ARRANGEMENT AGREEMENT
THIS AGREEMENT is made as of the1st day of May, 2002
BETWEEN:
VERB EXCHANGE INC., a corporation incorporated under the laws of
British Columbia, with an office in the City of Vancouver, in the
Province of British Columbia
(hereinafter referred to as "VERB")
- and -
▇▇▇▇▇▇ MUSIC INC., a corporation continued under the laws of Canada,
with an office in the City of Vancouver, in the Province of British
Columbia
(hereinafter referred to as "▇▇▇▇▇▇")
RECITALS:
A. The board of directors of each of ▇▇▇▇▇▇ and Verb has determined that it
would be in the best interests of ▇▇▇▇▇▇ and Verb to combine their
respective businesses.
▇. ▇▇▇▇▇▇ and Verb have entered into a letter of intent, dated November 27,
2001 (the "LETTER OF Intent"), pursuant to which ▇▇▇▇▇▇ and Verb have set
forth the general terms and conditions in respect of which they intend to
combine their respective businesses, including, without limitation, Ayotte's
acquisition of certain of the issued and outstanding securities of Verb in
exchange for certain securities of ▇▇▇▇▇▇ to be issued from treasury (the
"TRANSACTION").
C. Verb intends to effect the Transaction by way of a plan of arrangement (the
"PLAN OF ARRANGEMENT") under the provisions of section 252 of the Company
Act (British Columbia) on the terms and conditions set forth herein.
D. If effected, the transactions contemplated by the Letter of Intent,
including the Transaction, will most likely constitute a reverse takeover of
▇▇▇▇▇▇ pursuant to the policies of the TSX Venture Exchange.
▇. ▇▇▇▇▇▇, although a party to this agreement, is not itself conducting an
arrangement for the purposes of corporate law in order to effect the
Transaction.
NOW THEREFORE in consideration of the mutual covenants and agreements herein
contained and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto, the
parties agree as follows:
-2-
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this agreement:
"AGREEMENT" means this Agreement (including all Schedules hereto as the same may
be supplemented or amended from time to time.
"ALTERNATIVE COMPANY TRANSACTION" means an amalgamation, merger, arrangement or
other business combination of or involving Verb, the sale, lease, exchange,
transfer or other disposition of any material portion of the assets of Verb, the
adoption of any plan of liquidation or dissolution of or involving Verb, or any
similar transaction of or involving Verb, other than pursuant to this Agreement
and the Plan of Arrangement.
"ARRANGEMENT" means the arrangement under Section 252 of the BCCA on the terms
and conditions set out in this Agreement and the Plan of Arrangement attached as
Schedule "A" and any amendment or variation thereto.
"▇▇▇▇▇▇ FINANCIAL STATEMENTS" means the audited financial statements of ▇▇▇▇▇▇
for the years ended February 28, 2001 and the fiscal period ended December 31,
2001.
"▇▇▇▇▇▇ MEETING DATE" means the date of the ▇▇▇▇▇▇ Meeting.
"▇▇▇▇▇▇ MEETING" means the extraordinary and annual general meeting of ▇▇▇▇▇▇
Shareholders and any adjournment thereof to be held to consider and, if deemed
advisable, approve, among other things, the Transaction and all other matters
requiring approval pursuant to the terms and conditions of this Agreement and
the Arrangement.
"▇▇▇▇▇▇ RESOLUTIONS" means the resolutions (special or otherwise) of the holders
of ▇▇▇▇▇▇ Shares approving the matters to be considered at the ▇▇▇▇▇▇ Meeting.
"▇▇▇▇▇▇ SHAREHOLDERS" means, at any time, the registered holders at that time of
▇▇▇▇▇▇ Shares.
"▇▇▇▇▇▇ SHARES" means the common shares in the capital of ▇▇▇▇▇▇.
"BCCA" means the Company Act (British Columbia), R.S.B.C. 1996, C-62, as
amended.
"BUSINESS DAY" means any day which is not a Saturday, Sunday or a day on which
banks are not open for business in the relevant place.
"CIRCULAR" means the joint management information circular of Verb and ▇▇▇▇▇▇,
including all schedules thereto, to be mailed to ▇▇▇▇▇▇ Shareholders and Verb
Securityholders in connection with the Verb Meeting and the ▇▇▇▇▇▇ Meeting,
together with any amendments or supplements thereto.
"COMMISSION" means the British Columbia Securities Commission.
"COMPETING OFFER" means a proposal by a third party to purchase all of the
outstanding common shares of Verb or ▇▇▇▇▇▇ (or sufficient number of such shares
to give such third party de facto control of Verb or ▇▇▇▇▇▇, as the case may
be), or involving an amalgamation, plan of arrangement, sale of substantially
all of the assets, liquidation or other business combination involving Verb or
▇▇▇▇▇▇, as the case may be, the
-3-
effect of which would be that ownership or de facto control of Verb or ▇▇▇▇▇▇
would be transferred to a third party.
"COURT" means the Supreme Court of British Columbia.
"DISPOSITION CIRCULAR" the management information circular of ▇▇▇▇▇▇ dated
December 4, 2001, wherein the ▇▇▇▇▇▇ Shareholders were asked to consider and, if
deemed appropriate, approve, amongst other things, the disposition of the then
current core business enterprise of ▇▇▇▇▇▇.
"DISSENTING SHAREHOLDER" means a Verb Shareholder who exercises the right of
dissent ordered by the Court with respect to the Arrangement.
"EFFECTIVE DATE" means the day on which the Effective Time falls.
"EFFECTIVE TIME" means the point in time when a certified copy of the Final
Order has been accepted for filing by the Registrar.
"EXCHANGE" means theTSX Venture Exchange.
"FINAL ORDER" means the final order of the Court made in connection with the
approval of the Arrangement.
"INTELLECTUAL PROPERTY OF VERB" means all right, title, interest and benefit of
Verb in and to intellectual property of every nature, whether registered or
unregistered, including, without limitation, all world-wide copyrights, patents,
patent rights, trademarks, applications for any of the foregoing, trade names,
service marks and other trade rights, license agreements, marketing rights,
trade secrets, and know how, technology, inventions, engineering and other
proprietary processes, source codes, object codes, computer programs and other
computer software, in whatever media, and data, specifications, prototypes,
designs, records, drawings and calculations, domain names, Internet addresses,
web-sites, licenses, sub-licenses and computer rights, together with all
antecedent derivative works, used in the business of Verb.
"INTERIM ORDER" means the interim court order of the Court made in connection
with the approval of the Arrangement, as the same may be amended, supplemented
or varied by the Court.
"LETTER OF INTENT" means the agreement entered into between Verb and ▇▇▇▇▇▇ and
certain shareholders of Verb dated November 27, 2001, as the same may be amended
from time to time by agreement between the parties.
"MATERIAL ADVERSE EFFECT" means, with respect to any party, any condition, event
or development which is or would reasonably be expected to have a material
adverse effect on the business, affairs, properties, capitalization, prospects
or financial condition of that party and its subsidiaries taken as a whole.
"MEETINGS" means, collectively, the ▇▇▇▇▇▇ Meeting and the Verb Meeting.
"PLAN OF ARRANGEMENT" means the plan of arrangement set out in Schedule "A", as
amended or supplemented from time to time in accordance with any order of the
Court.
"REGISTRAR" means the Registrar of Companies for British Columbia.
"TRANSACTION" means the acquisition of certain of the outstanding securities of
Verb by ▇▇▇▇▇▇, together with other transactions contemplated in this Agreement.
-4-
"VERB FINANCIAL STATEMENTS" means the audited financial statements of Verb for
the years ended December 31, 2000 and 2001.
"VERB MEETING" means the extraordinary general meeting of Verb Shareholders and
any adjournment thereof to be held to consider and, if deemed advisable,
approve, among other things, the Arrangement and all other matters requiring
approval pursuant to the terms and conditions of this Agreement, or the Interim
Order.
"VERB MEETING DATE" means the date of the Verb Meeting.
"VERB RESOLUTIONS" means the resolutions (special or otherwise) of the holders
of Verb Shares approving the matters to be considered at the Verb Meeting.
"VERB SECURITYHOLDERS" means, at any time, the registered holders of any
securities of Verb, including shares, options to purchase shares, special
warrants and warrants.
"VERB SHAREHOLDERS" means, at any time, the registered holders of Verb Shares.
"VERB SHARES" means the issued and outstanding common shares in the capital of
Verb.
"VERB SPECIAL WARRANTS" means the issued and outstanding special warrants of
Verb, as more fully described in Schedule "B" hereto.
1.2 CURRENCY
Except where otherwise specified, all sums of money referred to in this
Agreement are expressed in lawful money of Canada.
1.3 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Agreement into articles, sections, paragraphs and
subparagraphs and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of this Agreement.
The terms "the Agreement", "hereof", "herein", "hereunder", and similar
expressions refer to this Agreement and the schedules hereto and not to any
particular article, section or other portion hereof and include any agreement,
schedule or instrument supplementary or ancillary hereto. 1.4 NUMBER, ETC.
Unless the context otherwise requires, words importing the singular number only
shall include the plural and vice versa; words importing the use of any gender
shall include all genders; and words importing persons shall include firms and
corporations and vice versa.
1.5 DATE OF ANY ACTION
In the event that any date on which any action required to be taken hereunder by
any of the parties is not a Business Day in the place where the action is
required to be taken, such action shall be required to be taken on the next
succeeding day which is a Business Day in such place.
1.6 ACCOUNTING PRINCIPLES
Whenever in this Agreement reference is made to generally accepted accounting
principles, such reference shall be deemed to be the Canadian generally accepted
accounting principles from time to time
-5-
approved by the Canadian Institute of Chartered Accountants, or any successor
thereto, applicable as at the date on which such calculation is made or required
to be made in accordance with generally accepted accounting principles.
1.7 SCHEDULES
The following Schedules are attached to and form a part of this Agreement:
------------------------------------------------------------------------
Schedule "A" Plan of Arrangement
------------------------------------------------------------------------
Schedule "B" Rights to Acquire Securities of Verb
------------------------------------------------------------------------
Schedule "C" Rights to Acquire Securities of ▇▇▇▇▇▇
------------------------------------------------------------------------
ARTICLE 2
THE ARRANGEMENT
2.1 IMPLEMENTATION
▇▇▇▇▇▇ and Verb agree that the Arrangement shall be implemented in accordance
with Section 252 of the BCCA subject to the terms and conditions contained in
this Agreement and the Plan of Arrangement which is attached as Schedule "A".
2.2 EFFECTIVE TIME
The Arrangement shall become effective as of the Effective Time.
