UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13
or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of
earliest event reported): July 6, 2015
YAPPN CORP.
(Exact Name of Small Business Issuer as Specified
in Charter)
Delaware |
|
000-55082 |
|
27-3448069 |
(State or Other Jurisdiction
of Incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification
No.) |
1001 Avenue of the
Americas, 11th Floor
New York, NY |
|
10018 |
(Address of Principal Executive Offices ) |
|
(Zip Code) |
Small Business Issuer’s
telephone number, including area code: (888) 859-4441
Check the appropriate box below if the Form
8-K filing is intended to simultaneously satisfy the filing obligation of the small business issuer under any of the following
provisions:
☐ |
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
In this Current Report on Form 8-K, “Company,”
“our company,” “us,” and “our” refer to Yappn Corp. and its subsidiaries, unless the context
requires otherwise.
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this Current
Report on Form 8-K contains some forward-looking statements. Certain of the matters discussed concerning our operations, cash flows,
financial position, economic performance and financial condition, and the effect of economic conditions include forward-looking
statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include
words such as "expects," "anticipates," "intends," "plans," "believes," "estimates"
and similar expressions are forward-looking statements. Although we believe that these statements are based upon reasonable assumptions,
including projections of orders, sales, operating margins, earnings, cash flow, research and development costs, working capital,
capital expenditures and other projections, they are subject to several risks and uncertainties. Investors are cautioned that our
forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially
from the expectations expressed in the forward-looking statements.
As for the forward-looking statements that
relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of estimates,
forecasts and projections may be better or worse than projected. Given these uncertainties, you should not place any reliance on
these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the
date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates
and assumptions associated with them, after the date of this filing to reflect events or changes in circumstances or changes in
expectations or the occurrence of anticipated events. You are advised, however, to consult any additional disclosures we make in
our reports on Form 10-K, Form 10-Q, Form 8-K, or their successors.
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
See Item 2.01
ITEM 2.01 –
ACQUISITION OR DISPOSITION OF ASSETS.
On July 6, 2015, the Company, entered into
a definitive agreement to acquire all of the intellectual property assets of Ortsbo Inc. (“Ortsbo”), a subsidiary of
Intertainment Media Inc. (“Intertainment”), both controlled by David Lucatch, our Chief Executive Officer. The purchased
assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property
for a total purchase price of US $17 Million, which will be paid by the assumption of US $1 Million in debt and the issuance of
US $16 Million worth of the Company’s restricted common shares (320 Million shares at US $0.05 per share). A description
of the terms and conditions of the transaction is incorporated by reference to the copy of the Asset Purchase Agreement between
the Company, Ortsbo, Intertainment, and Winterberry Investments Inc., is attached hereto as Exhibit 2.1.
The transaction is expected to close on
or before September 15, 2015 (the “Closing Date”), and is subject to closing conditions, including but not
limited to, each party obtaining all necessary approvals, an agreement to be entered into with Winterberry Investments Inc. as
one of the Closing Date transactions, pursuant to which Winterberry will provide certain services for the consideration
described therein, and a requirement to consolidate the Company common shares on a ten-to-one (10:1) basis before the Closing
Date. No assurances can be provided as to the closing of the transaction or as to the Closing Date.
The foregoing
description of the Asset Purchase Agreement is a summary and is qualified in its entirety by
reference to such document, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL
OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
On July 15, 2015, the Company completed a
secured debt financing of US $4.5 Million of 12% Secured Debentures. The Secured Debentures have a maturity date of December
31, 2015 but may be accelerated under certain conditions. Furthermore, the Company has an obligation to consolidate the
Company common shares on a ten-to-one (10:1) basis on or before the Closing Date (as defined in Item 2.01 herein).
The
foregoing description of the 12% Secured Debentures is a summary and is qualified in its
entirety by reference to the form of such document, which is attached hereto as Exhibit 10.1 and is incorporated herein by
reference.
In addition, the Company has executed a Security
Agreement which provides a general and continuing security interest over all of the Company assets for the payment and performance
of the Company’s obligations under the Secured Debentures.
The foregoing
description of the Security Agreement is a summary and is qualified in its entirety by reference
to the form of such document, which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.
The offer and sale of all
securities listed above to all non-U.S. citizens or entities were affected in reliance on the exemptions for sales of
securities not involving a public offering, as set forth in Regulation S promulgated under the Securities Act of 1933
(“Securities Act”). The Subscribers acknowledged the following: Subscriber is not a United States Person, nor is
the Subscriber acquiring the securities directly or indirectly for the account or benefit of a United States Person. None of
the funds used by the Subscriber to purchase the securities have been obtained from United States Persons. For purposes of
the foregoing, "United States Person" within the meaning of U.S. tax laws, means a citizen or resident of
the United States, any former U.S. citizen subject to Section 877 of the Internal Revenue Code, any corporation, or
partnership organized or existing under the laws of the United States of America or any state, jurisdiction, territory or
possession thereof and any estate or trust the income of which is subject to U.S. federal income tax irrespective of its
source, and within the meaning of U.S. securities laws, as defined in Rule 902(o) of Regulation S, means: (i) any natural
person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the
United States; (iii) any estate of which any executor or administrator is a U.S. person; (iv) any trust of which any trustee
is a U.S. person; (v) any agency or branch of a foreign entity located in the United States; (vi) any non-discretionary
account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of
a U.S. person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other
fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership or
corporation if organized under the laws of any foreign jurisdiction, and formed by a U.S. person principally for the purpose
of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by
accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts.
ITEM 7.01 REGULATION FD DISCLOSURE.
A copy of the press release reflecting the
actions in the report is furnished as Exhibit 99.1 to this Current Report filed on Form 8-K and is incorporated herein by
reference.
Note: the information in this report (including
the exhibits) is furnished pursuant to Item 7.01 and shall not be deemed to be “filed” for the purposes of Section 18
of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, or incorporated by reference in
any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, except as shall be expressly set
forth by specific reference in such a filing. This report will not be deemed a determination or an admission as to the
materiality of any information in the report that is required to be disclosed solely by Regulation FD.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
The following exhibits are furnished herewith:
Exhibit No. |
| Description |
2.1 |
| Asset Purchase Agreement between the Company, Ortsbo Inc., Intertainment Media, Inc., and Winterberry Investments Inc. dated
July 6, 2015. |
10.1 |
| Form of 12% Secured Debentures. |
10.2 |
| Form of Security Agreement, dated July 15, 2015. |
99.1 |
| Press Release dated July 15, 2015, issued by the Company. |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
July 16, 2015
|
Yappn Corp. |
|
|
|
|
By: |
/s/ David Lucatch |
|
|
David Lucatch |
|
|
Chief Executive Officer |
5
Exhibit 2.1
Asset Purchase
Agreement
BETWEEN
intertainment
media inc.
- and -
ORTSBO INC.
- and -
YAPPN CORP.
- and -
WINTERBERRY
INVESTMENTS INC.
July 6, 2015
TABLE OF CONTENTS
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Page |
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Article 1 |
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INTERPRETATION |
2 |
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|
1.1 |
|
Definitions |
3 |
1.2 |
|
Certain Rules of Interpretation |
11 |
1.3 |
|
Governing Law |
12 |
1.4 |
|
Entire Agreement |
12 |
1.5 |
|
Schedules and Exhibits |
12 |
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|
Article 2 |
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Purchase and Sale |
13 |
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|
2.1 |
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Agreement of Purchase and Sale |
13 |
2.2 |
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Future Obligations |
13 |
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Article 3 |
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Purchase Price |
13 |
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|
3.1 |
|
Purchase Price |
13 |
3.2 |
|
Allocation of Purchase Price |
14 |
3.3 |
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Taxes |
14 |
3.4 |
|
United States Securities Regulatory Disclaimer |
14 |
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Article 4 |
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REPRESENTATIONS AND WARRANTIES OF THE Parent and the SELLER |
15 |
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|
4.1 |
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Corporate Existence |
15 |
4.2 |
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Capacity to Enter Agreement |
15 |
4.3 |
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Binding Obligation |
15 |
4.4 |
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Absence of Conflict |
16 |
4.5 |
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No Other Agreements to Purchase |
16 |
4.6 |
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Title to Purchased Assets |
16 |
4.7 |
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Residence of Seller |
16 |
4.8 |
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Sufficiency of Purchased Assets; No Material Contracts or Permits |
16 |
4.9 |
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Regulatory Approvals |
17 |
4.10 |
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Consents |
17 |
4.11 |
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Tax Matters |
17 |
4.12 |
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Intellectual Property |
17 |
4.13 |
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Rights to Use Personal Information |
19 |
4.14 |
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Litigation |
19 |
4.15 |
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No Expropriation |
20 |
4.16 |
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Disclosure |
20 |
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Article 5 |
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REPRESENTATIONS AND WARRANTIES OF the buyer |
20 |
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|
5.1 |
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Corporate Existence of Buyer |
20 |
5.2 |
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Capacity to Enter Agreement |
20 |
Table
of Contents
(continued)
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|
Page |
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5.3 |
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Binding Obligation |
21 |
5.4 |
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Absence of Conflict |
21 |
5.5 |
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Investment Canada Act |
21 |
5.6 |
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Regulatory Approvals |
21 |
5.7 |
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Litigation |
21 |
5.8 |
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GST/HST and QST |
21 |
5.9 |
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Post-closing Share Capital |
21 |
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Article 6 |
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REPRESENTATIONS AND WARRANTIES OF WINTERBERRY |
21 |
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|
6.1 |
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Corporate Existence of Winterberry |
21 |
6.2 |
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Capacity to Enter Agreement |
22 |
6.3 |
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Binding Obligation |
22 |
6.4 |
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Absence of Conflict |
22 |
6.5 |
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Regulatory Approvals |
22 |
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Article 7 |
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COVENANTS |
22 |
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7.1 |
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Completion of Closing Date and Pre-Closing Date Transactions |
22 |
7.2 |
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Conduct of Business Before Closing |
23 |
7.3 |
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Actions to Satisfy Closing Conditions |
23 |
7.4 |
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Risk of Loss |
23 |
7.5 |
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Non-Competition and Non-Solicitation |
24 |
7.6 |
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Restricted Business Opportunities |
25 |
7.7 |
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Allocation of Buyer Common Shares and Cash |
25 |
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Article 8 |
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CLOSING CONDITIONS |
25 |
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|
8.1 |
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Conditions for the Benefit of the Buyer |
25 |
8.2 |
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Waiver or Termination by the Buyer |
27 |
8.3 |
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Conditions for the Benefit of the Parent and the Seller |
27 |
8.4 |
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Waiver or Termination by the Seller |
28 |
8.5 |
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Conditions for the Benefit of Winterberry |
29 |
8.6 |
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Waiver or Termination by Winterberry |
30 |
8.7 |
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Conditions Precedent—No Action to Restrain |
30 |
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Article 9 |
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SURVIVAL AND INDEMNIFICATION |
30 |
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|
9.1 |
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Survival of Covenants and Representations and Warranties |
30 |
9.2 |
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Parent and Seller Indemnification for Breach of Warranty, etc |
30 |
9.3 |
|
Buyer’s Indemnifications for Breaches of Warranty, etc |
31 |
9.4 |
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Limitation on Mutual Indemnification |
31 |
9.5 |
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Additional Indemnities of the Parent and the Seller |
31 |
Table
of Contents
(continued)
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Page |
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|
9.6 |
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Additional Buyer’s Indemnities |
32 |
9.7 |
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Notice of Claim |
32 |
9.8 |
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Time Limits for Notice |
33 |
9.9 |
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Exclusive Remedy |
33 |
9.10 |
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Third Party Indemnification |
34 |
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Article 10 |
|
CLOSING ARRANGEMENTS |
33 |
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|
10.1 |
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Closing |
34 |
10.2 |
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Closing Procedures |
34 |
10.3 |
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Other Closing Date Transactions |
35 |
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Article 11 |
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GENERAL |
35 |
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|
11.1 |
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Investment Canada Act Reporting |
35 |
11.2 |
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Time of Essence |
35 |
11.3 |
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Notices |
35 |
11.4 |
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Severability |
38 |
11.5 |
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Submission to Jurisdiction |
38 |
11.6 |
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Amendment and Waiver |
39 |
11.7 |
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Further Assurances |
39 |
11.8 |
|
Assignment and Enurement |
39 |
11.9 |
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Counterparts and Electronic Delivery |
39 |
11.10 |
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No Broker |
39 |
11.11 |
|
Payment and Currency |
39 |
11.12 |
|
Vienna Convention |
40 |
11.13 |
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No Contra Proferentem |
40 |
11.14 |
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Acknowledgement |
40 |
11.15 |
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Language |
40 |
11.16 |
|
Expenses |
40 |
Asset PURCHASE
AGREEMENT
THIS AGREEMENT is dated as of July 6,
2015
BETWEEN:
INTERTAINMENT MEDIA INC., a corporation existing under
the laws of Alberta
(the “Parent”)
- and -
ORTSBO INC., a corporation existing under the laws
of Ontario
(the “Seller”)
- and -
YAPPN CORP., a corporation existing under the laws
of Delaware
(the “Buyer”)
- and -
WINTERBERRY INVESTMENTS INC., a corporation existing
under the laws of Ontario
(“Winterberry”)
PREAMBLE:
| A. | The Parent is a public company listed on the TSX-V and legally and beneficially owns 93.05% of
the issued and outstanding shares of the Seller. |
| B. | The Seller carries on the Business. |
| C. | The Seller wishes to sell, and the Buyer wishes to purchase, all of the Seller’s assets that
are used in connection with the Business. |
THEREFORE, the Parties agree as follows:
Article
1
INTERPRETATION
In this Agreement, the following terms have
the following meanings:
| 1.1.1 | “Affiliate” means, with respect to any Person, any Person that directly or indirectly
controls, is controlled by, or is under common control with the first Person. The terms “control”, “controlled
by” and “under common control with” means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the ownership of voting shares, by contract or otherwise. |
| 1.1.2 | “Agreement” means this agreement, including all Schedules, as it may be confirmed,
amended, modified, supplemented or restated by written agreement between the Parties. |
| 1.1.3 | “Business” means the following components of the business of the Seller: developing
technologies, software and processes related to language translation and communication services. |
| 1.1.4 | “Business Day” means any day excluding a Saturday, Sunday or statutory holiday
in the Province of Ontario or the State of New York and also excluding any day on which the principal
chartered banks located in the City of Toronto or New York City are not open for business during normal banking hours. |
| 1.1.5 | “Buyer” is defined in the recital of the Parties above. |
| 1.1.6 | “Buyer’s Certificate of Incorporation” means the certificate of incorporation
of the Buyer issued by the State of Delaware dated November 3, 2010, as amended. |
| 1.1.7 | “Buyer Common Shares” means shares of common stock in the capital of the Buyer. |
| 1.1.8 | “Buyer Debentures” means up to $5.5 million of 12% secured debentures to be
issued by the Buyer to certain subscribers, including Winterberry. |
| 1.1.9 | “Claim” means any claim, demand, action, cause of action, suit, arbitration,
investigation, proceeding, complaint, grievance, charge, prosecution, assessment or reassessment, including any appeal or application
for review. |
| 1.1.10 | “Closing” means the completion of the sale to, and purchase by, the Buyer of
the Purchased Assets pursuant to this Agreement. |
| 1.1.11 | “Closing Date” means September 15, 2015 or any other date that the Parties may
agree is the date upon which the Closing will take place. |
| 1.1.12 | “Closing Time” means 10:00 am (Toronto time) on the Closing Date at which the
Closing takes place. |
| 1.1.13 | “Closing Date Transactions” means the transactions described in Schedule 1.1.13. |
| 1.1.14 | “Commodity Taxes” means all Taxes levied on or measured by, or referred to as
transfer, land transfer, registration charges, gross receipt, sales, provincial sales, use, consumption, GST/HST, QST, value-added,
turnover, excise or stamp, all customs duties, countervail, anti-dumping and special import measures and all import and export
taxes. |
| 1.1.15 | “Communication” means any notice, demand, request, consent, approval or other
communication which is required or permitted by this Agreement to be given or made by a Party. |
| 1.1.16 | “Contract” means any agreement, understanding, undertaking, commitment, licence,
or lease, whether written or oral. |
| 1.1.17 | “Damage Notice” is defined in Section 7.4. |
| 1.1.18 | “Employees” means all personnel and independent contractors employed, engaged
or retained by the Seller in connection with the Business, including any that are on medical or long-term disability leave or other
statutory or authorized leave of absence. |
| 1.1.19 | “Encumbrance” means any security interest, mortgage, charge, pledge, hypothec,
lien, encumbrance, restriction, option, adverse claim, right of others or other encumbrance of any kind. |
| 1.1.20 | “ETA” means the Excise Tax Act (Canada). |
| 1.1.21 | “Excluded Assets” means the property and assets of the Seller except the Purchased
Intellectual Property. |
| 1.1.22 | “Excluded Liabilities” means all liabilities of the Parent and the Seller existing
as of the Closing Time or relating to the period ending at the Closing Time other than the Parent Debt, the Seller Debt and the
Ortsbo Debt, including for certainty: |
| 1.1.22.1 | any liability of the Parent or the Seller to any bank or other financial institution by way of
loan or other credit facility; |
| 1.1.22.2 | any liability of the Parent or the Seller for any personal injury Claims arising by reason of the
occurrence on or before the Closing Date of any injury, accident or other alleged damage-causing event with respect to the operations
of the Parent or the Seller on or before the Closing Date or relating to products manufactured or sold or services performed by
the Parent or the Seller on or before the Closing Date that provide the basis for a personal injury Claim after the Closing Date; |
| 1.1.22.3 | any liability of the Parent or the Seller to their respective shareholders, affiliates or associates
or any other Person not dealing at arm’s length with any of them; |
