**Exhibit 10.1**

** **

**EXECUTION VERSION**

** **

**CONFIDENTIAL TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIALTREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “**”.  AN UNREDACTED VERSION OF THIS DOCUMENT HASALSO BEEN PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION.**

 

**ACQUISITION AGREEMENT**

 

**AMONG**

 

**NEULION, INC.**

 

**-AND-**

 

**INTERACTIVE NETCASTINGSYSTEMS INC.**

 

**-AND-**

 

**HUGH DOBBIE, JR.**

 

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**TABLE OFCONTENTS**

 
| ARTICLE  I - DEFINITIONS                                 |   | 1                                                           |
|----------------------------------------------------------|--------|-------------------------------------------------------------|
| ARTICLE  II - THE ARRANGEMENT                            |   | 8                                                           |
| 2.1                                                      |   | Arrangement                                                 |   | 8 |
| 2.2                                                      |   | Interim  Order                                              |   | 8 |
| 2.3                                                      |   | Company  Meeting                                            |   | 8 |
| 2.4                                                      |   | Company  Circular                                           |   | 9 |
| 2.5                                                      |   | Final  Order                                                |   | 10 |
| 2.6                                                      |   | Court  Proceedings                                          |   | 10 |
| 2.7                                                      |   | Articles  of Arrangement and Effective Date                 |   | 10 |
| 2.8                                                      |   | Preparation  of Filings                                     |   | 11 |
| 2.9                                                      |   | Withholding  Taxes                                          |   | 11 |
| ARTICLE  III - REPRESENTATIONS OF THE COMPANY AND DOBBIE |   | 11                                                          |
| 3.1                                                      |   | Disclosure                                                  |   | 11 |
| 3.2                                                      |   | Corporate  Organization                                     |   | 11 |
| 3.3                                                      |   | Authorization;  No Violation                                |   | 12 |
| 3.4                                                      |   | Capitalization                                              |   | 13 |
| 3.5                                                      |   | Consents  and Approvals                                     |   | 13 |
| 3.6                                                      |   | Financial  Statements                                       |   | 13 |
| 3.8                                                      |   | Litigation                                                  |   | 16 |
| 3.9                                                      |   | Intellectual  Property                                      |   | 16 |
| 3.10                                                     |   | Privacy  Laws                                               |   | 18 |
| 3.11                                                     |   | Compliance  with Laws and Regulations                       |   | 18 |
| 3.12                                                     |   | Environmental                                               |   | 19 |
| 3.13                                                     |   | Contracts  and Commitments                                  |   | 19 |
| 3.14                                                     |   | Related-Party  Transactions                                 |   | 20 |
| 3.15                                                     |   | Changes                                                     |   | 20 |
| 3.16                                                     |   | Company  Assets                                             |   | 21 |
| 3.17                                                     |   | Insurance                                                   |   | 21 |
| 3.18                                                     |   | Employee  Benefit Plans                                     |   | 22 |
| 3.19                                                     |   | Occupational  Health and Safety; Workers’ Compensation |   | 22 |
| 3.20                                                     |   | Employment;  Confidentiality                                |   | 22 |
| 3.21                                                     |   | Banking  Facilities                                         |   | 22 |
| 3.22                                                     |   | Brokers  and Finders                                        |   | 22 |
| 3.23                                                     |   | Takeover  Statutes                                          |   | 23 |
| ARTICLE  IV - REPRESENTATIONS OF PURCHASER               |   | 23                                                          |
| 4.1                                                      |   | Disclosure                                                  |   | 23 |
| 4.2                                                      |   | Corporate  Organization                                     |   | 23 |
| 4.3                                                      |   | Authorization;  No Violation                                |   | 24 |
| 4.4                                                      |   | Capitalization                                              |   | 24 |
| 4.5                                                      |   | Issuance  of Securities                                     |   | 25 |
| 4.6                                                      |   | Consents  and Approvals                                     |   | 25 |
| 4.7                                                      |   | Securities  Filings; Financial Statements                   |   | 25 |
| 4.8                                                      |   | Litigation                                                  |   | 26 |
| 4.9                                                      |   | Intellectual  Property                                      |   | 26 |
| 4.10                                                     |   | Compliance  with Laws and Regulations                       |   | 26 |
| 4.11                                                     |   | Environmental                                               |   | 26 |
| 4.12                                                     |   | Contracts  and Commitments                                  |   | 27 |
| 4.13                                                     |   | Related-Party  Transactions                                 |   | 27 |
| 4.14                                                     |   | Changes                                                     |   | 27 |
| 4.15                                                     |   | Purchaser  Assets                                           |   | 28 |
| 4.16                                                     |   | Insurance                                                   |   | 29 |
| 4.17                                                     |   | Employee  Benefit Plans                                     |   | 29 |
| 4.18                                                     |   | Workers’  Compensation; Employment; Confidentiality    |   | 29 |
| 4.19                                                     |   | Brokers  or Finders                                         |   | 29 |

 

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| 4.20                                                      |   | Takeover  Statutes                                                  |   | 30 |
|-----------------------------------------------------------|--------|---------------------------------------------------------------------|--------|----|
| ARTICLE  V - CERTAIN COVENANTS OF THE PARTIES             |   | 30                                                                  |
| 5.1                                                       |   | Conduct  of the Company’s Business Prior to the Effective Time |   | 30 |
| 5.2                                                       |   | Reports,  Taxes                                                     |   | 30 |
| 5.3                                                       |   | Non-Solicitation                                                    |   | 31 |
| 5.4                                                       |   | Intellectual  Property                                              |   | 31 |
| 5.5                                                       |   | Stock  Option Grants                                                |   | 32 |
| ARTICLE  VI - ADDITIONAL MUTUAL COVENANTS                 |   | 32                                                                  |
| 6.1                                                       |   | Access  to Information                                              |   | 32 |
| 6.2                                                       |   | Legal  Conditions to Arrangement                                    |   | 32 |
| 6.3                                                       |   | Public  Disclosure                                                  |   | 32 |
| 6.4                                                       |   | Consents                                                            |   | 33 |
| 6.5                                                       |   | Securities  Compliance                                              |   | 33 |
| 6.6                                                       |   | Expenses                                                            |   | 33 |
| 6.7                                                       |   | Additional  Agreements; Commercially Reasonable Efforts             |   | 33 |
| 6.8                                                       |   | Supplements  to Disclosure Letters                                  |   | 34 |
| 6.9                                                       |   | Non-Solicitation  of Employees                                      |   | 34 |
| ARTICLE  VII - CONDITIONS TO THE OBLIGATIONS OF PURCHASER |   | 34                                                                  |
| 7.1                                                       |   | Accuracy  of Representations and Warranties                         |   | 34 |
| 7.2                                                       |   | Covenants  Performed                                                |   | 34 |
| 7.3                                                       |   | Final  Financial Statements                                         |   | 35 |
| 7.4                                                       |   | Officers’  Certificate                                         |   | 35 |
| 7.5                                                       |   | Interim  Order                                                      |   | 35 |
| 7.6                                                       |   | Company  Shareholder Approval                                       |   | 35 |
| 7.7                                                       |   | Court  Approval                                                     |   | 35 |
| 7.8                                                       |   | No  Injunctions or Litigation                                       |   | 35 |
| 7.9                                                       |   | Consents                                                            |   | 35 |
| 7.10                                                      |   | Receipt  of Regulatory Approvals                                    |   | 35 |
| 7.11                                                      |   | Third  Party Consents                                               |   | 36 |
| 7.12                                                      |   | Dissent  Rights                                                     |   | 36 |
| 7.13                                                      |   | Other  Agreements                                                   |   | 36 |
| 7.14                                                      |   | Fee  Certificate                                                    |   | 36 |
| ARTICLE  VIII - CONDITIONS TO THE OBLIGATIONS OF COMPANY  |   | 36                                                                  |
| 8.1                                                       |   | Accuracy  of Representations and Warranties                         |   | 36 |
| 8.2                                                       |   | Covenants  Performed                                                |   | 36 |
| 8.3                                                       |   | Officer’s  Certificate                                         |   | 36 |
| 8.4                                                       |   | Company  Shareholder Approval                                       |   | 37 |
| 8.5                                                       |   | Court  Approval                                                     |   | 37 |
| 8.6                                                       |   | No  Injunctions or Litigation                                       |   | 37 |
| 8.7                                                       |   | Consents                                                            |   | 37 |
| 8.8                                                       |   | Receipt  of Regulatory Approvals                                    |   | 37 |
| 8.9                                                       |   | Third  Party Consents                                               |   | 37 |
| 8.10                                                      |   | Other  Agreements                                                   |   | 37 |
| ARTICLE IX - INDEMNIFICATION                              |   | 37                                                                  |
| ARTICLE  X - TERMINATION                                  |   | 41                                                                  |
| 10.1                                                      |   | Termination                                                         |   | 41 |
| 10.2                                                      |   | Effect  of Termination                                              |   | 41 |
| 10.3                                                      |   | Extension;  Waiver                                                  |   | 41 |
| ARTICLE  XI - MISCELLANEOUS                               |   | 41                                                                  |
| 11.1                                                      |   | Amendment                                                           |   | 41 |
| 11.2                                                      |   | Entire  Agreement                                                   |   | 42 |
| 11.3                                                      |   | Governing  Law; Venue                                               |   | 42 |
| 11.4                                                      |   | Headings                                                            |   | 42 |
| 11.5                                                      |   | Notices                                                             |   | 42 |
| 11.6                                                      |   | Severability                                                        |   | 43 |
| 11.7                                                      |   | Interpretation                                                      |   | 44 |

 

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| 11.8  |   | Waiver                |   | 44 |
|-------|--------|-----------------------|--------|----|
| 11.9  |   | Waiver  of Jury Trial |   | 44 |
| 11.10 |   | Assignment            |   | 44 |
| 11.11 |   | Counterparts          |   | 44 |
| 11.12 |   | Attorneys Fees        |   | 44 |

 

Schedules:

 
| Schedule 1 | Plan of Arrangement    |
|------------|------------------------|
| Schedule 2 | Arrangement Resolution |

 

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**ACQUISITION AGREEMENT**

 

ThisAcquisition Agreement (“**Agreement**”)****is made andentered into as of October 5, 2009 by and among NeuLion, Inc., acorporation existing under the federal laws of Canada (“**Purchaser**”),****InteractiveNetcasting Systems Inc., a corporation existing under the federal laws ofCanada (the “**Company**”), and Hugh Dobbie, Jr., a Canadiancitizen residing at 2562 136th Street, Surrey, British Columbia (“**Dobbie**”). Capitalized terms shallhave the meanings set forth in Article I.

 

**RECITALS**

 

**WHEREAS**,** **the parties hereto desire to pursue the acquisition of the Company byPurchaser by way of Arrangement;

 

**WHEREAS**,** **the board of directors of the Company has determined that theArrangement is advisable, fair to and in the best interests of the Company Shareholdersand approved the Arrangement on the terms and subject to the conditions setforth in this Agreement;

 

**WHEREAS**,** **the Company Shareholders are required to vote on and approve theArrangement on the terms and subject to the conditions set forth in thisAgreement;

 

**WHEREAS**,** **the acquisition of the Company by Purchaser shall be effected by theterms of this Agreement by way of Arrangement pursuant to section 192 of theCBCA; and

 

**WHEREAS**,** **Dobbie and Dowco ComputerSystems Ltd., a corporation existing under the laws of the Province ofBritish Columbia (“Dowco”), haveentered into an irrevocable proxy and voting support agreement (the “**Voting Support Agreement**”) pursuant to which they haveagreed to vote in favor of the Arrangement and the other transactionscontemplated by this Agreement.

 

**NOW THEREFORE,**in consideration of the foregoing premises and the representations,warranties, covenants and agreements herein contained and intending to belegally bound hereby, Purchaser, the Company and Dobbie hereby agree asfollows:

 

# **ARTICLEI - DEFINITIONS**

# ** **

Theterms defined in this Article I shall, for purposes of this Agreement,have the meanings specified in this Article I unless the context otherwiserequires:

 

1.1           “**Acquisition Proposal**”shall have the meaning set forth in Section 5.3(a) of this Agreement.

 

1.2           “**Affiliates**” ofany party to the Agreement shall be Persons that directly or indirectly,through one or more intermediaries, control, or are controlled by, or are undercommon control with, such party.

 

1.3           “**Arrangement**”shall mean the arrangement under section 192 of the CBCA on the terms andsubject to the conditions set out in the Plan of Arrangement, subject to anyamendments or variations thereto made in accordance with Section 11.1hereof or the Plan of Arrangement or made at the direction of the Court in theFinal Order with the consent of the Company and the Purchaser, each actingreasonably.

 

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1.4           “**Arrangement Resolution**”shall mean the special resolution approving the Plan of Arrangement to be consideredat the Company Meeting, to be substantially in the form and content of Schedule2 hereto.

 

1.5           “**Articles of Arrangement**”shall mean the articles of arrangement of the Company in respect of theArrangement, required by the CBCA to be sent to the Director after the FinalOrder is made by the Court, which shall be in a form and content satisfactoryto Company and the Purchaser, each acting reasonably, subject to any amendmentsor variations thereto made with the consent of the Company and the Purchaser,each acting reasonably.

 

1.6           “**CBCA**” shallmean the *Canada Business Corporations Act* and theregulations made thereunder, as promulgated or amended from time to time.

 

1.7           “**Company**” shallhave the meaning set forth in the introductory paragraph to this Agreement.

 

1.8           “**Company Assets**”shall have the meaning set forth in Section 3.16 of this Agreement.

 

1.9           “**Company Circular**”shall mean the notice of the Company Meeting and accompanying ManagementInformation Circular, including all schedules, appendices and exhibits thereto,to be sent to the Company Shareholders in connection with the Company Meeting,as amended, supplemented or otherwise modified from time to time.

 

1.10         “**Company Common Shares**”shall mean the common shares, no par value per share, of the Company.

 

1.11         “**Company Disclosure Letter**”shall have the meaning set forth in Article III of this Agreement.

 

1.12         “**Company Employee Plans**”shall have the meaning set forth in Section 3.18 of this Agreement.

 

1.13         “**Company FinancialStatements**” shall have the meaning set forth in Section 3.6(a) ofthis Agreement.

 

1.14         “**Company Entity**”or “**Company Entities**” shall have themeaning set forth in Section 3.2(b) of this Agreement.

 

1.15         “**Company****Insurance Policies**” shall have the meaning set forth in Section 3.17of this Agreement.

 

1.16         “**Company Material AdverseEffect**” shall mean any effect that has, or would be reasonablylikely to have, a material adverse effect on the condition, business,commercial relationships, assets, operating results, customer/supplier oremployee relationships, properties or financial affairs or results ofoperations of the Company Entities taken as a whole, other than (i) anyeconomic, political or industry condition or effect that affects the economy ingeneral or affects any Company Entity’s industry on an industry-wide basis, andin each case not specifically or uniquely relating to such Company Entity or (ii) theeffect of any changes in Laws and Regulations or accounting rules.

 

1.17         “**Company Meeting**”shall mean the special meeting of Company Shareholders, including anyadjournment or postponement thereof, to be called and held in accordance withthe Interim Order to consider the Arrangement Resolution.

 

2

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1.18         “**Company Shareholders**”shall mean the holders of the Shares.

 

1.19         “**Confidentiality Agreement**”shall mean the mutual non-disclosure agreement between Purchaser and theCompany, dated September 4, 2009.

 

1.20         “**Consideration**”shall mean the consideration to be paid by Purchaser to the CompanyShareholders as defined in the Plan of Arrangement.

 

1.21         “**Contract**” shallmean any written or oral agreement, contract, subcontract, lease,understanding, instrument, note or commitment that is legally binding.

 

1.22         “**Court**” shallmean the Supreme Court of British Columbia.

 

1.23         “**CRA**” shall meanCanada Revenue Agency.

 

1.24         “**Developers**”shall have the meaning set forth in Section 3.9(i).

 

1.25         “**Director**” shallmean the Director appointed pursuant to the CBCA.

 

1.26         “**Dissent Rights**”means the rights of dissent in respect of the Arrangement described in the Planof Arrangement.

 

1.27         “**Dobbie**” shallmean Hugh Dobbie, Jr.

 

1.28         “**Effective Date**”means the date upon which the Arrangement becomes effective as provided in thePlan of Arrangement.

 

1.29         “**Effective Time**”means the effective time on the Effective Date determined by the Plan ofArrangement.

 

1.30         **“Employee Plans**” shall mean any pension or other retirementbenefit, profit sharing, medical, life or other insurance coverage, severancebenefit, disability benefit, salary continuation, unemployment benefit,vacation, bonus, stock option, stock purchase, stock appreciation, incentivecompensation, employment or consulting, retention, change in control, savings,welfare benefit, fringe benefit, cafeteria or other forms of incentivecompensation plans or agreements.

 

1.31         “**Final Order**”shall mean the order of the Court approving the Arrangement.

 

1.32         “**GAAP**” shallmean generally accepted accounting principles in Canada or the United States ofAmerica, as applicable, applied consistently with past practices.

 

1.33         **“Governmental****Entity**” shallmean any government, municipality or political subdivision thereof, whetherfederal, state, local, provincial, municipal or foreign, or any governmental orquasi-governmental agency or regulatory agency, authority, board, bureau,commission, department, instrumentality or public body, or any court,arbitrator, administrative tribunal, public utility or any Taxing authority.

 

1.34         “**GST**” shall havethe meaning set forth in Section 3.7(j).

 

1.35         “**INSINC Technologies**”shall mean INSINC Technologies Ltd., British Columbia corporation no.BC0809438, which is a direct wholly-owned Subsidiary of the Company.

 

3

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1.36         “**Intellectual Property**”shall mean intellectual property of any nature and kind, including all domesticand foreign trade-marks, business names, trade names, domain names, tradingstyles, patents, trade secrets, Software, industrial designs and copyrights, whetherregistered or unregistered, and all applications for registration thereof, andinventions, formulae, recipes, product formulations, processes and processingmethods, technology and techniques, and know-how.

 

1.37         “**Indemnified Party**”shall have the meaning set forth in Section 9.1.

 

1.38         “**Indemnifying Party**”shall have the meaning set forth in Section 9.1.

 

1.39         **“Interim Order**” means the interim order of the Courtproviding for, among other things, the calling and holding of the CompanyMeeting, as the same may be amended by the Court with the consent of theCompany and the Purchaser, each acting reasonably.

 

1.40         “**Laws and Regulations**”shall mean all laws, statutes, codes, rules, regulations and ordinances of allGovernmental Entities.

 

1.41         “**Legal Proceeding**”shall mean any action, suit, litigation, arbitration, proceeding, hearing,inquiry, audit, examination or investigation commenced, brought, conducted orheard by or before, or otherwise involving, any court or other GovernmentalEntity or any arbitrator or arbitration panel.

 

1.42         “**Licensed IntellectualProperty**” shall mean all material Intellectual Property other thanshrink-wrap software or other software, online software services or onlinedatabase services purchased off the shelf that is used by the Company but ownedby another party (other than INSINC Technologies) and which is necessary to theoperation of the business of the Company as presently conducted.

 

1.43         “**Lien**” shallmean any lien, claim, charge, option, encumbrance, mortgage, pledge or securityinterest or other transfer restrictions, except for any restrictions ontransfer generally arising under any applicable Securities Laws.

 

1.44         “**Loan Repayment Agreement**”shall have the meaning set forth in Section 3.13(c) of thisAgreement.

 

1.45         “**Losses**” shallhave the meaning set forth in Section 9.1 of this Agreement.

 

1.46         “**Material Contracts**”means all Contracts material to the business of the Company orPurchaser, as the context requires, to which the Company or Purchaser, asapplicable, or any of their Subsidiaries is a party, including all agreements,leases of real property, licences, undertakings, engagements or commitments ofany nature, written or oral.

 

1.47         “**OEM**” shall mean Original Equipment Manufacturer.

 

1.48         “**Open Source Materials**”means software or other material (i) that is distributed as “free software”,“open source software” or under a similar licensing or distribution model(including but not limited to the GNU General Public License (GPL), GNU LesserGeneral Public License (LGPL), Mozilla Public License (MPL), BSD licenses, theArtistic License, the Netscape Public License, the Sun Community Source License(SCSL), the Sun Industry Standards License (SISL) and the Apache License) or (ii) thatrequire that software incorporated into, derived from or 

 

4

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distributedwith such material be (a) disclosed or distributed in source code form, (b) belicensed for the purpose of making derivative works, or (c) beredistributable at no charge.

 

1.49         “**Owned IntellectualProperty**” shall mean all material Intellectual Property that isowned by the Company or INSINC Technologies and which is necessary to theoperation of the business of the Company as presently conducted.

 

1.50         “**Owned Software**”shall mean all material Software that is owned by the Company or INSINCTechnologies and which is necessary to the operation of the business of theCompany as presently conducted.

 

1.51         “**Participating INSINCShareholder**” shall have the meaning ascribed thereto in the Plan ofArrangement.

 

1.52         “**Permitted Liens**”shall mean any Lien consisting of (a) carriers’, warehousemen’s, mechanics’,landlords’, materialmen’s, repairmen’s, construction or similar common law orstatutory Liens or encumbrances arising in the ordinary course of businesswhich are not delinquent or remain payable without penalty, (b) encumbrancesfor Taxes and other assessments or governmental charges or levies not yet dueor payable and (c) any other Liens that individually or in the aggregateare not material to the Company or Purchaser, as the case may be, and itsSubsidiaries, taken as a whole.

 

1.53         “**Person**” shallmean any individual, corporation, partnership, limited liability company,association, joint venture, trust, Governmental Entity or other entity ororganization.

 

1.54         “**Personal Information**”means the type of information regulated by Privacy Laws and collected, used,disclosed or retained by the Company, including information regarding theCompany’s customers, suppliers, employees and agents, such as an individual’sname, address, age, gender, identification number, income, family status,citizenship, employment, assets, liabilities, source of funds, payment records,credit information, personal references and health records.

 

1.55         “**Plan of Arrangement**”means the plan of arrangement, substantially in the form of Schedule 1, and anyamendments or variations thereto made in accordance with Article 5 of thePlan of Arrangement or made at the direction of the Court in the Final Orderwith the consent of the Company and the Purchaser, each acting reasonably.

