-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HQO1b1kw0BJuGXZjH4cg22MKqhpwhMwWUtXKZvg553m1mm+rmWPjULcQC5SPL3i5 /o74JOclE4/97FeVpjK/eQ== 0001094328-00-000093.txt : 20000518 0001094328-00-000093.hdr.sgml : 20000518 ACCESSION NUMBER: 0001094328-00-000093 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: URBANA CA INC CENTRAL INDEX KEY: 0001058330 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 880393257 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24723 FILM NUMBER: 638412 BUSINESS ADDRESS: STREET 1: 750 WEST PENDER ST STREET 2: SUITE 804 CITY: VANCOUVER BRITISH CO STATE: A6 ZIP: V6C 2T8 BUSINESS PHONE: 7027322253 MAIL ADDRESS: STREET 1: 1600 E DESERT INN RD STREET 2: SUITE 102 CITY: LAS VEGAS STATE: NV ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED CARBONICS CORP DATE OF NAME CHANGE: 19980729 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER: 000-24723 URBANA.CA, INC. (Exact name of registrant as specified in its charter) Nevada 88-0393257 (State or jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 750 West Pender Street, Suite 804, Vancouver, British Columbia V6C 2T8 (Address of principal executive offices) (Zip Code) Registrant's telephone number: (604) 682-8445 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 Par Value Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) been subject to such filing requirements for the past 90 days. Yes X No As of March 31, 2000, the Registrant had 22,038,283 shares of common stock issued and outstanding. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION PAGE ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2000 AND MARCH 31, 1999 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999 5 NOTES TO FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13 PART II ITEM 1. LEGAL PROCEEDINGS 17 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 17 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17 ITEM 5. OTHER INFORMATION 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18 SIGNATURE 18 PART I. ITEM 1. FINANCAL STATEMENTS. URBANA.CA, INC. (A Development Stage Company) CONSOLIDATED BALANCE SHEETS March 31 December 31 2000 1999 (Unaudited) ASSETS CURRENT ASSETS Cash $ 285,953 $ 535 Accounts receivable 42,538 - Prepaid expenses and deposits 106,571 7,667 435,062 8,202 DUE FROM RELATED PARTIES (Note 6) - 64,037 FURNITURE AND EQUIPMENT, net of Depreciation 140,717 - GOODWILL, net of amortization (Note 3) 3,453,705 - $ 4,029,484 $ 72,239 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued Liabilities $ 247,765 $ 144,187 LOANS PAYABLE (Note 4) 1,284,162 60,000 DUE TO RELATED PARTIES (Note 6) 24,547 - COMMITMENTS AND CONTINGENCIES (Notes 1 and 9) STOCKHOLDERS' EQUITY (DEFICIT) Capital stock (Note 5) Authorized Common stock, $0.0001 par value, 70,000,000 shares Preferred stock $0.001 par value, 10,000,000 shares Issued and outstanding 11,588,283 (1999 - 11,082,318) shares of common stock 11,588 11,082 Additional paid-in capital 1,301,133 1,132,549 Exchangeable shares (Note 5) 3,226,500 - Deficit accumulated during development stage (2,054,844) (1,277,309) Accumulated other comprehensive income (11,367) 1,730 2,473,010 (131,948) $ 4,029,484 $ 72,239 The accompanying notes are an integral part of these interim consolidated financial statements URBANA.CA, INC. (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Three February 23 Months Months 1992 Ended Ended (inception) March 31 March 31 to March 31 2000 1999 2000 EXPENSES Consulting and management $ 249,926 $ - $ 468,211 Depreciation and amortization 187,734 1,007 193,873 Development costs 55,648 - 55,648 Engineering costs - - 274,170 Interest expense 19,618 74 29,254 Office and general 137,449 177,693 397,333 Professional fees 71,458 3,702 152,557 Transfer agent and filing fees - 4,953 22,903 Rent 11,598 6,502 64,679 Salaries 44,104 - 127,808 Write-off of interest in mineral property - - 15,000 Write-off of Graphite processing joint venture - - 253,408 NET LOSS FOR THE PERIOD 777,535 193,931 2,054,844 BASIC NET LOSS PER SHARE 0.07 0.02 WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 11,419,635 10,196,350 The accompanying notes are an integral part of these interim consolidated financial statements URBANA.CA, INC. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Three February 23 Months Months 1993 Ended Ended (Inception) March 31 March 31 to 2000 1999 March 31 2000 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period (777,535) (193,931) (2,054,844) Adjustments to reconcile net loss to net cash from operating activities: - depreciation and amortization 187,734 1,007 193,873 - imputed interest on long term debt - - 9,000 - organization costs - - (308) - - loss on disposal of furniture - - and equipment - - 3,620 - write-off of interest in mineral property - - 15,000 - write-off of investment in graphite processing joint venture - - 253,408 - - net changes in non-cash - - working capital 22,776 18,787 388,768 CASH USED IN OPERATING ACTIVITIES (567,025) (174,137) (1,191,483) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of furniture and Equipment (124,322) - (135,745) Proceeds from sale of furniture and equipment - - 1,972 Acquisitions of subsidiaries net of cash acquired (Note 3) (75,602) - (75,602) Investment in graphite processing joint venture - - (37,463) Purchase of other assets - - (4,500) CASH USED IN INVESTING ACTIVITIES (199,924) - (251,338) CASH FLOWS FROM FINANCING ACTIVITIES Advances to related parties (158,698) - (136,467) Payments on agreement payable - - (70,000) Loan advances 1,224,162 - 1,284,162 Issuance of common stock - 173,502 662,446 CASH FROM FINANCING ACTIVITIES 1,065,464 173,502 1,740,141 EFFECT OF EXCHANGE RATE CHANGES ON CASH (13,097) - (11,367) INCREASE (DECREASE) IN CASH 285,418 (635) 285,953 CASH, BEGINNING OF PERIOD 535 713 - CASH, END OF PERIOD 285,953 78 285,953 Non-cash activities: Refer to Notes 3 and 5. The accompanying notes are an integral part of these interim consolidated financial statements URBANA.CA, INC. (A development stage company) NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION The Company was organized on February 23, 1993 under the laws of the State of Delaware as PLR, Inc. On October 3, 1997, it changed its name to Integrated Carbonics Corp. and on October 30, 1997, changed its jurisdiction of incorporation to Nevada. On April 15, 1999 a wholly-owned subsidiary company, U.R.B.A. Holdings Inc. ("URBA") (formerly ICC Integrated Carbonics (Canada) Corp.), was incorporated under the laws of British Columbia to facilitate acquisitions in Canada. During January, 2000, the Company entered into agreements to acquire, through URBA, 100% of the outstanding shares of Urbana.ca Enterprises Corp. ("Urbana Enterprises"), E-Bill Direct Inc. ("E-Bill"), and Enersphere.com, Inc. ("Enersphere"), which are in the business of developing and marketing internet based products and services through the distribution of set top boxes. The consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company is a development stage enterprise and as such has no revenue and is incurring substantial costs in connection with the development of its business and requires additional working capital to fund ongoing losses from operations. The ability of the Company to continue as a going concern is dependent on its ability to obtain additional financing and ultimately to attain profitable operations. During April, 2000 the Company entered into an Agency agreement with Groome Capital.com Inc. ("Groome") whereby Groome will use its best efforts to raise up to $25,000,000 by way of a private placement of special warrants at a price of $1.25 per special warrant. (Refer to Note 10) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These financial statements are expressed in US dollars and have been prepared in accordance with accounting principles generally accepted in the United States. Principles of Consolidation The financial statements include the accounts of the Company and its wholly-owned subsidiaries U.R.B.A. Holdings Inc. and Urbana Enterprises Corp. Urbana Enterprises Corp. was formed effective March 10, 2000, when Urbana Enterprises, Enersphere and E-Bill were amalgamated under the statutory laws of the Province of Ontario. All significant intercompany balances and transactions are eliminated on consolidation. Use of Estimates and Assumptions Preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Goodwill The company amortizes goodwill on a straight-line basis over five years. Foreign Currency Translation The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the period. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. Net Loss per Common Share Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive earnings per share reflects the potential dilution of securities that could share in the earnings of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share. Stock-based Compensation The Company accounts for stock-based compensation using the intrinsic value based method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No.25"). APB No. 25 requires that compensation cost be recorded for the excess, if any, of the quoted market price of the common stock over the exercise price at the date the options are granted. In addition, as required by SFAS No. 123, the company provides pro-forma disclosure of the impact of applying the fair value method of SFAS No. 123. NOTE 3 - ACQUISITIONS Urbana Enterprises By agreement dated January 4, 2000, the Company's wholly-owned subsidiary URBA, acquired 100% of the outstanding shares of Urbana Enterprises, a company engaged in distribution of Linux based set top boxes which are used as an alternative method of delivering internet content. Urbana Enterprises was incorporated November 18, 1998 in the province of British Columbia. In consideration for the acquisition, URBA issued 3,000,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held. A holder of an exchangeable share may, at any time, require URBA to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. URBA may satisfy the resulting obligation in cash or in Company shares at its option. Pursuant to the terms of the agreement, the Company issued 3,000,000 common shares in trust to be held under the terms of a trust agreement executed January 4, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. In anticipation of this acquisition, two shareholders of Urbana Enterprises, each holding a 36.75% interest in Urbana Enterprises, became directors of the Company effective July 21, 1999 and, subsequent to the acquisition, entered into five year management contracts for an aggregate of Cdn$120,000 in year 1 and for amounts to be negotiated for years 2 through 5. In addition, the Company has also agreed to grant a total of 400,000 stock options to these individuals pursuant to the Stock Option Plan implemented in 1999. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 17,716 Capital assets 7,387 Goodwill 1,093,102 1,118,205 Liabilities assumed at fair value: Accounts payable (87,474) Due to related parties (130,731) Purchase price 3,000,000 shares at $0.30 per share $ 900,000 Urbana Enterprises had net losses totaling $193,171 for the period from May 1, 1999 (inception) to the date of acquisition. Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years and amortization of $54,655 has been recorded in the current period. E-Bill By agreement dated January 10, 2000, the Company's wholly-owned subsidiary URBA, acquired 100% of the outstanding shares of E- Bill, a company engaged in designing, developing and providing electronic presentment and payment services to the business community. E-Bill was incorporated May 27, 1999 in the province of Ontario. In consideration for the acquisition, URBA issued 2,950,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held. A holder of an exchangeable share may, at any time, require URBA to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. URBA may satisfy the resulting obligation in cash or in Company shares at its option. Pursuant to the terms of the agreement, the Company issued 2,950,000 common shares in trust to be held under the terms of a trust agreement executed January 10, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. E-Bill had losses totaling $16,214 for the period from May 27, 1999 (inception) to the date of acquisition. Subsequent to the acquisition, the Company signed three year management contracts with the two principals of E-Bill in the aggregate of Cdn$120,000 in year 1, Cdn$160,000 in year 2 and Cdn$120,000 in year 3. In addition, the Company has also agreed to grant a total of 200,000 stock options to these individuals pursuant to the Stock Option Plan implemented in 1999. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 9 Capital assets 4,646 Goodwill 812,645 817,300 Liabilities assumed at fair value: Accounts payable (4,021) Due to related parties (16,779) Purchase price 2,950,000 shares at $0.27 per share 796,500 Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years and amortization of $40,632 has been recorded in the current period. Enersphere By agreement dated January 9, 2000, the Company's wholly-owned subsidiary URBA, acquired 100% of the outstanding shares of Enersphere, a content company that utilizes set top boxes as their medium to deliver internet and intranet-based services to customers. Enersphere was incorporated September 28, 1999 in the province of Ontario. In consideration for the acquisition, URBA paid $84,828 and issued 4,500,000 non-voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held. A holder of an exchangeable share may, at any time, require URBA to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. URBA may satisfy the resulting obligation in cash or in Company shares at its option. Pursuant to the terms of the agreement, the Company issued 4,500,000 common shares in trust to be held under the terms of a trust agreement executed January 9, 2000 until such time as the exchangeable shares are exchanged by their holders or all remaining exchangeable shares are cancelled. Enersphere had net losses totaling $114,917 for the period from September 28, 1999 (inception) to the date of acquisition. Subsequent to the acquisition, the Company signed two year management contracts with the two principals of Enersphere in the aggregate Cdn$160,000 in year 1 and Cdn$250,000 in year 2. In addition, the Company has also agreed to grant a total of 200,000 stock options to these individuals pursuant to the Stock Option Plan implemented in 1999. Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years and amortization of $86,486 has been recorded in the current period. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 3,540 Capital assets 10,324 Goodwill 1,729,731 1,743,595 Liabilities assumed at fair value: Accounts payable (28,995) Due to related parties (99,772) Purchase price $84,828 and 4,500,000 shares at $0.34 per share $ 1,614,828 NOTE 4 - LOANS PAYABLE The Company has outstanding loans totaling $1,284,162 which bear interest at an annual rate of 8%. These loans were due and payable on March 15, 2000. The Company did not repay these loans and as a result has offered the lenders the right to convert the principal amount of the loan into units of the Company at a price of $0.57 per unit. Each unit is comprised of one common share of the Company and one-half share purchase warrant. Each whole share purchase warrant entitles the holder to purchase an additional common share of the Company at a price of $5.00 per share. This offer is to be made by way of a prospectus that is being conducted in Ontario, Quebec and British Columbia, Canada. NOTE 5 - CAPITAL STOCK During the quarter ended March 31, 2000 the following shares were issued: Common shares The Company settled $40,000 due to a relative of a director by the issuance of 100,000 restricted shares of common stock at a price of $0.40 per share. The Company settled a total of $99,900 of accounts payable by the issuance of 333,000 restricted shares of common stock at a price of $0.30 per share. The Company settled $9,190 of accounts payable by the issuance of 22,975 restricted shares of common stock at a price of $0.40 per share. The Company issued 50,000 restricted shares of common stock, at a price of $0.40 per share, as a retainer pursuant to a media relations contract dated December 15, 1999. Refer to Notes 3 and 10. Exchangeable shares The Company's subsidiary, URBA, issued a total of 10,450,000 exchangeable shares as consideration for the acquisitions of Urbana Enterprises, E-Bill and Enersphere as described in Note 3. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held and may, at any time, require URBA to repurchase the exchangeable share for an amount equal to the then current market value of a common share of the Company. NOTE 6 - RELATED PARTY TRANSACTIONS All amounts due to and from related parties are unsecured, non- interest bearing, and have no specific terms of repayment. Refer to Notes 3 and 5. NOTE 7 - STOCK-BASED COMPENSATION The Company has adopted a Stock Option Plan which will provide options to purchase up to 2,000,000 common shares of the Company for its employees, officers and directors. The options that will be granted pursuant to the Stock Option Plan are exercisable at a price of $0.50 which is equal to the fair value of the common shares at the time of adoption of the plan. As at March 31, 2000, no stock-based compensation cost has been recorded for any period and no stock options have been issued under this plan. NOTE 8 - INCOME TAXES The Company has net operating loss carryforwards which result in deferred tax assets. The realization of the benefits from these deferred tax assets appears uncertain due to the Company's limited operating history and continuing losses. Accordingly, no benefit has been recorded for deferred tax assets. NOTE 9 - COMMITMENTS AND CONTINGENCIES Fair Value of Financial Instruments The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107. Disclosures about Fair Value of Financial Instruments. The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities including cash and cash equivalents and notes and accounts payable approximate carrying value due to the short-term maturity of the instruments. Uncertainty Due to the Year 2000 Issue The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. Although the change in date has occurred, it is not possible to conclude that all aspects of the Year 2000 issue that may affect the Company, including those related to customers, suppliers, or other third parties, have been fully resolved. NOTE 10 - SUBSEQUENT EVENTS Financing Agreement The Company entered into an Agency agreement effective April 10, 2000 with Groome Capital.com Inc. whereby the Company and Groome will engage in a best efforts offering of up to 20,000,000 Special Warrants at a price of $1.25 per Special Warrant. Each Special Warrant is convertible into one common share and one-half share purchase warrant exercisable for a period of two years at a price of $5.00 per whole share purchase warrant. Groome will receive an Agent's Fee equal to 8% of the total amount raised (reduced to 4% for investors on the President's List). In addition, Groome has been granted non-assignable warrants to acquire, without payment of additional consideration, 1 year Compensation Options providing the right to purchase, at $1.25 per unit, a number of units equal to 10% of the number of Special Warrants sold under this offering. To date the Company has received subscriptions for 847,989 units with total proceeds of $1,060,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations During the quarter the Company continued with its program to develop Urbana.ca, Inc. ("Urbana") (formerly Integrated Carbonics Corp.) into an operating company. For the three months ended March 31, 2000, Urbana had a net loss of $777,535 or $0.07 cents per share. This loss compares with a loss of $193,931 or $0.02 cents per share for the corresponding three-month period ended March 31, 1999. During the quarter, a wholly-owned subsidiary company, changed its name from ICC Integrated Carbonics (Canada) Corp. to U.R.B.A. Holdings Inc. ("URBA"). During the quarter the Company acquired through URBA all of the outstanding shares of three Canadian companies which are in the business of developing and marketing internet based products and services through the distribution of set top boxes. The companies acquired were Urbana.ca Enterprises Corp. ("Urbana Enterprises"), E-Bill Direct Inc. ("E-Bill"), and Enersphere.com, Inc. ("Enersphere"). On March 10, 2000 these companies were amalgamated under the statutory laws of the province of Ontario to form Urbana Enterprises Corp. Urbana Enterprises Urbana Enterprises was incorporated November 18, 1998 in the province of British Columbia. Urbana Enterprises is engaged in the distribution of Linux based set top boxes used as an alternative method of delivering Internet content. From inception (second quarter in 1999) to the date of acquisition, losses totaled $193,171. Comparative pro forma financial information is therefore not available in this quarter. In consideration of the acquisition, URBA issued 3,000,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held. The holder of these shares at any time may require URBA to repurchase the shares at the then current market value of the common shares. At its option, URBA may satisfy this obligation in cash or in Company shares. Any exchangeable share not exchanged within 25 years is to be cancelled. The terms of the acquisition agreement required the Company to issue 3,000,000 common shares to ensure URBA has sufficient shares of the Company to satisfy its repurchase obligations. The common shares are held under a trust agreement until such time as the exchangeable shares are exchanged or cancelled. In connection with the acquisition, the Company signed five-year management contracts with the two principals The Company agreed to grant a total of 400,000 stock options to these individuals. The business combination has been accounted for using the purchase method of accounting. The 3,000,000 shares issued on acquisition have been valued at $0.30 per share for a purchase price of $900,000. Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years with amortization of $54,655 recorded during the quarter. E-Bill E-Bill was incorporated May 27, 1999 in the province of Ontario. E-Bill is engaged in designing, developing and providing electronic presentment and payment services to the business community. From inception (second quarter in 1999) to the date of acquisition, losses totaled $16,214. Comparative pro-forma financial information for 1999 is therefore not available in this quarter. In consideration of the acquisition, URBA issued 2,950,000 non- voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held. The holder of these shares at any time may require URBA to repurchase the shares at the then current market value of the common shares. At its option, URBA may satisfy this obligation in cash or in Company shares. Any exchangeable share not exchanged within 25 years is to be cancelled. The terms of the acquisition agreement required the Company to issue 2,950,000 common shares to ensure URBA has sufficient shares of the Company to satisfy its repurchase obligations. The common shares are held under a trust agreement until such time as the exchangeable shares are exchanged or cancelled. In connection with the acquisition, the Company signed three-year management contracts with the two principals. The Company agreed to grant a total of 200,000 stock options to these individuals. The business combination has been accounted for using the purchase method of accounting. The 2,950,000 shares issued on the acquisition have been valued at $0.27 per share for a purchase price of $796,500. Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years with amortization of $40,632 recorded during the quarter. Enersphere Enersphere was incorporated September 28, 1999 in the province of Ontario. Enersphere is a content company that utilizes set top boxes as their medium to deliver internet and intranet-based services to customers. From inception (third quarter in 1999) to the date of acquisition, losses totaled $114,917. Comparative pro-forma financial information for 1999 is therefore not available in this quarter. In consideration of the acquisition, URBA paid $84,828 cash and issued 4,500,000 non-voting exchangeable shares. The holders of these shares have been granted votes in the Company on a basis of one vote for each exchangeable share of URBA held. The holder of these shares at any time may require URBA to repurchase the shares at the then current market value of the common shares. At its option, URBA may satisfy this obligation in cash or in Company shares. Any exchangeable share not exchanged within 25 years is to be cancelled The terms of the acquisition agreement required the Company to issue 4,500,000 common shares to ensure URBA has sufficient shares of the Company to satisfy its repurchase obligations. The common shares are held under a trust agreement until such time as the exchangeable shares are exchanged or cancelled. In connection with the acquisition, the Company signed two-year management contracts with the two principals. The Company agreed to grant a total of 200,000 stock options to these individuals. The business combination has been accounted for using the purchase method of accounting. The 4,500,000 shares issued on the acquisition have been valued at $0.34 per share for a purchase price of $1,614,828, including the cash payment. Goodwill arising on this acquisition is being amortized on a straight-line basis over 5 years with amortization of $86,486 recorded during the quarter. Liquidity and Capital Resources Urbana is a development stage enterprise. The Company has no revenue and is continuing to incur substantial costs in connection with pursuing the development of its business. The Company's continued existence is dependent on its ability to obtain sufficient financing to meet its financial needs. At March 31, 2000 the Company had working capital of $187,297. This compares with a working capital deficiency of $135,985 at March 31, 1999. During the quarter the Company settled debts of $40,000 due to a relative of a director of the Company by the issuance of 100,000 restricted shares at $0.40 per share. The Company settled a total of $99,900 of accounts payable by the issuance of 333,000 restricted shares at $0.30 per share and $9,190 of accounts payable by the issuance of 22,975 restricted shares at $0.40 per share. The Company issued 50,000 restricted shares at $0.40 per share as a retainer on a media relations contract. As consideration for the acquisition of the three subsidiaries during the quarter, URBA issued a total of 10,450,000 exchangeable shares. During the quarter the Company received loans of $1,224,162 for total loans of $1,284,162. These loans bear interest at an annual rate of 8% and were due and payable on March 15, 2000. The Company did not repay these loans and as a result has offered the lenders the right to convert the principal into units of the Company at a price of $0.57 per unit. Each unit is comprised of one common share of the Company and one-half share purchase warrant. Each whole share purchase warrant entitles the holder to purchase an additional share at a price of $5.00 per share. This offer is to be made by way of a prospectus that is being conducted in Ontario, Quebec and British Columbia in Canada. Subsequent to the quarter, the Company entered into an Agency agreement with Groome Capital.com Inc. ("Groome") whereby the Company and Groome will engage in a best efforts offering of up to 20,000,000 Special Warrants at a price of $1.25 per Special Warrant. Each Special Warrant is convertible into one share and one-half share purchase warrant exercisable for a period of two years at a price of $5.00 per whole share purchase warrant. Groome will receive an Agent's Fee equal to 8% of the total amount raised (reduced to 4% for investors on the President's List). Groome has also been granted non-assignable warrants to acquire, without payment, one year Compensation Options which provide the right to purchase, at $1.25 per unit, a number of units equal to 10% of the number of Special Warrants sold under this offering. To date the Company has received subscriptions for 847,989 units with total proceeds of $1,060,000. The Company intends to use the proceeds from the financing to fund operating deficits, research and development, joint venture agreements, acquisitions and working capital. Capital Expenditures. No material capital expenditures were made during the quarter ended on March 31, 2000. Year 2000 Issue. The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using the year 2000 date is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. The effects of the Year 2000 issue may be experienced after January 1, 2000, and if not addressed, the impact on operations and financial reporting may range from minor errors to significant system failure which could affect the Registrant's ability to conduct normal business operations. This creates potential risk for all companies, even if their own computer systems are Year 2000 compliant. It is not possible to be certain that all aspects of the Year 2000 issue affecting the Registrant, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved. The Registrant currently believes that its systems are Year 2000 compliant in all material respects. Although management is not aware of any material operational issues or costs associated with preparing its internal systems for the Year 2000, the Registrant may experience serious unanticipated negative consequences (such as significant downtime for one or more of its suppliers) or material costs caused by undetected errors or defects in the technology used in its internal systems. Furthermore, the purchasing patterns of consumers may be affected by Year 2000 issues. The Registrant does not currently have any information about the Year 2000 status of its potential material suppliers. The Registrant's Year 2000 plans are based on management's best estimates. Forward Looking Statements. The foregoing Management's Discussion and Analysis contains "forward looking statements" within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended, including statements regarding, among other items, the Registrant's business strategies, continued growth in the Registrant's markets, projections, and anticipated trends in the Registrant's business and the industry in which it operates. The words "believe," "expect," "anticipate," "intends," "forecast," "project," and similar expressions identify forward-looking statements. These forward-looking statements are based largely on the Registrant's expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Registrant's control. The Registrant cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements, including, among others, the following: reduced or lack of increase in demand for the Registrant's products, competitive pricing pressures, changes in the market price of ingredients used in the Registrant's products and the level of expenses incurred in the Registrant's operations. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained herein will in fact transpire or prove to be accurate. The Registrant disclaims any intent or obligation to update "forward looking statements." PART II. ITEM 1. LEGAL PROCEEDINGS. The Registrant is not a party to any material pending legal proceedings and, to the best of its knowledge, no such action by or against the Registrant has been threatened. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 5. OTHER INFORMATION. In January, 2000, the Registrant formally completed the acquisition of one British Columbia corporation (Urbana.ca Enterprises Corporation) and two Ontario corporations (Enersphere.com, Inc. and E-Bill Direct, Inc.) (collectively, "Acquired Entities"). These acquisitions were completed with the execution of a Share Exchange and Share Purchase Agreement with each company wherein the shareholders of each Acquired Entity received Exchangeable Non-Voting shares in the capital of URBA Holdings Inc. that are exchangeable on a one-for-one basis to restricted common shares in the capital of the Registrant (see Exhibits 10.6, 10.7, and 10.8 to this Form 10-QSB). The aggregate consideration paid for the Acquired Entities was 10,450,000 common shares of the Registrant (after conversion) plus $84,828 CDN in cash payments to Enersphere.com, Inc. All consideration is paid in full. In January, 2000, Urbana.ca Enterprises Corp. entered into an Exclusivity Agreement with Eagle Wireless International, Inc. of League City, Texas (see Exhibit 10.9 to this Form 10-QSB). Within the terms of this Agreement, Eagle has agreed to manufacture and sell Set-Top Boxes to the Registrant and granted exclusive right to the Registrant to sell Eagle Manufactured STBs in Canada in return for certain volume p/purchases by the Registrant over a 24 month period. The Registrant also entered into a License Agreement with USA Video of Mystic, Connecticut wherein certain compression technology developed by USA Video will be embedded in STBs manufactured by Eagle and sold by the Registrant. In March 2000, the Registrant undertook the merger of the three Acquired Entities into Urbana Enterprises Corp., an Ontario registered corporation wholly owned by the Registrant (see Exhibit 2.2 to this Form 10-QSB). The resulting corporate structure has the Registrant, which operates as a financing and holding Registrant for its two wholly owned subsidiaries: (a) URBA Holdings Inc. a non-operating subsidiary which facilitated the acquisition of the subsidiaries; and (b) Urbana Enterprises Corp., an Ontario registered corporation which is the operating, wholly owned subsidiary company established to execute the business plan of the Registrant. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Reports on Form 8-K. The following report on Form 8-K were filed during the first quarter of the fiscal year covered by this Form 10-QSB, as follows: A Form 8-K was filed on March 30, 2000 which reflected the following: (1) Effective on January 26, 2000, the independent accountant who was previously engaged as the principal accountant to audit the Registrant's financial statements, Kurt D. Saliger, C.P.A., resigned; and (b) effective on January 27, 2000, the firm of LaBonte & Co. was engaged to serve as the new principal accountant to audit the Registrant's financial statements. (b) Exhibits. Exhibits included or incorporated by reference herein: See Exhibit Index. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Urbana.ca, Inc. Dated: May 15, 2000 By: /s/ Jason Cassis Jason Cassis, Chief Executive Officer EXHIBIT INDEX Exhibit Description No. 2.1 Articles of Merger of Foreign Corporation into Integrated Carbonics Corp. (incorporated by reference to Exhibit 2 to the Registration Statement on Form 10-SB/A filed on December 17, 1998). 2.2 Amalgation Agreement between Urbana.ca Enterprises Corp., Enersphere.com, Inc., and E-Bill Direct Inc., dated March 3, 2000 (see below). 3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Registration Statement on Form 10-SB/A filed on December 17, 1998. 3.2 Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.2 of the Form 10-QSB filed on November 15, 1999). 3.3 Bylaws (incorporated by reference to Exhibit 3.2 of the Registration Statement on Form 10-SB/A filed on December 17, 1999). 4 Integrated Carbonics Corp. 1999 Stock Option Plan (incorporated by reference to Exhibit 4 to the Form 10-QSB filed on November 15, 1999). 10.1 Agreement between PLR, Inc. and Da-Jung Resource Corp., dated September 22, 1997 and PLR, Inc. (incorporated by reference to Exhibit 10.1 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.2 Agreement between Integrated Carbonics Corp. and Da-Jung Resource Corp., dated October 7, 1997 (incorporated by reference to Exhibit 10.2 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.3 Agreement on Establishment of Sino Equity Joint Venture, China-Canada Liumao Graphite Products Co. Ltd., dated September 9, 1997 (incorporated by reference to Exhibit 10.3 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.4 Equity Joint Venture Agreement between Integrated Carbonics Corp. and Liumao Graphite Mine, dated November 10, 1997 (incorporated by reference to Exhibit 10.4 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.5 Cooperative Joint Venture Agreement between Da-Jung Resource Corp. and Heilongjiang Geological and Mining Technology Development Corp., dated September 9, 1997 (incorporated by reference to Exhibit 10.5 of the Registration Statement on Form 10-SB/A filed on December 17, 1998). 10.6 Share Exchange and Share Purchase Agreement between the Registrant, ICC Integrated Carbonics (Canada) Corp., and Enersphere.com, Inc., dated December 1, 1999 (see below). 10.7 Share Exchange and Share Purchase Agreement between the Registrant, ICC Integrated Carbonics (Canada) Corp., and Urbana.ca Enterprises Corp., dated January 4, 2000 (see below). 10.8 Share Exchange and Share Purchase Agreement between the Registrant, ICC Integrated Carbonics (Canada) Corp., and E-Bill Direct, Inc., dated January 10, 2000 (see below). 10.9 Exclusivity Agreement between Urbana.ca Enterprises Corp. and Eagle Wireless International, Inc., dated January 17, 2000. 21 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21 of the Form 10-KSB filed on March 31, 2000). 27 Financial Data Schedule (see below). EX-2.2 2 AMALGAMATION AGREEMENT THIS AMALGAMATION AGREEMENT entered into this 3rd day of March, 2000. PRIVATE BETWEEN: E-Bill Direct Inc. (hereinafter referred to as "E-Bill") OF THE FIRST PART - - and - Enersphere.com Inc. (hereinafter referred to as "Enersphere") OF THE SECOND PART - - and - Urbana.ca Enterprises Corp. (hereinafter referred to as "Urbana") OF THE THIRD PART WHEREAS: A. E-Bill was incorporated under the Business Corporations Act (Ontario) (the "Act") by Articles of Incorporation dated the 27th day of May, 1999. B. Enersphere was incorporated under the Act by Articles of Incorporation dated the 28th day of September, 1999. C. Urbana. was incorporated under the Company Act (British Columbia) by Articles of Incorporation dated the 18th day of November, 1998, and continued under the Act by Articles of Continuance dated the 3rd day of March, 2000. D. Urbana, Enersphere and E-Bill acting under the authority contained in the Act have agreed to amalgamate on the terms and conditions set out below; E. Urbana, Enersphere and E-Bill have each made full disclosure to the others of all their respective assets and liabilities. F. It is desirable that the said amalgamation should be effected; NOW THEREFORE the parties have agreed as follows: 1. In this Agreement the expression "Amalgamated Corporation" means the Corporation continuing from the amalgamation of E-Bill, Enersphere and Urbana, the parties to this Agreement. 2. E-Bill, Enersphere and Urbana do hereby agree to amalgamate under the provisions of Section 183 of the Act and to continue as one corporation on and subject to the terms and conditions set out below. 3. The name of the amalgamated Corporation shall be: URBANA ENTERPRISES CORP. 4. The registered office of the amalgamated Corporation shall be at the City of Cambridge, in the Province of Ontario. 5. The Amalgamated Corporation is authorized to issue an unlimited number of shares of a class designated as Common Shares. 6. The right to issue, allot or transfer its shares shall be restricted in that no share or shares of the Amalgamated Corporation shall be issued, allotted or transferred without either: (a) the approval of the Board of Directors evidenced by Resolution of the Board of Directors or by an instrument or instruments in writing signed by a majority of the members of the Board of Directors; or (b) approval of the holders of at least 51% of the shares having full voting rights for the time being outstanding, evidenced by a Resolution passed at a meeting of the holders of such outstanding shares, or by an instrument or instruments in writing signed by the holders of at least 51% of such outstanding shares. No allotment or issue of the Amalgamated Corporation's securities shall be made pursuant to any invitation to the public to subscribe for such securities. 