| 1.1.22.4 | any liability of the Parent or the Seller for any Claims relating to the Excluded Assets; |
| 1.1.22.5 | any liability of the Parent or the Seller, absolute or contingent, incurred, due or accruing due,
whether before or after the Closing Date, relating to the Excluded Assets or any Contract relating to the Excluded Assets, and
any obligations, absolute or contingent, arising from, incidental to, or in any way related to the ownership or operation of the
Excluded Assets; |
| 1.1.22.6 | any liability of the Seller for any breach by the Seller of any Laws relating to the operation
of the Business or use of the Purchased Assets up to the Closing Date; |
| 1.1.22.7 | any liability incurred or accruing due before the Closing Time under any Contract; |
| 1.1.22.8 | any liability of the Parent or the Seller for any Taxes (including penalties, fines and interest);
and |
| 1.1.22.9 | any liability of the Seller for wages, salary, bonus, vacation pay or other remuneration, severance
pay, pension obligations or other obligations under any employee plans or otherwise, or for any Claims pursuant to workers’
compensation or similar Laws, relating to any Employees while employed, engaged or retained by the Seller in the Business. |
| 1.1.23 | “Future Obligations” means all obligations arising from or incidental to the
ownership or operation of, or in any way related to, the Purchased Assets which are not Excluded Liabilities and which arise after
the Closing Time. |
| 1.1.24 | “Governmental Authority” means: |
| 1.1.24.1 | any federal, provincial, state, local, municipal, regional, territorial, aboriginal, or other government,
governmental or public department, branch, ministry, or court, domestic or foreign, including any district, agency, commission,
board, arbitration panel or authority and any subdivision of any of them exercising or entitled to exercise any administrative,
executive, judicial, ministerial, prerogative, legislative, regulatory, or taxing authority or power of any nature; and |
| 1.1.24.2 | any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority
under or for the account of any of them, and any subdivision of any of them. |
| 1.1.25 | “GST/HST” means the goods and services tax and the harmonized sales tax imposed
under the ETA. |
| 1.1.26 | “Indemnified Party” means the Party or other indemnified Person entitled to
make a Claim for indemnification under any provision of Article 9. |
| 1.1.27 | “Indemnifying Party” means the Party providing indemnification under any provision
of Article 9 |
| 1.1.28 | “Indemnity Claim” is defined in Section 9.7. |
| 1.1.29 | “Indemnity Notice” is defined in Section 9.7. |
| 1.1.30 | “Insurance Policies” means the insurance policies maintained by the Seller with
respect to the Purchased Assets. |
| 1.1.31 | “Intellectual Property” means: |
| 1.1.31.1 | trade-marks, design marks, logos, service marks, certification marks, official marks, trade names,
business names, corporate names, trade dress, distinguishing guises, slogans, meta tags, keywords, adwords and other characters,
brand elements or other distinguishing features used in association with wares or services, whether or not registered or the subject
of an application for registration and whether or not registrable, and associated goodwill (“Trade-marks”); |
| 1.1.31.2 | inventions, arts, processes, machines, articles of manufacture, compositions of matter, business
methods, formulae, developments and improvements, whether or not patented or the subject of an application for patent and whether
or not patentable, methods and processes for making any of them, and related documentation (whether in written or electronic form)
and know-how (“Inventions”); |
| 1.1.31.3 | software in source code or object code form, documentation, literary works, artistic works, pictorial
works, graphic works, musical works, dramatic works, audio visual works, performances, sound recordings and signals, including
their content, and any compilations of any of them, whether or not registered or the subject of an application for registration,
or capable of being registered (“Works”); |
| 1.1.31.4 | domain names, whether registered primary domain names or secondary or other higher level domain
names (“Domain Names”); |
| 1.1.31.5 | industrial designs and all variants of industrial designs, whether or not registered or the subject
of an application for registration and whether or not registrable (“Designs”); and |
| 1.1.31.6 | trade secrets, technical expertise, and research data and other confidential information relating
to goods and services. |
| 1.1.32 | “Intellectual Property Rights” means: |
| 1.1.32.1 | any common law principle or statutory provision which may provide a right in Intellectual Property,
including all: |
| 1.1.32.1.1 | common law rights and registrations, pending applications for registration and rights to file applications
for the Trade-marks, including all rights of priority; |
| 1.1.32.1.2 | patents, pending patent applications and rights to file applications for the Inventions, including
all rights of priority and rights in continuations, continuations-in-part, divisions, reissues, renewals, re-examinations, exclusions,
and other derivative applications and patents; |
| 1.1.32.1.3 | copyrights in Works and all registrations, pending applications for registration and rights to
file applications for Works and all moral rights and benefits of waivers of moral rights in Works; |
| 1.1.32.1.4 | registrations, pending applications for registration and rights to file applications for registration
of Domain Names and all other common law and statutory rights in Domain Names; and |
| 1.1.32.1.5 | industrial design rights, design patents, design registrations, pending patent and design applications
and rights to file applications for Designs, including all rights of priority and rights in continuations, continuations-in-part,
divisions, re-examinations, reissues and other derivative applications; |
| 1.1.32.2 | all rights in licences, sub-licences, franchise agreements, waivers and other contractual rights
in any of the items listed in Section 1.1.32; and |
| 1.1.32.3 | all rights to enforce the rights and obtain remedies for a violation of any of the rights listed
in Sections 1.1.32.1 and 1.1.32.2. |
| 1.1.33 | “Investment Canada Act” means the Investment Canada Act (Canada). |
| 1.1.34 | “ITA” means the Income Tax Act (Canada). |
| 1.1.35 | “Knowledge of the Seller” means the knowledge that the Parent or the Seller
either has, or would have obtained, after having made or caused to be made all reasonable inquiries necessary to obtain informed
knowledge, including inquiries of the records and management employees of the Parent and the Seller, who are reasonably likely
to have knowledge of the relevant matter. |
| 1.1.36 | “Law” or “Laws” means all laws, statutes, codes, ordinances,
decrees, rules, regulations, by-laws, statutory rules, principles of law, published policies and guidelines, judicial or arbitral
or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, including general
principles of common and civil law, and the terms and conditions of any grant of approval, permission, authority or licence of
any Governmental Authority, and the term “applicable” with respect to Laws and in a context that refers to one or more
Persons, means that the Laws apply to the Person or Persons, or its or their business, undertaking or property, and emanate from
a Governmental Authority having jurisdiction over the Person or Persons or its or their business, undertaking or property. |
| 1.1.37 | “Licence Agreements” is defined in Section 4.12.6. |
| 1.1.38 | “Licensed IP” means the Intellectual Property and Intellectual Property
Rights owned by Persons other than the Seller and that are licensed to the Seller or that are otherwise used in, necessary for
or relate to the conduct of the Business, and includes any Intellectual Property owned by those Persons relating to the Technology
or the Technical Information. |
| 1.1.39 | “Loss” means any loss, liability, damage, cost, expense, charge, fine, penalty
or assessment including the costs and expenses of any action, suit, proceeding, demand, assessment, judgment, settlement or compromise
and all interest, fines, penalties and reasonable professional fees and disbursements. |
| 1.1.40 | “Material Adverse Effect” means any event, occurrence, fact, condition or change:
(i) that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to the business, results
of operations, condition or assets of the Business or the value of the Purchased Assets; or (ii) the knowledge of which would have
affected any decision of a reasonable Person in the Buyer’s position regarding whether to enter into this Agreement, or would
affect any decision of a reasonable Person in the Buyer’s position regarding whether to complete the transactions contemplated
by this Agreement. |
| 1.1.41 | “Material Contract” means a Contract that: |
| 1.1.41.1 | involves or may result in the payment of money or money’s worth by or to the Seller in an
amount in excess of $500,000; |
| 1.1.41.2 | has an unexpired term of more than 3 years (including renewals); |
| 1.1.41.3 | cannot be terminated by the Seller without penalty upon less than thirty (30) days’ notice;
or |
| 1.1.41.4 | the termination of which, or under which the loss of rights, would constitute a Material Adverse
Effect. |
| 1.1.42 | “Originating Persons” means all current and former Employees, officers, directors
and consultants of the Seller, including, in the case of a consultant that is not an individual, all employees, officers, directors,
shareholders and partners of the consultant. |
| 1.1.43 | “Ortsbo Debt” means the aggregate amount of $500,000 owed by the Seller
to Amir Bem, Toronto Tree Top Holdings Ltd. and David Berry. |
| 1.1.44 | “Ortsbo Debt Assumption Agreement” is defined in Section 3.1.4. |
| 1.1.45 | “Owned IP” means all Intellectual Property that is owned by the Seller,
including Intellectual Property relating to the Technology and the Technical Information, as well as all Intellectual Property
Rights that are owned or enforceable by the Seller; |
| 1.1.46 | “Parent” is defined in the recital of the Parties above. |
| 1.1.47 | “Parent Debt” means the sum of approximately $500,000 owed by the Parent to
Winterberry. |
| 1.1.48 | “Parent Debt Assumption Agreement” is defined in Section 3.1.2. |
| 1.1.49 | “Parties” means the Parent, the Seller and the Buyer, collectively, and “Party”
means either of them. |
| 1.1.50 | “Permits” means all authorizations, registrations, permits, certificates of
approval, approvals, grants, licences, quotas, consents, commitments, rights or privileges (other than those relating to the Intellectual
Property) issued or granted by any Governmental Authority to the Seller in respect of the Purchased Assets. |
| 1.1.51 | “Person” will be broadly interpreted and includes: |
| 1.1.51.1 | a natural person, whether acting in his or her own capacity, or in his or her capacity as executor,
administrator, estate trustee, trustee or personal or legal representative, and the heirs, executors, administrators, estate trustees,
trustees or other personal or legal representatives of a natural person; |
| 1.1.51.2 | a corporation or a company of any kind, a partnership of any kind, a sole proprietorship, a trust,
a joint venture, an association, an unincorporated association, an unincorporated syndicate, an unincorporated organization or
any other association, organization or entity of any kind; and |
| 1.1.51.3 | a Governmental Authority. |
| 1.1.52 | “Personal Information” means information about an individual who can be identified
by the Person who holds that information. |
| 1.1.53 | “Privacy Laws” means any Laws that regulate the collection, use or disclosure
of Personal Information. |
| 1.1.54 | “Purchase Price” is defined in Section 3.1. |
| 1.1.55 | “Purchased Assets” means the Purchased Intellectual Property. |
| 1.1.56 | “Purchased Intellectual Property” means: (i) all Intellectual Property and Intellectual
Property Rights that are owned by the Seller, including without limitation those that relate to, are associated with, or are derived
from the patents and patent applications set out in Schedule 1.1.56 and any research and design in respect thereof or improvements
thereto; and (ii) the Licensed IP. |
| 1.1.57 | “QST” means the Quebec sales tax imposed under the QSTA. |
| 1.1.58 | “QSTA” means an Act representing the Quebec sales tax. |
| 1.1.59 | “Restricted Business” means the Business and other any business that would be
directly or indirectly competitive with the Business. |
| 1.1.60 | “Restricted Business Opportunity” means any potential opportunity in the Restricted
Business. |
| 1.1.61 | “Restricted Period” has the meaning set out in Section 7.5.1. |
| 1.1.62 | “Seller” is defined in the recital of the Parties above. |
| 1.1.63 | “Seller Debt” means the aggregate sum of $3,000,000 owed by the Seller to the
Seller Debtholders, as described in more detail in Schedule 10.3.1 |
| 1.1.64 | “Seller Debt Assumption Agreement” is defined in Section 3.1.2. |
| 1.1.65 | “Seller Debtholders” means those Persons identified in Schedule 1.1.65. |
| 1.1.66 | “Tax” means all taxes, duties, fees, premiums, assessments, imposts, levies,
rates, withholdings, dues, government contributions and other charges of any kind whatsoever, whether direct or indirect, together
with all interest, penalties, fines, additions to tax or other additional amounts, imposed by any Governmental Authority. |
| 1.1.67 | “Tax Law” means any Law that imposes Taxes or that deals with the administration
or enforcement of liabilities for Taxes. |
| 1.1.68 | “Technical Information” means all technical information owned by or licensed
(expressly or impliedly) to the Seller including all: |
| 1.1.68.1 | information of a scientific or business nature, regardless of its form; |
| 1.1.68.2 | documentation with respect to research, development, demonstration or engineering work; |
| 1.1.68.3 | information that can be or is used to define a design or process, or to procure, produce, support
or operate materials or equipment; |
| 1.1.68.4 | information regarding methods of production; |
| 1.1.68.5 | other drawings, blueprints, patterns, plans, flow charts, equipment parts lists, computer software
and procedures, specifications, protocols, data structures, formulas, designs, technical data, descriptions, related instruction
manuals, records, passwords, and procedures; and |
| 1.1.68.6 | data and databases, whether registered or unregistered. |
| 1.1.69 | “Technology” means all technology owned by, or licensed to, the Seller. |
| 1.1.70 | “Third Party Claim” is defined in Section 9.7. |
| 1.1.71 | “TSX-V” means the TSX Venture Exchange. |
| 1.1.72 | “Winterberry” is defined in the recital of the Parties above. |
| 1.1.73 | “Winterberry Agreement” means the agreement to be entered into between the Seller
and Winterberry as one of the Closing Date Transactions, pursuant to which Winterberry will provide certain services to the Seller
for the consideration described therein. |
| 1.2 | Certain Rules of Interpretation |
| 1.2.1 | In this Agreement, words signifying the singular number include the plural and vice versa, and
words signifying gender include all genders. Every use of the words “including” or “includes” in this Agreement
is to be construed as meaning “including, without limitation” or “includes, without limitation”, respectively. |
| 1.2.2 | The division of this Agreement into Articles and Sections, the insertion of headings and the inclusion
of a table of contents are for convenience of reference only and do not affect the construction or interpretation of this Agreement. |
| 1.2.3 | Wherever in this Agreement reference is made to a calculation to be made in accordance with GAAP,
the reference is to Canadian generally accepted accounting principles applicable to publicly accountable enterprises under Part I
of the CPA Canada Handbook of the Chartered Professional Accountants of Canada applicable as at the date on which the calculation
is made or required to be made in accordance with GAAP. |
| 1.2.4 | References in this Agreement to an Article, Section, Schedule or Exhibit are to be construed as
references to an Article, Section, Schedule or Exhibit of or to this Agreement unless otherwise specified. |
| 1.2.5 | Unless otherwise specified, any reference in this Agreement to any statute includes all regulations
and subordinate legislation made under or in connection with that statute at any time, and is to be construed as a reference to
that statute as amended, modified, restated, supplemented, extended, re-enacted, replaced or superseded at any time. |
This Agreement is governed by, and is to be
construed and interpreted in accordance with, the Laws of the Province of Ontario and the Laws of Canada applicable in that Province.
This Agreement constitutes the entire agreement
between the Parties pertaining to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties, and there are no representations, warranties or other agreements between
the Parties , express or implied, in connection with the subject matter of this Agreement except as specifically set out in this
Agreement. No Party has been induced to enter into this Agreement in reliance on, and there will be no liability assessed, either
in tort or contract, with respect to, any warranty, representation, opinion, advice or assertion of fact, except to the extent
it has been reduced to writing and included as a term in this Agreement.
| 1.5 | Schedules and Exhibits |
The following is a list of Schedules and Exhibits:
Schedule |
|
Subject Matter |
1.1.13 |
|
Closing Date Transactions |
1.1.56 |
|
Patents and Applications |
1.1.65 |
|
Seller Debtholders |
10.3.1 |
|
Allocation of Consideration to Seller Debtholders |
Article
2
Purchase and Sale
| 2.1 | Agreement of Purchase and Sale |
Subject to the terms and conditions of this
Agreement, on the Closing Date the Seller will sell and the Buyer will purchase, as of and with effect from the Closing Time, the
Purchased Assets.
Effective as of the Closing Time, the Buyer
will, incidental to the acquisition of the Purchased Assets, pay when due, perform and discharge the Future Obligations, but, for
greater certainty, the Buyer will not assume, pay, perform, or discharge any of the Excluded Liabilities or any other liabilities
or obligations of the Seller (other than the Parent Debt, the Seller Debt and the Ortsbo Debt), all of which will remain the sole
responsibility of the Seller or the Parent.
Article
3
Purchase Price
The aggregate purchase price payable by the
Buyer to the Seller for the Purchased Assets is equal to $17,000,000 (the “Purchase Price”) and will be satisfied
by the Buyer at the Closing Time as follows:
| 3.1.1 | by issuing an aggregate of 260,000,000 Buyer Common Shares, at a price of $0.05 per Buyer Common
Share, as follows: |
| 3.1.1.1 | 83,125,000 Buyer Common Shares to the Seller who directs that such 83,125,000 Buyer Common Shares
be issued to the Parent; and |
| 3.1.1.2 | 176,875,000 Buyer Common Shares to the Seller who directs that such 176,875,000 Buyer
Common Shares be issued to Winterberry, or as directed by Winterberry, pursuant to the terms of the Winterberry Agreement; |
| 3.1.2 | by assuming from the Seller, and agreeing to pay when due, perform and discharge, the Parent Debt
under the terms of an assumption agreement in a form and of substance to be agreed to by the Parties acting reasonably (the “Parent
Debt Assumption Agreement”); |
| 3.1.3 | by assuming from the Seller, and agreeing to pay when due, perform and discharge, the Seller Debt
under the terms of an assumption agreement in a form and of substance to be agreed to by the Parties acting reasonably (the “Seller
Debt Assumption Agreement”); and |
| 3.1.4 | by assuming from the Seller, and agreeing to pay when due, perform and discharge, the Ortsbo Debt
under the terms of an assumption agreement in a form and of substance to be agreed to by the Parties acting reasonably (the “Ortsbo
Debt Assumption Agreement”). |
| 3.2 | Allocation of Purchase Price |
The Purchase Price will be allocated among
the Purchased Assets in a manner to be agreed to in writing by the Seller and the Buyer no more than sixty (60) days following
the Closing Date. The Seller and the Buyer will cooperate in the filing of any elections under the ITA and any other applicable
Tax Law as may be necessary or desirable to give effect to that allocation for Tax purposes. The Seller and the Buyer will prepare
and file their respective Tax returns in a manner consistent with that allocation and those elections.
| 3.3.1 | The Seller will pay all Taxes relating to the Purchased Assets which arise before, or are related
to a period of time before, the Closing Time. |
| 3.3.2 | The Seller and the Buyer agree that the sale of the Purchased Assets are zero-rated for GST/HST
pursuant to sections 10 and 10.1 of Part V of Schedule VI to the ETA and sections 188 and 188.1 of the QSTA,
and that the Purchase Price is inclusive of GST/HST and QST, if any. The Buyer will be liable for all other Commodity Taxes properly
payable by the Buyer in connection with the sale and transfer of the Purchased Assets. |
| 3.4 | United States Securities Regulatory Disclaimer |
| 3.4.1 | The issuance of the Buyer Common Shares listed
above (and the Buyer Debentures referenced in Schedule 1.1.13 herein) will be
effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Regulation S promulgated
under the Securities Act of 1933, as amended. The Parent, Selling Debtholders, and Winterberry, as a condition to receiving the
Buyer Common Shares (and the recipients of Buyer Debentures referenced in Schedule 1.1.13
herein), will be required to acknowledge the following: They are not a United States
Person, nor are they acquiring the Buyer Common Shares (and/or the Buyer Debentures
referenced in Schedule 1.1.13 herein) directly or indirectly for the account
or benefit of a United States Person. For these purposes, “United States Person” within the meaning of United States
tax laws, means a citizen or resident of the United States, any former United States citizen subject to Section 877 of the Internal
Revenue Code, any corporation, or partnership organized or existing under the laws of the United States of America or any state,
jurisdiction, territory or possession thereof and any estate or trust the income of which is subject to United States federal income
tax irrespective of its source, and within the meaning of United States securities laws, as defined in Rule 902(o) of Regulation
S, means: (i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under
the laws of the United States; (iii) any estate of which any executor or administrator is a United States person; (iv) any trust
of which any trustee is a United States person; (v) any agency or branch of a foreign entity located in the United States; (vi)
any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit
or account of a United States person; (vii) any discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership
or corporation if organized under the laws of any foreign jurisdiction, and formed by a United States person principally for the
purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned,
by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts. |
| 3.4.2 | The Buyer Common Shares, when issued, will be: (i)
duly authorized and validly issued and are fully paid and nonassessable; and (ii) issued in compliance with all applicable state
and federal laws concerning the issuance of securities. The rights, preferences, privileges and restrictions of the shares of the
Buyer Common Shares are as stated in the Buyer’s Certificate of Incorporation. |
Article
4
REPRESENTATIONS AND WARRANTIES OF THE Parent and the SELLER
Each of the Seller and the Parent represents
and warrants to the Buyer, on a joint and several basis, as follows, and acknowledges that the Buyer is relying upon these representations
and warranties in connection with the purchase of the Purchased Assets, despite any investigation made by or on behalf of the Buyer,
and that this reliance is a right that has been bargained for, and forms part of the consideration in the transactions contemplated
by this Agreement.