 

1.56         “**Pre-Closing Period**”shall have the meaning set forth in Section 5.1 of this Agreement.

 

1.57         “**Privacy Laws**”means all applicable federal, provincial, state, municipal or other lawsgoverning the collection, use, disclosure and retention of PersonalInformation, including the *Personal InformationProtection and Electronic Documents Act* (Canada).

 

1.58         “**Privacy Policies**”means all privacy, data protection and similar policies adopted or used by theCompany in respect of Personal Information, including any complaints process.

 

1.59         “**Purchaser**”shall have the meaning set forth in the introductory paragraph to thisAgreement.

 

1.60         “**Purchaser Assets**”shall have the meaning set forth in Section 4.15.

 

1.61         “**Purchaser Common Shares**”shall mean the common shares, no par value, of Purchaser.

 

5

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1.62         “**Purchaser DisclosureLetter**” shall have the meaning set forth in Article IV of thisAgreement.

 

1.63         “**Purchaser Employee Plans**”shall have the meaning set forth in Section 4.17 of this Agreement.

 

1.64         “**Purchaser Entities**”shall have the meaning set forth in Section 4.2(b) of this Agreement.

 

1.65         “**Purchaser InsurancePolicies**” shall have the meaning set forth in Section 4.16.

 

1.66         “**Purchaser Material AdverseEffect**” shall mean any effect that is, or would be reasonably likelyto have, a material adverse effect on the condition, business, commercialrelationships, assets, operating results, customer/supplier and employeerelationships, properties or financial affairs or results of operations of thePurchaser Entities taken as a whole, other than (i) any economic,political or industry condition or effect that affects the economy in generalor affects any Purchaser Entity’s industry on an industry-wide basis, and ineach case not specifically or uniquely relating to such Purchaser Entity, (ii) anychange in the price of Purchaser Common Shares (it being understood that aneffect relating directly to the operations of Purchaser that results from oroccurs or exists separately from any such price change and that is nototherwise an effect identified in (i) above shall not be precluded frombeing a Purchaser Material Adverse Effect), or (iii) the effect of anychanges in Laws and Regulations or accounting rules.

 

1.67         “**Purchaser Public Filings**”shall have the meaning set forth in Section 4.7(a) of this Agreement.

 

1.68         “**Purchaser Stock OptionPlan**” means the SecondAmended and Restated Stock Option Plan of Purchaser, as amended.

 

1.69         “**Required Disclosure**”shall have the meaning set forth in Section 6.3.

 

1.70         “**SEC**” shall meanthe United States Securities and Exchange Commission.

 

1.71         “**Securities Commissions**”shall mean (i) the securities commissions or similar entities in each ofthe Provinces of Canada and (ii) the SEC.

 

1.72         “**Securities Laws**”shall mean, unless the context otherwise requires, all applicable securities lawsin each of the Provinces of Canada and in the United States and the applicablesecurities laws of all other jurisdictions other than each of the Provinces ofCanada and the United States, as applicable, and the respective regulationsmade thereunder, together with applicable published fee schedules, prescribedforms, policy statements, national or multilateral instruments, orders, blanketrulings and other regulatory instruments of the securities regulatoryauthorities in such jurisdictions.

 

1.73         “**Securities Act**”shall mean the Securities Act of 1933, as amended.

 

1.74         “**Shares**” shallmean the issued and outstanding Company Common Shares.

 

1.75         “**Software**” meansall software relating to the Company, including all versions of the computerprograms known by the names as set out in Section 3.9(a) of theCompany Disclosure Letter, and all related documentation, manuals, source codeand object code, program files, data files, computer related data, field anddata definitions and relationships, data definition specifications, datamodels, program and system logic, interfaces, program modules, routines,sub-routines, algorithms, program architecture, design concepts, systemdesigns, program structure, sequence 

 

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andorganization, screen displays and report layouts, and all other material relatedto such software.

 

1.76         “**Subsidiary**”shall mean any Person of which another Person (i) (a) owns, directlyor indirectly, fifty percent (50%) or more of the outstanding voting securitiesor equity interests or (b) is a general partner or managing member, or (ii) ownsor controls, directly or indirectly, securities or other ownership interestshaving by their terms the power to elect a majority of the board of directorsof such Person or other Persons performing similar functions.

 

1.77         “**Tax Act**” meansthe *Income Tax Act* (Canada), as amended,superseded or replaced and includes any regulations thereto.

 

1.78         “**Tax**” and “**Taxes**” shall mean all federal, state, provincial,territorial, county, municipal, local or foreign taxes, duties, imposts,levies, assessments, tariffs and other charges imposed, assessed or collectedby a Governmental Entity including, but not limited to, (i) any grossincome, net income, gross receipts, business, royalty, capital, capital gains,goods and services, value added, severance, stamp, franchise, occupation,premium, capital stock, sales and use, real property, land transfer, personalproperty, ad valorem, transfer, license, profits, windfall profits,environmental, payroll, employment, employer health, pension plan, anti-dumping,countervail, excise, severance, stamp, occupation, or premium tax, (ii) allwithholdings on amounts paid to or by the relevant Person, (iii) allemployment insurance premiums, Canada, Quebec and any other pension plancontributions or premiums, (iv) any fine, penalty, interest, or additionto tax, (v) any tax imposed, assessed, or collected or payable pursuant toany tax-sharing agreement or any other Contract relating to the sharing orpayment of any such tax, levy, assessment, tariff, duty, deficiency, or fee,and (vi) any liability for any of the foregoing as a transferee,successor, guarantor, or by contract or by operation of law.

 

1.79         “**Tax Returns**”shall mean all reports, elections, declarations, claims for refund, estimates,returns (including any schedules and attachments thereto) and any otherdocument relating to, or required to be filed in connection with, any Taxes,including material information, returns or reports with respect to withholdingor payments to third parties, pursuant to the statutes, rules andregulations of any federal, state, local or foreign Governmental Entity.

 

1.80         “**Third Party Programs**”shall have the meaning set forth in Section 3.9(k).

 

1.81         “**VAR**”shall mean Value Added Reseller.

 

1.82         “**Voting Support Agreement**” shall havethe meaning set forth in the recitals of this Agreement.

 

1.83         “**Warrants**”shall mean the warrants to beissued by Purchaser to the Company Shareholders as defined in the Plan ofArrangement.

 

1.84         “**WorkingCapital**” shall mean the sum of the Company’s cash, accountsreceivable and prepaid expenses, less the sum of the Company’s accounts payable(including accrued expenses) and current amounts due to shareholders and/orrelated parties.  “Unearned revenue” isspecifically excluded from this calculation. Further, cash balances arising from steps undertaken in Article 2of the Plan of Arrangement are specifically excluded from this calculation.

 

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# **ARTICLEII - THE ARRANGEMENT**

# ** **

**2.1**                               Arrangement.

** **

The Company and the Purchaser agree that the Arrangement will beimplemented in accordance with and subject to the terms and conditionscontained in this Agreement and the Plan of Arrangement.

 

**2.2**                               InterimOrder.

** **

The Company agrees that as soon as reasonably practicable, the Companyshall apply in a manner acceptable to Purchaser, acting reasonably, pursuant tosection 192 of the CBCA and, in cooperation with the Purchaser, prepare, fileand diligently pursue an application for the Interim Order, which shallprovide, among other things:

 

(a)                                  for the class of persons to whom noticeis to be provided in respect of the Arrangement and the Company Meeting and forthe manner in which such notice is to be provided;

 

(b)                                 that the requisite approval for theArrangement Resolution shall be two-thirds of the votes cast on the ArrangementResolution by Company Shareholders present in person or represented by proxy atthe Company Meeting;

 

(c)                                  that, in all other respects, the terms,restrictions and conditions of the Company’s articles of incorporation andby-laws, including quorum requirements and all other matters, shall apply inrespect of the Company Meeting;

 

(d)                                 for the grant of the Dissent Rights;

 

(e)                                  for the notice requirements with respectto the presentation of the application to the Court for the Final Order;

 

(f)                                    that the Company Meeting may be adjournedor postponed from time to time by the Company (with the prior written consentof the Purchaser, not to be unreasonably withheld or delayed) without the needfor additional approval of the Court; and

 

(g)                                 for such other matters as the Purchasermay reasonably require subject to obtaining the prior written consent of theCompany, such consent not to be unreasonably withheld or delayed.

 

**2.3**                               CompanyMeeting.

** **

(a)                                  Subject to the terms of this Agreement,the Company agrees to convene and conduct the Company Meeting in accordancewith the Interim Order, the Company’s articles of incorporation and by-laws andapplicable Laws and Regulations as soon as reasonably practicable.

 

(b)                                 The Company will give notice to thePurchaser of the Company Meeting and allow the Purchaser’s representatives andlegal counsel to attend and speak at the Company Meeting.

 

(c)                                  The Company will advise the Purchaser asthe Purchaser may reasonably request as to the aggregate tally of the proxiesreceived by the Company in respect of the Arrangement Resolution.

 

(d)                                 The Company will promptly advise thePurchaser of any written notice received by the Company of exercise by anyCompany Shareholder of Dissent Rights in relation to the Arrangement 

 

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Resolution and any withdrawal of Dissent Rights received by the Companyand, subject to applicable Laws and Regulations, any written communicationssent by or on behalf of the Company to any Company Shareholder exercising orpurporting to exercise Dissent Rights in relation to the ArrangementResolution.

 

**2.4**                               CompanyCircular.

** **

(a)                                  Subject to the timely cooperation ofPurchaser in providing information to the Company pursuant to Section 2.4(c) below,the Company shall prepare the Company Circular in the English language incompliance with Securities Laws and mail the same as required by the InterimOrder and in accordance with all applicable Laws and Regulations, in alljurisdictions where the same is required, complying in all material respectswith all applicable Laws and Regulations on the date of mailing thereof andcontaining full, true and plain disclosure of all material facts relating tothe Arrangement.

 

(b)                                 The Company shall ensure that the CompanyCircular complies in all material respects with the terms of this Agreement andall applicable Laws and Regulations, and, without limiting the generality ofthe foregoing, that the Company Circular will not contain any untrue statementof a material fact or omit to state a material fact required to be statedtherein or necessary to make the statements contained therein not misleading inlight of the circumstances in which they are made (other than in each case withrespect to any information concerning the Purchaser provided in writing by oron behalf of the Purchaser for inclusion in the Company Circular) and shallprovide the Company Shareholders with information in sufficient detail topermit them to form a reasoned judgment concerning the matters to be placedbefore them at the Company Meeting.  TheCompany Circular will include the recommendation of the board of directors ofthe Company that the Company Shareholders vote in favour of the ArrangementResolution, and a statement that each director of the Company intends to votein favour of the Arrangement Resolution, subject to the other terms of thisAgreement.  The Company shall indemnifyand hold harmless the Purchaser against any costs and expenses (includingreasonable legal fees), judgments, fines, losses, claims and damages andliabilities and amounts paid in settlement thereof with the consent of thePurchaser (such consent not to be unreasonably delayed or withheld) to whichthe Purchaser may be subject or may suffer in connection with any claim,action, suit, proceeding or investigation that is based on or arises out of anymisrepresentation in the disclosure in the Company Circular other than inrespect of information concerning the Purchaser that is provided in writing byor on behalf of the Purchaser for inclusion in the Company Circular.

 

(c)                                  The Purchaser will furnish to the Companyall such information concerning the Purchaser as may be reasonably required bythe Company in the preparation of the Company Circular. The Purchaser shallindemnify and hold harmless the Company against reasonable costs and expenses(including reasonable legal fees), judgments, fines, losses, claims and damagesand liabilities and amounts paid in settlement thereof with the consent of theCompany (such consent not to be unreasonably delayed or withheld) to which theCompany may be subject or may suffer in connection with any claim, action,suit, proceeding or investigation that is based on or arises out of anymisrepresentation or alleged misrepresentation in the disclosure in the CompanyCircular in respect of information concerning the Purchaser that is provided inwriting by or on behalf of the Purchaser for inclusion in the Company Circular.

 

(d)                                 The Purchaser and its legal counsel shallbe given a reasonable opportunity to review and comment on the CompanyCircular, prior to the Company Circular being printed and mailed to the CompanyShareholders, and reasonable consideration shall be given to any comments madeby the Purchaser and its counsel, provided that all information relating solelyto the Purchaser 

 

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included in the Company Circular shall be in form and contentsatisfactory to the Purchaser, acting reasonably.  The Company shall provide the Purchaser witha final copy of the Company Circular prior to the mailing to the CompanyShareholders.

 

(e)                                  Each of the Company and the Purchasershall promptly notify the other if at any time before the Effective Date itbecomes aware (in the case of the Company only with respect to the Company andin the case of the Purchaser only with respect to the Purchaser) that theCompany Circular contains an untrue statement of a material fact or omits tostate a material fact required to be stated therein or necessary to make thestatements contained therein not misleading in light of the circumstances inwhich they are made, or that otherwise requires an amendment or supplement tothe Company Circular, and the parties shall co-operate in the preparation ofany amendment or supplement to the Company Circular, as required orappropriate, and the Company shall promptly mail or otherwise disseminate anyamendment or supplement to the Company Circular to the Company Shareholders.

 

**2.5**                               Final Order.

** **

If the Interim Order is obtained, and if the Arrangement Resolution ispassed at the Company Meeting by the Company Shareholders, as provided for inthe Interim Order and as required by applicable Laws and Regulations andsubject to the terms of this Agreement, the Company shall as soon as reasonablypracticable thereafter and in any event within one business day thereafter takeall steps necessary or desirable to submit the Arrangement to the Court anddiligently pursue an application for the Final Order pursuant to section 192 ofthe CBCA.

 

**2.6**                               CourtProceedings.

** **

Subject to the terms of this Agreement, the Purchaser will cooperatewith, assist and consent to the Company seeking the Interim Order and the FinalOrder, including by providing the Company on a timely basis any informationrequired to be supplied by the Purchaser in connection therewith.  The Company will provide legal counsel to thePurchaser with reasonable opportunity to review and comment upon drafts of allmaterial to be filed with the Court in connection with the Arrangement, andwill give reasonable consideration to all such comments.  The Company will also provide legal counselto the Purchaser on a timely basis with copies of any notice of appearance ornotice of intent to oppose and any evidence served on the Company or its legalcounsel in respect of the application for the Interim Order or the Final Orderor any appeal therefrom.  Subject toapplicable Laws and Regulations, the Company will not file any material withthe Court in connection with the Arrangement or serve any such material, andwill not agree to modify or amend materials so filed or served, except ascontemplated hereby or with the Purchaser’s prior written consent, such consentnot to be unreasonably withheld, conditioned or delayed; provided that nothingherein shall require the Purchaser to agree or consent to any increase inConsideration or other modification or amendment to such filed or served materialsthat expands or increases the Purchaser’s obligations set forth in any suchfiled or served materials or under this Agreement.

 

**2.7**                               Articlesof Arrangement and Effective Date.

** **

The Articles of Arrangement shall implement the Plan ofArrangement.  On the same business day asthe satisfaction or, where not prohibited, the waiver by the applicable partyin whose favour the condition is, and subject to applicable Laws andRegulations, of the conditions (excluding conditions that, by their terms,cannot be satisfied until the Effective Date, but subject to the satisfactionor, where not prohibited, the waiver by the applicable party in whose favourthe condition is, of those conditions as of the Effective Date) set forth inArticles VII and VIII hereof, unless another time or date is agreed to in 

 

10

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writing by theparties, the Articles of Arrangement shall be filed by the Company with theDirector.  From and after the EffectiveTime, the Plan of Arrangement will have the effect as provided therein and byapplicable Laws and Regulations, including the CBCA.  The closing of the transactions contemplatedhereby will take place at the offices of Day Pitney LLP, 7 Times Square, NewYork, New York, USA or at such other location as may be agreed upon by theparties.

 

**2.8**                               Preparation of Filings.

** **

Purchaser andthe Company shall co-operate in the preparation of any application for anyorders, registrations, consents, filings, rulings, exemptions, no-actionletters, notifications and approvals and the preparation of any documentsreasonably deemed by either of them to be necessary to discharge its respectiveobligations or otherwise advisable under applicable Laws and Regulations inconnection with this Agreement or the Plan of Arrangement.

 

**2.9**                               WithholdingTaxes.

** **

Purchaser and the Company shall be entitled to deduct and withhold fromthe Consideration payable or otherwise deliverable to any Person hereunder suchamounts as Purchaser or the Company may be required to deduct and withholdtherefrom under any provision of Tax Laws and Regulations.  To the extent that such amounts are sodeducted and withheld and remitted to the relevant taxing authority inaccordance with such Tax Laws and Regulations, such amounts shall be treatedfor all purposes under this Agreement as having been paid to the Person to whomsuch amounts would otherwise have been paid.

 

# **ARTICLEIII - REPRESENTATIONS OF THE COMPANY AND DOBBIE**

# ** **

TheCompany and Dobbie, jointly and severally, represent and warrant to Purchaserthat, except as set forth in the disclosure letter of the Company dated as ofthe date hereof (the “**Company Disclosure Letter**”), each of which exceptions shallspecifically identify the relevant Section hereof to which it relates orbe reasonably clear that it is relevant to such Section:

 

## ***3.1***                               Disclosure.

## *** ***

Norepresentation or warranty of the Company or Dobbie contained in thisAgreement, and no statement contained in the Company Disclosure Letter or inany certificate or other information furnished or to be furnished, includingall information required to be included in the Company Circular, contains orwill contain any untrue statement of a material fact.  The information disclosed to the Purchaser pursuantto the diligence requisition list it provided to the Company in connection withthe Purchaser’s due diligence investigations of the Company Entities was in allmaterial respects true, accurate and complete. Notwithstanding anything to the contrary, the Company and Dobbie shallnot be deemed to make to Purchaser any representation or warranty (express orimplied) other than as expressly made by the Company or Dobbie in thisAgreement.

 

## ***3.2***                               Corporate Organization.

## *** ***

(a)                                  The Company is a corporation duly organized,validly existing and in good standing under the federal laws of Canada.  The Company’s Subsidiary is a corporationduly organized, validly existing and in good standing under the laws of theProvince of British Columbia.  TheCompany, directly or indirectly through the Company Entities, has property orconducts business, and is qualified to transact business, in each of thejurisdictions identified in Section 3.2(a) of the 

 

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CompanyDisclosure Letter.  The Company is dulyqualified to transact business and is in good standing in each jurisdiction inwhich the ownership of property or the character of its business requires suchqualification, except those jurisdictions where the failure to be so qualifiedor to be in good standing would not have a Company Material AdverseEffect.  The Company has all requiredcorporate power, authority and capacity necessary to own and operate itsproperty, to carry on its business as now conducted, to execute and deliver theAgreement and the agreements contemplated herein and, subject to the approvalof the Company Shareholders and the Court, to consummate the transactionscontemplated hereby and thereby.

 

(b)                                 Except as set forth in Section 3.2(b) ofthe Company Disclosure Letter, the Company does not (i) have anySubsidiaries, (ii) presently own or control, directly or indirectly, orhold any rights to acquire, any interest in any other Person or (iii) haveany Contract or other obligation to provide funds to, or make any investmentin, any other Person.  The Company is nota participant in any joint venture, partnership or similar arrangement.  The Company, together with any Subsidiary ofthe Company, are herein referred to as “**Company Entities**”or a “**Company Entity**.”

 

(c)                                  The organizational documents of the Companyas currently in effect are in the form previously provided to counsel for thePurchaser and no amendments have been made thereto or have been authorizedsince the date thereof.

 

## ***3.3***                               Authorization; No Violation.

## *** ***

(a)                                  The execution and delivery by the Company ofthis Agreement and the agreements provided for herein, and the consummation ofall transactions contemplated hereunder and thereunder by the Company, havebeen duly authorized by all requisite corporate action on the part of the Companyand will be recommended to the shareholders of the Company for adoption andapproval.  This Agreement has been dulyand validly executed and delivered by the Company.  Assuming the due authorization, execution anddelivery of this Agreement by Purchaser and the other parties hereto, otherthan the Company and, in the case of the other agreements, by the partiesthereto, other than the Company, this Agreement and each other agreementcontemplated hereby to which the Company is a party constitute valid and legallybinding obligations of the Company, enforceable in accordance with itsrespective terms, except (i) as limited by applicable bankruptcy,insolvency, reorganization, moratorium and other laws of general applicationaffecting enforcement of creditors’ rights generally and (ii) as limitedby laws relating to the availability of specific performance, injunctive reliefor other equitable remedies.

 

(b)                                 The execution, delivery and performance bythe Company of this Agreement and the agreements provided for herein, and theconsummation by the Company of the transactions contemplated hereby andthereby, will not, with or without the giving of notice or the passage of timeor both, (i) violate the provisions of the organizational documents of anyCompany Entity, (ii) violate any Laws and Regulations applicable to anyCompany Entity or any of their respective Company Assets, (iii) violate,conflict with, result in a breach of any provision of or the loss of anybenefit, constitute a default (or an event which, with notice or lapse of time,or both, would constitute a default), result in the termination of or a rightof termination or cancellation, accelerate the performance required by orrights or obligations, except for any such violations, conflicts or breachesthat would not have, individually or in the aggregate, a Company MaterialAdverse Effect or (iv) result in the creation of any Lien (other thanPermitted Liens) upon any of the respective Company Assets of any CompanyEntity.

 

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## *** ***

## ***3.4***                               Capitalization.

## *** ***

(a)                                  Authorized Capital Shares. The authorized capital shares of theCompany consist of an unlimited number of Company Common Shares, of which14,766,953 shares are issued and outstanding as of the date hereof, and anunlimited number of preferred shares none of which are issued and outstandingas of the date hereof.  Section 3.4(a) ofthe Company Disclosure Letter sets forth a true and complete list of theholders of the outstanding Company Common Shares, the respective number ofshares held thereby and, to the best of the Company’s knowledge, the country ofresidence of each such holder.  Eachoutstanding Company Common Share has been duly and validly authorized andissued, is fully paid and non-assessable, was issued in compliance with allapplicable Securities Laws, is free of any Liens imposed by or in favor of theCompany and is not subject to preemptive rights or rights of first refusalcreated by its incorporating statute, the organizational documents of theCompany or any agreement to which the Company is a party or by which it isbound.