7. The minimum number of directors of the Amalgamated Corporation shall be one (1) and the maximum number of directors shall be ten (10). 8. There shall be no restrictions on the business which the Amalgamated Corporation is authorized to carry on. 9. (a) The number of shareholders of the Amalgamated Corporation, exclusive of persons who are in its employment and exclusive of persons who, having been formerly in the employment of the Amalgamated Corporation, were, while in the employment, and have continued after the termination of that employment, to be shareholders of the Amalgamated Corporation, is limited to not more than fifty, two or more persons who are the joint registered owners of one or more shares being counted as one shareholder. (b) Any invitation to the public to subscribe for securities of the Amalgamated Corporation is prohibited. (c) The directors may, and they are hereby authorized from time to time when they deem it expedient: (i) borrow money upon the credit of the Amalgamated Corporation; (ii) issue bonds, debentures, notes or other securities of the Amalgamated Corporation and pledge or sell the same for such prices or other consideration as may be deemed expedient; (iii) notwithstanding the provisions of the Civil Code of Quebec or any other law, hypothecate, mortgage, pledge and charge, cede and transfer the property, undertaking and assets, real or personal, moveable or immoveable, present or future, of the Amalgamated Corporation, to secure any such bonds, debentures, notes and securities or give any guarantee(s) or give part only of such guarantee for such purposes and constitute the hypothec, mortgage or pledge or charge or cession, and transfer any of the above mentioned by trust deed in accordance with section 23 and 24 of the Special Corporate Powers Act, (Quebec), or any successor thereto, or in any other manner. (iv) hypothecate or mortgage the immoveable property of the Amalgamated Corporation or pledge or otherwise affect the moveable property, or give all such guarantees to secure the payment of loans made otherwise than by the issue of debentures, as well as the payment or performance of any other debt, contract or obligations of the Amalgamated Corporation; (v) exercise generally all or any of the rights or powers which the Amalgamated Corporation itself may exercise under its charter and the laws governing it; and (vi) delegate in and by any resolution or by-law to any officers or directors all or any of the powers hereby conferred upon the directors. Nothing contained herein shall limit or restrict the borrowing of money by the Amalgamated Corporation on bills of exchange or promissory notes made, drawn, accepted or endorsed by or on behalf of the Amalgamated Corporation or to affect, alter or restrict any power or authority conferred upon the directors by any other by-laws or resolutions of the Amalgamated Corporation. (d) The Amalgamated Corporation may, at any time and from time to time, purchase for cancellation or otherwise acquire any of its issued shares of any class or any of its warrants pursuant to the provisions of the Act at the lowest price and on the most favourable terms which, in the opinion of the board of directors of the Amalgamated Corporation, such shares or warrants are obtainable. 10. The first directors of the Amalgamated Corporation shall be the persons whose names and addresses are set out below, who shall hold office until the first annual meeting of the Amalgamated Corporation or until their successors are elected or appointed: Name Address David M. Groves 2523 Robinson Street Mississauga, Ontario L5C 2P2 Jason I. Cassis 1276 Shaver Road Ancaster, Ontario L9G 3L1 The directors shall subsequently be elected each year at either a general meeting or the annual meeting of the shareholders by a majority of the votes cast at the meeting. The management and supervision of the business and affairs of the Amalgamated Corporation shall be under the control of the board of directors from time to time, subject to the provisions of the Act. 11. The authorized shares of E-Bill, Enersphere and Urbana shall be converted into authorized and issued shares of the Amalgamated Corporation as follows: (a) the 2,950,000 issued and outstanding common shares in the capital of E-Bill shall be converted into 2,950,000 common shares in the capital of the Amalgamated Corporation at the rate of one (1) common share of E-Bill being converted into one (1) common share of the Amalgamated Corporation; (b) the 2,123,000 issued and outstanding common shares in the capital of Enersphere shall be converted into 2,123,000 common shares in the capital of the Amalgamated Corporation at the rate of one (1) common share of Enersphere being converted into one (1) common share of the Amalgamated Corporation; and (c) the 10,000,000 issued and outstanding common shares in the capital of Urbana shall be converted into 10,000,000 common shares in the capital of the Amalgamated Corporation at the rate of one (1) common share of Urbana being converted into one (1) common share of the Amalgamated Corporation. After the issue of a Certificate of Amalgamation giving effect to the amalgamation contemplated by this Agreement, the shareholders of E-Bill, Enersphere and Urbana shall, at the request of the Amalgamated Corporation, surrender the certificates representing shares held by them in E-Bill, Enersphere and Urbana and, in return, shall be entitled to receive certificates representing shares of the Amalgamated Corporation on the basis set out above. 12. The by-laws of E-Bill shall, to the extent not inconsistent with this Agreement, be the by-laws of the Amalgamated Corporation, until repealed, amended, altered or added to. 13. E-Bill shall contribute to the Amalgamated Corporation all of its property and its assets subject to all its liabilities. 14. Enersphere shall contribute to the Amalgamated Corporation all of its property and its assets subject to all its liabilities. 15. Urbana shall contribute to the Amalgamated Corporation all of its property and its assets subject to all its liabilities. 16. The Amalgamated Corporation shall possess all the property, assets, rights, privileges and franchises and shall be subject to all the contracts, liabilities, debts and obligations of E-Bill, Enersphere and Urbana. 17. No action or proceeding by or against E-Bill, Enersphere and Urbana shall abate or be affected by the amalgamation, but for all purposes of the action or proceeding, the names of the Amalgamated Corporation shall be substituted in the action or proceeding in place of E-Bill, Enersphere and Urbana as the case may be. 18. On the shareholders of E-Bill, Enersphere and Urbana respectively approving this agreement in accordance with the provisions of the Act, the parties to this agreement shall complete and send Articles of Amalgamation prescribed form to the Director, Corporations Branch, Ministry of Consumer and Commercial Relations , providing for the amalgamation of E-Bill, Enersphere and Urbana on and subject to the terms and conditions of this agreement. 19. This agreement may be terminated without cause or reason by the board of directors of any of E-Bill, Enersphere and Urbana, despite the approval of this agreement or by the shareholders of E-Bill, Enersphere and Urbana, at any time before the issue of a Certificate of Amalgamation under the Act. IN WITNESS WHEREOF this Agreement has been duly executed by the Parties to as witnessed by the signatures of their proper offices in that behalf E-BILL DIRECT INC. Per: /s/ David Groves President & Secretary - David Groves ENERSPHERE.COM INC. Per: /s/ Rick Whittaker President - Rick Whittaker Per: /s/ John Cullen Secretary - John Cullen URBANA.CA ENTERPRISES CORP. Per: /s/ Jason Cassis President - Jason Cassis Per: /s/ Greg Alexanian Secretary - Greg Alexanian EX-10.6 3 SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT THIS SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT is dated for reference the 1st day of December, 1999. AMONG: URBANA.CA INC., a corporation incorporated under the laws of the State of Nevada, (the "Parent") AND: ICC INTEGRATED CARBONICS (CANADA) CORP., a corporation incorporated under the laws of the Province of British Columbia, (the "Purchaser") AND: ENERSPHERE.COM INC., a corporation incorporated under the laws of the Province of Ontario (the "Corporation") AND: ALL OF THE SHAREHOLDERS OF THE CORPORATIONS as more particularly described on Schedule "A" attached hereto, (Individually a "Shareholder" and collectively the "Shareholders"); WHEREAS: A. The Corporation is an Internet based provider of comprehensive financial information and consumer products; B. The Shareholders own all of the issued and outstanding shares of the Corporation (the "Corporation Shares"); C. The Parent owns all of the issued and outstanding shares in the capital stock of the Purchaser; D. The Purchaser desired to purchase all of the Corporation Shares and the Shareholders desire to sell all of the Corporation Shares to the Purchaser on the terms and conditions hereinafter set forth and, on October 1, 1999, entered into a letter of intent to purchase all of the issued and outstanding shares of The Corporation and, on <>, 1999, entered into a letter of intent to purchase all of the issued and outstanding shares of Urbana (BC) (collectively, the "Letter of Intent"); E. The Letter of Intent called for the parties thereto to enter into formal share purchase and exchange agreements; F. The respective boards of directors of the Purchaser, Parent and Corporation each deem it advisable and in the best interests of their respective shareholders to combine their respective businesses by the Purchaser acquiring all of the shares in the capital stock of the Corporation pursuant to the terms of this Agreement; and G. The respective boards of directors of the Purchaser, Parent and Corporation have approved and adopted this Agreement as a plan of reorganization under section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), and as a transfer of shares pursuant to section 85 of the Income Tax Act (Canada) (the "Tax Act"). NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the foregoing premises, the mutual representations, warranties, covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I: DEFINITIONS 1.01 Definitions. The following terms, as used herein, have the following meanings: "Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under direct or indirect common control with such other Person. "Agreement" means this Share Exchange and Share Purchase Agreement by and among the Purchaser, Parent, Corporation and Shareholders. "Applicable Law" means, with respect to any Person, any United States (whether federal, territorial, state or local), Canadian (whether federal, territorial, provincial, municipal or local) or foreign statute, law, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment, decree or other requirement, all as in effect as of the Closing, of any Governmental Authority applicable to such Person or any of its Affiliates or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer's, director's, employee's, consultant's or agent's activities on behalf of such Person or any of its Affiliates). "Associate" means with respect to any Person (a) any other Person of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities issued by such other Person, (b) any trust or other estate in which such Person has a ten percent (10%) or more beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, and (c) any relative or spouse of such Person, or any relative of such spouse who has the same home as such Person or who is a director or officer of such Person or any Affiliate thereof. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in Toronto, Ontario are authorized or required by law to close. "Buying Group" means the Purchaser and the Parent. "Buying Group Business" means the business as heretofore or currently conducted by the Buying Group. "Buying Group Contracts" means all contracts, agreements, options, leases, licences, sales and purchase orders, commitments and other instruments of any kind, whether written or oral, to which either the Purchaser or the Parent is a party on the Closing Date. "Corporation Balance Sheet" means the balance sheet of the Corporation dated November 30, 1999. "Corporation Business" means the business as heretofore or currently conducted by the Corporation. "Corporation Contracts" means all contracts, agreements, options, leases, licences, sales and purchase orders, commitments and other instruments of any kind, whether written or oral, to which the Corporation, or any Shareholder on behalf of the Corporation, is a party on the Closing Date. "Corporation Premises" means those premises that have been occupied or used, or are occupied or used, by the Corporation in connection with the Corporation Business. "Exchange and Voting Agreement" means the agreement in substantially the form set out in Schedule "B" hereto to be entered into by the Parent, Purchaser and Trustee. "Exchangeable Non-Voting Shares" means those 4,500,000 Class "A" exchangeable, non-voting, participating common shares without par value in the capital stock of the Purchaser, having those rights and terms set forth in the Exchange and Voting Agreement and the Exchangeable Share Provisions, which will be issued to the Shareholders in consideration for the purchase and sale of the Corporation Shares. "Exchangeable Share Provisions" means those rights, restrictions, terms and provisions pertaining to the Exchangeable Non-Voting Shares, as set forth in Schedule "F" hereto, and as summarized in section 5.03 hereof. "Governmental Authority" means any United States (whether federal, territorial, state, municipal or local), Canadian (whether federal, territorial, provincial, municipal or local) or foreign government, governmental authority, quasi-governmental authority, instrumentality, court, government or self-regulatory organization, commission, tribunal or organization or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing. "GST" means all goods and services taxes, sales taxes levied by the federal government of Canada, value added taxes or multi- stage taxes and all provincial sales taxes integrated with such federal taxes, assessed, rated or charged upon the Corporation. "Interim Period" means the period from and including the date of this Agreement to and including the Closing Date. "Liability" means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person. "Lien" means, with respect to any asset, any mortgage, assignment, trust or deemed trust (whether contractual, statutory or otherwise arising), title defect or objection, lien, pledge, charge, security interest, hypothecation, restriction, encumbrance or charge of any kind in respect of such assets. "Material Adverse Effect" means a change in, or effect on, the operations, affairs, prospects, financial condition, results of operations, assets, Liabilities, reserves or any other aspect of a party to this Agreement or to its business that results in a material adverse effect on, or a material adverse change in, any such aspect of the party or to its business. "Parent's Balance Sheet" means the balance sheet of the Parent dated September 30, 1999. "Parent Common Shares" means 4,500,000 common shares in the capital of the Parent to be issued to the Trustee pursuant to paragraph 2.05 hereof, in consideration of subscription proceeds from the Trustee of $0.0001 per share, having those rights and terms as set forth in the Exchange and Voting Agreement. "Person" includes an individual, body corporate, partnership, company, unincorporated syndicate or organization, trust, Trustee, executor, administrator and other legal representative. "SEC" means the United States Securities and Exchange Commission. "Stock Option Plan" means the stock option plan of the Parent which plan is more particularly described in Schedule "H" attached hereto. "Subsidiary" means, with respect to any Person, (i) any corporation as to which more than 10% of the outstanding shares having ordinary voting rights or power (and excluding shares having voting rights only upon the occurrence of a contingency unless and until such contingency occurs and such rights may be exercised) is owned or controlled, directly or indirectly, by such Person and/or by one or more of such Person's Subsidiaries, and (ii) any partnership, joint venture or other similar relationship between such Person (or any Subsidiary thereof) and any other Person (whether pursuant to a written agreement or otherwise). "Support Agreement" means that agreement between the Parent and the Purchaser, in the form attached hereto as Schedule "G" hereto, whereby the Parent agrees to make certain payments and deliveries to enable the Purchaser to comply with the Exchangeable Share Provisions. "Tax" means all taxes imposed of any nature including any United States (whether federal, territorial, state or local), Canadian (whether federal, territorial, provincial or local) or foreign income tax, alternative or add-on minimum tax, profits or excess profits tax, franchise tax, gross income, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax or employer health tax), capital tax, real or personal property tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any withholding or back up withholding tax, value added tax, GST, severance tax, prohibited tax, premiums tax, occupation tax, customs and import duties, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax or in respect of or pursuant to any United States (whether federal, territorial, state or local), Canadian (whether federal, territorial, provincial or local) or other Applicable Law. "Tax Return" means all returns, reports, forms or other information required to be filed with respect to any Tax. "Trustee" means the Trustee or successor Trustee designated under the Exchange and Voting Agreement attached hereto as Schedule "B". "33 Act" means the United States Securities Act of 1933 and all amendments thereto. "34 Act" means the United States Securities Act of 1934 and all amendments thereto. 1.02 Currency Used. All references herein to dollars or the use of the symbol "$" shall be deemed to refer to United States dollars unless such reference is prefaced by "CDN" in which case the reference will be to Canadian dollars. 1.03 Canadian Generally Accepted Accounting Principles. Where the Canadian Institute of Chartered Accountants or any successor thereto includes a statement in its handbook or any successor thereto on a method or alternative methods of accounting or on a standard or standards of auditing, such statement shall be regarded as the only generally accepted accounting principle or principles or generally accepted auditing standard or standards ("Canadian GAAP") applicable to the circumstances that it covers, and references herein to "generally accepted accounting principles" shall be interpreted accordingly. All accounting and financial terms used herein with respect to the Corporation, unless specifically provided to the contrary, shall be interpreted and applied in accordance with Canadian GAAP. 1.04 American Generally Accepted Accounting Principles. Where the American Institute of Certified Public Accountants or any successor thereto includes a statement in its handbook or any successor thereto on a method or alternative methods of accounting or on a standard or standards of auditing, such statement shall be regarded as the only generally accepted accounting principle or principles or generally accepted auditing standard or standards ("American GAAP") applicable to the circumstances that it covers, and references herein to "generally accepted accounting principles" shall be interpreted accordingly. All accounting and financial terms used herein with respect to the Parent, unless specifically provided to the contrary, shall be interpreted and applied in accordance with American GAAP. ARTICLE II: PURCHASE, SALE AND SUBSCRIPTION 2.01 Purchase of Corporation Shares. On the terms and subject to the conditions set forth herein, the Shareholders hereby agree to sell, transfer, convey, assign and deliver to the Purchaser, free and clear of all Corporation Share Encumbrances (as defined in paragraph 3.01.1), and the Purchaser hereby agrees to purchase, acquire and accept from the Shareholders, all of the Corporation Shares held by the Shareholders. At Closing, the Shareholders will deliver to the Purchaser certificates evidencing all of the Corporation Shares duly endorsed for transfer and such other instruments as have been reasonably requested by the Purchaser to transfer full legal and beneficial ownership of the Corporation Shares to the Purchaser, free and clear of all Corporation Share Encumbrances and the Corporation agree to enter the Purchaser or the Purchaser's nominee on the books of the Corporation as the holder of the Corporation Shares and to issue one or more replacement share certificates representing the Corporation Shares to the Purchaser or the Purchaser's nominee. The Purchaser shall pay the Purchase Price for the Corporation Shares in accordance with the terms of Sections 2.02 of this Agreement. 2.02 Purchase Price for Corporation Shares. The aggregate purchase price to be paid to the Shareholders by the Purchaser for the Corporation Shares (the "Purchase Price") will be: (a) 4,500,000 Exchangeable Non-Voting Shares, each Exchangeable Non-Voting Share exchangeable for a Parent Common Share on the terms and conditions contained herein; and (b) those sums totalling CDN$123,000 (the "Purchase Price Cash Portion") and set forth in Schedule "I" hereto. The Purchase Price Cash Portion shall be paid at and after Closing as set forth in Schedule "I". 2.03 Subscription of Parent Common Shares and Optioned Securities. The Parent agrees to grant: (a) to each Shareholder, such number of voting rights in the Parent as is equivalent to the number of Exchangeable Non- Voting Shares held by each Shareholder, as if each Shareholder held an equivalent number of Parent Common Shares, and, subject to the remaining terms of this Agreement, which voting rights will be exercisable by the Shareholders through their holding Exchangeable Non-Voting Shares in accordance with the Exchange and Voting Agreement; (b) to each Shareholder, the rights to exchange their Exchangeable Non-Voting Shares for Parent Common Shares, such rights to be exercised in accordance with the terms of the Exchange and Voting Agreement; (c) to Rick Whittaker and John Cullen, Shareholders who are shareholders of The Corporation, incentive stock options providing for the purchase of 100,000 Parent Common Shares, exercisable until June 7, 2001 at an exercise price of $0.50 under the terms of the stock option plan attached hereto as Schedule "H". In the event that some or all of these incentive stock options are unexercised on June 7, 2001, the Parent agrees to grant to each of Rick Whittaker and to John Cullen that number of incentive stock options which is equal to 100,000 less that number of incentive stock options they personally exercised on such terms and conditions as may be permitted under the Parent's stock option plan effective on June 7, 2001 (or later) and under applicable laws, statutes and regulations. To ensure that the Parent has sufficient common shares available to issue in exchange for Exchangeable Non-Voting Shares, and as security for its covenant to do so, the Parent agrees to issue the Parent Common Shares to the Trustee, at or shortly following Closing, at the purchase price of $0.0001 per share; such Parent Common Shares to be held in accordance with the Exchange and Voting Agreement. 2.04 Closing. The closing (the "Closing") of the transactions contemplated by this Agreement shall take place at the offices of the Parent in Ontario, Canada, on such date as the parties hereto may mutually agree in writing (the "Closing Date"). 2.05 Payment of Purchase Price. At Closing the Purchaser will deliver to the Shareholders certificates representing the Exchangeable Non-Voting Shares, all such Exchangeable Non-Voting Shares to be issued as fully paid and non-assessable, and registered in the names of the Shareholders and in the denominations set forth in Schedule "A" to the Exchange and Voting Agreement. On or shortly following the Closing, the Parent will issue the Parent Common Shares to the Trustee, such Parent Common Shares to be issued as fully paid and non- assessable, and registered in the name of the Trustee in such denominations as the Trustee may request. At Closing the Purchaser will also deliver promissory notes (the "Promissory Notes"), in a form acceptable to the Shareholders and the Purchaser evidencing the Purchaser's obligation to pay the Purchase Price Cash Portion. The Promissory Notes shall be guaranteed by the Corporation and shall be secured by the Corporation's assets. 2.06 Reversion for Non-Payment of Purchase Price. Notwithstanding anything else in this Agreement, in the event that the Purchaser fails to make any of the Purchase Price payments as outlined in Schedule "I" hereto or in the event that the Purchaser fails to make any of the Loans as detailed in paragraph 7.04 then, unless otherwise agreed to in writing by the Shareholders, the Parent and the Purchaser: (a) the Shareholders will, within six (6) months of the Default Date, return to the Purchaser any portion of the Purchase Price Cash Portion previously paid to them and will agree in writing to gift back to the treasury of the Purchaser their Exchangeable Non-Voting Shares; (b) upon receipt of repayment of the Purchase Price Cash Portion previously paid to the Shareholders, the Purchaser shall transfer, for consideration of Cdn $1.00, all shares of the Corporation back to the Shareholders from whom they were purchased; and (c) all Loans made by the Purchaser or the Parent to the Corporation shall become due and payable on a date (the "Default Date") being six months from a default on the payment of the purchase price or a failure to advance a Loan where no extension has been granted by the Shareholders. ARTICLE III: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS As an inducement to the Buying Group to enter into this Agreement and to consummate the transactions provided for herein, each Shareholder, as to himself, herself or itself and as to such of the Corporation Shares owned by him, her or it (and not as to any other Shareholder or to any of the Corporation Shares owned by any other Shareholder) represents and warrants to the Buying Group as follows and confirms that the Purchaser and the Parent are relying upon the accuracy of each of such representations and warranties in connection with the purchase of the Corporation Shares and the completion of the transactions set out herein: 3.01 Representations Regarding the Corporation Shares. 3.01.1 Each Shareholder has good and marketable title to his or her respective holdings in the Corporation Shares, free and clear of any and all covenants, conditions, restrictions, voting trust arrangements, rights of first refusal, options, Liens and adverse claims and rights whatsoever (collectively, the "Corporation Share Encumbrances"), and on the Closing Date, the Shareholders will deliver to the Purchaser, good and marketable title to the Corporation Shares free and clear of any and all Corporation Share Encumbrances; 3.01.2 Each Shareholder has the full right, power and authority to enter into this Agreement and each Shareholder has the full right, power and authority to transfer, convey and sell to the Purchaser at the Closing his or her respective holdings of the Corporation Shares sold to the Purchaser by the Shareholders hereunder, and upon consummation of the purchase, the Purchaser will acquire from the Shareholders good and marketable title to the Corporation Shares sold to the Purchaser by the Shareholders, free and clear of all Corporation Share Encumbrances; and 3.01.3 No Shareholder is a party to, subject to or bound by any agreement, judgment, order, writ, prohibition, injunction or decree of any court or other Governmental Authority that would prevent the execution or delivery to the Purchaser of this Agreement by any Shareholder, the transfer, conveyance and sale of the Corporation Shares sold by Shareholder to the Purchaser pursuant to the terms hereof, or the consummation of the transactions under this Agreement in accordance with the terms of this Agreement. 3.02 Authorization. The execution, delivery and performance of this Agreement, and the consummation of the transactions provided for herein, by each Shareholder are within the respective powers of each Shareholder and have been duly authorized by all necessary action on the part of each Shareholder, respectively. This Agreement has been duly and validly executed by each Shareholder and constitutes a legal, valid and binding agreement upon each Shareholder, respectively, enforceable against each Shareholder in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and subject to general principles of equity or family law. 3.03 Non-Contravention. The execution, delivery and performance of this Agreement, and the consummation of the transactions provided for herein, by each Shareholder, do not (a) contravene or conflict with or constitute a material violation of any provision of any Applicable Law binding upon or applicable to any Shareholder or the Corporation Shares or (b) result in the creation or imposition of any Lien. 3.04 Residency. Each Shareholder is a resident of Canada as defined in the Income Tax Act (Canada). ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE CORPORATION As an inducement to the Buying Group to enter into this Agreement and to consummate the transactions provided for herein, the Corporation represent and warrant to the Buying Group as follows: 4.01 Existence and Power. The Corporation is a corporation duly incorporated, organized and validly existing under the laws of the Province of Ontario and has all corporate power and all governmental licences, authorizations, permits, consents and approvals required to carry on the business of The Corporation as now conducted and to own and operate business of The Corporation as now owned and operated. The Corporation is not required to be qualified to conduct business in any jurisdiction where the failure to be so qualified, whether individually or in the aggregate, would have a Material Adverse Effect. No proceedings have been taken or authorized by The Corporation or any Shareholder or, to the knowledge of The Corporation, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding-up of The Corporation or with respect to any amalgamation, merger, consolidation, arrangement or reorganization relating to The Corporation. 4.02 Authorization. The execution, delivery and performance by the Corporation of this Agreement and the consummation thereby of the transactions provided for herein are within the Corporations powers and have been duly authorized by all necessary action on its part. This Agreement has been duly and validly executed by the Corporation and constitutes a legal, valid and binding agreement of the Corporation enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and subject to general principles of equity. 4.03 Capital Stock. 4.03.1 The authorized capital stock of the Corporation consists solely of the share capital described in Schedule "A" hereto (the "Corporation Shares"). 4.03.2 All such issued and outstanding Corporation Shares have been duly and validly authorized and issued and are validly outstanding, fully paid and non-assessable. The Corporation Shares represent all of the issued and outstanding shares of the Corporation. The Corporation do not hold any of the issued and outstanding Corporation Shares in the treasury of the Corporation, and there are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Corporation except as disclosed in Schedule "C" hereto, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Corporation or options, warrants or other securities of the Corporation. 4.04 Subsidiaries. The Corporation have no Subsidiaries. 4.05 Governmental Authorization. The execution, delivery and performance by the Corporation of this Agreement requires no action by, consent or approval of, or filing with, any Governmental Authority other than as expressly referred to in this Agreement or which would normally be expected to be required as part of the transactions contemplated by this Agreement. 4.06 Non-Contravention. The execution, delivery and performance of this Agreement by the Corporation, and the consummation by it of the transactions provided for herein, do not and will not (a) contravene or conflict with the articles or bylaws of the Corporation; (b) contravene or conflict with or constitute a material violation of any provision of any Applicable Law binding upon or applicable to the Corporation, the Corporation Business or the Corporation Shares and would not, individually or in the aggregate, have a Material Adverse Effect; (c) constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit to which the Corporation are entitled, under any Corporation Contract to which the Corporation are a party or any permit or similar authorization relating to the Corporation, the Corporation Business or the Corporation Shares by which the Corporation, the Corporation Business or the Corporation Shares may be bound or affected; or (d) result in the creation or imposition of any Lien. 4.07 Financial Statements: Undisclosed Liabilities. 4.07.1 Attached hereto as Schedule "C" are true and complete copies of the Corporation Balance Sheets as of November 30, 1999 (collectively, the "Corporation Financials"). 4.07.2 The Corporation Financials: (i) have been prepared on a consistent basis and are based on the books and records of the Corporation in accordance with Canadian GAAP and present fairly the financial position, results of operations and statements of changes in the Corporations financial position as of the dates indicated or the periods indicated; (ii) contain and reflect all necessary adjustments and accruals for a fair presentation of its financial position and the results of its operations for the periods covered by said financial statements; (iii) contain and reflect adequate provisions for all reasonably anticipated Liabilities (including Taxes) with respect to the periods then ended and all prior periods; and (iv) with respect to the Corporation Contracts and commitments for the sale of goods or the provision of services by the Corporation, contain and reflect adequate reserves for all reasonably anticipated material losses and costs and expenses in excess of expected receipts. 4.07.3 To the best of the knowledge of the Corporation, there are no Liabilities of the Corporation other than: (i) any Liabilities accrued as Liabilities on the Corporation Balance Sheet; (ii) Liabilities incurred since the date of the Corporation Balance Sheet that do not, and could not, individually or in the aggregate have a Material Adverse Effect; and (iii) other Liabilities disclosed in this Agreement or in any schedules attached hereto. 4.08 Absence of Certain Changes. Since December 1, 1999, the Corporation Business has been conducted in the ordinary course, and there has not been: (a) any event, occurrence, state of circumstances, or facts or change in the Corporation or in the Corporation Business that has had, or which the Corporation, after reasonable inquiry, expect to have, either individually or in the aggregate, a Material Adverse Effect; (b) (i) any change in any Liabilities of the Corporation that has had, or which the Corporation may, after reasonable inquiry, expect to have, a Material Adverse Effect such that the total Liabilities of the Corporation would exceed CDN $162,001 or (ii) any incurrence, assumption or guarantee of any indebtedness for borrowed money by the Corporation in connection with the Corporation Business or otherwise; (c) any (i) payments by the Corporation in respect of any indebtedness of the Corporation for borrowed money or in satisfaction of any Liabilities of the Corporation related to the Corporation Business, other than in the ordinary course of business or the guarantee by the Corporation of any of the indebtedness of any other Person or (ii) creation, assumption or sufferance of (whether by action or omission) the existence of any Lien on any assets reflected on the Corporation's Balance Sheet; (d) any transaction or commitment made, or any Contract entered into, by the Corporation, or any waiver, amendment, termination or cancellation of any of the Corporation Contracts by the Corporation, or any relinquishment of any rights thereunder by the Corporation or of any other right or debt owed to the Corporation, other than, in each such case, actions taken in the ordinary course of business consistent with past practice; (e) any grant of any severance, continuation or termination pay to any director, officer, stockholder or employee of the Corporation or any Affiliate of the Corporation, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer, stockholder or employee of the Corporation or any Affiliate of the Corporation, (iii) increase in benefits payable or potentially payable under any severance, continuation or termination pay policies or employment agreements with any director, officer, stockholder or employee of the Corporation or any Affiliate of the Corporation, (iv) increase in compensation, bonus or other benefits payable or potentially payable to directors, officers, stockholders or employees of the Corporation or any Affiliate of the Corporation other than in the normal course of business, (v) change in the terms of any bonus, pension, insurance, health or other benefit plan of the Corporation or (vi) representation of the Corporation to any employee or former employee of the Corporation that the Purchaser promised to continue any Corporation benefit plan after the Closing Date, (f) any change by the Corporation in its accounting principles, methods or practices or in the manner it keeps its books and records; (g) any distribution, dividend, bonus, management fee or other payment by the Corporation to any officer, director, stockholder or Affiliate of the Corporation or any of their respective Affiliates or Associates; or (h) any (i) material single capital expenditure or commitment, or any group of related capital expenditures or commitments, or (ii) sale, assignment, transfer, lease or other disposition of or agreement to sell, assign, transfer, lease or otherwise dispose of any asset or property other than in the ordinary course of business. 4.09 Properties; Corporation Material Leases; Tangible Assets. 4.09.1 The Corporation does not own any real property. 4.09.2 The Corporation hold, title to each of its properties and assets free and clear of all Liens, adverse claims, easements, rights of way, servitudes, zoning or building restrictions or any other rights of others or other adverse interests of any kind, including leases, chattel mortgages, conditional sales contracts, collateral security arrangements and other title or interest retention arrangements (collectively, "Corporation Encumbrances"). 4.09.3 All tangible properties and assets reflected on the Corporation Balance Sheet are in all material respects fit for the purposes for which they are used and are in good operating condition and repair and are adequate for the uses to which they are put, and no material properties or assets necessary for the conduct of the Corporation Business in substantially the same manner as the Corporation Business has heretofore been conducted are in need of replacement, maintenance or repair except for routine replacement, maintenance and repair. 4.10 Affiliates. Other than as disclosed herein, there are no Corporation Contracts which have been entered into within the past five years or are currently in force and effect between the Corporation and any Shareholder, or any Affiliate or Associate of any Shareholder. The Corporation is not indebted to any Shareholder. 