2.3 ESCROW RESTRICTIONS
It is recognized that the ▇▇▇▇▇▇ Shares and other securities issued to certain
of the Verb Securityholders pursuant to the Arrangement and this Agreement will
be subject to escrow restrictions in accordance with the rules and policies of
the Exchange. Such securities will be deposited, on the Effective Date, pursuant
to the terms of an escrow agreement in the form required by the Exchange, and
will be released from escrow on the basis of, at the time of, and in the manner
stipulated by the Exchange.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF VERB
Verb represents and warrants to ▇▇▇▇▇▇ as follows, as continuing representations
and warranties which are true and correct on the date hereof or, if any such
representation and warranty is expressed to be made and given in respect of a
particular date other than the date hereto, then such representation and
warranty shall be true and correct on such date, and all representations and
warranties herein shall be true and correct on each day thereafter to and
including the Effective Date with the same effect as if made and given on and as
of each such day, and confirms that ▇▇▇▇▇▇ is relying upon the accuracy of each
of such representations and warranties:
(a) Verb is duly organized, validly existing and in good standing under the
laws of British Columbia and has the necessary corporate power and
authority to carry on the business
-6-
which it now carries on in such jurisdiction and to hold the assets
which it now holds and to enter into and complete the transactions
contemplated hereby;
(b) This Agreement has been duly and validly executed and delivered by Verb
and constitutes a legal, valid and binding obligation of Verb,
enforceable against it in accordance with its terms, except as may be
limited by laws of general application affecting the rights of
creditors;
(c) The consummation of the transactions contemplated hereby will not
conflict with, constitute a default under, result in a breach of,
entitle any person or company to a right of termination under, or
result in the creation or imposition of any lien, encumbrance or
restriction of any nature whatsoever, upon or against the property or
assets of Verb, its constating documents, any contract, agreement,
indenture or other instrument to which it is a party or by which it is
bound, any law, judgment, order, writ, injunction or decree of any
court, administrative agency or other tribunal or any regulation of any
governmental authority;
(d) The authorized capital of Verb consists of two hundred million shares
divided into one hundred million common shares without par value and
one hundred million preference shares without par value, of which a
total of 13,487,383 Verb Shares have been validly issued and are
outstanding and are fully paid and non-assessable;
(e) Except as set forth in Schedule "B" hereto, no person or company has
any right, agreement or option, present or future, contingent or
absolute, or any right capable of becoming a right, agreement or
option, other than provided for herein:
(i) to require Verb to issue any shares in its capital or to convert
any securities of Verb or any other company into shares in the
capital of Verb;
(ii) for the issue or allotment by Verb of any of its authorized but
unissued share capital; or
(iii) to require Verb to purchase, redeem or otherwise acquire any of
its issued and outstanding shares.
(f) The directors and officers of Verb as of the date hereof are as
follows:
NAME POSITION
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ President, Chief Executive Officer
and Director
▇▇▇▇▇ ▇▇▇▇▇ Chief Financial Officer
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Chairman of the Board
▇▇▇▇ ▇▇▇▇▇ Director and Secretary
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Director
▇▇▇▇▇▇ ▇▇▇▇▇ Director
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Director
▇▇▇▇▇▇▇ ▇▇▇▇▇ Director
▇▇▇▇▇ ▇▇▇▇▇▇▇ Vice-President of Sales
▇▇▇▇▇▇ ▇▇▇▇ Chief Technical Officer
-7-
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Vice-President of Operations
▇▇▇▇▇ ▇▇▇▇▇▇ Vice-President of Marketing
(g) The corporate records of Verb, as required to be maintained by Verb
under its act of incorporation, are accurate, complete and up-to-date
in all material respects and all material transactions of Verb have
been promptly and properly recorded in its books or filed with its
records. No shares or other securities of Verb have been issued in
violation of any laws or the articles of Verb;
(h) The Verb Financial Statements are true and correct in every material
respect, as at the date of such statements, and have been prepared in
accordance with generally accepted accounting principles and fairly
reflect the business, property, assets and financial position of Verb
as at the date of the applicable Verb Financial Statements and the
results of its operations for the periods then ended;
(i) Verb does not have any liability, due or accruing, contingent or
absolute, and is not directly or indirectly subject to any guarantee,
indemnity or other contingent or indirect obligation with respect to
the obligation of any other person or company not shown or reflected in
the Verb Financial Statements, other than any such liability,
guarantee, indemnity or obligation incurred or assumed by it in the
course of its normal and ordinary day to day business or in connection
with the Transaction, and no such liability, guarantee, indemnity or
obligation has been paid or discharged by Verb after the date of the
most recent of the Verb Financial Statements other than in the course
of its normal and ordinary day to day business;
(j) Verb has good and marketable title to all of its assets as reflected in
the most recent of the Verb Financial Statements and except as
disclosed in the Verb Financial Statements such assets are free and
clear of any financial encumbrances;
(k) Verb holds all permits, licenses, consents and authorizations issued by
any government or governmental authority which are necessary in
connection with the operation of its business and the ownership of its
properties and assets;
(l) Canadian and U.S. federal, provincial and state tax filings remain
outstanding for fiscal 2000 and 2001; Verb's auditors have been
retained to complete and file all necessary returns in conjunction with
the completion of their audit of Verb's financial statements;
(m) Verb has not declared or paid any dividends of any kind or declared or
made any other distributions of any kind whatsoever including, without
limitation, by way of redemption, repurchase or reduction of its
authorized capital;
(n) There has been no material adverse change in the financial condition
and position of Verb since the date of the most recent of the Verb
Financial Statements and no damage, loss, destruction or other change
in circumstances materially affecting the business, property or assets
of Verb or its right or capacity to carry on business since the date of
the most recent of the Verb Financial Statements which would result in
a Material Adverse Effect;
(o) Verb has not engaged in any transaction or made any disbursement or
assumed or incurred any liability or obligation or made any commitment,
including, without limitation, any forward purchase commitment or
similar obligation, to make any expenditure which would have a Material
Adverse Effect on Verb or its operations,
-8-
property, assets or financial condition not shown or reflected in the
most recent of the Verb Financial Statements or since the date of the
most recent of the Verb Financial Statements, except any commitments
incurred in the course of its normal and ordinary day to day business;
(p) Verb has not purchased, leased or acquired, or agreed to purchase,
lease or acquire, any additional property or assets and has not sold,
transferred, disposed, mortgaged, pledged, charged, leased or otherwise
encumbered, or agreed to sell, transfer, dispose of, mortgage, pledge,
charge, lease or otherwise encumber, any of its property or assets
other than in the ordinary course of its business or as shall be set
out in the Circular;
(q) Verb has not waived or surrendered any right of substantial value and
has not made any gift of money or of any of its property or assets;
(r) Verb has carried on its business in the normal course;
(s) Verb does not have outstanding any material continuing contractual
obligations whatsoever relating to or affecting the conduct of its
business or any of its property or assets or for the purchase, sale or
leasing of any property other than those contracts set out in the most
recent of the Verb Financial Statements or as shall be set out in the
Circular and all such contracts, agreements, indentures, or other
instruments are in good standing and Verb is entitled to all benefits
thereunder;
(t) Other than as set in the most recent of the Verb Financial Statements
or as shall be set out in the Circular, Verb is not in default under or
in breach of, or would, after notice or lapse of time or both, be in
default under any contract, agreement, indenture or other instrument to
which it is a party or by which it is bound;
(u) Except as set forth in the most recent of the Verb Financial Statements
or as shall be set out in the Circular, there are no management
contracts or consulting contracts to which Verb is a party or by which
it is bound, and other than in ordinary course of its business, no
amount is payable or has been agreed to be paid by Verb to any persons
as remuneration, pension, bonus, share of profits or other similar
benefit and no director, officer or member, or former director, officer
or member of Verb, nor any associate or affiliate of any such person,
has any claim of any nature against, or is indebted to Verb;
(v) There are no actions, suits, proceedings or investigations pending or,
to the knowledge of Verb, threatened against or affecting Verb, at law
or in equity, before or by any court, administrative agency or other
tribunal or any governmental authority;
(w) Verb has the right to use, sell, license, sub-license and prepare
derivative works for and dispose of and bring actions for the
infringement or misappropriation of the Intellectual Property of Verb
and other than as disclosed in the most recent of the Verb Financial
Statements, Verb has not conveyed, assigned or encumbered any of the
Intellectual Property of Verb owned or used by or licensed to it;
(x) To the best of the knowledge of Verb, the conduct of the business of
Verb and the use by it of the Intellectual Property of Verb in
connection therewith has not, does not and will not infringe upon or
violate the intellectual property or other proprietary rights of any
other person;
-9-
(y) There are no existing, pending or, to the best of the knowledge of
Verb, threatened claims or litigation contesting the validity,
ownership or right to use, sell, license or dispose of any of the
Intellectual Property of Verb, nor to the best of Verb's knowledge is
there any basis for such claim;
(z) To the best of the knowledge of Verb, no employee of Verb is in
violation of any term of any non-disclosure, proprietary rights or
similar agreement between the employee and any former employer or any
other person;
(aa) Verb has taken all reasonable steps within its power to ensure that all
technical information developed by and belonging to Verb for which a
copyright has not been registered or which has not been patented has
been kept confidential;
(bb) All persons having access to or knowledge of the Intellectual Property
of Verb or information of a confidential nature that is necessary or
required or otherwise used for or in connection with the conduct of the
business of Verb have entered into appropriate non-disclosure and
proprietary rights or similar agreements with Verb;
(cc) Verb owns or has contractual rights to the proprietary technology
relating to its business and Verb is not aware of possible infringement
of a trade secret or patent in connection with such technology;
(dd) With the exception of Cadium Systems Inc. (the "SUBSIDIARY"), Verb does
not own any subsidiary and does not own, directly or indirectly, any
shares or interest in any other corporation, partnership, joint venture
or firm;
(ee) The representations and warranties and other factual statements of Verb
contained in this Agreement, and all information in the Schedules
hereto, taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements made herein and therein not misleading;
(ff) Verb is not in possession of any information, documents or material
under an obligation of confidentiality to any other person. The conduct
of Verb's business as presently conducted will not violate or conflict
with the obligations of confidentiality to any such other person; and
(gg) Verb has no information or knowledge of any facts pertaining to Verb
which, if known to ▇▇▇▇▇▇, might reasonably be expected to deter ▇▇▇▇▇▇
from completing the transactions contemplated hereby.