 

(b)                                 Other Rights.  Asof the date hereof there are no outstanding options, warrants, rights(including conversion or preemptive rights) or agreements for the purchase or acquisitionfrom any Company Entity of any, or rights to acquire from any Company Entityany, capital shares.  Except for theVoting Support Agreement and except as set forth in Section 3.4(b) ofthe Company Disclosure Letter, the Company is not a party or subject to anyagreement or understanding, and to the Company’s knowledge, there is noagreement or understanding between any Person, which affects or relates to theownership, voting or giving of written consents with respect to any security orby a director of the Company.

 

(c)                                  Subsidiaries. All of the outstanding shares of capitalstock and voting securities or other interests of each Subsidiary of theCompany are duly and validly authorized and issued, fully paid andnon-assessable, were issued in compliance with all applicable Securities Lawsand are free of any Liens.

 

## ***3.5***                               Consents and Approvals.

## *** ***

Except as set forth in Section 3.5 of theCompany Disclosure Letter, no consents or approvals of any Governmental Entityor any third parties are required in connection with the execution, delivery orperformance of this Agreement and the agreements provided for herein by theCompany or the consummation of the transactions contemplated hereby or thereby.

 

## ***3.6***                               Financial Statements.

## *** ***

(a)                                  The Company has delivered to Purchaser (i) theconsolidated financial statements (balance sheet and statement of operations,including notes thereto) at each of December 31, 2008, December 31,2007 and December 31, 2006, and for the fiscal years then ended, and (ii) thefinancial statements as at and for the six-month period ended June 30,2009 (the “**Company Financial Statements**”). The Company Financial Statements were prepared in accordance withCanadian GAAP consistently applied (except (A) as otherwise indicated insuch financial statements and the notes thereto or, in the case of auditedstatements, in the related report of the Company’s independent auditors or (B) inthe case of unaudited interim statements, which are subject to normalperiod-end adjustments and may omit notes which are not required by applicableLaws and Regulations in the unaudited statements).  There has been no material change in theCompany’s accounting policies, except as described in the notes to the CompanyFinancial Statements, since June 30, 2009.

 

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(b)                                 The Company Financial Statements fairlypresent in all material respects the consolidated financial condition, retainedearnings, assets and liabilities and operating results of the Company Entitiesand as at the dates, and for the periods, indicated therein.

 

(c)                                  Except as set forth in the Company FinancialStatements, no Company Entity has any liabilities or obligations other than (i) liabilitiesand obligations that have arisen after June 30, 2009 in the ordinarycourse of business consistent with past practice which, individually or in theaggregate, have not had a Company Material Adverse Effect and (ii) obligationsunder Contracts and commitments incurred in the ordinary course of businessconsistent with past practice that would not be required to be reflected infinancial statements (or the notes thereto) prepared in accordance withCanadian GAAP.

 

(d)                                 Except as disclosed in the Company FinancialStatements, no Company Entity is a guarantor or indemnitor of any indebtednessfor borrowed money of any other Person.

 

**3.7****                              ****Taxes.**

 

The Company and each Subsidiary of the Company:

 

(a)                                  Has filed all Tax Returns, including anyelections and designations required by or referred to in any such Tax Return,which were required to be filed by it with any Governmental Entity prior to theEffective Date.  All such Tax Returns areaccurate and complete in all material respects.

 

(b)                                 Has withheld, and will continue until theEffective Date to withhold, any Taxes which are required by applicable law tobe withheld and has timely paid or remitted, and will continue until theEffective Date to pay and remit, on a timely basis, the full amount of anyTaxes which have been or will be withheld, to the applicable GovernmentalEntity.

 

(c)                                  Has paid and will continue until theEffective Date to pay all Taxes, including any amount due on or before theEffective Date, including instalments or prepayments of Taxes, which arerequired to have been paid to any Governmental Entity pursuant to applicablelaw, and no deficiency with respect to the payment of any Taxes or Taxinstalments has been asserted against it by any Governmental Entity.  The Company Entities have not incurred anyliability, whether actual or contingent, for Taxes or engaged in anytransaction or event which would result in any liability, whether actual orcontingent, for Taxes or realized any income or gain for Tax purposes otherwisethan in the ordinary course of its business. Other than Taxes not yet due and reflected in the Working Capital theCompany Entities have no liability or obligation in respect of any Taxes forany taxable periods ending on or before the Effective Date, and where notaxable period ends or is deemed to end on or immediately prior to the EffectiveDate, no liability or obligation for Taxes in respect of any time or eventprior to the Effective Date.  There areno actual or pending collection activities in relation to Taxes nor are thereany Encumbrances or Liens on any of the assets of a Company Entity that arosein connection with any failure (or alleged failure) to pay any Tax.

 

(d)                                 Has had its income Tax liability assessed bythe relevant Governmental Entity in respect of the taxation years of suchcompany ending before the date hereof.

 

(e)                                  Has no outstanding assessments for Taxes,there are no reviews or audits in progress or pending, there have been noadjustments made or proposed by a Governmental Entity in the last three years,and the Company Entities and Dobbie have no knowledge of any threatened orpotential assessment or other proceedings, any grounds therefor, or anynegotiations or investigations in 

 

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respect of Taxes against a Company Entity.

 

(f)                                    Is not a party to any agreement, waiver,extension or arrangement with any Governmental Entity which relates to anyextension of time with respect to the filing of any Tax Return, any payment ofTaxes or any assessment.

 

(g)                                 Except as set forth in Section 3.7(g) ofthe Company Disclosure Letter, has not made any elections in respect of Taxespursuant to applicable law.

 

(h)                                 Represents and warrants that no circumstancesexist or have existed which have resulted in or may result in the applicationof any of sections 79 to 80.04 of the Tax Act to a Company Entity.

 

(i)                                     Has never been required to file any TaxReturn with, and has never been liable to pay any Taxes to, any GovernmentalEntity outside Canada.  No claim has everbeen made by a Governmental Entity in a jurisdiction where a Company Entitydoes not file Tax Returns that it is or may be subject to the imposition of anyTax by that jurisdiction.

 

(j)                                     Is duly registered with the Canada RevenueAgency under the Excise Tax Act (Canada) for purposes of the goods and servicestax (“**GST**”). All input tax credits claimed by any such company for GST purposes werecalculated in accordance with applicable law. Each Company Entity has complied with all registration, reporting,payment, collection and remittance requirements in respect of GST andprovincial sales tax or harmonized tax legislation.

 

(k)                                  Has not claimed any reserves, other than areserve under section 20(1)(m) of the Tax Act in respect of deferredrevenue, for purposes of the Tax Act (or analogous provincial or similarprovisions) for the most recent taxation year ending prior to the date hereof.

 

(l)                                     Has not made any payment, nor is obligated tomake any payment, and is not a party to any agreement under which it could beobligated to make any payment, that may not be deductible (in whole or in part)by virtue of section 67 of the Tax Act or could result in an income inclusionpursuant to section 78 of the Tax Act or any analogous provincial or similarprovision.

 

(m)                               Has made or obtained records or documentsthat meet the requirements of paragraphs 247(4)(a) to (c) of the TaxAct with respect to all material transactions between a Company Entity and anynon-resident Person with whom such company was not dealing at arm’s lengthwithin the meaning of the Tax Act, during a taxation year commencing after 1998and ending on or before the Effective Date.

 

(n)                                 Is not a party to any Tax-sharing, Taxindemnity, Tax allocation agreement, or other similar agreement.  No Company Entity is a party to anyarrangement with any Governmental Entity relating to Taxes, including anyadvance pricing agreement or other material agreement.  No Company Entity has any liability for Taxesof any other Person whether pursuant to Tax Laws and Regulations, as atransferee or successor, by Contract, agreement, or otherwise.  Transactions in respect of goods or servicesbetween a Company Entity and any non-arm’s length Person have occurred at fairmarket value.

 

(o)                                 Has not at any time been a member of anypartnership or joint venture or the holder of a beneficial interest in anytrust for any period for which the statute of limitations for any Taxpotentially applicable as a result of such membership or holding has notexpired.

 

(p)                                 The Company has non-capital losscarry-forwards of CAD $30,000 for purposes of the Tax Act 

 

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which are available to it and such losses do notbegin to expire until 20 taxation years following December 31, 2008.  There has been no acquisition of control ofthe Company for purposes of the Tax Act.

 

(q)                                 The capital dividend account of the Company,determined for purposes of the Tax Act, at the date hereof is not less than CAD$1,487,000.

 

(r)                                    Each of Dobbie and Dowco is a person relatedto the Company, and will remain a person related to the Company until theEffective Time, for purposes of the Tax Act (determined without regard toparagraph 251(5)(b) thereof).

 

(s)                                  Represents and warrants that, to theirknowledge and relying on the information provided to the Company by the CompanyShareholders, and other than as set forth on Schedule A of the CompanyDisclosure Letter, none of the Company Shareholders is a non-resident of Canadawithin the meaning of section 116 of the Tax Act.

 

## ***3.8***                               Litigation.

## *** ***

There is no Legal Proceeding or investigationpending or, to the knowledge of the Company, currently threatened against anyCompany Entity that questions (i) the validity of this Agreement or anyagreement contemplated hereby, (ii) the right of the Company to enter intothis Agreement or any agreement contemplated hereby or thereby or (iii) theright of the Company to consummate the transactions contemplated hereby orthereby.

 

**3.9****                               Intellectual Property**.

 

Tothe best of the Company’s and Dobbie’s knowledge:

 

(a)                                  All of the Owned Intellectual Property is set out in Section 3.9(a) ofthe Company Disclosure Letter.  TheCompany or INSINC Technologies holds the entire right, title and interest inand to all of the Owned Intellectual Property.

 

(b)                                 The Company and INSINC Technologies have the exclusive right to use theOwned Intellectual Property except to the extent the Company or INSINCTechnologies have licensed others to use the Owned Intellectual Property, whichlicences are listed in Section 3.9(b) of the Company DisclosureLetter.

 

(c)                                  All of the Licensed Intellectual Property is set out in Section 3.9(c) ofthe Company Disclosure Letter.  TheCompany  has the exclusive right to usethe Licensed Intellectual Property except to the extent the rights areidentified in Section 3.9(c) of the Company Disclosure Letter asbeing non-exclusive.

 

(d)                                 The Company is not a party to any Contract or commitment to pay anyroyalty or other fee to use the Licensed Intellectual Property except as setout in Section 3.9(d) of the Company Disclosure Letter.

 

(e)                                  No consents are required in order for the Licensed IntellectualProperty to be licensed or sub-licensed to a third party except as set out in Section 3.9(e) ofthe Company Disclosure Letter.

 

(f)                                    The Intellectual Property listed in Sections 3.9(a) and (c) ofthe Company Disclosure Letter is all of the Intellectual Property used in orrequired for the proper carrying on of the business of the 

 

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Company.

 

(g)                                 Neither the use of the Owned Intellectual Property nor the conduct ofthe business of the Company infringes or otherwise violates the IntellectualProperty rights of any other Person.  Noinfringement, misuse or misappropriation of the Owned Intellectual Property hasoccurred or is occurring.

 

(h)                                 The Owned Intellectual Property is valid.

 

(i)                                     The Owned Software was written only by the individuals (the “**Developers**”) listed in Section 3.9(i) ofthe Company Disclosure Letter, other than minor components of the OwnedSoftware which, in the aggregate, do not comprise more than 5% of the sourcecode for the current version of any individual program.

 

(j)                                     All Developers, at the time they wrote the Owned Software, were eitherfull-time employees of the Company employed as software programmers or werecontractors who assigned their intellectual property rights in the OwnedSoftware to the Company pursuant to written agreements.

 

(k)                                  Except for the third party software (“**ThirdParty Programs**”) listed in Section 3.9(k) of the CompanyDisclosure Letter, the Owned Software neither contains nor embodies nor usesnor requires any third party software, including development tools andutilities, and the Owned Software, together with the Third Party Programs,contains all material necessary for the continued maintenance and developmentof the Owned Software.

 

(l)                                     Copies of all licence and maintenance agreements for the Third PartyPrograms have been made available by the Company to the Purchaser, except inrespect of Third Party Programs that are shrinkwrapped software and that are purchasedoff-the-shelf by the Company.

 

(m)                               Except as disclosed in Section 3.9(m) of the CompanyDisclosure Letter, the source code for the Owned Software has not beendelivered or made available to any Person and the Company has not agreed to orundertaken to or in any other way promised to provide such source code to anyPerson.  Except as disclosed in Section 3.9(m) ofthe Company Disclosure Letter, the source code is currently stored in, and hasnever been removed from, the Company’s premises in Burnaby, British Columbia,Canada.

 

(n)                                 Except as listed in Section 3.9(n) of the Company DisclosureLetter, there are no, and have never been any, distributors, sales agents,representatives or other Persons, including VARs, OEMs or resellers, who haveor had rights to market or license the Owned Software.

 

(o)                                 Section 3.9(o) of the Company Disclosure Letter lists all theother licences, maintenance or support agreements, development contracts andall other agreements (other than requests for proposals and proposals that arereferred to in such agreements), or the forms thereof, between the Company andusers of the Owned Software, copies of each of which have been made availableto the Purchaser.  With respect to theusers of the Software listed in Section 3.9(o) of the CompanyDisclosure Letter, all such users have non-transferable, non-exclusive licencesto use only object code versions of the Owned Software.

 

(p)                                 Except as listed in Section 3.9(p) of the Company DisclosureLetter, there are no known problems or defects in the Software including bugs,logic errors or failures of the Software to operate as described in the relateddocumentation, and, except for such disclosed problems or defects, the 

 

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Softwareoperates in accordance with its documentation and specifications.  The Software does not contain anyundocumented code, disabling mechanism or protection feature intentionallydesigned to prevent its use, including any clock, timer, counter, computervirus, worm, software lock, drop dead device, Trojan-horse routine, trap door,time bomb or any other codes or instructions that may be used to access,modify, replicate, distort, delete, damage or disable Software or data, othersoftware, operating systems, computers or equipment with which the Softwareinteracts.

 

(q)                                 Section 3.9(q) of the Company Disclosure Letter accuratelydescribes the current state of the Software, together with all currentdevelopment plans for the Software, including design problems, remedial plans,requests for new features from customers and enhancement plans.

 

(r)                                    The Company and any Company Subsidiary have incorporated the OpenSource Materials set forth in Section 3.9(r) of the CompanyDisclosure Letter into, or combined such Open Source Materials with, theIntellectual Property owned or developed by the Company (including, withoutlimitation, the Owned Intellectual Property) or otherwise used in the businessof the Company and have used the Open Source Materials set forth in Section 3.9(r) ofthe Company Disclosure Letter in accordance with the terms of any licensingagreements associated therewith.

 

**3.10****                        Privacy Laws****.**

 

(a)                                  The collection, use and retention of thePersonal Information by the Company, the disclosure or transfer of the PersonalInformation by the Company to any third parties and transfer of the PersonalInformation by the Company to Purchaser as part of Purchaser’s due diligenceand as contemplated by this Agreement or any ancillary agreement complies withall Privacy Laws and is consistent with the Company’s own Privacy Policies.

 

(b)                                 There are no restrictions on the Company’scollection, use, disclosure and retention of the Personal Information except asprovided by Privacy Laws and the Company’s own Privacy Policies.

 

(c)                                  There are no Legal Proceedings pending,ongoing, or to the Company’s knowledge, threatened, with respect to the Company’scollection, use, disclosure or retention of the Personal Information.

 

(d)                                 No decision, judgment or order, whetherstatutory or otherwise, is pending or has been made, and no notice has beengiven pursuant to any Privacy Laws, requiring the Company to take (or torefrain from taking) any action with respect to the Personal Information.

 

## ***3.11***                        Compliance with Laws and Regulations.

## *** ***

(a)                                  The Company Entities are, and at all timeshave been, in full material compliance with all Laws and Regulations of anyGovernmental Entity applicable to their respective businesses oroperations.  Except with respect toimmaterial violations, no Company Entity has received any written notice of,has knowledge of or has been charged with, the violation of any Laws andRegulations.

 

(b)                                 The Company and its Subsidiaries have allpermits which are required for the operation of their respective businesses aspresently conducted, except where the absence of which would not, individuallyor in the aggregate, materially affect the business of the CompanyEntities.  No Company Entity is indefault or violation (and no event has occurred which, with notice or the lapseof time or both, would constitute a default or violation) of any term,condition or provision

 

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ofany permit to which it is a party, except where such default or violation wouldnot, individually or in the aggregate, materially affect the business of theCompany Entities.

 

## ***3.12***                        Environmental.

## *** ***

Thereare no Legal Proceedings or investigations of any nature that would bereasonably likely to result in the imposition on any Company Entity of anyliability or obligation arising under common law or under any local, state,provincial, municipal or federal environmental statute, regulation or ordinancepending or, to the knowledge of the Company, threatened against any CompanyEntity, which liability or obligation would be material to the Company. To theknowledge of the Company, there is no reasonable basis for any such LegalProceeding or investigation.

 

## ***3.13***                        Contracts and Commitments.

## *** ***

(a)                                  The Company’s Material Contracts are setforth in Section 3.13(a) of the Company Disclosure Letter.  Except as disclosed in Section 3.13(a) ofthe Company Disclosure Letter, all of the Material Contracts are valid, bindingand enforceable in accordance with their respective terms and in full force andeffect, without amendment.  Except asdisclosed in Section 3.13(a) of the Company Disclosure Letter, noMaterial Contract requires the consent by the other parties thereto in order toconsummate the transactions contemplated by this Agreement.  Immediately after giving effect to theArrangement, the Company Entities will be permitted to exercise all of suchCompany Entities’ rights under the Material Contracts to the same extent theCompany Entities would have been able to had the transactions contemplated bythis Agreement not occurred and without the payment of any additional amountsor consideration other than ongoing payments which the Company Entities wouldotherwise be required to pay.  TheCompany Entity party thereto has performed in all material respects allobligations required to be performed by it and is not in default under or inbreach of nor in receipt of any claim of default or breach under any MaterialContract, and such Company Entity does not have any present expectation orintention of not fully performing all such obligations, except where any suchdefault or non-performance would not constitute a Company Material AdverseEffect.  No event has occurred which withthe passage of time or the giving of notice or both would result in a default,breach or event of noncompliance by the Company Entity party thereto under anyMaterial Contract, except where such event would not constitute a CompanyMaterial Adverse Effect.  The Company hasno knowledge of any material breach or anticipated material breach by the otherparties to any Material Contract.  True,correct and complete copies of each written Material Contract and an accuratedescription of each oral Material Contract, together with all amendments,waivers or other changes thereto, have been made available to counsel toPurchaser.

 

(b)                                 Except as set forth in the Company FinancialStatements or in Section 3.13(b) of the Company Disclosure Letter, noCompany Entity has, since June 30, 2009, (i) declared or paid anydividends or authorized or made any distribution upon or with respect to anyclass or series of its capital shares or corporate interests, (ii) incurredany indebtedness for money borrowed or any other liabilities, (iii) madeany loans or advances to any Person, other than ordinary course advances forbusiness expenses, or (iv) sold, exchanged or otherwise disposed of any ofits Company Assets or rights, other than the sale of its inventory in the ordinarycourse of business.

 

(c)                                  Except as set forth in Section 3.13(c) ofthe Company Disclosure Letter, the Company has no outstanding loans.  The repayment schedule for each loan setforth in Section 3.13(c) of the Company Disclosure Letter has beenagreed to, and such agreement has been set forth in a writing executed, by theCompany and the relevant lienor (such agreement, the “**LoanRepayment Agreement**”).  Atrue, correct and complete copy of the Loan Repayment 

 

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Agreement(which constitutes a Material Contract) has been provided to counsel toPurchaser.  The Loan Repayment Agreementhas not been amended or changed, and no provision therein has been waived,since its execution.

 

## ***3.14***                        Related-Party Transactions.

## *** ***

Exceptas set forth in Section 3.14 of the Company Disclosure Letter, noemployee, shareholder, officer or director of any Company Entity or member ofhis/her immediate family is indebted to any Company Entity, nor is any CompanyEntity indebted (or committed to make loans or extend or guarantee credit) toany of them.  All commercial transactionsare negotiated on an arms length basis and at fair market value.

 

## ***3.15***                        Changes.

## *** ***

Except as set forth in Section 3.15 of theCompany Disclosure Letter, since June 30, 2009 and except as otherwisereflected in the Company Financial Statements, each Company Entity hasconducted its business, in all material respects, in the ordinary courseconsistent with past practice and there has not occurred:

 

(a)                                  any change, event or condition that,individually or in the aggregate, is a Company Material Adverse Effect;

 

(b)                                 any material damage, destruction or loss toCompany Assets, whether or not covered by insurance, having a Company MaterialAdverse Effect;

 

(c)                                  any waiver by any Company Entity of avaluable right or of a debt owed to it;

 

(d)                                 any satisfaction or discharge of any Lien orpayment of any obligation by any Company Entity, except in the ordinary courseof business consistent with past practice and that is not material to theCompany Assets, financial condition, operating results or business of theCompany Entities, taken as a whole;

 

(e)                                  any Contract or arrangement entered into byany Company Entity, or amendment to a Contract or arrangement by which anyCompany Entity or any of its Company Assets is bound or subject, other than inthe ordinary course of business consistent with past practice;

 

(f)                                    any acquisition, sale, assignment or transferof any material asset of any Company Entity, or disclosure of any proprietaryconfidential information to any Person;

 

(g)                                 any resignation or termination of employmentof any officer or key employee of any Company Entity, or any change in anyMaterial Contract or other arrangement (including any Company Employee Plan)providing for compensation to any officer or key employee of any CompanyEntity;

 

(h)                                 any declaration, payment, setting aside orother distribution of cash or other property to the Company’s shareholders orinterest holders with respect to its common shares, other equity securities orother interests (including, without limitation, any warrants, options or otherrights to acquire Company Common Shares or other equity securities), or anydirect or indirect redemption, purchase or other acquisition by the Company ofany Company Common Shares or interests;

 

20

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(i)                                     any mortgage, pledge, transfer of a securityinterest in, or Lien, created by any Company Entity, with respect to anyCompany Assets, except for Permitted Liens;

 

(j)                                     any notice that there has been a loss of, ororder cancellation by, any major customer of any Company Entity;

 

(k)                                  any capital expenditures or commitmentstherefor;

 

(l)                                     any loans or advances to, guarantees for thebenefit of, or any investments in, any Person (including, without limitation,any employees, officers or directors, or any members of their immediatefamilies, of any Company Entity);

 

(m)                               any expenditure of cash other than in theordinary course of business consistent with past practice;

 

(n)                                 any change in accounting methods or practicesmaterially affecting the Company Assets, or any election with respect to Taxesor changes in tax accounting methods;

 

(o)                                 any amendment or change to the organizationaldocuments of any Company Entity;

 

(p)                                 any agreement by any Company Entity to do anyof the things described in the preceding clauses (a) through (o) (otherthan negotiations with Purchaser and its representatives regarding thetransactions contemplated by this Agreement); or

 

(q)                                 to the knowledge of the Company, any otherevent or condition of any character that would have a Company Material AdverseEffect.

