why immediately after the transactions herein contemplated,
Diversified would be restricted in its choice of:
(i) one or more broker-dealers to market or underwrite its
securities
(ii) one or more attorneys to assist in Diversified's compliance
with all securities laws and other legal affairs;
(iii) one or more accountants or CPA's to audit, review or compile
the financial statements of Diversified;
(iv) who Diversified can appoint as its directors, officers,
employees or agents; or
(v) what price to offer its securities for to the open market, or
to any existing shareholder, or to any person or which would
restrict the number, type or value of any securities to be sold
by Diversified after the closing as herein contemplated.
Survival
6.02 The representations and warranties contained in section 6.01 shall survive
the completion of the transactions contemplated by this Agreement and shall
continue in full force and effect for the benefit of Inforetech and the Founders
thereafter, notwithstanding any independent enquiry or investigation by such
parties.
Indemnity
6.03 Xxxxxx and Diversified covenant to indemnify and hold harmless Inforetech
and the Founders from and against any loss, claims, damages, liability, expenses
and costs, including any payment made in good faith in settlement of any claim
or potential claim, arising from any of the representations and warranties set
forth in section 6.01 being incorrect or breached.
ARTICLE 7
DIVERSIFIED DUE DILIGENCE
7.01 The Founders and Inforetech requested that Diversified and Xxxxxx make
certain representations and warranties in regard to Diversified that:
(a) current management of Diversified were either unable or unwilling to
make; and
(b) Xxxxxx did not have the factual knowledge to permit them to make such
representations.
Accordingly, the parties have agreed that prior to Closing they will use
their reasonable best efforts and conduct such reasonable due diligence as may
be necessary to confirm the following:
(a) that except as disclosed in the Diversified Financial Statements,
Diversified does not have any outstanding indebtedness or any
liabilities or obligations (whether accrued, contingent or otherwise);
(b) that since the date of the balance sheet included in the Diversified
Financial Statements there has not been:
(i) any changes in the condition or operations of the business,
assets or financial position of Diversified which are,
individually or in the aggregate, materially adverse; or
(ii) any damage, destruction or loss or other event, development or
condition, of any character (whether or not covered by
insurance) which is not generally known or which has not been
disclosed to Diversified, which has or may materially and
adversely affect the business, assets, properties or future
prospects of Diversified;
(c) that all material financial transactions of Diversified have been
accurately recorded in the books and records of Diversified and such
books and records fairly present the financial position and the
corporate affairs of Diversified;
(d) that since the date of the Diversified Financial Statements,
Diversified has not:
(i) transferred, assigned, sold or otherwise disposed of any of the
assets shown in the Diversified Financial Statements or
cancelled any debts or claims except in each case in the
ordinary and usual course of business;
(ii) incurred or assumed any obligation or liability (fixed or
contingent), except unsecured current obligations and
liabilities incurred in the ordinary and normal course of
business exceeding $10,000, in the aggregate;
(iii) declared or made, or committed itself to make, any payment of
any dividend or other distribution in respect of any of its
shares or purchased or redeemed any of its shares, consolidated
or reclassified any of its shares;
(iv) suffered any operating loss or any material extraordinary loss
or entered into any material commitment or transaction not in
the ordinary and usual course of business;
(v) waived or surrendered any right of substantial value;
(vi) made any gift of money or of any property or assets to any
Person;
(vii) other than the split in its issued capital and the change of
corporate name disclosed to the parties hereto, amended or
changed or taken any action to amend or change its Articles of
Incorporation or Bylaws.
(e) that Diversified does not own or possess any assets other than the
assets described in the Diversified Financial Statements;
(f) that Diversified is not party to, bound by or subject to any
indenture, mortgage, lease, agreement, instrument, judgement or decree
which would be violated or breached by, or under which default would
occur or which could be terminated, cancelled or accelerated, in whole
or in part, as a result of the execution and delivery of this
Agreement or the consummation of any of the transactions provided for
herein;
(g) that there is not any suit, action, litigation, arbitration proceeding
or governmental proceeding, including appeals and applications for
review, in progress, pending or threatened against, or relating to
Diversified or affecting its assets, properties or business which
might materially and adversely affect the assets, properties,
business, future prospects or financial condition of Diversified; and
there is not presently outstanding against Diversified any judgement,
decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator;
(h) that the books and records, financial and otherwise, of Diversified
are in all material respects complete and correct and have been made
and maintained in accordance with sound business and bookkeeping
practices and, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of Diversified.