The Parent is a corporation duly incorporated
and validly existing under the laws of the Province of Alberta. The Seller is a corporation duly incorporated and validly existing
under the laws of the Province of Ontario.
| 4.2 | Capacity to Enter Agreement |
Each of the Parent and the Seller has all necessary
corporate power, authority and capacity to enter into and perform its obligations under this Agreement.
The execution and delivery of this Agreement
and the completion of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action
on the part of each of the Parent and the Seller. This Agreement has been duly executed and delivered by each of the Parent and
the Seller and constitutes a valid and binding obligation of each of the Parent and the Seller, enforceable against each of them
in accordance with its terms, subject to applicable bankruptcy, insolvency and other Laws of general application limiting the enforcement
of creditors’ rights generally and to the fact that equitable remedies, including specific performance, are discretionary
and may not be ordered in respect of certain defaults.
None of the execution and delivery of this
Agreement, the performance of the Parent’s obligations or the Seller’s obligations under this Agreement, or the completion
of the transactions contemplated by this Agreement will (with or without the giving of notice or lapse of time, or both):
| 4.4.1 | result in or constitute a breach of any term or provision of, or constitute a default under the
articles or by-laws or any resolutions of the board of directors or shareholders of the Seller or the Parent; |
| 4.4.2 | result in the creation or imposition of any Encumbrance on the Purchased Assets; |
| 4.4.3 | contravene any applicable Law; or |
| 4.4.4 | contravene any judgment, order, writ, injunction or decree of any Governmental Authority. |
| 4.5 | No Other Agreements to Purchase |
No Person other than the Buyer has any written
or oral agreement or option or any right or privilege (whether by Law, pre-emptive, contractual or otherwise) capable of becoming
an agreement or option for the purchase or acquisition from the Seller of any of the Purchased Assets or of forming an Encumbrance
against any of the Purchased Assets.
| 4.6 | Title to Purchased Assets |
The Seller owns, possesses and has good and
marketable title to all of the Purchased Assets free and clear of all Encumbrances. At Closing, the Seller will have the absolute
and exclusive right to sell the Purchased Assets to the Buyer as contemplated by this Agreement.
The Seller is not a non-resident of Canada
for purposes of the ITA.
| 4.8 | Sufficiency of Purchased Assets; No Material Contracts or Permits |
| 4.8.1 | The Purchased Assets comprise all of the undertaking, assets and property required for the Buyer
to carry on the Business as it is currently conducted or intended to be conducted by the Seller. |
| 4.8.2 | No Contracts to which Seller or Parent is a party, Material Contracts or Permits are used by, or
necessary for, the Seller to carry on the Business as it is currently conducted or intended to be conducted by the Seller. |
No authorization, approval, order, consent
of, or filing with, any Governmental Authority is required on the part of the Parent or the Seller in connection with the execution,
delivery and performance of this Agreement or any other documents and agreements to be delivered under this Agreement except for
conditional approval in respect of the Parent of the transactions contemplated under this Agreement from the TSX-V, which approval
has been obtained by the Parent prior to the date of this Agreement.
There is no requirement to obtain any consent,
approval or waiver of a party under any Contract to which the Seller is bound in order to complete the transactions contemplated
by this Agreement.
The Seller has paid or made arrangements for
the payment of all Taxes in respect of the Purchased Assets which, as of the Closing Date, are capable of forming or resulting
in a lien on the Purchased Assets or of becoming a liability or obligation of the Buyer. To the Knowledge of the Seller there are
no Claims either in progress, pending or threatened, in connection with any Taxes in respect of the Purchased Assets. The Seller
has deducted, withheld or collected, and remitted all amounts required to be deducted, withheld, collected or remitted by it in
respect of any Taxes owing in respect of the Purchased Assets.
| 4.12 | Intellectual Property |
| 4.12.1 | The Seller is the only Person to have any right of title and interest, legal or beneficial, in
any of the Owned IP which forms part of the Purchased Intellectual Property, all of which is owned by the Seller free and
clear of any Encumbrances, and none of which is registered in the name of any Person other than the Seller. No consent of any Person
is necessary to make, construct, use, reproduce, translate, license, sell, modify, update, enhance or otherwise exploit any Owned IP
that forms part of the Purchased Intellectual Property. All Originating Persons have, by irrevocable written assignments, transferred
to the Seller all Intellectual Property Rights, and waived all moral rights, that any of them may have enjoyed with respect to
any Owned IP that forms part of the Purchased Intellectual Property to which they contributed. |
| 4.12.2 | The Seller has not assigned, licensed or otherwise granted any interest in any Owned IP that
forms part of the Purchased Intellectual Party, including any right to receive royalties or other payments, to any Person. |
| 4.12.3 | To the Knowledge of the Seller, no Person has infringed or misappropriated, or is infringing or
misappropriating, any Intellectual Property Right in any part of the Purchased Intellectual Property. |
| 4.12.4 | All Intellectual Property Rights relating to Owned IP that forms part of the Purchased Intellectual
Property are in full force and effect, and all required registration or other fees have been paid to maintain them all in good
standing in those jurisdictions where any such Owned IP is used. |
| 4.12.5 | Each registered Trade-mark that is Owned IP and forms part of the Purchased Intellectual Property
is used in its jurisdiction of registration, in association with all wares and services for which it is registered and in the form
appearing in the applicable registration, and has been used with sufficient continuity in association with those wares and services
and in that form, and any use by any licensee of any such Trade-mark has been controlled and enforced by the Seller (as applicable)
so as to avoid any abandonment, cancellation, expungement or other such challenge against that Trade-mark associated with non-continuous
use, or otherwise (including the unenforceability of the Trade-mark), in each applicable jurisdiction. |
| 4.12.6 | The Seller has entered into valid and enforceable written agreements pursuant to which the Seller
has been granted all licenses, rights and permissions to use, reproduce, translate, sub-license, sell, modify, update, enhance
or otherwise exploit the Licensed IP (including, if required, the right to incorporate such Licensed IP into other Purchased
Intellectual Property and to create and own derivatives and modifications of such Licensed IP) (the “Licence Agreements”),
and: |
| 4.12.6.1 | all Licence Agreements are in full force and effect and neither the Seller nor any licensor is
in default of its obligations under any such Licence Agreement; |
| 4.12.6.2 | to the Knowledge of the Seller, no licensor of any Licensed IP is involved in an insolvency,
bankruptcy or similar proceeding or has had a receiver appointed; |
| 4.12.6.3 | all License Agreements for Licensed IP are irrevocable licenses granted in perpetuity and
worldwide in nature; |
| 4.12.6.4 | the rights licensed under each Licence Agreement will be enforceable by the Seller on and after
the Closing to the same extent as prior to the Closing; and |
| 4.12.6.5 | to the Knowledge of the Seller, no Person has infringed or misappropriated, or is infringing or
misappropriating, any Intellectual Property Right of any licensor in or to any Licensed IP that form parts of the Purchased
Intellectual Property of which it is the exclusive licensee. |
| 4.12.7 | The Seller has entered into escrow agreements (including source code escrow agreements) or other
arrangements as necessary to facilitate its continued use and exploitation of any Licensed IP that forms part of the Purchased
Intellectual Property, the use and exploitation of which might be impaired in the event that the licensor of any of that Licensed
IP ceases to carry on business, ceases to support or maintain that Licensed IP, or is involved in an insolvency, bankruptcy or
similar proceeding. |
| 4.12.8 | The past, current and proposed conduct of the Business (including all use or other exploitation
of the Licensed IP and other Purchased Intellectual Property) has not resulted in, and neither does nor will result in, any infringement,
violation, misappropriation, or other conflict with any Intellectual Property Right of any Person, and there is no action or proceeding
ongoing or threatened that alleges any such violation, misappropriation, or other conflict. |
| 4.12.9 | There are no outstanding orders, judgments, rulings, decrees, stipulations, covenants not to sue,
or agreements (including any funding or facilities agreements or grants from any college, university, or Governmental Authority)
relating to any of the Licensed IP or other Purchased Intellectual Property that restrict enforcement of any Intellectual
Property Rights included in such Purchased Intellectual Property, or the use, exercise, practise, or other exploitation of
any such Purchased Intellectual Property by the Seller or any of its customers, distributors or other licensees. |
| 4.12.10 | No Purchased Intellectual Property contains any open source code. |
| 4.13 | Rights to Use Personal Information |
| 4.13.1 | All Personal Information in the possession of the Seller that forms part of the Purchased Assets
or relates to the Purchased Assets has been collected, used and disclosed in compliance with all applicable Privacy Laws in those
jurisdictions in which the Seller conducts, or is deemed by operation of law in those jurisdictions to conduct, the Business. |
| 4.13.2 | The Seller has disclosed to the Buyer all Contracts and facts concerning the collection, use, retention,
destruction and disclosure of Personal Information, and there are no other Contracts, or facts which would restrict the ability
of the Seller to transfer Personal Information to the Buyer in connection with the transactions contemplated by this Agreement,
or which, on completion of the transactions contemplated by this Agreement, would restrict or interfere with the use of any Personal
Information by the Buyer. |
| 4.13.3 | There are no Claims pending or, to the Knowledge of the Seller, threatened, with respect to the
Seller’s collection, use or disclosure of Personal Information that forms part of the Purchased Assets or relates to the
Purchased Assets. |
| 4.14.1 | There are no Claims, whether or not purportedly on behalf of the Seller, pending, commenced, or,
to the Knowledge of the Seller, threatened, which might involve the possibility of an Encumbrance against the Purchased
Assets. |
| 4.14.2 | There is no outstanding judgment, decree, order or ruling relating in any way to the transactions
contemplated by this Agreement. |
None of the Purchased Assets have been taken
or expropriated by any Governmental Authority and no notice or proceeding in respect of any expropriation has been given or commenced
or, to the Knowledge of the Seller, is there any intent or proposal to give any notice or commence any proceeding in respect of
any expropriation.
No representation or warranty or other statement
made by the Seller in this Agreement contains any untrue statement or omits to state a material fact necessary to make it, in light
of the circumstances in which it was made, not misleading.
Article
5
REPRESENTATIONS AND WARRANTIES OF the buyer
The Buyer represents and warrants to the Seller
as follows, and acknowledges that the Seller is relying upon these representations and warranties in connection with the sale of
the Purchased Assets, despite any investigation made by or on behalf of the Seller.
| 5.1 | Corporate Existence of Buyer |
The Buyer is a corporation duly incorporated
and validly existing under the laws of the State of Delaware.
| 5.2 | Capacity to Enter Agreement |
The Buyer has all necessary corporate power,
authority and capacity to enter into and perform its obligations under this Agreement.
The execution and delivery of this Agreement
and the completion of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action
on the part of the Buyer. This Agreement has been duly executed and delivered by the Buyer and constitutes a valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency
and other Laws of general application limiting the enforcement of creditors’ rights generally and to the fact that equitable
remedies, including specific performance, are discretionary and may not be ordered in respect of certain defaults.
None of the execution and delivery of this
Agreement, the performance of the Buyer’s obligations in this Agreement, or the completion of the transactions contemplated
by this Agreement, will result in or constitute a breach of any term or provision of, or constitute a default under, the articles
or by-laws of the Buyer or any agreement or other commitment to which the Buyer is a party.
The Buyer is not a Canadian within the meaning
of the Investment Canada Act.
No authorization, approval, order, consent
of, or filing with, any Governmental Authority is required on the part of the Buyer in connection with the execution, delivery
and performance of this Agreement or any other documents and agreements to be delivered under this Agreement.
There is no outstanding judgment, decree, order,
ruling or injunction involving the Buyer that relates in any way to the transactions contemplated by this Agreement.
The Buyer is not registered for purposes of
the GST/HST levied under the ETA, nor for purposes of the QST under the QSTA. The Buyer is a non-resident of Canada for the purposes
of ETA.
| 5.9 | Post-closing Share Capital |
Upon issuance of the 260,000,000 Buyer Common
Shares pursuant to Section 3.1 and the 60,000,000 Buyer Common Shares pursuant to Section 10.3.1, the 176,875,000 Buyer Common
Shares to be issued to, or as directed by, Winterberry pursuant to Section 3.1.1 will constitute 31.25% of the issued and outstanding
Buyer Common Shares on a fully diluted basis.
Article
6
REPRESENTATIONS AND WARRANTIES OF WINTERBERRY
Winterberry represents and warrants to the
Buyer, the Parent and the Seller as follows.
| 6.1 | Corporate Existence of Winterberry |
Winterberry is a corporation duly incorporated
and validly existing under the laws of the Province of Ontario.
| 6.2 | Capacity to Enter Agreement |
Winterberry has all necessary corporate power,
authority and capacity to enter into and perform its obligations under this Agreement.
The execution and delivery of this Agreement
and the completion of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action
on the part of Winterberry. This Agreement has been duly executed and delivered by Winterberry and constitutes a valid and binding
obligation of Winterberry, enforceable against Winterberry in accordance with its terms, subject to applicable bankruptcy, insolvency
and other Laws of general application limiting the enforcement of creditors’ rights generally and to the fact that equitable
remedies, including specific performance, are discretionary and may not be ordered in respect of certain defaults.
None of the execution and delivery of this
Agreement, the performance of Winterberry’s obligations in this Agreement, or the completion of the transactions contemplated
by this Agreement, will result in or constitute a breach of any term or provision of, or constitute a default under, the articles
or by-laws of Winterberry or any agreement or other commitment to which Winterberry is a party.
No authorization, approval, order, consent
of, or filing with, any Governmental Authority is required on the part of Winterberry in connection with the execution, delivery
and performance of this Agreement or any other documents and agreements to be delivered under this Agreement.
Article
7
COVENANTS
| 7.1 | Completion of Closing Date and Pre-Closing Date Transactions |
| 7.1.1 | The Buyer will use commercially reasonable efforts to consolidate the Buyer Common Shares on a
ten-to-one (10:1) basis before the Closing Time. |
| 7.1.2 | The Parent will use commercially reasonable efforts to consolidate the common shares in its capital
on a ten-to-one (10:1) basis before the Closing Time. |
| 7.1.3 | The Buyer will use commercially reasonable efforts to file in the Province of Ontario a preliminary
prospectus in respect of the Buyer Common Shares, resolve all comments received or deficiencies raised by the Ontario Securities
Commission and file and obtain a receipt for a (final) prospectus before the Closing Time. |
| 7.1.4 | The Buyer will use commercially reasonable efforts to apply for a listing of the Buyer Common Shares
on the TSX-V before the Closing Time. |
| 7.1.5 | The Parent will assign the Parent Debt to the Seller before the Closing Time. |
| 7.1.6 | The Parties will complete the Closing Date Transactions before the Closing Time. |
| 7.2 | Conduct of Business Before Closing |
During the period beginning on the date of
this Agreement and ending at the Closing Time, the Seller will:
| 7.2.1 | conduct the Business diligently, prudently and in a manner that would not reasonably be expected
to adversely affect the Purchased Assets; |
| 7.2.2 | refrain from entering into any Contract which concerns the Purchased Assets, except in the ordinary
course of the Business, or with the prior written consent of the Buyer; |
| 7.2.3 | continue in full force the Insurance Policies; |
| 7.2.4 | comply in all material respects with all Laws applicable to the Purchased Assets or the Business;
and |
| 7.2.5 | apply for, maintain in good standing and renew all Permits. |
| 7.3 | Actions to Satisfy Closing Conditions |
Each Party will take all actions that are within
its power to control, and will make all commercially reasonable efforts to cause other actions to be taken which are not within
its power to control, so as to ensure its compliance with, and satisfaction of, all conditions in Article 8 that are for the benefit
of the other Party.