 

## ***3.16***                        Company Assets.

## *** ***

EachCompany Entity has good and marketable title to, or valid leasehold interestsin, its respective properties and assets (all such properties and assets beingreferred to as the “**Company Assets**”),****other than suchproperty and assets as to which the failure to have the title or lease rights,individually or in the aggregate, would not have a Company Material AdverseEffect.  The Company Assets are free andclear of all Liens, except (a) as reflected in the Company FinancialStatements and (b) Permitted Liens. The Company Assets constitute all the assets used or held for use in theconduct of the respective businesses of the Company Entities and necessary forPurchaser to operate such businesses as currently conducted by such CompanyEntities.  No Company Entity owns anyreal property.  All of the tangibleCompany Assets of each Company Entity are in good operating condition, subjectto normal wear and tear, and are reasonably fit and useable for the purposesfor which they are currently being used.

 

## ***3.17***                        Insurance.

## *** ***

There is no claim pending under any fire, theft,casualty, general liability, workers compensation, business interruption, lifeinsurance or other insurance policy maintained by any Company Entity(collectively, the “**Company Insurance Policies**”) as to which coverage has beenquestioned, denied or disputed by the underwriters of such policies.  All premiums due and payable on the CompanyInsurance Policies or renewals thereof have been paid and each Company Entityis otherwise in material compliance with the material terms of suchpolicies.  All Company Insurance Policieswill remain in full force and effect through the Effective Date and also as toclaims arising out of events that occur prior to the Effective Date.  The Company has no knowledge of anythreatened termination of, or premium increase with respect to, any of theCompany Insurance Policies.

 

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## *** ***

## ***3.18***                        Employee Benefit Plans.

## *** ***

Section 3.18 of the Company DisclosureLetter contains a true and complete list of each Company Employee Plansponsored, maintained or contributed to or required to be contributed to by anyCompany Entity or as to which any Company Entity has, or may have, anyliability or obligation, contingent or otherwise, whether written or oral andwhether legally binding or not (collectively, the “**CompanyEmployee Plans**”).  The Companyhas heretofore made available to Purchaser true and complete copies of theCompany Employee Plans.

 

## ***3.19***                        Occupational Health and Safety; Workers’ Compensation.

## *** ***

(a)                                  The Company is in compliance with allprovisions of the *Occupational Health and Safety Act*(British Columbia) and regulations made pursuant thereto, and there are nooutstanding claims, charges or orders thereunder.

 

(b)                                 The Company is in compliance with applicableworkers’ compensation laws and regulations made pursuant thereto and there areno outstanding assessments, levies or penalties thereunder.

 

## ***3.20***                        Employment; Confidentiality.

## *** ***

(a)                                 Except as disclosed in Section 3.20(a) ofthe Company Disclosure Letter, as of the date hereof, no Company Entity isaware that any executive officer, or that any group of employees of any CompanyEntity, intends to terminate their employment with such Company Entity, nordoes such Company Entity have a present intention to terminate the employmentof any of the foregoing.

 

(b)                                Except as disclosed in Section 3.20(b) ofthe Company Disclosure Letter, each current and former employee and consultantto each Company Entity has entered into a confidentiality agreement with suchCompany Entity, a copy of each of which has previously been delivered toPurchaser.  Except as set forth in Section 3.20(b) ofthe Company Disclosure Letter, no Company Entity has agreements or arrangementswith Persons titled as independent contractors or consultants, as a result ofwhich, by virtue of the control exercised by such Company Entity, the type ofwork performed by the Persons or any other circumstances, such Persons couldreasonably be deemed to be employees of such Company Entity.

 

## ***3.21***                        Banking Facilities.

## *** ***

Section 3.21of the Company Disclosure Letter sets forth a true, correct and complete listof:

 

(a)                                  each bank, savings and loan or otherfinancial institution in which any Company Entity has an account or safetydeposit box and the numbers of the accounts or safety deposit boxes maintainedthereat; and

 

(b)                                 the names of all persons authorized to drawon each such account or to have access to any such safety deposit box facility.

 

## ***3.22***                        Brokers and Finders.

## *** ***

Otherthan to Alexander Capital Group Inc., no Company Entity is obligated to pay anybroker’s or finder’s fee or any other commission or similar fee to any agent,broker, investment banker, financial advisor or other firm or Person inconnection with any of the transactions contemplated by this 

 

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Agreement.  Any such fee or commission owed will bepayable to Alexander Capital Group Inc. as set forth in the Plan ofArrangement.

 

## ***3.23***                        Takeover Statutes

## *** ***

(a)                                  No state takeover statute or similar statuteor regulation or charter or by-law anti-takeover provision applies or purportsto apply to the Company with respect to this Agreement, the Arrangement or anyother transaction contemplated hereby.

 

(b)                                 The Company has no shareholder rights plan orother similar agreement.

 

# **ARTICLE IV - REPRESENTATIONS OF PURCHASER**

# ** **

Purchaserrepresents and warrants to the Company that, except as set forth in thedisclosure letter of the Purchaser dated as of the date hereof (the “**Purchaser Disclosure Letter**”), each of which exceptions shall specifically identify therelevant Section hereof to which it relates or be reasonably clear that itis relevant to such Section:

 

## ***4.1***                               Disclosure.

## *** ***

No representation or warranty of the Purchasercontained in this Agreement, and no statement contained in the PurchaserDisclosure Letter or in any certificate or other information furnished or to befurnished, contains or will contain any untrue statement of a material fact.The information disclosed to the Company pursuant to the diligence requisitionlist provided to the Purchaser by the Company in connection with the Company’sdue diligence investigations of the Purchaser Entities was in all materialrespects true, accurate and complete. Notwithstanding anything to the contrary, the Purchaser shall not bedeemed to make to the Company any representation or warranty (express orimplied) other than as expressly made by the Purchaser in this Agreement

 

## ***4.2***                               Corporate Organization.

## *** ***

(a)                                  Purchaser is a corporation duly organized,validly existing and in good standing under the federal laws of Canada.  Purchaser, directly or indirectly through thePurchaser Entities, has property or conducts business in each of thejurisdictions identified on Section 4.2(a) of the PurchaserDisclosure Letter and is qualified to transact business in each of thejurisdictions identified in Section 4.2(a) of the PurchaserDisclosure Letter.  Purchaser is dulyqualified to transact business and is in good standing in each jurisdiction inwhich the ownership of property or the character of its business requires suchqualification, except those jurisdictions where the failure to be so qualifiedor to be in good standing would not have a Purchaser Material AdverseEffect.  Purchaser has all requiredcorporate power, authority and capacity necessary to own and operate itsproperty, to carry on its business as now conducted and presently proposed tobe conducted, to execute and deliver the Agreement and the agreementscontemplated herein and, subject to the approval of the Court, to consummatethe transactions contemplated hereby and thereby.

 

(b)                                 Except as set forth in Section 4.2(b) ofthe Purchaser Disclosure Letter, Purchaser does not (i) have anySubsidiaries, (ii) presently own or control, directly or indirectly, orhold any rights to acquire, any interest in any other Person or (iii) haveany Contract or other obligation to provide funds to, or make any investmentin, any other Person.  Purchaser is not aparticipant in any joint venture, partnership or similar arrangement.  Purchaser, together with any Subsidiary ofPurchaser, are herein referred to as “**Purchaser Entities**”or a “**Purchaser Entity**.”

 

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(c)                                  The organizational documents of Purchaser ascurrently in effect are in the form previously provided to counsel for theCompany and no amendments have been made thereto or have been authorized sincethe date thereof.

 

## ***4.3***                               Authorization; No Violation.

## *** ***

(a)                                  The execution and delivery by Purchaser ofthis Agreement and the agreements provided for herein, and the consummation ofall transactions contemplated hereunder and thereunder by Purchaser, have beenduly authorized by all requisite corporate action on the part of Purchaser, andthis Agreement has been duly and validly executed and delivered byPurchaser.  Assuming the dueauthorization, execution and delivery of this Agreement by the Company and theother parties hereto, other than Purchaser and, in the case of the otheragreements, by the parties thereto, other than Purchaser, this Agreement andeach other agreement contemplated hereby to which Purchaser is a partyconstitute valid and legally binding obligations of each of Purchaser,enforceable in accordance with its respective terms, except as limited by (i) applicablebankruptcy, insolvency, reorganization, moratorium and other laws of generalapplication affecting enforcement of creditors’ rights generally and (ii) lawsrelating to the availability of specific performance, injunctive relief orother equitable remedies.

 

(b)                                 The execution, delivery and performance byPurchaser of this Agreement and the agreements provided for herein, and theconsummation by Purchaser of the transactions contemplated hereby and thereby,will not, with or without the giving of notice or the passage of time or both, (i) violatethe provisions of the organizational documents of any Purchaser Entity, (ii) violateany Laws and Regulations applicable to any Purchaser Entity or any of theirrespective Purchaser Assets, (iii) violate, conflict with, result in abreach of any provision of or the loss of any benefit, constitute a default (oran event which, with notice or lapse of time, or both, would constitute adefault), result in the termination of or a right of termination orcancellation, accelerate the performance required by or rights or obligations,except for any such violations, conflicts or breaches that would not have,individually or in the aggregate, a Purchaser Material Adverse Effect or (iv) resultin the creation of any Lien (other than Permitted Liens) upon any of therespective Purchaser Assets of any Purchaser Entity.

 

## ***4.4***                               Capitalization.

## *** ***

(a)                                  Authorized Capital Shares.  Theauthorized share capital of the Purchaser consists of an unlimited number ofPurchaser Common Shares, an unlimited number of Class 1 preference shares,issuable in series, and an unlimited number of Class 2 preference shares,issuable in series.  As of the datehereof, 110,537,883 Common Shares and no Class 1 or Class 2preference shares were issued and outstanding. Each outstanding Purchaser Common Share has been duly and validly authorizedand issued, is fully paid and non-assessable, was issued in compliance with allapplicable Securities Laws and is not subject to preemptive rights or rights offirst refusal created by its incorporating statute, the organizationaldocuments of Purchaser or any agreement to which Purchaser is a party.

 

(b)                                 Other Rights. Except as set forth in the Purchaser Disclosure Letter, there are nooutstanding options, warrants, rights (including conversion or preemptiverights) or agreements for the purchase or acquisition from Purchaser of any, orrights to acquire from the Purchaser any, capital shares.  Section 4.4(b) of the PurchaserDisclosure Letter accurately sets forth the following information with respectto all outstanding options, warrants and other rights to acquire Purchaser’scapital shares:  the type of equityinstrument; the number of shares covered; the exercise price; the grant date;and the expiration date.  A true andcomplete copy of the Purchaser 

 

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StockOption Plan has been provided to the Company, and except as requested byPurchaser, such Purchaser Stock Option Plan has not been amended, modified orsupplemented.  All currently outstandingoptions to acquire Purchaser Common Shares were issued in compliance with theterms of the Purchaser Stock Option Plan. All registrations and approvals of the Purchaser Stock Option Planrequired by, and necessary to obtain any right or benefit under, applicableLaws and Regulations to be made by Purchaser or its respective shareholdershave been made.

 

(c)                                  Subsidiaries.  Allof the outstanding shares of capital stock and voting securities or otherinterests of each Subsidiary of Purchaser are duly and validly authorized andissued, fully paid and non-assessable, were issued in compliance with allapplicable Securities Laws and are free of any Liens.

 

## ***4.5***                               Issuance of Securities.

## *** ***

ThePurchaser Common Shares and the Warrants to be issued pursuant to theArrangement, and the options to be granted to Dobbie, will be duly authorized,validly issued, fully paid and non-assessable.

 

## ***4.6***                               Consents and Approvals.

## *** ***

Exceptas set forth in Section 4.6 of the Purchaser Disclosure Letter, and otherthan stock exchange and regulatory approvals, no consents or approvals of anyGovernmental Entity or any third parties are required in connection with theexecution, delivery or performance of this Agreement and the agreementsprovided for herein by Purchaser or the consummation of the transactionscontemplated hereby or thereby by Purchaser.

 

## ***4.7***                               Securities Filings; Financial Statements.

## *** ***

(a)                                  Purchaser has filed and made available to theCompany all forms, reports and documents required to be filed by Purchaser withthe Securities Commissions since August 10, 2006 (collectively, the “**Purchaser Public Filings**”).  ThePurchaser Public Filings (i) at the time filed complied in all materialrespects with the applicable requirements of the Securities Laws, and (ii) didnot at the time they were filed (or if amended or superseded by a filing priorto the date of this Agreement, then on the date of such filing) contain anyuntrue statement of a material fact or omit to state a material fact requiredto be stated in such Purchaser Public Filings or necessary in order to make thestatements in such Purchaser Public Filings, in the light of the circumstancesunder which they were made, not misleading.

 

(b)                                 Each of the consolidated financial statements(including, in each case, any related notes) contained in the Purchaser PublicFilings complied as to form in all material respects with the applicablepublished rules and regulations of the Securities Commissions with respectthereto, was prepared in accordance with US GAAP or Canadian GAAP (as may beindicated in the notes to such financial statements or, in the case ofunaudited statements, as permitted under applicable law) and fairly presentedthe consolidated financial position of Purchaser and its Subsidiaries as of therespective dates and the consolidated results of their operations and cashflows, retained earnings, assets and liabilities and operating results for theperiods indicated, except that the unaudited interim financial statements donot include all notes, but do include all adjustments, which consist only ofnormal recurring adjustments, necessary for fair presentation.  The books and records of each PurchaserEntity are true and complete in all material respects.

 

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(c)                                  Except as set forth in the Purchaser PublicFilings, no Purchaser Entity has any liabilities or obligations other than (i) liabilitiesand obligations that have arisen after June 30, 2009 in the ordinarycourse of business consistent with past practice which, individually or in theaggregate, have not had a Purchaser Material Adverse Effect and (ii) obligationsunder Contracts and commitments incurred in the ordinary course of businessconsistent with past practice that would not be required to be reflected infinancial statements (or the notes thereto) prepared in accordance with USGAAP.

 

(d)                                 Except as disclosed in the Purchaser PublicFilings, no Purchaser Entity is a guarantor or indemnitor of any indebtednessfor borrowed money of any other Person.

 

(e)                                  Since June 30, 2009, there has been noevent which has had a Purchaser Material Adverse Effect.

 

## ***4.8***                               Litigation.

## *** ***

Thereis no Legal Proceeding or investigation pending or, to the knowledge ofPurchaser, currently threatened against any Purchaser Entity that questions (i) thevalidity of this Agreement or any agreement contemplated hereby, (ii) theright of Purchaser to enter into this Agreement or any agreement contemplatedhereby or thereby or (iii) the right of Purchaser to consummate thetransactions contemplated hereby or thereby.

 

## ***4.9***                               Intellectual Property.

## *** ***

Purchaserowns all rights, title, and interests in and to its Intellectual Property freeand clear of any encumbrance.  Theexecution and performance of this Agreement, and the conduct of the businessafter the Effective Date, will not result in any breach or violation of anyMaterial Contract, or create on behalf of any third party the right toterminate or modify any Material Contract, relating to any IntellectualProperty.

 

## ***4.10***                        Compliance with Laws and Regulations.

## *** ***

(a)                                  The Purchaser Entities are, and at all timeshave been, in full material compliance with all Laws and Regulations of anyGovernmental Entity applicable to their respective businesses oroperations.  Except with respect toimmaterial violations, no Purchaser Entity has received any written notice of,has knowledge of or has been charged with, the violation of any Laws andRegulations.

 

(b)                                 The Purchaser Entities have all permits whichare required for the operation of their respective businesses as presentlyconducted, except where the absence of which would not, individually or in theaggregate, materially affect the business of the Purchaser Entities.  No Purchaser Entity is in default orviolation (and no event has occurred which, with notice or the lapse of time orboth, would constitute a default or violation) of any term, condition orprovision of any permit to which it is a party, except where such default orviolation would not, individually or in the aggregate, materially affect thebusiness of the Purchaser Entities.

 

## ***4.11***                        Environmental.

## *** ***

Thereare no Legal Proceedings or investigations of any nature that would bereasonably likely to result in the imposition on any Purchaser Entity of anyliability or obligation arising under common law or under any local, state,provincial, municipal or federal environmental statute, regulation or ordinancepending or, to the knowledge of Purchaser, threatened against any PurchaserEntity, which liability or 

 

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obligation would be materialto Purchaser.  To the knowledge ofPurchaser, there is no reasonable basis for any such Legal Proceeding orinvestigation.

 

## ***4.12***                        Contracts and Commitments.

## *** ***

(a)                                  All of the Material Contracts are valid,binding and enforceable (and, if applicable, were registered with theappropriate Governmental Entity, as required in order to be enforceable) inaccordance with their respective terms and in full force and effect, withoutamendment (except as disclosed on Section 4.12(a) of the PurchaserDisclosure Letter). No Material Contract requires the consent by the otherparties thereto in order to consummate the transactions contemplated by thisAgreement. The Purchaser Entity party thereto has performed in all materialrespects all obligations required to be performed by it and is not in defaultunder or in breach of nor in receipt of any claim of default or breach underany Material Contract, and such Purchaser Entity does not have any presentexpectation or intention of not fully performing all such obligations, exceptwhere any such default or non-performance would not constitute a PurchaserMaterial Adverse Effect.  No event hasoccurred which with the passage of time or the giving of notice or both wouldresult in a default, breach or event of noncompliance by the Purchaser Entityparty thereto under any Material Contract, except where such event would notconstitute a Purchaser Material Adverse Effect. Purchaser has no knowledge of any material breach or anticipatedmaterial breach by the other parties to any Material Contract. True, correctand complete copies of each written Material Contract and an accuratedescription of each oral Material Contract, together with all amendments,waivers or other changes thereto, have been made available to counsel to theCompany.

 

(b)                                 Except as set forth in the Purchaser’sfinancial statements available on www.SEDAR.com and www.sec.gov, no PurchaserEntity has, since June 30, 2009, (i) declared or paid any dividendsor authorized or made any distribution upon or with respect to any class orseries of its capital shares or corporate interests, (ii) incurred anyindebtedness for money borrowed or any other liabilities individually, (iii) madeany loans or advances to any Person, other than ordinary course advances forbusiness expenses, or (iv) sold, exchanged or otherwise disposed of any ofits Purchaser Assets or rights, other than the sale of its inventory in theordinary course of business.

 

## ***4.13***                        Related-Party Transactions.

## *** ***

Exceptas set forth in the Purchaser Public Filings, no employee, shareholder, officeror director of any Purchaser Entity or member of his/her immediate family isindebted to any Purchaser Entity, nor is any Purchaser Entity indebted (orcommitted to make loans or extend or guarantee credit) to any of them.  All commercial transactions are negotiated onan arms length basis and at fair market value.

 

## ***4.14***                        Changes.

## *** ***

SinceJune 30, 2009 and except as otherwise reflected in the Purchaser PublicFilings or as set forth in Section 4.14 of the Purchaser Disclosure Letter,each Purchaser Entity has conducted its business, in all material respects, inthe ordinary course consistent with past practice and there has not occurred:

 

(a)                                  any change, event or condition that,individually or in the aggregate, is a Purchaser Material Adverse Effect;

 

(b)                                 any material damage, destruction or loss toPurchaser Assets, whether or not covered by insurance having a PurchaserMaterial Adverse Effect;

 

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(c)                                  any satisfaction or discharge of any Lien orpayment of any obligation by any Purchaser Entity, except in the ordinarycourse of business consistent with past practice and that is not material tothe Purchaser Assets, financial condition, operating results or business of thePurchaser Entities, taken as a whole;

 

(d)                                 any Contract entered into by any PurchaserEntity, or any change or amendment to a Contract or arrangement by which anyPurchaser Entity or any of its Purchaser Assets is bound or subject, other thanin the ordinary course of business consistent with past practice;

 

(e)                                  any acquisition, sale, assignment or transferof any material asset of any Purchaser Entity, or disclosure of any proprietaryconfidential information to any Person;

 

(f)                                    any resignation or termination of employmentof any officer or key employee of any Purchaser Entity, or any change in anyMaterial Contract or other arrangement (including any Purchaser Employee Plan)providing for compensation to any officer or key employee of any PurchaserEntity;

 

(g)                                 any declaration, payment, setting aside orother distribution of cash or other property to its shareholders or interestholders with respect to its common shares, other equity securities or otherinterests (including without limitation, any warrants, options or other rightsto acquire its common shares or other equity securities), or any direct orindirect redemption, purchase or other acquisition by Purchaser of any of itscommon shares or interests;

 

(h)                                 any mortgage, pledge, transfer of a securityinterest in, or Lien, created by any Purchaser Entity, with respect to any ofits Purchaser Assets, except for Permitted Liens;

 

(i)                                     any notice that there has been a loss of, ororder cancellation by, any major customer of any Purchaser Entity;

 

(j)                                     any loans or advances to, guarantees for thebenefit of, or any investments in, any Person (including, without limitation,any employees, officers or directors, or any members of their immediatefamilies, of any Purchaser Entity);

 

(k)                                  any change in the accounting methods orpractices materially affecting the Purchaser Assets of any Purchaser Entity, orany election with respect to Taxes or changes in tax accounting methods;

 

(l)                                     any amendment or change to the organizationaldocuments of any Purchaser Entity;

 

(m)                               any agreement by any Purchaser Entity to doany of the things described in the preceding clauses (a) through (l) (otherthan negotiations with the Company and its representatives regarding thetransactions contemplated by this Agreement); or

 

(n)                                 to the knowledge of Purchaser , any otherevent or condition of any character that would have a Purchaser MaterialAdverse Effect.

