Document:

Exhibit
10.5

 

	
  

  	
   

  	
  Note
  Modification Agreement

  

 

This agreement is dated as of November 6, 2009 (the “Agreement Date”), by and between Supreme
Corporation (the “Borrower”) and
JPMorgan Chase Bank, N.A. (together with its successors and assigns, the “Bank”). The
provisions of this agreement are effective on the date that this agreement has
been executed by all of the signers and delivered to the Bank (the “Effective Date”).

 

WHEREAS, the Borrower executed a Line of Credit
Note dated as of December 23, 2008 in the original principal amount of
Thirty-Three Million and 00/100 Dollars ($33,000,000.00), (as same may have
been amended or modified from time to time, the “Note”) as evidence of an extension of credit from the Bank to
the Borrower, which Note has at all times been, and is now, continuously and
without interruption outstanding in favor of the Bank; and,

 

WHEREAS, the Borrower has requested and the Bank
has agreed that the Note be modified to the limited extent as hereinafter set
forth in this agreement;

 

NOW
THEREFORE, in
mutual consideration of the agreements contained herein and for other good and
valuable consideration, the parties agree as follows:

 

1.     ACCURACY OF RECITALS. The Borrower acknowledges the accuracy
of the Recitals stated above.

 

2.     DEFINITIONS. Capitalized terms used in this agreement shall
have the same meanings as in the Note, unless otherwise defined in this
agreement.

 

3.     MODIFICATION OF NOTE.

 

3.1  From and after the Effective Date, the
provision in the Note captioned “Promise to Pay” is hereby amended as
follows:  The date on which the entire
balance of unpaid principal plus accrued interest shall be due and payable
immediately is hereby changed from July 31, 2010 to October 31, 2010.

 

3.2  Each of the
Related Documents is modified to provide that it shall be a default or an event
of default thereunder if the Borrower shall fail to comply with any of the
covenants of the Borrower herein or if any representation or warranty by the
Borrower herein or by any guarantor in any Related Documents is materially
incomplete, incorrect, or misleading as of the date hereof. As used in this
agreement, the “Related Documents”
shall include the Note and all applications for letters of credit, loan
agreements, credit agreements, reimbursement agreements, security agreements,
mortgages, deeds of trust, pledge agreements, assignments, guaranties, or any
other instrument or document executed in connection with the Note or in
connection with any other obligations of the Borrower to the Bank.

 

3.3  Each
reference in the Related Documents to any of the Related Documents shall be a
reference to such document as modified by this agreement.

 

4.     RATIFICATION OF RELATED DOCUMENTS AND COLLATERAL. The Related
Documents are ratified and reaffirmed by the Borrower and shall remain in full
force and effect as they may be modified by this agreement. All property
described as security in the Related Documents shall remain as security for the
Note, as modified by this agreement, and the Liabilities under the other
Related Documents.

 

5.     BORROWER REPRESENTATIONS AND WARRANTIES. The Borrower
represents and warrants to the Bank that each of the representations and
warranties made in the Note and the other Related Documents and each of the
following representations and warranties are and will remain, true and correct
until the later of maturity or the date on which all Liabilities evidenced by
the Note are paid in full:

 

5.1  No default,
event of default or event that would constitute a default or event of default
but for the giving of notice, the lapse of time or both, has occurred and is
continuing under any provision of the Note, as modified by this agreement, or
any other Related Document.

 

5.2  No event has occurred which may in any one
case or in the aggregate materially and adversely affect the financial
condition, properties, business, affairs, prospects or operations of the
Borrower or any guarantor or any subsidiary of the Borrower.

 

5.3  The Borrower
has no defenses or counterclaims, offsets or adverse claims, demands or actions
of any kind, personal or otherwise, that it could assert with respect to the
Note or any other Liabilities.

 

 

5.4  The Note, as
modified by this agreement, and the other Related Documents are the legal,
valid, and binding obligations of the Borrower and the other parties,
enforceable against the Borrower and other parties in accordance with their
terms, except as may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity.

 

5.5  The
Borrower, other than any Borrower who is a natural person, is validly existing
under the laws of the State of its formation or organization. The Borrower has
the requisite power and authority to execute and deliver this agreement and to
perform the obligations described in the Related Documents as modified herein.
The execution and delivery of this agreement and the performance of the
obligations described in the Related Documents as modified herein have been
duly authorized by all requisite action by or on behalf of the Borrower. This
agreement has been duly executed and delivered by or on behalf of the Borrower.

 

6.     BORROWER COVENANTS. The Borrower covenants with the Bank:

 

6.1  The Borrower
shall execute, deliver, and provide to the Bank such additional agreements,
documents, and instruments as reasonably required by the Bank to effectuate the
intent of this agreement.

 

6.2  The Borrower
fully, finally, and forever releases and discharges the Bank, its successors,
and assigns and their respective directors, officers, employees, agents, and
representatives (each a “Bank Party”)
from any and all causes of action, claims, debts, demands, and liabilities, of
whatever kind or nature, in law or equity, of the Borrower, whether now known
or unknown to the Borrower, (i) in respect of the loan evidenced by the
Note and the Related Documents, or of the actions or omissions of any Bank
Party in any manner related to the loan evidenced by the Note or the Related
Documents and (ii) arising from events occurring prior to the date of this
agreement.

 

6.3  To the
extent not prohibited by applicable law, the Borrower shall pay to the Bank:

 

6.3.1       All
the internal and external costs and expenses incurred (or charged by internal
allocation) by the Bank in connection with this agreement (including, without
limitation, inside and outside attorneys, appraisal, appraisal review,
processing, title, filing, and recording costs, expenses, and fees).

 

7.     EXECUTION AND DELIVERY OF AGREEMENT BY THE BANK. The Bank
shall not be bound by this agreement until (i) the Bank has executed this
agreement and (ii) the Borrower performed all of the obligations of the
Borrower under this agreement to be performed contemporaneously with the
execution and delivery of this agreement.

 

8.     INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
The Note, as modified by this agreement, and the other Related Documents
contain the complete understanding and agreement of the Borrower and the Bank
in respect of any Liabilities evidenced by the Note and supersede all prior
understandings, and negotiations. No provision of the Note, as modified by this
agreement, or any other Related Documents may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by the party
against whom it is being enforced.

 

9.     GOVERNING LAW AND VENUE. This agreement shall be governed by
and construed in accordance with the laws of the State of Indiana (without
giving effect to its laws of conflicts). The Borrower agrees that any legal
action or proceeding with respect to any of its obligations under the Note or
this agreement may be brought by the Bank in any state or federal court located
in the State of Indiana, as the Bank in its sole discretion may elect. By the
execution and delivery of this agreement, the Borrower submits to and accepts,
for itself and in respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of those courts. The Borrower waives any claim that
the State of Indiana is not a convenient forum or the proper venue for any such
suit, action or proceeding. This agreement binds the Borrower and its
successors, and benefits the Bank, its successors and assigns. The Borrower
shall not, however, have the right to assign the Borrower’s rights under this
agreement or any interest therein, without the prior written consent of the
Bank.

 

10.  COUNTERPART EXECUTION. This agreement may be executed in
multiple counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts, taken together, shall constitute one and
the same agreement.

 

2

 

11.  NOT A NOVATION. This agreement is a modification only and not
a novation. In addition to all amounts hereafter due under the Note, as
modified by this agreement, and the other Related Documents, all accrued
interest evidenced by the Note being modified by this agreement and all accrued
amounts due and payable under the Related Documents shall continue to be due
and payable until paid. Except for the modification(s) set forth in this
agreement, the Note, the other Related Documents and all the terms and
conditions thereof, shall be and remain in full force and effect with the
changes herein deemed to be incorporated therein. This agreement is to be
considered attached to the Note and made a part thereof. This agreement shall
not release or affect the liability of any guarantor, surety or endorser of the
Note or release any owner of collateral securing the Note. The validity, priority
and enforceability of the Note shall not be impaired hereby. References to the
Related Documents and to other agreements shall not affect or impair the
absolute and unconditional obligation of the Borrower to pay the principal and
interest on the Note when due. The Bank reserves all rights against all parties
to the Note and the other Related Documents.

 

 

	
   

  	
  Borrower:

  
	
   

  	
   

  
	
  Address:

  	
  2581 Kercher Road

  	
  Supreme
  Corporation

  
	
   

  	
  Goshen, IN 46528

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeff Mowery

  	
   

  
	
   

  	
   

  	
  Jeff Mowery

  	
  CFO

  
	
   

  	
   

  	
  Printed Name

  	
  Title

  
	
   

  	
   

  
	
   

  	
  Date Signed:

  	
  11-6-09

  
						

 

 

BANK’S ACCEPTANCE

 

The foregoing agreement is hereby agreed to and acknowledged.

 

 

	
   

  	
  Bank:

  
	
   

  	
   

  
	
   

  	
  JPMorgan Chase
  Bank, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
   

  
	
   

  	
   

  	
   

  	
  VP

  
	
   

  	
   

  	
  Printed Name

  	
  Title

  
	
   

  	
   

  
	
   

  	
  Date Signed:

  	
  11-6-09

  
					

 

3Exhibit 10.1

 

EXECUTION VERSION

 

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

 

ACQUISITION AGREEMENT

 

AMONG

 

NEULION, INC.