All of the Purchased Assets will be and remain
at the risk of the Seller until the Closing Time, and the Seller will continue in full force and effect all Insurance Policies
and give all notices and present all Claims under all such Insurance Policies in due and timely fashion. If the Purchased Assets
or any substantial part of them should be damaged or destroyed before the Closing Time, the Seller will promptly give notice of
that damage or destruction (the “Damage Notice”) to the Buyer and the Buyer will have the option, exercisable
by notice given within ten Business Days of receipt of the Damage Notice:
| 7.4.1 | to reduce the Purchase Price by an amount equal to the cost of repair or, if destroyed or damaged
beyond repair, by an amount equal to the replacement cost of the assets forming part of the Purchased Assets so damaged or destroyed
and to complete the purchase; |
| 7.4.2 | to complete the purchase without reduction of the Purchase Price, in which event all proceeds of
Insurance Policies will be payable to the Buyer together with a sum equal to the deductible amount required to be paid under the
applicable Insurance Policies, plus applicable Commodity Taxes and all right and claim of the Seller to any amounts not paid by
the Closing Date will be assigned to the Buyer; or |
| 7.4.3 | to terminate this Agreement and not complete the purchase if, in the reasonable opinion of the
Buyer, the destruction or damage constitutes or gives rise to a Material Adverse Effect, in which event the Seller and the Buyer
will be released from all obligations under this Agreement (except as set out in Article 9). |
If the Seller gives the Damage Notice within
ten Business Days before the Closing Date, the Closing Date will be postponed until ten Business Days after the giving of the Damage
Notice, or such other later date as the Parties agree to in writing.
| 7.5 | Non-Competition and Non-Solicitation |
| 7.5.1 | For the period comprising the greater of (i) five (5) years commencing on the Closing Date and
(ii) such period of time during which the Parent directly or indirectly owns at least ten percent (10%) or more of the outstanding
common shares of the Buyer (the “Restricted Period”), the Parent and Seller shall not, and shall not permit
any of their Affiliates to, directly or indirectly: (i) engage in or assist others in engaging in the Restricted Business; (ii)
have an interest in any Person that engages directly or indirectly in the Restricted Business in any capacity, including as a partner,
shareholder, employee, principal, agent, trustee or consultant; or (iii) intentionally interfere in any material respect with the
business relationships (whether formed prior to or after the date of this Agreement) between the Buyer and customers or suppliers
of the Buyer. |
| 7.5.2 | Notwithstanding the provisions of Section 7.5.1, nothing in this Agreement shall prohibit the Parent
from owning the shares that it owns in Lexifone Communications Systems (2010) Ltd. (“Lexifone”) as at the Effective
Date of this Agreement, provided that such ownership interest is not exercised in a manner that causes Lexifone to compete with
the Restricted Business. |
| 7.5.3 | During the Restricted Period, the Parent and Seller shall not, and shall not permit any of their
Affiliates to, directly or indirectly, solicit or entice, or attempt to solicit or entice, any clients or customers of the Buyer
or potential clients or customers of the Buyer for purposes of diverting their business or services from the Buyer. |
| 7.5.4 | The Parent and Seller acknowledge that the restrictions contained in this Section 7.5 are reasonable
and necessary to protect the legitimate interests of Buyer and constitute a material inducement to Buyer to enter into this Agreement
and consummate the transactions contemplated by this Agreement, and that a failure by the Parent or Seller to comply with such
restrictions would cause irreparable harm to the Buyer. In the event that any covenant contained in this Section 7.5 should ever,
in whole or in part, be adjudicated to be illegal, invalid, void, voidable or unenforceable in any jurisdiction by any court of
competent jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed,
in such jurisdiction to the maximum time, geographic, product or service, or other limitations permitted by applicable Law. |
| 7.6 | Restricted Business Opportunities |
For a period of five (5) years commencing on
the Closing Date, each of the Parent and Seller will provide the Buyer will written notice of any Restricted Business Opportunity
that comes to its attention, which notice will contain all information which is known to the Parent or Seller, as the case may
be, that could reasonably be expected to impact a decision on the part of the Buyer regarding whether to pursue any such Restricted
Business Opportunity.
| 7.7 | Allocation of Buyer Common Shares and Cash |
Schedule 10.3.1 may be updated prior to the
Closing Time as agreed to by the Seller and the Buyer, each acting reasonably, to change the: (i) allocation of the 60,000,000
Buyer Common Shares referenced therein; and (ii) amount of the cash payments referenced therein; provided, however, that any such
updates may be made only for the purposes of adjusting the consideration to be paid by the Buyer pursuant to Section 10.3.1 upon
the retirement of the Seller Debt to properly reflect the amount of principal and interest actually owing in respect of the Seller
Debt as at the Closing Time.
Article
8
CLOSING CONDITIONS
| 8.1 | Conditions for the Benefit of the Buyer |
The obligation of the Buyer to complete the
purchase of the Purchased Assets will be subject to the fulfilment of the following conditions at or before the Closing Time:
| 8.1.1 | Representations, Warranties and Covenants. The representations and warranties of the Parent,
the Seller and Winterberry made in this Agreement, and in any other agreement or document delivered pursuant to this Agreement,
will be true and accurate at the Closing Time with the same force and effect as though those representations and warranties had
been made as of the Closing Time. Each of the Parent, the Seller and Winterberry will have complied with all covenants and agreements
to be performed or caused to be performed by it under this Agreement, and in any other agreement or document delivered pursuant
to this Agreement, at or before the Closing Time. In addition, each of the Parent, the Seller and Winterberry will have delivered
to the Buyer a certificate of a senior officer of the Parent, the Seller or Winterberry, as the case may be, confirming the same.
The receipt of that certificate and the completion of the Closing will not be deemed to constitute a waiver of any of the representations,
warranties or covenants of the Parent, the Seller and Winterberry contained in this Agreement, or in any other agreement or document
delivered pursuant to this Agreement. Those representations, warranties and covenants will continue in full force and effect as
provided in Article 9, or, if Article 9 does not apply, the terms of the agreement or document in which they are made. |
| 8.1.2 | No Material Adverse Effect. The Business has been carried on in the ordinary course since
March 31, 2015 and since the date of this Agreement there will not have been any event, development or condition of any character
(whether or not covered by insurance) that has, or might reasonably be expected to have, a Material Adverse Effect. |
| 8.1.3 | Consents. Each of the Parent, Seller and Winterberry will receive the approvals of their
respective boards of directors (and shareholders, if appropriate), and in each case for the boards of directors consent, acknowledging
that these are related parties and determining the fairness of the transaction contemplated hereby. |
| 8.1.4 | Completion of Due Diligence. The Buyer will have completed legal and business due diligence
to its satisfaction and will be satisfied with the results of such due diligence, in each case, as determined by the Buyer in its
sole discretion. |
| 8.1.5 | Share Consolidations. The Buyer and the Parent will each have completed the share consolidations
referenced in Sections 7.1.1 and 7.1.2. |
| 8.1.6 | Reporting Issuer Status. The Buyer will have used commercially reasonable efforts to file
in the Province of Ontario a preliminary prospectus in respect of the Buyer Common Shares, resolve all comments received or deficiencies
raised by the Ontario Securities Commission and file and obtain a receipt for a (final) prospectus. The Buyer will use commercially
reasonable efforts to apply for a listing of the Buyer Common Shares on the TSX-V. The Parties acknowledge that the Buyer, as a
United States reporting company pursuant to the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as
amended, must comply with United States public federal disclosure requirements, including any related party status, as determined
in the rules and regulations promulgated by the Securities and Exchange Commission, where appropriate. |
| 8.1.7 | Deliveries. The Parent, the Seller and Winterberry, as applicable, will have delivered to
the Buyer the following in form and substance satisfactory to the Buyer: |
| 8.1.7.1 | a general conveyance in a form to be agreed to by the Parties acting reasonably; |
| 8.1.7.2 | all deeds, conveyances, assurances, transfers and assignments and any other instruments necessary
or reasonably required to transfer the Purchased Assets to the Buyer with a good title, free and clear of all Encumbrances; and |
| 8.1.7.3 | all documentation and other evidence reasonably requested by the Buyer in order to establish the
due authorization and completion of the transactions contemplated by this Agreement, including the taking of all corporate proceedings
by the board of directors and the shareholders of the Parent, the Seller and Winterberry, as applicable, required to effectively
carry out the obligations of the Parent, the Seller and Winterberry pursuant to this Agreement. |
| 8.2 | Waiver or Termination by the Buyer |
The conditions contained in Section 8.1
are inserted for the exclusive benefit of the Buyer and may be waived in whole or in part by the Buyer at any time without prejudice
to any of its rights of termination in the event of non-performance of any other condition in whole or in part. If any of the conditions
contained in Section 8.1 are not fulfilled or complied with by the time that is required under this Agreement, the Buyer may,
at or before the Closing Time, terminate this Agreement by notice in writing after that time to the Parent, the Seller and Winterberry.
In that event the Buyer, the Parent, the Seller and Winterberry will be released from all obligations under this Agreement.
| 8.3 | Conditions for the Benefit of the Parent and the Seller |
The obligation of the Parent and the Seller
to complete the sale of the Purchased Assets will be subject to the fulfilment of the following conditions at or before the Closing
Time:
| 8.3.1 | Representations, Warranties and Covenants. The representations and warranties of the Buyer
and Winterberry made in this Agreement, and in any other agreement or document delivered pursuant to this Agreement, will be true
and accurate at the Closing Time with the same force and effect as though those representations and warranties had been made as
of the Closing Time. Each of the Buyer and Winterberry will have complied with all covenants and agreements to be performed or
caused to be performed by it under this Agreement, and in any other agreement or document delivered pursuant to this Agreement,
at or before the Closing Time. In addition, each of the Buyer and Winterberry will have delivered to the Parent and the Seller
a certificate of a senior officer of the Buyer or Winterberry, as the case may be, confirming the same. The receipt of that certificate
and the completion of the Closing will not be deemed to constitute a waiver of any of the representations, warranties or covenants
of the Buyer or Winterberry contained in this Agreement, or in any other agreement or document delivered pursuant to this Agreement.
Those representations, warranties and covenants will continue in full force and effect as provided in Article 9, or, if Article
9 does not apply, the terms of the agreement or document in which they are made. |
| 8.3.2 | No Material Adverse Effect. Since the date of this Agreement there will not have been any
event, development or condition of any character (whether or not covered by insurance) that has, or might reasonably be expected
to become, individually or in the aggregate, materially adverse to the business, results of operations, condition or assets of
the Buyer. |
| 8.3.3 | Consents. Each of Winterberry and the Buyer will receive the approvals of their respective
boards of directors (and shareholders, if appropriate), and in each case for the boards of directors consent, acknowledging that
these are related parties and determining the fairness of the transaction contemplated hereby. |
| 8.3.4 | Share Consolidations. The Buyer and the Parent will each have completed the share consolidations
referenced in Sections 7.1.1 and 7.1.2. |
| 8.3.5 | Reporting Issuer Status. The Buyer will have used commercially reasonable efforts to file
in the Province of Ontario a preliminary prospectus in respect of the Buyer Common Shares, resolve all comments received or deficiencies
raised by the Ontario Securities Commission and file and obtain a receipt for a (final) prospectus. The Buyer will use commercially
reasonable efforts to apply for a listing of the Buyer Common Shares on the TSX-V. The Parties acknowledge that the Buyer, as a
United States reporting company pursuant to the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as
amended, must comply with United States public federal disclosure requirements, including any related party status, as determined
in the rules and regulations promulgated by the Securities and Exchange Commission, where appropriate. |
| 8.3.6 | Deliveries. The Buyer and Winterberry, as applicable, will have delivered to the Parent
and the Seller the following in form and substance satisfactory to the Parent and the Seller: |
| 8.3.6.1 | the Parent Debt Assumption Agreement; |
| 8.3.6.2 | the Seller Debt Assumption Agreement; |
| 8.3.6.3 | the Ortsbo Debt Assumption Agreement; and |
| 8.3.6.4 | all documentation and other evidence reasonably requested by the Seller in order to establish the
due authorization and completion of the transactions contemplated by this Agreement, including the taking of all corporate proceedings
by the board of directors and the shareholders of the Buyer or Winterberry, as applicable, required to effectively carry out the
obligations of the Buyer pursuant to this Agreement. |
| 8.4 | Waiver or Termination by the Seller |
The conditions contained in Section 8.3
are inserted for the exclusive benefit of the Parent and the Seller and may be waived in whole or in part jointly by the Parent
and the Seller at any time without prejudice to its rights of termination in the event of non-performance of any other condition
in whole or in part. If any of the conditions contained in Section 8.3 are not fulfilled or complied with by the time that
is required under this Agreement, the Parent and the Seller may, at or before the Closing Time, terminate this Agreement by joint
notice in writing after that time to the Buyer and Winterberry. In that event the Parent, the Seller, the Buyer and Winterberry
will be released from all obligations under this Agreement.
| 8.5 | Conditions for the Benefit of Winterberry |
The obligation of Winterberry to complete the
sale of the Purchased Assets will be subject to the fulfilment of the following conditions at or before the Closing Time:
| 8.5.1 | Representations, Warranties and Covenants. The representations and warranties of each of
the Buyer, the Seller and the Parent made in this Agreement, and in any other agreement or document delivered pursuant to this
Agreement, will be true and accurate at the Closing Time with the same force and effect as though those representations and warranties
had been made as of the Closing Time. The Buyer, the Seller and the Parent will, as applicable, have complied with all covenants
and agreements to be performed or caused to be performed by it under this Agreement, and in any other agreement or document delivered
pursuant to this Agreement, at or before the Closing Time. In addition, the Buyer, the Seller and the Parent will have delivered
to Winterberry a certificate of a senior officer of the Buyer, the Seller and the Parent , as applicable, confirming the same.
The receipt of that certificate and the completion of the Closing will not be deemed to constitute a waiver of any of the representations,
warranties or covenants of the Buyer, the Parent and the Seller contained in this Agreement, or in any other agreement or document
delivered pursuant to this Agreement. Those representations, warranties and covenants will continue in full force and effect as
provided in Article 9, or, if Article 9, does not apply, the terms of the agreement or document in which they are made. |
| 8.5.2 | Share Consolidations. The Buyer and the Parent will each have completed the share consolidations
referenced in Sections 7.1.1 and 7.1.2. |
| 8.5.3 | Reporting Issuer Status. The Buyer will have used commercially reasonable efforts to file
in the Province of Ontario a preliminary prospectus in respect of the Buyer Common Shares, resolve all comments received or deficiencies
raised by the Ontario Securities Commission and file and obtain a receipt for a (final) prospectus. The Buyer will use commercially
reasonable efforts to apply for a listing of the Buyer Common Shares on the TSX-V. The Parties acknowledge that the Buyer, as a
United States reporting company pursuant to the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as
amended, must comply with United States public federal disclosure requirements, including any related party status, as determined
in the rules and regulations promulgated by the Securities and Exchange Commission, where appropriate. |
| 8.5.4 | Deliveries. The Parent, the Seller and the Buyer, as applicable will have delivered to Winterberry
the following in form and substance satisfactory to Winterberry: |
| 8.5.4.1 | All documentation and other evidence reasonably requested by the Winterberry in order to establish
the due authorization and completion of the transactions contemplated by this Agreement, including the taking of all corporate
proceedings by the board of directors and the shareholders of Parent and the Seller, as applicable, required to effectively carry
out the obligations of the Parent, the Seller, as applicable, and the Buyer pursuant to this Agreement. |
| 8.6 | Waiver or Termination by Winterberry |
The conditions contained in Section 8.5
are inserted for the exclusive benefit of Winterberry and may be waived in whole or in part by Winterberry at any time without
prejudice to its rights of termination in the event of non-performance of any other condition in whole or in part. If any of the
conditions contained in Section 8.5 are not fulfilled or complied with by the time that is required under this Agreement,
Winterberry may, at or before the Closing Time, terminate this Agreement by joint notice in writing after that time to the Buyer,
the Seller and the Parent. In that event the Parent, the Seller and the Buyer will be released from all obligations under this
Agreement.
| 8.7 | Conditions Precedent—No Action to Restrain |
The purchase and sale of the Purchased Assets
is subject to the conditions that no order of any Governmental Authority will be in force, and no action or proceeding will be
pending or threatened by any Person:
| 8.7.1 | to restrain or prohibit the completion of the transactions contemplated by this Agreement, including
the sale and purchase of the Purchased Assets; or |
| 8.7.2 | which would have a Material Adverse Effect. |
These conditions are true
conditions precedent to the completion of the transactions contemplated by this Agreement. If they have not been fulfilled at or
before the Closing Time, this Agreement will be terminated and the Parties will be released from all obligations under this Agreement.
Article
9
SURVIVAL AND INDEMNIFICATION
| 9.1 | Survival of Covenants and Representations and Warranties |
All of the covenants and representations and
warranties contained in this Agreement and in any other agreement or document delivered pursuant to this Agreement, including this
Article 9, will survive the Closing.
| 9.2 | Parent and Seller Indemnification for Breach of Warranty, etc. |
Subject to the remaining provisions of this
Article 9, each of the Parent and the Seller agrees that if it fails to observe or perform any covenant or obligation, or breaches
any representation and warranty, contained in this Agreement, or in any other agreement or document delivered pursuant to this
Agreement, it will jointly and severally indemnify and hold harmless the Buyer and each director, officer, shareholder, agent or
employee of the Buyer from and against the full amount of any Loss that each may suffer as a result of that failure. Each of the
Parent and the Seller also agrees to jointly and severally indemnify and hold harmless the Buyer and each director, officer, shareholder,
agent or employee of the Buyer from and against the full amount of any Loss that each may suffer as a result of a Third Party Claim,
even if that Third Party Claim is ultimately found not to be meritorious, or is settled with no verdict on its merits being reached.
| 9.3 | Buyer’s Indemnifications for Breaches of Warranty, etc. |
Subject to the remaining provisions of this
Article 9, the Buyer agrees that if it fails to observe or perform any covenant or obligation, or breaches any representation and
warranty, contained in this Agreement, or in any other agreement or document delivered pursuant to this Agreement, it will indemnify
and hold harmless each of the Parent, the Seller and each director, officer, shareholder, agent or employee of the Parent and the
Seller from and against the full amount of any Loss that each may suffer as a result of that failure. The Buyer also agrees to
indemnify and hold harmless the Parent, the Seller and each director, officer, shareholder, agent or employee of the Parent or
the Seller from and against the full amount of any Loss that each may suffer as a result of a Third Party Claim, even if that Third
Party Claim is ultimately found not to be meritorious, or is settled with no verdict on its merits being reached.
| 9.4 | Limitation on Mutual Indemnification |
The indemnification obligations
of each of the Parent, the Seller and the Buyer pursuant to Article 9 are limited to the sum of $1,250,000 in the aggregate, except
if the Loss results from a breach by the Parent or the Seller of any of Sections 4.1, 4.2, 4.3, 4.4, 4.6, 4.11 and 4.12 in which
cases the indemnification obligations of the Parent and the Seller will be limited to the Purchase Price.
| 9.5 | Additional Indemnities of the Parent and the Seller |
The Parent and the Seller will jointly and
severally indemnify and hold harmless the Buyer and each director, officer, shareholder, agent or employee of the Buyer from and
against any Loss that each may suffer resulting from:
| 9.5.1 | Claims that may be made or brought against the Buyer or any director, officer, shareholder, agent
or employee of the Buyer: |
| 9.5.1.1 | related to or arising from liabilities incurred before the Closing that are not Future Obligations
or related to the Parent Debt, the Seller Debt or the Ortsbo Debt; or |
| 9.5.1.2 | by reason of the non-compliance of the Seller with applicable provincial bulk sales or transfer
in bulk Laws in connection with the completion of the transactions contemplated in this Agreement; or |
| 9.5.2 | the termination of this Agreement under the terms of Section 8.2, if the Loss arises from
the non-fulfilment or non-performance of the relevant conditions as a result of a breach of covenant, or representation and warranty,
of the Seller, |
provided that the Seller’s
indemnification obligations under this Section 9.5 will be limited to the Purchase Price.
| 9.6 | Additional Buyer’s Indemnities |
The Buyer will indemnify and hold harmless
each of the Parent and the Seller and each director, officer, shareholder, agent or employee of the Parent and the Seller from
and against any Loss that each may suffer resulting from:
| 9.6.1 | Claims that may be made or brought against the Parent or the Seller or any director, officer, shareholder,
agent or employee of the Parent or the Seller relating to or arising out of the non-payment or performance after the Closing Date
by the Buyer of: |
| 9.6.1.1 | the Parent Debt, the Seller Debt or the Ortsbo Debt; or |
| 9.6.1.2 | Future Obligations; and |
| 9.6.2 | the termination of this Agreement under the terms of Section 8.4, if the Loss arises from
the non-fulfilment or non-performance of the relevant conditions as a result of a breach of covenant, or representation and warranty,
of the Buyer, |
provided that the Buyer’s indemnification
obligations under: (i) Section 9.6.1.1 will be limited to the sum of $4,000,000; (ii) Section 9.6.1.2 will be unlimited; and (iii)
Section 9.6.2 will be limited to the sum of $1,250,000.