4.11 Litigation. There are no material proceedings pending or, to the knowledge of the Corporation, threatened against or affecting the Corporation or the Corporation Business or that seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement and (ii) there is no existing order, judgment or decree of any Governmental Authority naming the Corporation as an affected party which has not been paid or discharged in full. 4.12 Material Contracts. To the knowledge of the Corporation, all Corporation Contracts are legal, valid and binding obligations of the Corporation and each other Person who is a party thereto, enforceable against the Corporation and each such Person in accordance with their terms, and none are subject to any material default thereunder. 4.13 Required Consents. There are no governmental or other registrations, filings, applications, notices, transfers, consents, approvals, orders, qualifications or waivers required under Applicable Law or otherwise required to be obtained or made with any Governmental Authority to be obtained by the Corporation or any Shareholder by virtue of the execution and delivery of this Agreement and the consummation of the transactions provided for herein for any reason; nor are there any Corporation Contracts with respect to which the consent of the other party or parties thereto must be obtained by the Corporation or any Shareholder by virtue of the execution and delivery of this Agreement and the consummation of the transactions provided for herein (the "Required Consents"). 4.14 Corporation Intellectual Property. 4.14.1 Schedule "E" sets forth a complete and correct list of each patent, patent application and invention, trademark, tradename, trademark or tradename registration or application, copyright or copyright registration or application for copyright registration, and each licence or licensing agreement, for any of the foregoing relating to the Corporation Business as conducted by the Corporation or held by the Corporation (the "Corporation's Intellectual Property Rights"). The Corporation's Intellectual Property Rights also include any trade secrets that are material to the conduct of the Corporation Business in the manner that the Corporation Business has heretofore been conducted. 4.14.2 The Corporation has not, during the three years preceding the date of this Agreement, been a party to any proceeding, nor to the knowledge of the Corporation, is any proceeding threatened, as to which there is a reasonable possibility of a determination adverse to the Corporation, involving a claim of infringement by any Person (including any Governmental Authority) of any of the Corporation's Intellectual Property Rights. None of the Corporation Intellectual Property Right are subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof by the Corporation or restricting the licensing thereof by the Corporation to any Person. 4.14.3 To the knowledge of the Corporation, the Corporation either owns the entire right, title and interest in, to and under, or has acquired an exclusive licence to use, any and all patents, trademarks, trade names, brand names and copyrights that are material to the conduct of the Corporation Business in the manner that the Corporation Business has heretofore been conducted. The Corporation's Intellectual Property Rights are in full force and effect and have not been used or enforced or failed to be used or enforced in a manner that would result in the abandonment, cancellation or unenforceability of any of the Corporation's Intellectual Property Rights. All registrations and filings necessary to preserve the rights of the Corporation in and to the Corporation's Intellectual Property Rights have been made. 4.15 Tax Matters. 4.15.1 The Corporation has prepared and filed all Tax Returns on time with all appropriate Governmental Authorities which were required to be filed on or prior to the Closing Date. To the best of the Corporation's knowledge, each such Tax Return was correct and complete. 4.15.2 The Corporation has paid all Taxes due and payable by them and have paid all assessments and reassessments they have received in respect of Taxes. The Corporation have paid all Tax installments due and payable by them as at November 30, 1999, save and except as disclosed in Schedule "C" hereto. 4.15.3 The Corporation has withheld from each payment made to any of its present or former employees, officers and directors, and to all persons who are non-residents of Canada for the purposes of the Income Tax Act (Canada) all amounts required by Applicable Law and has remitted such withheld amounts within the prescribed periods to the appropriate Governmental Authority. The Corporation has remitted all Canada Pension Plan contributions, employment insurance premiums, employer health taxes and other Taxes payable by them in respect of their employees and have remitted such amounts to the proper Governmental Authority within the time required by Applicable Law. The Corporation has charged, collected and remitted on a timely basis all Taxes as required by Applicable Law on any sale, supply or delivery whatsoever, made by the Corporation. 4.15.4 The Corporation Business is the only business ever conducted by the Corporation. The non-capital losses (as defined in the Tax Act and any applicable provincial taxing statute) were incurred by the Corporation only in carrying on the Corporation Business. The Corporation is not prevented by virtue of any amalgamation or dissolution from carrying back against income earned by it prior to the Closing Date, any losses incurred by it after the Closing Date. 4.15.5 The Corporation has paid all Taxes imposed by applicable legislation in the provinces of British Columbia and Ontario on the acquisition of its tangible personal property as defined in applicable legislation in the province of Ontario, and none of its tangible personal property has been transferred at any time on a tax-exempt basis under applicable legislation of the Province of Ontario or any predecessor legislation thereof. The foregoing is accurate, mutatis mutandis, with respect to all sales or transfer Taxes imposed under comparable legislation of other provinces. 4.16 Securities Legislation. The Corporation is a private issuer within the meaning of the Securities Act (Ontario) and the sale of the Corporation Shares by the Shareholders to the Purchaser is made in compliance with the exempt takeover-bid provisions of this Act or such other exemption as may be available to it and the Shareholder. 4.17 Full Disclosure. The information contained in the documents, certificates and written statements (including this Agreement and the schedules and exhibits hereto) furnished to the Purchaser by or on behalf of the Corporation with respect to the Corporation (including the Corporation Business and the results of operations, financial condition and prospects of the Corporation) for use in connection with this Agreement or the transactions contemplated by this Agreement is true and complete in all material respects and does not, to the best of the knowledge of the Corporation after conducting an inquiry which a reasonably prudent person would make under the circumstances, omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Corporation that has not been disclosed to the Purchaser by the Corporation in writing that has had a Material Adverse Effect on or, so far as the Corporation can now foresee, could be reasonably likely to have a Material Adverse Effect on, the Corporation (including the Corporation Business and the results of operations, financial condition or prospects of the Corporation). ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE BUYING GROUP As an inducement to the Corporation and each Shareholder to enter into this Agreement and to consummate the transactions provided for herein, the Purchaser and the Parent, jointly and severally, represent and warrant to the Corporation and to each Shareholder and confirms that the Corporation and each Shareholder are relying upon the accuracy of each of such representations and warranties in connection with the purchase of the Corporation Shares and the completion of the transactions set out herein: 5.01 Existence and Power. Each of the Purchaser and the Parent is a corporation duly incorporated, organized and validly existing under the laws of its incorporating jurisdiction (being the Province of British Columbia for the Purchaser and the State of Nevada for the Parent) and each has all corporate power and all governmental licences, authorizations, permits, consents and approvals required to carry on the Buying Group Business as now conducted and to own and operate their respective businesses as now owned and operated. The Purchaser and the Parent are not required to be qualified to conduct business in any jurisdiction where the failure to be so qualified, whether individually or in the aggregate, would have a Material Adverse Effect. No proceedings have been taken or authorized by the Purchaser or the Parent or, to the knowledge of the Purchaser or the Parent, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding-up of the Purchaser or the Parent or with respect to any amalgamation, merger, consolidation, arrangement or reorganization relating to the Purchaser or the Parent. 5.02 Authorization. The execution, delivery and performance by each of the Purchaser and the Parent of this Agreement and the consummation thereby of the transactions provided for herein are within the powers of the Purchaser and the Parent and have been duly authorized by all necessary action on their part. This Agreement has been duly and validly executed by each of the Purchaser and the Parent and constitutes a legal, valid and binding agreement of the Purchaser and the Parent enforceable against them in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and subject to general principles of equity. 5.03 Capital Stock of the Purchaser. 5.03.1 The authorized capital stock of the Purchaser consists of 100,000,000 common shares of no par value of which one common share is issued and outstanding on the date hereof to and 50,000,000 Exchangeable Non-Voting Shares with no par value of which no shares are issued and outstanding. Each Exchangeable Non-Voting Share shall: (a) be non-voting as to matters concerning the Purchaser (such that all voting shares of the Purchaser will be and remain held by the Parent); however, as stated above in paragraph 2.03, the holder of Exchangeable Non-Voting Shares will be entitled to voting rights in the Parent as is equivalent to the number of Exchangeable Non-Voting Shares held by each Shareholder as if each Shareholder held an equivalent number of Parent Common Shares; (b) entitle the holder thereof (the "Holder") to dividend rights equal, after conversion into Canadian dollars based on the Canadian/U.S. exchange rate in effect on the record date thereof, to the per share dividend rights of Parent Common Shares; (c) entitle the Holder, on a liquidation of the Purchaser, to receive in exchange for each Exchangeable Non-Voting Share one Parent Common Shares for a period ending on the twenty-fifth anniversary of the Closing Date; and (d) entitle the Holder, at his or her election from time to time for a period ending on the twenty-fifth anniversary of the Closing Date, upon 30 days' written notice given by such Holder to the Purchaser, to require the Purchaser to redeem any or all Exchangeable Non-Voting Shares and to exchange therefor, on a share for share basis, Parent Common Shares (the "Right of Retraction"), 5.03.2 The Parent and the Purchaser shall be entitled to deduct and withhold from the consideration otherwise payable to any Holder of Exchangeable Non-Voting Shares, including any dividend payments in respect of the Exchangeable Non-Voting Shares, such amount as the Parent or the Purchaser is required or permitted to deduct and withhold with respect to such payment under the United States Internal Revenue Code, the Income Tax Act (Canada) or any provision of state, provincial, local or foreign tax law. The Parent and the Purchaser shall not initially withhold any United States Tax on dividends paid on the Exchangeable Non-Voting Shares. However, if any United States taxing authority determines that the Parent or the Purchaser is liable for United States withholding Tax on dividends paid to the Holders on the Exchangeable Non-Voting Shares, the Purchaser shall be entitled to reduce the amount of any future dividends to be paid to the Holders by such withholding obligation. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the Holder of Exchangeable Non-Voting Shares in respect of which such deduction and withholding was made; provided, however, that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required or permitted to be deducted or withheld from any payment to a Holder exceeds the cash portion of the consideration otherwise payable to the Holders, the Parent upon at least ten (10) days' prior written notice to such Holder, is hereby authorized to sell or otherwise dispose of at fair market value such portion of such non-cash consideration otherwise payable to the Holder as is necessary to provide sufficient funds to the Parent in order to enable it to comply with such deduction or withholding requirement and the Parent shall give an accounting to the Holder with respect thereof and any balance of such proceeds of sale. 5.03.3 There are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Purchaser, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Purchaser or options, warrants or other securities of the Purchaser. 5.04 Capital Stock of the Parent. 5.04.1 The authorized capital stock of the Parent consists solely of 70,000,000 common shares with no par value ("Parent Common Shares") of which 10,031,350 Parent Common Shares are issued and outstanding on the date hereof. 5.04.2 There are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Parent from treasury, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Parent or options, warrants or other securities of the Parent which materially vary from those disclosed in the financial statements of the Parent attached hereto as Schedule "D". 5.05 General Provisions of the Capital of the Purchaser and the Parent. 5.05.1 All of the issued and outstanding shares in the respective capital stocks of the Purchaser and the Parent have been duly and validly authorized and issued and are validly outstanding, fully paid and non-assessable. The Purchaser does not hold any of the issued and outstanding shares in the treasury of the Purchaser or the Parent, the Parent does not hold any of the issued and outstanding shares in the treasury of the Parent and there are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Purchaser or the Parent, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Purchaser or Parent or options, warrants or other securities of the Purchaser or Parent other than as disclosed in Article 5.03.1 herein. 5.05.2 All of the Exchangeable Non-Voting Shares and the Parent Common Shares which will be issued hereunder will be fully paid and non-assessable, subject to such terms and provisions as set forth in the Exchange and Voting Agreement, and the Purchaser's articles of incorporation and the Parent's Directors Resolutions relating to the issuance of the Parent Common Shares, as applicable, and all such shares will be issued free and clear of all Liens, charges, encumbrances and trading restrictions other than as may be imposed by Applicable Law. 5.06 Subsidiaries. The Purchaser has no Subsidiaries and the only Subsidiary of the Parent is the Purchaser. 5.07 Governmental Authorization. The execution, delivery and performance by the Buying Group of this Agreement requires no action by, consent or approval of, or filing with, any Governmental Authority other than as expressly referred to in this Agreement. 5.08 Non-Contravention. The execution, delivery and performance of this Agreement by the Buying Group, and the consummation by it of the transactions provided for herein, do not and will not (a) contravene or conflict with the respective articles or bylaws of the Buying Group; (b) contravene or conflict with or constitute a material violation of any provision of any Applicable Law binding upon or applicable to the Buying Group, the Buying Group Business or the outstanding shares in their respective capital stocks and would not, individually or in the aggregate have a Material Adverse Effect; (c) constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit to which the Purchaser or the Parent are entitled, under any Buying Group Contract to which the Purchaser or the Parent is a party or any Permit or similar authorization relating to the Purchaser or Parent, the Buying Group Business or the outstanding shares in their respective capital stocks may be bound or affected; or (d) result in the creation or imposition of any Lien. 5.09 Financial Statements: Undisclosed Liabilities. 5.09.1 Attached hereto as Schedule "D" are true and complete copies of the Parent's Balance Sheet, prepared on a consolidated basis, as of September 30, 1999 and the related statements of income and retained earnings and changes of financial position, prepared on a consolidated basis, for the year ended December 31, 1998 (collectively, the "Parent's Financials"). 5.09.2 The Parent's Financials: (i) have been prepared on a consistent basis and are based on the books and records of the Parent in accordance with American GAAP and present fairly the financial position, results of operations and statements of changes in the Parent's financial position as of the dates indicated or the periods indicated; (ii) contain and reflect all necessary adjustments and accruals for a fair presentation of its financial position and the results of its operations for the periods covered by said financial statements; (iii) contain and reflect adequate provisions for all reasonably anticipated liabilities (including Taxes) with respect to the periods then ended and all prior periods; and (iv) with respect to Buying Group Contracts and commitments for the sale of goods or the provision of services by the Parent, contain and reflect adequate reserves for all reasonably anticipated material losses and costs and expenses in excess of expected receipts. 5.09.3 To the best of the knowledge of the Buying Group, there are no Liabilities of the Buying Group other than: (i) any Liabilities accrued as Liabilities on the Parent's Balance Sheet; (ii) Liabilities incurred since the date of the Parent's Balance Sheet that do not, and could not, individually or in the aggregate have a Material Adverse Effect; (iii) other Liabilities disclosed in this Agreement or in any schedules attached hereto; (iv) the Tax on reserves; and (v) debts, liabilities and obligations of the Purchaser (other than intercorporate loans between Parent and Purchaser) totaling not more than Cdn $2,000. 5.10 Absence of Certain Changes. Since December 1, 1999, the Buying Group Business has been conducted in the ordinary course, and, after having made reasonable inquiry, they believe there has not been: (a) any event, occurrence, state of circumstances, or facts or change in the Purchaser or the Parent or in the Buying Group Business that has had, or which the Purchaser or the Parent, expect to have, either individually or in the aggregate, a Material Adverse Effect; (b) (i) any change in any Liabilities of the Purchaser or the Parent that has had, or which the Purchaser or the Parent expect to have, a Material Adverse Effect or (ii) any incurrence, assumption or guarantee of any indebtedness for borrowed money by the Purchaser or the Parent in connection with the Buying Group Business or otherwise; (c) any (i) payments by the Purchaser or Parent in respect of any indebtedness of the Purchaser or Parent for borrowed money or in satisfaction of any Liabilities of the Purchaser or Parent related to the Buying Group Business, other than in the ordinary course of business or the guarantee by the Purchaser or the Parent of any of the indebtedness of any other Person or (ii) creation, assumption or sufferance of (whether by action or omission) the existence of any Lien on any assets reflected on the Parent's Balance Sheet; (d) any transaction or commitment made, or any Contract entered into, by the Buying Group, any waiver, amendment, termination or cancellation of any Contract by the Buying Group, or any relinquishment of any rights thereunder by the Buying Group or of any other right or debt owed to the Buying Group, other than, in each such case, actions taken in the ordinary course of business consistent with past practice; (e) any (i) grant of any severance, continuation or termination pay to any director, officer, stockholder or employee of the Buying Group or any Affiliate of the Buying Group, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer, stockholder or employee of the Buying Group or any Affiliate of the Buying Group, (iii) increase in benefits payable or potentially payable under any severance, continuation or termination pay policies or employment agreements with any director, officer, stockholder or employee of the Buying Group or any Affiliate of the Buying Group, (iv) increase in compensation, bonus or other benefits payable or potentially payable to directors, officers, stockholders or employees of the Buying Group or any Affiliate of the Buying Group, (v) change in the terms of any bonus, pension, insurance, health or other benefit plan of the Buying Group or (vi) representation of the Buying Group to any employee or former employee of the Buying Group that the Buying Group promised to continue any benefit plan after the Closing Date, (f) any change by the Buying Group in its accounting principles, methods or practices or in the manner it keeps its books and records; (g) any distribution, dividend, bonus, management fee or other payment by the Buying Group to any of their respective officers, directors, stockholders or Affiliates of the Buying Group or any of their respective Affiliates or Associates; and (h) any (i) single capital expenditure or commitment, or any group of related capital expenditures or commitments by either the Purchaser or the Parent or (ii) sale, assignment, transfer, lease or other disposition of or agreement to sell, assign, transfer, lease or otherwise dispose of any asset or property by either of the Purchaser or the Parent other than in the ordinary course of business. 5.11 Properties; Material Leases; Tangible Assets. Neither the Purchaser nor the Parent own or lease any real property or material assets. 5.12 Affiliates. There are no undisclosed material contracts of which the Shareholders are unaware between either the Parent or Purchaser and any of its shareholders, or any Affiliate or Associate of any of its shareholders. There is no undisclosed material indebtedness of which the Shareholders are unaware of either the Parent or the Purchaser to any of its shareholders, or to any Affiliate or Associate of any of its shareholders. 5.13 Litigation. There is no proceeding pending or, to the knowledge of the Buying Group, threatened against or affecting the Buying Group or the Buying Group Business or that seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement, and there is no existing order, judgment or decree of any Governmental Authority naming either the Purchaser or the Parent as an affected party which has not been paid or discharged in full. 5.14 Material Contracts. The Buying Group is not party to any Buying Group Contract other than as specified herein. 5.15 Compliance with Applicable Laws. The operation of the Buying Group Business (i) has not violated or infringed, except for violations or infringements that have been cured and the prior existence of which could not, individually or in the aggregate, reasonably be expected to have an adverse effect on either the Purchaser or the Parent and (ii) does not in any material respect violate or infringe any Applicable Law, the terms of any Permit or any order, writ, injunction or decree of any Governmental Authority including but not limited to, the 33 Act, the 34 Act, the Rules and Regulations of the SEC, or the Securities Laws and Regulations of any state. The Parent is not an investment company as defined in, or otherwise subject to regulation under, the Investment Company Act of 1940. The Parent is required to file reports pursuant to Section 12(g) of the 34 Act and is now, and as of the Closing Date will be, current in its filings. The Parent's Form 10-K Annual Reports have been filed with certified financial statements, in compliance with SEC Regulations. 5.16 Buying Group Employment Agreement; and Employee Benefits. 5.16.1 There are no employment, consulting, severance pay, continuation pay, termination pay, indemnification agreements, collective agreements, employee benefit plans or other similar agreements of any nature whatsoever affecting either the Purchaser or the Parent save those to which a company listed on the OTCBB would, in the ordinary course of its business, be party to. 5.16.2 The Buying Group and its Affiliates have complied and are currently complying, in respect of all employees of the Buying Group and its Affiliates, with all Applicable Laws respecting employment and employment practices and the protection of the health and safety of employees, except for such instances which do not materially affect the interests of the Shareholders under this Agreement. 5.17 Intellectual Property. The Buying Group has no interest in any patent, patent application and invention, trademark, trade name, trademark or trade name registration or application, copyright or copyright registration or application for copyright registration. 5.18 Tax Matters. 5.18.1 Except as disclosed in the Parent's Financials, the Purchaser and the Parent have prepared and filed all Tax Returns on time with all appropriate Governmental Authorities which were required to be filed on or prior to the Closing Date. Each such Tax Return was correct and complete. 5.18.2 The Purchaser is not a registrant for the purposes of the goods and services tax provided for under the Tax Act. 5.18.3 The Purchaser is a taxable Canadian Corporation, as that term is defined in the Tax Act. 5.18.4 The Purchaser has paid all applicable sales and retail taxes in the Province of British Columbia, and none of its tangible personal property has been transferred at any time on a tax-exempt basis under applicable legislation in the Province of British Columbia. The foregoing is accurate, mutatis mutandis, with respect to all sales or transfer Taxes imposed under comparable legislation of other provinces. 5.18.5 The Purchaser has never acquired or had the use of any of its assets from a Person (a "Related Person") with whom the Purchaser was not dealing at arm's length, within the meaning of the Tax Act. The Purchaser has never disposed of any asset to a Related Person for proceeds less than the fair market value of that asset. The Purchaser is not a party to or bound by any agreement with, is not indebted to, and no amount is owing to the Purchaser by any Related Person, not dealing at arm's length, within the meaning of the Tax Act, with the Purchaser. 5.18.6 For the purposes of the Tax Act the Purchaser and the Shareholders hereby covenant and agree to elect jointly under Subsection 85(1) or 85.1 of the Tax Act, by completing and filing with the Department of National Revenue the prescribed form T2057 within the prescribed time for the purposes of the Tax Act with respect to the sale by the Shareholders to the Purchaser of the Corporation Shares and further agree to transfer the Corporation Shares at an agreed amount equal to the adjusted cost base of the Corporation Shares to the Shareholders for purposes of the Tax Act or such greater amount determined by the Shareholders (the "Elected Amount"). 5.18.7 If at any time after the Closing Date the Shareholders determine that either: (a) it is necessary or desirable to change the Elected Amount; or (b) the Tax Act deems the Elected Amount to be an amount which is different than the amount agreed upon between the Shareholder and the Purchaser, then the Shareholder and the Purchaser shall do all things reasonably necessary to reflect such change including, for example, filing an amended election pursuant to subsection 85(1) or 85.1 of the Tax Act. 5.19 Issuance of Shares. 5.19.1 The issuance of the Parent Common Shares by the Parent, and the terms and provisions of the Parent Common Shares, will not violate any provisions of the Parent's articles or bylaws or any Applicable Law, nor will the voting rights attached to the Parent Common Shares derogate from any rights under Applicable Law. 5.19.2 The issuance of the Exchangeable Non-Voting Shares by the Purchaser, and the terms and provisions of the Exchangeable Non-Voting Shares, will not violate any provisions of the Purchaser's articles or bylaws or any Applicable Law. 5.20 Continuing NASD Status. The Parent warrants that the National Association of Securities Dealers has cleared the Parent for quotation of its common shares, including the Parent Common Shares, on the over-the-counter bulletin board in the United States, which will continue after the Closing. 5.21 Full Disclosure. The information contained in the documents, certificates and written statements (including this Agreement and the schedules and exhibits hereto) furnished to the Shareholders by or on behalf of the Buying Group with respect to each of the Purchaser and the Parent (including the Buying Group Business and the respective results of operations, financial condition and prospects of the Purchaser and the Parent) for use in connection with this Agreement or the transactions contemplated by this Agreement is true and complete in all material respects and does not, to the best of the knowledge of the Purchaser and the Parent after conducting an inquiry which a reasonably prudent person would make under the circumstances, omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Purchaser or the Parent that has not been disclosed to the Shareholders by the Buying Group in writing that has had a Material Adverse Effect on or, so far as the Buying Group can now foresee, could be reasonably likely to have a Material Adverse Effect on the Buying Group (including the Buying Group Business and the respective results of operations, financial condition or prospects of the Buying Group). ARTICLE VI: COVENANTS OF THE CORPORATION AND SHAREHOLDERS 6.01 Conduct of the Business. During the Interim Period, other than with the express written approval of the Purchaser, the Corporation shall conduct the Corporation Business in the ordinary course consistent with past practice and shall use its best efforts to preserve intact the organization, relationships with third parties and goodwill of the Corporation and keep available the services of the present officers, employees, agents and other personnel of the Corporation Business. 6.01.1 Without limiting in any way the importance of the foregoing, during the Interim Period, other than with the express written approval of the Purchaser, the Corporation shall not, and each Shareholder shall not cause the Corporation to: (a) adopt any material change in any method of accounting or accounting practice used by the Corporation other than by reason of a concurrent change in generally accepted accounting principles; (b) amend its articles or bylaws; (c) sell, mortgage, pledge or otherwise dispose of any substantial assets or properties of the Corporation; (d) declare, set aside or pay any management fee or dividend or make any other distribution with respect to the capital stock of the Corporation or otherwise make a distribution or payment to any Shareholder; (e) amalgamate, merge or consolidate with or agree to amalgamate, merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any Corporation, partnership or other business organization or division thereof; (f) authorize for issuance, issue, sell or deliver any additional shares of its capital stock of any class or any securities or obligations convertible into shares of its capital stock of any class or commit to doing any of the foregoing; (g) split, combine or reclassify any shares of the capital stock of any class of the Corporation or redeem or otherwise acquire, directly or indirectly, any shares of such capital stock; (h) incur or agree to incur any debt or guarantee any debt for borrowed money, including any debt to any Shareholder, or to any Affiliate or Associate of any Shareholder, except debt incurred in the ordinary course of business consistent with past practice; (i) make any loan, advance or capital contribution to or investment in any person other than loans, advances and capital contributions to or investments in joint ventures or other similar arrangements in which the Corporation has an equity interest in the ordinary course of business and travel advances made in the ordinary course of business by the Corporation to its employees to meet business expenses expected to be incurred by such employees; (j) enter into any settlement with respect to any Proceeding or consent to any order, decree or judgment relating to or arising out of any such Proceeding; (k) take any action to terminate, dismiss or cause the retirement of any key employee of the Corporation; (l) fail in any material respect to comply with any Applicable Laws; or (m) make, or make any commitments for, capital or contractual expenditure exceeding $5,000 for any individual commitment or $100,000 for all such commitments taken in the aggregate. 6.01.2 During the Interim Period, other than with the express written approval of the Purchaser, the Corporation shall: (a) file all Canadian, United States, foreign, federal, state, provincial and local Tax Returns required to be filed and make timely payment of all applicable Taxes when due; (b) promptly notify the Purchaser in writing of any action or circumstance that results in, or could reasonably be expected to result in, a Material Adverse Effect or the occurrence of any breach by the Corporation or any Shareholder of any representation or warranty, or any covenant or agreement contained in this Agreement; and (c) promptly notify the Purchaser in writing of the commencement of any proceeding or the threat thereof by or against the Corporation or any Shareholder. 6.02 Completion of Schedule "I" payments before conversion of Exchangeable Shares. The Shareholders covenant and agree that they shall not, prior to completion by the Parent and the Purchaser of all payments and obligations under Schedule "I", attempt to exchange any of their Exchangeable Non-Voting Shares for Parent Common Shares. 6.03 Maintenance of Corporation Insurance Policies. During the Interim Period, the Corporation shall not take or fail to take any action if such action or inaction would adversely affect the applicability of any insurance in effect on the date hereof that covers all or any material part of the assets of the Corporation or the Business. 6.04 Tax Election. In accordance with the Letter of Intent, the Corporation shall not file an election pursuant to subsection 256(9) of the Income Tax Act (Canada) or any equivalent provincial provision. ARTICLE VII: COVENANTS OF THE BUYING GROUP 7.01 Appointment of Director. At Closing, the following person(s) will be appointed a director of the Parent: Name Position Rick Whittaker Director 7.02 Execution of Management Agreements. At Closing, The Corporation shall execute the following 2 year term management agreements: (a) with Rick Whittaker ("Whittaker"), a management agreement whereby Whittaker shall receive a salary of CDN $35,000 for the first six months of the agreements' two year term, CDN $45,000 for the second six months of the two year term and CDN $125,000 for the remaining 12 months of the two year term, in exchange for a minimum of 40 hours per week as President of The Corporation; and (b) with John Cullen ("Cullen"), a management agreement whereby Cullen shall receive a salary of CDN $35,000 for the first six months of the agreement's two year term, CDN $45,000 for the second six months of the two year term and CDN $125,000 for the remaining 12 months of the two year term, in exchange for a minimum of 40 hours per week as an employee of The Corporation. The agreements in (a) and (b) above shall stipulate that Whittaker and Cullen each receive a CDN $500.00 monthly car allowance for the agreements' term. 7.03 Conduct of Business. During the Interim Period, the Buying Group will conduct the Buying Group Business in the ordinary course consistent with past practice and shall use its best efforts to preserve intact the organization, relationships with third parties and goodwill of the Buying Group and keep available the services of the present officers, directors, employees, agents and other personnel of the Buying Group Business; and without limiting in any way the importance of the foregoing, the Buying Group shall not undertake any of those matters referred to in sections 6.01.1 and 6.01.2, and all such clauses thereof shall apply mutatis mutandis to the Buying Group. In the event that a Material Adverse Effect occurs, the Buying Group shall notify the Corporation of it within one business day. 7.04 Loans. The Buying Group will cause to be made, in accordance with Schedule "I" hereto, those loans (the "Loans") set out here, which are intended to permit the Corporation to meet outstanding debts, liabilities and obligations of it to certain parties. 7.05 Priority. Notwithstanding any term of the Purchaser's bylaws, memorandum and articles to the contrary, the terms and provisions of this Agreement and the Exchange and Voting Agreement shall prevail such that the directors of the Purchaser will only authorize the exchange of the Exchangeable Non-Voting Shares for shares in the Parent Common Shares in accordance with the terms of the Exchange and Voting Agreement. 7.06 Nothing in Paragraph 6.01.2 shall read to prohibit the Purchaser or the Parent from negotiating and completing transactions involving the acquisition of other subsidiaries including E-Bill Inc. ARTICLE VIII: ACKNOWLEDGMENTS AND COVENANTS OF ALL PARTIES 8.01 Further Assurances. Each party hereto agrees to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be reasonably necessary or desirable (including obtaining all required consents) in order to evidence the consummation or implementation of the transactions provided for under this Agreement. 8.02 Certain Filings. The parties hereto shall cooperate with one another in determining whether any action by or in respect of, or filing with, any Governmental Authority is required or reasonably appropriate, or any action, consent, approval or waiver from any party to any Contract is required or reasonably appropriate, in connection with the consummation of the transactions contemplated by this Agreement. Subject to the terms and conditions of this Agreement, in taking such actions or making any such filings, the parties hereto shall furnish information required in connection therewith and seek timely to obtain any such actions, consents, approvals or waivers. 