 

-AND-

 

INTERACTIVE NETCASTING
SYSTEMS INC.

 

-AND-

 

HUGH DOBBIE, JR.

 

 

TABLE OF
CONTENTS

 

	
  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

  

 

i

 

	
  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

  

 

ii

 

	
  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

  

 

iii

 

ACQUISITION AGREEMENT

 

This
Acquisition Agreement (“Agreement”)  is made and
entered into as of October 5, 2009 by and among NeuLion, Inc., a
corporation existing under the federal laws of Canada (“Purchaser”),  Interactive
Netcasting Systems Inc., a corporation existing under the federal laws of
Canada (the “Company”), and Hugh Dobbie, Jr., a Canadian
citizen residing at 2562 136th Street, Surrey, British Columbia (“Dobbie”). 
Capitalized terms shall
have the meanings set forth in Article I.

 

RECITALS

 

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

 

WHEREAS, the board of directors of the Company has determined that the
Arrangement is advisable, fair to and in the best interests of the Company Shareholders
and approved the Arrangement on the terms and subject to the conditions set
forth in this Agreement;

 

WHEREAS, the Company Shareholders are required to vote on and approve the
Arrangement on the terms and subject to the conditions set forth in this
Agreement;

 

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

 

WHEREAS, Dobbie and Dowco Computer
Systems Ltd., a corporation existing under the laws of the Province of
British Columbia (“Dowco”), have
entered into an irrevocable proxy and voting support agreement (the “Voting Support Agreement”) pursuant to which they have
agreed to vote in favor of the Arrangement and the other transactions
contemplated by this Agreement.

 

NOW THEREFORE, in consideration of the foregoing premises and the representations,
warranties, covenants and agreements herein contained and intending to be
legally bound hereby, Purchaser, the Company and Dobbie hereby agree as
follows:

 

ARTICLE
I - 

DEFINITIONS

 

The
terms defined in this Article I shall, for purposes of this Agreement,
have the meanings specified in this Article I unless the context otherwise
requires:

 

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

 

1.2           “Affiliates” of
any party to the Agreement shall be Persons that directly or indirectly,
through one or more intermediaries, control, or are controlled by, or are under
common control with, such party.

 

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

 

 

1.4           “Arrangement Resolution”
shall mean the special resolution approving the Plan of Arrangement to be considered
at the Company Meeting, to be substantially in the form and content of Schedule
2 hereto.

 

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

 

1.6           “CBCA” shall
mean the Canada Business Corporations Act and the
regulations made thereunder, as promulgated or amended from time to time.

 

1.7           “Company” shall
have 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 Management
Information 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 Financial
Statements” shall have the meaning set forth in Section 3.6(a) of
this Agreement.

 

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

 

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

 

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

 

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

 

2

 

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 the
Company, dated September 4, 2009.

 

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

 

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

 

1.22         “Court” shall
mean the Supreme Court of British Columbia.

 

1.23         “CRA” shall mean
Canada Revenue Agency.

 

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

 

1.25         “Director” shall
mean the Director appointed pursuant to the CBCA.

 

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

 

1.27         “Dobbie” shall
mean Hugh Dobbie, Jr.

 

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

 

1.29         “Effective Time”
means the effective time on the Effective Date determined by the Plan of
Arrangement.

 

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

 

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

 

1.32         “GAAP” shall
mean generally accepted accounting principles in Canada or the United States of
America, as applicable, applied consistently with past practices.

 

1.33         “Governmental  Entity” shall
mean any government, municipality or political subdivision thereof, whether
federal, state, local, provincial, municipal or foreign, or any governmental or
quasi-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 have
the 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

 

1.36         “Intellectual Property”
shall mean intellectual property of any nature and kind, including all domestic
and foreign trade-marks, business names, trade names, domain names, trading
styles, patents, trade secrets, Software, industrial designs and copyrights, whether
registered or unregistered, and all applications for registration thereof, and
inventions, formulae, recipes, product formulations, processes and processing
methods, 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 Court
providing for, among other things, the calling and holding of the Company
Meeting, as the same may be amended by the Court with the consent of the
Company and the Purchaser, each acting reasonably.

 

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

 

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

 

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

 

1.43         “Lien” shall
mean any lien, claim, charge, option, encumbrance, mortgage, pledge or security
interest or other transfer restrictions, except for any restrictions on
transfer generally arising under any applicable Securities Laws.

 

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

 

1.45         “Losses” shall
have 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 or
Purchaser, as the context requires, to which the Company or Purchaser, as
applicable, or any of their Subsidiaries is a party, including all agreements,
leases of real property, licences, undertakings, engagements or commitments of
any 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 Lesser
General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the
Artistic License, the Netscape Public License, the Sun Community Source License
(SCSL), the Sun Industry Standards License (SISL) and the Apache License) or (ii) that
require that software incorporated into, derived from or 

 

4

 

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

 

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

 

1.51         “Participating INSINC
Shareholder” shall have the meaning ascribed thereto in the Plan of
Arrangement.

 

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 or
statutory Liens or encumbrances arising in the ordinary course of business
which are not delinquent or remain payable without penalty, (b) encumbrances
for Taxes and other assessments or governmental charges or levies not yet due
or payable and (c) any other Liens that individually or in the aggregate
are not material to the Company or Purchaser, as the case may be, and its
Subsidiaries, taken as a whole.

 

1.53         “Person” shall
mean any individual, corporation, partnership, limited liability company,
association, joint venture, trust, Governmental Entity or other entity or
organization.

 

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 the
Company’s customers, suppliers, employees and agents, such as an individual’s
name, 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 any
amendments or variations thereto made in accordance with Article 5 of the
Plan of Arrangement or made at the direction of the Court in the Final Order
with 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 laws
governing the collection, use, disclosure and retention of Personal
Information, including the Personal Information
Protection and Electronic Documents Act (Canada).

 

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

 

1.59         “Purchaser”
shall have the meaning set forth in the introductory paragraph to this
Agreement.

 

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

 

1.62         “Purchaser Disclosure
Letter” shall have the meaning set forth in Article IV of this
Agreement.

 

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 Insurance
Policies” shall have the meaning set forth in Section 4.16.

 

1.66         “Purchaser Material Adverse
Effect” shall mean any effect that is, or would be reasonably likely
to have, a material adverse effect on the condition, business, commercial
relationships, assets, operating results, customer/supplier and employee
relationships, properties or financial affairs or results of operations of the
Purchaser Entities taken as a whole, other than (i) any economic,
political or industry condition or effect that affects the economy in general
or affects any Purchaser Entity’s industry on an industry-wide basis, and in
each case not specifically or uniquely relating to such Purchaser Entity, (ii) any
change in the price of Purchaser Common Shares (it being understood that an
effect relating directly to the operations of Purchaser that results from or
occurs or exists separately from any such price change and that is not
otherwise an effect identified in (i) above shall not be precluded from
being a Purchaser Material Adverse Effect), or (iii) the effect of any
changes 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 Option
Plan” means the Second
Amended 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 mean
the United States Securities and Exchange Commission.

 

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

 

1.72         “Securities Laws”
shall mean, unless the context otherwise requires, all applicable securities laws
in each of the Provinces of Canada and in the United States and the applicable
securities laws of all other jurisdictions other than each of the Provinces of
Canada and the United States, as applicable, and the respective regulations
made thereunder, together with applicable published fee schedules, prescribed
forms, policy statements, national or multilateral instruments, orders, blanket
rulings and other regulatory instruments of the securities regulatory
authorities in such jurisdictions.

 

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

 

1.74         “Shares” shall
mean the issued and outstanding Company Common Shares.

 

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

 

6

 

and
organization, screen displays and report layouts, and all other material related
to such software.

 

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

 

1.77         “Tax Act” means
the 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 collected
by a Governmental Entity including, but not limited to, (i) any gross
income, 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, personal
property, 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) all
withholdings on amounts paid to or by the relevant Person, (iii) all
employment insurance premiums, Canada, Quebec and any other pension plan
contributions or premiums, (iv) any fine, penalty, interest, or addition
to tax, (v) any tax imposed, assessed, or collected or payable pursuant to
any tax-sharing agreement or any other Contract relating to the sharing or
payment 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 other
document relating to, or required to be filed in connection with, any Taxes,
including material information, returns or reports with respect to withholding
or payments to third parties, pursuant to the statutes, rules and
regulations 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 have
the meaning set forth in the recitals of this Agreement.

 

1.83         “Warrants”
shall mean the warrants to be
issued by Purchaser to the Company Shareholders as defined in the Plan of
Arrangement.

 

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

 

7

 

ARTICLE
II - 

THE ARRANGEMENT

 

2.1                               Arrangement.

 

The Company and the Purchaser agree that the Arrangement will be
implemented in accordance with and subject to the terms and conditions
contained in this Agreement and the Plan of Arrangement.

 

2.2                               Interim
Order.

 

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

 

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

 

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

 

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

 

(d)                                 for the grant of the Dissent Rights;

 

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

 

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

 

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

 

2.3                               Company
Meeting.

 

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

 

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

 

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

 

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

 

8

 

Resolution and any withdrawal of Dissent Rights received by the Company
and, subject to applicable Laws and Regulations, any written communications
sent by or on behalf of the Company to any Company Shareholder exercising or
purporting to exercise Dissent Rights in relation to the Arrangement
Resolution.