If an Indemnified Party becomes aware of a
Loss or potential Loss in respect of which the Indemnifying Party has agreed to indemnify it under this Agreement, the Indemnified
Party will promptly give written notice (an “Indemnity Notice”) of its Claim or potential Claim for indemnification
(an “Indemnity Claim”) to the Indemnifying Party. An Indemnity Notice must specify whether the Indemnity Claim
arises as the result of a Claim made against an Indemnified Party by a Person who is not a Party (a “Third Party Claim”)
or as a result of a Loss that was suffered directly by an Indemnified Party, and must also specify with reasonable particularity
(to the extent that the information is available)
| 9.7.1 | the factual basis for the Indemnity Claim; and |
| 9.7.2 | the amount of the Indemnity Claim, if known. |
If, through the fault of the Indemnified Party,
the Indemnifying Party does not receive an Indemnity Notice of an Indemnity Claim in time to effectively contest the determination
of any liability capable of being contested, the Indemnifying Party will be entitled to set off against the amount claimed by the
Indemnified Party the amount of any Loss incurred by the Indemnifying Party resulting from the Indemnified Party’s failure
to give an Indemnity Notice on a timely basis.
| 9.8 | Time Limits for Notice |
| 9.8.1 | Subject to the remaining provisions of this Section 9.8, no Indemnity Claim may be made under
Sections 9.2, 9.3, 9.5 or 9.6, unless an Indemnity Notice of that Indemnity Claim is delivered to the Indemnifying Party within
three years after the Closing Date. |
| 9.8.2 | No Indemnity Claim may be made with respect to the breach of the representations and warranties
of the Parent and the Seller contained in Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 and 4.12 unless an Indemnity Notice of that
Indemnity Claim is delivered to the Parent or the Seller within five years after the Closing Date. |
| 9.8.3 | No Indemnity Claim may be made with respect to the breach of the representations and warranties
of the Parent and the Seller contained in Section 11.1 unless an Indemnity Notice of that Indemnity Claim is delivered to
the Parent or the Seller within 90 days of the date on which the reassessment period for the taxation year which gave rise to the
Indemnity Claim expires. |
| 9.8.4 | An Indemnity Notice of a Third Party Claim may be delivered to the Indemnifying Party in accordance
with Section 9.7 at any time that the Third Party Claim arises. |
| 9.8.5 | An Indemnity Notice of an Indemnity Claim may be delivered to the Indemnifying Party in accordance
with Section 9.7 at any time if it relates to fraud or deliberate misconduct of the Indemnifying Party, or if the Indemnity
Claim is made with respect to the indemnification obligations of the Seller set out in Section 9.5.1.2. |
| 9.9.1 | The rights of indemnity in this Article 9 are the sole and exclusive remedy through which an Indemnified
Party may make any Claim for any loss, liability, damage, cost, expense, charge, fine, penalty or assessment including the costs
and expenses of any action, suit, proceeding, demand, assessment, judgment, settlement or compromise and all interest, punitive
damages, fines, penalties and professional fees and disbursements, suffered or incurred in connection with the transactions contemplated
by this Agreement or by any agreement or other document delivered pursuant to this Agreement including any such Claim arising from
alleged fraud or wilful misconduct. |
| 9.9.2 | This Section 9.9 will remain in full force and effect in all circumstances and will not be
terminated by any breach (fundamental, negligent or otherwise) by any Party of its covenants, representations or warranties in
this Agreement or under any agreement or other document delivered pursuant to this Agreement, or by any termination or rescission
of this Agreement. |
| 9.10 | Third Party Indemnification |
To ensure that the indemnities provided by
each of the Parent, the Seller and the Buyer to the other’s directors, officers and employees under this Agreement are enforceable,
it is agreed by the Parties that each of the Parent, the Seller and the Buyer is acting as agent for its respective directors,
officers and employees with respect to the indemnities intended to be given to those directors, officers and employees under this
Article 9. Each of the Parent, the Seller and the Buyer agrees that it will hold any right to indemnification that any director,
officer, shareholder, agent or employee of it is intended to have under this Article in trust for that director, officer, shareholder,
agent or employee, and that funds received by the Parent, the Seller or the Buyer in respect of any Claims under this Article by
any director, officer, shareholder, agent or employee of it will be held in trust for that director, officer, shareholder, agent
or employee.
Article
10
CLOSING ARRANGEMENTS
The Closing will take place at the Closing
Time on the Closing Date at the offices of Gowling Lafleur Henderson LLP, located at 100 King Street West, Suite 1600, Toronto,
Ontario M5X 1G5, or at any other place as the Parties may agree.
At the Closing Time:
| 10.2.1 | the Seller will sell and the Buyer will purchase the Purchased Assets for the Purchase Price as
provided in this Agreement; |
| 10.2.2 | each Party will deliver or cause to be delivered to the other Parties, as applicable, all documents
referred to in Sections 8.1.7, 8.3.6 and 8.5.4; |
| 10.2.3 | the Seller will deliver or cause to be delivered to the Buyer the Purchased Assets accompanied
by certified copies of directors’ and shareholders’ (if applicable) resolutions authorizing the sale and transfer of
the Purchased Assets; |
| 10.2.4 | the Buyer will issue the Buyer Common Shares as set out in Section 3.1.1; |
| 10.2.5 | the Buyer will assume the Parent Debt, the Seller Debt and the Ortsbo Debt as set out in Sections
3.1.2 , 3.1.3 and 3.1.4; and |
| 10.2.6 | Winterberry and the Seller will cause to be delivered to the Buyer and the Parent the Winterberry
Agreement. |
| 10.3 | Other Closing Date Transactions |
| 10.3.1 | Immediately following the Closing Time, the Buyer shall retire the Seller Debt and the Seller Debtholders
shall receive 60,000,000 Buyer Common Shares from the Seller, at a price of $0.05 per Buyer Common Share, and/or cash, in full
satisfaction of the Seller Debt, as set out in more detail in Schedule 10.3.1. |
| 10.3.2 | Immediately following the Closing Time, the Buyer shall retire the Parent Debt and Winterberry
shall use the proceeds to acquire an equivalent amount of Buyer Debentures. |
| 10.3.3 | Immediately following the Closing Time, the Buyer shall retire the Ortsbo Debt and the holders
of the Ortsbo Debt shall use the proceeds to acquire an equivalent amount of Buyer Debentures. |
Article
11
GENERAL
| 11.1 | Investment Canada Act Reporting |
On or before the date that is thirty (30) days
after the Closing Date, the Buyer will report the transactions contemplated hereunder to Industry Canada on the prescribed forms
and in accordance with the requirements under the Investment Canada Act.
Time is of the essence in all respects of this
Agreement.
Any Communication must be in writing and either:
| 11.3.1 | delivered personally or by courier; |
| 11.3.2 | sent by prepaid registered mail; or |
| 11.3.3 | transmission, charges
(if any) prepaid. |
Any Communication must be sent to the intended
recipient at its address as follows:
to the Parent at:
Intertainment Media Inc.
80 Tiverton Court, Suite 100
|
Markham, Ontario |
|
L3R 0G4 |
|
|
|
Attention: |
Girvan Patterson, Corporate Secretary |
|
Tel No.: |
905-763-3510 |
|
Facsimile No.: |
905-763-6175 |
|
|
|
|
with a copy to: |
|
|
|
|
DLA Piper (Canada) LLP |
|
100, 250-2nd Street SW |
|
Calgary, Alberta |
|
T2P 0C1 |
|
|
|
|
Attention: |
Marek Lorenc |
|
Tel No.: |
403.776.8816 |
|
E-mail: |
marek.lorenc@dlapiper.com |
|
|
|
|
to the Seller at: |
|
|
|
Ortsbo Inc. |
|
80 Tiverton Court, Suite 100 |
|
Markham, Ontario |
|
L3R 0G4 |
|
|
|
|
Attention: |
Herb Willer, Director |
|
Tel No.: |
905-763-3510 |
|
Facsimile No.: |
905-763-6175 |
|
|
|
|
with a copy to: |
|
|
|
DLA Piper (Canada) LLP |
|
100, 250-2nd Street SW |
|
Calgary, Alberta |
|
T2P 0C1 |
|
|
|
|
Attention: |
Marek Lorenc |
|
Tel No.: |
403.776.8816 |
|
E-mail: |
marek.lorenc@dlapiper.com |
|
|
|
|
to the Buyer at: |
|
|
|
Yappn Corp. |
|
1001 Avenue of the Americas, 11th Floor |
|
New York, New York, USA |
|
10018 |
|
|
|
|
Attention: |
Neil Stiles, Director |
|
E-mail: |
neilstiles@gmail.com |
|
with a copy to: |
|
|
|
Gowling Lafleur Henderson LLP |
|
1 First Canadian Place |
|
100 King St W., Suite 1600 |
|
Toronto, Ontario |
|
M5X 1G5 |
|
|
|
|
Attention: |
Peter Simeon |
|
Tel No.: |
416-862-4448 |
|
Facsimile No.: |
416-862-7661 |
|
E-mail: |
peter.simeon@gowlings.com |
|
|
|
|
to Winterberry at: |
|
|
|
Winterberry Investments Inc. |
|
124 Park Road |
|
Toronto, Ontario |
|
M4W 2N7 |
|
|
|
|
Attention: |
David Berry, President |
|
Tel No.: |
416.500.9080 |
|
Email: |
davidmmberry@rogers.com |
|
|
|
|
with a copy to: |
|
|
|
Chitiz Pathak LLP |
|
320 Bay Street |
|
Suite 1600 |
|
Toronto, Ontario |
|
M5G 4A6 |
|
|
|
|
Attention: |
Paul Pathak |
|
Tel No.: |
416.644.9964 |
|
Facsimile No.: |
416.368.0300 |
|
E-mail: |
ppathak@chitizpathak.com |
or at any other address as any Party may at
any time advise the other by Communication given or made in accordance with this Section 11.3. Any Communication delivered
to the Party to whom it is addressed will be deemed to have been given or made and received on the day it is delivered at that
Party’s address, provided that if that day is not a Business Day then the Communication will be deemed to have been given
or made and received on the next Business Day. Any Communication sent by prepaid registered mail will be deemed to have been given
or made and received on the fifth Business Day after which it is mailed. If a strike or lockout of postal employees is then in
effect, or generally known to be impending, every Communication must be delivered personally or by courier or transmitted by facsimile,
e-mail or functionally equivalent electronic means of transmission. Any Communication transmitted by facsimile, e-mail or other
functionally equivalent electronic means of transmission will be deemed to have been given or made and received on the day on which
it is transmitted; but if the Communication is transmitted on a day which is not a Business Day or after 5:00 p.m. (local time
of the recipient), the Communication will be deemed to have been given or made and received on the next Business Day.
Each Section of this Agreement is distinct
and severable. If any Section of this Agreement, in whole or in part, is or becomes illegal, invalid, void, voidable or unenforceable
in any jurisdiction by any court of competent jurisdiction, the illegality, invalidity or unenforceability of that Section, in
whole or in part, will not affect:
| 11.4.1 | the legality, validity or enforceability of the remaining Sections of this Agreement, in whole
or in part; or |
| 11.4.2 | the legality, validity or enforceability of that Section, in whole or in part, in any other jurisdiction. |
| 11.5 | Submission to Jurisdiction |
Each of the Parties irrevocably and unconditionally
submits and attorns to the non-exclusive jurisdiction of the courts of the Province of Ontario to determine all issues, whether
at law or in equity arising from this Agreement. To the extent permitted by applicable Law, each of the Parties:
| 11.5.1 | irrevocably waives any objection, including any Claim of inconvenient forum, that it may now or
in the future have to the venue of any legal proceeding arising out of or relating to this Agreement in the courts of that Province,
or that the subject matter of this Agreement may not be enforced in those courts; |
| 11.5.2 | irrevocably agrees not to seek, and waives any right to, judicial review by any court which may
be called upon to enforce the judgment of the courts referred to in this Section 11.5, of the substantive merits of any suit,
action or proceeding; and |
| 11.5.3 | to the extent a Party has or may acquire any immunity from the jurisdiction of any court or from
any legal process, whether through service or notice, attachment before judgment, attachment in aid of execution, execution or
otherwise, with respect to itself or its property, that Party irrevocably waives that immunity in respect of its obligations under
this Agreement. |
No amendment, discharge, modification, restatement,
supplement, termination or waiver of this Agreement or any Section of this Agreement is binding unless it is in writing and executed
by the Party to be bound. No waiver of, failure to exercise or delay in exercising, any Section of this Agreement constitutes a
waiver of any other Section (whether or not similar) nor does any waiver constitute a continuing waiver unless otherwise expressly
provided.
Each Party will, at the requesting Party’s
cost and expense, execute and deliver any further agreements and documents and provide any further assurances, undertakings and
information as may be reasonably required by the requesting Party to give effect to this Agreement and, without limiting the generality
of this Section 11.7, will do or cause to be done all acts and things, execute and deliver or cause to be executed and delivered
all agreements and documents and provide any assurances, undertakings and information as may be required at any time by all Governmental
Authorities or stock exchanges having jurisdiction over the Buyer’s affairs, or as may be required at any time under applicable
securities Laws.
| 11.8 | Assignment and Enurement |
Neither this Agreement nor any right or obligation
under this Agreement may be assigned by either Party without the prior written consent of the other Party. This Agreement enures
to the benefit of and is binding upon the Parties and their respective successors and permitted assigns.
| 11.9 | Counterparts and Electronic Delivery |
This Agreement may be executed and delivered
by the Parties in one or more counterparts, each of which will be an original, and each of which may be delivered by facsimile,
e-mail or other functionally equivalent electronic means of transmission, and those counterparts will together constitute one and
the same instrument.
Each Party represents and warrants to the other
Party that all negotiations relating to this Agreement and the transactions contemplated by this Agreement have been carried on
between them directly, without the intervention of any other Person on behalf of any Party in such manner as to give rise to any
valid Claim against the Buyer for a brokerage commission, finder’s fee or other similar payment.
| 11.11 | Payment and Currency |
Any money to be advanced, paid or tendered
by one Party to another under this Agreement must be advanced, paid or tendered by bank draft, certified cheque or wire transfer
of immediately available funds payable to the Person to whom the amount is due. Unless otherwise specified, the word “dollar”
and the “$” sign refer to United States currency, and all amounts to be advanced, paid, tendered or calculated under
this Agreement are to be advanced, paid, tendered or calculated in United States currency.
The United Nations Convention on Contracts
for the International Sale of Goods (also called the Vienna Convention which is cited in the statutes of Canada as the International
Sale of Goods Contracts Convention Act) will not be applicable to this Agreement or the transactions contemplated by this Agreement.
| 11.13 | No Contra Proferentem |
This Agreement has been reviewed by each Party’s
professional advisors, and revised during the course of negotiations between the Parties. Each Party acknowledges that this Agreement
is the product of their joint efforts, that it expresses their agreement, and that, if there is any ambiguity in any of its provisions,
that provision should not be interpreted in favour of either one of them.
Each Party acknowledges that:
| 11.14.1 | it has received independent legal advice from its own lawyers with respect to the terms of this
Agreement before its execution; |
| 11.14.2 | it has read this Agreement, understands it, and agrees to be bound by its terms and conditions;
and |
| 11.14.3 | it has received a copy of this Agreement. |
The Parties have expressly required that this
Agreement, any Communication and all other contracts, documents and notices relating to this Agreement be drafted in the English
language. Les parties ont expressément exigé que la présente convention, la communication et tous les autres
contrats, documents et avis qui y sont afférents soient rédigés dans la langue anglaise.
All reasonable fees, expenses and disbursements
incurred by Winterberry in relation to the transactions contemplated herein shall be paid by the Buyer, up to a maximum amount
of CDN$85,000 (exclusive of Taxes and expenses), unless the Buyer consents in writing to a greater amount. Winterberry acknowledges
and confirms that any amount in respect of such fees, expenses and disbursements owing as of the date of this Agreement have been
paid by the Buyer and received by Winterberry, and the Buyer agrees to pay any such additional fees, expenses or disbursements
on the Closing Date. Other than the foregoing, each Party shall be responsible for and bear its own fees, costs and expenses incurred
at any time in connection with the preparation of this Agreement or pursuing or completing the transactions contemplated herein.
THE REMAINDER
OF THIS PAGE IS INTENTIONALLY LEFT BLANK
Each of the Parties has executed and
delivered this Agreement as of the date noted at the beginning of the Agreement.
|
INTERTAINMENT MEDIA INC. |
|
|
|
By: |
|
|
|
Name: |
|
|
Title: |
|
|
|
|
ORTSBO INC. |
|
|
|
|
By: |
|
|
|
Name: |
|
|
Title: |
|
|
|
|
YAPPN CORP. |
|
|
|
|
By: |
|
|
|
Name: |
|
|
Title: |
|
|
|
|
WINTERBERRY INVESTMENTS INC. |
|
|
|
|
By: |
|
|
|
Name: |
|
|
Title: |
SCHEDULE 1.1.13
CLOSING DATE TRANSACTIONS
SCHEDULE 1.1.56
PATENTS AND APPLICATIONS
SCHEDULE 1.1.65
SELLER DEBTHOLDERS
SCHEDULE 10.3.1
ALLOCATION OF CONSIDERATION TO SELLER DEBTHOLDERS
- 45 -
Exhibit 10.1
THESE SECURITIES HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR PROVINCE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY CANADIAN NATIONAL OR PROVINCIAL
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR ANY CANADIAN NATIONAL OR PROVINCIAL SECURITIES LAW OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY CANADIAN NATIONAL OR PROVINCIAL SECURITIES LAW AND IN
ACCORDANCE WITH APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION,
THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) JULY
15, 2015, AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
Date of Issuance: July
15, 2015
$n
YAPPN CORP.
12% SECURED DEBENTURE
DUE DECEMBER 31, 2015
THIS DEBENTURE is a duly
authorized and issued 12% Secured Debenture of Yappn Corp., a Delaware corporation, having a principal place of business at 1001
Avenue of the Americas, 11th Floor, New York, NY 10018 (the "Company"), designated as its 12% Secured Debenture,
due December 31, 2015 (the "Debenture").
FOR
VALUE RECEIVED, the Company promises to pay to n
or his registered assigns (the "Holder"), the principal sum of n
Dollars ($n) on December
31, 2015 or such earlier date as the Debenture is required or permitted to be repaid as provided hereunder (the "Maturity
Date"), and to pay interest to the Holder on the aggregate outstanding principal amount of this Debenture at the rate of 12%
per annum, payable on the Maturity Date (except that, if any such date is not a Business Day, then such payment shall be due on
the next succeeding Business Day).