3.2
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
▇▇▇▇▇▇ represents and warrants to Verb as follows, as continuing representations
and warranties which are true and correct on the date hereof or, if any such
representation and warranty is expressed to be made and given in respect of a
particular date other than the date hereof, then such representation and
warranty shall be true and correct on such date, and all representations and
warranties herein shall be true and correct on each day thereafter to and
including the Effective Date with the same effect as if made and given on and as
of each such day, and confirms that Verb is relying upon the accuracy of each of
such representations and warranties:
(a) ▇▇▇▇▇▇ is a company duly organized, validly existing and in good
standing under the laws of Canada and has the necessary corporate power
and authority to carry on the business
-10-
which it now carries on and to hold the assets which it now holds and
to enter and complete the transactions contemplated hereby;
(b) This Agreement has been duly and validly executed and delivered by
▇▇▇▇▇▇ and constitutes a legal, valid and binding obligation of ▇▇▇▇▇▇,
enforceable against it in accordance with its terms, except as may be
limited by laws of general application affecting the rights of
creditors;
(c) The consummation of the transactions contemplated hereby will not
conflict with, constitute a default under, result in a breach of,
entitle any person or company to a right of termination under, or
result in the creation or imposition of any lien, encumbrance or
restriction of any nature whatsoever, upon or against the property or
assets of ▇▇▇▇▇▇, its constating documents, any contract, agreement,
indenture or other instrument to which it is a party or by which it is
bound, any law, judgment, order, writ, injunction or decree of any
court, administrative agency or other tribunal or any regulation of any
governmental authority;
(d) ▇▇▇▇▇▇ is a "reporting issuer" within the meaning of the Securities
Acts of British Columbia and Alberta, and ▇▇▇▇▇▇ is up-to-date and in
good standing with respect to all filings required to be made with any
regulatory authority, including the Exchange;
(e) As of the date of this Agreement, the authorized capital of ▇▇▇▇▇▇
consists of an unlimited number of common shares without par value and
an unlimited number of preferred shares, of which 16,444,000 ▇▇▇▇▇▇
Shares have been validly issued and are outstanding and are fully paid
and non-assessable;
(f) Except as set forth in Schedule "C" hereto, no person or company has
any right, agreement or option, present or future, contingent or
absolute, or any right capable of becoming a right, agreement or
option, other than provided for herein:
(i) to require ▇▇▇▇▇▇ to issue any shares in its capital or to convert
any securities of ▇▇▇▇▇▇ or any other company into shares in its
capital;
(ii) for the issue or allotment by ▇▇▇▇▇▇ of any of its authorized but
unissued share capital; or
(iii) to require ▇▇▇▇▇▇ to purchase, redeem or otherwise acquire any of
its issued and outstanding shares.
(g) The directors and officers of ▇▇▇▇▇▇ as of the date hereof are as
follows:
NAME POSITION
▇▇▇▇▇ ▇▇▇▇▇▇ President and Chairman of the Board
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Chief Financial Officer and Director
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇. Secretary, General Manager, and Director
(h) The corporate records of ▇▇▇▇▇▇, as required to be maintained by ▇▇▇▇▇▇
under its act of incorporation are accurate, complete and up-to-date in
all material respects and all material transactions of ▇▇▇▇▇▇ have been
promptly and properly recorded in its books or
-11-
filed with its records. No shares or other securities have been issued
in violation of any laws or the constating documents of ▇▇▇▇▇▇;
(i) The ▇▇▇▇▇▇ Financial Statements are true and correct in every material
respect, as at the date of such statements, were prepared in accordance
with generally accepted accounting principles and fairly reflect the
business, property, assets and financial position of ▇▇▇▇▇▇ as at the
date of the applicable ▇▇▇▇▇▇ Financial Statements, and the results of
its operations for the periods then ended;
(j) ▇▇▇▇▇▇ does not have any liability, due or accruing, contingent or
absolute, and is not directly or indirectly subject to any guarantee,
indemnity or other contingent or indirect obligation with respect to
the obligation of any other person or company not shown or reflected in
the ▇▇▇▇▇▇ Financial Statements, other than any such liability,
guarantee, indemnity or obligation incurred or assumed by it in the
course of its normal and ordinary day to day business and no such
liability, guarantee, indemnity or obligation has been paid or
discharged by Ayotte after the date of the most recent of the ▇▇▇▇▇▇
Financial Statements other than in the course of its normal and
ordinary day to day business;
(k) Other than in connection with the completion of the transaction
contemplated in the Disposition Circular, ▇▇▇▇▇▇ has good and
marketable title to all of its assets as reflected in the most recent
of the ▇▇▇▇▇▇ Financial Statements and except as disclosed in the
▇▇▇▇▇▇ Financial Statements such assets are free and clear of any
financial encumbrances;
(l) ▇▇▇▇▇▇ holds all permits, licenses, consents and authorizations issued
by any government or governmental authority which are necessary in
connection with the operation of its business and the ownership of its
properties and assets;
(m) ▇▇▇▇▇▇ has filed all necessary tax returns in all jurisdictions
required to be filed by ▇▇▇▇▇▇, all returns affecting workers'
compensation with the appropriate agency, corporation capital tax
returns, if required, and any other material reports and information
required to be filed by ▇▇▇▇▇▇ with any governmental authority; ▇▇▇▇▇▇
has paid all income, sales and capital taxes payable by it; ▇▇▇▇▇▇ has
withheld and remitted to tax collection authorities such taxes as are
required by law to be withheld and remitted; ▇▇▇▇▇▇ has paid all
instalments of corporate taxes due and payable, and there is not
presently outstanding any notice of re-assessment from any applicable
tax collecting authority;
(n) ▇▇▇▇▇▇ has not declared or paid any dividends of any kind nor declared
or made any other distributions of any kind whatsoever including,
without limitation, by way of redemption, repurchase or reduction of
its authorized capital;
(o) There has been no material adverse change in the financial condition
and position of ▇▇▇▇▇▇ since the date of the most recent of the ▇▇▇▇▇▇
Financial Statements, or as shall be set out in the Circular, and no
damage, loss, destruction or other change in circumstances materially
affecting the business, property or assets of ▇▇▇▇▇▇ or its right or
capacity to carry on business since the date of the most recent of the
▇▇▇▇▇▇ Financial Statements;
(p) ▇▇▇▇▇▇ has not engaged in any transaction or made any disbursement or
assumed or incurred any liability or obligation or made any commitment,
including, without limitation, any forward purchase commitment or
similar obligation, to make any expenditure which would have a Material
Adverse Effect on ▇▇▇▇▇▇ or its operations, property, assets or
financial condition not shown or reflected in the most recent of the
-12-
▇▇▇▇▇▇ Financial Statements or since the date of the most recent of the
▇▇▇▇▇▇ Financial Statements, except as shall be set out in the
Circular;
(q) ▇▇▇▇▇▇ has not purchased, leased or acquired or agreed to purchase,
lease or acquire, any additional property or assets and has not sold,
transferred, disposed, mortgaged, pledged, charged, leased or otherwise
encumbered, or agreed to sell, transfer, dispose of, mortgage, pledge,
charge, lease or otherwise encumber, any of its property or assets
other than as disclosed in the Disposition Circular or the Circular;
(r) ▇▇▇▇▇▇ has not waived or surrendered any right of substantial value and
has not made any gift of money or of any of its property or assets;
(s) ▇▇▇▇▇▇ has carried on its business in the normal course;
(t) ▇▇▇▇▇▇ does not have outstanding any material continuing contractual
obligations whatsoever relating to or affecting the conduct of its
business or any of its property or assets or for the purchase, sale or
leasing of any property other than those contracts set out in the most
recent of the ▇▇▇▇▇▇ Financial Statements or as shall be set out in the
Circular and all such contracts, agreements, indentures, or other
instruments are in good standing and ▇▇▇▇▇▇ is entitled to all benefits
thereunder;
(u) ▇▇▇▇▇▇ is not in default under or in breach of, or would, after notice
or lapse of time or both, be in default under any contract, agreement,
indenture or other instrument to which it is a party or by which it is
bound. Following the Effective Time, ▇▇▇▇▇▇ will not have any
continuing contractual obligations of any nature;
(v) Except as set forth in the most recent of the ▇▇▇▇▇▇ Financial
Statements, or in the Circular, as it relates to ▇▇. ▇▇▇▇▇▇▇▇▇▇▇, there
are no management contracts or consulting contracts to which ▇▇▇▇▇▇ is
a party or by which it is bound, no amount is payable or has been
agreed to be paid by ▇▇▇▇▇▇ to any person as remuneration, pension,
bonus, share of profits or other similar benefit, and no director,
officer or member, or former director, officer or member, of ▇▇▇▇▇▇,
nor any associate or affiliate of any such person, has any claims of
any nature against, or is indebted to ▇▇▇▇▇▇;
(w) There are no actions, suits, proceedings or investigations pending or,
to the knowledge of ▇▇▇▇▇▇, threatened against or affecting ▇▇▇▇▇▇, at
law or in equity, before or by any court, administrative agency or
other tribunal or any governmental authority, except as contemplated in
the Disposition Circular; (x) To the best of the knowledge of ▇▇▇▇▇▇,
the conduct of the business of ▇▇▇▇▇▇ has not infringed upon or
violated the intellectual property or other proprietary rights of any
other person;
(y) ▇▇▇▇▇▇ does not beneficially own, directly or indirectly, shares of any
other corporate entity or any interest in a partnership, joint venture
or other business entity;
(z) The representations and warranties and other factual statements of
▇▇▇▇▇▇ contained in this Agreement, and all information in the
Schedules hereto, taken as a whole, do not contain any untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements made herein and therein not misleading;
-13-
(aa) ▇▇▇▇▇▇ is not in possession of any information, documents or material
under an obligation of confidentiality to any other person. The conduct
of ▇▇▇▇▇▇'▇ business as presently conducted will not violate or
conflict with the obligations of confidentiality to any such other
person; and
(bb) ▇▇▇▇▇▇ has no information or knowledge of any facts pertaining to
▇▇▇▇▇▇ which, if known to Verb, might reasonably be expected to deter
Verb from completing the transactions contemplated hereby.
3.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties made by Verb and ▇▇▇▇▇▇ and contained in this
Agreement, or contained in any document or certificate given in order to carry
out the transactions contemplated hereby, will survive the Effective Date and,
notwithstanding any closing or an investigation made by or on behalf of ▇▇▇▇▇▇
or Verb, or any other person, or any knowledge of ▇▇▇▇▇▇ or Verb, as applicable,
or any other person, shall continue in full force and effect for the benefit of
▇▇▇▇▇▇ or Verb, as applicable, for a period of six months from the Effective
Date.