 

2.4                               Company
Circular.

 

(a)                                  Subject to the timely cooperation of
Purchaser in providing information to the Company pursuant to Section 2.4(c) below,
the Company shall prepare the Company Circular in the English language in
compliance with Securities Laws and mail the same as required by the Interim
Order and in accordance with all applicable Laws and Regulations, in all
jurisdictions where the same is required, complying in all material respects
with all applicable Laws and Regulations on the date of mailing thereof and
containing full, true and plain disclosure of all material facts relating to
the Arrangement.

 

(b)                                 The Company shall ensure that the Company
Circular complies in all material respects with the terms of this Agreement and
all applicable Laws and Regulations, and, without limiting the generality of
the foregoing, that the Company Circular will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading in
light of the circumstances in which they are made (other than in each case with
respect to any information concerning the Purchaser provided in writing by or
on behalf of the Purchaser for inclusion in the Company Circular) and shall
provide the Company Shareholders with information in sufficient detail to
permit them to form a reasoned judgment concerning the matters to be placed
before them at the Company Meeting.  The
Company Circular will include the recommendation of the board of directors of
the Company that the Company Shareholders vote in favour of the Arrangement
Resolution, and a statement that each director of the Company intends to vote
in favour of the Arrangement Resolution, subject to the other terms of this
Agreement.  The Company shall indemnify
and hold harmless the Purchaser against any costs and expenses (including
reasonable legal fees), judgments, fines, losses, claims and damages and
liabilities and amounts paid in settlement thereof with the consent of the
Purchaser (such consent not to be unreasonably delayed or withheld) to which
the 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 any
misrepresentation in the disclosure in the Company Circular other than in
respect of information concerning the Purchaser that is provided in writing by
or on behalf of the Purchaser for inclusion in the Company Circular.

 

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

 

(d)                                 The Purchaser and its legal counsel shall
be given a reasonable opportunity to review and comment on the Company
Circular, prior to the Company Circular being printed and mailed to the Company
Shareholders, and reasonable consideration shall be given to any comments made
by the Purchaser and its counsel, provided that all information relating solely
to the Purchaser 

 

9

 

included in the Company Circular shall be in form and content
satisfactory to the Purchaser, acting reasonably.  The Company shall provide the Purchaser with
a final copy of the Company Circular prior to the mailing to the Company
Shareholders.

 

(e)                                  Each of the Company and the Purchaser
shall promptly notify the other if at any time before the Effective Date it
becomes aware (in the case of the Company only with respect to the Company and
in the case of the Purchaser only with respect to the Purchaser) that the
Company Circular contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading in light of the circumstances in
which they are made, or that otherwise requires an amendment or supplement to
the Company Circular, and the parties shall co-operate in the preparation of
any amendment or supplement to the Company Circular, as required or
appropriate, and the Company shall promptly mail or otherwise disseminate any
amendment 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 is
passed at the Company Meeting by the Company Shareholders, as provided for in
the Interim Order and as required by applicable Laws and Regulations and
subject to the terms of this Agreement, the Company shall as soon as reasonably
practicable thereafter and in any event within one business day thereafter take
all steps necessary or desirable to submit the Arrangement to the Court and
diligently pursue an application for the Final Order pursuant to section 192 of
the CBCA.

 

2.6                               Court
Proceedings.

 

Subject to the terms of this Agreement, the Purchaser will cooperate
with, assist and consent to the Company seeking the Interim Order and the Final
Order, including by providing the Company on a timely basis any information
required to be supplied by the Purchaser in connection therewith.  The Company will provide legal counsel to the
Purchaser with reasonable opportunity to review and comment upon drafts of all
material to be filed with the Court in connection with the Arrangement, and
will give reasonable consideration to all such comments.  The Company will also provide legal counsel
to the Purchaser on a timely basis with copies of any notice of appearance or
notice of intent to oppose and any evidence served on the Company or its legal
counsel in respect of the application for the Interim Order or the Final Order
or any appeal therefrom.  Subject to
applicable Laws and Regulations, the Company will not file any material with
the Court in connection with the Arrangement or serve any such material, and
will not agree to modify or amend materials so filed or served, except as
contemplated hereby or with the Purchaser’s prior written consent, such consent
not to be unreasonably withheld, conditioned or delayed; provided that nothing
herein shall require the Purchaser to agree or consent to any increase in
Consideration or other modification or amendment to such filed or served materials
that expands or increases the Purchaser’s obligations set forth in any such
filed or served materials or under this Agreement.

 

2.7                               Articles
of Arrangement and Effective Date.

 

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

 

10

 

writing by the
parties, the Articles of Arrangement shall be filed by the Company with the
Director.  From and after the Effective
Time, the Plan of Arrangement will have the effect as provided therein and by
applicable Laws and Regulations, including the CBCA.  The closing of the transactions contemplated
hereby will take place at the offices of Day Pitney LLP, 7 Times Square, New
York, New York, USA or at such other location as may be agreed upon by the
parties.

 

2.8                               Preparation of Filings.

 

Purchaser and
the Company shall co-operate in the preparation of any application for any
orders, registrations, consents, filings, rulings, exemptions, no-action
letters, notifications and approvals and the preparation of any documents
reasonably deemed by either of them to be necessary to discharge its respective
obligations or otherwise advisable under applicable Laws and Regulations in
connection with this Agreement or the Plan of Arrangement.

 

2.9                               Withholding
Taxes.

 

Purchaser and the Company shall be entitled to deduct and withhold from
the Consideration payable or otherwise deliverable to any Person hereunder such
amounts as Purchaser or the Company may be required to deduct and withhold
therefrom under any provision of Tax Laws and Regulations.  To the extent that such amounts are so
deducted and withheld and remitted to the relevant taxing authority in
accordance with such Tax Laws and Regulations, such amounts shall be treated
for all purposes under this Agreement as having been paid to the Person to whom
such amounts would otherwise have been paid.

 

ARTICLE
III - 

REPRESENTATIONS OF THE COMPANY AND DOBBIE

 

The
Company and Dobbie, jointly and severally, represent and warrant to Purchaser
that, except as set forth in the disclosure letter of the Company dated as of
the date hereof (the “Company Disclosure Letter”), each of which exceptions shall
specifically identify the relevant Section hereof to which it relates or
be reasonably clear that it is relevant to such Section:

 

3.1                               Disclosure.

 

No
representation or warranty of the Company or Dobbie contained in this
Agreement, and no statement contained in the Company Disclosure Letter or in
any certificate or other information furnished or to be furnished, including
all information required to be included in the Company Circular, contains or
will contain any untrue statement of a material fact.  The information disclosed to the Purchaser pursuant
to the diligence requisition list it provided to the Company in connection with
the Purchaser’s due diligence investigations of the Company Entities was in all
material respects true, accurate and complete. 
Notwithstanding anything to the contrary, the Company and Dobbie shall
not be deemed to make to Purchaser any representation or warranty (express or
implied) other than as expressly made by the Company or Dobbie in this
Agreement.

 

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 corporation
duly organized, validly existing and in good standing under the laws of the
Province of British Columbia.  The
Company, directly or indirectly through the Company Entities, has property or
conducts business, and is qualified to transact business, in each of the
jurisdictions identified in Section 3.2(a) of the 

 

11

 

Company
Disclosure Letter.  The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the ownership of property or the character of its business requires such
qualification, except those jurisdictions where the failure to be so qualified
or to be in good standing would not have a Company Material Adverse
Effect.  The Company has all required
corporate power, authority and capacity necessary to own and operate its
property, to carry on its business as now conducted, to execute and deliver the
Agreement and the agreements contemplated herein and, subject to the approval
of the Company Shareholders and the Court, to consummate the transactions
contemplated hereby and thereby.

 

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

 

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

 

3.3                               Authorization; No Violation.

 

(a)                                  The execution and delivery by the Company of
this Agreement and the agreements provided for herein, and the consummation of
all transactions contemplated hereunder and thereunder by the Company, have
been duly authorized by all requisite corporate action on the part of the Company
and will be recommended to the shareholders of the Company for adoption and
approval.  This Agreement has been duly
and validly executed and delivered by the Company.  Assuming the due authorization, execution and
delivery of this Agreement by Purchaser and the other parties hereto, other
than the Company and, in the case of the other agreements, by the parties
thereto, other than the Company, this Agreement and each other agreement
contemplated hereby to which the Company is a party constitute valid and legally
binding obligations of the Company, enforceable in accordance with its
respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally and (ii) as limited
by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies.

 

(b)                                 The execution, delivery and performance by
the Company of this Agreement and the agreements provided for herein, and the
consummation by the Company of the transactions contemplated hereby and
thereby, will not, with or without the giving of notice or the passage of time
or both, (i) violate the provisions of the organizational documents of any
Company Entity, (ii) violate any Laws and Regulations applicable to any
Company Entity or any of their respective Company Assets, (iii) violate,
conflict with, result in a breach of any provision of or the loss of any
benefit, 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 right
of termination or cancellation, 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 Company Material
Adverse Effect or (iv) result in the creation of any Lien (other than
Permitted Liens) upon any of the respective Company Assets of any Company
Entity.