This
Debenture is derived from a Subscription Agreement between the Holder and the Company (the
“Subscription Agreement”) dated July _____, 2015 and incorporates the terms and conditions contained in the
Subscription Agreement by reference. The lead Debenture Holder shall be Winterberry Investments Inc.
(“Winterberry” or the “Lead Debenture Holder”), including with respect to the covenants of the
Company, default by the Company and the remedies of the Holder. The Debentures shall, however, rank equally with one
another.
Prior to December 31, 2015, the Debentures
and all accrued interest shall become immediately due and payable upon written notice being provided by Winterberry to the Company
in any of the following circumstances:
| (i) | at any time after September 15, 2015, if any of the following have not been completed on or before
September 15, 2015: |
| (a) | the Closing, as defined in an Asset Purchase Agreement dated July 6, 2015 entered into among the
Company, Intertainment Media Inc. (“Intertainment”), Ortsbo Inc. and Winterberry (the “Definitive Agreement”); |
| | |
| (b) | a consolidation of the outstanding common shares of the Company on a 1 for 10 basis; or |
| | |
| (c) | a consolidation of the outstanding common shares of Intertainment on a 1 for 10 basis; or |
| (ii) | upon completion of an equity financing by the Company of an aggregate minimum amount of $10 million. |
THE COMPANY MAY PREPAY ANY PORTION OF THE PRINCIPAL
AMOUNT OF THIS DEBENTURE TOGETHGER WITH ALL ACCRUED INTEREST WITHOUT THE PRIOR WRITTEN CONSENT OF THE HOLDER.
This Debenture is subject
to the following additional provisions:
Section 1. This Debenture
is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same, subject to regulatory requirements. No service charge will be made for such registration of transfer
or exchange.
Section 2. This Debenture
has been issued subject to certain investment representations of the original Holder set forth in the Subscription Agreement. Interest
shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated
damages and other amounts which may become due hereunder, has been made. Any payment hereunder will be paid to the Holder in whose
name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture
Register”). Prior to due presentment to the Company for transfer of this Debenture, the Company and any agent of the
Company may treat the Holder in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
Section 3. Events of Default.
(a) "Event of Default",
wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of
any administrative or governmental body):
i) any default in the payment
of the principal of, interest (including Late Fees) on, or liquidated damages in respect of, any Debentures, free of any claim
of subordination, as and when the same shall become due and payable which default is not cured, if possible to cure, within 10
days of notice of such default sent by the Lead Debenture Holder;
ii) the Company or any
of its subsidiaries shall commence, or there shall be commenced against the Company or any such subsidiary a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy, insolvency or other proceeding which remains undismissed for
a period of 60 days; or the Company or any subsidiary thereof is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60
days; or the Company or any subsidiary thereof makes a general assignment for the benefit of creditors; or the Company shall fail
to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company
or any subsidiary thereof shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring
of its debts; or the Company or any subsidiary thereof shall by any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary thereof
for the purpose of effecting any of the foregoing;
iii) the Company breaches
any covenant in the Subscription Agreement or hereunder, which breach is not cured, if possible to cure, within 10 days of notice
of such breach sent by the Lead Debenture Holder.
(b) If any Event of Default
occurs and is continuing, the full principal amount of this Debenture, together with interest and other amounts owing in respect
thereof, to the date of acceleration shall become at the Holder's election, immediately due and payable in cash.
Section 4. Negative Covenants.
This Debenture contains
the following covenants of the Company satisfactory to Winterberry:
(a) that the Company will
not, and will not permit any of its subsidiaries to, directly or indirectly, issue, incur, guarantee, assume, become liable, contingently
or otherwise, with respect to or otherwise become responsible for the payment of any indebtedness except in the ordinary course
of business;
(b) the Company will not,
and will not permit any of its subsidiaries to, make payment of any dividend or other distribution in respect of such corporation’s
capital stock, purchase, redeem, or otherwise acquire or retire for value any capital stock, option, warrant, or any other right
to acquire shares of capital stock of such corporation, make any principal payment on, or purchase, repurchase, redeem or otherwise
acquire retire for value prior to any scheduled maturity or scheduled repayment of any indebtedness which is subordinated in right
of payment to the Debentures;
(c) that the Company will
not, and will not permit any of its subsidiaries to, sell any asset of such corporation except on conditions acceptable to Winterberry
or except in the ordinary course of business;
(d) that the Company will
not, and will not permit any of its subsidiaries to, create, incur, assume or suffer to exist any liens upon any of their respective
properties securing any indebtedness of the Company or the subsidiaries unless such indebtedness is expressly subordinated to the
Debentures;
(e) that the Company will
not amalgamate, consolidate or merge with any individual, corporation, partnership, joint venture, trust, estate, unincorporated
organization or government or any agency or political subdivision thereof ("Person") or convey, transfer or lease
all or substantially all of its assets to any Person, except on conditions acceptable to Winterberry or in the ordinary course
of business;
(f) that the Company will
not, and will not permit any of subsidiaries to, enter into any sale/leaseback transaction except on conditions acceptable to Winterberry;
(g) that the Company will
not, and will not permit any of subsidiaries to, issue any securities in the capital stock of such corporation, except pursuant
to currently outstanding rights to convert and warrants, the issuance of incentive stock options or Shares upon exercise of such
options, issued in accordance with the Company’s stock option plan or securities issued for the purpose of payment of the
principal amount of the Debentures.
Section 5. Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Subscription Agreement, and (b) the following terms shall have the following
meanings:
"Business Day"
means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which
banking institutions in the State of New York are authorized or required by law or other government action to close.
"Common Stock"
means the common stock, $.0001 par value per share, of the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Exchange Act"
means the Securities Exchange Act of 1934, as amended.
"Original Issue
Date" shall mean the date of the first issuance of the Debentures regardless of the number of transfers of any Debenture
and regardless of the number of instruments which may be issued to evidence such Debenture.
Section 6. The Debentures
shall be secured and supported by a first security interest in all of the assets and undertakings of the Company and its subsidiaries.
Section 7. Except as expressly
provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of, interest and liquidated damages (if any) on, this Debenture at the time, place, and rate, and in the coin
or currency, herein prescribed. This Debenture is a direct debt obligation of the Company. This Debenture ranks pari passu with
all other Debentures now or hereafter issued under the terms set forth herein. As long as this Debenture is outstanding, the Company
shall not and shall cause it subsidiaries not to, without the consent of the Holder, amend its certificate of incorporation, bylaws
or other charter documents so as to adversely affect any rights of the Holder.
Section 8. If this Debenture
shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss,
theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
Section 9. Any and all
notices or other communications or deliveries to be provided by the Holder hereunder, shall be in writing and delivered personally,
by facsimile, by email attachment, or sent by a nationally recognized overnight courier service, addressed to the Company, at the
address set forth above, or such other facsimile number, email address, or address as the Company may specify for such purposes
by notice to the Holder delivered in accordance with this Section 9. Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, by email attachment, or sent
by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or email address or address
of the Holder appearing on the books of the Company, or if no such facsimile number or email attachment or address appears on the
books of the Company, at the principal place of business of such Holder, as set forth in the Subscription Agreement. Any
notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile number or email attachment to the email address set
forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Business Day after
the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment
to the email address set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m.
(New York City time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
Section 10. Except as expressly
set forth in any security agreement securing the obligations under this Debenture, all questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of law thereof and each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the transaction contemplated herein (whether brought against
a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the
state and federal courts sitting in the City of New York, Borough of Manhattan (the "New York Courts"). Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed herein and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Debenture or the transactions contemplated hereby. If either party shall commence an action
or proceeding to enforce any provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.
Section 11. Any waiver
by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Company or
the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture.
Any waiver must be in writing.
Section 12. If any provision
of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision
is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The
Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on the Debentures as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company
(to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will
suffer and permit the execution of every such as though no such law has been enacted.
IN WITNESS WHEREOF,
the Company has caused this 12% Secured Debenture to be duly executed by a duly authorized officer as of the date first above
indicated.
|
YAPPN CORP. |
|
|
|
|
By: |
|
|
Name: |
David Lucatch |
|
Title: |
Chief Executive Officer |
7
Exhibit 10.2
SECURITY
AGREEMENT
THIS
AGREEMENT is made as of July____, 2015,
BETWEEN
YAPPN
CORP., a corporation incorporated under the laws of Delaware
(the
“Borrower”),
-
and -
YAPPN
ACQUISITION SUB INC., a corporation incorporated under the laws of Delaware;
YAPPN
CANADA INC., a corporation incorporated under the laws of Ontario;
FOTOYAP
INC., a corporation incorporated under the laws of Delaware;
LANGULAS
INC., a corporation incorporated under the laws of Florida;
YADMARK
INC., a corporation incorporated under the laws of Florida;
YAFFILIATE
MARKETING SERVICES INC., a corporation incorporated under the laws of Florida;
(each
a “Guarantor”)
-
and -
WINTERBERRY
INVESTMENTS INC., a corporation formed under the laws of Ontario
(the
“Collateral Agent”)
WHEREAS
the Borrower has offered debentures (the “Debentures”) pursuant to the terms and conditions of a subscription
agreement dated July ___, 2015 (the “Subscription Agreement”);
AND
WHEREAS the Borrower has agreed to grant a general and continuing security interest over all of its assets for the payment and
performance of its obligations under the Subscription Agreement and Debentures (the “Secured Obligations” as
hereinafter further defined);
AND
WHEREAS each Guarantor has agreed to unconditionally guarantee the Secured Obligations (the Borrower and the Guarantors are each
a “Grantor” and together the “Grantors”) as further set out in this Agreement;
AND
WHEREAS the Grantors have agreed to grant general and continuing security interests over all of their assets in favor of the Collateral
Agent, in its capacity as lead investor and collateral agent pursuant to the Subscription Agreement and the Debentures, as pledgee,
assignee and secured party;
AND
WHEREAS the Borrower and each Guarantor will receive substantial direct and indirect benefits from the execution, delivery and
performance of the obligations under the Subscription Agreement and Debentures and each is, therefore, willing to enter into this
Agreement;
AND
WHEREAS it is a condition to the payment of the amounts made by each holder of a Debenture (collectively the “Holders”)
under the Debentures that each Grantor execute and deliver this Agreement;
AND
WHEREAS this Agreement is given by each Grantor in favor of the Collateral Agent for the ratable benefit of the Holders to secure
the payment and performance of all of the Secured Obligations;
NOW
THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each Grantor and the Collateral Agent hereby agree as follows:
Article
1
interpretation
(1) Unless
otherwise defined herein or in the Subscription Agreement, capitalized terms used in this Agreement that are defined in the UCC
shall have the meanings assigned to them in the UCC. However, if a term is defined in Article 9 of the UCC differently than in
another Article of the UCC, the term has the meaning specified in Article 9.
(2) The
following terms shall have the following meanings:
“Agreement” has
the meaning set forth in the recitals above.
“Business
Day” means a day other than a Saturday, Sunday or statutory holiday in the Province of Ontario.
“Claims” means
any and all property and other taxes, assessments and special assessments, levies, fees and all governmental charges imposed upon
or assessed against, and landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's
Liens and other claims arising by operation of law against, all or any portion of the Pledged Collateral.
“Collateral
Support” means all Property assigned, hypothecated or otherwise securing any Pledged Collateral and shall include
any security agreement or other agreement granting a Lien or security interest in such Property.
“Contracts” means,
collectively, with respect to each Grantor, the Intellectual Property Licenses, all sale, service, performance, equipment or property
lease contracts, agreements and grants and all other contracts, agreements or grants (in each case, whether written or oral, or
third party or intercompany), between such Grantor and any third party, and all assignments, amendments, restatements, supplements,
extensions, renewals, replacements or modifications thereof.
“Copyrights” means,
collectively, with respect to each Grantor, all copyrights (whether statutory or common law, whether established or registered
in the United States, Canada or any other country or any political subdivision thereof, whether registered or unregistered and
whether published or unpublished), all tangible embodiments of the foregoing and all copyright registrations and applications
made by such Grantor, in each case, whether now owned or hereafter created or acquired by or assigned to such Grantor, together
with any and all (i) rights and privileges arising under applicable law and international treaties and conventions with respect
to such Grantor's use of such copyrights, (ii) reissues, renewals, continuations and extensions thereof and amendments thereto,
(iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including
damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world
and (v) rights to sue for past, present or future infringements thereof.
“Excluded
Property” means, collectively:
| (i) | any
United States intent-to-use trademark applications to the extent that, and solely during
the period in which, the grant, attachment or enforcement of a security interest therein
would, under applicable federal law, impair the registrability of such applications or
the validity or enforceability of registrations issuing from such applications; and |
| (ii) | any
asset or property to the extent that the grant of a security interest is prohibited by
applicable law, rule or regulation or requires a consent not obtained of any Governmental
Authority pursuant to such applicable law, rule or regulation, in each case after giving
effect to the applicable anti-assignment provisions of the UCC, PPSA or other applicable
law and other than Proceeds and receivables thereof, the assignment of which is expressly
deemed effective under the UCC or other applicable law notwithstanding such prohibition. |
“Event
of Default” has the meaning ascribed thereto in each of the Debentures.
“First
Priority” means, with respect to any Lien purported to be created in any Pledged Collateral pursuant to this Agreement,
such Lien is the most senior lien to which such Pledged Collateral is subject (subject only to Liens permitted under the Subscription
Agreement).
“Grantor” has
the meaning set forth in the recitals above.
“Guarantors” has
the meaning set forth in the recitals.
“Intellectual
Property Collateral” means, collectively, the Patents, Trademarks (excluding only United States intent-to-use Trademark
applications to the extent that and solely during the period in which the grant of a security interest therein would impair, under
applicable federal law, the registrability of such applications or the validity or enforceability of registrations issuing from
such applications), Copyrights, Trade Secrets, Intellectual Property Licenses and all other industrial, intangible and intellectual
property of any type, including mask works and industrial designs.
“Intellectual
Property Licenses” means, collectively, with respect to each Grantor, all license and distribution agreements with,
and covenants not to sue, any other party with respect to any Patent, Trademark, Copyright or Trade Secret or any other patent,
trademark, copyright or trade secret, whether such Grantor is a licensor or licensee, distributor or distributee under any such
license or distribution agreement, together with any and all (i) renewals, extensions, supplements and continuations thereof,
(ii) income, fees, royalties, damages, claims and payments now and hereafter due and/or payable thereunder and with respect thereto
including damages and payments for past, present or future infringements or violations thereof, (iii) rights to sue for past,
present and future infringements or violations thereof and (iv) other rights to use, exploit or practice any or all of the Patents,
Trademarks, Copyrights or Trade Secrets or any other patent, trademark, copyright or trade secret.
“Subscription
Agreement” has the meaning set forth in the recitals above.
“Organizational
Documents” means the certificate of incorporation and by-laws or any comparable organizational documents of any
corporate entity (including limited liability companies and partnerships).
“Patents” means,
collectively, with respect to each Grantor, all patents issued or assigned to, and all patent applications and registrations made
by, such Grantor (whether issued, established or registered or recorded in the United States, Canada or any other country or any
political subdivision thereof) and all tangible embodiments of the foregoing, together with any and all (i) rights and privileges
arising under applicable law and international treaties and conventions with respect to such Grantor's use of any patents, (ii)
inventions and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof and amendments thereto, (iv) income, fees, royalties, damages, claims and payments now or hereafter
due and/or payable thereunder and with respect thereto including damages and payments for past, present or future infringements
thereof, (v) rights corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements
thereof.
“Pledged
Collateral” has the meaning set forth in 3.1.
“Pledged
Debt” means, with respect to each Grantor, all debt (including intercompany notes) from time to time owed to such
Grantor by any obligor, and all interest, cash, instruments and other property, assets or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all of such debt and all certificates, instruments
or agreements evidencing such debt, and all assignments, amendments, restatements, supplements, extensions, renewals, replacements
or modifications thereof.
“Pledged
Securities” means, collectively, with respect to each Grantor, (i) all issued and outstanding equity interests
of each issuer or subsidiary that are owned by such Grantor and all options, warrants, rights, agreements and additional equity
interests of whatever class of any such issuer or subsidiary acquired by such Grantor in any manner, together with all claims,
rights, privileges, authority and powers of such Grantor relating to such equity interests in each such issuer or subsidiary or
under any Organizational Document of each such issuer or subsidiary, and the certificates, instruments and agreements representing
such equity interests and any and all interest of such Grantor in the entries on the books of any financial intermediary pertaining
to such equity interests, (ii) all additional equity interests of any issuer or subsidiary from time to time acquired by or issued
to such Grantor and all options, warrants, rights, agreements and additional equity interests of whatever class of any such issuer
or subsidiary from time to time acquired by such Grantor in any manner, together with all claims, rights, privileges, authority
and powers of such Grantor relating to such equity interests or under any Organizational Document of any such issuer or subsidiary,
and the certificates, instruments and agreements representing such equity interests and any and all interest of such Grantor in
the entries on the books of any financial intermediary pertaining to such equity interests, from time to time acquired by such
Grantor in any manner, and (iii) all equity interests issued in respect of the equity interests referred to in clause (i) or (ii)
upon any consolidation or merger of any issuer of such equity interests of any successor subsidiary owned by such Grantor (unless
such Grantor is the surviving entity);
“PPSA”
means the Personal Property Security Act (Ontario), as now enacted or as the same may from time to time be amended, re-enacted
or replaced
“Receivables” means
all (i) Accounts, (ii) Chattel Paper, (iii) Payment Intangibles, (iv) Instruments, (v) General Intangibles, and (vi) to the extent
not otherwise covered above, all other rights to payment, whether or not earned by performance, for goods or other property sold,
leased, licensed, assigned or otherwise disposed of, or services rendered or to be rendered, regardless of how classified under
the UCC together with all of Grantors' rights, if any, in any goods or other property giving rise to such right to payment and
all Collateral Support and Supporting Obligations related thereto and all Records relating thereto.
“Related
Parties” means, with respect to any Person, such Person's Affiliates and the directors, officers, employees, partners,
agents, trustees, administrators, managers, advisors and representatives of it and its Affiliates.
“Secured
Obligations” means obligations of the Borrower from time to time arising under the Subscription Agreement and Debentures.
“Securities
Collateral” means, collectively, the Pledged Securities, the Pledged Debt and the Distributions.
“Trade
Secrets” means, collectively, with respect to each Grantor, all know-how, trade secrets, manufacturing and production
processes and techniques, inventions, research and development information, technical, marketing, financial and business data
and databases, pricing and cost information, business and marketing plans, customer and supplier lists and information, all other
confidential and proprietary information and all tangible embodiments of the foregoing, together with any and all (i) rights and
privileges arising under applicable law and international treaties and conventions with respect to such trade secrets, (ii) income,
fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto including damages and payments
for past, present or future misappropriations thereof, (iii) rights corresponding thereto throughout the world and (iv) rights
to sue for past, present or future misappropriations thereof.