ARTICLE 4
COVENANTS
4.1 MUTUAL COVENANTS
Except as contemplated in, and conducted in accordance with the terms and
conditions of, this Agreement and the Plan of Arrangement, each party covenants
and agrees that until the Effective Date, except with the prior written consent
of the other party:
(a) it will not declare or pay any dividends or make any distribution of
its properties or assets to its shareholders or purchase or retire any
shares of its capital stock;
(b) it will not alter or amend or authorize any alteration or amendment to
its constating documents or bylaws as they exist at the date of this
Agreement;
(c) it will not split, consolidate, exchange or reclassify its shares or
other securities;
(d) it will not engage in any business enterprise or other activity other
than in the ordinary course of business;
(e) it will not acquire or agree to acquire, by amalgamating, plan of
arrangement, merging, consolidating or entering into a business
combination with or purchasing or leasing substantially all of the
assets or otherwise of any business or undertaking or any corporation,
partnership, association or other business organization or division
thereof;
(f) it will not sell, lease, transfer, mortgage or otherwise dispose of or
encumber any of its property or assets, real or personal, or agree to
the same;
(g) it will not resolve or propose that it be wound-up, dissolved,
liquidated, amalgamated or merged into, appoint or agree to the
appointment of a liquidator, receiver or trustee in bankruptcy for it
or consent to an order by a court for its winding-up or dissolution;
(h) it will not take any action or fail to take any action which would
cause any of the conditions precedent set forth in Article 5 not to be
satisfied;
-14-
(i) it will continue to furnish to the other party and to its accountants,
counsel and other representatives such information relating to the
financial condition, business, operations, properties, assets and
affairs of it as may be reasonably requested by the other party, which
information shall be true, correct and complete in all material
respects and will not contain an untrue statement of any material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading in the
light of the circumstances in which they are made;
(j) it will notify the other party in writing:
(i) promptly after the occurrence thereof of any material adverse
change (actual, anticipated, or threatened) with respect to it;
and
(ii) promptly after the occurrence, or failure to occur, of any such
event, of information of which it becomes aware with respect to
any event which, if known as of the date of this Agreement, would
have been required to be disclosed to the other party or which
would have been likely to cause any of its representations or
warranties in this Agreement to be untrue or incorrect or result
in the failure to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by any party herein
provided, however, that no such notification shall affect the
representations or warranties of the parties or the conditions to
the obligations of the parties herein;
(k) it will do or refrain from doing all acts and things in order to ensure
that the representations and warranties in Section 3.1, in the case of
Verb, and 3.2, in the case of ▇▇▇▇▇▇, remain true and correct as of the
Effective Date as if such representations and warranties were made at
and as of such date;
(l) it will use commercially reasonable efforts (including co-operating
with the other party where applicable) to cause each of the conditions
precedent set forth in Article 5 hereof to be complied with on or
before the Effective Date;
(m) if for any reason whatsoever, except by reason of a breach by either
party of its obligations hereunder, the Arrangement cannot be completed
on the basis contemplated by this Agreement, it will negotiate in good
faith with the other party to restructure the transactions contemplated
by this Agreement and the Plan of Arrangement on a mutually acceptable
basis with a view to the completion of a transaction on as similar a
basis to the Arrangement as is possible in the circumstances on or
before June 30, 2002 or such other date as may be agreed upon between
the parties;
(n) it will cooperate with the other party in preparing the Circular as a
joint management information circular with respect to the Verb Meeting
and the ▇▇▇▇▇▇ Meeting and the information relating to such party in
the Circular will not contain an untrue statement of a material fact
and will not omit to state a material fact that is necessary to make a
statement not misleading in the light of the circumstances in which it
is made;
(o) it will use its best efforts to ensure that the Verb Meeting and the
▇▇▇▇▇▇ Meeting are held on the same date;
(p) it will cooperate and use its respective best efforts to obtain, before
the Effective Date, all authorizations, waivers, exemptions, consents,
orders and other approvals from domestic or foreign courts,
governmental or regulatory agencies, boards, commissions or other
-15-
authorities, shareholders and third parties as are necessary for the
consummation of the transactions contemplated hereby;
(q) it will support the transactions contemplated herein and in the Plan of
Arrangement and, without limiting the generality of the foregoing, it
shall not act or fail to act in any way that might reasonably be
expected to discourage Verb Shareholders from voting in favour of the
Verb Resolution or that might encourage Verb Shareholders to vote
against the Verb Resolution or that might be expected to discourage
▇▇▇▇▇▇ Shareholders from voting in favour of the ▇▇▇▇▇▇ Resolutions or
that might encourage ▇▇▇▇▇▇ Shareholders to vote against the ▇▇▇▇▇▇
Resolutions and any public comment (whether oral or written) shall be
consistent with and supportive of the Arrangement provided, however,
that nothing herein shall prevent either party from making any written
disclosure to comply with any legal or regulatory requirement so long
as such disclosure is made in accordance with Section 7.5.
4.2 COVENANTS OF ▇▇▇▇▇▇
▇▇▇▇▇▇ covenants and agrees that until the Effective Date, except with the prior
written consent of Verb or except as contemplated in, and conducted in
accordance with the terms and conditions of, this Agreement and the Plan of
Arrangement:
(a) it will not incur or commit to incur any indebtedness for borrowed
money except indebtedness of Verb;
(b) it will not allot or issue, or enter into any agreement for the
allotment or issuance, or grant any other rights to acquire, ▇▇▇▇▇▇
Shares or other securities or securities convertible into, exchangeable
for, or which carry a right to acquire, directly or indirectly, ▇▇▇▇▇▇
Shares or other securities, except for ▇▇▇▇▇▇ Shares which may be
issued as contemplated in Schedule "C" hereto;
(c) it will not make any employment contracts or other arrangements with
any officers, agents, servants or employees of ▇▇▇▇▇▇ and prior to the
Effective Date it will terminate or cancel all such existing contracts
or arrangements;
(d) it will cooperate with Verb in the preparation of the Circular and will
ensure that the disclosure in the Circular with respect to ▇▇▇▇▇▇ and
the ▇▇▇▇▇▇ Shares shall constitute full, true and plain disclosure of
all material facts relating to ▇▇▇▇▇▇ and the ▇▇▇▇▇▇ Shares and will
not contain any untrue statement of any material fact or omit to state
any material fact required to be stated therein or necessary in order
to make any statement therein not misleading in light of the
circumstances in which it is made (and ▇▇▇▇▇▇ acknowledges that with
respect to such information in the Circular relating to ▇▇▇▇▇▇ and the
▇▇▇▇▇▇ Shares, Verb will rely upon the information provided by or on
behalf of ▇▇▇▇▇▇ for the purpose of inclusion in the Circular, without
having to make any independent investigations and Verb will assume no
responsibility for the accuracy or completeness of such information);
(e) subject to Section 4.6, it will not authorize or permit any officers,
directors or employees, agents, advisers, consultants or other
representatives of it to:
(i) solicit, initiate or encourage (including, without limitation, by
way of furnishing information) any inquiry or the making of any
proposal to it or its shareholders from any person which
constitutes, or may reasonably be expected to lead to (in
-16-
either case whether in one transaction or a series of
transactions), a Competing Offer, or agree to or endorse any of
the foregoing; or
(ii) enter into or participate in any discussions or negotiations
regarding any Competing Offer, or furnish to any other person any
information with respect to the business, properties, operations,
prospects or conditions (financial or otherwise) of it or in
connection with any Competing Offer, or otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek to do any
of the foregoing;
(f) it will provide Verb with full access to such records of ▇▇▇▇▇▇ and
furnish Verb with such information with respect thereto and with
respect to any other matters pertaining to ▇▇▇▇▇▇ as Verb may
reasonably require; provided that any information which Verb has
received pursuant to this subparagraph is confidential and will not be
released to any other party or parties nor will it be used by Verb or
its directors and officers for their own benefit without the permission
of ▇▇▇▇▇▇;
(g) it will, both before and after the Effective Date, execute and do all
such further deeds, things and assurances as may be required in the
reasonable view of Verb's counsel for consummating the transactions
contemplated herein;
(h) it will forthwith take steps to convene the ▇▇▇▇▇▇ Meeting at the
earliest opportunity and shall use its best efforts to obtain the
approval of its shareholders to the terms of this Agreement; and
(i) it will forthwith use its best efforts to obtain the necessary approval
of the Exchange to the terms of this Agreement and the Transaction.
4.3 COVENANTS OF VERB
Verb covenants and agrees that until the Effective Date, except with the prior
written consent of ▇▇▇▇▇▇ or except as contemplated in, and conducted in
accordance with the terms and conditions of, this Agreement and the Plan of
Arrangement:
(a) it will not incur or commit to incur any indebtedness for borrowed
money, out of the ordinary course of its business;
(b) it will not allot or issue, or enter into any agreement for the
allotment or issuance, or grant any other rights to acquire Verb Shares
or other securities or securities convertible into, exchangeable for,
or which carry a right to acquire, directly or indirectly, any Verb
Shares or other securities, except for Verb Shares which may be issued
as contemplated in Schedule "B" hereto;
(c) it will conduct its business diligently and in the ordinary course
consistent with the manner in which the business generally has been
operated up to the date of execution of this Agreement;
(d) it will take all actions required under its constating documents to
approve the Arrangement and the transfer of the Verb Shares to ▇▇▇▇▇▇
as contemplated by this Agreement;
-17-
(e) it will provide ▇▇▇▇▇▇ with full access to such records of Verb and
furnish ▇▇▇▇▇▇ with such information with respect thereto and with
respect to any other matters pertaining to Verb as ▇▇▇▇▇▇ may
reasonably require; provided that any information which ▇▇▇▇▇▇ and its
directors and officers has received pursuant to this subparagraph is
confidential and will not be released to any other party or parties nor
will it be used by ▇▇▇▇▇▇ or its directors or officers for their own
benefit without the permission of Verb;
(f) it will, both before and after the Effective Date, execute and do all
such further deeds, acts, things and assurances as may be required in
the reasonable view of ▇▇▇▇▇▇'▇ counsel for consummating the
transactions contemplated herein;
(g) on or before the Effective Date, it will arrange for those Verb
Securityholders whose shares in ▇▇▇▇▇▇ are to be held in escrow, to
execute the escrow agreement referred to in Section 2.3;
(h) it will, and will arrange for the Verb Securityholders to execute and
deliver to ▇▇▇▇▇▇ any securities regulatory materials required in
connection with the transactions contemplated hereby, including,
without limitation, any documentation or undertaking required by the
Exchange or any relevant securities regulatory authority;
(i) it will forthwith take steps to convene the Verb Meeting at the
earliest opportunity and shall use its best efforts to obtain the
approval of its shareholders to the terms of this Agreement and the
Arrangement;
(j) it will cooperate with ▇▇▇▇▇▇ in the preparation of the Circular and
will ensure that the disclosure in the Circular with respect to Verb
and the Verb Shares shall constitute full, true and plain disclosure of
all material facts relating to Verb and the Verb Shares and Verb
Special Warrants and will not contain any untrue statement of any
material fact or omit to state any material fact required to be stated
therein or necessary in order to make any statement therein not
misleading in light of the circumstances in which it is made (and Verb
acknowledges that with respect to such information in the Circular
relating to Verb, the Verb Shares and the Verb Special Warrants, ▇▇▇▇▇▇
will rely upon the information provided by or on behalf of Verb for the
purpose of inclusion in the Circular, without having to make any
independent investigations and ▇▇▇▇▇▇ will assume no responsibility for
the accuracy or completeness of such information);
(k) it will promptly notify ▇▇▇▇▇▇ of all notices of dissent or written
objections to the transactions contemplated hereby received from
dissenting Verb Shareholders and of any withdrawal of such notices of
dissent or written objections;
(l) subject to Section 4.6, it will not, and it will not authorize or
permit any of its officers, directors or employees, agents, advisers,
consultants or other representatives to:
(i) solicit, initiate or encourage (including, without limitation, by
way of furnishing information) any inquiry or the making of any
proposal to it or its shareholders from any person which
constitutes, or may reasonably be expected to lead to (in either
case whether in one transaction or a series of transactions), a
Competing Offer, or agree to or endorse any of the foregoing; or
(ii) enter into or participate in any discussions or negotiations
regarding any Competing Offer, or furnish to any other person any
information with respect to its business, properties, operations,
prospects or conditions (financial or
-18-
otherwise) in connection with any Competing Offer, or otherwise
cooperate in any way with, or assist or participate in, facilitate
or encourage, any effort or attempt by any other person to do or
seek to do any of the foregoing.