Diversified has maintained a system of internal accounting controls
sufficient to provide reasonable assurances that:
(i) transactions have been and are executed in accordance with
management's general or specific authorization;
(ii) transactions are recorded as necessary to permit the
preparation of financial statements in conformity with
generally accepted accounting principals or any other criteria
applicable to such statements and to maintain accountability
for assets;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals, and appropriate action
is taken with respect to any differences.
(i) obtain description of every material contract, agreement, or
arrangement, if any, between Diversified and any person who is or has
ever been an officer or director of Diversified or person owning of
record, or known by Diversified to own beneficially, 5% or more of the
issued and outstanding common stock of Diversified and which is to be
performed in whole or in part after the date hereof or was entered
into within three years before the date hereof will be delivered at
closing. In all of such circumstances, will confirm that the
contract, agreement, or arrangement was for a bona fide business
purpose of Diversified and the amount paid or received, whether in
cash, in services, or in kind, is, has been during the full term
thereof, and is required to be during the unexpired portion of the
term thereof, no less favourable to Diversified than terms available
from otherwise unrelated parties in arm's length transaction. Except
as disclosed herein, that no officer or director of Diversified or 5%
shareholder of Diversified has, or has had during the preceding three
years or such shorter period as Diversified has been in existence, any
interest, directly or indirectly, in any material transaction with
Diversified. Prepare and deliver at Closing a schedule that will
include a description of any commitment by Diversified, whether
written or oral, to lend any funds to, borrow any money from, or enter
into any other material transaction with, any such affiliated person.
(j) that Diversified holds all permits, licenses, consents and authorities
issued by any government or governmental authority, or any municipal,
regional or other authority, or any subdivision thereof, including,
without limitation, any governmental department, commission, bureau,
board or administrative agency, which are necessary or desirable in
connection with the conduct and operation of Diversified's business
and is not in breach of or in default under any term or condition of
any thereof;
(k) that Diversified:
(i) has filed in a timely manner all federal and state income tax
returns and election forms and the tax returns of any other
jurisdiction required to be filed and all such returns and
forms have been completed accurately and correctly in all
respects;
(ii) has filed in a timely manner all other reports and information
required to be filed with all applicable government
authorities, agencies or regulatory bodies;
(iii) has paid all taxes (including all federal, state, local and
property taxes, assessments or other imposts in respect of its
income, business, assets or property) and all interest and
penalties thereon with respect to Diversified, for all previous
years and all required instalment payments due for the current
fiscal year have been paid;
(iv) has provided adequate reserves for all taxes for the periods
covered by, and such reserves are reflected in, the Diversified
Financial Statements;
and there is no agreement, waiver or other arrangement providing for
an extension of time with respect to the filing of any tax return, or
payment of any tax, governmental charge or deficiency by Diversified
nor is there any action, suit, proceeding, investigation or claim now
threatened or pending against Diversified in respect of, or discussion
underway with any governmental authority relating to, any such tax or
governmental charge or deficiency;
(l) that Diversified has not:
(i) disposed of anything to a Person with whom it was not dealing at
arm's length for proceeds less than the fair market value
thereof; or
(ii) discontinued carrying on any business in respect of which non-
capital losses were incurred, and any non-capital losses which
Diversified has are not losses from property or business
investment losses;
(m) that the Diversified Financial Statements and schedules attached to
the corporate income tax returns as filed by Diversified for each of
its taxation years reflect and disclose all transactions to which
Diversified was party as required by the Internal Revenue Code or
other applicable revenue laws and all of the transactions to which
Diversified was or is a party are reflected or disclosed in such
Diversified Financial Statements and schedules and the corporate
income tax returns;
(n) that none of Diversified, or any directors, officers, agents or
employees of Diversified has used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
relating to initiating or maintaining a trading market in
Diversified's securities, or any political activity, made any unlawful
payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or
made any other unlawful payment;
(o) that the minute book of Diversified contains, and will contain at the
Closing Date, evidence of the due election and incumbency of the board
of directors and officers of Diversified executing this Agreement or
any document, certificate, or other instrument executed in order to
consummate the transactions herein contemplated together with an
accurate and complete record of the proceeds of all meeting of
directors, committees thereof, or stockholders and all written
consents in lieu thereof;
(p) that all securities of Diversified issued since its inception,
consisting solely of common voting stock, have been issued pursuant to
and in compliance with applicable federal and state laws, rules, and
regulations; specifically, all offers and sales of shares of common
voting stock were made pursuant to exemptions from the registration
requirements of Section 5 of the Securities Act, and pursuant to
available exemptions provided by applicable state securities laws.