“Trademarks” means,
collectively, with respect to each Grantor, all trademarks (including service marks), slogans, logos, symbols, certification marks,
collective marks, trade dress, uniform resource locators (URL's), domain names, corporate names and trade names, whether statutory
or common law, whether registered or unregistered and whether established or registered in the United States, Canada or any other
country or any political subdivision thereof, that are owned by or assigned to such Grantor, all registrations and applications
for the foregoing and all tangible embodiments of the foregoing, together with, in each case, the goodwill symbolized thereby
and any and all (i) rights and privileges arising under applicable law and international treaties and conventions with respect
to such Grantor's use of any trademarks, (ii) reissues, continuations, extensions and renewals thereof and amendments thereto,
(iii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto,
including damages, claims and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout
the world and (v) rights to sue for past, present and future infringements thereof.
“UCC” means
the Uniform Commercial Code as in effect from time to time in the State of Delaware; provided, however, that if by reason
of mandatory provisions of law, any or all of the perfection or priority of the Collateral Agent’s and the Holders’
security interest in any item or portion of the Pledged Collateral is governed by the Uniform Commercial Code as in effect in
a jurisdiction other than the State of Delaware, then the term “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority and
for purposes of definitions relating to such provisions.
Article
2
guarantees
Each
Guarantor absolutely, irrevocably and unconditionally guarantees to the Holders, jointly with the other Guarantors and severally,
as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Debentures. Each Guarantor
further agrees that the Debentures may be extended or renewed, in whole or in part, without notice to or further assent from it,
and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Debenture. Each Guarantor waives
(to the extent permitted by applicable law) presentment to, demand of payment from and protest to the Borrower or any other Grantor
of any Debenture, and also waives notice of acceptance of its guarantee and notice of protest for non-payment. Each Guarantor
hereby further jointly and severally agrees that if the Borrower shall fail to pay in full when due (whether at stated maturity,
by acceleration or otherwise) any of the Debentures, such Guarantor will promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of the Debentures, the same will be promptly paid in
full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.
Each
Guarantor further agrees that its guarantee under this Agreement constitutes a guarantee of payment when due and payable and not
of collection, and waives any right (except such as shall be required by applicable law and cannot be waived) to require that
any resort be had by the Collateral Agent or any other Holder to any security held for the payment of the Debentures or to any
balance of any deposit account or credit on the books of the Collateral Agent in favour of the Borrower or any other person.
(1) The
obligations of each Guarantor under this Agreement shall not be subject to any reduction, limitation, impairment or termination
for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense
or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the
Subscription Agreement, Debentures or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor
shall not be discharged or impaired or otherwise affected by (i) the failure of the Collateral Agent or any other Holder to assert
any claim or demand or to enforce any right or remedy under the provisions of the Subscription Agreement or any Debenture or otherwise,
(ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, the Subscription
Agreement or any Debenture (other than pursuant to the terms of a waiver, amendment, modification or release of this Agreement
in accordance with the terms of this Agreement) or any other agreement, including with respect to the release of any other Guarantor
under this Agreement, (iii) the release of, or any impairment of or failure to perfect any Lien on or security interest in, any
security held by the Collateral Agent or any other Holder for the Debentures, (iv) any default, failure or delay, wilful or otherwise,
in the performance of the Debentures, or (v) any other act or omission that may or might in any manner or to any extent vary the
risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity. Each Guarantor expressly
authorizes the Collateral Agent, in accordance with the Subscription Agreement and applicable law, to take and hold security for
the payment and performance of the Debentures, to exchange, waive or release any or all such security (with or without consideration),
to enforce or apply such security and direct the order and manner of any sale thereof in its sole discretion or to release or
substitute any one or more other Guarantors upon or in respect of the Debentures, all without affecting the obligations of any
Guarantor.
(2) To
the fullest extent permitted by applicable law, each Guarantor waives any defense (other than payment or performance of the Debentures
(other than contingent obligations), in full) based on or arising out of any defense of the Borrower or any other Grantor or the
unenforceability of the Debentures or any part thereof from any cause, or the cessation from any cause of the liability of the
Borrower or any other Grantor. The Collateral Agent and the other Holders may, in accordance with the provisions of this Agreement,
the Debentures and applicable law, at their election, foreclose on any security held by one or more of them by one or more judicial
or non-judicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the
Debentures, make any other accommodation with the Borrower or any other Grantor or exercise any other right or remedy available
to them against the Borrower or any other Grantor, without affecting or impairing in any way the liability of any Guarantor hereunder.
To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though
such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other
right or remedy of such Guarantor against the Borrower or any other Grantor, as the case may be, or any security.
Each
Guarantor agrees that its guarantee hereunder shall continue to be effective or shall be automatically reinstated, as the case
may be, if at any time and for any reason full or partial payment of any Debenture is rescinded or must otherwise be restored
by the Collateral Agent or any other Holder whether upon the bankruptcy or reorganization of the Borrower, any other Grantor,
or otherwise.
| 2.5 | Agreement
To Pay and Subrogation |
In
furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Holder has at law
or in equity against any Guarantor by virtue of this Agreement, upon the failure of the Borrower or any other Grantor to pay any
Debenture when and as the same shall become due and payable, whether at maturity, by acceleration, after notice of prepayment
or otherwise, each Guarantor hereby jointly and severally promises to and will promptly pay, or cause to be paid, to the Collateral
Agent for distribution to the Holders in cash the amount of such unpaid Debenture (other than payment of any contingent obligations).
Each
Guarantor assumes all responsibility for being and keeping itself reasonably informed of the Borrower’s and each other Grantor’s
financial condition and assets and of all other circumstances bearing upon the risk of non-payment of the Debentures and the nature,
scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that neither the Collateral Agent nor
any other Holder will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances
or risks.
| 2.7 | Instrument
for the Payment of Money |
Each
Guarantor hereby acknowledges that the guarantees in this Article 2 constitute instruments for the payment of money, and consents
and agrees that the Collateral Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys
due under this Agreement, shall have the right to bring a summary judgment motion-action under New York CVP. Law Section 3213.
Article
3
Grant of security interest
| 3.1 | Grant
of Security Interest |
(1) As
collateral security for the payment and performance in full of all the Secured Obligations, each Grantor hereby pledges and grants
to the Collateral Agent for the ratable benefit of the Holders, a Lien on and security interest in and to all of the right, title
and interest of such Grantor in, to and under the following property, wherever located, and whether now existing or hereafter
arising or acquired from time to time (collectively, the “Pledged Collateral”):
| (b) | all
Equipment, Goods, Inventory and Fixtures; |
| (c) | all
Documents, Instruments and Chattel Paper; |
| (d) | all
Letters of Credit and Letter-of-Credit Rights; |
| (e) | all
Securities Collateral; |
| (f) | all
Investment Property; |
| (g) | all
Intellectual Property Collateral; |
| (h) | all
General Intangibles; |
| (i) | all
Money and all Deposit Accounts; |
| (j) | all
Supporting Obligations; |
| (k) | all
books and records, customer lists, credit files, computer files, programs, printouts
and other computer materials and records relating to the Pledged Collateral and any General
Intangibles at any time evidencing or relating to any of the foregoing; and |
| (l) | to
the extent not covered by clauses (a) to (k) of this sentence, all other assets, personal
property and rights of such Grantor, whether tangible or intangible, all Proceeds and
products of each of the foregoing and all accessions to, substitutions and replacements
for, and rents, profits and products of, each of the foregoing, and any and all Proceeds
of any insurance, indemnity, warranty or guaranty payable to such Grantor from time to
time with respect to any of the foregoing. |
(2) Notwithstanding
anything to the contrary contained in subsection 3.1(1), the security interest created by this Agreement shall not extend to,
and the term “Pledged Collateral” shall not include, any Excluded Property, provided that, if any Excluded
Property would have otherwise constituted Pledged Collateral, when such property shall cease to be Excluded Property, such property
shall be deemed at all times from and after the date hereof to constitute Pledged Collateral.
(3) The
Grantors shall from time to time at the request of the Collateral Agent give written notice to the Collateral Agent identifying
in reasonable detail the Excluded Property (and stating in such notice that such Excluded Property constitutes “Excluded
Property”) and shall provide to the Collateral Agent such other information regarding the Excluded Property as the Collateral
Agent may reasonably request.
(1) Each
Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction
any financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9
of the UCC of each applicable jurisdiction, or as applicable by the provisions of the PPSA, for the filing of any financing statement
or amendment relating to the Pledged Collateral, including (i) whether such Grantor is an organization, the type of organization
and any organizational identification number issued to such Grantor, and (ii) any financing or continuation statements or other
documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by such
Grantor hereunder, without the signature of such Grantor where permitted by law, including the filing of a financing statement
describing the Pledged Collateral as “all assets now owned or hereafter acquired by the Grantor or in which the Grantor
otherwise has rights”. Each Grantor agrees to provide all information described in the immediately preceding sentence to
the Collateral Agent promptly upon request by the Collateral Agent.
(2) Each
Grantor hereby further authorizes the Collateral Agent to file with the United States Patent and Trademark Office, the United
States Copyright Office, the Canadian Intellectual Property Office (and any successor office and any similar office in any United
States state or other country) this Agreement, an Intellectual Property security agreement and other documents for the purpose
of perfecting, confirming, continuing, enforcing or protecting the security interest granted by such Grantor hereunder, without
the signature of such Grantor where permitted by law, and naming such Grantor as debtor, and the Collateral Agent as secured party.
Article
4
Perfection and further assurances
| 4.1 | Maintenance
of Perfected Security Interest |
Each
Grantor represents and warrants that on the date hereof all financing statements, agreements, instruments and other documents
necessary to perfect the security interest granted by it to the Collateral Agent in respect of the Pledged Collateral have been
delivered to the Collateral Agent in completed and, to the extent necessary or appropriate, duly executed form for filing in each
governmental, municipal or other office. Each Grantor agrees that at its sole cost and expense, such Grantor will maintain the
security interest created by this Agreement in the Pledged Collateral as a perfected First Priority security interest.
| 4.2 | Joinder
of Additional Grantors |
The
Grantors shall cause each Subsidiary of the Borrower which, from time to time, after the date hereof shall be formed, to execute
and deliver to the Collateral Agent a joinder agreement within 30 days of the date on which it was acquired or created and, upon
such execution and delivery, such Subsidiary shall constitute a “Grantor” for all purposes hereunder with the same
force and effect as if originally named as a Grantor herein. The execution and delivery of such joinder agreements shall not require
the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor as a party to this Agreement.
(1) Each
Grantor shall take such further actions, and execute and deliver to the Collateral Agent such additional financing statements,
amendments, assignments, agreements, supplements, powers and instruments, as the Collateral Agent may in its reasonable judgment
deem necessary or appropriate in order to create and maintain the validity, perfection or priority of and protect any security
interest granted or purported to be granted in the Pledged Collateral as provided herein and the rights and interests granted
to the Collateral Agent hereunder, and enable the Collateral Agent to exercise and enforce its rights, powers and remedies hereunder
with respect to any Pledged Collateral, including the filing of any financing statements, continuation statements and other documents
under the UCC, PPSA or other similar laws in effect in any jurisdiction with respect to the security interest created hereby,
the filing of the Intellectual Property Collateral security acknowledgments and supplemental Intellectual Property Collateral
security acknowledgments with the United States Patent and Trademark Office, United States Copyright Office, the Canadian Intellectual
Property Office and any other applicable jurisdiction’s intellectual property registration office, all in form reasonably
satisfactory to the Collateral Agent and in such offices wherever required by law to perfect, continue and maintain the validity,
enforceability and priority of the security interest in the Pledged Collateral as provided herein and to preserve the other rights
and interests granted to the Collateral Agent hereunder, as against third parties, with respect to the Pledged Collateral.
Article
5
Representations, warranties and covenants
Each
Grantor represents, warrants and covenants as follows:
| (a) | Approvals.
In the event that the Collateral Agent desires to exercise any remedies, voting or
consensual rights or attorney-in-fact powers set forth in this Agreement and determines
it necessary to obtain any approvals or consents of any Governmental Authority or any
other Person therefor, then, upon the reasonable request of the Collateral Agent, such
Grantor agrees to use its commercially reasonable efforts to assist the Collateral Agent
in obtaining as soon as practicable any necessary approvals or consents for the exercise
of any such remedies, rights and powers. |
| (b) | Pledged
Collateral Information. All information set forth herein, including the schedules
annexed hereto, and all information contained in any documents, schedules and lists heretofore
delivered to the Collateral Agent or any Holder, in connection with this Agreement, in
each case, relating to the Pledged Collateral, is accurate and complete in all material
respects. The Pledged Collateral described on the schedules hereof constitutes all of
the property of such type of Pledged Collateral owned or held by the Grantors. |
| (c) | Insurance.
In the event that the proceeds of any insurance claim are paid to any Grantor after
the Collateral Agent has exercised its right to foreclose on all or any part of the Pledged
Collateral during the existence of an Event of Default, such net cash proceeds shall
be held in trust for the benefit of the Collateral Agent and immediately after receipt
thereof shall be paid to the Collateral Agent for application in accordance with the
Subscription Agreement. |
| (d) | Compliance
With Laws. Each Grantor shall pay promptly when due all Claims upon the Pledged Collateral
or incurred in connection with the use or operation of the Pledged Collateral or incurred
in connection with this Agreement. All Claims imposed upon or assessed against the Pledged
Collateral have been paid and discharged. In the event any Grantor shall fail to make
such payment contemplated in the immediately preceding sentence, the Collateral Agent
may (following notice to the Grantor, to the extent practicable) do so for the account
of such Grantor and the Grantors shall promptly reimburse and indemnify the Collateral
Agent for all costs and expenses incurred by the Collateral Agent under this Article
5(d) in accordance with Section 8.8. |
Article
6
Intellectual property collateral
| 6.1 | Intellectual
Property License |
For
the purpose of enabling the Collateral Agent, during the continuance of an Event of Default, to exercise rights and remedies under
Article 7 hereof at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for
no other purpose, each Grantor hereby grants to the Collateral Agent, to the extent of such Grantor's rights and effective only
during the continuance of an Event of Default, an irrevocable, non-exclusive license, subject, in the case of Trademarks, to sufficient
rights to quality control and inspection in favor of such Grantor to avoid the risk of invalidation of such Trademarks, to use
and sublicense any of the Intellectual Property Collateral then owned by or licensed to such Grantor. Such license shall include
access to all devices, products and media in which any of the Intellectual Property Collateral is embodied, embedded, recorded
or stored and to all computer programs used for the compilation or printout hereof.
| 6.2 | Dealing
With Intellectual Property |
On
a continuing basis, each Grantor shall, at its sole cost and expense:
| (a) | promptly
following its becoming aware thereof, notify the Collateral Agent of any materially adverse
determination in any proceeding or the institution of any proceeding in any federal,
state or local court or administrative body or in the United States Patent and Trademark
Office or the United States Copyright Office regarding such Grantor's claim of ownership
in or right to use any of the Intellectual Property Collateral, such Grantor's right
to register such Intellectual Property Collateral or its right to keep and maintain such
registration in full force and effect; |
| (b) | maintain
and protect the material Intellectual Property Collateral as presently used and operated
and as contemplated by the Subscription Agreement; |
| (c) | not
permit to lapse or become abandoned any material Intellectual Property Collateral as
presently used and operated, and not settle or compromise any pending or future litigation
or administrative proceeding with respect to such Intellectual Property Collateral, in
each case except as shall be consistent with commercially reasonable business judgment; |
| (d) | upon
such Grantor obtaining knowledge thereof, promptly notify the Collateral Agent in writing
of any event which may be reasonably expected to materially and adversely affect the
value or utility of any of the material Intellectual Property Collateral, the ability
of such Grantor or the Collateral Agent to dispose of the Intellectual Property Collateral
or any portion thereof, or the rights and remedies of the Collateral Agent in relation
thereto including a levy or threat of levy or any legal process against the Intellectual
Property Collateral or any portion thereof; |
| (e) | not
license the Intellectual Property Collateral other than licenses entered into by such
Grantor in, or incidental to, the ordinary course of business, or amend or permit the
amendment of any of the licenses in a manner that would materially impair the value of
the Intellectual Property Collateral or the Lien on and security interest in the Intellectual
Property Collateral created therein hereby, without the consent of the Collateral Agent;
and |
| (f) | furnish
to the Collateral Agent from time to time upon the Collateral Agent's reasonable request
therefor reasonably detailed statements and amended schedules further identifying and
describing the Intellectual Property Collateral and such other materials evidencing or
reports pertaining to the Intellectual Property Collateral as the Collateral Agent may
from time to time reasonably request. |
| 6.3 | Additional
Intellectual Property |
If
any Grantor shall at any time after the date hereof (a) obtain any rights to any additional Intellectual Property Collateral or
(b) become entitled to the benefit of any additional Intellectual Property Collateral or any registration, renewal or extension
thereof, including any reissue, division, continuation, or continuation-in-part of any Intellectual Property Collateral, or any
improvement on any Intellectual Property Collateral, the provisions hereof shall automatically apply thereto and any such item
enumerated in clause (a) or (b) of this Section 6.3 with respect to such Grantor shall automatically constitute Intellectual Property
Collateral as if such would have constituted Intellectual Property Collateral at the time of execution of this Agreement and be
subject to the Lien and security interest created by this Agreement without further action by any party.
Article
7
Remedies
(1) If
any Event of Default shall have occurred and be continuing, the Collateral Agent may exercise, without any other notice to or
demand upon any Grantor, in addition to the other rights and remedies provided for herein or in any Debenture or otherwise available
to it, all the rights and remedies of a secured party upon default under the UCC or PPSA, as applicable, and also may:
| (a) | require
each Grantor to, and each Grantor hereby agrees that it will at its expense and upon
request of the Collateral Agent immediately, assemble the Pledged Collateral or any part
thereof, as directed by the Collateral Agent and make it available to the Collateral
Agent at a place and time to be designated by the Collateral Agent; |
| (b) | without
notice except as specified below, sell, resell, assign and deliver or grant a license
to use or otherwise dispose of the Pledged Collateral or any part thereof, in one or
more parcels at public or private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as the Collateral
Agent may deem commercially reasonable; |
| (c) | occupy
any premises owned or leased by any of the Grantors where the Pledged Collateral or any
part thereof is assembled or located for a reasonable period in order to effectuate its
rights and remedies hereunder or under law, without obligation to such Grantor in respect
of such occupation; and |
| (d) | exercise
any and all rights and remedies of any of the Grantors under or in connection with the
Pledged Collateral, or otherwise in respect of the Pledged Collateral, including without
limitation, (A) any and all rights of such Grantor to demand or otherwise require payment
of any amount under, or performance of any provision of, the Contracts, the Receivables,
and the other Pledged Collateral, (B) withdraw, or cause or direct the withdrawal, of
all funds with respect to the Deposit Accounts, and (C) exercise all other rights and
remedies with respect to the Receivables and the other Pledged Collateral. |
(2) Each
Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to such Grantor
of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification.