8.03 Registration. All parties acknowledge and agree that the Parent is a reporting issuer in the United States, and all of the Parent Common Shares have been registered under the 33 Act; and all parties further acknowledge and agree that neither the Parent nor the Purchaser is a reporting issuer in any province of Canada, and the Exchangeable Non-Voting Shares and Parent Common Shares will be subject to such resale restrictions as imposed by the Applicable Law of the jurisdiction in which a Shareholder is resident. ARTICLE IX: CONDITIONS PRECEDENT TO CLOSING 9.01 Conditions to Obligation of the Buying Group. The obligations of the Buying Group to consummate the Closing are subject to the completion of due diligence of the Corporation on the part of the Buying Group and to the Buying Group's satisfaction on or before December 20, 1999 and are further subject to the satisfaction of each of the following conditions: (a) (i) the Corporation and each Shareholder shall have performed and satisfied each of their respective obligations hereunder required to be performed and satisfied by them on or prior to the Closing Date, (ii) each of the representations and warranties of the Corporation and each Shareholder contained herein shall have been true and correct and contained no misstatement or omission that would make any such representation or warranty misleading when made and shall be true and correct and contain no misstatement or omission that would make any such representation or warranty misleading at and as of the Closing with the same force and effect as if made as of the Closing, and (iii) the Buying Group shall have received certificates signed by each Shareholder and a duly authorized executive officer of the Corporation to the foregoing effect and to the effect that the conditions specified within this Section 9.01(a) have been satisfied. (b) ll Required Consents for the transactions contemplated by this Agreement shall have been obtained without the imposition of any conditions that are or would become applicable to the Corporation, the Corporation Business, the Corporation Shares or the Buying Group (or any of its Affiliates or Associates) after the Closing that would be materially burdensome upon the Corporation, the Corporation Business, the Corporation Shares or the Buying Group (or any of its Affiliates or Associates) or their respective businesses substantially as such businesses have been conducted prior to the Closing Date or as said businesses, as of the date hereof, would be reasonably expected to be conducted after the Closing Date. All such approvals shall be in effect, and no proceedings shall have been instituted or threatened by any Governmental Authority or other person with respect thereto as to which there is a material risk of a determination that would terminate the effectiveness of, or otherwise materially and adversely modify the terms of, any such approval; all applicable waiting periods with respect to such approvals shall have expired; and all conditions and requirements prescribed by Applicable Law or by such approvals to be satisfied on or prior to the Closing Date shall have been satisfied to the extent necessary such that all such approvals are, and will remain, in full force and effect assuming continued compliance with the terms thereof after the Closing. (c) The transactions contemplated by this Agreement and the consummation of the Closing shall not violate any Applicable Law. The operation of the Corporation Business shall not have violated or infringed, or be in violation or infringement of any Applicable Law or any order, writ, injunction or decree of any Governmental Authority, where such violations and infringements, individually or in aggregate, have resulted in, or could reasonably be expected to result in a Material Adverse Effect. (d) Since the date hereof, there shall not have been any event, occurrence, development or state of circumstances or facts or change in the Corporation or the Corporation Business, including any damage, destruction or other casualty loss affecting the Corporation or the Corporation Business that has had or that may be reasonably expected to have, either alone or together with all such events, occurrences, developments, states of circumstances or facts or changes, a Material Adverse Effect on the Corporation. 9.02 Conditions to Obligations of the Shareholders. The obligations of each Shareholder to consummate the Closing are subject completion of reasonable due diligence investigations of the Buying Group to be completed on or before December 20, 1999 and are further subject to the satisfaction of each of the following conditions: (a) (i) the Buying Group shall have performed and satisfied each of its obligations hereunder required to be performed and satisfied by it on or prior to the Closing Date; and (ii) each of the representations and warranties of the Buying Group contained herein shall have been true and correct and contained no misstatement or omission that would make any such representation or warranty misleading when made and shall be true and correct and contain no misstatement or omission that would make any such representation or warranty misleading at and as of the Closing with the same force and effect as if made as of the Closing. (b) All Required Consents for the transactions contemplated by this Agreement shall have been obtained without the imposition of any conditions that are or would become applicable to any Shareholder (or any of their respective Affiliates or Associates) after the Closing that would be materially burdensome upon any such Person. All such approvals shall be in effect, and no Proceedings shall have been instituted or threatened by any Governmental Authority with respect thereto as to which there is a material risk of a determination that would terminate the effectiveness of, or otherwise materially and adversely modify the terms of, any such approval. All applicable waiting periods shall have expired, and all conditions and requirements such approvals to be satisfied on or prior to the Closing extent necessary such that all such approvals are, and will remain, in full force and effect assuming continued compliance with the terms thereof after the Closing. (c) The transactions contemplated by this Agreement and the consummation of the Closing shall not violate any Applicable Law. No temporary restraining order, preliminary or permanent injunction, cease and desist order or other order issued by any court of competent jurisdiction or any competent Governmental Authority or any other legal restraint or prohibition preventing the transfer and exchange contemplated hereby or the consummation of the Closing, or imposing Damages in respect thereto, shall be in effect, and there shall be no pending actions or proceedings by any Governmental Authority (or determinations by any Governmental Authority) or by any other Person challenging or seeking to materially restrict or prohibit the transfer and exchange contemplated hereby or the consummation of the Closing. (d) Since the date hereof, there shall not have been any event, occurrence, development or state of circumstances or facts or change in the Buying Group or the Buying Group Business, including any damage, destruction or other casualty loss affecting the Buying Group or the Buying Group Business that has had or that may be reasonably expected to have, either alone or together with all such events, occurrences, developments, states of circumstances or facts or changes, a Material Adverse Effect on the Buying Group. (e) Since the date hereof, there shall not have been any: (i) material change in the capital structure of either the Purchaser or the Parent, other than as to effect the creation or issuance of the Exchangeable Non-Voting Shares or the Parent Common Shares as contemplated herein, or to effect the rights, restrictions, privileges and terms of the Exchangeable Non-Voting Shares or Parent Common Shares in accordance with the terms hereof; or (ii) any actions, investigations, inquiries or proceedings commenced or continued against either the Parent or the Purchaser, or their respective officers, directors, promoters, representatives, agents or their respective businesses by any securities regulatory authority, tribunal or body having jurisdiction. (f) The Parent's Board of Directors, by proper and sufficient vote, shall have approved this Agreement, the Exchange and Voting Agreement and the Support Agreement, and the transactions contemplated hereby and the issuance of the Parent Common Shares hereunder. (g) The Parent and the Purchaser will have entered into the Exchange and Voting Agreement and the Support Agreement. ARTICLE X: INDEMNIFICATION 10.01 Agreement to Indemnify. 10.01.1 Each of the Purchaser and the Parent, and their respective Affiliates, Associates, officers, directors, shareholders, representatives and agents (collectively, the "Purchaser Indemnitees") shall each be indemnified and held harmless to the extent set forth in this Article X by each Shareholder in respect of any and all damages incurred by any Purchaser Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation or warranty made in this Agreement by such Shareholder, provided, however, that each Shareholder shall have no obligation to indemnify the Purchaser Indemnitees with respect to damages incurred by any Purchaser Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation or warranty made in this Agreement by any other Shareholder and further a Shareholder shall have no such obligation to indemnify a Purchaser Indemnitee hereunder unless, and to the extent, the aggregate of all damages incurred by the Purchaser Indemnities for all items covered by this Section 10.01(1) shall exceed $1,000 in the aggregate. 10.01.2 Each of the Purchaser Indemnitees shall be indemnified and held harmless to the extent set forth in this Article X by the Corporation in respect of any and all damages incurred by any Purchaser Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation, warranty, covenant or agreement made in this Agreement by the Corporation. 10.01.3 Each Shareholder and their respective Affiliates and Associates and each officer, director, shareholder, employer, representative and agent of any of the foregoing (collectively, the "Shareholder Indemnitees") shall each be indemnified and held harmless to the extent set forth in this Article X by the Purchaser and Parent in respect of any and all damages incurred by any Shareholder Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation, warranty, covenant or agreement made by the Parent or the Purchaser in this Agreement. 10.02 Survival of Representation, Warranties and Covenants. Except as hereinafter provided in this Section 10.02, all representations, warranties, covenants, agreements and obligations of each Indemnifying Party contained herein and all claims of any Purchaser Indemnitee or Shareholder Indemnitee in respect of any breach of any representation, warranty, covenant, agreement or obligation of any Indemnifying Party contained in this Agreement, shall survive the Closing and shall expire two years following the Closing Date. ARTICLE XI: MISCELLANEOUS 11.01 Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) if personally delivered, when so delivered, (ii) if mailed, two Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid and addressed to the intended recipient as set forth below, (iii) if given by facsimile or telecopier, once such notice or other communication is transmitted to the facsimile or telecopier number specified below and the appropriate answer back or telephonic confirmation is received, provided that such notice or other communication is promptly thereafter mailed in accordance with the provisions of clause (ii) above or (iv) if sent through an overnight delivery service in circumstances under which such service guarantees next day delivery, the day following being so sent: If to the Corporation: 98 Willow Street, Waterloo, Ontario, N2J 1W2 If to the Purchaser: 804-750 W. Pender Street, Vancouver, B.C., V6C 2T8 If to the Parent: 19 Concession Street, Cambridge, Ontario, N1R 2G6 If to a Shareholder: John Cullen 98 Willow Street, Waterloo, Ontario, N2J 1W2 Rick Whittaker 481 Huron Street, New Hamburg, Ontario, N0B 2G0 Doris Cullen 98 Willow Street, Waterloo, Ontario, N2J 1W2 Barbara Schwartzentruber 481 Huron Street, New Hamburg, Ontario, N0B 2G0 Any party may give any notice, request, demand, claim or other communication hereunder using any other means (including ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the individual for whom it is intended. Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth. 11.02 Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by all parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) No waiver by a party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence. No failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 11.03 Expenses. All costs and expenses incurred in connection with this Agreement and enclosing and carrying out the transactions provided for herein shall be paid by the party incurring such cost or expense. This Section shall survive the Closing and the termination of this Agreement. 11.04 Successors and Assigns. This Agreement shall be binding upon and enure to the benefit, of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and permitted assigns. No party hereto may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of each other party, which approval shall not be unreasonably withheld. 11.05 Governing Law. This Agreement shall be governed by, and interpreted and enforced in accordance with, the laws in force in the Province of Ontario and the laws of Canada applicable therein (excluding any conflict of laws rule or principle that might refer such interpretation to the laws of another jurisdiction). Each party irrevocably submits to the jurisdiction of the courts of British Columbia with respect to any matter arising hereunder or related hereto. 11.06 Counterparts; Effectiveness. This Agreement and the documents relating to the transactions contemplated by this Agreement may be signed in any number of counterparts and the signatures delivered by facsimile, each of which shall be deemed to be an original, with the same effect as if the signatures thereto were upon the same instrument and delivered in person. This Agreement and such documents shall become effective when each party thereto shall have received a counterpart thereof signed by the other parties thereto. In the case of execution and delivery by facsimile by any party, that party shall forthwith deliver a manually executed original to each of the other parties. 11.07 Entire Agreement. This Agreement (including the Schedules referred to herein, which are hereby incorporated by reference) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement including, without limiting the generality of the foregoing, the Letter of Intent. Neither this Agreement nor any provision hereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. 11.08 Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. All references to an Article or Section include all subparts thereof. 11.09 Severability. If any provision of this Agreement, or the application thereof to any Person, place or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, the remainder of this Agreement and such provisions as applied to other Persons, places and circumstances shall remain in full force and effect only if, after excluding the portion deemed to be unenforceable, the remaining terms shall provide for the consummation of the transactions contemplated hereby in substantially the same manner as originally set forth at the later of the date this Agreement was executed or last amended. 11.10 Construction. The parties hereto intend that each representation, warranty, and covenant contained herein shall have independent significance. If any party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) that the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty or covenant. 11.11 Meaning of Include and Including. Whenever in this Agreement the word "include" or "including" is used, it shall be deemed to mean "include, without limitation" or "including without limitation", as the case may be, and the language following "include" or "including" shall not be deemed to set forth an exhaustive list. 11.12 Cumulative Remedies. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 11.13 Third Party Beneficiaries. Other than Indemnitees under Article X hereof who are not parties to this Agreement, no provision of this Agreement shall create any third party beneficiary rights in any Person, including any employee or former employee of the Corporation or any Affiliate or Associate thereof (including any beneficiary or dependent thereof). 11.14 Transmission by Facsimile. The parties hereto agree that this Agreement may be transmitted by facsimile or such similar device and that the reproduction of signatures by facsimile or such similar device will be treated as binding as if originals and each party hereto undertakes to provide each and every other party hereto with a copy of the Agreement bearing original signatures forthwith upon demand. 11.15 Fees and Commissions. No broker, finder or other person or entity is entitled to any fee or commission from the Buying Group or the Corporation for services rendered on behalf of the Buying Group or the Corporation in connection with the transactions contemplated by this Agreement. 11.16 Maitland & Company. The parties hereto acknowledge and agree that Maitland & Company acts only for the Parent in the preparation and negotiation of this Agreement. The parties hereto further acknowledge and agree that: (a) they have been advised to seek independent legal advice regarding this Agreement, (b) Maitland & Company has provided no tax advice with respect to this Agreement and hereby has advised the parties hereto to seek tax advice respecting their respective tax obligations; and (c) Maitland & Company has not provided legal advice to any of the Shareholders with respect to U.S. securities laws. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. URBANA.CA INC. Per: /s/ Robert Tyson Robert Tyson, Authorized Signatory ICC INTEGRATED CARBONICS (CANADA) CORP. Per: /s/ Robert Tyson Robert Tyson, Authorized Signatory ENERSPHERE.COM INC. Per: /s/ Rick Whittaker Rick Whittaker, Authorized Signatory SHAREHOLDERS /s/ Rick Whittaker Rick Whittaker /s/ Barbara Schwartzentruber Barbara Schwartzentruber /s/ John Cullen John Cullen /s/ Doris Cullen Doris Cullen EX-10.7 4 SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT THIS SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT is dated for reference the 4th day of January, 2000. AMONG: URBANA.CA INC., a corporation incorporated under the laws of the State of Nevada, (the "Parent") AND: ICC INTEGRATED CARBONICS (CANADA) CORP., a corporation incorporated under the laws of the Province of British Columbia, (the "Purchaser") AND: URBANA.CA ENTERPRISES CORP., a corporation incorporated under the laws of the Province of British Columbia (the "Corporation") AND: ALL OF THE SHAREHOLDERS OF THE CORPORATION as more particularly described on Schedule "A" attached hereto, (Individually a "Shareholder" and collectively the "Shareholders"); WHEREAS: A. The Corporation is a company which distributes Set Top Boxes to its customers; B. The Shareholders own all of the issued and outstanding shares of the Corporation (the "Corporation Shares"); C. The Parent owns all of the issued and outstanding shares in the capital stock of the Purchaser; D. The Purchaser desired to purchase all of the Corporation Shares and the Shareholders desire to sell all of the Corporation Shares to the Purchaser on the terms and conditions hereinafter set forth; E. The respective boards of directors of the Purchaser, Parent and Corporation each deem it advisable and in the best interests of their respective shareholders to combine their respective businesses by the Purchaser acquiring all of the shares in the capital stock of the Corporation pursuant to the terms of this Agreement; and F. The respective boards of directors of the Purchaser, Parent and Corporation have approved and adopted this Agreement as a plan of reorganization under section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), and as a transfer of shares pursuant to section 85 of the Income Tax Act (Canada) (the "Tax Act"). NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the foregoing premises, the mutual representations, warranties, covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I: DEFINITIONS 1.01 Definitions. The following terms, as used herein, have the following meanings: "Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under direct or indirect common control with such other Person. "Agreement" means this Share Exchange and Share Purchase Agreement by and among the Purchaser, Parent, Corporation and Shareholders. "Applicable Law" means, with respect to any Person, any United States (whether federal, territorial, state or local), Canadian (whether federal, territorial, provincial, municipal or local) or foreign statute, law, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment, decree or other requirement, all as in effect as of the Closing, of any Governmental Authority applicable to such Person or any of its Affiliates or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer's, director's, employee's, consultant's or agent's activities on behalf of such Person or any of its Affiliates). "Associate" means with respect to any Person (a) any other Person of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities issued by such other Person, (b) any trust or other estate in which such Person has a ten percent (10%) or more beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, and (c) any relative or spouse of such Person, or any relative of such spouse who has the same home as such Person or who is a director or officer of such Person or any Affiliate thereof. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in Toronto, Ontario are authorized or required by law to close. "Buying Group" means the Purchaser and the Parent. "Buying Group Business" means the business as heretofore or currently conducted by the Buying Group. "Buying Group Contracts" means all contracts, agreements, options, leases, licences, sales and purchase orders, commitments and other instruments of any kind, whether written or oral, to which either the Purchaser or the Parent is a party on the Closing Date. "Corporation Balance Sheet" means the balance sheet of the Corporation dated November 30, 1999. "Corporation Business" means the business as heretofore or currently conducted by the Corporation. "Corporation Contracts" means all contracts, agreements, options, leases, licences, sales and purchase orders, commitments and other instruments of any kind, whether written or oral, to which the Corporation, or any Shareholder on behalf of the Corporation, is a party on the Closing Date. "Corporation Premises" means those premises that have been occupied or used, or are occupied or used, by the Corporation in connection with the Corporation Business. "Exchange and Voting Agreement" means the agreement in substantially the form set out in Schedule "B" hereto to be entered into by the Parent, Purchaser and Trustee. "Exchangeable Non-Voting Shares" means those 3,000,000 Class "A" exchangeable, non-voting, participating common shares without par value in the capital stock of the Purchaser, having those rights and terms set forth in the Exchange and Voting Agreement and the Exchangeable Share Provisions, which will be issued to the Shareholders in consideration for the purchase and sale of the Corporation Shares. "Exchangeable Share Provisions" means those rights, restrictions, terms and provisions pertaining to the Exchangeable Non-Voting Shares, as set forth in Schedule "F" hereto, and as summarized in section 5.03 hereof. "Governmental Authority" means any United States (whether federal, territorial, state, municipal or local), Canadian (whether federal, territorial, provincial, municipal or local) or foreign government, governmental authority, quasi-governmental authority, instrumentality, court, government or self-regulatory organization, commission, tribunal or organization or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing. "GST" means all goods and services taxes, sales taxes levied by the federal government of Canada, value added taxes or multi- stage taxes and all provincial sales taxes integrated with such federal taxes, assessed, rated or charged upon the Corporation. "Interim Period" means the period from and including the date of this Agreement to and including the Closing Date. "Liability" means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person. "Lien" means, with respect to any asset, any mortgage, assignment, trust or deemed trust (whether contractual, statutory or otherwise arising), title defect or objection, lien, pledge, charge, security interest, hypothecation, restriction, encumbrance or charge of any kind in respect of such assets. "Material Adverse Effect" means a change in, or effect on, the operations, affairs, prospects, financial condition, results of operations, assets, Liabilities, reserves or any other aspect of a party to this Agreement or to its business that results in a material adverse effect on, or a material adverse change in, any such aspect of the party or to its business. "Parent's Balance Sheet" means the balance sheet of the Parent dated September 30, 1999. "Parent Common Shares" means 3,000,000 common shares in the capital of the Parent to be issued to the Trustee pursuant to paragraph 2.05 hereof, in consideration of subscription proceeds from the Trustee of $0.0001 per share, having those rights and terms as set forth in the Exchange and Voting Agreement. "Person" includes an individual, body corporate, partnership, company, unincorporated syndicate or organization, trust, Trustee, executor, administrator and other legal representative. "SEC" means the United States Securities and Exchange Commission. "Stock Option Plan" means the stock option plan of the Parent which plan is more particularly described in Schedule "H" attached hereto. "Subsidiary" means, with respect to any Person, (i) any corporation as to which more than 10% of the outstanding shares having ordinary voting rights or power (and excluding shares having voting rights only upon the occurrence of a contingency unless and until such contingency occurs and such rights may be exercised) is owned or controlled, directly or indirectly, by such Person and/or by one or more of such Person's Subsidiaries, and (ii) any partnership, joint venture or other similar relationship between such Person (or any Subsidiary thereof) and any other Person (whether pursuant to a written agreement or otherwise). "Support Agreement" means that agreement between the Parent and the Purchaser, in the form attached hereto as Schedule "G" hereto, whereby the Parent agrees to make certain payments and deliveries to enable the Purchaser to comply with the Exchangeable Share Provisions. "Tax" means all taxes imposed of any nature including any United States (whether federal, territorial, state or local), Canadian (whether federal, territorial, provincial or local) or foreign income tax, alternative or add-on minimum tax, profits or excess profits tax, franchise tax, gross income, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax or employer health tax), capital tax, real or personal property tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any withholding or back up withholding tax, value added tax, GST, severance tax, prohibited tax, premiums tax, occupation tax, customs and import duties, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax or in respect of or pursuant to any United States (whether federal, territorial, state or local), Canadian (whether federal, territorial, provincial or local) or other Applicable Law. "Tax Return" means all returns, reports, forms or other information required to be filed with respect to any Tax. "Trustee" means the Trustee or successor Trustee designated under the Exchange and Voting Agreement attached hereto as Schedule "B". "33 Act" means the United States Securities Act of 1933 and all amendments thereto. "34 Act" means the United States Securities Act of 1934 and all amendments thereto. 1.02 Currency Used. All references herein to dollars or the use of the symbol "$" shall be deemed to refer to United States dollars unless such reference is prefaced by "CDN" in which case the reference will be to Canadian dollars. 1.03 Canadian Generally Accepted Accounting Principles. Where the Canadian Institute of Chartered Accountants or any successor thereto includes a statement in its handbook or any successor thereto on a method or alternative methods of accounting or on a standard or standards of auditing, such statement shall be regarded as the only generally accepted accounting principle or principles or generally accepted auditing standard or standards ("Canadian GAAP") applicable to the circumstances that it covers, and references herein to "generally accepted accounting principles" shall be interpreted accordingly. All accounting and financial terms used herein with respect to the Corporation, unless specifically provided to the contrary, shall be interpreted and applied in accordance with Canadian GAAP. 1.04 American Generally Accepted Accounting Principles. Where the American Institute of Certified Public Accountants or any successor thereto includes a statement in its handbook or any successor thereto on a method or alternative methods of accounting or on a standard or standards of auditing, such statement shall be regarded as the only generally accepted accounting principle or principles or generally accepted auditing standard or standards ("American GAAP") applicable to the circumstances that it covers, and references herein to "generally accepted accounting principles" shall be interpreted accordingly. All accounting and financial terms used herein with respect to the Parent, unless specifically provided to the contrary, shall be interpreted and applied in accordance with American GAAP. ARTICLE II: PURCHASE, SALE AND SUBSCRIPTION 2.01 Purchase of Corporation Shares. On the terms and subject to the conditions set forth herein, the Shareholders hereby agree to sell, transfer, convey, assign and deliver to the Purchaser, free and clear of all Corporation Share Encumbrances (as defined in paragraph 3.01.1), and the Purchaser hereby agrees to purchase, acquire and accept from the Shareholders, all of the Corporation Shares held by the Shareholders. At Closing, the Shareholders will deliver to the Purchaser certificates evidencing all of the Corporation Shares duly endorsed for transfer and such other instruments as have been reasonably requested by the Purchaser to transfer full legal and beneficial ownership of the Corporation Shares to the Purchaser, free and clear of all Corporation Share Encumbrances and the Corporation agree to enter the Purchaser or the Purchaser's nominee on the books of the Corporation as the holder of the Corporation Shares and to issue one or more replacement share certificates representing the Corporation Shares to the Purchaser or the Purchaser's nominee. The Purchaser shall pay the Purchase Price for the Corporation Shares in accordance with the terms of Sections 2.02 of this Agreement. 2.02 Purchase Price for Corporation Shares. The aggregate purchase price to be paid by the Purchaser for the Corporation Shares (the "Purchase Price") will be 3,000,000 Exchangeable Non- Voting Shares, each Exchangeable Non-Voting Share exchangeable for a Parent Common Share on the terms and conditions contained herein. 2.03 Subscription of Parent Common Shares and Optioned Securities. The Parent agrees to grant: (a) to each Shareholder, such number of voting rights in the Parent as is equivalent to the number of Exchangeable Non- Voting Shares held by each Shareholder, as if each Shareholder held an equivalent number of Parent Common Shares, and, subject to the remaining terms of this Agreement, which voting rights will be exercisable by the Shareholders through their holding Exchangeable Non-Voting Shares in accordance with the Exchange and Voting Agreement; and (b) to each Shareholder, the rights to exchange their Exchangeable Non-Voting Shares for Parent Common Shares, such rights to be exercised in accordance with the terms of the Exchange and Voting Agreement. To ensure that the Parent has sufficient common shares available to issue in exchange for Exchangeable Non-Voting Shares, and as security for its covenant to do so, the Parent agrees to issue the Parent Common Shares to the Trustee, at or shortly following Closing, at the purchase price of $0.0001 per share; such Parent Common Shares to be held in accordance with the Exchange and Voting Agreement. 2.04 Closing. The closing (the "Closing") of the transactions contemplated by this Agreement shall take place at the offices of the Parent in Ontario, Canada, on such date as the parties hereto may mutually agree in writing (the "Closing Date"). 2.05 Payment of Purchase Price. At Closing the Purchaser will deliver to the Shareholders certificates representing the Exchangeable Non-Voting Shares, all such Exchangeable Non-Voting Shares to be issued as fully paid and non-assessable, and registered in the names of the Shareholders and in the denominations set forth in Schedule "A" to the Exchange and Voting Agreement. On or shortly following the Closing, the Parent will issue the Parent Common Shares to the Trustee, such Parent Common Shares to be issued as fully paid and non- assessable, and registered in the name of the Trustee in such denominations as the Trustee may request. At Closing the Purchaser will also deliver promissory notes (the "Promissory Notes"), in a form acceptable to the Shareholders and the Purchaser evidencing the Purchaser's obligation to pay the Purchase Price Cash Portion. The Promissory Notes shall be guaranteed by the Corporation and shall be secured by the Corporation's assets. ARTICLE III: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS As an inducement to the Buying Group to enter into this Agreement and to consummate the transactions provided for herein, each Shareholder, as to himself, herself or itself and as to such of the Corporation Shares owned by him, her or it (and not as to any other Shareholder or to any of the Corporation Shares owned by any other Shareholder) represents and warrants to the Buying Group as follows and confirms that the Purchaser and the Parent are relying upon the accuracy of each of such representations and warranties in connection with the purchase of the Corporation Shares and the completion of the transactions set out herein: 3.01 Representations Regarding the Corporation Shares. 3.01.1 Each Shareholder has good and marketable title to his or her respective holdings in the Corporation Shares, free and clear of any and all covenants, conditions, restrictions, voting trust arrangements, rights of first refusal, options, Liens and adverse claims and rights whatsoever (collectively, the "Corporation Share Encumbrances"), and on the Closing Date, the Shareholders will deliver to the Purchaser, good and marketable title to the Corporation Shares free and clear of any and all Corporation Share Encumbrances; 3.01.2 Each Shareholder has the full right, power and authority to enter into this Agreement and each Shareholder has the full right, power and authority to transfer, convey and sell to the Purchaser at the Closing his or her respective holdings of the Corporation Shares sold to the Purchaser by the Shareholders hereunder, and upon consummation of the purchase, the Purchaser will acquire from the Shareholders good and marketable title to the Corporation Shares sold to the Purchaser by the Shareholders, free and clear of all Corporation Share Encumbrances; and 3.01.3 No Shareholder is a party to, subject to or bound by any agreement, judgment, order, writ, prohibition, injunction or decree of any court or other Governmental Authority that would prevent the execution or delivery to the Purchaser of this Agreement by any Shareholder, the transfer, conveyance and sale of the Corporation Shares sold by Shareholder to the Purchaser pursuant to the terms hereof, or the consummation of the transactions under this Agreement in accordance with the terms of this Agreement. 3.02 Authorization. The execution, delivery and performance of this Agreement, and the consummation of the transactions provided for herein, by each Shareholder are within the respective powers of each Shareholder and have been duly authorized by all necessary action on the part of each Shareholder, respectively. This Agreement has been duly and validly executed by each Shareholder and constitutes a legal, valid and binding agreement upon each Shareholder, respectively, enforceable against each Shareholder in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and subject to general principles of equity or family law. 3.03 Non-Contravention. The execution, delivery and performance of this Agreement, and the consummation of the transactions provided for herein, by each Shareholder, do not (a) contravene or conflict with or constitute a material violation of any provision of any Applicable Law binding upon or applicable to any Shareholder or the Corporation Shares or (b) result in the creation or imposition of any Lien. 3.04 Residency. Each Shareholder is a resident of Canada as defined in the Income Tax Act (Canada). ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE CORPORATION As an inducement to the Buying Group to enter into this Agreement and to consummate the transactions provided for herein, the Corporation represent and warrant to the Buying Group as follows: 4.01 Existence and Power. The Corporation is a corporation duly incorporated, organized and validly existing under the laws of the Province of British Columbia and has all corporate power and all governmental licences, authorizations, permits, consents and approvals required to carry on the business of The Corporation as now conducted and to own and operate business of The Corporation as now owned and operated. The Corporation is not required to be qualified to conduct business in any jurisdiction where the failure to be so qualified, whether individually or in the aggregate, would have a Material Adverse Effect. No proceedings have been taken or authorized by The Corporation or any Shareholder or, to the knowledge of The Corporation, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding-up of The Corporation or with respect to any amalgamation, merger, consolidation, arrangement or reorganization relating to The Corporation. 4.02 Authorization. The execution, delivery and performance by the Corporation of this Agreement and the consummation thereby of the transactions provided for herein are within the Corporations powers and have been duly authorized by all necessary action on its part. This Agreement has been duly and validly executed by the Corporation and constitutes a legal, valid and binding agreement of the Corporation enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and subject to general principles of equity. 4.03 Capital Stock. 4.03.1 The authorized capital stock of the Corporation consists solely of the share capital described in Schedule "A" hereto (the "Corporation Shares"). 4.03.2 All such issued and outstanding Corporation Shares have been duly and validly authorized and issued and are validly outstanding, fully paid and non-assessable. The Corporation Shares represent all of the issued and outstanding shares of the Corporation. The Corporation do not hold any of the issued and outstanding Corporation Shares in the treasury of the Corporation, and there are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Corporation except as disclosed in Schedule "C" hereto, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Corporation or options, warrants or other securities of the Corporation. 4.04 Subsidiaries. The Corporation has no Subsidiaries. 4.05 Governmental Authorization. The execution, delivery and performance by the Corporation of this Agreement requires no action by, consent or approval of, or filing with, any Governmental Authority other than as expressly referred to in this Agreement or which would normally be expected to be required as part of the transactions contemplated by this Agreement. 4.06 Non-Contravention. The execution, delivery and performance of this Agreement by the Corporation, and the consummation by it of the transactions provided for herein, do not and will not (a) contravene or conflict with the articles or bylaws of the Corporation; (b) contravene or conflict with or constitute a material violation of any provision of any Applicable Law binding upon or applicable to the Corporation, the Corporation Business or the Corporation Shares and would not, individually or in the aggregate, have a Material Adverse Effect; (c) constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit to which the Corporation are entitled, under any Corporation Contract to which the Corporation are a party or any permit or similar authorization relating to the Corporation, the Corporation Business or the Corporation Shares by which the Corporation, the Corporation Business or the Corporation Shares may be bound or affected; or (d) result in the creation or imposition of any Lien. 4.07 Financial Statements: Undisclosed Liabilities. 