Further that, Diversified has made all the required filings with any
federal or state regulatory agency regarding the offer and sale of all
issued and outstanding shares of common voting stock;
(q) that the information set forth in the any Schedule delivered by
Diversified is complete and accurate and does not contain any untrue
statement of material fact, or omit a material fact necessary in order
to make the statements contained therein, in light of the
circumstances under which such statements are or were made, not
misleading.
(r) that neither Diversified nor, to the best of Diversified's knowledge,
any other person, has at any time during the past year or currently
has any agreement, plan, or arrangement to at any time in the future
to provide to any securities broker-dealer any incentive or
inducement, financial or otherwise, to publish quotations for the
common stock of Diversified at any specific or minimum prices or
amounts or to execute any specific transactions in such common stock,
other than usual and customary commissions and xxxx-ups.
(s) that to the extent applicable, Diversified has complied with the
securities laws of each and every jurisdiction in which a shareholder
resided as of the date such shareholder purchased securities from
Diversified, and such shares purchased from Diversified can be resold
without restriction (except for any applicable control restrictions)
by such shareholder in said jurisdiction immediately after the closing
as herein contemplated
7.02 If a party determines that any of the matters set out in Section 7.01
hereof are materially incorrect, such party shall immediately advise the other
parties hereto and all parties shall use their reasonable best efforts to remedy
such defect. If such defect cannot be resolved the parties shall either accept
such defect or utilize the right to terminate this Agreement set out in Article
8.02 and 8.07 hereof.
ARTICLE 8
CONDITIONS PRECEDENT TO COMPLETION
Conditions Precedent to Obligation of Xxxxxx and Diversified
8.01 The obligation of Xxxxxx and Diversified to carry out the terms and
conditions of this Agreement is subject to and conditional upon the fulfilment,
on or before the Completion Date, of the following conditions:
(a) the representations and warranties of the Founders and Inforetech set
out in Article 5 shall be true and correct at and as of the Completion
Date as if such representations and warranties were made at and as of
the Completion Date;
(b) the Founders shall have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by the Founders on or before the Completion Date; and
(c) the Founders shall have delivered or caused to be delivered to
Diversified or Inforetech the documents and other items referred to in
Section 9.02 and 9.03.
8.02 The obligation of Diversified to carry out the terms and conditions of this
Agreement is subject to and conditional upon the fulfilment, on or before
January 14, 2000 of completion of a due diligence review of Inforetech
satisfactory to Diversified.
8.03 The conditions described in section 8.01 and 8.02 are conditions only to
Diversified being required to complete the transactions contemplated by this
Agreement and are not conditions to the existence of a binding agreement. If
the conditions described in section 8.01 have not been satisfied or waived at or
prior to the Completion Date, Diversified may elect not to complete.
8.04 All of the conditions precedent set out in section 8.01 and 8.02 are for
the sole and exclusive benefit of Diversified and may be waived, in whole or in
part, by notice in writing to the Founders. Subject to section 8.02, all such
conditions precedent shall merge in the closing documents on Closing.