At any sale of the Pledged Collateral, if permitted by applicable law, the Collateral Agent may be the purchaser, licensee, assignee
or recipient of the Pledged Collateral or any part thereof and shall be entitled, for the purpose of bidding and making settlement
or payment of the purchase price for all or any portion of the Pledged Collateral sold, assigned or licensed at such sale, to
use and apply any of the Secured Obligations as a credit on account of the purchase price of the Pledged Collateral or any part
thereof payable at such sale. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it
may acquire against the Collateral Agent arising out of the exercise by it of any rights hereunder. Each Grantor hereby waives
and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Pledged Collateral,
whether before or after sale hereunder, and all rights, if any, of marshalling the Pledged Collateral and any other security for
the Secured Obligations or otherwise. The Collateral Agent shall not be liable for failure to collect or realize upon any or all
of the Pledged Collateral or for any delay in so doing nor shall it be under any obligation to take any action with regard thereto.
The Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor agrees that
it would not be commercially unreasonable for the Collateral Agent to dispose of the Pledged Collateral or any portion thereof
by utilizing internet sites that provide for the auction of assets of the type included in the Pledged Collateral or that have
the reasonable capability of doing so, or that match buyers and sellers of assets. The Collateral Agent shall not be obligated
to clean-up or otherwise prepare the Pledged Collateral for sale.
(3) If
any Event of Default shall have occurred and be continuing, all payments received by any Grantor in respect of the Pledged Collateral
shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall
be forthwith paid over the Collateral Agent in the same form as so received (with any necessary endorsement).
(4) If
any Event of Default shall have occurred and be continuing, the Collateral Agent may, without notice to any Grantor except as
required by law and at any time or from time to time, charge, set off and otherwise apply all or part of the Secured Obligations
against any funds deposited with it or held by it.
(5) If
any Event of Default shall have occurred and be continuing, upon the written demand of the Collateral Agent, each Grantor shall
execute and deliver to the Collateral Agent an assignment or assignments of any or all of the Intellectual Property Collateral
and such other documents and take such other actions as are necessary or appropriate to carry out the intent and purposes hereof.
Within five (5) Business Days of written notice thereafter from the Collateral Agent, each Grantor shall make available to the
Collateral Agent, to the extent within such Grantor's power and authority, such personnel in such Grantor's employ on the date
of the Event of Default as the Collateral Agent may reasonably designate to permit such Grantor to continue, directly or indirectly,
to produce, advertise and sell the products and services sold by such Grantor under the Intellectual Property Collateral, and
such persons shall be available to perform their prior functions on the Collateral Agent's behalf.
| 7.2 | No
Waiver and Cumulative Remedies |
The
Collateral Agent shall not by any act (except by a written instrument pursuant to Section 8.6, delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No
failure on the part of the Collateral Agent to exercise, no course of dealing with respect to, and no delay on the part of the
Collateral Agent in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power, privilege or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy; nor shall the Collateral Agent be required to look first to, enforce
or exhaust any other security, collateral or guaranties. All rights and remedies herein provided are cumulative and are not exclusive
of any rights or remedies provided by law.
| 7.3 | Application
of Proceeds |
Upon
the exercise by the Collateral Agent of its remedies hereunder, any proceeds received by the Collateral Agent in respect of any
realization upon any Pledged Collateral shall be applied, together with any other sums then held by the Collateral Agent pursuant
to this Agreement, in accordance with the Subscription Agreement. Each Grantor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Pledged Collateral are insufficient to pay the Secured Obligations and the fees and other
charges of any attorneys employed by the Collateral Agent to collect such deficiency.
Article
8
GENERAL
| 8.1 | Appointment
of Collateral Agent |
(1) The
Collateral Agent has been appointed as collateral agent in the Subscription Agreement and shall act in accordance with the terms
of the Subscription Agreement. The Collateral Agent may exercise or refrain from exercising any rights (including making demands
and giving notices) and take or refrain from taking any action (including the release or substitution of the Pledged Collateral),
in accordance with this Agreement and the Subscription Agreement. The Collateral Agent may employ agents and attorneys-in-fact
in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected
by it in good faith. The Collateral Agent may resign and a successor Collateral Agent may be appointed in the manner provided
in the Subscription Agreement. On the acceptance of appointment as the successor Collateral Agent, that successor Collateral Agent
shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent
under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this
Agreement. After any retiring Collateral Agent's resignation, the provisions hereof shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was the Collateral Agent.
(2) The
Collateral Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Pledged Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals
with its own property consisting of similar instruments or interests. Neither the Collateral Agent nor any of the Holders shall
have responsibility for (i) ascertaining or taking action whatsoever with regard to any Pledged Collateral (including matters
relating to the Pledged Securities, whether or not the Collateral Agent or any other Holder has or is deemed to have knowledge
of such matters; or (ii) taking any necessary steps to preserve rights against any Person with respect to any Pledged Collateral.
(3) The
Collateral Agent shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone
message believed by it to be genuine and correct and to have been signed, sent or made by the proper Person, and, with respect
to all matters pertaining to this Agreement and its duties hereunder.
| 8.2 | Performance
By Collateral Agent |
If
any Grantor shall fail to perform any covenants contained in this Agreement after giving effect to all applicable grace periods
if any (including any covenants to pay insurance, taxes and claims arising by operation of law in respect of the Pledged Collateral
and to pay or perform any Grantor obligations under any Pledged Collateral) or if any representation or warranty on the part of
any Grantor contained herein shall be breached, the Collateral Agent may (but shall not be obligated to) do or cause it to be
done or remedy any such breach, and may make payments for such purpose; provided, however, that the Collateral Agent shall
in no event be bound to inquire into the validity of any tax, Lien, imposition or other obligation which such Grantor fails to
pay or perform as and when required hereby and which such Grantor does not contest in accordance with the provisions of the Subscription
Agreement. Any and all amounts so paid by the Collateral Agent shall be reimbursed by the Grantors in accordance with the provisions
of Section 8.8. Neither the provisions of this Section 8.2 nor any action taken by the Collateral Agent pursuant to the provisions
of this Section 8.2 shall prevent any such failure to observe any covenant contained in this Agreement nor any breach of representation
or warranty from constituting an Event of Default.
Each
Grantor hereby appoints the Collateral Agent its attorney-in-fact, with full power and authority in the place and stead of such
Grantor and in the name of such Grantor, or otherwise, from time to time during the existence of an Event of Default in the Collateral
Agent's discretion to take any action and to execute any instrument consistent with the terms of the Subscription Agreement and
the Debentures which the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof (but the Collateral
Agent shall not be obligated to and shall have no liability to such Grantor or any third party for failure to so do or take action).
The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for
the term hereof. Each Grantor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof.
| 8.4 | Continuing
Security Interest and Assignment |
This
Agreement shall create a continuing security interest in the Pledged Collateral and shall (a) be binding upon the Grantors, their
respective successors and assigns and (b) inure, together with the rights and remedies of the Collateral Agent hereunder, to the
benefit of the Collateral Agent and the other Holders and each of their respective permitted successors, transferees and assigns
and their respective officers, directors, employees, affiliates, agents, advisors and controlling Persons; provided that,
no Grantor shall assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written
consent of the Collateral Agent and any attempted assignment or transfer without such consent shall be null and void. Without
limiting the generality of the foregoing clause (b), any Holder may assign or otherwise transfer any indebtedness held by it secured
by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof
granted to such Holder, herein or otherwise, subject however, to the provisions of the Subscription Agreement.
| 8.5 | Termination
and Release |
At
such time as the Debentures shall have been paid in full, the Pledged Collateral shall be released from the Liens created hereby,
and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent
and each Grantor hereunder shall terminate, all without delivery of any instrument or any further action by any party, and all
rights to the Pledged Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such
termination, the Collateral Agent shall deliver to such Grantor any Pledged Collateral held by the Collateral Agent hereunder,
and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.
| 8.6 | Modification
in Writing |
None
of the terms or provisions of this Agreement may be amended, modified, supplemented, terminated or waived, and no consent to any
departure by any Grantor therefrom shall be effective, except by a written instrument signed by the Collateral Agent in accordance
with the terms of the Subscription Agreement. Any amendment, modification or supplement of any provision hereof, any waiver of
any provision hereof and any consent to any departure by any Grantor from the terms of any provision hereof in each case shall
be effective only in the specific instance and for the specific purpose for which made or given. This Agreement shall be construed
as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, terminated or waived with respect
to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.
Unless
otherwise provided herein, any notice or other communication required or permitted to be given under this Agreement shall be in
writing and shall be given in the manner and become effective as set forth in the Subscription Agreement, and, as to any Grantor,
addressed to it at the address of the Grantor set forth in Schedule A to this Agreement, and as to the Collateral Agent, addressed
to it at the address set forth in the Subscription Agreement, or in each case at such other address as shall be designated by
such party in a written notice to the other party.
| 8.8 | Indemnity
and Expenses |
(1) Each
Grantor hereby agrees to indemnify and hold harmless the Collateral Agent (and any sub-agent thereof) and each other Holder (each
such Person being called an “Indemnitee”) from any losses, damages, liabilities, claims and related expenses
(including the fees and expenses of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee
by any Person (including any Grantor) other than such Indemnitee arising out of, in connection with or resulting from this Agreement
(including, without limitation, enforcement of this Agreement) or any failure of any Secured Obligations to be the legal, valid,
and binding obligations of any Grantor in accordance with their terms, whether brought by a third party or by such, and regardless
of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the
extent that such losses, claims, damages, liabilities or related expenses (i) are determined by a court of competent jurisdiction
by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee or (ii)
result from a claim brought by any Grantor against an Indemnitee for breach in bad faith of such Indemnitee's obligations hereunder
or under any Debenture, if such Grantor or such party has obtained a final and nonappealable judgment in its favor on such claim
as determined by a court of competent jurisdiction.
(2) To
the fullest extent permitted by applicable law, each Grantor hereby agrees not to assert, and hereby waives, any claim against
any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this Agreement, or any agreement or instrument contemplated
hereby, or the transactions contemplated hereby or thereby. No Indemnitee shall be liable for any damages arising from the use
of any information or other materials distributed by it through telecommunications, electronic or other information transmission
systems in connection with this Agreement or the Debentures or the transactions contemplated hereby or thereby by unintended recipients.
(3) Without
prejudice to the survival of any other agreement of any Grantor under this Agreement, the Subscription Agreement or any Debenture,
the agreements and obligations of each Grantor contained in this Section shall survive termination of such agreements and payment
in full of the Debentures.
This
Agreement will be governed by and construed in accordance with the internal laws of the State of New York and and the courts of
the State of New York will have jurisdiction to entertain any action arising under this Agreement, except for matters pertaining
to the enforcement of Secured Obligations against Pledged Collateral located in Canada, in which case the laws of the Province
of Ontario shall apply and jurisdiction and venue shall be in the Province of Ontario.
| 8.10 | Severability
of Provisions |
Any
provision hereof which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof or affecting
the validity, legality or enforceability of such provision in any other jurisdiction.
| 8.11 | Counterparts;
Integration; Effectiveness |
This
Agreement and any amendments, waivers, consents or supplements hereto may be executed in counterparts (and by different parties
hereto in different counterparts), each of which shall constitute an original, but all taken together shall constitute a single
contract. This Agreement, the Subscription Agreement and the Debentures constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect thereto.
This Agreement shall become effective when it shall have been executed by the Collateral Agent and when the Collateral Agent shall
have received counterparts hereof signed by each of the other parties hereto. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective
as delivery of a manually executed counterpart of this Agreement.
Nothing
in this Agreement, nor the exercise by the Collateral Agent of any of the rights or remedies hereunder, shall relieve any Grantor
from the performance of any term, covenant, condition or agreement on such Grantor's part to be performed or observed in respect
of any of the Pledged Collateral or from any liability to any Person in respect of any of the Pledged Collateral or shall impose
any obligation on the Collateral Agent or any other Holder to perform or observe any such term, covenant, condition or agreement
on such Grantor's part to be so performed or observed or shall impose any liability on the Collateral Agent or any other Holder
for any act or omission on the part of such Grantor relating thereto or for any breach of any representation or warranty on the
part of such Grantor contained in this Agreement, the Subscription Agreement or the Debentures, or in respect of the Pledged Collateral
or made in connection with them. Neither the Collateral Agent nor any other Holder shall have any obligation or liability under
any contracts, agreements and other documents included in the Pledged Collateral by reason of this Agreement, nor shall the Collateral
Agent or any other Holder be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action
to collect or enforce any such contract, agreement or other document included in the Pledged Collateral. The obligations of each
Grantor contained in this Section 8.12 shall survive the termination of this Agreement and the discharge of the Grantor's
other obligations under this Agreement, the Subscription Agreement and the Debentures.
[SIGNATURE
PAGE FOLLOWS]
TO
EVIDENCE ITS AGREEMENT the parties hereto have executed this Security Agreement on the date first written above.
|
YAPPN
CORP. |
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Per: |
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Name: |
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Title: |
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YAPPN
ACQUISITION SUB INC. |
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Per: |
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Name: |
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Title: |
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YAPPN
CANADA INC. |
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Per: |
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Name: |
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Title: |
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FOTOYAPP
INC. |
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Per: |
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Name: |
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Title: |
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LANGULAS
INC. |
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Per: |
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Name: |
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Title: |
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YADMARK
INC. |
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Per: |
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Name: |
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Title: |
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YAFFILIATE
MARKETING SERVICES INC. |
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Per: |
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Name: |
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Title: |
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WINTERBERRY
INVESTMENTS INC. |
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Per: |
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Name: |
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Title: |
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SCHEDULE
A
GRANTOR
ADDRESSES FOR NOTICES
24
Exhibit 99.1
|
FOR IMMEDIATE RELEASE |
Yappn executes
purchase agreement for patents and
ecommerce language services assets
Yappn buys assets
of Ortsbo Inc.
NEW
YORK, NY – July 16, 2015 – Yappn Corp. (“Yappn” or “Company”) (OCTQB: YPPN)
a leader in real-time language technology
and translation is pleased to announce that it has, with the approval of the Board of Directors of each company, entered into
a definitive agreement to acquire all of the intellectual property assets of Ortsbo Inc. (“Ortsbo”), a subsidiary
of Intertainment Media Inc. (TSXV: INT / OTC: ITMTF / FRA: I4T) (“Intertainment”) as previously announced on
May 26, 2015.
The purchased assets
include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including
Ecommerce and Customer Care know-how for a total purchase price of US $17 Million, which will be paid by the assumption of US
$1 Million in debt and the issuance of US $16 Million worth of Yappn restricted common shares (320 Million shares at US $0.05
per share). The transaction is subject to closing conditions including each party obtaining all necessary approvals, including
stock exchange approval and shareholder approval, if required.
In anticipation
of these transactions, on June 11, 2015, Yappn announced that its Windrose Global Ecommerce Platform (“Windrose”
or “WGE”) is now available at Shopify’s® app store. Yappn’s WGE application for Shopify®
is a Microsoft Azure® cloud recurring fee based software-as-a-service (SaaS) deliverable that is a combination of a native
Shopify® application (app) and a cloud-based real-time service and portal enabling E-tailers to expand their reach into up
to 67 different languages simply and easily through an automated app install without any development or computer programming experience
required on the user’s part. The Windrose app allows online stores to be viewed in multiple languages without the creation
of additional Shopify® storefronts, making marketing, sales and support seamless and easy to both the customer and vendor.
Yappn
also announces that it has completed a secured debt financing of US $4.5 Million of secured debentures and expects to close a
further US $1 Million prior to the completion of the purchase of the Ortsbo assets. This financing is
supported by Yappn’s secured line of credit holders and, as previously
announced, Yappn executed a non-binding letter of intent with Winterberry Investments Inc. (“Winterberry”),
a private company led by Mr. David Berry, pursuant to which Winterberry will facilitate and manage the financing transaction as
well as to advise on Yappn’s future capital programs. This
additional capital will be primarily used by Yappn to roll out its global Ecommerce expansion programs, and enable online Ecommerce
technology companies, online vendors and development partners to enable real-time language programs to service a growing global
audience.
"Execution
of this agreement provides Yappn with ownership of key assets to move its business forward and continue to accelerate revenue
programs and opportunities,” said David Lucatch, Founder and CEO of Yappn Corp. “Throughout our development
our key stakeholders, including our line of credit holders, have been very supportive and we believe that the agreement to engage
with David Berry to lead our capital markets programs enhances opportunities and potential future value of Yappn.”
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FOR IMMEDIATE RELEASE |
The Company continues
to expand its efforts with Ecommerce and communications as it has been testing a number of solutions to enable single language
online storefronts to effectively market, sell and support E-tailing efforts, including the shopping cart, in multiple languages
and is expecting a near term delivery of its framework for commercial revenue programs.
For more information, please
visit www.yappn.com
To learn more about Why
Language Matters to a growing global economy, visit our blog at www.whylanguagematters.com
About
Yappn
Yappn is a real-time multilingual
company that amplifies brand and social messaging, expands online commerce and provides customer support by globalizing these
experiences with its proprietary approach to language. Through its real-time multilingual amplification platform, Yappn eliminates
the language barrier, allowing the free flow of communications in 67 languages.
Yappn focuses on delivering
global reach and efficiencies without the need of human intervention, making the language experience immediate through all phases
of Ecommerce, online events and content programming.
Yappn Corp. is publicly traded
in the U.S. on the OTCQB – symbol “YPPN” Intertainment Media Inc. (TSXV: INT / OTC: ITMTF / FRA: I4T), a leading
technology incubator, has a controlling interest in Yappn Corp.
For more information,
please visit http://www.yappn.com or contact:
David Lucatch, Founder and
CEO
info@yappn.com
or
Jeanny So,
VP, Corporate Communications
jeanny@yappn.com
T: 1.800.395.9943
x 228
To
be added to the news release distribution list, please email: jeanny@yappn.com with the word
“News” on the
subject line.
|
FOR IMMEDIATE RELEASE |
Forward
Looking Information
Legal Notice and Safe Harbor Statement
This
press release contains “forward-looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, and
those preceded by or that include the words “believes,” “expects,”
“given,” “targets,” “intends,”
“anticipates,” “plans,” “projects,”
“forecasts” or similar expressions, are “forward-looking
statements.” Although Yappn Corp.’s management believes
that such forward-looking statements are reasonable; it cannot guarantee that such expectations are, or will be, correct. These
forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to differ
materially from those anticipated. Additional information regarding the factors that may cause actual results to differ materially
from these forward-looking statements is available in the Company's filings with the SEC including the Current Report on Form
8-K filed on April 3, 2013 and each subsequently filed Quarterly Report on Form 10-Q and Current Report on Form 8-K. The Company
assumes no obligation to update any of the information contained or referenced in this press release.
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