4.07.1 Attached hereto as Schedule "C" are true and complete copies of the Corporation Balance Sheets as of November 30, 1999 and other financial information believed to be material by the Corporation (collectively, the "Corporation Financials"). 4.07.2 The Corporation Financials: (i) have been prepared on a consistent basis and are based on the books and records of the Corporation in accordance with Canadian GAAP and present fairly the financial position, results of operations and statements of changes in the Corporations financial position as of the dates indicated or the periods indicated; (ii) contain and reflect all necessary adjustments and accruals for a fair presentation of its financial position and the results of its operations for the periods covered by said financial statements; (iii) contain and reflect adequate provisions for all reasonably anticipated Liabilities (including Taxes) with respect to the periods then ended and all prior periods; and (iv) with respect to the Corporation Contracts and commitments for the sale of goods or the provision of services by the Corporation, contain and reflect adequate reserves for all reasonably anticipated material losses and costs and expenses in excess of expected receipts. 4.07.3 To the best of the knowledge of the Corporation, there are no Liabilities of the Corporation other than: (i) any Liabilities accrued as Liabilities on the Corporation Balance Sheet; (ii) Liabilities incurred since the date of the Corporation Balance Sheet that do not, and could not, individually or in the aggregate have a Material Adverse Effect; and (iii) other Liabilities disclosed in this Agreement or in any schedules attached hereto. 4.08 Absence of Certain Changes. Since January 4, 2000, the Corporation Business has been conducted in the ordinary course, and there has not been: (a) any event, occurrence, state of circumstances, or facts or change in the Corporation or in the Corporation Business that has had, or which the Corporation, after reasonable inquiry, expect to have, either individually or in the aggregate, a Material Adverse Effect; (b) (i) any change in any Liabilities of the Corporation that has had, or which the Corporation may, after reasonable inquiry, expect to have, a Material Adverse Effect such that the total Liabilities of the Corporation would exceed CDN $15,000 or (ii) any incurrence, assumption or guarantee of any indebtedness for borrowed money by the Corporation in connection with the Corporation Business or otherwise; (c) any (i) payments by the Corporation in respect of any indebtedness of the Corporation for borrowed money or in satisfaction of any Liabilities of the Corporation related to the Corporation Business, other than in the ordinary course of business or the guarantee by the Corporation of any of the indebtedness of any other Person or (ii) creation, assumption or sufferance of (whether by action or omission) the existence of any Lien on any assets reflected on the Corporation's Balance Sheet; (d) any transaction or commitment made, or any Contract entered into, by the Corporation, or any waiver, amendment, termination or cancellation of any of the Corporation Contracts by the Corporation, or any relinquishment of any rights thereunder by the Corporation or of any other right or debt owed to the Corporation, other than, in each such case, actions taken in the ordinary course of business consistent with past practice; (e) any grant of any severance, continuation or termination pay to any director, officer, stockholder or employee of the Corporation or any Affiliate of the Corporation, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer, stockholder or employee of the Corporation or any Affiliate of the Corporation, (iii) increase in benefits payable or potentially payable under any severance, continuation or termination pay policies or employment agreements with any director, officer, stockholder or employee of the Corporation or any Affiliate of the Corporation, (iv) increase in compensation, bonus or other benefits payable or potentially payable to directors, officers, stockholders or employees of the Corporation or any Affiliate of the Corporation other than in the normal course of business, (v) change in the terms of any bonus, pension, insurance, health or other benefit plan of the Corporation or (vi) representation of the Corporation to any employee or former employee of the Corporation that the Purchaser promised to continue any Corporation benefit plan after the Closing Date, (f) any change by the Corporation in its accounting principles, methods or practices or in the manner it keeps its books and records; (g) any distribution, dividend, bonus, management fee or other payment by the Corporation to any officer, director, stockholder or Affiliate of the Corporation or any of their respective Affiliates or Associates; or (h) any (i) material single capital expenditure or commitment, or any group of related capital expenditures or commitments, or (ii) sale, assignment, transfer, lease or other disposition of or agreement to sell, assign, transfer, lease or otherwise dispose of any asset or property other than in the ordinary course of business. 4.09 Properties; Corporation Material Leases; Tangible Assets. 4.09.1 The Corporation does not own any real property. 4.09.2 The Corporation hold, title to each of its properties and assets free and clear of all Liens, adverse claims, easements, rights of way, servitudes, zoning or building restrictions or any other rights of others or other adverse interests of any kind, including leases, chattel mortgages, conditional sales contracts, collateral security arrangements and other title or interest retention arrangements (collectively, "Corporation Encumbrances"). 4.09.3 All tangible properties and assets reflected on the Corporation Balance Sheet are in all material respects fit for the purposes for which they are used and are in good operating condition and repair and are adequate for the uses to which they are put, and no material properties or assets necessary for the conduct of the Corporation Business in substantially the same manner as the Corporation Business has heretofore been conducted are in need of replacement, maintenance or repair except for routine replacement, maintenance and repair. 4.10 Affiliates. Other than as disclosed herein, there are no material undisclosed Corporation Contracts which have been entered into within the past five years or are currently in force and effect between the Corporation and any Shareholder, or any Affiliate or Associate of any Shareholder. The Corporation is not materially indebted to any Shareholder. 4.11 Litigation. There are no material proceedings pending or, to the knowledge of the Corporation, threatened against or affecting the Corporation or the Corporation Business or that seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement and (ii) there is no existing order, judgment or decree of any Governmental Authority naming the Corporation as an affected party which has not been paid or discharged in full. 4.12 Material Contracts. All Corporation Contracts are legal, valid and binding obligations of the Corporation and each other Person who is a party thereto, enforceable against the Corporation and each such Person in accordance with their terms, and none are subject to any material default thereunder. 4.13 Required Consents. There are no governmental or other registrations, filings, applications, notices, transfers, consents, approvals, orders, qualifications or waivers required under Applicable Law or otherwise required to be obtained or made with any Governmental Authority to be obtained by the Corporation or any Shareholder by virtue of the execution and delivery of this Agreement and the consummation of the transactions provided for herein for any reason; nor are there any Corporation Contracts with respect to which the consent of the other party or parties thereto must be obtained by the Corporation or any Shareholder by virtue of the execution and delivery of this Agreement and the consummation of the transactions provided for herein (the "Required Consents"). 4.14 Corporation Intellectual Property. 4.14.1 Schedule "E" sets forth a complete and correct list of each patent, patent application and invention, trademark, tradename, trademark or tradename registration or application, copyright or copyright registration or application for copyright registration, and each licence or licensing agreement, for any of the foregoing relating to the Corporation Business as conducted by the Corporation or held by the Corporation (the "Corporation's Intellectual Property Rights"). The Corporation's Intellectual Property Rights also include any trade secrets that are material to the conduct of the Corporation Business in the manner that the Corporation Business has heretofore been conducted. 4.14.2 The Corporation has not, during the three years preceding the date of this Agreement, been a party to any proceeding, nor to the knowledge of the Corporation, is any proceeding threatened, as to which there is a reasonable possibility of a determination adverse to the Corporation, involving a claim of infringement by any Person (including any Governmental Authority) of any of the Corporation's Intellectual Property Rights. None of the Corporation Intellectual Property Right are subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof by the Corporation or restricting the licensing thereof by the Corporation to any Person. The Corporation has no knowledge that would cause such Person to believe that the use of the Corporation's Intellectual Property Rights or the conduct of the Corporation Business conflicts with, infringes upon or violates any patent, patent licence, patent application, trademark, tradename, trademark or tradename registration, copyright, copyright registration, service mark, brand mark or brand name or any pending application relating thereto, or any trade secret, know-how, programs or processes, or any similar rights, of any Person. 4.14.3 To the knowledge of the Corporation, the Corporation either owns the entire right, title and interest in, to and under, or has acquired an exclusive licence to use, any and all patents, trademarks, trade names, brand names and copyrights that are material to the conduct of the Corporation Business in the manner that the Corporation Business has heretofore been conducted. The Corporation's Intellectual Property Rights are in full force and effect and have not been used or enforced or failed to be used or enforced in a manner that would result in the abandonment, cancellation or unenforceability of any of the Corporation's Intellectual Property Rights. All registrations and filings necessary to preserve the rights of the Corporation in and to the Corporation's Intellectual Property Rights have been made. 4.15 Tax Matters. 4.15.1 The Corporation has prepared and filed all Tax Returns on time with all appropriate Governmental Authorities which were required to be filed on or prior to the Closing Date. Each such Tax Return was correct and complete. 4.15.2 The Corporation has paid all Taxes due and payable by them and have paid all assessments and reassessments they have received in respect of Taxes. The Corporation have paid all Tax installments due and payable by them as at November 30, 1999, save and except as disclosed in Schedule "C" hereto. 4.15.3 The Corporation has withheld from each payment made to any of its present or former employees, officers and directors, and to all persons who are non-residents of Canada for the purposes of the Income Tax Act (Canada) all amounts required by Applicable Law and has remitted such withheld amounts within the prescribed periods to the appropriate Governmental Authority. The Corporation has remitted all Canada Pension Plan contributions, employment insurance premiums, employer health taxes and other Taxes payable by them in respect of their employees and have remitted such amounts to the proper Governmental Authority within the time required by Applicable Law. The Corporation has charged, collected and remitted on a timely basis all Taxes as required by Applicable Law on any sale, supply or delivery whatsoever, made by the Corporation. 4.15.4 The Corporation Business is the only business ever conducted by the Corporation. The non-capital losses (as defined in the Tax Act and any applicable provincial taxing statute) were incurred by the Corporation only in carrying on the Corporation Business. The Corporation is not prevented by virtue of any amalgamation or dissolution from carrying back against income earned by it prior to the Closing Date, any losses incurred by it after the Closing Date. 4.15.5 The Corporation has paid all Taxes imposed by applicable legislation in the provinces of British Columbia and Ontario on the acquisition of its tangible personal property as defined in applicable legislation in the province of Ontario, and none of its tangible personal property has been transferred at any time on a tax-exempt basis under applicable legislation of the Province of Ontario or any predecessor legislation thereof. The foregoing is accurate, mutatis mutandis, with respect to all sales or transfer Taxes imposed under comparable legislation of other provinces. 4.16 Securities Legislation. The Corporation is a private issuer within the meaning of the Securities Act (Ontario) and the sale of the Corporation Shares by the Shareholders to the Purchaser is made in compliance with the exempt takeover-bid provisions of this Act or such other exemption as may be available to it and the Shareholder. 4.17 Full Disclosure. The information contained in the documents, certificates and written statements (including this Agreement and the schedules and exhibits hereto) furnished to the Purchaser by or on behalf of the Corporation with respect to the Corporation (including the Corporation Business and the results of operations, financial condition and prospects of the Corporation) for use in connection with this Agreement or the transactions contemplated by this Agreement is true and complete in all material respects and does not, to the best of the knowledge of the Corporation after conducting an inquiry which a reasonably prudent person would make under the circumstances, omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Corporation that has not been disclosed to the Purchaser by the Corporation in writing that has had a Material Adverse Effect on or, so far as the Corporation can now foresee, could be reasonably likely to have a Material Adverse Effect on, the Corporation (including the Corporation Business and the results of operations, financial condition or prospects of the Corporation). ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE BUYING GROUP As an inducement to the Corporation and each Shareholder to enter into this Agreement and to consummate the transactions provided for herein, the Purchaser and the Parent, jointly and severally, represent and warrant to the Corporation and each Shareholder that: 5.01 Existence and Power. Each of the Purchaser and the Parent is a corporation duly incorporated, organized and validly existing under the laws of its incorporating jurisdiction (being the Province of British Columbia for the Purchaser and the State of Nevada for the Parent) and each has all corporate power and all governmental licences, authorizations, permits, consents and approvals required to carry on the Buying Group Business as now conducted and to own and operate their respective businesses as now owned and operated. The Purchaser and the Parent are not required to be qualified to conduct business in any jurisdiction where the failure to be so qualified, whether individually or in the aggregate, would have a Material Adverse Effect. No proceedings have been taken or authorized by the Purchaser or the Parent or, to the knowledge of the Purchaser or the Parent, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding-up of the Purchaser or the Parent or with respect to any amalgamation, merger, consolidation, arrangement or reorganization relating to the Purchaser or the Parent. 5.02 Authorization. The execution, delivery and performance by each of the Purchaser and the Parent of this Agreement and the consummation thereby of the transactions provided for herein are within the powers of the Purchaser and the Parent and have been duly authorized by all necessary action on their part. This Agreement has been duly and validly executed by each of the Purchaser and the Parent and constitutes a legal, valid and binding agreement of the Purchaser and the Parent enforceable against them in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and subject to general principles of equity. 5.03 Capital Stock of the Purchaser. 5.03.1 The authorized capital stock of the Purchaser consists of 100,000,000 common shares of no par value of which one common share is issued and outstanding on the date hereof to and 50,000,000 Exchangeable Non-Voting Shares with no par value of which no shares are issued and outstanding. Each Exchangeable Non-Voting Share shall: (a) be non-voting as to matters concerning the Purchaser (such that all voting shares of the Purchaser will be and remain held by the Parent); however, as stated above in paragraph 2.03, the holder of Exchangeable Non-Voting Shares will be entitled to voting rights in the Parent as is equivalent to the number of Exchangeable Non-Voting Shares held by each Shareholder as if each Shareholder held an equivalent number of Parent Common Shares; (b) entitle the holder thereof (the "Holder") to dividend rights equal, after conversion into Canadian dollars based on the Canadian/U.S. exchange rate in effect on the record date thereof, to the per share dividend rights of Parent Common Shares; (c) entitle the Holder, on a liquidation of the Purchaser, to receive in exchange for each Exchangeable Non-Voting Share one Parent Common Shares for a period ending on the twenty-fifth anniversary of the Closing Date; and (d) entitle the Holder, at his or her election from time to time for a period ending on the twenty-fifth anniversary of the Closing Date, upon 30 days' written notice given by such Holder to the Purchaser, to require the Purchaser to redeem any or all Exchangeable Non-Voting Shares and to exchange therefor, on a share for share basis, Parent Common Shares (the "Right of Retraction"), 5.03.2 The Parent and the Purchaser shall be entitled to deduct and withhold from the consideration otherwise payable to any Holder of Exchangeable Non-Voting Shares, including any dividend payments in respect of the Exchangeable Non-Voting Shares, such amount as the Parent or the Purchaser is required or permitted to deduct and withhold with respect to such payment under the United States Internal Revenue Code, the Income Tax Act (Canada) or any provision of state, provincial, local or foreign tax law. The Parent and the Purchaser shall not initially withhold any United States Tax on dividends paid on the Exchangeable Non-Voting Shares. However, if any United States taxing authority determines that the Parent or the Purchaser is liable for United States withholding Tax on dividends paid to the Holders on the Exchangeable Non-Voting Shares, the Purchaser shall be entitled to reduce the amount of any future dividends to be paid to the Holders by such withholding obligation. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the Holder of Exchangeable Non-Voting Shares in respect of which such deduction and withholding was made; provided, however, that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required or permitted to be deducted or withheld from any payment to a Holder exceeds the cash portion of the consideration otherwise payable to the Holders, the Parent upon at least ten (10) days' prior written notice to such Holder, is hereby authorized to sell or otherwise dispose of at fair market value such portion of such non-cash consideration otherwise payable to the Holder as is necessary to provide sufficient funds to the Parent in order to enable it to comply with such deduction or withholding requirement and the Parent shall give an accounting to the Holder with respect thereof and any balance of such proceeds of sale. 5.03.3 There are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Purchaser, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Purchaser or options, warrants or other securities of the Purchaser. 5.04 Capital Stock of the Parent. 5.04.1 The authorized capital stock of the Parent consists solely of 70,000,000 common shares with no par value ("Parent Common Shares") 5.04.2 There are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Parent from treasury, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Parent or options, warrants or other securities of the Parent which materially vary from those disclosed in the financial statements of the Parent attached hereto as Schedule "D". 5.05 General Provisions of the Capital of the Purchaser and the Parent. 5.05.1 All of the issued and outstanding shares in the respective capital stocks of the Purchaser and the Parent have been duly and validly authorized and issued and are validly outstanding, fully paid and non-assessable. The Purchaser does not hold any of the issued and outstanding shares in the treasury of the Purchaser or the Parent, the Parent does not hold any of the issued and outstanding shares in the treasury of the Parent and there are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Purchaser or the Parent, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Purchaser or Parent or options, warrants or other securities of the Purchaser or Parent other than as disclosed in Article 5.03.1 herein. 5.05.2 All of the Exchangeable Non-Voting Shares and the Parent Common Shares which will be issued hereunder will be fully paid and non-assessable, subject to such terms and provisions as set forth in the Exchange and Voting Agreement, and the Purchaser's articles of incorporation and the Parent's Directors Resolutions relating to the issuance of the Parent Common Shares, as applicable, and all such shares will be issued free and clear of all Liens, charges, encumbrances and trading restrictions other than as may be imposed by Applicable Law. 5.06 Subsidiaries. The Purchaser has no Subsidiaries and the only Subsidiary of the Parent is the Purchaser. 5.07 Governmental Authorization. The execution, delivery and performance by the Buying Group of this Agreement requires no action by, consent or approval of, or filing with, any Governmental Authority other than as expressly referred to in this Agreement. 5.08 Non-Contravention. The execution, delivery and performance of this Agreement by the Buying Group, and the consummation by it of the transactions provided for herein, do not and will not (a) contravene or conflict with the respective articles or bylaws of the Buying Group; (b) contravene or conflict with or constitute a material violation of any provision of any Applicable Law binding upon or applicable to the Buying Group, the Buying Group Business or the outstanding shares in their respective capital stocks and would not, individually or in the aggregate have a Material Adverse Effect; (c) constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit to which the Purchaser or the Parent are entitled, under any Buying Group Contract to which the Purchaser or the Parent is a party or any Permit or similar authorization relating to the Purchaser or Parent, the Buying Group Business or the outstanding shares in their respective capital stocks may be bound or affected; or (d) result in the creation or imposition of any Lien. 5.09 Financial Statements: Undisclosed Liabilities. 5.09.1 Attached hereto as Schedule "D" are true and complete copies of the Parent's Balance Sheet, prepared on a consolidated basis, as of September 30, 1999 and the related statements of income and retained earnings and changes of financial position, prepared on a consolidated basis, for the year ended December 31, 1998 (collectively, the "Parent's Financials"). 5.09.2 The Parent's Financials: (i) have been prepared on a consistent basis and are based on the books and records of the Parent in accordance with American GAAP and present fairly the financial position, results of operations and statements of changes in the Parent's financial position as of the dates indicated or the periods indicated; (ii) contain and reflect all necessary adjustments and accruals for a fair presentation of its financial position and the results of its operations for the periods covered by said financial statements; (iii) contain and reflect adequate provisions for all reasonably anticipated liabilities (including Taxes) with respect to the periods then ended and all prior periods; and (iv) with respect to Buying Group Contracts and commitments for the sale of goods or the provision of services by the Parent, contain and reflect adequate reserves for all reasonably anticipated material losses and costs and expenses in excess of expected receipts. 5.09.3 To the best of the knowledge of the Buying Group, there are no Liabilities of the Buying Group other than: (i) any Liabilities accrued as Liabilities on the Parent's Balance Sheet; (ii) Liabilities incurred since the date of the Parent's Balance Sheet that do not, and could not, individually or in the aggregate have a Material Adverse Effect; (iii) other Liabilities disclosed in this Agreement or in any schedules attached hereto; and (iv) the Tax on reserves. 5.10 Absence of Certain Changes. Since January 4, 2000, the Buying Group Business has been conducted in the ordinary course, and there has not been: (a) any event, occurrence, state of circumstances, or facts or change in the Purchaser or the Parent or in the Buying Group Business that has had, or which the Purchaser or the Parent, expect to have, either individually or in the aggregate, a Material Adverse Effect; (b) (i) any change in any Liabilities of the Purchaser or the Parent that has had, or which the Purchaser or the Parent expect to have, a Material Adverse Effect or (ii) any incurrence, assumption or guarantee of any indebtedness for borrowed money by the Purchaser or the Parent in connection with the Buying Group Business or otherwise; (c) any (i) payments by the Purchaser or Parent in respect of any indebtedness of the Purchaser or Parent for borrowed money or in satisfaction of any Liabilities of the Purchaser or Parent related to the Buying Group Business, other than in the ordinary course of business or the guarantee by the Purchaser or the Parent of any of the indebtedness of any other Person or (ii) creation, assumption or sufferance of (whether by action or omission) the existence of any Lien on any assets reflected on the Parent's Balance Sheet; (d) any transaction or commitment made, or any Contract entered into, by the Buying Group, any waiver, amendment, termination or cancellation of any Contract by the Buying Group, or any relinquishment of any rights thereunder by the Buying Group or of any other right or debt owed to the Buying Group, other than, in each such case, actions taken in the ordinary course of business consistent with past practice; (e) any (i) grant of any severance, continuation or termination pay to any director, officer, stockholder or employee of the Buying Group or any Affiliate of the Buying Group, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer, stockholder or employee of the Buying Group or any Affiliate of the Buying Group, (iii) increase in benefits payable or potentially payable under any severance, continuation or termination pay policies or employment agreements with any director, officer, stockholder or employee of the Buying Group or any Affiliate of the Buying Group, (iv) increase in compensation, bonus or other benefits payable or potentially payable to directors, officers, stockholders or employees of the Buying Group or any Affiliate of the Buying Group, (v) change in the terms of any bonus, pension, insurance, health or other benefit plan of the Buying Group or (vi) representation of the Buying Group to any employee or former employee of the Buying Group that the Buying Group promised to continue any benefit plan after the Closing Date, (f) any change by the Buying Group in its accounting principles, methods or practices or in the manner it keeps its books and records; (g) any distribution, dividend, bonus, management fee or other payment by the Buying Group to any of their respective officers, directors, stockholders or Affiliates of the Buying Group or any of their respective Affiliates or Associates; and (h) any (i) material single capital expenditure or commitment, or any group of related capital expenditures or commitments by either the Purchaser or the Parent or (ii) material sale, assignment, transfer, lease or other disposition of or agreement to sell, assign, transfer, lease or otherwise dispose of any asset or property by either of the Purchaser or the Parent other than in the ordinary course of business. 5.11 Properties; Material Leases; Tangible Assets. Neither the Purchaser nor the Parent own or lease any real property or material assets. 5.12 Affiliates. There are no contracts between either the Parent or Purchaser and any of its shareholders, or any Affiliate or Associate of any of its shareholders. There is no indebtedness of either the Parent or the Purchaser to any of its shareholders, or to any Affiliate or Associate of any of its shareholders. 5.13 Litigation. There is no proceeding pending or, to the knowledge of the Buying Group, threatened against or affecting the Buying Group or the Buying Group Business or that seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement, and there is no existing order, judgment or decree of any Governmental Authority naming either the Purchaser or the Parent as an affected party which has not been paid or discharged in full. 5.14 Material Contracts. The Buying Group is not party to any Buying Group Contract other than as specified herein. 5.15 Compliance with Applicable Laws. The operation of the Buying Group Business (i) has not violated or infringed, except for violations or infringements that have been cured and the prior existence of which could not, individually or in the aggregate, reasonably be expected to have an adverse effect on either the Purchaser or the Parent and (ii) does not in any material respect violate or infringe any Applicable Law, the terms of any Permit or any order, writ, injunction or decree of any Governmental Authority including but not limited to, the 33 Act, the 34 Act, the Rules and Regulations of the SEC, or the Securities Laws and Regulations of any state. The Parent is not an investment company as defined in, or otherwise subject to regulation under, the Investment Company Act of 1940. The Parent is required to file reports pursuant to Section 12(g) of the 34 Act and is now, and as of the Closing Date will be, current in its filings. The Parent's Form 10-K Annual Reports have been filed with certified financial statements, in compliance with SEC Regulations. 5.16 Buying Group Employment Agreement; and Employee Benefits. 5.16.1 There are no employment, consulting, severance pay, continuation pay, termination pay, indemnification agreements, collective agreements, employee benefit plans or other similar agreements of any nature whatsoever affecting either the Purchaser or the Parent save those to which a company listed on the OTCBB would, in the ordinary course of its business, be party to. 5.16.2 The Buying Group and its Affiliates have complied and are currently complying, in respect of all employees of the Buying Group and its Affiliates, with all Applicable Laws respecting employment and employment practices and the protection of the health and safety of employees, except for such instances which are not, in the aggregate, material. 5.17 Intellectual Property. The Buying Group has no interest in any patent, patent application and invention, trademark, trade name, trademark or trade name registration or application, copyright or copyright registration or application for copyright registration. 5.18 Tax Matters. 5.18.1 Except as disclosed in the Parent's Financials, the Purchaser and the Parent have prepared and filed all Tax Returns on time with all appropriate Governmental Authorities which were required to be filed on or prior to the Closing Date. Each such Tax Return was correct and complete. 5.18.2 The Purchaser is not a registrant for the purposes of the goods and services tax provided for under the Tax Act. 5.18.3 The Purchaser is a taxable Canadian Corporation, as that term is defined in the Tax Act. 5.18.4 The Purchaser has paid all applicable sales and retail taxes in the Province of British Columbia, and none of its tangible personal property has been transferred at any time on a tax-exempt basis under applicable legislation in the Province of British Columbia. The foregoing is accurate, mutatis mutandis, with respect to all sales or transfer Taxes imposed under comparable legislation of other provinces. 5.18.5 The Purchaser has never acquired or had the use of any of its assets from a Person (a "Related Person") with whom the Purchaser was not dealing at arm's length, within the meaning of the Tax Act. The Purchaser has never disposed of any asset to a Related Person for proceeds less than the fair market value of that asset. The Purchaser is not a party to or bound by any agreement with, is not indebted to, and no amount is owing to the Purchaser by any Related Person, not dealing at arm's length, within the meaning of the Tax Act, with the Purchaser. 5.18.6 For the purposes of the Tax Act the Purchaser and the Shareholders hereby covenant and agree to elect jointly under Subsection 85(1) of the Tax Act, by completing and filing with the Department of National Revenue the prescribed form T2057 within the prescribed time for the purposes of the Tax Act with respect to the sale by the Shareholders to the Purchaser of the Corporation Shares and further agree to transfer the Corporation Shares at an agreed amount equal to the adjusted cost base of the Corporation Shares to the Shareholders for purposes of the Tax Act or such greater amount determined by the Shareholders (the "Elected Amount"). 5.18.7 If at any time after the Closing Date the Shareholders determine that either: (a) it is necessary or desirable to change the Elected Amount; or (b) the Tax Act deems the Elected Amount to be an amount which is different than the amount agreed upon between the Shareholder and the Purchaser, then the Shareholder and the Purchaser shall do all things reasonably necessary to reflect such change including, for example, filing an amended election pursuant to subsection 85(1) of the Tax Act. 5.19 Issuance of Shares. 5.19.1 The issuance of the Parent Common Shares by the Parent, and the terms and provisions of the Parent Common Shares, will not violate any provisions of the Parent's articles or bylaws or any Applicable Law, nor will the voting rights attached to the Parent Common Shares derogate from any rights under Applicable Law. 5.19.2 The issuance of the Exchangeable Non-Voting Shares by the Purchaser, and the terms and provisions of the Exchangeable Non-Voting Shares, will not violate any provisions of the Purchaser's articles or bylaws or any Applicable Law. 5.20 Continuing NASD Status. The Parent warrants that the National Association of Securities Dealers has cleared the Parent for quotation of its common shares, including the Parent Common Shares, on the over-the-counter bulletin board in the United States, which will continue after the Closing. 5.21 Full Disclosure. The information contained in the documents, certificates and written statements (including this Agreement and the schedules and exhibits hereto) furnished to the Shareholders by or on behalf of the Buying Group with respect to each of the Purchaser and the Parent (including the Buying Group Business and the respective results of operations, financial condition and prospects of the Purchaser and the Parent) for use in connection with this Agreement or the transactions contemplated by this Agreement is true and complete in all material respects and does not, to the best of the knowledge of each Shareholder after conducting an inquiry which a reasonably prudent person would make under the circumstances, omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Purchaser or the Parent or any Shareholder that has not been disclosed to the Shareholders by the Buying Group in writing that has had a Material Adverse Effect on or, so far as the Buying Group can now foresee, could be reasonably likely to have a Material Adverse Effect on the Buying Group (including the Buying Group Business and the respective results of operations, financial condition or prospects of the Buying Group). ARTICLE VI: COVENANTS OF THE CORPORATION AND SHAREHOLDERS 6.01 Conduct of the Business. During the Interim Period, other than with the express written approval of the Purchaser, the Corporation shall conduct the Corporation Business in the ordinary course consistent with past practice and shall use its best efforts to preserve intact the organization, relationships with third parties and goodwill of the Corporation and keep available the services of the present officers, employees, agents and other personnel of the Corporation Business. 6.01.1 Without limiting in any way the importance of the foregoing, during the Interim Period, other than with the express written approval of the Purchaser, the Corporation shall not, and each Shareholder shall not cause the Corporation to: (a) adopt any material change in any method of accounting or accounting practice used by the Corporation other than by reason of a concurrent change in generally accepted accounting principles; (b) amend its articles or bylaws; (c) sell, mortgage, pledge or otherwise dispose of any substantial assets or properties of the Corporation; (d) declare, set aside or pay any management fee or dividend or make any other distribution with respect to the capital stock of the Corporation or otherwise make a distribution or payment to any Shareholder; (e) amalgamate, merge or consolidate with or agree to amalgamate, merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any Corporation, partnership or other business organization or division thereof; (f) authorize for issuance, issue, sell or deliver any additional shares of its capital stock of any class or any securities or obligations convertible into shares of its capital stock of any class or commit to doing any of the foregoing; (g) split, combine or reclassify any shares of the capital stock of any class of the Corporation or redeem or otherwise acquire, directly or indirectly, any shares of such capital stock; (h) incur or agree to incur any debt or guarantee any debt for borrowed money, including any debt to any Shareholder, or to any Affiliate or Associate of any Shareholder, except debt incurred in the ordinary course of business consistent with past practice; (i) make any loan, advance or capital contribution to or investment in any person other than loans, advances and capital contributions to or investments in joint ventures or other similar arrangements in which the Corporation has an equity interest in the ordinary course of business and travel advances made in the ordinary course of business by the Corporation to its employees to meet business expenses expected to be incurred by such employees; (j) enter into any settlement with respect to any Proceeding or consent to any order, decree or judgment relating to or arising out of any such Proceeding; (k) take any action to terminate, dismiss or cause the retirement of any key employee of the Corporation; (l) fail in any material respect to comply with any Applicable Laws; or (m) make, or make any commitments for, capital or contractual expenditure exceeding $5,000 for any individual commitment or $100,000 for all such commitments taken in the aggregate. 