4.4 SPECIAL MEETINGS
As soon as practicable, the parties will prepare the Circular for mailing to
their respective securityholders and, subject to the issuance of the Interim
Order, ▇▇▇▇▇▇ and Verb will respectively convene the Meetings (with the Verb
meeting being held on the same day and immediately following the ▇▇▇▇▇▇
meeting). The parties will file the Circular with the appropriate regulatory
authorities in all jurisdictions where the same is required and will mail the
same to the appropriate persons in accordance with applicable law and, in the
case of Verb, the Interim Order. Each party will provide the other on a timely
basis with all such information as may be required to be included in the
Circular which relates to it. The parties will cooperate with each other in
connection with the preparation of documentation for submission to regulatory
authorities and holders of their respective securities and will keep each other
informed of any requests or comments made by regulatory authorities in
connection with such documentation.
4.5 COURT PROCEEDINGS
Verb and ▇▇▇▇▇▇, together, will arrange for the preparation of the documents to
be filed with the Court for the purposes of obtaining the Interim Order and the
Final Order. In addition, Verb will not object to counsel for ▇▇▇▇▇▇ making such
submissions on the hearing of the motion for the Interim Order and the
application for the Final Order as such counsel deems appropriate, provided that
Verb is advised of the nature of any submissions not reasonably contemplated in
the material to be filed with the Court prior to the hearing.
4.6 FIDUCIARY DUTIES
Nothing contained in this Agreement will prohibit, enjoin or otherwise restrict
the board of directors of ▇▇▇▇▇▇ or Verb or any director of ▇▇▇▇▇▇ or Verb in
the fulfilment of their fiduciary duties, from supporting or facilitating any
Competing Offer or Alternative Company Transaction or from failing to give,
qualifying or otherwise amending any recommendation to be or previously given to
▇▇▇▇▇▇ Shareholders or Verb Securityholders in connection with the consummation
of the transaction contemplated by this Agreement including, without limitation,
the Arrangement.
4.7 DIRECTORS AND OFFICERS
On the Effective Date, the directors and officers of ▇▇▇▇▇▇ and Verb (which
shall be a wholly-owned subsidiary of ▇▇▇▇▇▇) shall be as follows, and the
parties agree to obtain such registrations and/or consents to act as may be
required in order to effect such appointments:
-19-
▇▇▇▇▇▇
Board of Directors Officers
------------------ --------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - President & Chief Executive Officer
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ - Chief Financial Officer
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ - Secretary
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
VERB
Board of Directors Officers
------------------ --------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - President & Chief Executive Officer
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ - Chief Financial Officer
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ - Vice-President of Sales
▇▇▇▇▇▇ ▇▇▇▇ - Chief Technical Officer
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - Vice-President of Operations
▇▇▇▇▇ ▇▇▇▇▇ - Vice-President of Marketing
ARTICLE 5
CONDITIONS PRECEDENT
5.1 MUTUAL CONDITIONS PRECEDENT
The respective obligations of the parties hereto to complete the Arrangement by
filing a certified copy of the Final Order with the Registrar for acceptance are
subject to the satisfaction of, or mutual waiver by the parties on or before the
Effective Time of each of the following conditions, which are for the mutual
benefit of ▇▇▇▇▇▇ and Verb:
(a) The Interim Order shall have been obtained in form and substance
satisfactory to each of the parties, acting reasonably;
(b) The Plan of Arrangement, without amendment or with amendments
acceptable to Verb and ▇▇▇▇▇▇ acting reasonably, shall have been
approved at the Verb Meeting by the Verb Shareholders as required by
the Interim Order;
(c) The Transaction shall have been approved at the ▇▇▇▇▇▇ Meeting by the
▇▇▇▇▇▇ Shareholders;
(d) The Final Order shall have been obtained in form and substance
satisfactory to each of the parties, acting reasonably;
(e) All approvals and consents, regulatory or otherwise, which are required
in connection with the consummation of the transactions contemplated in
this Agreement and in the Plan of Arrangement shall have been obtained
(including, without limitation, the approval of the Transaction by the
Exchange and the listing or reservation for listing of the ▇▇▇▇▇▇
Shares to be issued pursuant to the Plan of Arrangement);
(f) The time period for the exercise of any right to dissent conferred upon
Verb Shareholders in respect of the Arrangement shall have expired and
Verb Shareholders shall not have
-20-
exercised (and not abandoned) such right of dissent with respect to
greater than 10% of the number of outstanding Verb Shares;
(g) No preliminary or permanent injunction, restraining order, cease
trading order or order or decree of any domestic or foreign court,
tribunal, governmental agency or other regulatory authority or
administrative agency, board or commission, and no law, regulation,
policy, directive or order shall have been enacted, promulgated, made,
issued or applied to cease trade, enjoin, prohibit or impose material
limitations on the Arrangement or the transactions contemplated herein
or in the Plan of Arrangement and remain in effect and no such action,
proceeding or order shall, to the best of the knowledge of Verb or
▇▇▇▇▇▇ be pending or threatened and, without limiting the generality of
the foregoing, no person shall have filed any notice of appeal of the
Final Order, and no person shall have communicated to Verb or ▇▇▇▇▇▇
(orally or in writing) any intention to appeal the Final Order which,
in the reasonable opinion of Verb or ▇▇▇▇▇▇ (on the advice of counsel),
would make it inadvisable to proceed with the implementation of the
Arrangement;
(h) There shall not exist any prohibition at law against the completion of
the Arrangement; and
(i) This Agreement shall not have been terminated pursuant to Article 6.
5.2 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF VERB
The obligation of Verb to complete the Arrangement by filing a certified copy of
the Final Order with the Registrar for acceptance shall be subject to the
satisfaction or waiver by Verb on or before the Effective Time, of the following
conditions, which are for the benefit of Verb and may be waived in whole or in
part by Verb at any time:
(a) ▇▇▇▇▇▇ shall have performed and not be in material default of any
covenant contained herein and its representations and warranties shall
be true and correct as of the date of mailing of the Circular and as of
the Effective Date and Verb shall have received a certificate of
▇▇▇▇▇▇, dated each such date, signed by the Chief Executive Officer and
one other senior officer confirming the foregoing;
(b) ▇▇▇▇▇▇ shall have furnished Verb with a favourable opinion of counsel
to ▇▇▇▇▇▇, dated the Effective Date, in form and substance acceptable
to Verb and its counsel, acting reasonably;
(c) There shall not exist or have occurred (or been threatened) any change
(or any condition, event or development involving a prospective change)
which, singly or in the aggregate, would or does have a Material
Adverse Effect on ▇▇▇▇▇▇;
(d) The issue of the ▇▇▇▇▇▇ Shares pursuant to the Arrangement will have
been approved by all necessary corporate action to permit such shares
to be issued as fully paid and non-assessable and such issuance will be
exempt from the registration and prospectus requirements of applicable
securities laws in each of the provinces of Canada in which registered
holders of Verb Shares are resident; and the ▇▇▇▇▇▇ Shares issued
pursuant to the Arrangement will not be subject to restrictions on
resale under the securities laws in any of the provinces of Canada in
which registered holders of Verb Shares are resident, except by reason
of the existence of any controlling interest in ▇▇▇▇▇▇ pursuant to the
securities laws of any applicable jurisdiction or by reason of escrow
requirements
-21-
imposed by the Exchange or pursuant to applicable securities law, or as
otherwise disclosed in the Circular;
(e) Verb being satisfied, in its sole discretion, with its due diligence
investigations of ▇▇▇▇▇▇;
(f) On the Effective Date, the board of directors of ▇▇▇▇▇▇ shall be
reconstituted to consist of the individuals set forth in Section 4.7;
(g) ▇▇▇▇▇▇ shall have completed a consolidation of its common shares of 5
to 1 (five pre-consolidation shares to equal one post-consolidation
share) and shall have changed its name to "Verb Exchange Inc.";
(h) With the exception of the securities disclosed in Schedule "C" as
continuing after the completion of the Arrangement, ▇▇▇▇▇▇ shall have
cancelled all existing rights to acquire securities of ▇▇▇▇▇▇ (whether
pursuant to options, warrants, convertible securities, or otherwise);
and
(i) ▇▇▇▇▇▇ shall have adopted a stock option plan, in form acceptable to
Verb acting reasonably, to come into effect following the completion of
the Arrangement.
5.3 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ▇▇▇▇▇▇
The obligation of ▇▇▇▇▇▇ to complete the transactions set forth in the Plan of
Arrangement shall be subject to the satisfaction or waiver by ▇▇▇▇▇▇, on or
before the Effective Date, of the following conditions, which are for the
benefit of ▇▇▇▇▇▇ and which may be waived by ▇▇▇▇▇▇, in whole or in part, at any
time:
(a) Verb shall have performed and not be in default of any covenant
contained herein and its representations and warranties shall be true
and correct as of the date of mailing of the Circular and as of the
Effective Date and ▇▇▇▇▇▇ shall have received a certificate of Verb,
dated each such date, signed by the President and Chief Financial
Officer confirming the foregoing;
(b) Verb shall have furnished ▇▇▇▇▇▇ with a favourable opinion of counsel
to Verb dated the Effective Date, in form and substance acceptable to
▇▇▇▇▇▇ and its counsel, acting reasonably;
(c) There shall not exist or have occurred (or been threatened) any change
(or any condition, event or development involving a prospective change)
which, singly or in the aggregate, would or does have a Material
Adverse Effect on Verb;
(d) Verb will have delivered audited financial statements to ▇▇▇▇▇▇, for
such periods as may be required by the Exchange;
(e) The issue of the ▇▇▇▇▇▇ securities to the Verb Securityholders pursuant
to the Arrangement are able to be made in compliance with and reliance
on exemptions from the registration and prospectus requirements of the
applicable securities laws;
(f) Verb shall have settled or eliminated the debt owed by the Subsidiary
to AT&T and any debt of Verb owed in relation to such debt of the
Subsidiary;
-22-
(g) Verb shall have entered into a revised agreement with Webley Systems
Inc. ("WEBLEY") concerning Verb's use of Webley's platform technology,
on terms no less favourable than those previously granted to Verb;
(h) Verb will have entered into employment agreements with each of its
senior officers, on terms no less favourable than their current
agreements, in forms acceptable to ▇▇▇▇▇▇ acting reasonably;
(i) On the Effective Date, the board of directors of ▇▇▇▇▇▇ shall be
reconstituted to consist of the individuals set forth in Section 4.7;
(j) With the exception of the securities disclosed in Schedule "B" as
continuing after completion of the Arrangement, Verb shall have
cancelled all existing rights to acquire securities of Verb (whether
pursuant to options, warrants, convertible securities, or otherwise);
and
(k) Certain Securityholders shall have entered into such escrow agreements
as may be required by the Exchange, including, if adequate value cannot
be demonstrated by Verb to the Exchange, a Surplus Security Escrow
Agreement, as defined in Exchange Policy 5.4.