 

## ***4.15***                        Purchaser Assets.

## *** ***

EachPurchaser Entity has good and marketable title to, or valid leasehold interestsin, its respective properties and assets (all such properties and assets beingreferred to as the “**Purchaser Assets**”), other than such property and assets as to which the failure tohave the title or lease rights, individually or in the aggregate, would nothave a Purchaser Material Adverse Effect. The Purchaser

 

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Assets are free and clear ofall Liens, except (a) as reflected in the Purchaser Public Filings and (b) PermittedLiens.  The Purchaser Assets constituteall the assets used or held for use in the conduct of the respective businessesof the Purchaser Entities and necessary for Purchaser to operate suchbusinesses as currently conducted by such Purchaser Entities.  No Purchaser Entity owns any realproperty.  All of the tangible PurchaserAssets of each Purchaser Entity are in good operating condition, subject tonormal wear and tear, and are reasonably fit and useable for the purposes forwhich they are currently being used.

 

## ***4.16***                        Insurance.

## *** ***

Thereis no claim pending under any fire, theft, casualty, general liability, workerscompensation, business interruption, life insurance or other insurance policymaintained by any Purchaser Entity (collectively, the “**Purchaser Insurance Policies**”) as to which coverage has beenquestioned, denied or disputed by the underwriters of such policies.  All premiums due and payable on the PurchaserInsurance Policies or renewals thereof have been paid and each Purchaser Entityis otherwise in material compliance with the material terms of suchpolicies.  All Purchaser InsurancePolicies will remain in full force and effect through the Effective Date andalso as to claims arising out of events that occur prior to the EffectiveDate.  Purchaser has no knowledge of anythreatened termination of, or premium increase with respect to, any of thePurchaser Insurance Policies.

 

## ***4.17***                        Employee Benefit Plans.

## *** ***

Section 4.17 to thePurchaser Disclosure Letter contains a true and complete list of each PurchaserEmployee Plan sponsored, maintained or contributed to or required to becontributed to by any Purchaser Entity or as to which any Purchaser Entity has,or may have, any liability or obligation, contingent or otherwise, whetherwritten or oral and whether legally binding or not (collectively, the “**Purchaser Employee Plans**”). Purchaser has heretofore made available to the Company true and completecopies of the Purchaser Employee Plans.

 

## ***4.18***                        Workers’ Compensation; Employment; Confidentiality.

## *** ***

(a)                                 Purchaser is in compliance with applicableworkers’ compensation Laws and Regulations made pursuant thereto and there areno outstanding assessments, levies or penalties thereunder.

 

(b)                                Except as disclosed in Section 4.18(b) of the PurchaserDisclosure Letter, as of the date hereof, Purchaser is not aware that anyexecutive officer, or that any group of employees of Purchaser, intends toterminate their employment with Purchaser, nor does Purchaser have a presentintention to terminate the employment of any of the foregoing.  The employment of each officer and employeeof Purchaser is terminable at the will of Purchaser.

 

(c)                                 Except as disclosed in Section 4.18(c) ofthe Purchaser Disclosure Letter, each current and former employee andconsultant to Purchaser has entered into a confidentiality and assignment ofinventions agreement with Purchaser. Purchaser does not have agreements or arrangements with Persons titledas independent contractors or consultants, as a result of which, by virtue ofthe control exercised by Purchaser, the type of work performed by the Personsor any other circumstances, such Persons could reasonably be deemed to be employeesof Purchaser.

 

## ***4.19***                        Brokers or Finders.

## *** ***

No Purchaser Entity is obligated to pay any broker’sor finder’s fee or any other commission or similar fee to any agent, broker,investment banker, financial advisor or other firm or Person in 

 

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connection with any of the transactions contemplated by this Agreement.

 

## ***4.20***                        Takeover Statutes.

## *** ***

Notakeover statute or similar statute or regulation or organizational documentanti-takeover provision applies or purports to apply to Purchaser with respectto this Agreement, the Arrangement or any other transaction contemplatedhereby.

 

# **ARTICLE V - CERTAIN COVENANTS OF THE PARTIES**

# ** **

## ***5.1***                               Conduct of the Company’s Business Prior to the Effective Time.

## *** ***

During the period from the date of this Agreementand continuing until the earlier of the termination of this Agreement or theEffective Time (the “**Pre-Closing Period**”),****exceptas expressly contemplated or permitted by this Agreement:

 

(a)                                  other than in connection with

 

(i)                                     the CAD $55,000 capital expenditure set forthin Section 3.15(k) of the Company Disclosure Letter, and

 

(ii)                                  this Agreement, the transactions contemplatedhereby and the legal, accounting and Company Meeting fees, expenses and costsincurred by the Company in association therewith, which in the aggregate willamount to no more than CAD $*********. The foregoing does not include the fees of Alexander Capital Group Inc.,which will be paid as set forth in the Plan of Arrangement.

 

the Company shall, and shall cause its Subsidiariesto, conduct business in, and not take any action (including any action withrespect to Working Capital) except in, the usual and ordinary course ofbusiness and consistent with past practice, and it shall, and shall cause its Subsidiariesto, use commercially reasonable efforts to maintain and preserve its businessorganization, assets, employees and advantageous business relationships; and

 

(b)                                 the Company shall not, and it shall cause itsSubsidiaries not to, otherwise take actions that could reasonably be expectedto be prejudicial to Purchaser’s interest in the business, property or assetsof the Company Entities following the Effective Time.

 

Nothing in this Section 5.1shall give Purchaser, directly or indirectly, the right to control or directthe Company Entities’ operations prior to the Effective Time.  The Company Entities shall exercise,consistent with the terms and conditions of this Agreement, complete controland supervision over the Company Entities’ operations prior to the EffectiveTime.

 

## ***5.2***                               Reports, Taxes.

## *** ***

Duringthe Pre-Closing Period and except as expressly contemplated by this Agreementand the Plan of Arrangement, each of the Company Entities and PurchaserEntities shall:  (i) duly and timelyfile all Tax returns required to be filed by it on or after the date hereof andall such Tax Returns will be true, complete and correct and prepared consistentwith prior practice, except as may be required by applicable law; (ii) timelywithhold, collect, remit and pay all Taxes which are to be withheld, collected,remitted or paid by it to the extent due and payable, except for the payment ofany Taxes contested in good faith 

 

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pursuant to applicable lawswhere adequate reserves have been reflected on the Company Financial Statementsor the Purchaser financial statements, as the case may be; (iii) not makeor rescind any material express or deemed election relating to Taxes; (iv) notmake a request for a Tax ruling or enter into a closing agreement with anyGovernment Entity; (v) not settle or compromise any material claim,action, suit, litigation, proceeding, arbitration, investigation, audit orcontroversy relating to Taxes; (vi) not permit the Company to suffer an acquisitionof control, and (vii) not undertake any transaction which would adverselyaffect or reduce the tax balances described in Section 3.7(p) or (q).

 

## ***5.3***                               Non-Solicitation.

## *** ***

Duringthe Pre-Closing Period, except as expressly contemplated or permitted by thisAgreement:

 

(a)                                  Each of the Company and Purchaser shall notdirectly or indirectly, through any officer, director, employee, representativeor agent, solicit, initiate, or encourage any inquiries or proposals thatconstitute, or could reasonably be expected to lead to, a proposal or offer forany amalgamation, merger, consolidation, reorganization, recapitalization,asset transfer, share issuance or similar transaction involving the Company orthe Purchaser, as the case may be, or any of their Subsidiaries (any of theforegoing inquiries or proposals being referred to in this Agreement as an “**Acquisition Proposal**”),****(ii) engagein negotiations or discussions concerning, or provide any non-publicinformation to any Person relating to, any Acquisition Proposal, or (iii) agreeto, approve or recommend any Acquisition Proposal.

 

(b)                                 A party receiving an Acquisition Proposalshall notify, as promptly as practicable (and in no event later than 48 hours)the other party after receipt of any Acquisition Proposal or any inquiry orcontact by any Person that informs the Company or the Purchaser, as applicable,that it is considering making an Acquisition Proposal.  Such notice shall indicate in reasonabledetail the identity of the offeror and the terms and conditions of suchAcquisition Proposal, inquiry or contact.

 

## ***5.4***                               Intellectual Property.

## *** ***

(a)                                  During the Pre-Closing Period, except asexpressly contemplated or permitted by this Agreement, each of the Company andPurchaser shall, and each shall cause each of their Subsidiaries, to usecommercially reasonable efforts to do or cause to be done all things necessaryto preserve and keep in full force and effect all licenses, approvals,agreements, franchises, copyrights and patents, and all other rights (includingwithout limitation with respect to Intellectual Property) used in or necessaryto the present or reasonably anticipated future conduct of the Company Entities’or Purchaser Entities’ businesses, as the case may be, the loss of which wouldreasonably be likely to have a Company Material Adverse Effect or PurchaserMaterial Adverse Effect, respectively.

 

(b)                                 Notwithstanding the foregoing, no CompanyEntity shall take any actions during the Pre-Closing Period related to thesale, pricing, licensing, transfer, marketing of or access to IntellectualProperty, except in the ordinary course of business consistent with pastpractice, without Purchaser’s prior written consent, which consent shall not beunreasonably withheld, delayed or conditioned.

 

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## *** ***

## ***5.5***                               Stock Option Grants.

## *** ***

Promptlyfollowing the Effective Time and subject to compliance with applicable Laws andRegulations and the rules of the Toronto Stock Exchange, and inconsideration for Dobbie’s becoming an employee of Purchaser, Purchaser shallgrant to Dobbie employee stock options to purchase 500,000 Purchaser CommonShares with an exercise price that reflects the close-of-day market price ofthe Purchaser Common Shares on the business day immediately prior to theEffective Date.  Such option grant willbe memorialized in an agreement, in the form previously delivered by Purchaserto Dobbie to be executed by Dobbie and Purchaser, and such options will vest inaccordance with the schedule set forth in such agreement.

 

# **ARTICLEVI -ADDITIONAL MUTUAL COVENANTS**

# ** **

## ***6.1***                               Access to Information.

## *** ***

Subjectto the Confidentiality Agreement and upon reasonable notice, the Company andPurchaser shall each afford to the officers, employees, accountants, counseland other representatives of the other access, during normal business hoursduring the Pre-Closing Period, to all information concerning its business,properties and personnel, including the work papers of their respectiveindependent accountants, as may reasonably be requested.  The Company and Purchaser shall hold any suchinformation which is nonpublic in accordance with the ConfidentialityAgreement.  No information or knowledgeobtained in any investigation pursuant to this Section 6.1 shall affect orbe deemed to modify any representation or warranty contained in this Agreementor the conditions to the obligations of the parties to consummate theArrangement.  Purchaser undertakes toprovide counsel to the Company with copies of any material correspondence with,and with a copy of the conditional approval of, the Toronto Stock Exchangerelated to the listing of the Purchaser Common Shares to be issued pursuant tothe Arrangement.

 

## ***6.2***                               Legal Conditions to Arrangement.

## *** ***

Each of Purchaser and the Company shall take allreasonable actions necessary to comply promptly with all Laws and Regulationswhich may be imposed on itself with respect to the Arrangement (which actionsshall include, without limitation, furnishing all information required inconnection with approvals of or filings with any Governmental Entity) and shallpromptly cooperate with and furnish information to each other in connectionwith any such requirements imposed in connection with the Arrangement.

 

## ***6.3***                               Public Disclosure.

## *** ***

During the Pre-Closing Period, except as otherwiserequired by the Securities Laws and any applicable Laws and Regulations (“**RequiredDisclosure**”),****and except as required for thesolicitation of the approval of the Company’s shareholders, the pursuit ofthird-party consents, and announcements to and discussions with employees ofthe Company reasonably required in furtherance of the Arrangement and theperformance of the parties’ obligations pursuant to this Agreement, neither theCompany nor Purchaser shall issue or cause the publication of any press releaseor public announcement or disclosure to any third party of the existence or anysubject matter, terms or conditions of this Agreement unless jointly approvedby Purchaser and the Company prior to release, announcement or disclosure.  Notwithstanding the foregoing, if a partydetermines in its sole discretion that a Required Disclosure of informationrelating to this Agreement is required, such party shall provide the otherparty with as much prior written 

 

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notice (including the language, form and content of the RequiredDisclosure) and an opportunity for consultation as is reasonably practicableunder the circumstances of any intended Required Disclosure, it beingunderstood that nothing herein shall prevent the disclosing party from makingRequired Disclosure.  The Company andPurchaser further agree that the language, form and content of any publicdisclosure of information relating to this Agreement (whether through a pressrelease, public filing (which filing a party determines to be voluntary) orreport, public statement or otherwise) that is not a Required Disclosure shallbe mutually agreed in advance by the parties, which agreement shall not beunreasonably withheld.

 

## ***6.4***                               Consents.

## *** ***

TheCompany and Purchaser shall each use its respective commercially reasonableefforts to obtain any necessary consents, waivers and approvals under any ofits material agreements, Contracts, licenses or leases as may be required toconsummate the Arrangement.

 

## ***6.5***                               Securities Compliance.

## *** ***

(a)                                  Listing.  The Purchaser shall, promptlyfollowing the Effective Date, cause all Purchaser Common Shares issuable in theArrangement or Purchaser Common Shares issued on due exercise of Warrants or ofoptions of Purchaser granted to Dobbie pursuant to Section 5.5 hereof tobe listed on the Toronto Stock Exchange.

 

(b)                                 Compliance.  The Company and Purchasershall comply with all applicable rules and regulations of the SecuritiesCommissions in connection with the transactions contemplated by this Agreement.

 

(c)                                  Restrictive Legend. Each certificate representing PurchaserCommon Shares issuable in the Arrangement or Purchaser Common Shares issued ondue exercise of Warrants or of options of Purchaser granted to Dobbie pursuantto Section 5.5 hereof shall bear substantially the following legend (inaddition to any legends required under applicable Securities Laws) for CompanyShareholders located in the United States:

 

THESHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENTPURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, ASAMENDED.  THE SHARES MAY NOT BE SOLDOR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.

 

## ***6.6***                               Expenses.

## *** ***

Whether or not the Arrangement is consummated, allfees, costs and expenses (including legal, accounting and investment bankingfees and expenses) incurred in connection with this Agreement and thetransactions contemplated hereby shall be paid by the party incurring such fee,cost or expense.

 

## ***6.7***                               Additional Agreements; Commercially Reasonable Efforts.

## *** ***

(a)                                  Subject to the terms and conditions of thisAgreement, each of the parties agrees to use commercially reasonable efforts totake, or cause to be taken, all actions and to do, or cause to be done, allthings necessary under applicable Laws and Regulations to consummate and makeeffective the transactions contemplated by this Agreement.  In case at any time after the Effective 

 

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Timeany further action is reasonably necessary to carry out the purposes of thisAgreement each party to this Agreement shall use commercially reasonableefforts take all such necessary action.

 

## ***6.8***                               Supplements to Disclosure Letters.

## *** ***

(a)                                  The Company shall from time to time, from thedate hereof until the Effective Date, supplement or amend the CompanyDisclosure Letter with respect to any matter arising after the date hereofwhich, if existing as of or prior to the date hereof, would have been requiredto be set forth in the Company Disclosure Letter.  No supplement or amendment to the CompanyDisclosure Letter shall have any effect on the conditions to the obligations ofPurchaser to consummate the Arrangement set forth in Article VII.

 

(b)                                 Purchaser shall from time to time, from thedate hereof until the Effective Date, supplement or amend the PurchaserDisclosure Letter with respect to any matter arising after the date hereofwhich, if existing as of or prior to the date hereof, would have been requiredto be set forth in the Purchaser Disclosure Letter.  No supplement or amendment to the PurchaserDisclosure Letter shall have any effect on the conditions to the obligations ofthe Company to consummate the Arrangement set forth in Article VIII.

 

## ***6.9***                               Non-Solicitation of Employees.

## *** ***

Forone year following the termination of this Agreement pursuant to the provisionsof Article X hereof, neither the Company nor the Purchaser shall, eitherdirectly or indirectly, solicit for employment any individual who is employedby the Purchaser or the Company, respectively, as of the date of thisAgreement; provided, however, that this Section 6.9 shall not limitPurchaser’s or the Company’s right to continue its customary generaladvertisement for employees.

 

# **ARTICLEVII - CONDITIONS TO THE OBLIGATIONS OF PURCHASER**

# ** **

Theobligations of Purchaser to consummate the Arrangement are subject to thefulfillment, on or before the Effective Date, of all the following conditions,any one or more of which may be waived by Purchaser:

 

## ***7.1***                               Accuracy of Representations and Warranties.

## *** ***

Therepresentations and warranties of the Company contained in this Agreement shallbe true and correct in all respects, in each case as of the date of thisAgreement and as of the Effective Date as though made on such date, except tothe extent such representations and warranties are expressly made only as of anearlier date, in which case as of such earlier date, except for changes sincethe date of this Agreement that individually or in the aggregate do notconstitute a Company Material Adverse Effect.

 

## ***7.2***                               Covenants Performed.

## *** ***

Allof the obligations of the Company to be performed on or before the EffectiveDate pursuant to the terms of this Agreement shall have been duly performed inall material respects.

 

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## *** ***

## ***7.3***                               Final Financial Statements.

## *** ***

Onthe Effective Date, the Purchaser shall have received the Company’s (i) consolidatedfinancial statements (balance sheet and statement of operations, statement ofshareholders’ equity and statement of cash flows, including notes thereto) ateach of December 31, 2008, December 31, 2007 and December 31,2006, and for the fiscal years then ended, and (ii) financial statements(balance sheet and statement of income) prepared by the Company for January throughJune of 2009.

 

## ***7.4***                               Officers’ Certificate.

## *** ***

Onthe Effective Date, the Purchaser shall have received a certificate signed bythe Chief Executive Officer of the Company to the effect that the conditionsset forth in Sections 7.1, 7.2 and 7.3 hereof have been satisfied.

 

## ***7.5***                               Interim Order.

## *** ***

The Company shall have applied for the Interim Orderno later than October 8, 2009.

 

## ***7.6***                               Company Shareholder Approval.

## *** ***

TheArrangement, this Agreement and the related transactions shall have been dulyapproved by the requisite affirmative vote of the shareholders of the Companyat the Company Meeting, or at any adjournment or postponement thereof, and theCompany Meeting shall have been held no later than October 29, 2009.

 

## ***7.7***                               Court Approval.

## *** ***

TheFinal Order shall have been received.

 

## ***7.8***                               No Injunctions or Litigation.

## *** ***

No action or proceeding shall have been instituted and continuing, orthreatened in writing, by any Governmental Entity or private party against anyof the parties hereto which seeks to impair, restrain, prohibit or invalidatethe Arrangement, or regarding the effectiveness or validity of any regulatoryapprovals with respect to the Arrangement.

 

## ***7.9***                               Consents.

## *** ***

Each of Purchaser and the Company shall have receivedin writing all material consents, approvals, and waivers required in connectionwith the Arrangement that are set forth in Section 3.5 of the CompanyDisclosure Letter and Section 4.6 of the Purchaser Disclosure Letter.

 

## ***7.10***                        Receipt of Regulatory Approvals.

## *** ***

The Company and Purchasershall have received all required regulatory and stock exchange approvals,including any approvals of Industry Canada and the Toronto Stock Exchange.

 

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## ***7.11***                        Third Party Consents.

 

The Purchaser shall be satisfied, acting reasonably, that the Companyhas, prior to the Effective Date, received consents of all third partiesnecessary to permit the Company to:  (i) effectthe Arrangement; and (ii) carry on its business in the ordinary course asconducted prior to the date hereof consistent with past practice.

 

## ***7.12***                        Dissent Rights.

## *** ***

Holdersof no more than 5% of the Company Common Shares shall have exercised DissentRights.

 

## ***7.13***                        Other Agreements.

## *** ***

On the Effective Date, Dobbie will have entered intoan agreement restricting his right to resell the Purchaser Common Shares hereceives in the Arrangement and reflecting the terms set forth in Section 2.3(l) ofthe Plan of Arrangement.

 

## ***7.14***                        Fee Certificate.

## *** ***

Purchaser shall have received in writing from theCompany a certificate setting forth a final statement of all legal, accountingand Company Meeting fees, expenses and costs incurred by the Company inassociation with this Agreement and the transactions contemplated hereby.  The excess of these costs over $*********will be those covered by the definition of “Advisor Costs” in the Plan ofArrangement.

 

# **ARTICLEVIII - CONDITIONS TO THE OBLIGATIONS OF COMPANY**

# ** **

The obligations of the Company to consummate theArrangement are subject to the fulfillment, on or before the Effective Date, ofall of the following conditions, any one or more of which may be waived by theCompany:

 

## ***8.1***                               Accuracy of Representations and Warranties.

## *** ***

The representations and warranties of Purchasercontained in this Agreement shall be true and correct in all respects, in eachcase as of the date of this Agreement and as of the Effective Date as thoughmade on such date, except to the extent such representations and warranties areexpressly made only as of an earlier date, in which case as of such earlierdate, except for changes since the date of this Agreement that individually orin the aggregate do not constitute a Purchaser Material Adverse Effect.

 

## ***8.2***                               Covenants Performed.

## *** ***

Allof the obligations of Purchaser to be performed on or before the Effective Datepursuant to the terms of this Agreement shall have been duly performed in allmaterial respects.

 

## ***8.3***                               Officer’s Certificate.

## *** ***

Onthe Effective Date, the Company shall have received a certificate signed by theChief Executive Officer of Purchaser to the effect that the conditions setforth in Sections 8.1 and 8.2 hereof have been satisfied.