Conditions Precedent to Obligation of the Founders
8.05 The obligation of the Founders and Inforetech to carry out the terms and
conditions of this Agreement is subject to and conditional upon the fulfilment,
on or before the Completion Date of the following:
(a) the representations and warranties of Xxxxxx and Diversified set out
in Articles 6 shall be true and correct at and as of the Completion
Date as if such representation and warranties were made at and as of
the Completion Date;
(b) Xxxxxx and Diversified having performed and complied with all
agreements, covenants and conditions required by this Agreement to be
performed or complied with by Diversified or Xxxxxx on or before the
Completion Date;
(c) Xxxxxx or diversified, as the case may be, shall have delivered or
caused to be delivered to Inforetech or the Founders the documents and
other item referred to in Section 9.03;
(d) there shall not be any action taken or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the
transaction contemplated hereby by and governmental entity in
connection with the grant of a regulatory approval necessary, in the
reasonable business judgement of Diversified, to the continuing
operation of the current or future business of the combined
enterprises, which imposes any condition or restriction upon
diversified or its proposed future business or operations which, in
the reasonable business judgement of Inforetech, would be materially
burdensome in the context of the transactions contemplated by this
Agreement;
(e) Diversified shall not have received notice of or otherwise have
knowledge of any pending inquiry, matter under investigation, formal
order of investigation, or other possible enforcement action from the
SEC or any provincial or state securities or other regulatory
authority involving or possibly involving, whether or not actually
threatened, any violation of any law administered by such agency or
authority by either Diversified or any of its present or former
affiliates or persons acting in concert with any of them; and
(f) At, or immediately after, Closing the issued capital of Diversified
(on a fully diluted basis), exclusive of shares to be issued
hereunder, shall not exceed 6,156,000 common shares.
8.06 The obligations of Inforetech and the Founders to carry out the terms and
conditions of this Agreement is subject to and conditional upon the fulfilment,
on or before January 14, 2000, of completion of a due diligence review of
Diversified satisfactory to the Founders. The parties acknowledge that after
Closing the current directors of Inforetech will become the directors of
Diversified, that current management of Diversified may not have actual
knowledge of the matters represented by it in Article 7 hereof, and accordingly,
all parties agree to assist the Founders in completing their due diligence
hereunder.
8.07 The conditions described in section 8.05 and 8.06 are conditions only to
the Founders being required to complete the transactions contemplated by this
Agreement and are not conditions to the existence of a binding agreement. If
such conditions have not been satisfied or waived at or prior to the Completion
Date, the Founders may elect not to complete.
8.08 The conditions precedent set out in section 8.05 and 8.06 are for the sole
and exclusive benefit of the Founders and may be waived, in whole or in part, by
notice in writing to Diversified. Subject to section 6.02, all such conditions
precedent shall merge in the closing documents on Closing.
8.09 The Founders covenant and agree as follows:
(a) to vote in favour of all resolutions placed before shareholders of
Inforetech which are contemplated hereunder;
(b) to provide full access to the books, records and Property and other
property of Inforetech and to co-operate and provide assistance to
Xxxxxx and Diversified in connection with all filings with and
approvals required as a result of the transactions contemplated
hereunder; and
8.10 Xxxxxx and Diversified covenant and agree to maintain confidentiality with
respect to the business and affairs of Inforetech resulting from the review by
Diversified of the books and records of Inforetech.