5.4 SATISFACTION OF CONDITIONS
The conditions set out in Sections 5.1, 5.2 and 5.3 hereof shall be conclusively
deemed to have been satisfied, waived or released upon the filing of the Final
Order with the Registrar for acceptance to give effect to the Plan of
Arrangement pursuant to Section 252 of the BCCA.
5.5 CLOSING
On the Effective Date:
(a) Verb will deliver to ▇▇▇▇▇▇:
(i) the officers' certificate referred to in Section 5.3(a) hereof;
(ii) a certified copy of the resolutions of the directors of Verb
approving the Arrangement;
(iii) a certified copy of the minutes of a meeting of the shareholders
of Verb approving the Plan of Arrangement and the transactions
contemplated under this Agreement;
(iv) a duly executed share certificate of Verb in the name of ▇▇▇▇▇▇
representing all of the issued and outstanding Verb Shares;
(v) the escrow agreement(s) referred to in Section 2.3, duly executed
by those Verb Shareholders whose ▇▇▇▇▇▇ Shares are to be held in
escrow;
(vi) the opinion of counsel referred to in Section 5.3(b); and
(vii) such other documents reasonably required by Ayotte's counsel.
-23-
(b) ▇▇▇▇▇▇ will deliver to Verb:
(i) a copy of a letter from the Exchange approving the Transaction;
(ii) the opinion of counsel referred to in Section 5.2(b);
(iii) a certified copy of the minutes of the meeting of the
shareholders of ▇▇▇▇▇▇ approving the Transaction and the
transactions contemplated under this Agreement;
(iv) a certified copy of the resolution of the directors of ▇▇▇▇▇▇
authorizing the allotment and issuance of the securities of ▇▇▇▇▇▇
to be issued to the Verb Securityholders pursuant to the terms of
this Agreement;
(v) the resignations of the current directors of ▇▇▇▇▇▇ and a
certified copy of the resolution of the directors of ▇▇▇▇▇▇
authorizing the appointment of the individuals to the board of
directors specified in Section 4.7;
(vi) the officers' certificate of ▇▇▇▇▇▇ referred to in Section 5.2(a);
(vii) share certificates of ▇▇▇▇▇▇ for the ▇▇▇▇▇▇ Shares registered in
the names of the Verb Securityholders and, where applicable,
replacement warrant certificates; and
(viii) such other documents reasonably required by Verb's counsel.
(c) Subject to the terms and conditions hereof, the transactions
contemplated herein will be closed on the Effective Date at the offices
of Anfield ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Durno, at 1600 - ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ or at such other place or places
as may be mutually agreed upon by Verb and ▇▇▇▇▇▇.
ARTICLE 6
TERMINATION OF AGREEMENT
6.1 TERMINATION BY VERB OR ▇▇▇▇▇▇
If, at any time prior to the Effective Time, any representation and warranty or
covenant (which by its terms must be complied with or fulfilled at such time),
made or given by either party in this Agreement is not, in the case of a
representation and warranty, true and correct with the same force and effect as
if given at and as of such time (whether or not the truth and correctness of
such representation and warranty is within such party's control) or, in the case
of a covenant, is not being complied with or fulfilled in all material respects
and if such representation and warranty or covenant is not made true and correct
or complied with or fulfilled in all material respects by action of such party
by the later of: the Business Day in Vancouver prior to the Verb Meeting Date;
and two Business Days in Vancouver from such party receiving notice in writing
to that effect from the other party, the other party may, at the expiry of such
period, by giving notice in writing to such party, terminate this Agreement and
the obligations of the parties hereunder other than those set out in Sections
7.2 (Fees and Expenses) and, in respect of such termination, 7.5 (Public
Announcements).
If any of the conditions set forth in Section 5.1 are not complied with or
waived on or before the date required for the performance thereof, either ▇▇▇▇▇▇
or Verb upon written notice to the other party, may rescind and terminate this
Agreement and shall have no other right or remedy against the other party
-24-
except as set forth in Sections 7.2 or 7.5. If any of the conditions set forth
in Sections 5.2 or 5.3 are not complied with or waived on or before the date
required for the performance thereof, the party which has the benefit of such
condition, upon written notice to the other party, may rescind and terminate
this Agreement and shall have no other right or remedy against the other party
except as set forth in Sections 7.2 or 7.5. 6.2 AUTOMATIC TERMINATION
This Agreement shall terminate and the obligations and covenants of the parties
hereunder other than those set out in Section 7.2 (Fees and Expenses) and, in
respect of such termination, 7.5 (Public Announcement) shall terminate at 11:59
p.m. (Vancouver time) on July 31, 2002 unless extended by the parties.
ARTICLE 7
GENERAL
7.1 NOTICES
All notices and other communications hereunder shall be in writing and shall be
delivered by hand to the parties at the following addresses or sent by telecopy
at the following numbers or at such other addresses or telecopier numbers as
shall be specified by the parties by like notice:
if to Verb:
Verb Exchange Inc.
▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Anfield ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇
1600 - ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
and if to ▇▇▇▇▇▇:
▇▇▇▇▇▇ Music Inc.
c/o 2200 - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ Blaikie LLP
Suite 2200 - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
-25-
The date of receipt of any such notice shall be deemed to be the date of
delivery thereof or, in the case of notice sent by telecopy, the date of
successful transmission thereof unless transmission is received after business
hours, in which case the date of receipt shall be deemed to be the next Business
Day in the place of receipt.
7.2 FEES AND EXPENSES
Each party will be responsible for and bear all of its own fees, costs and
expenses incurred at any time in connection with entering into this Agreement
and consummating the transactions contemplated herein and in the Plan of
Arrangement.
7.3 SUCCESSORS AND ASSIGNS
This Agreement and all the provisions hereof shall be binding upon and enure to
the benefit of the parties hereto and their respective successors and permitted
assigns. Neither party may assign its rights or obligations under this Agreement
or the Arrangement without the prior written consent of the other party.
7.4 TIME OF ESSENCE
Time shall be of the essence of this Agreement and of each of its provisions.
7.5 PUBLIC ANNOUNCEMENTS
All press releases or other public written communications of any sort by either
of the parties hereto relating to this Agreement or the Arrangement and the
method of release for publication thereof will be provided for review and
comment by the other party hereto. Each party will deal expeditiously with a
request for comments on such written communication provided that the party
issuing such written communication shall not be delayed if to do so would be
contrary to any legal or regulatory requirement. 7.6 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
British Columbia and the laws of Canada applicable therein.
7.7 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, between
the parties hereto with respect to the subject matter hereof. There are no
representations, warranties, covenants or conditions with respect to the subject
matter hereof except as contained herein. For greater certainty, the parties
acknowledge the separate existence of a Loan Agreement dated November 29, 2001
between the parties and such other agreements as may be contemplated thereunder.
7.8 FURTHER ASSURANCES
Each party shall make, do and execute, or cause to be made, done and executed
all such further acts, deeds, agreements, transfers, assurances, instruments or
documents as may be reasonably required in order to implement this Agreement,
the transactions contemplated herein and in the Plan of Arrangement.
-26-
7.9 AMENDMENT OR WAIVER
Subject to any requirements imposed by law or by the Court, this Agreement may
be supplemented or amended, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, but only by written document
executed by both parties; provided, however, that the terms of this Agreement
may not be supplemented or amended, or any of the provisions waived, in a manner
materially prejudicial to the holders of Verb Shares without their approval at
the Verb Meeting or, following the Meeting, without their approval given in the
same manner as required by law for the approval of the Arrangement or, in either
case, as may be required by the Court. No waiver of any nature, in any one or
more instances, shall be deemed or construed as a further or continued waiver of
any condition or breach of any other term, representation or warranty in this
Agreement. Notwithstanding the foregoing, the Plan of Arrangement may only be
supplemented or amended in accordance with the provisions thereof.
7.10 COUNTERPARTS
This Agreement may be executed in counterparts and may be delivered by
facsimile, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
VERB EXCHANGE INC.
Per: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ MUSIC INC.
Per: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
SCHEDULE "A"
TO THE ARRANGEMENT AGREEMENT DATED AS OF MAY 1, 2002
BETWEEN VERB EXCHANGE INC. AND ▇▇▇▇▇▇ MUSIC INC.
PLAN OF ARRANGEMENT UNDER
SECTION 252 OF THE COMPANY ACT (BRITISH COLUMBIA)
ARTICLE 8
INTERPRETATION
8.1 DEFINITIONS
In this Plan of Arrangement:
"ARRANGEMENT AGREEMENT" means the arrangement agreement dated as of May 1, 2002
between Verb and ▇▇▇▇▇▇ to which this Plan of Arrangement is attached as
Schedule "A", as the same may be amended from time to time.
"ARRANGEMENT" means the arrangement under Section 252 of the BCCA on the terms
and conditions set forth in this Plan of Arrangement and any amendment or
variation thereto made in accordance with the terms of the Arrangement
Agreement.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ Music Inc.
"▇▇▇▇▇▇ MEETING" means the extraordinary general meeting of ▇▇▇▇▇▇ Shareholders
and any adjournment thereof to be held to consider and, if deemed advisable,
approve, among other things, the Transaction and all other matters requiring
approval pursuant to the terms and conditions of the Arrangement Agreement.
"▇▇▇▇▇▇ SHAREHOLDERS" means, at any time, the registered holders at that time of
▇▇▇▇▇▇ Shares.
"▇▇▇▇▇▇ SHARES" means the common shares in the capital of ▇▇▇▇▇▇, as constituted
on the date hereof, and upon the completion of a 5:1 share consolidation, as
shall be constituted subsequent to such share consolidation.
"BCCA" means the Company Act (British Columbia), R.S.B.C. 1996, C-62, as
amended.
"BUSINESS DAY" means any day which is not a Saturday, a Sunday or a day on which
banks are not open for business in the relevant place.
"CIRCULAR" means the joint management information circular of Verb and ▇▇▇▇▇▇,
including any schedules attached thereto, to be mailed to ▇▇▇▇▇▇ Shareholders
and Verb Securityholders in connection with the ▇▇▇▇▇▇ and Verb Meetings,
together with any amendments or supplements thereto.
"COURT" means the Supreme Court of British Columbia.
"DISSENTING SHAREHOLDER" means a Verb Shareholder who exercises the right of
dissent ordered by the Court with respect to the Arrangement.
"EFFECTIVE DATE" means the date on which the Effective Time falls.
-2-
"EFFECTIVE TIME" means the point in time when a certified copy of the Final
Order has been accepted for filing by the Registrar.
"ESCROW AGREEMENT" means the escrow agreement(s) contemplated under Section 2.3
of the Arrangement Agreement between ▇▇▇▇▇▇ and certain Verb Shareholders in the
form required by the Exchange to be dated as of the Effective Date.
"EXCHANGE" means the Canadian Venture Exchange.
"EXCHANGED SHARES" has the meaning ascribed thereto in Section 3.4 of this Plan
of Arrangement.