 

12

 

3.4                               Capitalization.

 

(a)                                  Authorized Capital Shares. The authorized capital shares of the
Company consist of an unlimited number of Company Common Shares, of which
14,766,953 shares are issued and outstanding as of the date hereof, and an
unlimited number of preferred shares none of which are issued and outstanding
as of the date hereof.  Section 3.4(a) of
the Company Disclosure Letter sets forth a true and complete list of the
holders of the outstanding Company Common Shares, the respective number of
shares held thereby and, to the best of the Company’s knowledge, the country of
residence of each such holder.  Each
outstanding Company Common Share has been duly and validly authorized and
issued, is fully paid and non-assessable, was issued in compliance with all
applicable Securities Laws, is free of any Liens imposed by or in favor of the
Company and is not subject to preemptive rights or rights of first refusal
created by its incorporating statute, the organizational documents of the
Company or any agreement to which the Company is a party or by which it is
bound.

 

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

 

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

 

3.5                               Consents and Approvals.

 

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

 

3.6                               Financial Statements.

 

(a)                                  The Company has delivered to Purchaser (i) the
consolidated 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) the
financial 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 with
Canadian GAAP consistently applied (except (A) as otherwise indicated in
such financial statements and the notes thereto or, in the case of audited
statements, in the related report of the Company’s independent auditors or (B) in
the case of unaudited interim statements, which are subject to normal
period-end adjustments and may omit notes which are not required by applicable
Laws and Regulations in the unaudited statements).  There has been no material change in the
Company’s accounting policies, except as described in the notes to the Company
Financial Statements, since June 30, 2009.

 

13

 

(b)                                 The Company Financial Statements fairly
present in all material respects the consolidated financial condition, retained
earnings, assets and liabilities and operating results of the Company Entities
and as at the dates, and for the periods, indicated therein.

 

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

 

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

 

3.7                               Taxes.

 

The Company and each Subsidiary of the Company:

 

(a)                                  Has filed all Tax Returns, including any
elections 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 the
Effective Date.  All such Tax Returns are
accurate and complete in all material respects.

 

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

 

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

 

(d)                                 Has had its income Tax liability assessed by
the relevant Governmental Entity in respect of the taxation years of such
company 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 no
adjustments made or proposed by a Governmental Entity in the last three years,
and the Company Entities and Dobbie have no knowledge of any threatened or
potential assessment or other proceedings, any grounds therefor, or any
negotiations or investigations in 

 

14

 

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 any
extension of time with respect to the filing of any Tax Return, any payment of
Taxes or any assessment.

 

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

 

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

 

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

 

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

 

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

 

(l)                                     Has not made any payment, nor is obligated to
make any payment, and is not a party to any agreement under which it could be
obligated 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 inclusion
pursuant to section 78 of the Tax Act or any analogous provincial or similar
provision.

 

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

 

(n)                                 Is not a party to any Tax-sharing, Tax
indemnity, Tax allocation agreement, or other similar agreement.  No Company Entity is a party to any
arrangement with any Governmental Entity relating to Taxes, including any
advance pricing agreement or other material agreement.  No Company Entity has any liability for Taxes
of any other Person whether pursuant to Tax Laws and Regulations, as a
transferee or successor, by Contract, agreement, or otherwise.  Transactions in respect of goods or services
between a Company Entity and any non-arm’s length Person have occurred at fair
market value.

 

(o)                                 Has not at any time been a member of any
partnership or joint venture or the holder of a beneficial interest in any
trust for any period for which the statute of limitations for any Tax
potentially applicable as a result of such membership or holding has not
expired.

 

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

 

15

 

which are available to it and such losses do not
begin to expire until 20 taxation years following December 31, 2008.  There has been no acquisition of control of
the 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 related
to the Company, and will remain a person related to the Company until the
Effective Time, for purposes of the Tax Act (determined without regard to
paragraph 251(5)(b) thereof).

 

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

 

3.8                               Litigation.

 

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

 

3.9                               Intellectual Property.

 

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

 

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

 

(b)                                 The Company and INSINC Technologies have the exclusive right to use the
Owned Intellectual Property except to the extent the Company or INSINC
Technologies have licensed others to use the Owned Intellectual Property, which
licences are listed in Section 3.9(b) of the Company Disclosure
Letter.

 

(c)                                  All of the Licensed Intellectual Property is set out in Section 3.9(c) of
the Company Disclosure Letter.  The
Company  has the exclusive right to use
the Licensed Intellectual Property except to the extent the rights are
identified in Section 3.9(c) of the Company Disclosure Letter as
being non-exclusive.

 

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

 

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

 

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

 

16

 

Company.

 

(g)                                 Neither the use of the Owned Intellectual Property nor the conduct of
the business of the Company infringes or otherwise violates the Intellectual
Property rights of any other Person.  No
infringement, misuse or misappropriation of the Owned Intellectual Property has
occurred 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) of
the Company Disclosure Letter, other than minor components of the Owned
Software which, in the aggregate, do not comprise more than 5% of the source
code for the current version of any individual program.

 

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

 

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

 

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

 

(m)                               Except as disclosed in Section 3.9(m) of the Company
Disclosure Letter, the source code for the Owned Software has not been
delivered or made available to any Person and the Company has not agreed to or
undertaken to or in any other way promised to provide such source code to any
Person.  Except as disclosed in Section 3.9(m) of
the Company Disclosure Letter, the source code is currently stored in, and has
never been removed from, the Company’s premises in Burnaby, British Columbia,
Canada.

 

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

 

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

 

(p)                                 Except as listed in Section 3.9(p) of the Company Disclosure
Letter, 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 related
documentation, and, except for such disclosed problems or defects, the 

 

17

 

Software
operates in accordance with its documentation and specifications.  The Software does not contain any
undocumented code, disabling mechanism or protection feature intentionally
designed to prevent its use, including any clock, timer, counter, computer
virus, 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, other
software, operating systems, computers or equipment with which the Software
interacts.

 

(q)                                 Section 3.9(q) of the Company Disclosure Letter accurately
describes the current state of the Software, together with all current
development 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 Open
Source Materials set forth in Section 3.9(r) of the Company
Disclosure Letter into, or combined such Open Source Materials with, the
Intellectual Property owned or developed by the Company (including, without
limitation, the Owned Intellectual Property) or otherwise used in the business
of the Company and have used the Open Source Materials set forth in Section 3.9(r) of
the Company Disclosure Letter in accordance with the terms of any licensing
agreements associated therewith.

 

3.10                        Privacy Laws.

 

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

 

(b)                                 There are no restrictions on the Company’s
collection, use, disclosure and retention of the Personal Information except as
provided 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’s
collection, use, disclosure or retention of the Personal Information.

 

(d)                                 No decision, judgment or order, whether
statutory or otherwise, is pending or has been made, and no notice has been
given pursuant to any Privacy Laws, requiring the Company to take (or to
refrain 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 times
have been, in full material compliance with all Laws and Regulations of any
Governmental Entity applicable to their respective businesses or
operations.  Except with respect to
immaterial violations, no Company Entity has received any written notice of,
has knowledge of or has been charged with, the violation of any Laws and
Regulations.

 

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

 

18

 

of
any permit to which it is a party, except where such default or violation would
not, individually or in the aggregate, materially affect the business of the
Company Entities.

 

3.12                        Environmental.

 

There
are no Legal Proceedings or investigations of any nature that would be
reasonably likely to result in the imposition on any Company Entity of any
liability or obligation arising under common law or under any local, state,
provincial, municipal or federal environmental statute, regulation or ordinance
pending or, to the knowledge of the Company, threatened against any Company
Entity, which liability or obligation would be material to the Company. To the
knowledge of the Company, there is no reasonable basis for any such Legal
Proceeding or investigation.

 

3.13                        Contracts and Commitments.

 

(a)                                  The Company’s Material Contracts are set
forth in Section 3.13(a) of the Company Disclosure Letter.  Except as disclosed in Section 3.13(a) of
the Company Disclosure Letter, all of the Material Contracts are valid, binding
and enforceable in accordance with their respective terms and in full force and
effect, without amendment.  Except as
disclosed in Section 3.13(a) of the Company Disclosure Letter, no
Material Contract requires the consent by the other parties thereto in order to
consummate the transactions contemplated by this Agreement.  Immediately after giving effect to the
Arrangement, the Company Entities will be permitted to exercise all of such
Company Entities’ rights under the Material Contracts to the same extent the
Company Entities would have been able to had the transactions contemplated by
this Agreement not occurred and without the payment of any additional amounts
or consideration other than ongoing payments which the Company Entities would
otherwise be required to pay.  The
Company Entity party thereto has performed in all material respects all
obligations required to be performed by it and is not in default under or in
breach of nor in receipt of any claim of default or breach under any Material
Contract, and such Company Entity does not have any present expectation or
intention of not fully performing all such obligations, except where any such
default or non-performance would not constitute a Company Material Adverse
Effect.  No event has occurred which with
the 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 any
Material Contract, except where such event would not constitute a Company
Material Adverse Effect.  The Company has
no knowledge of any material breach or anticipated material breach by the other
parties to any Material Contract.  True,
correct and complete copies of each written Material Contract and an accurate
description of each oral Material Contract, together with all amendments,
waivers or other changes thereto, have been made available to counsel to
Purchaser.