6.01.2 Nothing in this Agreement, and specifically in Paragraph 6.01.2, shall be read to prohibit the Purchaser or the Parent from negotiating and completing transactions involving the acquisition of other subsidiaries including Enersphere Inc. or E- Bill Direct Inc.. 6.01.3 During the Interim Period, other than with the express written approval of the Purchaser, the Corporation shall: (a) file all Canadian, United States, foreign, federal, state, provincial and local Tax Returns required to be filed and make timely payment of all applicable Taxes when due; (b) promptly notify the Purchaser in writing of any action or circumstance that results in, or could reasonably be expected to result in, a Material Adverse Effect or the occurrence of any breach by the Corporation or any Shareholder of any representation or warranty, or any covenant or agreement contained in this Agreement; and (c) promptly notify the Purchaser in writing of the commencement of any proceeding or the threat thereof by or against the Corporation or any Shareholder. 6.02 Maintenance of Corporation Insurance Policies. On and after the Closing Date, the Corporation shall not take or fail to take any action if such action or inaction would adversely affect the applicability of any insurance in effect on the date hereof that covers all or any material part of the assets of the Corporation or the Business. 6.03 Tax Election. In accordance with the Letter of Intent, the Corporation shall not file an election pursuant to subsection 256(9) of the Income Tax Act (Canada) or any equivalent provincial provision. ARTICLE VII: COVENANTS OF THE BUYING GROUP 7.01 Conduct of Business. During the Interim Period, the Buying Group will conduct the Buying Group Business in the ordinary course consistent with past practice and shall use its best efforts to preserve intact the organization, relationships with third parties and goodwill of the Buying Group and keep available the services of the present officers, directors, employees, agents and other personnel of the Buying Group Business; and without limiting in any way the importance of the foregoing, the Buying Group shall not undertake any of those matters referred to in sections 6.01.1 and 6.01.2, and all such clauses thereof shall apply mutatis mutandis to the Buying Group. 7.02 Priority. Notwithstanding any term of the Purchaser's bylaws, memorandum and articles to the contrary, the terms and provisions of this Agreement and the Exchange and Voting Agreement shall prevail such that the directors of the Purchaser will only authorize the exchange of the Exchangeable Non-Voting Shares for shares in the Parent Common Shares in accordance with the terms of the Exchange and Voting Agreement. ARTICLE VIII: ACKNOWLEDGMENTS AND COVENANTS OF ALL PARTIES 8.01 Further Assurances. Each party hereto agrees to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be reasonably necessary or desirable (including obtaining all required consents) in order to evidence the consummation or implementation of the transactions provided for under this Agreement. 8.02 Certain Filings. The parties hereto shall cooperate with one another in determining whether any action by or in respect of, or filing with, any Governmental Authority is required or reasonably appropriate, or any action, consent, approval or waiver from any party to any Contract is required or reasonably appropriate, in connection with the consummation of the transactions contemplated by this Agreement. Subject to the terms and conditions of this Agreement, in taking such actions or making any such filings, the parties hereto shall furnish information required in connection therewith and seek timely to obtain any such actions, consents, approvals or waivers. 8.03 Registration. All parties acknowledge and agree that the Parent is a reporting issuer in the United States, and all of the Parent Common Shares have been registered under the 33 Act; and all parties further acknowledge and agree that neither the Parent nor the Purchaser is a reporting issuer in any province of Canada, and the Exchangeable Non-Voting Shares and Parent Common Shares will be subject to such resale restrictions as imposed by the Applicable Law of the jurisdiction in which a Shareholder is resident. ARTICLE IX: CONDITIONS PRECEDENT TO CLOSING 9.01 Conditions to Obligation of the Buying Group. The obligations of the Buying Group to consummate the Closing are subject to the completion of due diligence of the Corporation on the part of the Buying Group and to the Buying Group's satisfaction on or before December 20, 1999 and are further subject to the satisfaction of each of the following conditions: (a) (i) the Corporation and each Shareholder shall have performed and satisfied each of their respective obligations hereunder required to be performed and satisfied by them on or prior to the Closing Date, (ii) each of the representations and warranties of the Corporation and each Shareholder contained herein shall have been true and correct and contained no misstatement or omission that would make any such representation or warranty misleading when made and shall be true and correct and contain no misstatement or omission that would make any such representation or warranty misleading at and as of the Closing with the same force and effect as if made as of the Closing, and (iii) the Buying Group shall have received certificates signed by each Shareholder and a duly authorized executive officer of the Corporation to the foregoing effect and to the effect that the conditions specified within this Section 9.01(a) have been satisfied. (b) All Required Consents for the transactions contemplated by this Agreement shall have been obtained without the imposition of any conditions that are or would become applicable to the Corporation, the Corporation Business, the Corporation Shares or the Buying Group (or any of its Affiliates or Associates) after the Closing that would be materially burdensome upon the Corporation, the Corporation Business, the Corporation Shares or the Buying Group (or any of its Affiliates or Associates) or their respective businesses substantially as such businesses have been conducted prior to the Closing Date or as said businesses, as of the date hereof, would be reasonably expected to be conducted after the Closing Date. All such approvals shall be in effect, and no proceedings shall have been instituted or threatened by any Governmental Authority or other person with respect thereto as to which there is a material risk of a determination that would terminate the effectiveness of, or otherwise materially and adversely modify the terms of, any such approval; all applicable waiting periods with respect to such approvals shall have expired; and all conditions and requirements prescribed by Applicable Law or by such approvals to be satisfied on or prior to the Closing Date shall have been satisfied to the extent necessary such that all such approvals are, and will remain, in full force and effect assuming continued compliance with the terms thereof after the Closing. (c) The transactions contemplated by this Agreement and the consummation of the Closing shall not violate any Applicable Law. The operation of the Corporation Business shall not have violated or infringed, or be in violation or infringement of any Applicable Law or any order, writ, injunction or decree of any Governmental Authority, where such violations and infringements, individually or in aggregate, have resulted in, or could reasonably be expected to result in a Material Adverse Effect. (d) Since the date hereof, there shall not have been any event, occurrence, development or state of circumstances or facts or change in the Corporation or the Corporation Business, including any damage, destruction or other casualty loss affecting the Corporation or the Corporation Business that has had or that may be reasonably expected to have, either alone or together with all such events, occurrences, developments, states of circumstances or facts or changes, a Material Adverse Effect on the Corporation. 9.02 Conditions to Obligations of the Shareholders. The obligations of each Shareholder to consummate the Closing are subject completion of reasonable due diligence investigations of the Buying Group to be completed on or before December 20, 1999 and are further subject to the satisfaction of each of the following conditions: (a) (i) the Buying Group shall have performed and satisfied each of its obligations hereunder required to be performed and satisfied by it on or prior to the Closing Date; and (ii) each of the representations and warranties of the Buying Group contained herein shall have been true and correct and contained no misstatement or omission that would make any such representation or warranty misleading when made and shall be true and correct and contain no misstatement or omission that would make any such representation or warranty misleading at and as of the Closing with the same force and effect as if made as of the Closing. (b) All Required Consents for the transactions contemplated by this Agreement shall have been obtained without the imposition of any conditions that are or would become applicable to any Shareholder (or any of their respective Affiliates or Associates) after the Closing that would be materially burdensome upon any such Person. All such approvals shall be in effect, and no Proceedings shall have been instituted or threatened by any Governmental Authority with respect thereto as to which there is a material risk of a determination that would terminate the effectiveness of, or otherwise materially and adversely modify the terms of, any such approval. All applicable waiting periods shall have expired, and all conditions and requirements such approvals to be satisfied on or prior to the Closing extent necessary such that all such approvals are, and will remain, in full force and effect assuming continued compliance with the terms thereof after the Closing. (c) The transactions contemplated by this Agreement and the consummation of the Closing shall not violate any Applicable Law. No temporary restraining order, preliminary or permanent injunction, cease and desist order or other order issued by any court of competent jurisdiction or any competent Governmental Authority or any other legal restraint or prohibition preventing the transfer and exchange contemplated hereby or the consummation of the Closing, or imposing Damages in respect thereto, shall be in effect, and there shall be no pending actions or proceedings by any Governmental Authority (or determinations by any Governmental Authority) or by any other Person challenging or seeking to materially restrict or prohibit the transfer and exchange contemplated hereby or the consummation of the Closing. (d) Since the date hereof, there shall not have been any event, occurrence, development or state of circumstances or facts or change in the Buying Group or the Buying Group Business, including any damage, destruction or other casualty loss affecting the Buying Group or the Buying Group Business that has had or that may be reasonably expected to have, either alone or together with all such events, occurrences, developments, states of circumstances or facts or changes, a Material Adverse Effect on the Buying Group. (e) Since the date hereof, there shall not have been any: (i) material change in the capital structure of either the Purchaser or the Parent, other than as to effect the creation or issuance of the Exchangeable Non-Voting Shares or the Parent Common Shares as contemplated herein, or to effect the rights, restrictions, privileges and terms of the Exchangeable Non-Voting Shares or Parent Common Shares in accordance with the terms hereof; or (ii) any actions, investigations, inquiries or proceedings commenced or continued against either the Parent or the Purchaser, or their respective officers, directors, promoters, representatives, agents or their respective businesses by any securities regulatory authority, tribunal or body having jurisdiction. (f) The Parent's Board of Directors, by proper and sufficient vote, shall have approved this Agreement, the Exchange and Voting Agreement and the Support Agreement, and the transactions contemplated hereby and the issuance of the Parent Common Shares hereunder. (g) The Parent and the Purchaser will have entered into the Exchange and Voting Agreement and the Support Agreement. ARTICLE X: INDEMNIFICATION 10.01 Agreement to Indemnify. 10.01.1 Each of the Purchaser and the Parent, and their respective Affiliates, Associates, officers, directors, shareholders, representatives and agents (collectively, the "Purchaser Indemnitees") shall each be indemnified and held harmless to the extent set forth in this Article X by each Shareholder in respect of any and all damages incurred by any Purchaser Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation or warranty made in this Agreement by such Shareholder, provided, however, that each Shareholder shall have no obligation to indemnify the Purchaser Indemnitees with respect to damages incurred by any Purchaser Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation or warranty made in this Agreement by any other Shareholder and further a Shareholder shall have no such obligation to indemnify a Purchaser Indemnitee hereunder unless, and to the extent, the aggregate of all damages incurred by the Purchaser Indemnities for all items covered by this Section 10.01(1) shall exceed $1,000 in the aggregate. 10.01.2 Each of the Purchaser Indemnitees shall be indemnified and held harmless to the extent set forth in this Article X by the Corporation in respect of any and all damages incurred by any Purchaser Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation, warranty, covenant or agreement made in this Agreement by the Corporation. 10.01.3 Each Shareholder and their respective Affiliates and Associates and each officer, director, shareholder, employer, representative and agent of any of the foregoing (collectively, the "Shareholder Indemnitees") shall each be indemnified and held harmless to the extent set forth in this Article X by the Purchaser and Parent in respect of any and all damages incurred by any Shareholder Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation, warranty, covenant or agreement made by the Parent or the Purchaser in this Agreement. 10.02 Survival of Representation, Warranties and Covenants. Except as hereinafter provided in this Section 10.02, all representations, warranties, covenants, agreements and obligations of each Indemnifying Party contained herein and all claims of any Purchaser Indemnitee or Shareholder Indemnitee in respect of any breach of any representation, warranty, covenant, agreement or obligation of any Indemnifying Party contained in this Agreement, shall survive the Closing and shall expire one year following the Closing Date. ARTICLE XI: MISCELLANEOUS 11.01 Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) if personally delivered, when so delivered, (ii) if mailed, two Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid and addressed to the intended recipient as set forth below, (iii) if given by facsimile or telecopier, once such notice or other communication is transmitted to the facsimile or telecopier number specified below and the appropriate answer back or telephonic confirmation is received, provided that such notice or other communication is promptly thereafter mailed in accordance with the provisions of clause (ii) above or (iv) if sent through an overnight delivery service in circumstances under which such service guarantees next day delivery, the day following being so sent: If to the Corporation: 19 Concession Street, Cambridge, Ontario, N1R 2G6 If to the Purchaser: 804-750 W. Pender Street Vancouver, B.C., V6C 2T8 If to the Parent: 19 Concession Street Cambridge, Ontario, N1R 2G6 If to a Shareholder: at the last address for the Shareholder on the member registers of the Corporation. Any party may give any notice, request, demand, claim or other communication hereunder using any other means (including ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the individual for whom it is intended. Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth. 11.02 Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by all parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) No waiver by a party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence. No failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 11.03 Expenses. All costs and expenses incurred in connection with this Agreement and enclosing and carrying out the transactions provided for herein shall be paid by the party incurring such cost or expense. This Section shall survive the Closing and the termination of this Agreement. 11.04 Successors and Assigns. This Agreement shall be binding upon and enure to the benefit, of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and permitted assigns. No party hereto may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of each other party, which approval shall not be unreasonably withheld. 11.05 Governing Law. This Agreement shall be governed by, and interpreted and enforced in accordance with, the laws in force in the Province of Ontario and the laws of Canada applicable therein (excluding any conflict of laws rule or principle that might refer such interpretation to the laws of another jurisdiction). Each party irrevocably submits to the jurisdiction of the courts of British Columbia with respect to any matter arising hereunder or related hereto. 11.06 Counterparts; Effectiveness. This Agreement and the documents relating to the transactions contemplated by this Agreement may be signed in any number of counterparts and the signatures delivered by facsimile, each of which shall be deemed to be an original, with the same effect as if the signatures thereto were upon the same instrument and delivered in person. This Agreement and such documents shall become effective when each party thereto shall have received a counterpart thereof signed by the other parties thereto. In the case of execution and delivery by facsimile by any party, that party shall forthwith deliver a manually executed original to each of the other parties. 11.07 Entire Agreement. This Agreement (including the Schedules referred to herein, which are hereby incorporated by reference) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement including, without limiting the generality of the foregoing, the Letter of Intent. Neither this Agreement nor any provision hereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. 11.08 Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. All references to an Article or Section include all subparts thereof. 11.09 Severability. If any provision of this Agreement, or the application thereof to any Person, place or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, the remainder of this Agreement and such provisions as applied to other Persons, places and circumstances shall remain in full force and effect only if, after excluding the portion deemed to be unenforceable, the remaining terms shall provide for the consummation of the transactions contemplated hereby in substantially the same manner as originally set forth at the later of the date this Agreement was executed or last amended. 11.10 Construction. The parties hereto intend that each representation, warranty, and covenant contained herein shall have independent significance. If any party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) that the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty or covenant. 11.11 Meaning of Include and Including. Whenever in this Agreement the word "include" or "including" is used, it shall be deemed to mean "include, without limitation" or "including without limitation", as the case may be, and the language following "include" or "including" shall not be deemed to set forth an exhaustive list. 11.12 Cumulative Remedies. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 11.13 Third Party Beneficiaries. Other than Indemnitees under Article X hereof who are not parties to this Agreement, no provision of this Agreement shall create any third party beneficiary rights in any Person, including any employee or former employee of the Corporation or any Affiliate or Associate thereof (including any beneficiary or dependent thereof). 11.14 Transmission by Facsimile. The parties hereto agree that this Agreement may be transmitted by facsimile or such similar device and that the reproduction of signatures by facsimile or such similar device will be treated as binding as if originals and each party hereto undertakes to provide each and every other party hereto with a copy of the Agreement bearing original signatures forthwith upon demand. 11.15 Fees and Commissions. No broker, finder or other person or entity is entitled to any fee or commission from the Buying Group or the Corporation for services rendered on behalf of the Buying Group or the Corporation in connection with the transactions contemplated by this Agreement. 11.16 Maitland & Company. The parties hereto acknowledge and agree that Maitland & Company acts only for the Parent in the preparation and negotiation of this Agreement. The parties hereto further acknowledge and agree that: (a) they have been advised to seek independent legal advice regarding this Agreement, (b) Maitland & Company has provided no tax advice with respect to this Agreement and hereby has advised the parties hereto to seek tax advice respecting their respective tax obligations; and (c) Maitland & Company has not provided legal advice to any of the Shareholders with respect to U.S. securities laws. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. URBANA.CA INC. By: /s/ Robert Tyson Robert Tyson, Authorized Signatory ICC INTEGRATED CARBONICS (CANADA) CORP. By: /s/ Robert Tyson Robert Tyson, Authorized Signatory URBANA.CA ENTERPRISES CORP. By: /s/ Jason Cassis Jason Cassis, Authorized Signatory SHAREHOLDERS /s/ Jason Cassis Jason Cassis /s/ Greg Alexanian Greg Alexanian /s/ Lorna Seaton Lorna Seaton /s/ William J. Little William J. Little Stonewall Capital Corp. By: /s/ Christopher D. Farber Christopher D. Farber, Authorized Signatory EX-10.8 5 SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT THIS SHARE EXCHANGE AND SHARE PURCHASE AGREEMENT is dated for reference the 10th day of January, 2000. AMONG: URBANA.CA INC., a corporation incorporated under the laws of the State of Nevada, (the "Parent") AND: ICC INTEGRATED CARBONICS (CANADA) CORP., a corporation incorporated under the laws of the Province of British Columbia, (the "Purchaser") AND: E-BILL DIRECT INC., a corporation incorporated under the laws of the Province of Ontario (the "Corporation") AND: ALL OF THE SHAREHOLDERS OF THE CORPORATIONS as more particularly described on Schedule "A" attached hereto, (Individually a "Shareholder" and collectively the "Shareholders"); WHEREAS: A. The Corporation is a company which provides Rich content electronic bill presentment services to its clients; B. The Shareholders own all of the issued and outstanding shares of the Corporation (the "Corporation Shares"); C. The Parent owns all of the issued and outstanding shares in the capital stock of the Purchaser; D. The Purchaser desired to purchase all of the Corporation Shares and the Shareholders desire to sell all of the Corporation Shares to the Purchaser on the terms and conditions hereinafter set forth; E. The respective boards of directors of the Purchaser, Parent and Corporation each deem it advisable and in the best interests of their respective shareholders to combine their respective businesses by the Purchaser acquiring all of the shares in the capital stock of the Corporation pursuant to the terms of this Agreement; and F. The respective boards of directors of the Purchaser, Parent and Corporation have approved and adopted this Agreement as a plan of reorganization under section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), and as a transfer of shares pursuant to section 85 of the Income Tax Act (Canada) (the "Tax Act"). NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the foregoing premises, the mutual representations, warranties, covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I: DEFINITIONS 1.01 Definitions. The following terms, as used herein, have the following meanings: "Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under direct or indirect common control with such other Person. "Agreement" means this Share Exchange and Share Purchase Agreement by and among the Purchaser, Parent, Corporation and Shareholders. "Applicable Law" means, with respect to any Person, any United States (whether federal, territorial, state or local), Canadian (whether federal, territorial, provincial, municipal or local) or foreign statute, law, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment, decree or other requirement, all as in effect as of the Closing, of any Governmental Authority applicable to such Person or any of its Affiliates or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer's, director's, employee's, consultant's or agent's activities on behalf of such Person or any of its Affiliates). "Associate" means with respect to any Person (a) any other Person of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities issued by such other Person, (b) any trust or other estate in which such Person has a ten percent (10%) or more beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, and (c) any relative or spouse of such Person, or any relative of such spouse who has the same home as such Person or who is a director or officer of such Person or any Affiliate thereof. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in Toronto, Ontario are authorized or required by law to close. "Buying Group" means the Purchaser and the Parent. "Buying Group Business" means the business as heretofore or currently conducted by the Buying Group. "Buying Group Contracts" means all contracts, agreements, options, leases, licences, sales and purchase orders, commitments and other instruments of any kind, whether written or oral, to which either the Purchaser or the Parent is a party on the Closing Date. "Corporation Balance Sheet" means the balance sheet of the Corporation dated November 30, 1999. "Corporation Business" means the business as heretofore or currently conducted by the Corporation. "Corporation Contracts" means all contracts, agreements, options, leases, licences, sales and purchase orders, commitments and other instruments of any kind, whether written or oral, to which the Corporation, or any Shareholder on behalf of the Corporation, is a party on the Closing Date. "Corporation Premises" means those premises that have been occupied or used, or are occupied or used, by the Corporation in connection with the Corporation Business. "Exchange and Voting Agreement" means the agreement in substantially the form set out in Schedule "B" hereto to be entered into by the Parent, Purchaser and Trustee. "Exchangeable Non-Voting Shares" means those 2,950,000 Class "A" exchangeable, non-voting, participating common shares without par value in the capital stock of the Purchaser, having those rights and terms set forth in the Exchange and Voting Agreement and the Exchangeable Share Provisions, which will be issued to the Shareholders in consideration for the purchase and sale of the Corporation Shares. "Exchangeable Share Provisions" means those rights, restrictions, terms and provisions pertaining to the Exchangeable Non-Voting Shares, as set forth in Schedule "F" hereto, and as summarized in section 5.03 hereof. "Governmental Authority" means any United States (whether federal, territorial, state, municipal or local), Canadian (whether federal, territorial, provincial, municipal or local) or foreign government, governmental authority, quasi-governmental authority, instrumentality, court, government or self-regulatory organization, commission, tribunal or organization or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing. "GST" means all goods and services taxes, sales taxes levied by the federal government of Canada, value added taxes or multi- stage taxes and all provincial sales taxes integrated with such federal taxes, assessed, rated or charged upon the Corporation. "Interim Period" means the period from and including the date of this Agreement to and including the Closing Date. "Liability" means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person. "Lien" means, with respect to any asset, any mortgage, assignment, trust or deemed trust (whether contractual, statutory or otherwise arising), title defect or objection, lien, pledge, charge, security interest, hypothecation, restriction, encumbrance or charge of any kind in respect of such assets. "Material Adverse Effect" means a change in, or effect on, the operations, affairs, prospects, financial condition, results of operations, assets, Liabilities, reserves or any other aspect of a party to this Agreement or to its business that results in a material adverse effect on, or a material adverse change in, any such aspect of the party or to its business. "Parent's Balance Sheet" means the balance sheet of the Parent dated September 30, 1999. "Parent Common Shares" means 2,950,000 common shares in the capital of the Parent to be issued to the Trustee pursuant to paragraph 2.05 hereof, in consideration of subscription proceeds from the Trustee of $0.0001 per share, having those rights and terms as set forth in the Exchange and Voting Agreement. "Person" includes an individual, body corporate, partnership, company, unincorporated syndicate or organization, trust, Trustee, executor, administrator and other legal representative. "SEC" means the United States Securities and Exchange Commission. "Stock Option Plan" means the stock option plan of the Parent which plan is more particularly described in Schedule "H" attached hereto. "Subsidiary" means, with respect to any Person, (i) any corporation as to which more than 10% of the outstanding shares having ordinary voting rights or power (and excluding shares having voting rights only upon the occurrence of a contingency unless and until such contingency occurs and such rights may be exercised) is owned or controlled, directly or indirectly, by such Person and/or by one or more of such Person's Subsidiaries, and (ii) any partnership, joint venture or other similar relationship between such Person (or any Subsidiary thereof) and any other Person (whether pursuant to a written agreement or otherwise). "Support Agreement" means that agreement between the Parent and the Purchaser, in the form attached hereto as Schedule "G" hereto, whereby the Parent agrees to make certain payments and deliveries to enable the Purchaser to comply with the Exchangeable Share Provisions. "Tax" means all taxes imposed of any nature including any United States (whether federal, territorial, state or local), Canadian (whether federal, territorial, provincial or local) or foreign income tax, alternative or add-on minimum tax, profits or excess profits tax, franchise tax, gross income, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax or employer health tax), capital tax, real or personal property tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any withholding or back up withholding tax, value added tax, GST, severance tax, prohibited tax, premiums tax, occupation tax, customs and import duties, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax or in respect of or pursuant to any United States (whether federal, territorial, state or local), Canadian (whether federal, territorial, provincial or local) or other Applicable Law. "Tax Return" means all returns, reports, forms or other information required to be filed with respect to any Tax. "Trustee" means the Trustee or successor Trustee designated under the Exchange and Voting Agreement attached hereto as Schedule "B". "33 Act" means the United States Securities Act of 1933 and all amendments thereto. "34 Act" means the United States Securities Act of 1934 and all amendments thereto. 1.02 Currency Used. All references herein to dollars or the use of the symbol "$" shall be deemed to refer to United States dollars unless such reference is prefaced by "CDN" in which case the reference will be to Canadian dollars. 1.03 Canadian Generally Accepted Accounting Principles. Where the Canadian Institute of Chartered Accountants or any successor thereto includes a statement in its handbook or any successor thereto on a method or alternative methods of accounting or on a standard or standards of auditing, such statement shall be regarded as the only generally accepted accounting principle or principles or generally accepted auditing standard or standards ("Canadian GAAP") applicable to the circumstances that it covers, and references herein to "generally accepted accounting principles" shall be interpreted accordingly. All accounting and financial terms used herein with respect to the Corporation, unless specifically provided to the contrary, shall be interpreted and applied in accordance with Canadian GAAP. 1.04 American Generally Accepted Accounting Principles. Where the American Institute of Certified Public Accountants or any successor thereto includes a statement in its handbook or any successor thereto on a method or alternative methods of accounting or on a standard or standards of auditing, such statement shall be regarded as the only generally accepted accounting principle or principles or generally accepted auditing standard or standards ("American GAAP") applicable to the circumstances that it covers, and references herein to "generally accepted accounting principles" shall be interpreted accordingly. All accounting and financial terms used herein with respect to the Parent, unless specifically provided to the contrary, shall be interpreted and applied in accordance with American GAAP. ARTICLE II: PURCHASE, SALE AND SUBSCRIPTION 2.01 Purchase of Corporation Shares. On the terms and subject to the conditions set forth herein, the Shareholders hereby agree to sell, transfer, convey, assign and deliver to the Purchaser, free and clear of all Corporation Share Encumbrances (as defined in paragraph 3.01.1), and the Purchaser hereby agrees to purchase, acquire and accept from the Shareholders, all of the Corporation Shares held by the Shareholders. At Closing, the Shareholders will deliver to the Purchaser certificates evidencing all of the Corporation Shares duly endorsed for transfer and such other instruments as have been reasonably requested by the Purchaser to transfer full legal and beneficial ownership of the Corporation Shares to the Purchaser, free and clear of all Corporation Share Encumbrances and the Corporation agree to enter the Purchaser or the Purchaser's nominee on the books of the Corporation as the holder of the Corporation Shares and to issue one or more replacement share certificates representing the Corporation Shares to the Purchaser or the Purchaser's nominee. The Purchaser shall pay the Purchase Price for the Corporation Shares in accordance with the terms of Sections 2.02 of this Agreement. 2.02 Purchase Price for Corporation Shares. The aggregate purchase price to be paid by the Purchaser for the Corporation Shares (the "Purchase Price") will be 2,950,000 Exchangeable Non- Voting Shares, each Exchangeable Non-Voting Share exchangeable for a Parent Common Share on the terms and conditions contained herein. 2.03 Subscription of Parent Common Shares and Optioned Securities. The Parent agrees to grant: (a) to each Shareholder, such number of voting rights in the Parent as is equivalent to the number of Exchangeable Non- Voting Shares held by each Shareholder, as if each Shareholder held an equivalent number of Parent Common Shares, and, subject to the remaining terms of this Agreement, which voting rights will be exercisable by the Shareholders through their holding Exchangeable Non-Voting Shares in accordance with the Exchange and Voting Agreement; and (b) to each Shareholder, the rights to exchange their Exchangeable Non-Voting Shares for Parent Common Shares, such rights to be exercised in accordance with the terms of the Exchange and Voting Agreement. To ensure that the Parent has sufficient common shares available to issue in exchange for Exchangeable Non-Voting Shares, and as security for its covenant to do so, the Parent agrees to issue the Parent Common Shares to the Trustee, at or shortly following Closing, at the purchase price of $0.0001 per share; such Parent Common Shares to be held in accordance with the Exchange and Voting Agreement. 2.04 Closing. The closing (the "Closing") of the transactions contemplated by this Agreement shall take place at the offices of the Parent in Ontario, Canada, on such date as the parties hereto may mutually agree in writing (the "Closing Date"). 2.05 Payment of Purchase Price. At Closing the Purchaser will deliver to the Shareholders certificates representing the Exchangeable Non-Voting Shares, all such Exchangeable Non-Voting Shares to be issued as fully paid and non-assessable, and registered in the names of the Shareholders and in the denominations set forth in Schedule "A" to the Exchange and Voting Agreement. On or shortly following the Closing, the Parent will issue the Parent Common Shares to the Trustee, such Parent Common Shares to be issued as fully paid and non- assessable, and registered in the name of the Trustee in such denominations as the Trustee may request. ARTICLE III: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS As an inducement to the Buying Group to enter into this Agreement and to consummate the transactions provided for herein, each Shareholder, as to himself, herself or itself and as to such of the Corporation Shares owned by him, her or it (and not as to any other Shareholder or to any of the Corporation Shares owned by any other Shareholder) represents and warrants to the Buying Group as follows and confirms that the Purchaser and the Parent are relying upon the accuracy of each of such representations and warranties in connection with the purchase of the Corporation Shares and the completion of the transactions set out herein: 3.01 Representations Regarding the Corporation Shares. 3.01.1 Each Shareholder has good and marketable title to his or her respective holdings in the Corporation Shares, free and clear of any and all covenants, conditions, restrictions, voting trust arrangements, rights of first refusal, options, Liens and adverse claims and rights whatsoever (collectively, the "Corporation Share Encumbrances"), and on the Closing Date, the Shareholders will deliver to the Purchaser, good and marketable title to the Corporation Shares free and clear of any and all Corporation Share Encumbrances; 3.01.2 Each Shareholder has the full right, power and authority to enter into this Agreement and each Shareholder has the full right, power and authority to transfer, convey and sell to the Purchaser at the Closing his or her respective holdings of the Corporation Shares sold to the Purchaser by the Shareholders hereunder, and upon consummation of the purchase, the Purchaser will acquire from the Shareholders good and marketable title to the Corporation Shares sold to the Purchaser by the Shareholders, free and clear of all Corporation Share Encumbrances; and 3.01.3 No Shareholder is a party to, subject to or bound by any agreement, judgment, order, writ, prohibition, injunction or decree of any court or other Governmental Authority that would prevent the execution or delivery to the Purchaser of this Agreement by any Shareholder, the transfer, conveyance and sale of the Corporation Shares sold by Shareholder to the Purchaser pursuant to the terms hereof, or the consummation of the transactions under this Agreement in accordance with the terms of this Agreement. 