 

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## *** ***

## ***8.4***                               Company Shareholder Approval.

## *** ***

TheArrangement, this Agreement and the related transactions shall have been dulyapproved by the requisite affirmative vote of the shareholders of the Companyat the Company Meeting, or at any adjournment or postponement thereof, and theCompany Meeting shall have been held no later than October 29, 2009.

 

## ***8.5***                               Court Approval.

## *** ***

TheFinal Order shall have been received.

 

## ***8.6***                               No Injunctions or Litigation.

## *** ***

Noaction or proceeding shall have been instituted and continuing, or threatenedin writing, by any Governmental Entity or private party against any of theparties hereto which seeks to impair, restrain, prohibit or invalidate theArrangement, or regarding the effectiveness or validity of any regulatoryapprovals with respect to the Arrangement.

 

## ***8.7***                               Consents.

## *** ***

Each of Purchaser and the Company shall have received in writing allmaterial consents, approvals, and waivers required in connection with theArrangement that are set forth in Section 3.5 of the Company DisclosureLetter and Section 4.6 of the Purchaser Disclosure Letter.

 

## ***8.8***                               Receipt of Regulatory Approvals.

## *** ***

Receipt by the Company andPurchaser of all required regulatory and stock exchange approvals, includingany approvals of Industry Canada and the Toronto Stock Exchange.

 

## ***8.9***                               Third Party Consents.

## *** ***

The Company shall be satisfied, acting reasonably, that Purchaser has,prior to the Effective Date, received consents of all third parties necessaryto permit Purchaser to:  (i) effectthe Arrangement; and (ii) carry on its business in the ordinary course asconducted prior to the date hereof consistent with past practice.

 

## ***8.10***                        Other Agreements.

## *** ***

On the Effective Date, Dobbie will have entered intoan agreement restricting his right to resell the Purchaser Common Shares hereceives in the Arrangement and reflecting the terms set forth in Section 2.3(l) ofthe Plan of Arrangement.

 

# **ARTICLE IX - INDEMNIFICATION**

# ** **

**9.1****                              ****IndemnificationObligations.**

 

Dobbie(the “**Indemnifying Party**”) hereby agrees toindemnify and hold harmless Purchaser and/or its directors, officers,employees, Affiliates, agents and representatives (each, an “**Indemnified Party**” and collectively, the “**Indemnified Parties**”) from and against any and all loss,liability, claims, 

 

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damage,expense, fines, or penalties (including reasonable fees and expenses of counselin any matter, whether involving a third party or between the indemnifying orindemnified parties) (collectively, “**Losses**”)suffered or incurred by an Indemnified Party as a result of:

 

(a)                                  Any misrepresentation by, breach of warrantyby, or non-fulfillment of any covenant or agreement of, the Company and Dobbiecontained in this Agreement.

 

(b)                                 Any Taxes imposed on the Company as a resultof or in connection with the payment of the dividend to Participating INSINCShareholders in accordance with the Plan of Arrangement.

 

(c)                                  Any material inaccuracies, omissions orexclusions in the minute books or shareholder register, or in regard to theshare certificates, of the Company.

 

**9.2****                              ****Indemnification Thresholds.**

 

(a)                                  Indemnified Parties may make no claim forindemnification pursuant to Section 9.1 unless notice of such claim hasbeen given to the Indemnifying Party pursuant to Section 9.3 during thesurvival period set forth in Section 9.4. or 9.6, as applicable

 

(b)                                 Indemnified Parties shall not be entitled torecovery under Section 9.1 unless and until the Losses recoverable undersuch clause exceed $10,000, at which point the Indemnified Parties shall beentitled to recover the full amount of such Losses from the first dollar up tobut not exceeding $500,000.

 

(c)                                  Notwithstanding the foregoing, theindemnification thresholds and limitations in this Section 9.2 shall notapply to any indemnification for Losses arising pursuant to Section 9.1(b).

 

(d)                                 For purposes of notices and other mattersunder this Article IX, Purchaser shall act as the representative of theIndemnified Parties.

 

**9.3****                              ****Notice of Claims; Procedure forIndemnification.**

 

(a)                                  Each Indemnified Party entitled toindemnification pursuant to Section 9.1 shall give written notice to theIndemnifying Party specifying in reasonable detail (i) the basis of theclaim as to which indemnity may be sought, and (ii) if known, theaggregate amount of the Losses for which a claim is being made under Section 9.1or, to the extent that the amount of such Losses is not known or has not beenincurred at the time such claim is made, an estimate.  Written notice to the Indemnifying Party ofthe existence of a claim shall be given by the Indemnified Party as soon asreasonably possible after the Indemnified Party has concluded that it isentitled to seek indemnification hereunder; provided, however, that theIndemnified Party shall not be foreclosed from seeking indemnification pursuantto this Article IX by any failure to provide such notice of the existenceof a claim to the Indemnifying Party, except to the extent the IndemnifyingParty demonstrates that the defense of the action is prejudiced by the delay.

 

(b)                                 In case any such action shall be broughtagainst an Indemnified Party and such Indemnified Party gives notice to theIndemnifying Party of the commencement of the action, the Indemnifying Partyshall be entitled to participate in the action at his own expense and, to theextent that they shall wish, to assume the defense of the action with counselreasonably satisfactory to the Indemnified Party so long as the IndemnifyingParty provides the Indemnified Party with evidence reasonably acceptable to theIndemnified Party that the Indemnifying Party will have the financial resourcesto defend against the action and fulfill his indemnification obligationshereunder and the Indemnifying Party conducts the defense of the actionactively and diligently.  After noticefrom the Indemnifying Party to the Indemnified Party of his election so toassume the defense of the action, the Indemnifying Party shall control thedefense of the action and shall not be liable to the Indemnified Party under Section 9.1for any fees of other counsel or any other expenses subsequently incurred bythe Indemnified Party in connection with the defense of the action (it beingunderstood, however, that the Indemnified Party shall be entitled toparticipate in 

 

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theaction at its own cost and expense).  TheIndemnifying Party and the Indemnified Party shall cooperate with each other inconnection with any defense and in any notifications to insurers.  If the Indemnifying Party assumes the defenseof an action, no compromise or settlement of the action may be effected by theIndemnifying Party without the Indemnified Party’s consent, such consent not tobe unreasonably withheld or delayed.  Ifnotice is given to the Indemnifying Party of the commencement of any action andhe does not, within 20 days after receipt of such notice, give notice to theIndemnified Party of his election to assume the defense of the action, theIndemnified Party:  (i) shallcontrol the defense of such action until and unless the Indemnifying Partygives written notice of his election to assume the defense of the action; and (ii) may,with the consent of the Indemnifying party, such consent not to be unreasonablywithheld or delayed, compromise or settle such action at the cost and expenseof the Indemnifying Party, and the Indemnifying Party shall be bound by anydetermination made in such action or any compromise or settlement of the actioneffected by the Indemnified Party.

 

**9.4****                              ****Survival of Representations andWarranties.**

 

Notwithstandingany provision herein to the contrary, each representation or warranty in thisAgreement shall survive the closing of the transaction contemplated by thisAgreement until November 1, 2010, except for (i) representations andwarranties in Section 3.9 (Intellectual Property), which shall survive fortwo years after the Effective Date, and (ii) representations andwarranties in Sections 3.3 (Authorization; No Violation) and 3.4(Capitalization), which shall survive for three years after the Effective Date.

 

**9.5****                              ****Investigation.**

 

AnIndemnified Party’s right to indemnification or other remedies based upon therepresentations, warranties, covenants and agreements of the Company and Dobbiewill not be affected by any investigation or knowledge of the Indemnified Party(including, without limitation, by reason of the fact that the IndemnifiedParty knew or should have known that any representation or warranty might beinaccurate) or any waiver by the Indemnified Party of any condition based onthe accuracy of any representation or warranty, or compliance with any covenantor agreement; provided, however, that the representations and warranties of theCompany and Dobbie shall be qualified by the disclosures set forth in theCompany Disclosure Letter.  Anyinvestigation by such party shall be for its own protection only and shall notaffect or impair any right or remedy hereunder.

 

**9.6****                              ****Survival of CertainIndemnification Rights.**

 

Theindemnification right described in Section 9.1(b) shall survive until90 days following the expiry of the applicable limitations period after whichno claim may be made by any Governmental Entity and where such a claim isasserted by a Governmental Entity prior to the expiry of the applicablelimitations period, the indemnity rights shall survive until such time as anysuch claim is finally settled or finally adjudicated and is subject to nofurther appeal rights.

 

**9.7****                              ****Adjustments.**

 

In determining the amount of any Loss underthis Article IX, such amount will be reduced or increased to take intoaccount any net Tax benefit or cost (including any withholding tax) incurred bythe Indemnified Party as a result of the matter giving rise to such claim.  All amounts payable pursuant to this Article IXwill be considered to be an adjustment to the Consideration received by Dobbieas set forth in the Plan of Arrangement.

 

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**9.8****                              ****Mitigation.**

 

(a)                                  Purchaser undertakes to take commerciallyreasonable actions to minimize the amount of any Tax arising from thecircumstances described in Section 9.1(b) hereof, including causingthe Company (or its successor) to file an election in respect of the fullamount of any excess amount (within the meaning of subsection 184(2) ofthe Tax Act) pursuant to subsection 184(3) of the Tax Act.

 

(b)                                 Purchaser shall promptly give written noticeto the Indemnifying Party regarding any notice it may receive from CanadaRevenue Agency (“**CRA**”) specifying in reasonabledetail the nature of the CRA notice; provided, however, that the IndemnifiedParty shall not be foreclosed from seeking indemnification pursuant to Section 9.1(b) andthis Article IX for any failure to provide such written notice to theIndemnifying Party, except to the extent the Indemnifying Party demonstratesthat the defense of the matter raised in such notice is prejudiced by the delayunless such delay was caused by an event outside the control of the IndemnifiedParty.

 

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# **ARTICLEX - TERMINATION**

# ** **

## ***10.1***                        Termination.

## *** ***

ThisAgreement may be terminated:

 

(a)                                  by mutual consent of Purchaser and theCompany at any time prior to the Effective Date, even if and after the CompanyShareholders have approved this Agreement and the Arrangement; and

 

(b)                                 by either Purchaser or the Company at anytime after November 15, 2009 if the Effective Date shall not have occurredon or before November 15, 2009, provided that the right to terminate thisAgreement under this Section 10.1(b) shall not be available to anyparty whose action or failure to act has been the cause of or resulted in thefailure to consummate the transactions contemplated by this Agreement by theclose of business on November 15, 2009 and such action or failure to actconstitutes a breach of this Agreement.

 

## ***10.2***                        Effect of Termination.

## *** ***

In the event of a valid termination of thisAgreement as provided in Section 10.1, this Agreement shall forthwithbecome void and there shall be no liability or obligation on the part of Purchaser,the Company or their respective officers, directors, shareholders orAffiliates; provided that (a) the provisions of Section 6.3 (PublicDisclosure), Section 6.6 (Expenses), Section 6.9 (Non-Solicitation ofEmployees), Section 11.3 (Governing Law; Venue) and this Section 10.2shall remain in full force and effect and survive any termination of thisAgreement, (b) the Confidentiality Agreement shall continue in full forceand effect, and shall survive any termination of this Agreement, in accordancewith its terms, and (c) nothing herein shall relieve any party fromliability for fraud or willful breach in connection with this Agreement or thetransactions contemplated hereby.  Inparticular, there shall be no liability or obligation on the part of Purchaser,its officers, directors, shareholders or Affiliates regarding any fee or anyother commission owed to Alexander Capital Group Inc. or to any agent, broker,investment banker, financial advisor or other firm or Person consulted orengaged by the Company in connection with any of the transactions contemplatedby this Agreement.

 

## ***10.3***                        Extension; Waiver.

## *** ***

Atany time prior to the Effective Date, any party hereto may, to the extentlegally allowed and only if set forth in an instrument in writing signed onbehalf of such party, (a) extend the time for the performance of any ofthe obligations or other acts of the other parties hereto, (b) waive anyinaccuracies in the representations and warranties made to such party containedherein or in any document delivered pursuant hereto, and (c) waivecompliance with any of the agreements or conditions for the benefit of suchparty contained herein.

 

# **ARTICLEXI - MISCELLANEOUS**

# ** **

## ***11.1***                        Amendment.

## *** ***

This Agreement and the Plan of Arrangement may, at any time and fromtime to time before or after the holding of the Company Meeting but not laterthan the Effective Time, be amended by mutual 

 

41

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written agreementof the parties, and any such amendment may, subject to the Interim Order andthe Final Order and applicable Laws and Regulations, without limitation:

 

(a)                                  change the time for performance of any ofthe obligations or acts of the parties;

 

(b)                                 waive any inaccuracies or modify anyrepresentation or warranty contained herein or in any document deliveredpursuant hereto;

 

(c)                                  waive compliance with or modify any ofthe covenants herein contained and waive or modify performance of any of theobligations of the parties; and/or

 

(d)                                 waive compliance with or modify any mutualconditions precedent herein contained.

 

## ***11.2***                        Entire Agreement.

## *** ***

ThisAgreement, including the Schedules and other documents delivered pursuant tothis Agreement, contains all the terms and conditions agreed upon by theparties relating to the subject matter of this Agreement and supersedes allprior agreements (including the letter of intent dated September 4, 2009between Purchaser and the Company), negotiations, correspondence, undertakings,and communications of the parties, whether oral or written, respecting thatsubject matter, except for the confidentiality provisions of theConfidentiality Agreement, which shall continue in full force and effect andshall survive any termination of this Agreement in accordance with its terms.  Any representation, warranty or promise madeby Alexander Capital Group Inc., its directors, officers and employees in thecourse of its engagement by the Company in connection with the transactioncontemplated by this Agreement and the Plan of Arrangement is specifically excludedfrom this Agreement except to the extent that the same has been reduced towriting and is specifically included as a term of this Agreement, and theparties hereto expressly deny reliance on any such representation, warranty orpromise.

 

## ***11.3***                        Governing Law; Venue.

## *** ***

ThisAgreement shall be governed by and construed in accordance with the laws of theProvince of British Columbia and the federal laws of Canada applicable therein,without regard to conflicts of law principles. If Purchaser brings an action hereunder, the parties shall submit to theexclusive jurisdiction of the courts located in Vancouver, British Columbia andif the Company brings an action hereunder, the parties shall submit to theexclusive jurisdiction of the federal courts of the Eastern District of NewYork in the State of New York.

 

## ***11.4***                        Headings.

## *** ***

Theheadings and table of contents contained in this Agreement are intended forconvenience and reference purposes only and shall not be used to determine therights of the parties or affect the meaning or interpretation of this Agreementin any way.

 

## ***11.5***                        Notices.

## *** ***

Allnotices, requests, demands, and other communications made in connection withthis Agreement shall be in writing and shall be deemed to have been duly given (a) onthe date of delivery if delivered by hand delivery or by overnight courierservice, (b) on the date sent by facsimile, with confirmation oftransmission, if sent during normal business hours of the recipient, and ifnot, then on the 

 

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next day, or (c) threedays after mailing if mailed by certified or registered mail postage prepaidreturn receipt requested addressed as follows:

 

If to Purchaser:

 

RoyE. Reichbach, Esq.

NeuLion, Inc.

1600Old Country Road

Plainview,New York 11803

USA

Facsimile:  (516) 622-7510

 

With a copy to:

 

FrankLee, Esq.

DayPitney LLP

7Times Square

NewYork, New York 10036

USA

Facsimile:  (212) 916-2940

 

andto:

 

VanessaGrant, Esq.

McCarthyTétrault LLP

Box48, Suite 4700, Toronto Dominion Bank Tower

Toronto,Ontario  M5K 1E6

Canada

Facsimile:  (416) 868-0673

 

If to the Company (prior tothe Effective Date) and if to the Indemnifying Party (after the EffectiveDate):

 

HughDobbie, Jr.

InteractiveNetcasting Systems Inc.

201 —5595 Roy Street

Burnaby,British Columbia  V4P 1S4

Canada

Facsimile:  (604) 606-5726

 

With a copy to:

 

DrewWells, Esq.

GetzPrince Wells LLP

Suite 1810— 1111 West Georgia Street

Vancouver,British Columbia  V6E 4M3

Canada

Facsimile:  (604) 685-9798

 

Such addresses may bechanged from time to time by means of a notice given in the manner provided inthis Section.

 

## ***11.6***                        Severability.

## *** ***

In the event that any provision of this Agreement,or the application thereof, becomes or is 

 

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declared by a court of competent jurisdiction to be illegal, void,invalid or unenforceable, the remainder of this Agreement shall continue infull force and effect and the application of such provision to other Persons orcircumstances shall be interpreted so as reasonably to effect the intent of theparties hereto.

 

## ***11.7***                        Interpretation.

## *** ***

Whena reference is made in this Agreement to Schedules, such reference shall be toa Schedule to this Agreement unless otherwise indicated.  The words “include,” “includes” and “including”when used herein shall be deemed in each case to be followed by the words “withoutlimitation.”  All references to “$” or “dollar”are to U.S. dollars unless otherwise indicated.

 

## ***11.8***                        Waiver.

## *** ***

Waiverof any term or condition of this Agreement by any party shall not be construedas a waiver of a subsequent breach or failure of the same term or condition, ora waiver of any other term or condition in this Agreement.

 

## ***11.9***                        Waiver of Jury Trial.

## *** ***

THEPARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT WHICHANY PARTY MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY PROCEEDING,LITIGATION OR COUNTERCLAIM BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTIONWITH THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY COURSE OF CONDUCT, COURSEOF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANYPARTY.  IF THE SUBJECT MATTER OF ANYLAWSUIT IS ONE IN WHICH THE WAIVER OF JURY TRIAL IS PROHIBITED, NO PARTY TOTHIS AGREEMENT SHALL PRESENT AS A NON-COMPULSORY COUNTERCLAIM IN ANY SUCHLAWSUIT ANY CLAIM BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THISAGREEMENT.  FURTHERMORE, NO PARTY TO THISAGREEMENT SHALL SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIALCANNOT BE WAIVED.

 

## ***11.10***                 Assignment.

## *** ***

Neitherparty may assign, by operation of law or otherwise, all or any portion of itsrights or duties under this Agreement without the prior written consent of theother party, which consent may be withheld in the absolute discretion of theparty asked to give consent; provided, however, Purchaser may assign its rightsor duties under this Agreement to any Affiliates of Purchaser or to anysuccessor in interest to the assets or securities of Purchaser so long asPurchaser remains liable thereon.

 

## ***11.11***                 Counterparts.

## *** ***

This Agreement may be signed in counterparts withthe same effect as if the signatures to each party were upon a singleinstrument.  All counterparts shall bedeemed an original of this Agreement.

 

## ***11.12***                 Attorneys Fees.

## *** ***

In the event any dispute arises hereunder, the courtshall have the authority to award the costs and attorney’s fees to theprevailing party.

 

**[*Signature page follows]***

 

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**IN WITNESS WHEREOF,**Purchaser, the Company and Dobbie have caused this AcquisitionAgreement to be executed by their respective officers thereunto duly authorizedas of the date first above written.