 

(b)                                 Except as set forth in the Company Financial
Statements or in Section 3.13(b) of the Company Disclosure Letter, no
Company Entity has, since June 30, 2009, (i) declared or paid any
dividends or authorized or made any distribution upon or with respect to any
class or series of its capital shares or corporate interests, (ii) incurred
any indebtedness for money borrowed or any other liabilities, (iii) made
any loans or advances to any Person, other than ordinary course advances for
business expenses, or (iv) sold, exchanged or otherwise disposed of any of
its Company Assets or rights, other than the sale of its inventory in the ordinary
course of business.

 

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

 

19

 

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

 

3.14                        Related-Party Transactions.

 

Except
as set forth in Section 3.14 of the Company Disclosure Letter, no
employee, shareholder, officer or director of any Company Entity or member of
his/her immediate family is indebted to any Company Entity, nor is any Company
Entity indebted (or committed to make loans or extend or guarantee credit) to
any of them.  All commercial transactions
are negotiated on an arms length basis and at fair market value.

 

3.15                        Changes.

 

Except as set forth in Section 3.15 of the
Company Disclosure Letter, since June 30, 2009 and except as otherwise
reflected in the Company Financial Statements, each Company Entity has
conducted its business, in all material respects, in the 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 Company Material Adverse Effect;

 

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

 

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

 

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

 

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

 

(f)                                    any acquisition, sale, assignment or transfer
of any material asset of any Company Entity, or disclosure of any proprietary
confidential information to any Person;

 

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

 

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

 

20

 

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

 

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

 

(k)                                  any capital expenditures or commitments
therefor;

 

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

 

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

 

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

 

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

 

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

 

(q)                                 to the knowledge of the Company, any other
event or condition of any character that would have a Company Material Adverse
Effect.

 

3.16                        Company Assets.

 

Each
Company Entity has good and marketable title to, or valid leasehold interests
in, its respective properties and assets (all such properties and assets being
referred to as the “Company Assets”),  other than such
property 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 Adverse
Effect.  The Company Assets are free and
clear of all Liens, except (a) as reflected in the Company Financial
Statements and (b) Permitted Liens. 
The Company Assets constitute all the assets used or held for use in the
conduct of the respective businesses of the Company Entities and necessary for
Purchaser to operate such businesses as currently conducted by such Company
Entities.  No Company Entity owns any
real property.  All of the tangible
Company Assets of each Company Entity are in good operating condition, subject
to normal wear and tear, and are reasonably fit and useable for the purposes
for 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, life
insurance or other insurance policy maintained by any Company Entity
(collectively, the “Company Insurance Policies”) as to which coverage has been
questioned, denied or disputed by the underwriters of such policies.  All premiums due and payable on the Company
Insurance Policies or renewals thereof have been paid and each Company Entity
is otherwise in material compliance with the material terms of such
policies.  All Company Insurance Policies
will remain in full force and effect through the Effective Date and also as to
claims arising out of events that occur prior to the Effective Date.  The Company has no knowledge of any
threatened termination of, or premium increase with respect to, any of the
Company Insurance Policies.

 

21

 

3.18                        Employee Benefit Plans.

 

Section 3.18 of the Company Disclosure
Letter contains a true and complete list of each Company Employee Plan
sponsored, maintained or contributed to or required to be contributed to by any
Company Entity or as to which any Company Entity has, or may have, any
liability or obligation, contingent or otherwise, whether written or oral and
whether legally binding or not (collectively, the “Company
Employee Plans”).  The Company
has heretofore made available to Purchaser true and complete copies of the
Company Employee Plans.

 

3.19                        Occupational Health and Safety; Workers’ Compensation.

 

(a)                                  The Company is in compliance with all
provisions of the Occupational Health and Safety Act
(British Columbia) and regulations made pursuant thereto, and there are no
outstanding claims, charges or orders thereunder.

 

(b)                                 The Company is in compliance with applicable
workers’ compensation laws and regulations made pursuant thereto and there are
no outstanding assessments, levies or penalties thereunder.

 

3.20                        Employment; Confidentiality.

 

(a)                                 Except as disclosed in Section 3.20(a) of
the Company Disclosure Letter, as of the date hereof, no Company Entity is
aware that any executive officer, or that any group of employees of any Company
Entity, intends to terminate their employment with such Company Entity, nor
does such Company Entity have a present intention to terminate the employment
of any of the foregoing.

 

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

 

3.21                        Banking Facilities.

 

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

 

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

 

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

 

3.22                        Brokers and Finders.

 

Other
than to Alexander Capital Group Inc., no Company Entity is obligated to pay any
broker’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 in
connection with any of the transactions contemplated by this 

 

22

 

Agreement.  Any such fee or commission owed will be
payable to Alexander Capital Group Inc. as set forth in the Plan of
Arrangement.

 

3.23                        Takeover Statutes

 

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

 

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

 

ARTICLE IV - 

REPRESENTATIONS OF PURCHASER

 

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

 

4.1                               Disclosure.

 

No representation or warranty of the Purchaser
contained in this Agreement, and no statement contained in the Purchaser
Disclosure Letter or in any certificate or other information furnished or to be
furnished, contains or will contain any untrue statement of a material fact.
The information disclosed to the Company pursuant to the diligence requisition
list provided to the Purchaser by the Company in connection with the Company’s
due diligence investigations of the Purchaser Entities was in all material
respects true, accurate and complete. 
Notwithstanding anything to the contrary, the Purchaser shall not be
deemed to make to the Company any representation or warranty (express or
implied) 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 the
Purchaser Entities, has property or conducts business in each of the
jurisdictions identified on Section 4.2(a) of the Purchaser
Disclosure Letter and is qualified to transact business in each of the
jurisdictions identified in Section 4.2(a) of the Purchaser
Disclosure Letter.  Purchaser is duly
qualified to transact business and is in good standing in each jurisdiction in
which the ownership of property or the character of its business requires such
qualification, except those jurisdictions where the failure to be so qualified
or to be in good standing would not have a Purchaser Material Adverse
Effect.  Purchaser has all required
corporate power, authority and capacity necessary to own and operate its
property, to carry on its business as now conducted and presently proposed to
be conducted, to execute and deliver the Agreement and the agreements
contemplated herein and, subject to the approval of the Court, to consummate
the transactions contemplated hereby and thereby.

 

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

 

23

 

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

 

4.3                               Authorization; No Violation.

 

(a)                                  The execution and delivery by Purchaser of
this Agreement and the agreements provided for herein, and the consummation of
all transactions contemplated hereunder and thereunder by Purchaser, have been
duly authorized by all requisite corporate action on the part of Purchaser, and
this Agreement has been duly and validly executed and delivered by
Purchaser.  Assuming the due
authorization, execution and delivery of this Agreement by the Company and the
other parties hereto, other than Purchaser and, in the case of the other
agreements, by the parties thereto, other than Purchaser, this Agreement and
each other agreement contemplated hereby to which Purchaser is a party
constitute valid and legally binding obligations of each of Purchaser,
enforceable in accordance with its respective terms, except as limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally and (ii) laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.

 

(b)                                 The execution, delivery and performance by
Purchaser of this Agreement and the agreements provided for herein, and the
consummation 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) violate
the provisions of the organizational documents of any Purchaser Entity, (ii) violate
any Laws and Regulations applicable to any Purchaser Entity or any of their
respective Purchaser Assets, (iii) violate, conflict with, result in a
breach of any provision of or the loss of any benefit, 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 right of termination or
cancellation, 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) result
in the creation of any Lien (other than Permitted Liens) upon any of the
respective Purchaser Assets of any Purchaser Entity.

 

4.4                               Capitalization.

 

(a)                                  Authorized Capital Shares.  The
authorized share capital of the Purchaser consists of an unlimited number of
Purchaser 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 date
hereof, 110,537,883 Common Shares and no Class 1 or Class 2
preference shares were issued and outstanding. 
Each outstanding Purchaser Common Share has been duly and validly authorized
and issued, is fully paid and non-assessable, was issued in compliance with all
applicable Securities Laws and is not subject to preemptive rights or rights of
first refusal created by its incorporating statute, the organizational
documents 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 no
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from Purchaser of any, or
rights to acquire from the Purchaser any, capital shares.  Section 4.4(b) of the Purchaser
Disclosure Letter accurately sets forth the following information with respect
to all outstanding options, warrants and other rights to acquire Purchaser’s
capital shares:  the type of equity
instrument; the number of shares covered; the exercise price; the grant date;
and the expiration date.  A true and
complete copy of the Purchaser 

 

24

 

Stock
Option Plan has been provided to the Company, and except as requested by
Purchaser, such Purchaser Stock Option Plan has not been amended, modified or
supplemented.  All currently outstanding
options to acquire Purchaser Common Shares were issued in compliance with the
terms of the Purchaser Stock Option Plan. 
All registrations and approvals of the Purchaser Stock Option Plan
required by, and necessary to obtain any right or benefit under, applicable
Laws and Regulations to be made by Purchaser or its respective shareholders
have been made.