3.02 Authorization. The execution, delivery and performance of this Agreement, and the consummation of the transactions provided for herein, by each Shareholder are within the respective powers of each Shareholder and have been duly authorized by all necessary action on the part of each Shareholder, respectively. This Agreement has been duly and validly executed by each Shareholder and constitutes a legal, valid and binding agreement upon each Shareholder, respectively, enforceable against each Shareholder in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and subject to general principles of equity or family law. 3.03 Non-Contravention. The execution, delivery and performance of this Agreement, and the consummation of the transactions provided for herein, by each Shareholder, do not (a) contravene or conflict with or constitute a material violation of any provision of any Applicable Law binding upon or applicable to any Shareholder or the Corporation Shares or (b) result in the creation or imposition of any Lien. 3.04 Residency. Each Shareholder is a resident of Canada as defined in the Income Tax Act (Canada). ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE CORPORATION As an inducement to the Buying Group to enter into this Agreement and to consummate the transactions provided for herein, the Corporation represent and warrant to the Buying Group as follows: 4.01 Existence and Power. The Corporation is a corporation duly incorporated, organized and validly existing under the laws of the Province of Ontario and has all corporate power and all governmental licences, authorizations, permits, consents and approvals required to carry on the business of The Corporation as now conducted and to own and operate business of The Corporation as now owned and operated. The Corporation is not required to be qualified to conduct business in any jurisdiction where the failure to be so qualified, whether individually or in the aggregate, would have a Material Adverse Effect. No proceedings have been taken or authorized by The Corporation or any Shareholder or, to the knowledge of The Corporation, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding-up of The Corporation or with respect to any amalgamation, merger, consolidation, arrangement or reorganization relating to The Corporation. 4.02 Authorization. The execution, delivery and performance by the Corporation of this Agreement and the consummation thereby of the transactions provided for herein are within the Corporations powers and have been duly authorized by all necessary action on its part. This Agreement has been duly and validly executed by the Corporation and constitutes a legal, valid and binding agreement of the Corporation enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and subject to general principles of equity. 4.03 Capital Stock. 4.03.1 The authorized capital stock of the Corporation consists solely of the share capital described in Schedule "A" hereto (the "Corporation Shares"). 4.03.2 All such issued and outstanding Corporation Shares have been duly and validly authorized and issued and are validly outstanding, fully paid and non-assessable. The Corporation Shares represent all of the issued and outstanding shares of the Corporation. The Corporation do not hold any of the issued and outstanding Corporation Shares in the treasury of the Corporation, and there are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Corporation except as disclosed in Schedule "C" hereto, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Corporation or options, warrants or other securities of the Corporation. 4.04 Subsidiaries. The Corporation has no Subsidiaries. 4.05 Governmental Authorization. The execution, delivery and performance by the Corporation of this Agreement requires no action by, consent or approval of, or filing with, any Governmental Authority other than as expressly referred to in this Agreement or which would normally be expected to be required as part of the transactions contemplated by this Agreement. 4.06 Non-Contravention. The execution, delivery and performance of this Agreement by the Corporation, and the consummation by it of the transactions provided for herein, do not and will not (a) contravene or conflict with the articles or bylaws of the Corporation; (b) contravene or conflict with or constitute a material violation of any provision of any Applicable Law binding upon or applicable to the Corporation, the Corporation Business or the Corporation Shares and would not, individually or in the aggregate, have a Material Adverse Effect; (c) constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit to which the Corporation are entitled, under any Corporation Contract to which the Corporation are a party or any permit or similar authorization relating to the Corporation, the Corporation Business or the Corporation Shares by which the Corporation, the Corporation Business or the Corporation Shares may be bound or affected; or (d) result in the creation or imposition of any Lien. 4.07 Financial Statements: Undisclosed Liabilities. 4.07.1 Attached hereto as Schedule "C" are true and complete copies of the Corporation Balance Sheets as of November 30, 1999 and other financial information believed to be material by the Corporation (collectively, the "Corporation Financials"). 4.07.2 The Corporation Financials: (i) have been prepared on a consistent basis and are based on the books and records of the Corporation in accordance with Canadian GAAP and present fairly the financial position, results of operations and statements of changes in the Corporations financial position as of the dates indicated or the periods indicated; (ii) contain and reflect all necessary adjustments and accruals for a fair presentation of its financial position and the results of its operations for the periods covered by said financial statements; (iii) contain and reflect adequate provisions for all reasonably anticipated Liabilities (including Taxes) with respect to the periods then ended and all prior periods; and (iv) with respect to the Corporation Contracts and commitments for the sale of goods or the provision of services by the Corporation, contain and reflect adequate reserves for all reasonably anticipated material losses and costs and expenses in excess of expected receipts. 4.07.3 To the best of the knowledge of the Corporation, there are no Liabilities of the Corporation other than: (i) any Liabilities accrued as Liabilities on the Corporation Balance Sheet; (ii) Liabilities incurred since the date of the Corporation Balance Sheet that do not, and could not, individually or in the aggregate have a Material Adverse Effect; and (iii) other Liabilities disclosed in this Agreement or in any schedules attached hereto. 4.08 Absence of Certain Changes. Since December 2, 1999, the Corporation Business has been conducted in the ordinary course, and there has not been: (a) any event, occurrence, state of circumstances, or facts or change in the Corporation or in the Corporation Business that has had, or which the Corporation, after reasonable inquiry, expect to have, either individually or in the aggregate, a Material Adverse Effect; (b) (i) any change in any Liabilities of the Corporation that has had, or which the Corporation may, after reasonable inquiry, expect to have, a Material Adverse Effect such that the total Liabilities of the Corporation would exceed CDN $5,000 or (ii) any incurrence, assumption or guarantee of any indebtedness for borrowed money by the Corporation in connection with the Corporation Business or otherwise; (c) any (i) payments by the Corporation in respect of any indebtedness of the Corporation for borrowed money or in satisfaction of any Liabilities of the Corporation related to the Corporation Business, other than in the ordinary course of business or the guarantee by the Corporation of any of the indebtedness of any other Person or (ii) creation, assumption or sufferance of (whether by action or omission) the existence of any Lien on any assets reflected on the Corporation's Balance Sheet; (d) any transaction or commitment made, or any Contract entered into, by the Corporation, or any waiver, amendment, termination or cancellation of any of the Corporation Contracts by the Corporation, or any relinquishment of any rights thereunder by the Corporation or of any other right or debt owed to the Corporation, other than, in each such case, actions taken in the ordinary course of business consistent with past practice; (e) any grant of any severance, continuation or termination pay to any director, officer, stockholder or employee of the Corporation or any Affiliate of the Corporation, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer, stockholder or employee of the Corporation or any Affiliate of the Corporation, (iii) increase in benefits payable or potentially payable under any severance, continuation or termination pay policies or employment agreements with any director, officer, stockholder or employee of the Corporation or any Affiliate of the Corporation, (iv) increase in compensation, bonus or other benefits payable or potentially payable to directors, officers, stockholders or employees of the Corporation or any Affiliate of the Corporation other than in the normal course of business, (v) change in the terms of any bonus, pension, insurance, health or other benefit plan of the Corporation or (vi) representation of the Corporation to any employee or former employee of the Corporation that the Purchaser promised to continue any Corporation benefit plan after the Closing Date, (f) any change by the Corporation in its accounting principles, methods or practices or in the manner it keeps its books and records; (g) any distribution, dividend, bonus, management fee or other payment by the Corporation to any officer, director, stockholder or Affiliate of the Corporation or any of their respective Affiliates or Associates; or (h) any (i) material single capital expenditure or commitment, or any group of related capital expenditures or commitments, or (ii) sale, assignment, transfer, lease or other disposition of or agreement to sell, assign, transfer, lease or otherwise dispose of any asset or property other than in the ordinary course of business. 4.09 Properties; Corporation Material Leases; Tangible Assets. 4.09.1 The Corporation does not own any real property. 4.09.2 The Corporation hold, title to each of its properties and assets free and clear of all Liens, adverse claims, easements, rights of way, servitudes, zoning or building restrictions or any other rights of others or other adverse interests of any kind, including leases, chattel mortgages, conditional sales contracts, collateral security arrangements and other title or interest retention arrangements (collectively, "Corporation Encumbrances"). 4.09.3 All tangible properties and assets reflected on the Corporation Balance Sheet are in all material respects fit for the purposes for which they are used and are in good operating condition and repair and are adequate for the uses to which they are put, and no material properties or assets necessary for the conduct of the Corporation Business in substantially the same manner as the Corporation Business has heretofore been conducted are in need of replacement, maintenance or repair except for routine replacement, maintenance and repair. 4.10 Affiliates. Other than as disclosed herein, there are no material undisclosed Corporation Contracts which have been entered into within the past five years or are currently in force and effect between the Corporation and any Shareholder, or any Affiliate or Associate of any Shareholder. The Corporation is not materially indebted to any Shareholder. 4.11 Litigation. There are no material proceedings pending or, to the knowledge of the Corporation, threatened against or affecting the Corporation or the Corporation Business or that seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement and (ii) there is no existing order, judgment or decree of any Governmental Authority naming the Corporation as an affected party which has not been paid or discharged in full. 4.12 Material Contracts. All Corporation Contracts are legal, valid and binding obligations of the Corporation and each other Person who is a party thereto, enforceable against the Corporation and each such Person in accordance with their terms, and none are subject to any material default thereunder. 4.13 Required Consents. There are no governmental or other registrations, filings, applications, notices, transfers, consents, approvals, orders, qualifications or waivers required under Applicable Law or otherwise required to be obtained or made with any Governmental Authority to be obtained by the Corporation or any Shareholder by virtue of the execution and delivery of this Agreement and the consummation of the transactions provided for herein for any reason; nor are there any Corporation Contracts with respect to which the consent of the other party or parties thereto must be obtained by the Corporation or any Shareholder by virtue of the execution and delivery of this Agreement and the consummation of the transactions provided for herein (the "Required Consents"). 4.14 Corporation Intellectual Property. 4.14.1 Schedule "E" sets forth a complete and correct list of each patent, patent application and invention, trademark, tradename, trademark or tradename registration or application, copyright or copyright registration or application for copyright registration, and each licence or licensing agreement, for any of the foregoing relating to the Corporation Business as conducted by the Corporation or held by the Corporation (the "Corporation's Intellectual Property Rights"). The Corporation's Intellectual Property Rights also include any trade secrets that are material to the conduct of the Corporation Business in the manner that the Corporation Business has heretofore been conducted. 4.14.2 The Corporation has not, during the three years preceding the date of this Agreement, been a party to any proceeding, nor to the knowledge of the Corporation, is any proceeding threatened, as to which there is a reasonable possibility of a determination adverse to the Corporation, involving a claim of infringement by any Person (including any Governmental Authority) of any of the Corporation's Intellectual Property Rights. None of the Corporation Intellectual Property Right are subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof by the Corporation or restricting the licensing thereof by the Corporation to any Person. The Corporation has no knowledge that would cause such Person to believe that the use of the Corporation's Intellectual Property Rights or the conduct of the Corporation Business conflicts with, infringes upon or violates any patent, patent licence, patent application, trademark, tradename, trademark or tradename registration, copyright, copyright registration, service mark, brand mark or brand name or any pending application relating thereto, or any trade secret, know-how, programs or processes, or any similar rights, of any Person. 4.14.3 To the knowledge of the Corporation, the Corporation either owns the entire right, title and interest in, to and under, or has acquired an exclusive licence to use, any and all patents, trademarks, trade names, brand names and copyrights that are material to the conduct of the Corporation Business in the manner that the Corporation Business has heretofore been conducted. The Corporation's Intellectual Property Rights are in full force and effect and have not been used or enforced or failed to be used or enforced in a manner that would result in the abandonment, cancellation or unenforceability of any of the Corporation's Intellectual Property Rights. All registrations and filings necessary to preserve the rights of the Corporation in and to the Corporation's Intellectual Property Rights have been made. 4.15 Tax Matters. 4.15.1 The Corporation has prepared and filed all Tax Returns on time with all appropriate Governmental Authorities which were required to be filed on or prior to the Closing Date. Each such Tax Return was correct and complete. 4.15.2 The Corporation has paid all Taxes due and payable by them and have paid all assessments and reassessments they have received in respect of Taxes. The Corporation have paid all Tax installments due and payable by them as at November 30, 1999, save and except as disclosed in Schedule "C" hereto. 4.15.3 The Corporation has withheld from each payment made to any of its present or former employees, officers and directors, and to all persons who are non-residents of Canada for the purposes of the Income Tax Act (Canada) all amounts required by Applicable Law and has remitted such withheld amounts within the prescribed periods to the appropriate Governmental Authority. The Corporation has remitted all Canada Pension Plan contributions, employment insurance premiums, employer health taxes and other Taxes payable by them in respect of their employees and have remitted such amounts to the proper Governmental Authority within the time required by Applicable Law. The Corporation has charged, collected and remitted on a timely basis all Taxes as required by Applicable Law on any sale, supply or delivery whatsoever, made by the Corporation. 4.15.4 The Corporation Business is the only business ever conducted by the Corporation. The non-capital losses (as defined in the Tax Act and any applicable provincial taxing statute) were incurred by the Corporation only in carrying on the Corporation Business. The Corporation is not prevented by virtue of any amalgamation or dissolution from carrying back against income earned by it prior to the Closing Date, any losses incurred by it after the Closing Date. 4.15.5 The Corporation has paid all Taxes imposed by applicable legislation in the provinces of British Columbia and Ontario on the acquisition of its tangible personal property as defined in applicable legislation in the province of Ontario, and none of its tangible personal property has been transferred at any time on a tax-exempt basis under applicable legislation of the Province of Ontario or any predecessor legislation thereof. The foregoing is accurate, mutatis mutandis, with respect to all sales or transfer Taxes imposed under comparable legislation of other provinces. 4.16 Securities Legislation. The Corporation is a private issuer within the meaning of the Securities Act (Ontario) and the sale of the Corporation Shares by the Shareholders to the Purchaser is made in compliance with the exempt takeover-bid provisions of this Act or such other exemption as may be available to it and the Shareholder. 4.17 Full Disclosure. The information contained in the documents, certificates and written statements (including this Agreement and the schedules and exhibits hereto) furnished to the Purchaser by or on behalf of the Corporation with respect to the Corporation (including the Corporation Business and the results of operations, financial condition and prospects of the Corporation) for use in connection with this Agreement or the transactions contemplated by this Agreement is true and complete in all material respects and does not, to the best of the knowledge of the Corporation after conducting an inquiry which a reasonably prudent person would make under the circumstances, omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Corporation that has not been disclosed to the Purchaser by the Corporation in writing that has had a Material Adverse Effect on or, so far as the Corporation can now foresee, could be reasonably likely to have a Material Adverse Effect on, the Corporation (including the Corporation Business and the results of operations, financial condition or prospects of the Corporation). ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE BUYING GROUP As an inducement to the Corporation and each Shareholder to enter into this Agreement and to consummate the transactions provided for herein, the Purchaser and the Parent, jointly and severally, represent and warrant to the Corporation and each Shareholder that: 5.01 Existence and Power. Each of the Purchaser and the Parent is a corporation duly incorporated, organized and validly existing under the laws of its incorporating jurisdiction (being the Province of British Columbia for the Purchaser and the State of Nevada for the Parent) and each has all corporate power and all governmental licences, authorizations, permits, consents and approvals required to carry on the Buying Group Business as now conducted and to own and operate their respective businesses as now owned and operated. The Purchaser and the Parent are not required to be qualified to conduct business in any jurisdiction where the failure to be so qualified, whether individually or in the aggregate, would have a Material Adverse Effect. No proceedings have been taken or authorized by the Purchaser or the Parent or, to the knowledge of the Purchaser or the Parent, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding-up of the Purchaser or the Parent or with respect to any amalgamation, merger, consolidation, arrangement or reorganization relating to the Purchaser or the Parent. 5.02 Authorization. The execution, delivery and performance by each of the Purchaser and the Parent of this Agreement and the consummation thereby of the transactions provided for herein are within the powers of the Purchaser and the Parent and have been duly authorized by all necessary action on their part. This Agreement has been duly and validly executed by each of the Purchaser and the Parent and constitutes a legal, valid and binding agreement of the Purchaser and the Parent enforceable against them in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights and subject to general principles of equity. 5.03 Capital Stock of the Purchaser. 5.03.1 The authorized capital stock of the Purchaser consists of 100,000,000 common shares of no par value of which one common share is issued and outstanding on the date hereof to and 50,000,000 Exchangeable Non-Voting Shares with no par value of which no shares are issued and outstanding. Each Exchangeable Non-Voting Share shall: (a) be non-voting as to matters concerning the Purchaser (such that all voting shares of the Purchaser will be and remain held by the Parent); however, as stated above in paragraph 2.03, the holder of Exchangeable Non-Voting Shares will be entitled to voting rights in the Parent as is equivalent to the number of Exchangeable Non-Voting Shares held by each Shareholder as if each Shareholder held an equivalent number of Parent Common Shares; (b) entitle the holder thereof (the "Holder") to dividend rights equal, after conversion into Canadian dollars based on the Canadian/U.S. exchange rate in effect on the record date thereof, to the per share dividend rights of Parent Common Shares; (c) entitle the Holder, on a liquidation of the Purchaser, to receive in exchange for each Exchangeable Non-Voting Share one Parent Common Shares for a period ending on the twenty-fifth anniversary of the Closing Date; and (d) entitle the Holder, at his or her election from time to time for a period ending on the twenty-fifth anniversary of the Closing Date, upon 30 days' written notice given by such Holder to the Purchaser, to require the Purchaser to redeem any or all Exchangeable Non-Voting Shares and to exchange therefor, on a share for share basis, Parent Common Shares (the "Right of Retraction"), 5.03.2 The Parent and the Purchaser shall be entitled to deduct and withhold from the consideration otherwise payable to any Holder of Exchangeable Non-Voting Shares, including any dividend payments in respect of the Exchangeable Non-Voting Shares, such amount as the Parent or the Purchaser is required or permitted to deduct and withhold with respect to such payment under the United States Internal Revenue Code, the Income Tax Act (Canada) or any provision of state, provincial, local or foreign tax law. The Parent and the Purchaser shall not initially withhold any United States Tax on dividends paid on the Exchangeable Non-Voting Shares. However, if any United States taxing authority determines that the Parent or the Purchaser is liable for United States withholding Tax on dividends paid to the Holders on the Exchangeable Non-Voting Shares, the Purchaser shall be entitled to reduce the amount of any future dividends to be paid to the Holders by such withholding obligation. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the Holder of Exchangeable Non-Voting Shares in respect of which such deduction and withholding was made; provided, however, that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required or permitted to be deducted or withheld from any payment to a Holder exceeds the cash portion of the consideration otherwise payable to the Holders, the Parent upon at least ten (10) days' prior written notice to such Holder, is hereby authorized to sell or otherwise dispose of at fair market value such portion of such non-cash consideration otherwise payable to the Holder as is necessary to provide sufficient funds to the Parent in order to enable it to comply with such deduction or withholding requirement and the Parent shall give an accounting to the Holder with respect thereof and any balance of such proceeds of sale. 5.03.3 There are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Purchaser, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Purchaser or options, warrants or other securities of the Purchaser. 5.04 Capital Stock of the Parent. 5.04.1 The authorized capital stock of the Parent consists solely of 70,000,000 common shares with no par value ("Parent Common Shares") of which 10,031,350 Parent Common Shares are issued and outstanding on the date hereof. 5.04.2 There are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Parent from treasury, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Parent or options, warrants or other securities of the Parent which materially vary from those disclosed in the financial statements of the Parent attached hereto as Schedule "D". 5.05 General Provisions of the Capital of the Purchaser and the Parent. 5.05.1 All of the issued and outstanding shares in the respective capital stocks of the Purchaser and the Parent have been duly and validly authorized and issued and are validly outstanding, fully paid and non-assessable. The Purchaser does not hold any of the issued and outstanding shares in the treasury of the Purchaser or the Parent, the Parent does not hold any of the issued and outstanding shares in the treasury of the Parent and there are not outstanding (i) any options, warrants, rights of first refusal or other rights to purchase any shares of the Purchaser or the Parent, (ii) any securities convertible into or exchangeable for such shares or (iii) any other commitments of any kind for the issuance of additional shares of the Purchaser or Parent or options, warrants or other securities of the Purchaser or Parent other than as disclosed in Article 5.03.1 herein. 5.05.2 All of the Exchangeable Non-Voting Shares and the Parent Common Shares which will be issued hereunder will be fully paid and non-assessable, subject to such terms and provisions as set forth in the Exchange and Voting Agreement, and the Purchaser's articles of incorporation and the Parent's Directors Resolutions relating to the issuance of the Parent Common Shares, as applicable, and all such shares will be issued free and clear of all Liens, charges, encumbrances and trading restrictions other than as may be imposed by Applicable Law. 5.06 Subsidiaries. The Purchaser has no Subsidiaries and the only Subsidiary of the Parent is the Purchaser. 5.07 Governmental Authorization. The execution, delivery and performance by the Buying Group of this Agreement requires no action by, consent or approval of, or filing with, any Governmental Authority other than as expressly referred to in this Agreement. 5.08 Non-Contravention. The execution, delivery and performance of this Agreement by the Buying Group, and the consummation by it of the transactions provided for herein, do not and will not (a) contravene or conflict with the respective articles or bylaws of the Buying Group; (b) contravene or conflict with or constitute a material violation of any provision of any Applicable Law binding upon or applicable to the Buying Group, the Buying Group Business or the outstanding shares in their respective capital stocks and would not, individually or in the aggregate have a Material Adverse Effect; (c) constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit to which the Purchaser or the Parent are entitled, under any Buying Group Contract to which the Purchaser or the Parent is a party or any Permit or similar authorization relating to the Purchaser or Parent, the Buying Group Business or the outstanding shares in their respective capital stocks may be bound or affected; or (d) result in the creation or imposition of any Lien. 5.09 Financial Statements: Undisclosed Liabilities. 5.09.1 Attached hereto as Schedule "D" are true and complete copies of the Parent's Balance Sheet, prepared on a consolidated basis, as of September 30, 1999 and the related statements of income and retained earnings and changes of financial position, prepared on a consolidated basis, for the year ended December 31, 1998 (collectively, the "Parent's Financials"). 5.09.2 The Parent's Financials: (i) have been prepared on a consistent basis and are based on the books and records of the Parent in accordance with American GAAP and present fairly the financial position, results of operations and statements of changes in the Parent's financial position as of the dates indicated or the periods indicated; (ii) contain and reflect all necessary adjustments and accruals for a fair presentation of its financial position and the results of its operations for the periods covered by said financial statements; (iii) contain and reflect adequate provisions for all reasonably anticipated liabilities (including Taxes) with respect to the periods then ended and all prior periods; and (iv) with respect to Buying Group Contracts and commitments for the sale of goods or the provision of services by the Parent, contain and reflect adequate reserves for all reasonably anticipated material losses and costs and expenses in excess of expected receipts. 5.09.3 To the best of the knowledge of the Buying Group, there are no Liabilities of the Buying Group other than: (i) any Liabilities accrued as Liabilities on the Parent's Balance Sheet; (ii) Liabilities incurred since the date of the Parent's Balance Sheet that do not, and could not, individually or in the aggregate have a Material Adverse Effect; (iii) other Liabilities disclosed in this Agreement or in any schedules attached hereto; and (iv) the Tax on reserves. 5.10 Absence of Certain Changes. Since December 2, 1999, the Buying Group Business has been conducted in the ordinary course, and there has not been: (a) any event, occurrence, state of circumstances, or facts or change in the Purchaser or the Parent or in the Buying Group Business that has had, or which the Purchaser or the Parent, expect to have, either individually or in the aggregate, a Material Adverse Effect; (b) (i) any change in any Liabilities of the Purchaser or the Parent that has had, or which the Purchaser or the Parent expect to have, a Material Adverse Effect or (ii) any incurrence, assumption or guarantee of any indebtedness for borrowed money by the Purchaser or the Parent in connection with the Buying Group Business or otherwise; (c) any (i) payments by the Purchaser or Parent in respect of any indebtedness of the Purchaser or Parent for borrowed money or in satisfaction of any Liabilities of the Purchaser or Parent related to the Buying Group Business, other than in the ordinary course of business or the guarantee by the Purchaser or the Parent of any of the indebtedness of any other Person or (ii) creation, assumption or sufferance of (whether by action or omission) the existence of any Lien on any assets reflected on the Parent's Balance Sheet; (d) any transaction or commitment made, or any Contract entered into, by the Buying Group, any waiver, amendment, termination or cancellation of any Contract by the Buying Group, or any relinquishment of any rights thereunder by the Buying Group or of any other right or debt owed to the Buying Group, other than, in each such case, actions taken in the ordinary course of business consistent with past practice; (e) any (i) grant of any severance, continuation or termination pay to any director, officer, stockholder or employee of the Buying Group or any Affiliate of the Buying Group, (ii) entering into of any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer, stockholder or employee of the Buying Group or any Affiliate of the Buying Group, (iii) increase in benefits payable or potentially payable under any severance, continuation or termination pay policies or employment agreements with any director, officer, stockholder or employee of the Buying Group or any Affiliate of the Buying Group, (iv) increase in compensation, bonus or other benefits payable or potentially payable to directors, officers, stockholders or employees of the Buying Group or any Affiliate of the Buying Group, (v) change in the terms of any bonus, pension, insurance, health or other benefit plan of the Buying Group or (vi) representation of the Buying Group to any employee or former employee of the Buying Group that the Buying Group promised to continue any benefit plan after the Closing Date, (f) any change by the Buying Group in its accounting principles, methods or practices or in the manner it keeps its books and records; (g) any distribution, dividend, bonus, management fee or other payment by the Buying Group to any of their respective officers, directors, stockholders or Affiliates of the Buying Group or any of their respective Affiliates or Associates; and (h) any (i) material single capital expenditure or commitment, or any group of related capital expenditures or commitments by either the Purchaser or the Parent or (ii) material sale, assignment, transfer, lease or other disposition of or agreement to sell, assign, transfer, lease or otherwise dispose of any asset or property by either of the Purchaser or the Parent other than in the ordinary course of business. 5.11 Properties; Material Leases; Tangible Assets. Neither the Purchaser nor the Parent own or lease any real property or material assets. 5.12 Affiliates. There are no contracts between either the Parent or Purchaser and any of its shareholders, or any Affiliate or Associate of any of its shareholders. There is no indebtedness of either the Parent or the Purchaser to any of its shareholders, or to any Affiliate or Associate of any of its shareholders. 5.13 Litigation. There is no proceeding pending or, to the knowledge of the Buying Group, threatened against or affecting the Buying Group or the Buying Group Business or that seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement, and there is no existing order, judgment or decree of any Governmental Authority naming either the Purchaser or the Parent as an affected party which has not been paid or discharged in full. 5.14 Material Contracts. The Buying Group is not party to any Buying Group Contract other than as specified herein. 5.15 Compliance with Applicable Laws. The operation of the Buying Group Business (i) has not violated or infringed, except for violations or infringements that have been cured and the prior existence of which could not, individually or in the aggregate, reasonably be expected to have an adverse effect on either the Purchaser or the Parent and (ii) does not in any material respect violate or infringe any Applicable Law, the terms of any Permit or any order, writ, injunction or decree of any Governmental Authority including but not limited to, the 33 Act, the 34 Act, the Rules and Regulations of the SEC, or the Securities Laws and Regulations of any state. The Parent is not an investment company as defined in, or otherwise subject to regulation under, the Investment Company Act of 1940. The Parent is required to file reports pursuant to Section 12(g) of the 34 Act and is now, and as of the Closing Date will be, current in its filings. The Parent's Form 10-K Annual Reports have been filed with certified financial statements, in compliance with SEC Regulations. 5.16 Buying Group Employment Agreement; and Employee Benefits. 5.16.1 There are no employment, consulting, severance pay, continuation pay, termination pay, indemnification agreements, collective agreements, employee benefit plans or other similar agreements of any nature whatsoever affecting either the Purchaser or the Parent save those to which a company listed on the OTCBB would, in the ordinary course of its business, be party to. 5.16.2 The Buying Group and its Affiliates have complied and are currently complying, in respect of all employees of the Buying Group and its Affiliates, with all Applicable Laws respecting employment and employment practices and the protection of the health and safety of employees, except for such instances which are not, in the aggregate, material. 5.17 Intellectual Property. The Buying Group has no interest in any patent, patent application and invention, trademark, trade name, trademark or trade name registration or application, copyright or copyright registration or application for copyright registration. 5.18 Tax Matters. 5.18.1 Except as disclosed in the Parent's Financials, the Purchaser and the Parent have prepared and filed all Tax Returns on time with all appropriate Governmental Authorities which were required to be filed on or prior to the Closing Date. Each such Tax Return was correct and complete. 5.18.2 The Purchaser is not a registrant for the purposes of the goods and services tax provided for under the Tax Act. 5.18.3 The Purchaser is a taxable Canadian Corporation, as that term is defined in the Tax Act. 5.18.4 The Purchaser has paid all applicable sales and retail taxes in the Province of British Columbia, and none of its tangible personal property has been transferred at any time on a tax-exempt basis under applicable legislation in the Province of British Columbia. The foregoing is accurate, mutatis mutandis, with respect to all sales or transfer Taxes imposed under comparable legislation of other provinces. 5.18.5 The Purchaser has never acquired or had the use of any of its assets from a Person (a "Related Person") with whom the Purchaser was not dealing at arm's length, within the meaning of the Tax Act. The Purchaser has never disposed of any asset to a Related Person for proceeds less than the fair market value of that asset. The Purchaser is not a party to or bound by any agreement with, is not indebted to, and no amount is owing to the Purchaser by any Related Person, not dealing at arm's length, within the meaning of the Tax Act, with the Purchaser. 5.18.6 For the purposes of the Tax Act the Purchaser and the Shareholders hereby covenant and agree to elect jointly under Subsection 85 of the Tax Act, by completing and filing with the Department of National Revenue the prescribed form T2057 within the prescribed time for the purposes of the Tax Act with respect to the sale by the Shareholders to the Purchaser of the Corporation Shares and further agree to transfer the Corporation Shares at an agreed amount equal to the adjusted cost base of the Corporation Shares to the Shareholders for purposes of the Tax Act or such greater amount determined by the Shareholders (the "Elected Amount"). 5.18.7 If at any time after the Closing Date the Shareholders determine that either: (a) it is necessary or desirable to change the Elected Amount; or (b) the Tax Act deems the Elected Amount to be an amount which is different than the amount agreed upon between the Shareholder and the Purchaser,then the Shareholder and the Purchaser shall do all things reasonably necessary to reflect such change including, for example, filing an amended election pursuant to subsection 85 of the Tax Act. 5.19 Issuance of Shares. 