"FINAL ORDER" means the final order of the Court made in connection with the
approval of the Arrangement.
"INTERIM ORDER" means the interim order of the Court made in connection with the
approval of the Arrangement, as the same may be amended, supplemented or varied
by the Court.
"PLAN OF ARRANGEMENT" means this plan of arrangement, as amended and
supplemented from time to time in accordance herewith, the terms of the
Arrangement Agreement or any order of the Court.
"TAX ACT" means the Income Tax Act (Canada).
"TRANSACTION" means the acquisition of certain of the issued and outstanding
securities of Verb by ▇▇▇▇▇▇, together with other transactions contemplated in
the Arrangement Agreement.
"VERB" means Verb Exchange Inc.
"VERB MEETING" means the extraordinary general meeting of Verb Shareholders and
any adjournment thereof to be held to consider and, if deemed advisable,
approve, among other things, the Arrangement and all other matters requiring
approval pursuant to the terms and conditions of the Arrangement Agreement, or
the Interim Order.
"VERB SECURITYHOLDERS" means, at any time, the registered holders of any
securities of Verb, including special warrants, shares, options to purchase
shares and warrants.
"VERB SHAREHOLDERS" means at any time the registered holders at that time of
Verb Shares, excluding Dissenting Shareholders.
"VERB SHARES" means the issued and outstanding common shares in the capital of
Verb.
"VERB SPECIAL WARRANTS" means the issued and outstanding special warrants of
Verb, as set out in Schedule "B" of the Arrangement Agreement.
"VERB WARRANTS" means the issued and outstanding share purchase warrants of
Verb, as set out in Schedule "B" of the Arrangement Agreement.
8.2 HEADINGS AND REFERENCES
The division of this Plan of Arrangement into sections and the
insertion of headings are for convenience of reference only and do not affect
the construction or interpretation of this Plan of Arrangement. Unless otherwise
specified, references to sections are to sections of this Plan of Arrangement.
-3-
8.3 NUMBERS, ETC.
Unless the context otherwise requires, words importing the singular
number only shall include the plural and vice versa; words importing the use of
any gender shall include all genders; and words importing person shall include
firms and corporations and vice versa.
8.4 DATE OF ANY ACTION
In the event that any date on which any action is required to be taken
hereunder by any of the parties is not a Business Day in the place where the
action is required to be taken, such action shall be required to be taken on the
next succeeding day which is a Business Day in such place.
ARTICLE 9
ARRANGEMENT AGREEMENT
9.1 PLAN OF ARRANGEMENT
This Plan of Arrangement is made pursuant to, is subject to the
provisions of, and forms part of the Arrangement Agreement.
ARTICLE 10
THE ARRANGEMENT
10.1 PURPOSE AND EFFECT OF ARRANGEMENT
Upon completion of the Arrangement, Verb Securitholders will become
securityholders of ▇▇▇▇▇▇ and Verb will become a wholly-owned subsidiary of
▇▇▇▇▇▇. ▇▇▇▇▇▇ will thereafter carry on the business currently conducted by
Verb, through Verb, its wholly-owned subsidiary. 10.2 EXCHANGE OF SECURITIES
On the Effective Date at the Effective Time, the following shall occur
and shall be deemed to occur without any further authorization, act or
formality:
(a) in accordance with the calculations and adjustments set forth in
Section 3.4, all of the outstanding Verb Shares, other than shares held
by Dissenting Shareholders, will be acquired by ▇▇▇▇▇▇ in exchange for
the Exchanged Shares;
(b) with the exception of the Dissenting Shareholders, each holder of
issued and outstanding Verb Shares, as of immediately prior to the
Effective Time, shall be deemed to have delivered to Verb, the
certificates representing such Verb Shares, duly endorsed for transfer,
in exchange for their pro rata (exclusive of Verb Shares held by
Dissenting Shareholders) entitlement to Exchanged Shares, provided that
the number of Exchanged Shares issued to any Verb Shareholder, if
calculated to include a fraction of an ▇▇▇▇▇▇ Share, shall be rounded
to the next whole ▇▇▇▇▇▇ Share;
(c) All of the outstanding Class A Verb Special Warrants will be acquired
by ▇▇▇▇▇▇ in exchange for 700,000 post-consolidation ▇▇▇▇▇▇ Shares;
(d) all of the outstanding Class B Verb Special Warrants will be acquired
by ▇▇▇▇▇▇ in exchange for 132,000 post-consolidation ▇▇▇▇▇▇ Shares and
132,000 warrants, entitling
-4-
the holders to acquire an aggregate of 132,000 additional post-
consolidation ▇▇▇▇▇▇ Shares at a price of $0.80 per share, on or before
March 27, 2003;
(e) Each holder of issued and outstanding Class A Verb Special Warrants as
of immediately prior to the Effective Time, shall be deemed to have
delivered to Verb, certificates representing the Class A Verb Special
Warrants for cancellation, in exchange for their pro rata entitlement
to the 700,000 post-consolidation ▇▇▇▇▇▇ Shares, provided that the
number of ▇▇▇▇▇▇ Shares to be issued to any holder of Class A Verb
Special Warrants, if calculated to include a fraction of an ▇▇▇▇▇▇
Share, shall be rounded to the next whole ▇▇▇▇▇▇ Share;
(f) Each holder of issued and outstanding Class B Verb Special Warrants as
of immediately prior to the Effective Time, shall be deemed to have
delivered to Verb, certificates representing the Class B Verb Special
Warrants for cancellation, in exchange for their pro rata entitlement
to the 132,000 post-consolidation ▇▇▇▇▇▇ Shares and 132,000 warrants of
▇▇▇▇▇▇, provided that the number of ▇▇▇▇▇▇ Shares to be issued to any
holder of Class B Verb Special Warrants, if calculated to include a
fraction of an ▇▇▇▇▇▇ Share, shall be rounded to the next whole ▇▇▇▇▇▇
Share;
(g) Subject to the written consent of the holders of all outstanding Verb
Warrants as of immediately prior to the Effective Time, the
certificates evidencing the Verb Warrants shall be deemed to have been
delivered to Verb for cancellation, in exchange for the allotment and
issuance by ▇▇▇▇▇▇ of the warrants set forth in Section 2 of Schedule
"B" of the Arrangement Agreement, under the heading "Rights to Acquire
▇▇▇▇▇▇ Shares Post-Transaction".
(h) except as provided for in the Arrangement Agreement or herein all
options, warrants and other rights to acquire Verb Shares or securities
convertible into Verb Shares that remain in existence immediately prior
to the Effective Time, if any, shall be immediately cancelled;
(i) Verb shall transfer the Verb Shares to ▇▇▇▇▇▇ and shall issue a
certificate in the name of ▇▇▇▇▇▇ for all of the issued and outstanding
Verb Shares in exchange for the requisite number of Exchanged Shares.
Outstanding Verb Special Warrants and Verb Warrants shall be cancelled;
(j) ▇▇▇▇▇▇ shall deliver to Verb certificates representing the requisite
number of ▇▇▇▇▇▇ Shares, or share purchase warrants, as applicable,
issued in exchange for Ayotte's receipt of all of the issued and
outstanding Verb Shares and evidence of the cancellation of the Verb
Special Warrants and Verb Warrants, registered in the names of the Verb
Securityholders for delivery to the Verb Securityholders subject to the
conditions of Section 3.3 and Article 4;
(k) each Verb Securityholder, as constituted immediately prior to the
Effective Time, shall cease to be a holder of Verb securities and the
exchange of the securities held by each Verb Securityholder in exchange
for securities of ▇▇▇▇▇▇ shall be recorded in the security registers of
Verb as of the Effective Date;
(l) the certificate representing each Verb Share or other security of Verb,
other than the certificate issued to ▇▇▇▇▇▇ under Section 3.2(g) above
shall be deemed to have been transferred and cancelled as of the
Effective Time; and
-5-
(m) each Verb Securityholder, other then Dissenting Shareholders, as
constituted immediately prior to the Effective Time, shall be deemed to
have executed and delivered all consents, releases, assignments and
waivers, statutory or otherwise, required to transfer such securities
in accordance with the provisions hereof.
10.3 ACQUISITION OF COMMON SHARES OF DISSENTING HOLDERS
The shares of any Verb Shareholder who, at or prior to the Verb
Meeting, sent a Notice of Dissent (as defined in Section 5.2) to Verb in
accordance with Article 5 below, to whom Verb forwarded a Notice of Intention to
Act (as defined in Section 5.5) following approval of the Arrangement at the
Verb Meeting, and who then forwarded a notice to Verb requiring Verb to purchase
their Verb Shares in accordance with the provisions of Section 5.6 hereof, shall
be, and shall be deemed to be surrendered to Verb for cancellation and cancelled
contemporaneously with the acquisition by ▇▇▇▇▇▇ of Verb securities pursuant to
Section 3.2 on payment of the fair value therefor by Verb to the Dissenting
Shareholder and such holders shall thereupon have no rights or entitlements with
respect to those Verb Shares except as provided in Article 5.
10.4 CALCULATION OF EXCHANGED SHARES
The aggregate number of ▇▇▇▇▇▇ Shares to be issued by ▇▇▇▇▇▇ to the
Verb Shareholders on the Effective Date (the "EXCHANGED SHARES") in
consideration for Ayotte's acquisition of all of the issued and outstanding
shares of Verb, with the exception of those held by the Dissenting Shareholders,
shall be calculated in accordance with the following formulas:
ES = 4,320,925 - B - C
WHERE:
B = (F / 2,000,000) X 4,320,925
WHERE:
F = The amount, stated in Canadian dollars (using, where
necessary, the purchase exchange rate quoted by the Royal
Bank of Canada as of the close of business on the day
immediately preceding the Effective Date), that Verb's
aggregate liabilities (net of any amounts owing by Verb to
▇▇▇▇▇▇), including accrued lease obligations and
off-balance sheet liabilities, but excluding any accrued
liabilities relating to the Transaction or any financing
transactions undertaken in order to satisfy the Financing
Condition, exceed (US)$200,000 as of the close of business
on the day immediately preceding the Effective Date.
C = (4,320,925 - B) X (G / H)
WHERE:
G = The aggregate number of Verb Shares held by the
Dissenting Shareholders.
H = The aggregate number of issued and outstanding
Verb Shares immediately prior to the Effective Time,
inclusive of those held by the Dissenting
Shareholders.
-6-
Notwithstanding the aforesaid formulas, it is acknowledged that the aggregate
number of Exchanged Shares may differ to a minor extent from what is calculated
using the aforesaid formulas as the aggregate number of Exchanged Shares
issuable to any Verb Shareholder, if calculated to include a fraction, shall be
rounded to the nearest next whole share.