 

 
|                 | **NEULION,  INC.**                       |
|----------------------|------------------------------------------|
|                 |                                     |
|                 |                                     |
|                 | By:                                      | *(s) Roy E.  Reichbach* |
|                 |                                     | Name: |
|                 |                                     | Title: |
|                 |                                     |
|                 |                                     |
|                 | **INTERACTIVE NETCASTING  SYSTEMS INC.** |
|                 |                                     |
|                 |                                     |
|                 | By:                                      | *(s) Hugh  Dobbie, Jr.* |
|                 |                                     | Name: |
|                 |                                     | Title: |
|                 |                                     |
|                 |                                     |
|                 | By:                                      | *(s) John Rea* |
|                 |                                     | Name: |
|                 |                                     | Title: |
|                 |                                     |
|                 |                                     |
|                 | **HUGH  DOBBIE, JR.**                    |
|                 |                                     |
|                 |                                     |
| *(s) John  Rea* |                                     |   | *(s) Hugh  Dobbie, Jr.* |
| Witness              |                                     | Hugh Dobbie, Jr. |
| Name:                |                                     |
|                      |                                          |  |  |

 

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**SCHEDULE 1**

 

**PLAN OFARRANGEMENT**

 

**PLAN OF ARRANGEMENT UNDER SECTION 192 of the *CANADA BUSINESS CORPORATIONS ACT***

** **

**ARTICLE 1INTERPRETATION**

** **

**1.1**                                                                               Definitions

** **

In this Plan of Arrangement, unless there is something in the subjectmatter or context inconsistent therewith, the following terms shall have therespective meanings set out below and grammatical variations of such termsshall have corresponding meanings:

 

“**Acquisition****Agreement**”means the Acquisition Agreement dated as of October 5, 2009 among NeuLion,INSINC and Dobbie, together with the schedules, appendices and the NeuLionDisclosure Letter, INSINC Disclosure Letter thereto, as it may be amended,supplemented or otherwise modified from time to time in accordance with itsterms;

 

“**Advisor Costs**”means the costs payable in accordance with Section 2.3(b) hereof;

 

“**Applicable Law**” means, with respect toany person or property, any domestic or foreign federal, national, state,provincial or local law (statutory, common or otherwise), constitution, treaty,convention, ordinance, code, rule, regulation, order, injunction, judgment,decree, ruling or other similar requirement enacted, adopted, promulgated orapplied by a Governmental Entity that is binding upon or applicable to suchperson or property, as amended;

 

“**Arrangement**” means the arrangementinvolving NeuLion, INSINC, Dobbie and the INSINC Shareholders undersection 192 of the CBCA on the terms and subject to the conditions set outin this Plan of Arrangement, subject to any amendments or variations theretomade in accordance with Section 11.1 of the Acquisition Agreement or thisPlan of Arrangement or made at the direction of the Court;

 

“**Arrangement Resolution**” means thespecial resolution approving the Plan of Arrangement to be considered at theINSINC Meeting;

 

“**business day**” means any day, other thana Saturday, a Sunday and a statutory or civic holiday in Toronto, Ontario orVancouver, British Columbia;

 

“**Cash Consideration**” means $2,500,000less the amount of the Fee and the Advisor Costs;

 

“**CBCA**” means the *CanadaBusiness Corporations Act* and the regulations made thereunder, aspromulgated or amended from time to time;

 

2

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“**Certificate of Arrangement**” means thecertificate of arrangement to be issued by the Director pursuant to subsection192(7) of the CBCA giving effect to the Arrangement;

 

“**Consideration**” means the amount ofcash, Warrants, and NeuLion Shares to be paid per INSINC Share as described in Section 2.3hereof;

 

“**Costs Certificate**”means the certificate delivered by INSINC in accordance with Section 7.14of the Acquisition Agreement and specifying the amount of the Advisor Costs;

 

“**Court**” means the Supreme Court ofBritish Columbia;

 

“**D2****Effective Time**”means 12:01 a.m.****on the dayfollowing the Effective Date;

 

“**Depositary**” means ComputershareInvestor Services Inc.;

 

“**Director**” means the Director appointedpursuant to section 260 of the CBCA;

 

“**Dissent Rights**” means the rights ofdissent in respect of the Arrangement described in the Plan of Arrangement;

 

“**Dissenting Shareholder**” means a holderof INSINC Shares who has duly exercised its Dissent Rights and has notwithdrawn or been deemed to have withdrawn such exercise of Dissent Rights, butonly in respect of INSINC Shares in respect of which Dissents Rights arevalidly exercised by such holder;

 

“**Dobbie**” means Hugh Dobbie, Jr.;

 

“**Effective Date**” means the date shown onthe Certificate of Arrangement giving effect to the Arrangement;

 

“**Effective Time**” means 11:30 p.m.on the Effective Date;

 

“**Exchange**” means the Toronto StockExchange;

 

“**Fee**” means the fee payable inaccordance with Section 2.3(b) hereof;

 

“**Final Order**” means the final order ofthe Court approving the Arrangement as such order may be amended by the Court(with the consent of NeuLion, INSINC and Dobbie, each acting reasonably) at anytime prior to the Effective Date in respect of which any applicable delay toappeal has expired without appeal or, if appealed, then, unless such appeal iswithdrawn or denied, as affirmed or as amended (provided that any suchamendment is acceptable to NeuLion, INSINC and Dobbie, each acting reasonably)on appeal;

 

“**Governmental Entity**” means anygovernment, municipality or political subdivision thereof, whether federal,state, local, provincial, municipal or foreign, or any governmental orquasi-governmental agency or regulatory agency, authority, board, bureau,commission, department, instrumentality or public body, or any court,arbitrator, administrative tribunal, public utility or any taxing authority;

 

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“**INSINC**” means Interactive NetcastingSystems Inc., a corporation continued under the laws of Canada;

 

“**INSINC Board**” means the board ofdirectors of INSINC as the same is constituted from time to time;

 

“**INSINC Circular**” means the notice ofthe INSINC Meeting and accompanying management information circular, includingall schedules, appendices and exhibits thereto, to be sent to the INSINCShareholders in connection with the INSINC Meeting, as amended, supplemented orotherwise modified from time to time;

 

“**INSINC****DisclosureLetter**” means the disclosure letter dated October 5, 2009executed and delivered by INSINC in connection with the execution of theAcquisition Agreement;

 

“**INSINC Meeting**” means the specialmeeting of INSINC Shareholders, including any adjournment or postponementthereof, to be called and held in accordance with the Interim Order to considerthe Arrangement Resolution;

 

“**INSINC Shareholders**” means the holdersof INSINC Shares or S1 Preferred Shares;

 

“**INSINC Shares**” means the common sharesin the capital of INSINC;

 

“**Interim Order**” means the interim orderof the Court providing for, among other things, the calling and holding of theINSINC Meeting, as the same may be amended by the Court with the consent ofNeuLion, INSINC and Dobbie, each acting reasonably;

 

“**Letter of Transmittal**” means the letterof transmittal forwarded by INSINC to INSINC Shareholders in connection withthe Arrangement, in the form accompanying the INSINC Circular;

 

“**Liens**” means any hypothecs, mortgages,liens, charges, security interests, encumbrances and adverse rights or claims;

 

“**NeuLion**” means NeuLion, Inc., acorporation existing under the laws of Canada;

 

“**NeuLion****DisclosureLetter**” means the disclosure letter dated October 5, 2009executed and delivered by NeuLion in connection with the execution of theAcquisition Agreement;

 

**“NeuLionShares”**meansthe common shares in the capital of NeuLion;

 

“**Non-Participating INSINC Shareholder**”means each INSINC Shareholder other than a Participating INSINC Shareholder andas described in Section 2.3(a) hereof;

 

“**Participating INSINC Shareholder**” meanseach INSINC Shareholder that has duly completed, executed and delivered aParticipation Notice to INSINC on or before the conclusion of the INSINCMeeting wherein such INSINC Shareholder has elected to participate in thedividend contemplated under the Plan of Arrangement and such notice is acceptedon or before such time by INSINC as a valid notice in respect of such INSINCShareholder;

 

4

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“**Participation Notice**” means theparticipation notice in respect of any INSINC Shareholder, in the form setforth in Schedule “B” hereto;

 

“**Percentage 1**” means the sum of A andB  divided by the sum of A, B and C,where (A) is equal to the Cash Consideration, (B) is $650,000, and (C) isthe product of 6,000,000 and the trading price of a NeuLion Share on theToronto Stock Exchange on the last trading day prior to the Effective Date;

 

“**Percentage 2**” means one minusPercentage 1;

 

“**Percentage 3**” means the sum of A and Bdivided by the sum of A, B and C, where (A) is equal to the CashConsideration less $1,480,000, (B) is$650,000, (C) is the product of 6,000,000 and the trading price of aNeuLion Share on the Toronto Stock Exchange on the last trading day prior tothe Effective Date;

 

“**Percentage 4**” means one minusPercentage 3;

 

“**person**” includes an individual,partnership, association, body corporate, trustee, executor, administrator,legal representative, government (including any Governmental Entity) or anyother entity, whether or not having legal status;

 

“**Plan of Arrangement**” means this plan ofarrangement, including all Schedules hereto, proposed under Section 192 ofthe CBCA, and any amendments or variations thereto made in accordance with theAcquisition Agreement or this Plan of Arrangement or made at the direction ofthe Court in the Final Order with the consent of NeuLion, INSINC and Dobbie,each acting reasonably;

 

“**S1 Preferred Shares**” means the Series 1Preferred Shares of INSINC to be created and authorized in accordance with thisPlan of Arrangement and having the terms and conditions set forth on Schedule “A”hereto;

 

“**S2 Preferred Shares**” means the Series 2Preferred Shares of INSINC to be created and authorized in accordance with thisPlan of Arrangement and having the terms and conditions set forth on Schedule “A”hereto;

 

“**Series I Warrant**” means a warrantissued by NeuLion entitling the holder to acquire one common share of NeuLionby paying an exercise price of US$1.35 and which warrant expires on the secondanniversary of the Effective Date;

 

“**Series II Warrant**” means a warrantissued by NeuLion entitling the holder to acquire one common share of NeuLionby paying an exercise price of US$1.80 and which warrant expires on the secondanniversary of the Effective Date;

 

“**Subsidiary**” shall mean any person ofwhich another person (i) (a) owns, directly or indirectly, fiftypercent (50%) or more of the outstanding voting securities or equity interestsor (b) is a general partner or managing member, or (ii) owns orcontrols, directly or indirectly, securities or other ownership interestshaving by their terms the power to elect a majority of the board of directorsof such person or other persons performing similar functions;

 

5

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“**Tax Act**” means the Income Tax Act(Canada), as amended, superseded or replaced and includes any regulationsthereto;

 

“**Total INSINC Shares**” means the numberof INSINC Shares which are issued and outstanding at the Effective Time.

 

**1.2**                                                                               Interpretation Not Affected by Headings, etc.

** **

The division of this Planof Arrangement into articles, sections and other portions and the insertion ofheadings are for reference purposes only and shall not affect theinterpretation of this Plan of Arrangement. Unless otherwise indicated, anyreference in this Plan of Arrangement to “Article” or “section” followed by anumber refers to the specified Article or section of this Plan ofArrangement. The terms “this Plan of Arrangement”, “hereof”, “herein”, “hereunder”and similar expressions refer to this Plan of Arrangement, and any amendments,variations or supplements hereto made in accordance with the terms hereof orthe Acquisition Agreement or made at the direction of the Court in the FinalOrder and do not refer to any particular Article, section or other portion ofthis Plan of Arrangement.

 

**1.3**                                                                               Rules of Construction.

** **

In this Plan ofArrangement, unless the context otherwise requires, (a) words importingthe singular number include the plural and vice versa, (b) words importingany gender include all genders, and (c) “include”, “includes” and “including”shall be deemed to be followed by the words “without limitation”.

 

**1.4**                                                                               Time

** **

Time shall be of theessence in every matter or action contemplated hereunder.

 

**1.5**                                                                               Currency

** **

Unless otherwise stated,all references in this Plan of Arrangement to sums of money and payments to bemade hereunder are expressed in lawful money of Canada.

 

**1.6**                                                                               Statutes

** **

Any reference to a statuteincludes all rules and regulations made pursuant to such statute and,unless otherwise specified, the provisions of any statute or regulation or rule whichamends, supplements or supersedes any such statute, regulation or rule.

 

**ARTICLE 2ARRANGEMENT**

** **

**2.1**                                                                               Plan of Arrangement

** **

This Plan of Arrangement constitutes an arrangement as referred to in Section 192of the CBCA and is made pursuant to, and is subject to, the provisions of theAcquisition Agreement.

 

6

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** **

**2.2**                                                                               Binding Effect

** **

This Plan of Arrangement will become effective at, and be binding atand after, the Effective Time on:

 

(a)                                  NeuLion;

 

(b)                                 INSINC and all of its Subsidiaries;

 

(c)                                  Dobbie; and

 

(d)                                 all INSINC Shareholders,

 

without any further act or formality required on the part of anyperson, except as expressly provided herein.

 

**2.3**                                                                               Arrangement

** **

On and after the Effective Date and at thetimes provided, the following events shall occur and shall be deemed to occurconsecutively in the order set out in this Section 2.3 without any furtherauthorization, act or formality:

 

(a)                                  At the Effective Time, each INSINCShareholder that has not duly completed, executed and delivered a ParticipationNotice that has been accepted by INSINC shall be deemed to be aNon-Participating INSINC Shareholder;

 

(b)                                 At the Effective Time, INSINC shall pay $********* (“**Fee**”)to Alexander Capital Group Inc. and shall pay the amount set forth in the CostsCertificate (the “**Advisor Costs**”)to the advisors specified therein;

 

(c)                                  At five minutesfollowing the Effective Time, the authorized capital of INSINC shall be amendedto create and authorize an unlimited number of S1 Preferred Shares and S2Preferred Shares;

 

(d)                                 At ten minutesfollowing the Effective Time,

 

(i)                                     each INSINCShare held by a Non-Participating INSINC Shareholder shall be transferred bysuch Non-Participating INSINC Shareholder to INSINC in exchange for one (1) S1Preferred Share, on a one-for-one basis. which S1 Preferred Shares shall beissued to such Non-Participating INSINC Shareholder as fully paid andnon-assessable shares free from any encumbrances; and

 

(ii)                                  each INSINCShare transferred in paragraph (d)(i) shall be cancelled;

 

(e)                                  At fifteen minutes following the EffectiveTime,

 

(i)                                     INSINC shall declare a dividend of $1,480,000****onits issued and outstanding INSINC Shares.

 

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(ii)                                  such dividend shall be paid by the issuanceto Participating INSINC Shareholders on a pro-rata basis of 1,480,000****S2 Preferred Shares having an aggregate redemptionamount equal to the amount of the dividend referred to in paragraph (e)(i); and

 

(iii)                               INSINC shall add the full amount of thedividend to the stated capital account maintained for the S2 Preferred Shares;

 

(f)                                    INSINC is authorized to make an election,before or after the Effective Date, under subsection 83(2) of the**Tax Act in respect of the full amount of the dividend paidpursuant to paragraph (e);

 

(g)                                 At five minutes following the D2 EffectiveTime, a portion of the S1 Preferred Shares held by each Non-ParticipatingINSINCShareholder, equal to Percentage 1 of such holder’s S1 Preferred Shares, shallbe transferred to NeuLion in consideration for the following in respect of eachS1 Preferred Share:

 

(i)                                     a cash payment equal to A/B where (A) isthe Cash Consideration and (B) is the Total INSINC Shares;

 

(ii)                                  a number of Series I Warrantsdetermined as follows: A/B where (A) is 1,000,000 and (B) is theTotal INSINC Shares;

 

(iii)                               a number of Series II Warrantsdetermined as follows: A/B where (A) is 500,000 and (B) is the TotalINSINC Shares; and

 

(iv)                              the number of Series I Warrants and Series IIWarrants shall be rounded up or down (where an interest of 0.5 or more roundsup) to the nearest whole warrant;

 

(h)                                 At ten minutes following the D2 EffectiveTime, a portion of the S1 Preferred Shares held by each Non-ParticipatingINSINC Shareholder, equal to Percentage 2 of such holder’s S1 Preferred Shares,shall be transferred to NeuLion in consideration for a number of NeuLion Sharesin respect of each S1 Preferred Share determined as A/B: where (A) is6,000,000 and (B) is the Total INSINC Shares.  The number of NeuLion Shares shall be roundedup or down (where an interest of 0.5 or more rounds up) to the nearest wholeshare, except that each Non-Participating INSINC Shareholder shallreceive no less than one NeuLion Share;

 

(i)                                     At fifteen minutes following the D2Effective Time, each S2 Preferred Share held by a Participating INSINCShareholder shall be transferred to NeuLion in consideration for a cash paymentequal to A/B where (A) is $1,480,000****and (B) is thenumber of S2 Preferred Shares issued and outstanding at fifteen minutesfollowing the D2 Effective Time;

 

(j)                                     At twenty minutes following the D2Effective Time, a portion of the INSINC Shares held by each ParticipatingINSINC Shareholder, equal to Percentage 3 of 

 

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suchholder’s INSINC Shares, shall be transferred to NeuLion in consideration forthe following in respect of each INSINC Share:

 

(i)                                     a cash payment equal to [(A x B/C) — D] / Bwhere (A) is the Cash Consideration, (B) is the INSINC Shares issuedand outstanding at twenty minutes following the D2 Effective Time, (C) isthe Total INSINC Shares, and (D) is $1,480,000;

 

(ii)                                  a number of Series I Warrantsdetermined as follows: A/B where (A) is 1,000,000 and (B) is theTotal INSINC Shares;

 

(iii)                               a number of Series II Warrantsdetermined as follows: A/B where (A) is 500,000 and (B) is the TotalINSINC Shares; and

 

(iv)                              the number of Series I Warrants and Series IIWarrants shall be rounded up or down (where an interest of 0.5 or more roundsup) to the nearest whole warrant;

 

(k)                                  At twenty-five minutes following the D2Effective Time, a portion of the INSINC Shares held by each ParticipatingINSINC Shareholder, equal to Percentage 4 of such holder’s INSINC Shares, shallbe transferred to NeuLion in consideration for a number of NeuLion Shares inrespect of each INSINC Share determined as A/B: where (A) is 6,000,000 and (B) is the Total INSINCShares.  The number of NeuLion Sharesshall be rounded up or down (where an interest of 0.5 or more rounds up) to thenearest whole share, except that each Participating INSINC Shareholder shallreceive no less than one NeuLion Share;

 

(l)                                     All INSINC Shares, S1 Preferred Shares, andS2 Preferred Shares acquired hereunder by NeuLion shall be transferred toNeuLion free and clear of all Liens, claims and encumbrances;

 

(m)                               At thirty minutes following the D2Effective Time, the NeuLion Shares issued in the Arrangement to Dobbie shallbecome eligible for resale, in compliance with Laws and Regulations, in twoinstalments according to the following schedule:

 

(i)                                     50% (rounded down to the nearest wholeNeuLion Share) on the 180th day after theEffective Date; and

 

(ii)                                  the balance on the one-year anniversary ofthe Effective Date;

 

provided, however, that in the event Dobbie’semployment with NeuLion is terminated (other than by his resignation) prior tothe one-year anniversary of the Effective Date, 100% of the NeuLion Sharesissued to Dobbie in the Arrangement will be eligible for resale, in compliancewith Applicable Law, on the 120th day after the Effective Date; and

 

(n)                                 Atthirty-five minutesfollowing the D2 EffectiveTime, the directors of INSINC will resign and the persons whose names appearbelow, shall hold office until the next annual meeting of shareholders ofINSINC or until their successors are elected or appointed:

 

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| **Name**               |   |
|------------------------|--------|
| Roy  E. Reichbach      |   |
| Nancy  Li              |   |
| Arthur  J. McCarthy    |   |
| Hugh  Dobbie, Jr. |   |

 

**2.4**                                                                               Adjustments to Consideration

** **

The Consideration payable with respect to each INSINC Share transferredpursuant to Section 2.3 will be adjusted to reflect fully the effect ofany stock split, reverse split, stock dividend (including any dividend ordistribution of securities convertible into INSINC Shares other than stockdividends paid in lieu of ordinary course dividends), consolidation,reorganization, recapitalization or other like change with respect to INSINCShares effected in accordance with the terms of the Acquisition Agreementoccurring after the date of the Acquisition Agreement and prior to theEffective Time.

 

**ARTICLE 3RIGHTS OF DISSENT**

** **

**3.1**                                                                               Rights of Dissent

** **

Holders of INSINC Shares may exercise rights of dissent with respect tosuch shares pursuant to and in the manner set forth in Section 190 of theCBCA and this Section 3.1 (the **“Dissent Rights”**)in connection with the Arrangement as the same may be modified by the InterimOrder or the Final Order; provided that, notwithstanding Subsection 190(5) ofthe CBCA, the written objection to the Arrangement Resolution referred to inSubsection 190(5) of the CBCA must be received by INSINC not later than5:00 p.m. (Vancouver time) on the business day preceding the INSINCMeeting. Holders of INSINC Shares who duly exercise such rights of dissent andwho:

 

(a)                                  are ultimately determined to be entitled tobe paid fair value for their INSINC Shares, and who are paid such fair value,shall be deemed to have transferred such INSINC Shares as of the time referredto in Section 2.3(d)(i), without any further act or formality and free andclear of all Liens, claims and encumbrances, to NeuLion; or

 

(b)                                 are ultimately determined not to beentitled, for any reason, to be paid fair value for their INSINC Shares, shallbe deemed to have participated in the Arrangement on the same basis asnon-dissenting holders of INSINC Shares.

 

In no circumstances shall INSINC, NeuLion, the Depositary or any otherperson be required to recognize a person exercising Dissent Rights unless suchperson is a registered holder of those INSINC Shares in respect of which suchrights are sought to be exercised.  For greatercertainty, in no case shall INSINC, NeuLion, the Depositary or any other personbe required to recognize Dissenting Shareholders as holders of INSINC Sharesafter the time referred to in Section 2.3(d)(i), and the names of suchDissenting Shareholders shall be deleted from the register of INSINCShareholders at the time referred to in Section 2.3(d)(i).

 

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** **

**3.2**                                                                               Dissent Right Availability

** **

A holder is not entitled to exercise Dissent Rights with respect tosuch INSINC Shares if such shareholder votes (or instructs, or is deemed, bysubmission of any incomplete proxy, to have instructed his, her or itsproxyholder to vote) in favour of the Arrangement Resolution.

 

**ARTICLE 4CERTIFICATES AND PAYMENTS**

** **

**4.1**                                                                               Payment of Consideration

** **

(a)                                  Followingreceipt of the Final Order and prior to the filing of the Articles ofArrangement with the Director in accordance with the terms of the AcquisitionAgreement, NeuLion shall deposit, for the benefit of INSINC Shareholders, cashwith the Depositary in the aggregate amount equal to the payments in respectthereof required by the Plan of Arrangement, with the amount per INSINC Sharein respect of which Dissent Rights have been exercised being deemed to be theConsideration for this purpose.The cash deposited with the Depositary shall be held in an interest bearing account,and any interest earned on such funds shall be for the account of NeuLion.

 

(b)                                 Uponsurrender to the Depositary for cancellation of a certificate which immediatelyprior to the time described in Section 2.3(d)(i) representedoutstanding INSINC Shares and were transferred pursuant to Section 2.3(d)(i),together with a duly completed and executed Letter of Transmittal and suchadditional documents and instruments as the Depositary may reasonably require,the holder of INSINC Shares represented by such surrendered certificate shallbe entitled to receive in exchange therefor, and the Depositary shall deliverto such holder, the Consideration contemplated by Section 2.3, as applicable, andthe cash which such holder has the right to receive under Section 3.1,less any amounts withheld pursuant to Section 4.3, and any certificate sosurrendered shall forthwith be cancelled.

 

(c)                                  Untilsurrendered as contemplated by this Section 4.1, each certificate thatimmediately prior to the time described in Section 2.3(d)(i) representedINSINC Shares shall be deemed after the time described in Section 2.3(d)(i) torepresent only the right to receive upon such surrender the Consideration contemplated by Section 2.3 or a cashpayment as contemplated in Section 3.1, less any amounts withheld pursuantto Section 4.3. Any such certificate formerly representing INSINC Sharesnot duly surrendered on or before the sixth****anniversary ofthe Effective Date shall cease to represent a claim by or interest of anyformer holder of INSINC Shares of any kind or nature against or in INSINC orNeuLion (or any successor). On such date, all cash to which such former holderwas entitled shall be deemed to have been surrendered to NeuLion or anysuccessor.

 

(d)                                 Anypayment made by way of cheque by the Depositary pursuant to the Plan ofArrangement that has not been deposited or has been returned to the Depositaryor that otherwise remainsunclaimed, in each case, on or before the sixth anniversary 

 

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of the Effective Date,and any right or claim to payment hereunder that remains outstanding on the sixth anniversary of the Effective Date shall cease torepresent a right or claim of any kind or nature and the right of the holder toreceive the consideration for INSINC Shares (or S1 PreferredShares substituted therefor)pursuant to this Plan of Arrangement shall terminate and be deemed to besurrendered and forfeited to NeuLion or any successor, for no consideration.