ARTICLE 9
PRE-CLOSING DELIVERIES
9.01 Within five (5) days after the date of this Agreement, Diversified shall
deliver to Inforetech, at Inforetech's Offices originals or true and correct
copies of all:
(a) Written contracts relating to stockholders, directors, officers,
employees, and agents;
(b) Written contracts relating to any agreement with a securities broker
or underwriter concerning holding, selling, marketing, or otherwise
buying or selling stock or other securities of Diversified;
(c) Written contracts with attorneys engaged by Diversified;
(d) Written contracts with accountants engaged by Diversified;
(e) Written contracts with any other professional or agent of Diversified
not specified in subparagraphs (a) through (d) above;
(f) The current stockholder list, showing each stockholder's name,
address, number of shares owned, and denomination and date of each
certificate, all as of a date within five (5) days of the date of this
Agreement;
(g) A transaction register from Diversified's Transfer Agent setting forth
the details of all issuance's of common stock certificates, indicating
in the case of each certificate the date of issuance, certificate
number, number of shares, registered owner, and whether such
certificate constitutes an original issuance or the transfer of
outstanding stock, indicating, in the case of transfers, the number of
the certificate from which such stock was transferred;
(h) Assurances provided by Diversified stockholders, or an opinion of
legal counsel to Diversified, documenting the availability of an
exemption from registration under federal and state securities laws
for the original issuance of all certificates, together with a
memorandum of Diversified's counsel setting forth the principal
conditions applicable under the laws of the various states in which
the Diversified Stock has been issued in order to rely on exemptions
from the registration provisions of such laws;
(i) A schedule of all stock trades made in Diversified's stock since
incorporation, which schedule will be in reverse chronological order
(i.e., the most recent transaction first), showing the date of the
trade, the number of shares traded, the purchase price for the shares,
and the name of the purchaser and the seller;
(j) All filings, notices, or other communications with the SEC and the
NASD, together with copies of all communications received by
Diversified;
(k) All filings, notices, or other communication from either the SEC or
the NASD, with any state securities commission, state corporations
commission, or similar agency, together with copies of all
communication received by Diversified from any such authority; and
(l) all filings with any non-United States securities commission, non-
United States corporations commission, Canadian province, or similar
authority.
ARTICLE 10
CLOSING
Time and Place of Closing
10.01 The purchase and sale of Inforetech Shares and the other transactions
contemplated by this Agreement shall be completed at 10:00 a.m. (local time in
Vancouver, British Columbia) on the Completion Date at the offices of Xxxxxx
Xxxxxxxxxx, 0000-0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
or at such other time and place as may be agreed to by the parties.
Closing Documents
10.02 At the Closing, the Founders shall deliver to Diversified the following:
(a) share certificates representing the Inforetech Shares duly endorsed
for transfer to Holdco in exchange for the Holdco A or B Units;
(b) a resolution of the Board of Inforetech authorizing the transfer of
the issued and outstanding shares of Inforetech acquired hereunder
from the current shareholders to Holdco;
(c) the agreement of all Warrantholders, that have agreed to the exchange,
to replace their existing Warrants with Warrants for the acquisition
of the same number of shares of Diversified on the same terms and
conditions; mutatis mutandis;
(d) the agreement of all Noteholders, that have agreed to the exchange, to
deliver their Convertible Notes to Inforetech for cancellation;
subject to the issue of Diversified Convertible Notes (?Voting
Rights);
(e) the assignment of the Vindemiola Loans to Diversified and the
assumption of such loans by Diversified, including the right of loan
holders to convert such debts into shares of Diversified;
(f) the agreement of all holders of options to acquire shares of
Inforetech to replace such agreements with options to acquire shares
of Diversified;
(g) Release of the Stock Pledge Agreement by Base Capital, LLC, pursuant
to which Xxxxxx Xxxxxx, Xx. pledged his shares as security for a loan
by Base Capital, LLC;
(h) an opinion of legal counsel to Inforetech to the validity of the
issuance of the Inforetech Shares;
(i) such other documents and instruments that may be necessary to complete
the transactions contemplated hereunder.
10.03 At the Closing, Diversified shall deliver, or cause to be delivered, the
following:
(a) share certificates for common shares or NP Shares in the capital of
Diversified in the names of all parties exchanging their Inforetech
shares hereunder;
(b) Class A and Class B Preferred Shares to the Founders;
(c) Warrants of Diversified in the appropriate denominations in the names
of the Warrantholders;
(d) Diversified Convertible Notes in the appropriate denominations in the
names of the Noteholders;
(e) an assignment and assumption agreement in regard to the Vindemiola
Loans;
(f) Option Agreements duly executed by Diversified in accordance with the
Diversified Option Plan;
(g) a certified copy of a resolution of Diversified duly filed with the
Nevada corporation office confirming that the name of Diversified has
been changed to Inforetech Inc.