 

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

 

4.5                               Issuance of Securities.

 

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

 

4.6                               Consents and Approvals.

 

Except
as set forth in Section 4.6 of the Purchaser Disclosure Letter, and other
than stock exchange and regulatory approvals, no consents or approvals of any
Governmental Entity or any third parties are required in connection with the
execution, delivery or performance of this Agreement and the agreements
provided for herein by Purchaser or the consummation of the transactions
contemplated hereby or thereby by Purchaser.

 

4.7                               Securities Filings; Financial Statements.

 

(a)                                  Purchaser has filed and made available to the
Company all forms, reports and documents required to be filed by Purchaser with
the Securities Commissions since August 10, 2006 (collectively, the “Purchaser Public Filings”).  The
Purchaser Public Filings (i) at the time filed complied in all material
respects with the applicable requirements of the Securities Laws, and (ii) did
not at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required
to be stated in such Purchaser Public Filings or necessary in order to make the
statements in such Purchaser Public Filings, in the light of the circumstances
under which they were made, not misleading.

 

(b)                                 Each of the consolidated financial statements
(including, in each case, any related notes) contained in the Purchaser Public
Filings complied as to form in all material respects with the applicable
published rules and regulations of the Securities Commissions with respect
thereto, was prepared in accordance with US GAAP or Canadian GAAP (as may be
indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted under applicable law) and fairly presented
the consolidated financial position of Purchaser and its Subsidiaries as of the
respective dates and the consolidated results of their operations and cash
flows, retained earnings, assets and liabilities and operating results for the
periods indicated, except that the unaudited interim financial statements do
not include all notes, but do include all adjustments, which consist only of
normal recurring adjustments, necessary for fair presentation.  The books and records of each Purchaser
Entity are true and complete in all material respects.

 

25

 

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

 

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

 

(e)                                  Since June 30, 2009, there has been no
event which has had a Purchaser Material Adverse Effect.

 

4.8                               Litigation.

 

There
is no Legal Proceeding or investigation pending or, to the knowledge of
Purchaser, currently threatened against any Purchaser Entity that questions (i) the
validity of this Agreement or any agreement contemplated hereby, (ii) the
right of Purchaser to enter into this Agreement or any agreement contemplated
hereby or thereby or (iii) the right of Purchaser to consummate the
transactions contemplated hereby or thereby.

 

4.9                               Intellectual Property.

 

Purchaser
owns all rights, title, and interests in and to its Intellectual Property free
and clear of any encumbrance.  The
execution and performance of this Agreement, and the conduct of the business
after the Effective Date, will not result in any breach or violation of any
Material Contract, or create on behalf of any third party the right to
terminate or modify any Material Contract, relating to any Intellectual
Property.

 

4.10                        Compliance with Laws and Regulations.

 

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

 

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

 

4.11                        Environmental.

 

There
are no Legal Proceedings or investigations of any nature that would be
reasonably likely to result in the imposition on any Purchaser Entity of any
liability or obligation arising under common law or under any local, state,
provincial, municipal or federal environmental statute, regulation or ordinance
pending or, to the knowledge of Purchaser, threatened against any Purchaser
Entity, which liability or 

 

26

 

obligation would be material
to Purchaser.  To the knowledge of
Purchaser, there is no reasonable basis for any such Legal Proceeding or
investigation.

 

4.12                        Contracts and Commitments.

 

(a)                                  All of the Material Contracts are valid,
binding and enforceable (and, if applicable, were registered with the
appropriate Governmental Entity, as required in order to be enforceable) in
accordance with their respective terms and in full force and effect, without
amendment (except as disclosed on Section 4.12(a) of the Purchaser
Disclosure Letter). No Material Contract requires the consent by the other
parties thereto in order to consummate the transactions contemplated by this
Agreement. The Purchaser Entity party thereto has performed in all material
respects all obligations required to be performed by it and is not in default
under or in breach of nor in receipt of any claim of default or breach under
any Material Contract, and such Purchaser Entity does not have any present
expectation or intention of not fully performing all such obligations, except
where any such default or non-performance would not constitute a Purchaser
Material Adverse Effect.  No event has
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by the Purchaser Entity
party thereto under any Material Contract, except where such event would not
constitute a Purchaser Material Adverse Effect. 
Purchaser has no knowledge of any material breach or anticipated
material breach by the other parties to any Material Contract. True, correct
and complete copies of each written Material Contract and an accurate
description of each oral Material Contract, together with all amendments,
waivers or other changes thereto, have been made available to counsel to the
Company.

 

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

 

4.13                        Related-Party Transactions.

 

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

 

4.14                        Changes.

 

Since
June 30, 2009 and except as otherwise reflected in the Purchaser Public
Filings or as set forth in Section 4.14 of the Purchaser Disclosure Letter,
each Purchaser Entity has conducted its business, in all material respects, in
the 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 to
Purchaser Assets, whether or not covered by insurance having a Purchaser
Material Adverse Effect;

 

27

 

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

 

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

 

(e)                                  any acquisition, sale, assignment or transfer
of any material asset of any Purchaser Entity, or disclosure of any proprietary
confidential information to any Person;

 

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

 

(g)                                 any declaration, payment, setting aside or
other distribution of cash or other property to its shareholders or interest
holders with respect to its common shares, other equity securities or other
interests (including without limitation, any warrants, options or other rights
to acquire its common shares or other equity securities), or any direct or
indirect redemption, purchase or other acquisition by Purchaser of any of its
common shares or interests;

 

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

 

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

 

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

 

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

 

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

 

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

 

(n)                                 to the knowledge of Purchaser , any other
event or condition of any character that would have a Purchaser Material
Adverse Effect.

 

4.15                        Purchaser Assets.

 

Each
Purchaser Entity has good and marketable title to, or valid leasehold interests
in, its respective properties and assets (all such properties and assets being
referred to as the “Purchaser Assets”), other than such property and assets as to which the failure to
have the title or lease rights, individually or in the aggregate, would not
have a Purchaser Material Adverse Effect. 
The Purchaser

 

28

 

Assets are free and clear of
all Liens, except (a) as reflected in the Purchaser Public Filings and (b) Permitted
Liens.  The Purchaser Assets constitute
all the assets used or held for use in the conduct of the respective businesses
of the Purchaser Entities and necessary for Purchaser to operate such
businesses as currently conducted by such Purchaser Entities.  No Purchaser Entity owns any real
property.  All of the tangible Purchaser
Assets of each Purchaser Entity are in good operating condition, subject to
normal wear and tear, and are reasonably fit and useable for the purposes for
which they are currently being used.

 

4.16                        Insurance.

 

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

 

4.17                        Employee Benefit Plans.

 

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

 

4.18                        Workers’ Compensation; Employment; Confidentiality.

 

(a)                                 Purchaser is in compliance with applicable
workers’ compensation Laws and Regulations made pursuant thereto and there are
no outstanding assessments, levies or penalties thereunder.

 

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

 

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

 

4.19                        Brokers or Finders.

 

No Purchaser Entity is obligated to pay any broker’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 in 

 

29

 

connection with any of the transactions contemplated by this Agreement.

 

4.20                        Takeover Statutes.

 

No
takeover statute or similar statute or regulation or organizational document
anti-takeover provision applies or purports to apply to Purchaser with respect
to this Agreement, the Arrangement or any other transaction contemplated
hereby.

 

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 Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time (the “Pre-Closing Period”),  except
as expressly contemplated or permitted by this Agreement:

 

(a)                                  other than in connection with

 

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

 

(ii)                                  this Agreement, the transactions contemplated
hereby and the legal, accounting and Company Meeting fees, expenses and costs
incurred by the Company in association therewith, which in the aggregate will
amount 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 Subsidiaries
to, conduct business in, and not take any action (including any action with
respect to Working Capital) except in, the usual and ordinary course of
business and consistent with past practice, and it shall, and shall cause its Subsidiaries
to, use commercially reasonable efforts to maintain and preserve its business
organization, assets, employees and advantageous business relationships; and

 

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

 

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

 

5.2                               Reports, Taxes.

 

During
the Pre-Closing Period and except as expressly contemplated by this Agreement
and the Plan of Arrangement, each of the Company Entities and Purchaser
Entities shall:  (i) duly and timely
file all Tax returns required to be filed by it on or after the date hereof and
all such Tax Returns will be true, complete and correct and prepared consistent
with prior practice, except as may be required by applicable law; (ii) timely
withhold, 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 of
any Taxes contested in good faith 

 

30

 

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

 

5.3                               Non-Solicitation.

 

During
the Pre-Closing Period, except as expressly contemplated or permitted by this
Agreement:

 

(a)                                  Each of the Company and Purchaser shall not
directly or indirectly, through any officer, director, employee, representative
or agent, solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer for
any amalgamation, merger, consolidation, reorganization, recapitalization,
asset transfer, share issuance or similar transaction involving the Company or
the Purchaser, as the case may be, or any of their Subsidiaries (any of the
foregoing inquiries or proposals being referred to in this Agreement as an “Acquisition Proposal”),  (ii) engage
in negotiations or discussions concerning, or provide any non-public
information to any Person relating to, any Acquisition Proposal, or (iii) agree
to, approve or recommend any Acquisition Proposal.

 

(b)                                 A party receiving an Acquisition Proposal
shall 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 or
contact 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 reasonable
detail the identity of the offeror and the terms and conditions of such
Acquisition Proposal, inquiry or contact.