ARTICLE 11
CERTIFICATES
11.1 DELIVERY OF SHARE CERTIFICATES
On or before the Effective Date:
(a) on receipt from Verb of the share certificate registered in the
name of ▇▇▇▇▇▇, contemplated to be delivered under Section 3.2(g)
hereof, (less any shares for which a Notice of Dissent shall have
been received by Verb and pursuant to which, Verb will repurchase
the shares for which the Notice of Dissent was received for
cancellation), ▇▇▇▇▇▇ shall cause a treasury order to be delivered
to the registrar and transfer agent for ▇▇▇▇▇▇, ComputerShare
Investor Services Inc., (the "TRANSFER AGENT") providing for the
issuance of the ▇▇▇▇▇▇ Shares to be issued pursuant to the
Arrangement for delivery to such Verb Securityholders in
accordance with this Section 4.1; provided however that the
certificates representing the ▇▇▇▇▇▇ Shares of those certain Verb
Securityholders which are to be held in escrow will be retained by
the Transfer Agent, to be released to the Verb Securityholders in
accordance with the terms and conditions of the Escrow Agreement;
(b) unless otherwise directed by the applicable Verb Securityholder,
and as communicated by Verb to ▇▇▇▇▇▇ in writing, the certificates
evidencing the ▇▇▇▇▇▇ Shares referred to in this Section shall be
issued and registered in the name of the registered holder of the
Verb Shares or other Verb securities acquired or cancelled;
(c) on and after the Effective Date, any certificate representing Verb
Shares or other Verb securities shall represent only the right to
receive ▇▇▇▇▇▇ Shares or other ▇▇▇▇▇▇ securities in accordance
with this Section; and
(d) as soon as practicable following the Effective Date, where a Verb
Securityholder has not exercised the Right of Dissent in
accordance with Article 5, ▇▇▇▇▇▇ will cause the Transfer Agent to
deliver certificates representing the ▇▇▇▇▇▇ Shares or other
▇▇▇▇▇▇ securities as contemplated under Section 3.2 above,
required to be delivered to such holder pursuant to the provisions
hereof.
ARTICLE 12
AMENDMENT
12.1 GRANT OF RIGHT OF DISSENT
Notwithstanding Section 3.2, Verb Shareholders may exercise a right of
dissent (the "RIGHT OF DISSENT") pursuant to the provisions of the Interim Order
and this Article 5.
12.2 DISSENT PROCEDURES
A Verb Shareholder who wishes to exercise his or her Right of Dissent
must give written notice of his or her dissent (a "NOTICE OF DISSENT") to Verb
by depositing such Notice of Dissent with Verb, or mailing it to Verb by
registered mail, at its registered and records office at 1600 - ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇, marked to the attention of ▇▇▇▇
▇▇▇▇▇, or by personally
-7-
serving it on any director or officer of Verb, in all cases not later than 48
hours before the Verb Meeting. To be valid, a Notice of Dissent must:
(a) state that the Verb Shareholder is exercising its Right of Dissent; and
(b) specify the number of Verb Shares (which must not be less than all of
the Verb Shares held by such person) in respect of which such Verb
Shareholder is exercising its Right of Dissent.
12.3 RIGHT TO VOTE
The giving of a Notice of Dissent does not deprive a Verb Shareholder
of its right to vote at the Verb Meeting against the resolution approving the
Arrangement. A vote against such resolution or the execution or exercise of a
proxy does not constitute a Notice of Dissent.
12.4 VOTING
A Verb Shareholder is not entitled to exercise a Right of Dissent with
respect to any Verb Shares if the shareholder votes (or instructs or is deemed,
by submission of any incomplete proxy, to have instructed its proxyholder to
vote) in favour of the resolution approving the Arrangement. A Verb Shareholder,
however, may vote as proxy for a shareholder whose proxy requires an affirmative
vote, without affecting his or her right to exercise the Right of Dissent.
12.5 NOTICE OF INTENTION
If the resolution approving the Arrangement is passed, Verb will give
each Verb Shareholder that has delivered a valid Notice of Dissent (being the
"DISSENTING SHAREHOLDERS") prior notice of its intention to act (a "NOTICE OF
INTENTION TO ACT") on such resolution.
12.6 PURCHASE OF SHARES
On receiving a Notice of Intention to Act in accordance with Section
5.5, the Dissenting Shareholder is entitled to require Verb to purchase all of
the Verb Shares in respect of which the Notice of Dissent was given.
12.7 DELIVERY OF SHARES
The Dissenting Shareholder may only exercise the right under Section
5.6 by delivering to Verb, at the address specified in Section 5.2 within 14
days after Verb gives the Notice of Intention to Act in accordance with Section
5.5:
(a) a notice that he or she requires Verb to purchase all the Verb Shares
referred to in Section 5.6; and
(b) the share certificate(s) representing all the Verb Shares referred to
in Section 5.6,
and thereupon the Dissenting Shareholder is bound to sell those Verb Shares to
Verb and Verb is bound to purchase them.
12.8 PRICE PAID FOR SHARES
The price to be paid to the Dissenting Shareholder for his or her Verb
Shares will be their fair value as of the day before the date on which the
resolution referred to in Section 5.4 was passed and every Dissenting
Shareholder who has complied with Section 5.7 will be paid the same price.
-8-
12.9 DETERMINATION OF FAIR VALUE
The fair value of the Verb Shares shall be determined in accordance
with the provisions of the Interim Order and the BCCA.
12.10 NOTICE
Any notice required to be given by Verb or a Dissenting Shareholder to
the other in connection with the exercise of the Right of Dissent will be deemed
to have been given and received, if delivered, on the day of delivery, or, if
mailed, on the earlier of the date of receipt and the fifth business day after
the day of mailing, or, if sent by telecopier or other similar form of
transmission, the first business day after the date of transmittal.
12.11 PARTICIPATION
A holder of Verb Shares who:
(a) properly exercises the Right of Dissent by complying with all of the
procedures (the "DISSENT PROCEDURES") required to be complied with by a
Dissenting Shareholder, will (i) be bound by the provisions of this
Section 5.11;
(ii) be deemed not to have participated in the Arrangement;
(iii) as of the Effective Date, cease to have any right as
a Verb Shareholder other than the right to be paid
the fair value of the Verb Shares by Verb in
accordance with the Dissent Procedures; or
(b) seeks to exercise the Right of Dissent, but
(i) who for any reason does not properly fulfill each of the Dissent
Procedures required to be completed by a Dissenting Shareholder;
or
(ii) subsequent to giving his or her Notice of Dissent acts
inconsistently with such dissent;
will be deemed to have participated in the Arrangement on the same
basis as each non-dissenting Verb Shareholder and will be issued, as of
the Effective Date, such Exchanged Shares as it is entitled to on the
basis determined in accordance with Article 3.
ARTICLE 13
AMENDMENT OF THE PLAN OF ARRANGEMENT
13.1 AMENDMENT OF THE PLAN OF ARRANGEMENT
(a) Verb and ▇▇▇▇▇▇ may jointly amend or supplement this Plan of
Arrangement at any time and from time to time provided that such
amendment or supplement must be contained in a written document which
is filed with the Court and, if made following the Verb Meeting,
approved by the Court and communicated to the Verb Shareholders in the
manner, if any, required by the Court. Any amendment or supplement to
this Plan of Arrangement may be proposed by Verb and ▇▇▇▇▇▇, jointly,
at any time prior to or at the Verb Meeting with or without any prior
notice or communication and, if so proposed and accepted by the persons
voting at the Verb Meeting, shall become part of this Plan of
Arrangement for all purposes.
SCHEDULE "B"
TO THE ARRANGEMENT AGREEMENT DATED AS OF FEBRUARY 28MAY 1, 2002
BETWEEN VERB EXCHANGE INC. AND ▇▇▇▇▇▇ MUSIC INC.
CURRENT RIGHTS TO ACQUIRE VERB SHARES
-------------------------------------
1. 700,000 Class A Special Warrants entitling the holders to acquire 700,000
post-consolidation ▇▇▇▇▇▇ Shares for no additional consideration, and
conditional upon completion of the Arrangement.
2. 660,000 Class B Special Warrants entitling the holders to acquire 132,000
post-consolidation ▇▇▇▇▇▇ Shares and 132,000 warrants, for no additional
consolidation, and conditional upon completion of the Arrangement.
3.
a. 1,000,000 warrants exercisable at (US)$0.50 on or before June 26, 2003;
b. 25,000 warrants exercisable at (US)$0.25 on or before November 30,
2003;
c. 125,000 warrants exercisable at (US)$1.00 on or before November 15,
2002;
d. 77,342 warrants exercisable at (CDN)$0.25 on or before various dates
between June, 2003 and September, 2003;
e. 100,000 warrants exercisable for consideration if Verb is not public on
or before April, 2003;
f. 3,754,751 warrants issued in connection with the Cadium acquisition.
RIGHTS TO ACQUIRE ▇▇▇▇▇▇ SHARES POST-TRANSACTION
------------------------------------------------
1. Through the Plan of Arrangement, and with the written consent of all
holders, all Class A Special Warrants will be exchanged for 700,000
post-consolidation ▇▇▇▇▇▇ Shares.
2. Through the Plan of Arrangement, and pursuant to the terms of the
securities, all Class B Special Warrants will be exchanged for 132,000
post-consolidation ▇▇▇▇▇▇ Shares and warrants entitling the holders to
acquire an additional 132,000 post-consolidation ▇▇▇▇▇▇ Shares at a price of
$0.80 per share, on or before March 27, 2003.
3. Through the Plan of Arrangement, and with the consent of all holders, all
warrants will either be cancelled or exchanged for the following
post-consolidation warrants of the Resulting Issuer;
a. 200,000 warrants @ (US)$2.50 - expiring on June 26, 2002
b. 25,000 warrants @ (US)$5.00 - expiring on November 15, 2003
c. 30,000 warrants @ (Cdn)$1.25 - expiring on November 30, 2003(1)
d. 1,000,000 warrants @ (Cdn)$1.25 - expiring 18 months from Closing(1)
(1) If the shares trade at (Cdn)$1.75 for 10 consecutive trading days, the
warrants must be exercised within 30 days
SCHEDULE "C"
TO THE ARRANGEMENT AGREEMENT DATED AS OF MAY 1, 2002
BETWEEN VERB EXCHANGE INC. AND ▇▇▇▇▇▇ MUSIC INC.
CURRENT RIGHTS TO ACQUIRE ▇▇▇▇▇▇ SHARES
---------------------------------------
1. 1,235,000 Share Purchase Warrants exercisable at $0.80 on or before June 14,
2002.
2. 4,500,624 Special Warrants entitling the holders to acquire, for no
additional consideration, 4,500,624 ▇▇▇▇▇▇ Shares and 4,500,624 warrants,
each warrant exercisable at $0.16 on or before April 23, 2003.
RIGHTS TO ACQUIRE ▇▇▇▇▇▇ SHARES POST-TRANSACTION
------------------------------------------------
1. 247,000 Share Purchase Warrants exercisable at $4.00 on or before June 14,
2002.
2. 900,125 Special Warrants entitling the holders to acquire, for no additional
consideration, 900,125 post-consolidation ▇▇▇▇▇▇ Shares and 900,125
warrants, each warrant exercisable at $0.80 on or before April 23, 2003.