(h) the resignation of the existing directors and officers of Diversified,
effective in a series on the Completion Date, and a resolution duly
appointing the following to fill the vacancies on the board of
Diversified resulting therefrom so as to reconstitute the board of
Diversified without holding a stockholder meeting;
Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx, Xx.
Xxxxx Xxxxx
(i) a resolution of the Board of Diversified, effective the Completion
Date, changing the signing authority on all bank accounts of
Diversified to the parties appointed by Inforetech;
(j) an opinion of U.S. legal counsel for Diversified, in form and
substance acceptable to the Founders and the Transfer Agent for
Diversified, directed to the Founders and the Transfer Agent for
Diversified:
(i) Diversified is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Nevada.
(ii) The execution, delivery, and performance by Diversified of the
Agreement are within the corporate power and authority of
Diversified and do not contravene or violate any provisions of
the articles of incorporation or bylaws of Diversified, as
amended to the date hereof.
(iii) The execution, delivery and performance by Diversified of the
Agreement have been duly authorized by the board of directors
of Diversified, and no other corporate action is required to be
taken to authorize such execution, delivery, and performance.
(iv) The Agreement has been duly executed and delivered by
Diversified and constitutes a legal, valid, and binding
obligation of Diversified enforceable in accordance with its
terms.
(v) To the best of such counsel's knowledge and, except as
disclosed in the Agreement, there are no actions, suits,
proceedings, or investigations pending or threatened against
Diversified in any court or before or by any federal, state,
provincial, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic
or foreign seeking to enjoin, or questioning the legality or
validity of, the performance by Diversified of any of its
obligations under the Agreement or which have, or would have if
adversely determined, a material adverse effect on the ability
of Diversified to perform such obligations.
(vi) The Diversified Shares and warrants, options or rights issuable
on completion of the exchange are, and the Diversified shares
issuable on the exercise of the warrants, options and rights
have been duly and validly reserved by Diversified for issuance
will be, when issued and delivered in accordance with the
provisions of the Agreement and the warrants, options and
rights, validly issued, fully paid, and nonassessable.
(vii) To the tradability without restriction, other than restrictions
applicable to Affiliates named in such opinion, under the
Securities Act of all outstanding shares of Diversified,
exclusive of the shares to be issued to the Inforetech security
holders in accordance with this Agreement.
(viii)to such other matters as may be reasonably requested by
Inforetech and the Founders and as are normal in transactions
of this nature.
(k) such other documents and instruments that may be necessary to complete
the transactions contemplated hereunder.
10.04 At the Closing, Inforetech shall deliver, or cause to be delivered,the
following:
(a) Class A shares registered in the name of Holdco for the Class "A"
shares exchanged by the Founders; and
(b) Class A shares registered in the name of Diversified for the Class A
shares exchanged for common shares of Diversified.
ARTICLE 11
POST CLOSING MATTERS
11.01 After the Closing, the parties hereto shall co-operate and assist each
other in making any necessary securities or tax filings or elections that are
required, or recommended to be made by a party, including:
(a) a notice on Form D to be filed by Diversified with the SEC relating to
the issuance of the Diversified Shares and other securities as
contemplated by this Agreement; and
(b) the information respecting the appointment of new Diversified
directors otherwise than at a meeting of stockholders required by Rule
14f-1 promulgated under the Exchange Act to be filed with the SEC and
provided to security holders at least 10 days prior to the date such
directors take office.
ARTICLE 12
GENERAL PROVISIONS
Notices
12.01 All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered by hand,
faxed or mailed postage prepaid addressed as follows:
To Inforetech:
inFOREtech Golf Technology 2000 Inc.
Xxxxx 000
0000 - 000xx Xxxxxx
Xxxxxx, Xxxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
To the Founders:
Founders of inFOREtech Golf Technology 2000 Inc.
x/x Xxxxx 000
0000 - 000xx Xxxxxx
Xxxxxx, Xxxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
To Diversified:
Diversified Marketing Services, Inc.
c/x Xxxxxx Capital Inc.