 

5.4                               Intellectual Property.

 

(a)                                  During the Pre-Closing Period, except as
expressly contemplated or permitted by this Agreement, each of the Company and
Purchaser shall, and each shall cause each of their Subsidiaries, to use
commercially reasonable efforts to do or cause to be done all things necessary
to preserve and keep in full force and effect all licenses, approvals,
agreements, franchises, copyrights and patents, and all other rights (including
without limitation with respect to Intellectual Property) used in or necessary
to the present or reasonably anticipated future conduct of the Company Entities’
or Purchaser Entities’ businesses, as the case may be, the loss of which would
reasonably be likely to have a Company Material Adverse Effect or Purchaser
Material Adverse Effect, respectively.

 

(b)                                 Notwithstanding the foregoing, no Company
Entity shall take any actions during the Pre-Closing Period related to the
sale, pricing, licensing, transfer, marketing of or access to Intellectual
Property, except in the ordinary course of business consistent with past
practice, without Purchaser’s prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned.

 

31

 

5.5                               Stock Option Grants.

 

Promptly
following the Effective Time and subject to compliance with applicable Laws and
Regulations and the rules of the Toronto Stock Exchange, and in
consideration for Dobbie’s becoming an employee of Purchaser, Purchaser shall
grant to Dobbie employee stock options to purchase 500,000 Purchaser Common
Shares with an exercise price that reflects the close-of-day market price of
the Purchaser Common Shares on the business day immediately prior to the
Effective Date.  Such option grant will
be memorialized in an agreement, in the form previously delivered by Purchaser
to Dobbie to be executed by Dobbie and Purchaser, and such options will vest in
accordance with the schedule set forth in such agreement.

 

ARTICLE
VI -

ADDITIONAL MUTUAL COVENANTS

 

6.1                               Access to Information.

 

Subject
to the Confidentiality Agreement and upon reasonable notice, the Company and
Purchaser shall each afford to the officers, employees, accountants, counsel
and other representatives of the other access, during normal business hours
during the Pre-Closing Period, to all information concerning its business,
properties and personnel, including the work papers of their respective
independent accountants, as may reasonably be requested.  The Company and Purchaser shall hold any such
information which is nonpublic in accordance with the Confidentiality
Agreement.  No information or knowledge
obtained in any investigation pursuant to this Section 6.1 shall affect or
be deemed to modify any representation or warranty contained in this Agreement
or the conditions to the obligations of the parties to consummate the
Arrangement.  Purchaser undertakes to
provide counsel to the Company with copies of any material correspondence with,
and with a copy of the conditional approval of, the Toronto Stock Exchange
related to the listing of the Purchaser Common Shares to be issued pursuant to
the Arrangement.

 

6.2                               Legal Conditions to Arrangement.

 

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

 

6.3                               Public Disclosure.

 

During the Pre-Closing Period, except as otherwise
required by the Securities Laws and any applicable Laws and Regulations (“Required
Disclosure”),  and except as required for the
solicitation of the approval of the Company’s shareholders, the pursuit of
third-party consents, and announcements to and discussions with employees of
the Company reasonably required in furtherance of the Arrangement and the
performance of the parties’ obligations pursuant to this Agreement, neither the
Company nor Purchaser shall issue or cause the publication of any press release
or public announcement or disclosure to any third party of the existence or any
subject matter, terms or conditions of this Agreement unless jointly approved
by Purchaser and the Company prior to release, announcement or disclosure.  Notwithstanding the foregoing, if a party
determines in its sole discretion that a Required Disclosure of information
relating to this Agreement is required, such party shall provide the other
party with as much prior written 

 

32

 

notice (including the language, form and content of the Required
Disclosure) and an opportunity for consultation as is reasonably practicable
under the circumstances of any intended Required Disclosure, it being
understood that nothing herein shall prevent the disclosing party from making
Required Disclosure.  The Company and
Purchaser further agree that the language, form and content of any public
disclosure of information relating to this Agreement (whether through a press
release, public filing (which filing a party determines to be voluntary) or
report, public statement or otherwise) that is not a Required Disclosure shall
be mutually agreed in advance by the parties, which agreement shall not be
unreasonably withheld.

 

6.4                               Consents.

 

The
Company and Purchaser shall each use its respective commercially reasonable
efforts to obtain any necessary consents, waivers and approvals under any of
its material agreements, Contracts, licenses or leases as may be required to
consummate the Arrangement.

 

6.5                               Securities Compliance.

 

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

 

(b)                                 Compliance.  The Company and Purchaser
shall comply with all applicable rules and regulations of the Securities
Commissions in connection with the transactions contemplated by this Agreement.

 

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

 

THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.  THE SHARES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.

 

6.6                               Expenses.

 

Whether or not the Arrangement is consummated, all
fees, costs and expenses (including legal, accounting and investment banking
fees and expenses) incurred in connection with this Agreement and the
transactions 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 this
Agreement, each of the parties agrees to use commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary under applicable Laws and Regulations to consummate and make
effective the transactions contemplated by this Agreement.  In case at any time after the Effective 

 

33

 

Time
any further action is reasonably necessary to carry out the purposes of this
Agreement each party to this Agreement shall use commercially reasonable
efforts take all such necessary action.

 

6.8                               Supplements to Disclosure Letters.

 

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

 

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

 

6.9                               Non-Solicitation of Employees.

 

For
one year following the termination of this Agreement pursuant to the provisions
of Article X hereof, neither the Company nor the Purchaser shall, either
directly or indirectly, solicit for employment any individual who is employed
by the Purchaser or the Company, respectively, as of the date of this
Agreement; provided, however, that this Section 6.9 shall not limit
Purchaser’s or the Company’s right to continue its customary general
advertisement for employees.

 

ARTICLE
VII - 

CONDITIONS TO THE OBLIGATIONS OF PURCHASER

 

The
obligations of Purchaser to consummate the Arrangement are subject to the
fulfillment, 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.

 

The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all respects, in each case as of the date of this
Agreement and as of the Effective Date as though made on such date, except to
the extent such representations and warranties are expressly made only as of an
earlier date, in which case as of such earlier date, except for changes since
the date of this Agreement that individually or in the aggregate do not
constitute a Company Material Adverse Effect.

 

7.2                               Covenants Performed.

 

All
of the obligations of the Company to be performed on or before the Effective
Date pursuant to the terms of this Agreement shall have been duly performed in
all material respects.

 

34

 

7.3                               Final Financial Statements.

 

On
the Effective Date, the Purchaser shall have received the Company’s (i) consolidated
financial statements (balance sheet and statement of operations, statement of
shareholders’ equity and statement of cash flows, 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) financial statements
(balance sheet and statement of income) prepared by the Company for January through
June of 2009.

 

7.4                               Officers’ Certificate.

 

On
the Effective Date, the Purchaser shall have received a certificate signed by
the Chief Executive Officer of the Company to the effect that the conditions
set 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 Order
no later than October 8, 2009.

 

7.6                               Company Shareholder Approval.

 

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

 

7.7                               Court Approval.

 

The
Final Order shall have been received.

 

7.8                               No Injunctions or Litigation.

 

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

 

7.9                               Consents.

 

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

 

7.10                        Receipt of Regulatory Approvals.

 

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

 

35

 

7.11                        Third Party Consents.

 

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

 

7.12                        Dissent Rights.

 

Holders
of no more than 5% of the Company Common Shares shall have exercised Dissent
Rights.

 

7.13                        Other Agreements.

 

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

 

7.14                        Fee Certificate.

 

Purchaser shall have received in writing from the
Company a certificate setting forth a final statement of all legal, accounting
and Company Meeting fees, expenses and costs incurred by the Company in
association 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 of
Arrangement.

 

ARTICLE
VIII - 

CONDITIONS TO THE OBLIGATIONS OF COMPANY

 

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

 

8.1                               Accuracy of Representations and Warranties.

 

The representations and warranties of Purchaser
contained in this Agreement shall be true and correct in all respects, in each
case as of the date of this Agreement and as of the Effective Date as though
made on such date, except to the extent such representations and warranties are
expressly made only as of an earlier date, in which case as of such earlier
date, except for changes since the date of this Agreement that individually or
in the aggregate do not constitute a Purchaser Material Adverse Effect.

 

8.2                               Covenants Performed.

 

All
of the obligations of Purchaser to be performed on or before the Effective Date
pursuant to the terms of this Agreement shall have been duly performed in all
material respects.

 

8.3                               Officer’s Certificate.

 

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

 

36

 

8.4                               Company Shareholder Approval.

 

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

 

8.5                               Court Approval.

 

The
Final Order shall have been received.

 

8.6                               No Injunctions or Litigation.

 

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

 

8.7                               Consents.

 

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

 

8.8                               Receipt of Regulatory Approvals.

 

Receipt by the Company and
Purchaser of all required regulatory and stock exchange approvals, including
any 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 necessary
to permit Purchaser to:  (i) effect
the Arrangement; and (ii) carry on its business in the ordinary course as
conducted prior to the date hereof consistent with past practice.