5.19.1 The issuance of the Parent Common Shares by the Parent, and the terms and provisions of the Parent Common Shares, will not violate any provisions of the Parent's articles or bylaws or any Applicable Law, nor will the voting rights attached to the Parent Common Shares derogate from any rights under Applicable Law. 5.19.2 The issuance of the Exchangeable Non-Voting Shares by the Purchaser, and the terms and provisions of the Exchangeable Non-Voting Shares, will not violate any provisions of the Purchaser's articles or bylaws or any Applicable Law. 5.20 Continuing NASD Status. The Parent warrants that the National Association of Securities Dealers has cleared the Parent for quotation of its common shares, including the Parent Common Shares, on the over-the-counter bulletin board in the United States, which will continue after the Closing. 5.21 Full Disclosure. The information contained in the documents, certificates and written statements (including this Agreement and the schedules and exhibits hereto) furnished to the Shareholders by or on behalf of the Buying Group with respect to each of the Purchaser and the Parent (including the Buying Group Business and the respective results of operations, financial condition and prospects of the Purchaser and the Parent) for use in connection with this Agreement or the transactions contemplated by this Agreement is true and complete in all material respects and does not, to the best of the knowledge of each Shareholder after conducting an inquiry which a reasonably prudent person would make under the circumstances, omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Purchaser or the Parent or any Shareholder that has not been disclosed to the Shareholders by the Buying Group in writing that has had a Material Adverse Effect on or, so far as the Buying Group can now foresee, could be reasonably likely to have a Material Adverse Effect on the Buying Group (including the Buying Group Business and the respective results of operations, financial condition or prospects of the Buying Group). ARTICLE VI: COVENANTS OF THE CORPORATION AND SHAREHOLDERS 6.01 Conduct of the Business. During the Interim Period, other than with the express written approval of the Purchaser, the Corporation shall conduct the Corporation Business in the ordinary course consistent with past practice and shall use its best efforts to preserve intact the organization, relationships with third parties and goodwill of the Corporation and keep available the services of the present officers, employees, agents and other personnel of the Corporation Business. 6.01.1 Without limiting in any way the importance of the foregoing, during the Interim Period, other than with the express written approval of the Purchaser, the Corporation shall not, and each Shareholder shall not cause the Corporation to: (a) adopt any material change in any method of accounting or accounting practice used by the Corporation other than by reason of a concurrent change in generally accepted accounting principles; (b) amend its articles or bylaws; (c) sell, mortgage, pledge or otherwise dispose of any substantial assets or properties of the Corporation; (d) declare, set aside or pay any management fee or dividend or make any other distribution with respect to the capital stock of the Corporation or otherwise make a distribution or payment to any Shareholder; (e) amalgamate, merge or consolidate with or agree to amalgamate, merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any Corporation, partnership or other business organization or division thereof; (f) authorize for issuance, issue, sell or deliver any additional shares of its capital stock of any class or any securities or obligations convertible into shares of its capital stock of any class or commit to doing any of the foregoing; (g) split, combine or reclassify any shares of the capital stock of any class of the Corporation or redeem or otherwise acquire, directly or indirectly, any shares of such capital stock; (h) incur or agree to incur any debt or guarantee any debt for borrowed money, including any debt to any Shareholder, or to any Affiliate or Associate of any Shareholder, except debt incurred in the ordinary course of business consistent with past practice; (i) make any loan, advance or capital contribution to or investment in any person other than loans, advances and capital contributions to or investments in joint ventures or other similar arrangements in which the Corporation has an equity interest in the ordinary course of business and travel advances made in the ordinary course of business by the Corporation to its employees to meet business expenses expected to be incurred by such employees; (j) enter into any settlement with respect to any Proceeding or consent to any order, decree or judgment relating to or arising out of any such Proceeding; (k) take any action to terminate, dismiss or cause the retirement of any key employee of the Corporation; (l) fail in any material respect to comply with any Applicable Laws; or (m) make, or make any commitments for, capital or contractual expenditure exceeding $5,000 for any individual commitment or $100,000 for all such commitments taken in the aggregate. 6.01.2 Nothing in this Agreement, and specifically in Paragraph 6.01.2, shall be read to prohibit the Purchaser or the Parent from negotiating and completing transactions involving the acquisition of other subsidiaries including Enersphere Inc. or Urbana.ca Enterprises Inc. 6.01.3 During the Interim Period, other than with the express written approval of the Purchaser, the Corporation shall: (a) file all Canadian, United States, foreign, federal, state, provincial and local Tax Returns required to be filed and make timely payment of all applicable Taxes when due; (b) promptly notify the Purchaser in writing of any action or circumstance that results in, or could reasonably be expected to result in, a Material Adverse Effect or the occurrence of any breach by the Corporation or any Shareholder of any representation or warranty, or any covenant or agreement contained in this Agreement; and (c) promptly notify the Purchaser in writing of the commencement of any proceeding or the threat thereof by or against the Corporation or any Shareholder. 6.02 Maintenance of Corporation Insurance Policies. On and after the Closing Date, the Corporation shall not take or fail to take any action if such action or inaction would adversely affect the applicability of any insurance in effect on the date hereof that covers all or any material part of the assets of the Corporation or the Business. 6.03 Tax Election. In accordance with the Letter of Intent, the Corporation shall not file an election pursuant to subsection 256(9) of the Income Tax Act (Canada) or any equivalent provincial provision. ARTICLE VII: COVENANTS OF THE BUYING GROUP 7.01 Appointment of Director. At Closing, the following person(s) will be appointed a director of the Parent: Name Position David Groves Director 7.02 Execution of Management Agreements. At Closing, The Corporation shall execute the following 3 year term management agreements: (a) with David Groves ("David"), a management agreement whereby David shall receive a salary of CDN $60,000 for the agreements' first year, CDN$80,000, for the Agreement's second year term and CDN$120,000 for the third year term in exchange for a minimum of 40 hours per week as President of the Corporation; and (b) with Henry Tyler ("Henry"), a management agreement whereby Henry shall receive a salary of CDN $60,000 for the agreement's first year and CDN$80,000 for the agreement's second year in exchange for a minimum of 40 hours per week as an employee of the Corporation. 7.03 Conduct of Business. During the Interim Period, the Buying Group will conduct the Buying Group Business in the ordinary course consistent with past practice and shall use its best efforts to preserve intact the organization, relationships with third parties and goodwill of the Buying Group and keep available the services of the present officers, directors, employees, agents and other personnel of the Buying Group Business; and without limiting in any way the importance of the foregoing, the Buying Group shall not undertake any of those matters referred to in sections 6.01.1 and 6.01.2, and all such clauses thereof shall apply mutatis mutandis to the Buying Group. 7.04 Priority. Notwithstanding any term of the Purchaser's bylaws, memorandum and articles to the contrary, the terms and provisions of this Agreement and the Exchange and Voting Agreement shall prevail such that the directors of the Purchaser will only authorize the exchange of the Exchangeable Non-Voting Shares for shares in the Parent Common Shares in accordance with the terms of the Exchange and Voting Agreement. ARTICLE VIII: ACKNOWLEDGMENTS AND COVENANTS OF ALL PARTIES 8.01 Further Assurances. Each party hereto agrees to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be reasonably necessary or desirable (including obtaining all required consents) in order to evidence the consummation or implementation of the transactions provided for under this Agreement. 8.02 Certain Filings. The parties hereto shall cooperate with one another in determining whether any action by or in respect of, or filing with, any Governmental Authority is required or reasonably appropriate, or any action, consent, approval or waiver from any party to any Contract is required or reasonably appropriate, in connection with the consummation of the transactions contemplated by this Agreement. Subject to the terms and conditions of this Agreement, in taking such actions or making any such filings, the parties hereto shall furnish information required in connection therewith and seek timely to obtain any such actions, consents, approvals or waivers. 8.03 Registration. All parties acknowledge and agree that the Parent is a reporting issuer in the United States, and all of the Parent Common Shares have been registered under the 33 Act; and all parties further acknowledge and agree that neither the Parent nor the Purchaser is a reporting issuer in any province of Canada, and the Exchangeable Non-Voting Shares and Parent Common Shares will be subject to such resale restrictions as imposed by the Applicable Law of the jurisdiction in which a Shareholder is resident. ARTICLE IX: CONDITIONS PRECEDENT TO CLOSING 9.01 Conditions to Obligation of the Buying Group. The obligations of the Buying Group to consummate the Closing are subject to the completion of due diligence of the Corporation on the part of the Buying Group and to the Buying Group's satisfaction on or before December 20, 1999 and are further subject to the satisfaction of each of the following conditions: (a) (i) the Corporation and each Shareholder shall have performed and satisfied each of their respective obligations hereunder required to be performed and satisfied by them on or prior to the Closing Date, (ii) each of the representations and warranties of the Corporation and each Shareholder contained herein shall have been true and correct and contained no misstatement or omission that would make any such representation or warranty misleading when made and shall be true and correct and contain no misstatement or omission that would make any such representation or warranty misleading at and as of the Closing with the same force and effect as if made as of the Closing, and (iii) the Buying Group shall have received certificates signed by each Shareholder and a duly authorized executive officer of the Corporation to the foregoing effect and to the effect that the conditions specified within this Section 9.01(a) have been satisfied. (b) All Required Consents for the transactions contemplated by this Agreement shall have been obtained without the imposition of any conditions that are or would become applicable to the Corporation, the Corporation Business, the Corporation Shares or the Buying Group (or any of its Affiliates or Associates) after the Closing that would be materially burdensome upon the Corporation, the Corporation Business, the Corporation Shares or the Buying Group (or any of its Affiliates or Associates) or their respective businesses substantially as such businesses have been conducted prior to the Closing Date or as said businesses, as of the date hereof, would be reasonably expected to be conducted after the Closing Date. All such approvals shall be in effect, and no proceedings shall have been instituted or threatened by any Governmental Authority or other person with respect thereto as to which there is a material risk of a determination that would terminate the effectiveness of, or otherwise materially and adversely modify the terms of, any such approval; all applicable waiting periods with respect to such approvals shall have expired; and all conditions and requirements prescribed by Applicable Law or by such approvals to be satisfied on or prior to the Closing Date shall have been satisfied to the extent necessary such that all such approvals are, and will remain, in full force and effect assuming continued compliance with the terms thereof after the Closing. (c) The transactions contemplated by this Agreement and the consummation of the Closing shall not violate any Applicable Law. The operation of the Corporation Business shall not have violated or infringed, or be in violation or infringement of any Applicable Law or any order, writ, injunction or decree of any Governmental Authority, where such violations and infringements, individually or in aggregate, have resulted in, or could reasonably be expected to result in a Material Adverse Effect. (d) Since the date hereof, there shall not have been any event, occurrence, development or state of circumstances or facts or change in the Corporation or the Corporation Business, including any damage, destruction or other casualty loss affecting the Corporation or the Corporation Business that has had or that may be reasonably expected to have, either alone or together with all such events, occurrences, developments, states of circumstances or facts or changes, a Material Adverse Effect on the Corporation. 9.02 Conditions to Obligations of the Shareholders. The obligations of each Shareholder to consummate the Closing are subject completion of reasonable due diligence investigations of the Buying Group to be completed on or before December 20, 1999 and are further subject to the satisfaction of each of the following conditions: (a) (i) the Buying Group shall have performed and satisfied each of its obligations hereunder required to be performed and satisfied by it on or prior to the Closing Date; and (ii) each of the representations and warranties of the Buying Group contained herein shall have been true and correct and contained no misstatement or omission that would make any such representation or warranty misleading when made and shall be true and correct and contain no misstatement or omission that would make any such representation or warranty misleading at and as of the Closing with the same force and effect as if made as of the Closing. (b) All Required Consents for the transactions contemplated by this Agreement shall have been obtained without the imposition of any conditions that are or would become applicable to any Shareholder (or any of their respective Affiliates or Associates) after the Closing that would be materially burdensome upon any such Person. All such approvals shall be in effect, and no Proceedings shall have been instituted or threatened by any Governmental Authority with respect thereto as to which there is a material risk of a determination that would terminate the effectiveness of, or otherwise materially and adversely modify the terms of, any such approval. All applicable waiting periods shall have expired, and all conditions and requirements such approvals to be satisfied on or prior to the Closing extent necessary such that all such approvals are, and will remain, in full force and effect assuming continued compliance with the terms thereof after the Closing. (c) The transactions contemplated by this Agreement and the consummation of the Closing shall not violate any Applicable Law. No temporary restraining order, preliminary or permanent injunction, cease and desist order or other order issued by any court of competent jurisdiction or any competent Governmental Authority or any other legal restraint or prohibition preventing the transfer and exchange contemplated hereby or the consummation of the Closing, or imposing Damages in respect thereto, shall be in effect, and there shall be no pending actions or proceedings by any Governmental Authority (or determinations by any Governmental Authority) or by any other Person challenging or seeking to materially restrict or prohibit the transfer and exchange contemplated hereby or the consummation of the Closing. (d) Since the date hereof, there shall not have been any event, occurrence, development or state of circumstances or facts or change in the Buying Group or the Buying Group Business, including any damage, destruction or other casualty loss affecting the Buying Group or the Buying Group Business that has had or that may be reasonably expected to have, either alone or together with all such events, occurrences, developments, states of circumstances or facts or changes, a Material Adverse Effect on the Buying Group. (e) Since the date hereof, there shall not have been any: (i) material change in the capital structure of either the Purchaser or the Parent, other than as to effect the creation or issuance of the Exchangeable Non-Voting Shares or the Parent Common Shares as contemplated herein, or to effect the rights, restrictions, privileges and terms of the Exchangeable Non-Voting Shares or Parent Common Shares in accordance with the terms hereof; or (ii) any actions, investigations, inquiries or proceedings commenced or continued against either the Parent or the Purchaser, or their respective officers, directors, promoters, representatives, agents or their respective businesses by any securities regulatory authority, tribunal or body having jurisdiction. (f) The Parent's Board of Directors, by proper and sufficient vote, shall have approved this Agreement, the Exchange and Voting Agreement and the Support Agreement, and the transactions contemplated hereby and the issuance of the Parent Common Shares hereunder. (g) The Parent and the Purchaser will have entered into the Exchange and Voting Agreement and the Support Agreement. ARTICLE X: INDEMNIFICATION 10.01 Agreement to Indemnify. 10.01.1 Each of the Purchaser and the Parent, and their respective Affiliates, Associates, officers, directors, shareholders, representatives and agents (collectively, the "Purchaser Indemnitees") shall each be indemnified and held harmless to the extent set forth in this Article X by each Shareholder in respect of any and all damages incurred by any Purchaser Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation or warranty made in this Agreement by such Shareholder, provided, however, that each Shareholder shall have no obligation to indemnify the Purchaser Indemnitees with respect to damages incurred by any Purchaser Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation or warranty made in this Agreement by any other Shareholder and further a Shareholder shall have no such obligation to indemnify a Purchaser Indemnitee hereunder unless, and to the extent, the aggregate of all damages incurred by the Purchaser Indemnities for all items covered by this Section 10.01(1) shall exceed $1,000 in the aggregate. 10.01.2 Each of the Purchaser Indemnitees shall be indemnified and held harmless to the extent set forth in this Article X by the Corporation in respect of any and all damages incurred by any Purchaser Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation, warranty, covenant or agreement made in this Agreement by the Corporation. 10.01.3 Each Shareholder and their respective Affiliates and Associates and each officer, director, shareholder, employer, representative and agent of any of the foregoing (collectively, the "Shareholder Indemnitees") shall each be indemnified and held harmless to the extent set forth in this Article X by the Purchaser and Parent in respect of any and all damages incurred by any Shareholder Indemnitee as a result of any inaccuracy or misrepresentation in or breach of any representation, warranty, covenant or agreement made by the Parent or the Purchaser in this Agreement. 10.02 Survival of Representation, Warranties and Covenants. Except as hereinafter provided in this Section 10.02, all representations, warranties, covenants, agreements and obligations of each Indemnifying Party contained herein and all claims of any Purchaser Indemnitee or Shareholder Indemnitee in respect of any breach of any representation, warranty, covenant, agreement or obligation of any Indemnifying Party contained in this Agreement, shall survive the Closing and shall expire one year following the Closing Date. ARTICLE XI: MISCELLANEOUS 11.01 Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) if personally delivered, when so delivered, (ii) if mailed, two Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid and addressed to the intended recipient as set forth below, (iii) if given by facsimile or telecopier, once such notice or other communication is transmitted to the facsimile or telecopier number specified below and the appropriate answer back or telephonic confirmation is received, provided that such notice or other communication is promptly thereafter mailed in accordance with the provisions of clause (ii) above or (iv) if sent through an overnight delivery service in circumstances under which such service guarantees next day delivery, the day following being so sent: If to the Corporation: 2523 Robinson Street Mississauga, Ontario, L5C 2P2 If to the Purchaser: 804-750 W. Pender Street Vancouver, B.C., V6C 2T8 If to the Parent: 19 Concession Street Cambridge, Ontario, N1R 2G6 If to a Shareholder: at the last address for the Shareholder on the member registers of the Corporation. Any party may give any notice, request, demand, claim or other communication hereunder using any other means (including ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the individual for whom it is intended. Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth. 11.02 Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by all parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) No waiver by a party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence. No failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 11.03 Expenses. All costs and expenses incurred in connection with this Agreement and enclosing and carrying out the transactions provided for herein shall be paid by the party incurring such cost or expense. This Section shall survive the Closing and the termination of this Agreement. 11.04 Successors and Assigns. This Agreement shall be binding upon and enure to the benefit, of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and permitted assigns. No party hereto may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of each other party, which approval shall not be unreasonably withheld. 11.05 Governing Law. This Agreement shall be governed by, and interpreted and enforced in accordance with, the laws in force in the Province of Ontario and the laws of Canada applicable therein (excluding any conflict of laws rule or principle that might refer such interpretation to the laws of another jurisdiction). Each party irrevocably submits to the jurisdiction of the courts of British Columbia with respect to any matter arising hereunder or related hereto. 11.06 Counterparts; Effectiveness. This Agreement and the documents relating to the transactions contemplated by this Agreement may be signed in any number of counterparts and the signatures delivered by facsimile, each of which shall be deemed to be an original, with the same effect as if the signatures thereto were upon the same instrument and delivered in person. This Agreement and such documents shall become effective when each party thereto shall have received a counterpart thereof signed by the other parties thereto. In the case of execution and delivery by facsimile by any party, that party shall forthwith deliver a manually executed original to each of the other parties. 11.07 Entire Agreement. This Agreement (including the Schedules referred to herein, which are hereby incorporated by reference) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement including, without limiting the generality of the foregoing, the Letter of Intent. Neither this Agreement nor any provision hereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. 11.08 Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. All references to an Article or Section include all subparts thereof. 11.09 Severability. If any provision of this Agreement, or the application thereof to any Person, place or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, the remainder of this Agreement and such provisions as applied to other Persons, places and circumstances shall remain in full force and effect only if, after excluding the portion deemed to be unenforceable, the remaining terms shall provide for the consummation of the transactions contemplated hereby in substantially the same manner as originally set forth at the later of the date this Agreement was executed or last amended. 11.10 Construction. The parties hereto intend that each representation, warranty, and covenant contained herein shall have independent significance. If any party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) that the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty or covenant. 11.11 Meaning of Include and Including. Whenever in this Agreement the word "include" or "including" is used, it shall be deemed to mean "include, without limitation" or "including without limitation", as the case may be, and the language following "include" or "including" shall not be deemed to set forth an exhaustive list. 11.12 Cumulative Remedies. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 11.13 Third Party Beneficiaries. Other than Indemnitees under Article X hereof who are not parties to this Agreement, no provision of this Agreement shall create any third party beneficiary rights in any Person, including any employee or former employee of the Corporation or any Affiliate or Associate thereof (including any beneficiary or dependent thereof). 11.14 Transmission by Facsimile. The parties hereto agree that this Agreement may be transmitted by facsimile or such similar device and that the reproduction of signatures by facsimile or such similar device will be treated as binding as if originals and each party hereto undertakes to provide each and every other party hereto with a copy of the Agreement bearing original signatures forthwith upon demand. 11.15 Fees and Commissions. No broker, finder or other person or entity is entitled to any fee or commission from the Buying Group or the Corporation for services rendered on behalf of the Buying Group or the Corporation in connection with the transactions contemplated by this Agreement. 11.16 Maitland & Company. The parties hereto acknowledge and agree that Maitland & Company acts only for the Parent in the preparation and negotiation of this Agreement. The parties hereto further acknowledge and agree that: (a) they have been advised to seek independent legal advice regarding this Agreement, (b) Maitland & Company has provided no tax advice with respect to this Agreement and hereby has advised the parties hereto to seek tax advice respecting their respective tax obligations; and (c) Maitland & Company has not provided legal advice to any of the Shareholders with respect to U.S. securities laws. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. URBANA.CA INC. Per: /s/ Robert Tyson Robert Tyson, Authorized Signatory ICC INTEGRATED CARBONICS (CANADA) CORP. Per: /s/ Robert Tyson Robert Tyson, Authorized Signatory E-BILL DIRECT INC. Per: /s/ David Groves David Groves, Authorized Signatory SHAREHOLDERS /s/ David Groves David Groves /s/ Henry Tyler Henry Tyler Rockrimmon Investment Corporation Per: /s/ John Groves John Groves, Authorized Signatory Questech Corporation Per: /s/ John Groves John Groves, Authorized Signatory EX-10.9 6 EXCLUSIVITY AGREEMENT EXCLUSIVITY AGREEMENT This contract (hereinafter called the "Formal Contract) is executed this 17th day of January, 2000 between Eagle Wireless International, Inc, a Texas corporation having an office at 101 Courageous Drive, League City, TX, 77573, USA, (hereinafter called "Manufacturer") and Urbana.ca Enterprises Corp., a British Columbia Corporation having an office at 19 Concession Street, Cambridge ON, N1R2G6 (hereinafter called "Customer"). This Formal Contract replaces and supersedes any and all prior agreements, written and oral, between Manufacturer and Customer except that certain purchase order STB001 dated December 13, 1999 whose terms and order quantities are Incorporated within this agreement. WHEREAS, Manufacturer is a manufacturer, distributor and marketer of Set-Top-Box and other communication products and services; WHEREAS, Customer has initiated a business that requires the use of certain .Set-Top-Box products and other products and services that Manufacturer provides and is prepared to begin the use, distribution and marketing of these products; WHEREAS, Manufacturer and Customer (hereinafter called the "Parties') executed a Purchase Order for certain Set-Top-Box products on December 13, 1999 (hereinafter called the "Initial Purchase Order") to enter into an exclusive relationship whereby Customer will exclusively use, distribute, and market the Set-Top-Box products of Manufacturer throughout marketing territory of Customer in return for being awarded the exclusive distribution rights to Manufacturers Set-Top-Box product for Canada. WHEREAS, The parties agreed in the Initial Purchase Order to fully formalize their relationship through the execution of a Formal Contract that is approved by the respective management of each company. NOW THEREFORE, in consideration of the mutual covenants and undertakings set out herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree to as follows: Section I - Definitions 1.1 PRODUCT means any and all existing and future Set-Top-Box like devices owned, designed or licensed by Manufacturer that can be used as a computer, Internet gateway, digital video or audio disc player or other- similar multimedia personal device. 1.2 AFFILIATE of a party means any legal entity whose majority or controlling ownership interest representing the right to vote for or manage the affairs of the entity is, during the term of this Contract, owned or controlled (but only so long as such ownership or control exists), directly or indirectly, by that party, or any legal entity that possesses, directly or indirectly, such a majority or controlling ownership interest in a party hereto. 1.3 SEMI-EXCLUSIVE means that conveyed rights are equally shared by the grantee and the grantor with neither party having authority to transfer, assign or otherwise sublicense the rights to a third party without the express written consent of the other party. 1.4 FINANCING PERIOD means the date that a release of product is requested by Customer in writing until date Manufacturer receives liquidity of funds to pay for the products delivered to Customer. 1.5 MANUFACTURED COST means the- cost of direct and indirect materials attributed in accordance with US GAAP to the manufacture of the Product, manufacturing labor and overhead, software, royalty license, all other fees, collateral materials, shipping materials, warranty reserve, insurance, and manufacturing financing charges. 1.6 CUSTOMER BASE COST means the Manufactured Cost multiplied by a factor of 110%. 1.7 SALES PRICE means the final collected sales price to the distribution source system integrator, or retail customer, 1.8 PROFIT means the difference between the Sales Price and the Customer Cost Floor. 1.9 FINANCE CHARGE means an interest rate of 16% per annum compounded monthly that will accrue on amounts not paid by an established due date. Section 2 - Grants 2.1 For the term of this Contract, Manufacturer grants to Customer and Affiliates of Customer a Canadian exclusive and a U. S. non-exclusive, indivisible license to sell, distribute, and have third parties distribute the Product provided the minimum quantities are being maintained on a continuing semi-annual basis, and a worldwide exclusive virtual content driven local based portal communities based on the Urbana/Guelph Project.. The basis for the exclusivity is a average quantity of 500,000 Set-Top-Box units bought and paid for or $US-125M of paid for business to Manufacturer over a period of twenty one months from the start of this agreement. For greater clarity to maintain its Canadian Exclusive and U.S. Non-Exclusive rights, Customer must order, take delivery, and pay for an average of 166,666 Set-Top-Box Units at a Customer Bass Cost determined by section 4.1 in each of the first 3 seven month periods following the execution of this contract. 2.2 Customer grants to Manufacturer the exclusive right to provide all of its Set-Top-Box requirements for a period of three years after December 13, 1999 without regard to the location of the product usage or type of application. This grant is being provided In return for certain custom design commitments by Manufacturer to Customer; and the cost control and profit sharing agreements between Customer and Manufacturer detailed in Section 4. 1. Section 3 - Purchase Orders Customer and Manufacturer will jointly establish a sales committee to establish the configuration, delivery schedule, and associated pricing impacts for the various versions of the Product before final commitments by Customer to any of Customer's clients to receive final conformations of orders for any orders that are non-standard to Manufacturers product line. Manufacturer will be responsible for the determination of ail final pricing for standard and non-standard orders. 3.1 Manufacturer will provide Customer with a written conformation of all purchase orders and formal purchase order releases within three days of the receipt of such orders. Manufacturer reserves the sole right to accept or reject any purchase order. Purchase orders must be in writing to Manufacturer at least sixty-days in advance of the scheduled shipment date. Once issued, purchase orders may not be canceled without penalty. Purchase orders on custom configurations may not be canceled without paying for all work in process plus a 10% penalty. No penalty shall be assessed if future orders within 90 days utilize the work In process and Customer pays Manufacturer for any and all additional manufacturing and manufacturing financing costs associated with the delay. 3.2 Completed purchase orders will be invoiced by Manufacturer to Customer at the Customer Base Cost plus freight and handling FOB Singapore. Invoices will be payable Net 30 for domestic or Canadian shipments, after credit approval by Manufacturer and Manufacturer's production finance sources, and prepaid for International shipments. Invoiced amounts that remain unpaid more than thirty days will be subject to a finance charge of 16% per annum compounded monthly. Manufacturer will be the final authority regarding all credit matters. Section 4 - Profit Sharing 4.1 Both Manufacturer and Customer recognize the importance of obtaining market share during the initial introduction of the Set-Top-Box product line into the sales and marketing territories of Customer. In recognition of this fact Manufacturer agrees to develop new Set-Top-Box configurations and models required by Customer volume applications and to sell these models to Customer at actual Manufactured Cost plus 10%. This Cost will become the Customer Base Cost, Customer may sell to the end user or integrator at his independent SALES 4.2 PRICE and may establish his own PROFIT. Both parties agree that the final product must be priced to the end user competitively with other makes and models available and on a feature by feature basis. At some time after market share is achieved Manufacturer reserves the right to increase the Customer Cost Floor in order to recover product development costs and to increase profit margins. Section 5 -Warranty Provisions 5.1 Manufacturer will provide all warranty service for the United States and Canada from its contract facility in Houston Texas, Other warranty provisions will be made for sales outside of these locations. Manufacturer will provide technical support for training, installation, or system integration to large accounts of Customer if requested at standard industry rates. Manufacturer will indemnify Customer against any and all warranty costs damages and liabilities attributed to the failure of its Set-Top-Box unless such costs, damages and liabilities result from installation, misuse or other items specifically excluded from the warranty. Section 6 - Miscellaneous Provisions 6.1 The term of this contract shall be three years from the date of this contract. 6.2 Customers and related relationships and agreements remain the property of the respective parties to this Contract. Both parties acknowledge that there may arise instances of common customers and agree that these situations will be handled in a businesslike fashion on a case by case basis. 6.3 Should Customer have an opportunity to sell or merge the majority interest in its business to a third-party investor then any such new investor must abide with the terms and conditions of this contract or negotiate changes to the Contract that will provide protection to Manufacturer. 6.4 Customer and Manufacturer agree that any disputes arising under this Contract will be settled by arbitration in accordance with the rules of the American Arbitration Association in the location of the party not requesting arbitration. 6.5 This Contract shall be construed under and in accordance with the laws of the State of Texas and obligations of the parties created hereunder are enforceable in Harris County, Texas. 6.6 Should any part or portion of this Contract be invalid, the balance of the provision shall remain unaffected and shall be enforceable. 6.7 This Contract shall (save and except for the Purchase Order dated December 13, 1999) constitute the entire agreement between Manufacturer and Customer. Any amendments hereto shall be done only in writing signed by both parties. No oral agreements will be recognized, All purchase orders issued under this contract must be in conformance with this Contract. 6.8 Notices given under this Contract by either party must be given in writing and may be effected by certified mail, postage prepaid with return receipt requested. Mailed notices shall be addressed to the address of the party as it appears below. Mailed notices shall be deemed communicated seven days after the postmark date of the mailing. FAX copies will be sent at the same time as the mailed copies. The contact address for Customer is: President, Urbana.ca Enterprises Corp. 19 Concession Street Cambridge Ontario, N1R2G6 The contact address for Manufacturer is: President, Eagle Wireless International, Inc. 101 Courageous Drive League City, Texas 77573 6.9 This agreement may not be assigned or transferred by Customer without the express written consent of Manufacturer. In the event written authority to assign or transfer the obligations and benefits of this agreement are granted then all terms and provisions of this agreement shall inure to the benefit of, and be binding on, said assignee and successor interest of Customer. 6.10 This agreement shall be executed in two counterparts, each party to retain an original. Both parties agree to provide at their own expense the other with audited financial on an annual basis. IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized representative: EAGLE WIRELESS INTERNATIONAL, INC. By: /s/ Dr. Dean Cubley Dr. Dean Cubley, President URBANA.CA ENTERPRISES CORP. By: /s/ Jason Cassis Jason Cassis, President EX-27 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED FINANCIAL STATEMENTS CONTAINED IN THE REGISTRANT'S FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 285,953 0 42,538 0 0 435,062 140,717 0 4,029,484 247,765 0 0 0 11,588 2,473,010 4,029,484 0 0 0 0 757,917 0 19,618 (777,535) 0 (777,535) 0 0 0 (777,535) (.07) (.07)
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