Xxxxx 0000
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
Facsimile: (000) 000-0000
or to such other address as may be given in writing by the parties and shall be
deemed to have been received, if delivered by hand, on the date of delivery, if
faxed to the facsimile numbers set out above, on the business day next following
the date of transmission and if mailed as aforesaid to the addresses set out
above then on the fifth business day following the posting thereof provided that
if there shall be between the time of mailing and the actual receipt of the
notice a mail strike, slowdown or other labour dispute which might affect the
delivery of the notice by the mails, then the notice shall only be effective if
actually delivered or faxed to the facsimile numbers set out above.
Non-Merger
12.02 Notwithstanding the completion of the transactions contemplated by this
Agreement, the waiver of any condition contained herein (unless such waiver
expressly releases a party from any such representation, warranty, covenant or
agreement) or any investigation made by Diversified or the Founders, the
representations, warranties, covenants and agreements of the parties set forth
herein shall survive the Completion Date and will remain in full force and
effect and shall not be extinguished or merged in any way by the delivery or
recording of any deed or any other instrument relating to the completion of the
transactions contemplated by this Agreement.
Time of Essence
12.03 Time is hereby expressly made of the essence of this Agreement with
respect to the performance by the parties of their respective obligations under
this Agreement.
Binding Effect
12.04 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and assigns.
Entire Agreement
12.05 This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and shall supersede all previous
expectations, understandings, communications, representations and agreements
whether verbal or written between the parties with respect to the subject matter
hereof.
Further Assurances
12.06 Each of the parties hereto hereby covenants and agrees to execute such
further and other documents and instruments and do such further and other things
as may be necessary or desirable to implement and carry out the intent of this
Agreement.
Amendments
12.07 No amendment to this Agreement shall be valid unless it is evidenced by a
written agreement executed by all of the parties hereto.
Counterparts
12.08 This Agreement may be executed in counterpart and/or by facsimile.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
day and year first above written.
THE CORPORATE SEAL OF )
INFORETECH GOLF TECHNOLOGY )
2000 INC. was affixed hereto in the)
presence of: )
)
) c/s
Authorized Signatory )
)
)
Authorized Signatory )
SIGNED, SEALED AND DELIVERED )
by XXXXXX XXXXXX, XX. )
in the presence of: )
)
)
) /s/ Xxxxxx Xxxxxx, Xx.
Signature of Witness )
)
)
Name (print) )
)
)
Address )
)
)
Occupation )
SIGNED, SEALED AND DELIVERED )
by XXXX XXXXXX in the presence of: )
)
)
) /s/ Xxxx Xxxxxx
Signature of Witness )
)
)
Name (print) )
)
)
Address )
)
)
Occupation )
SIGNED, SEALED AND DELIVERED )
by XXXXX XXXXXX in the presence of:)
)
)
) /s/ Xxxxx Xxxxxx
Signature of Witness )
)
)
Name (print) )
)
)
Address )
)
)
Occupation )
SIGNED, SEALED AND DELIVERED )
by XXXXXX X. XXXXXX XX. in the )
presence of: )
)
)
) /s/ Xxxxxx X. Xxxxxx, Xx.
Signature of Witness )
)
)
Name (print) )
)
)
Address )
)
)
Occupation )
SIGNED, SEALED AND DELIVERED )
by XXXXX XXXXXX in the presence of )
)
)
) /s/ Xxxxx Xxxxxx
Signature of Witness )
)
)
Name (print) )
)
)
Address )
)
)
Occupation )
SIGNED, SEALED AND DELIVERED )
by XXXXX XXXXXX in the presence of:)
)
)
) /s/ Xxxxx Xxxxxx
Signature of Witness )
)
)
Name (print) )
)
)
Address )
)
)
Occupation )
THE CORPORATE SEAL OF )
DIVERSIFIED MARKETING )
SERVICES, INC. was affixed hereto )
in the presence of: )
)
) c/s
Authorized Signatory )
)
)
Authorized Signatory )
THE CORPORATE SEAL OF )
XXXXXX CAPITAL CORP. )
was affixed hereto in the presence )
of: )
) c/s
Authorized Signatory )
)
)
Authorized Signatory )