 

(e)                                  Noholder of INSINC Shares, S1 Preferred Shares, or S2 Preferred Shares shall beentitled toreceiveany consideration with respect to such shares other than the Consideration contemplated by Section 2.3 and anycash payment in accordance with Section 3.1and, for greater certainty, no such holder with be entitled to receiveany interest, dividends, premium or other payment in connection therewith.

 

**4.2**                                                                               Lost Certificates

** **

In the event any certificate which immediately prior to the EffectiveTime represented one or more outstanding INSINC Shares that were transferredpursuant to Section 2.3 shall have been lost, stolen or destroyed, uponthe making of an affidavit of that fact by the person claiming such certificateto be lost, stolen or destroyed, the Depositary will issue in exchange for suchlost, stolen or destroyed certificate, the Consideration contemplated by Section 2.3and cash deliverable in accordance with such holder’s Letter of Transmittal.When authorizing such payment in exchange for any lost, stolen or destroyedcertificate, the person to whom such cash is to be delivered shall as acondition precedent to the delivery of such cash, give a bond satisfactory toINSINC, NeuLion, the Depositary and any successor in such sum as NeuLion maydirect, or otherwise indemnify NeuLion and INSINC in a manner satisfactory toNeuLion and INSINC, against any claim that may be made against NeuLion andINSINC with respect to the certificate alleged to have been lost, stolen ordestroyed.

 

**4.3**                                                                               Withholding Rights

** **

INSINC, NeuLion, the Depositary and any successor shall be entitled todeduct and withhold from any Consideration otherwise payable to any INSINCShareholders under this Plan of Arrangement (including any payment toDissenting Shareholders), such amounts as INSINC, NeuLion, the Depositary andany successor is required to deduct and withhold with respect to such paymentunder the Tax Act and the rules and regulations promulgated thereunder, orany provision of Applicable Law. To the extent that amounts are so withheld,such withheld amounts shall be timely remitted by the party undertaking thewithholding and shall be treated for all purposes hereof as having been paid tothe INSINC Shareholder, in respect of which such deduction and withholding wasmade.

 

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**ARTICLE 5AMENDMENTS**

** **

**5.1**                                                                               Amendments to Plan of Arrangement

** **

(a)                                  INSINC may amend, modifyand/or supplement this Plan of Arrangement at any time and from time to timeprior to the Effective Date, provided that each such amendment, modificationand/or supplement must be:

 

(i)                                     set out in writing;

 

(ii)                                  approved by NeuLion;

 

(iii)                               filed with the Court and, ifmade following the INSINC Meeting, approved by the Court; and

 

(iv)                              communicated to INSINCShareholders if and as required by the Court.

 

(b)                                 Any amendment, modification orsupplement to this Plan of Arrangement may be proposed by INSINC at any timeprior to the INSINC Meeting (provided that NeuLion shall have consentedthereto) with or without any other prior notice or communication, and if soproposed and accepted by the persons voting at the INSINC Meeting (other thanas may be required under the Interim Order), shall become part of this Plan ofArrangement for all purposes.

 

(c)                                  Any amendment, modification orsupplement to this Plan of Arrangement that is approved or directed by theCourt following the INSINC Meeting shall be effective only if:

 

(i)                                     it is consented to by each ofINSINC and NeuLion (in each case, acting reasonably); and

 

(ii)                                  if required by the Court, itis consented to by INSINC Shareholders voting in the manner directed by theCourt.

 

**ARTICLE 6FURTHER ASSURANCES**

** **

**6.1**                                                                               Further Assurances

** **

Notwithstanding that the transactions and events setout herein shall occur and be deemed to occur in the order set out in this Planof Arrangement without any further act or formality, each of the parties to theAcquisition Agreement shall make, do and execute, or cause to be made, done andexecuted, all such further acts, deeds, agreements, transfers, assurances,instruments or documents as may reasonably be required by any of them in orderfurther to document or evidence or effect any of the transactions or events setout herein.

 

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** **

**6.2**                                                                               Paramountcy

** **

From and after the Effective Time:

 

(a)                                  this Plan of Arrangement shalltake precedence and priority over any and all rights related to INSINC Sharesissued prior to the Effective Time;

 

(b)                                 the rights and obligations ofthe holders of INSINC Shares, and any trustee and transfer agent therefor,shall be solely as provided for in this Plan of Arrangement; and

 

(c)                                  all actions, causes of action,claims or proceedings (actual or contingent, and whether or not previouslyasserted) based on or in any way relating to INSINC Shares, other shares issuedby INSINC, or INSINC shall be deemed to have been settled, compromised,released and determined without liability except as set forth herein.

 

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**SCHEDULEA**

 

**INSINC Series 1Preferred Shares**

 

1.                                       PREAMBLE

 

Therights, privileges, restrictions and conditions attaching to the Series 1Preferred Shares are as follows:

 

2.                                       DIVIDENDS

 

**Paymentof Dividends**:  The holders of the Series 1 Preferred Shares will beentitled to receive dividends if, as and when declared by the board ofdirectors of the Corporation out of the assets of the Corporation properlyapplicable to the payment of dividends in such amounts and payable in suchmanner as the board of directors may from time to time determine.  Subjectto the rights of the holders of any other class of shares of the Corporationentitled to receive dividends in priority to or concurrently with the holdersof the Series 1 Preferred Shares, the board of directors may in its solediscretion declare dividends on the Series 1 Preferred Shares to theexclusion of any other class of shares of the Corporation.

 

3.                                       LIQUIDATION, ETC.

 

**Participationupon Liquidation, Dissolution or Winding Up**:  In the event of the liquidation,dissolution or winding up of the Corporation or other distribution of assets ofthe Corporation among its shareholders for the purpose of winding up itsaffairs, the holders of the Series 1 Preferred Shares will be entitled toreceive from the assets of the Corporation a sum equivalent to the aggregateRedemption Amount (as hereinafter defined) of all Series 1 PreferredShares held by them respectively before any amount is paid or any assets of theCorporation are distributed to the holders of any Series 2 PreferredShares, common shares or shares of any other class ranking junior to the Series 1Preferred Shares.  After payment to the holders of the Series 1Preferred Shares of the amount so payable to them as above provided they willnot be entitled to share in any further distribution of assets of theCorporation among its shareholders for the purpose of winding up its affairs.

 

4.                                       REDEMPTION AND RETRACTION

 

**Redemptionby Corporation**:  The Corporation may, upon giving notice as hereinafterprovided, redeem at any time the whole or from time to time any part of thethen outstanding Series 1 Preferred Shares from any one or more of theholders thereof as the board of directors of the Corporation may in its solediscretion determine on payment of the Redemption Amount for each share to beredeemed.

 

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**Redemptionby Holder**: A holder may, upon giving notice to the Corporation at its registered office orother premises, call for the redemption of all or a portion of its Series 1Preferred Shares on a redemption date to be set by the holder, which date isnot less than 10 days following the date a redemption notice is given to theCorporation.  Such a holder’s Series 1Preferred Shares shall be redeemed by the Corporation upon payment of theRedemption Amount for each such share.

 

The “**Redemption Amount**” shall be equal to the Redemption Priceplus the amount of any declared and unpaid dividends on the relevantshares.  The “**RedemptionPrice**” means the sum of A, B, and C divided by E, where (A) isequal to the Cash Consideration, (B) is $650,000, and (C) is theproduct of 6,000,000 and the trading price of a NeuLion Share on the TorontoStock Exchange on the last trading day prior to the Effective Date, and (E) isequal to the Total INSINC Shares. Capitalized terms not otherwise defined herein shall have the meaningascribed thereto in the Articles of Arrangement of the Corporation filed on ·**.**

 

In thecase of redemption of the Series 1 Preferred Shares by the Corporationunder the provisions of Section 4 hereof, the Corporation will at least 21days (or, if all of the holders of the Series 1 Preferred Shares to beredeemed consent, such shorter period to which they may consent) before thedate specified for redemption mail (or, with the consent of any particularholder, otherwise deliver) a notice in writing of the intention of the Corporationto redeem such Series 1 Preferred Shares to each person who at the recorddate for the determination of shareholders entitled to receive notice is aholder of the Series 1 Preferred Shares to be redeemed.  Such notice will (subject to the consent ofany particular holder referred to above) be mailed by letter, postage prepaid,addressed to each such holder at the holder’s address as it appears on therecords of the Corporation or in the event of the address of any such holdernot so appearing then to the last known address of such holder; provided,however, that accidental failure to give any such notice to one or more of suchholders will not affect the validity of such redemption.  Such notice will set out the RedemptionAmount and the date on which redemption is to take place and if part only ofthe shares held by the person to whom it is addressed is to be redeemed thenumber thereof so to be redeemed.

 

On orafter the date so specified for redemption, the Corporation will pay or causeto be paid to or to the order of the holders of the Series 1 PreferredShares to be redeemed the Redemption Amount thereof on presentation andsurrender at the registered office of the Corporation or any other placedesignated in such notice of the certificates representing the Series 1Preferred Shares called for redemption. Such payment will be made by cheque payable at par at any branch of theCorporation’s bankers in Canada (or, with the consent of any particular holder,by any other means).  If a part only ofthe shares represented by any certificate are redeemed a new certificate forthe balance will be issued at the expense of the Corporation.  From and after the date specified forredemption in any such notice the holders of the Series 1 Preferred Sharescalled for redemption will cease to be entitled to dividends and will not beentitled to exercise any of the rights of holders of Series 1 PreferredShares in respect thereof unless payment of 

 

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theRedemption Amount is not made upon presentation of certificates in accordancewith the foregoing provisions, in which case the rights of the holders of thesaid Series 1 Preferred Shares will remain unaffected.

 

TheCorporation will have the right at any time after the mailing (or delivery, asthe case may be) of notice of its intention to redeem any Series 1Preferred Shares to deposit the Redemption Amount of the shares so called forredemption or of such of the said shares represented by certificates as have notat the date of such deposit been surrendered by the holders thereof inconnection with such redemption to a special account in any chartered bank orin any trust company in Canada, named in such notice, to be paid withoutinterest to or to the order of the respective holders of such Series 1Preferred Shares called for redemption upon presentation and surrender to suchbank or trust company of the certificates representing the same, and upon suchdeposit being made or upon the date specified for redemption in such notice,whichever is the later, the Series 1 Preferred Shares in respect whereofsuch deposit has been made will be redeemed and the rights of the holdersthereof after such deposit or such redemption date, as the case may be, will belimited to receiving without interest their proportionate part of the totalRedemption Amount so deposited against presentation and surrender of the saidcertificates held by them respectively and any interest allowed on such depositwill belong to the Corporation.

 

5.                                       VOTING

 

**VotingRights**: The holders of the Series 1 Preferred Shares will not be entitled toreceive notice of or to attend any meeting of the shareholders of theCorporation and will not be entitled to vote at any such meeting.

 

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**INSINC Series 2Preferred Shares**

 

1.                                       PREAMBLE

 

Therights, privileges, restrictions and conditions attaching to the Series 2Preferred Shares are as follows:

 

2.                                       DIVIDENDS

 

**Paymentof Dividends**:  The holders of the Series 2 Preferred Shares will beentitled to receive dividends if, as and when declared by the board ofdirectors of the Corporation out of the assets of the Corporation properlyapplicable to the payment of dividends in such amounts and payable in suchmanner as the board of directors may from time to time determine.  Subjectto the rights of the holders of any other class of shares of the Corporationentitled to receive dividends in priority to or concurrently with the holdersof the Series 2 Preferred Shares, the board of directors may in its solediscretion declare dividends on the Series 2 Preferred Shares to theexclusion of any other class of shares of the Corporation.

 

3.                                       LIQUIDATION, ETC.

 

**Participationupon Liquidation, Dissolution or Winding Up**:  In the event of the liquidation,dissolution or winding up of the Corporation or other distribution of assets ofthe Corporation among its shareholders for the purpose of winding up itsaffairs, the holders of the Series 2 Preferred Shares will be entitled toreceive from the assets of the Corporation a sum equivalent to the aggregateRedemption Amount (as hereinafter defined) of all Series 2 PreferredShares held by them respectively after the holders of Series 1 PreferredShares have received their liquidation entitlement, but before any amount ispaid to holders of common shares or shares of any other class ranking junior tothe Series 2 Preferred Shares.  After payment to the holders of the Series 2Preferred Shares of the amount so payable to them as above provided they willnot be entitled to share in any further distribution of assets of theCorporation among its shareholders for the purpose of winding up its affairs.

 

4.                                       REDEMPTION AND RETRACTION

 

**Redemptionby Corporation**:  The Corporation may, upon giving notice as hereinafterprovided, redeem at any time the whole or from time to time any part of thethen outstanding Series 2 Preferred Shares from any one or more of theholders thereof as the board of directors of the Corporation may in its solediscretion determine on payment of the Redemption Amount for each share to beredeemed.

 

**Redemptionby Holder**: A holder may, upon giving notice to the Corporation at its registered office orother premises, call for the redemption of all or a portion of 

 

4

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its Series 2Preferred Shares on a redemption date to be set by the holder, which date isnot less than 10 days following the date a redemption notice is given to theCorporation.  Such a holder’s Series 2Preferred Shares shall be redeemed by the Corporation upon payment of theRedemption Amount for each such share.

 

The “**Redemption Amount**” shall be equal to the Redemption Priceplus the amount of any declared and unpaid dividends on the relevantshares.  The “**RedemptionPrice**” means $1.00 per share. Capitalized terms not otherwise defined herein shall have the meaningascribed thereto in the Articles of Arrangement of the Corporation filed on ·**.**

 

In thecase of redemption of the Series 2 Preferred Shares by the Corporationunder the provisions of Section 4 hereof, the Corporation will at least 21days (or, if all of the holders of the Series 2 Preferred Shares to beredeemed consent, such shorter period to which they may consent) before thedate specified for redemption mail (or, with the consent of any particularholder, otherwise deliver) a notice in writing of the intention of theCorporation to redeem such Series 2 Preferred Shares to each person who atthe record date for the determination of shareholders entitled to receivenotice is a holder of the Series 2 Preferred Shares to be redeemed.  Such notice will (subject to the consent ofany particular holder referred to above) be mailed by letter, postage prepaid,addressed to each such holder at the holder’s address as it appears on therecords of the Corporation or in the event of the address of any such holdernot so appearing then to the last known address of such holder; provided,however, that accidental failure to give any such notice to one or more of suchholders will not affect the validity of such redemption.  Such notice will set out the RedemptionAmount and the date on which redemption is to take place and if part only ofthe shares held by the person to whom it is addressed is to be redeemed thenumber thereof so to be redeemed.

 

On orafter the date so specified for redemption, the Corporation will pay or causeto be paid to or to the order of the holders of the Series 2 PreferredShares to be redeemed the Redemption Amount thereof on presentation and surrenderat the registered office of the Corporation or any other place designated insuch notice of the certificates representing the Series 2 Preferred Sharescalled for redemption.  Such payment willbe made by cheque payable at par at any branch of the Corporation’s bankers inCanada (or, with the consent of any particular holder, by any othermeans).  If a part only of the sharesrepresented by any certificate are redeemed a new certificate for the balancewill be issued at the expense of the Corporation.  From and after the date specified forredemption in any such notice the holders of the Series 2 Preferred Sharescalled for redemption will cease to be entitled to dividends and will not beentitled to exercise any of the rights of holders of Series 2 PreferredShares in respect thereof unless payment of the Redemption Amount is not madeupon presentation of certificates in accordance with the foregoing provisions,in which case the rights of the holders of the said Series 2 PreferredShares will remain unaffected.

 

TheCorporation will have the right at any time after the mailing (or delivery, asthe case may be) of notice of its intention to redeem any Series 2Preferred Shares to deposit the Redemption Amount of the shares so called forredemption or of 

 

5

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such ofthe said shares represented by certificates as have not at the date of suchdeposit been surrendered by the holders thereof in connection with suchredemption to a special account in any chartered bank or in any trust companyin Canada, named in such notice, to be paid without interest to or to the orderof the respective holders of such Series 2 Preferred Shares called forredemption upon presentation and surrender to such bank or trust company of thecertificates representing the same, and upon such deposit being made or uponthe date specified for redemption in such notice, whichever is the later, the Series 2Preferred Shares in respect whereof such deposit has been made will be redeemedand the rights of the holders thereof after such deposit or such redemptiondate, as the case may be, will be limited to receiving without interest theirproportionate part of the total Redemption Amount so deposited againstpresentation and surrender of the said certificates held by them respectivelyand any interest allowed on such deposit will belong to the Corporation.

 

5.                                       VOTING

 

**VotingRights**: The holders of the Series 2 Preferred Shares will not be entitled toreceive notice of or to attend any meeting of the shareholders of theCorporation and will not be entitled to vote at any such meeting.

 

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**SCHEDULEBPARTICIPATION NOTICE**

 

**PARTICIPATIONNOTICE**

**PLANOF ARRANGEMENTINVOLVINGINTERACTIVE NETCASTING SYSTEMS INC. ANDNEULION, INC.**

 

This Participation Notice is being delivered by you asa shareholder of Interactive Netcasting Systems Inc. (“**INSINC**”).

 

In accordance with the proposed Plan of Arrangement(the “**Arrangement**”), each INSINC shareholderhas a choice in connection with the Arrangement.  The two options are as follows:

 

Option 1

 

The Arrangement provides that INSINC will pay acapital dividend to those INSINC shareholders who elect to be ParticipatingINSINC Shareholders and, accordingly, the Participating INSINC Shareholderswill effectively receive part of the cash consideration to be paid to them fortheir INSINC shares as a capital dividend. It is INSINC’s understanding that if a valid capital dividend electionis filed in the manner prescribed under the *Income Tax Act*(Canada)**(the “**Tax Act**”) thecapital dividend will be tax free to Canadian resident shareholders whoparticipate in the dividend.  Should theCanada Revenue Agency determine that the actual amount of INSINC’s capitaldividend account is less than the amount of the dividend provided for in theArrangement, INSINC expects to make a subsequent election pursuant to ss.184(3) and(4) of the Tax Act in order to mitigate the negative effects of an excesscapital dividend election.  The effect ofsuch a subsequent election would be to convert the excess amount to a taxabledividend.

 

INSINC shareholders who elect Option 1 elect toparticipate in the Arrangement as Participating INSINC Shareholders and toparticipate in the capital dividend in accordance with the Arrangement.  They also irrevocably authorize, approve,consent to and concur with INSINC (or any successor) making an election underss.184(3) and (4) of the Tax Act and related regulations to treat anyexcess portion of the capital dividend as a taxable dividend.

 

Option 2

 

INSINC shareholders who elect Option 2 will notreceive the capital dividend in accordance with the Arrangement and willreceive all of the cash consideration to be paid to them for their INSINCshares as proceeds of disposition.

 

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Election

 

I hereby confirm that I am the undersigned, that I amthe beneficial owner of common shares of INSINC and that I have the legalcapacity to deliver this notice.  Ihereby irrevocably elect to participate in the Arrangement as follows:

 

***[pleasecheck one box]***

*** ***
| o        | I hereby elect to be a  Participating INSINC Shareholder and to participate in the Arrangement in  accordance with Option 1, on the terms described herein and in the  Arrangement. I hereby irrevocably authorize, approve, consent to and concur  with INSINC (or any successor) making an election under s.184(3) and  (4) of the Tax Act to treat any excess portion of the capital dividend  as a taxable dividend. |
|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ***or*** |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| o        | I hereby elect to be a  Non-Participating INSINC Shareholder and to participate in the Arrangement in  accordance with Option 2, on the terms described herein and in the  Arrangement                                                                                                                                                                                                                                             |

 

This Participation Notice is to be completed, signedand returned to INSINC by completion of the meeting of INSINC shareholders tobe held on October 29, 2009 at 10 a.m. (Burnaby time).

 

Signed, delivered and witnessed this           day of October,2009 in the City of                                      in the Province of                                        .

 

 
| Witness Signature: |              |   | Shareholder Signature: |   |
|--------------------|-------------------|--------|------------------------|--------|
| Witness name:      | Shareholder Name: |

 

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**SCHEDULE 2**

 

**ARRANGEMENT RESOLUTION**

 

BE IT RESOLVED THAT:

 

1.                                       The arrangement (the “**Arrangement**”) under Section 192 of the *Canada Business Corporations Act*(the “**CBCA**”)involving Interactive Netcasting Systems Inc. (“**INSINC**”),all as more particularly described and set forth in the Management InformationCircular (the “**Circular**”) of INSINC dated October 8,2009 accompanying the notice of this meeting (as the Arrangement may bemodified or amended), is hereby authorized, approved and adopted;

 

2.                                       The plan of arrangement, as itmay be or has been amended (the “**Plan of Arrangement**”),involving INSINC and implementing the Arrangement, the full text of which isset out in Appendix “D” to the Circular (as the Plan of Arrangement may be, ormay have been, modified or amended), is hereby approved and adopted;

 

3.                                       The payment of the dividend toParticipating INSINC Shareholders as contemplated by the Plan of Arrangementand the filing of an election pursuant to subsection 83(2) of the Tax Actin respect of the full amount of such dividend are hereby approved;

 

4.                                       The acquisition agreement (the“**Acquisition Agreement**”) between NeuLion, Inc.,Hugh Dobbie, Jr. and INSINC, made as of October 5, 2009, the actionsof the directors of INSINC in approving the Arrangement and the actions of theofficers of INSINC in executing and delivering the Acquisition Agreement andany amendments thereto are hereby ratified and approved;

 

5.                                       Notwithstanding that thisresolution has been passed (and the Arrangement adopted) by the securityholdersof INSINC or that the Arrangement has been approved by the Supreme Court ofBritish Columbia, the directors of INSINC are hereby authorized and empoweredwithout further notice to, or approval of, the securityholders of INSINC toamend the Acquisition Agreement or the Plan of Arrangement to the extentpermitted by the Acquisition Agreement or the Plan of Arrangement; and

 

6.                                       Any officer or director ofINSINC is hereby authorized and directed for and on behalf of INSINC to executeand deliver articles of arrangement and such other documents as are necessaryor desirable to the Director under the CBCA in accordance with the AcquisitionAgreement.

 

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