 

8.10                        Other Agreements.

 

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

 

ARTICLE IX - 

INDEMNIFICATION

 

9.1                               Indemnification
Obligations.

 

Dobbie
(the “Indemnifying Party”) hereby agrees to
indemnify 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, 

 

37

 

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

 

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

 

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

 

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

 

9.2                               Indemnification Thresholds.

 

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

 

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

 

(c)                                  Notwithstanding the foregoing, the
indemnification thresholds and limitations in this Section 9.2 shall not
apply to any indemnification for Losses arising pursuant to Section 9.1(b).

 

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

 

9.3                               Notice of Claims; Procedure for
Indemnification.

 

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

 

(b)                                 In case any such action shall be brought
against an Indemnified Party and such Indemnified Party gives notice to the
Indemnifying Party of the commencement of the action, the Indemnifying Party
shall be entitled to participate in the action at his own expense and, to the
extent that they shall wish, to assume the defense of the action with counsel
reasonably satisfactory to the Indemnified Party so long as the Indemnifying
Party provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the action and fulfill his indemnification obligations
hereunder and the Indemnifying Party conducts the defense of the action
actively and diligently.  After notice
from the Indemnifying Party to the Indemnified Party of his election so to
assume the defense of the action, the Indemnifying Party shall control the
defense of the action and shall not be liable to the Indemnified Party under Section 9.1
for any fees of other counsel or any other expenses subsequently incurred by
the Indemnified Party in connection with the defense of the action (it being
understood, however, that the Indemnified Party shall be entitled to
participate in 

 

38

 

the
action at its own cost and expense).  The
Indemnifying Party and the Indemnified Party shall cooperate with each other in
connection with any defense and in any notifications to insurers.  If the Indemnifying Party assumes the defense
of an action, no compromise or settlement of the action may be effected by the
Indemnifying Party without the Indemnified Party’s consent, such consent not to
be unreasonably withheld or delayed.  If
notice is given to the Indemnifying Party of the commencement of any action and
he does not, within 20 days after receipt of such notice, give notice to the
Indemnified Party of his election to assume the defense of the action, the
Indemnified Party:  (i) shall
control the defense of such action until and unless the Indemnifying Party
gives 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 unreasonably
withheld or delayed, compromise or settle such action at the cost and expense
of the Indemnifying Party, and the Indemnifying Party shall be bound by any
determination made in such action or any compromise or settlement of the action
effected by the Indemnified Party.

 

9.4                               Survival of Representations and
Warranties.

 

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

 

9.5                               Investigation.

 

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

 

9.6                               Survival of Certain
Indemnification Rights.

 

The
indemnification right described in Section 9.1(b) shall survive until
90 days following the expiry of the applicable limitations period after which
no claim may be made by any Governmental Entity and where such a claim is
asserted by a Governmental Entity prior to the expiry of the applicable
limitations period, the indemnity rights shall survive until such time as any
such claim is finally settled or finally adjudicated and is subject to no
further appeal rights.

 

9.7                               Adjustments.

 

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

 

39

 

9.8                               Mitigation.

 

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

 

(b)                                 Purchaser shall promptly give written notice
to the Indemnifying Party regarding any notice it may receive from Canada
Revenue Agency (“CRA”) specifying in reasonable
detail the nature of the CRA notice; provided, however, that the Indemnified
Party shall not be foreclosed from seeking indemnification pursuant to Section 9.1(b) and
this Article IX for any failure to provide such written notice to the
Indemnifying Party, except to the extent the Indemnifying Party demonstrates
that the defense of the matter raised in such notice is prejudiced by the delay
unless such delay was caused by an event outside the control of the Indemnified
Party.

 

40

 

ARTICLE
X - 

TERMINATION

 

10.1                        Termination.

 

This
Agreement may be terminated:

 

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

 

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

 

10.2                        Effect of Termination.

 

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

 

10.3                        Extension; Waiver.

 

At
any time prior to the Effective Date, any party hereto may, to the extent
legally allowed and only if set forth in an instrument in writing signed on
behalf of such party, (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein.

 

ARTICLE
XI - 

MISCELLANEOUS

 

11.1                        Amendment.

 

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

 

41

 

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

 

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

 

(b)                                 waive any inaccuracies or modify any
representation or warranty contained herein or in any document delivered
pursuant hereto;

 

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

 

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

 

11.2                        Entire Agreement.

 

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

 

11.3                        Governing Law; Venue.

 

This
Agreement shall be governed by and construed in accordance with the laws of the
Province 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 the
exclusive jurisdiction of the courts located in Vancouver, British Columbia and
if the Company brings an action hereunder, the parties shall submit to the
exclusive jurisdiction of the federal courts of the Eastern District of New
York in the State of New York.

 

11.4                        Headings.

 

The
headings and table of contents contained in this Agreement are intended for
convenience and reference purposes only and shall not be used to determine the
rights of the parties or affect the meaning or interpretation of this Agreement
in any way.

 

11.5                        Notices.

 

All
notices, requests, demands, and other communications made in connection with
this Agreement shall be in writing and shall be deemed to have been duly given (a) on
the date of delivery if delivered by hand delivery or by overnight courier
service, (b) on the date sent by facsimile, with confirmation of
transmission, if sent during normal business hours of the recipient, and if
not, then on the 

 

42

 

next day, or (c) three
days after mailing if mailed by certified or registered mail postage prepaid
return receipt requested addressed as follows:

 

If to Purchaser:

 

Roy
E. Reichbach, Esq.

NeuLion, Inc.

1600
Old Country Road

Plainview,
New York 11803

USA

Facsimile:  (516) 622-7510

 

With a copy to:

 

Frank
Lee, Esq.

Day
Pitney LLP

7
Times Square

New
York, New York 10036

USA

Facsimile:  (212) 916-2940

 

and
to:

 

Vanessa
Grant, Esq.

McCarthy
Tétrault LLP

Box
48, Suite 4700, Toronto Dominion Bank Tower

Toronto,
Ontario  M5K 1E6

Canada

Facsimile:  (416) 868-0673

 

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

 

Hugh
Dobbie, Jr.

Interactive
Netcasting Systems Inc.

201 —
5595 Roy Street

Burnaby,
British Columbia  V4P 1S4

Canada

Facsimile:  (604) 606-5726

 

With a copy to:

 

Drew
Wells, Esq.

Getz
Prince Wells LLP

Suite 1810
— 1111 West Georgia Street

Vancouver,
British Columbia  V6E 4M3

Canada

Facsimile:  (604) 685-9798

 

Such addresses may be
changed from time to time by means of a notice given in the manner provided in
this Section.

 

11.6                        Severability.

 

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

 

43

 

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

 

11.7                        Interpretation.

 

When
a reference is made in this Agreement to Schedules, such reference shall be to
a 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 “without
limitation.”  All references to “$” or “dollar”
are to U.S. dollars unless otherwise indicated.

 

11.8                        Waiver.

 

Waiver
of any term or condition of this Agreement by any party shall not be construed
as a waiver of a subsequent breach or failure of the same term or condition, or
a waiver of any other term or condition in this Agreement.

 

11.9                        Waiver of Jury Trial.

 

THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT WHICH
ANY PARTY MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY PROCEEDING,
LITIGATION OR COUNTERCLAIM BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY.  IF THE SUBJECT MATTER OF ANY
LAWSUIT IS ONE IN WHICH THE WAIVER OF JURY TRIAL IS PROHIBITED, NO PARTY TO
THIS AGREEMENT SHALL PRESENT AS A NON-COMPULSORY COUNTERCLAIM IN ANY SUCH
LAWSUIT ANY CLAIM BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT.  FURTHERMORE, NO PARTY TO THIS
AGREEMENT SHALL SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL
CANNOT BE WAIVED.

 

11.10                 Assignment.

 

Neither
party may assign, by operation of law or otherwise, all or any portion of its
rights or duties under this Agreement without the prior written consent of the
other party, which consent may be withheld in the absolute discretion of the
party asked to give consent; provided, however, Purchaser may assign its rights
or duties under this Agreement to any Affiliates of Purchaser or to any
successor in interest to the assets or securities of Purchaser so long as
Purchaser remains liable thereon.

 

11.11                 Counterparts.

 

This Agreement may be signed in counterparts with
the same effect as if the signatures to each party were upon a single
instrument.  All counterparts shall be
deemed an original of this Agreement.

 

11.12                 Attorneys Fees.

 

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

 

[Signature page follows]

 

44

 

IN WITNESS WHEREOF, Purchaser, the Company and Dobbie have caused this Acquisition
Agreement to be executed by their respective officers thereunto duly authorized
as 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:

  	
   

  
				

 

 

SCHEDULE 1

 

PLAN OF
ARRANGEMENT

 

PLAN OF ARRANGEMENT UNDER SECTION 192 

of the CANADA BUSINESS CORPORATIONS ACT

 

ARTICLE 1

INTERPRETATION

 

1.1                                                                               Definitions

 

In this Plan of Arrangement, unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
respective meanings set out below and grammatical variations of such terms
shall 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 NeuLion
Disclosure Letter, INSINC Disclosure Letter thereto, as it may be amended,
supplemented or otherwise modified from time to time in accordance with its
terms;

 

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

 

“Applicable Law” means, with respect to
any 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 or
applied by a Governmental Entity that is binding upon or applicable to such
person or property, as amended;

 

“Arrangement” means the arrangement
involving NeuLion, INSINC, Dobbie and the INSINC Shareholders under
section 192 of the CBCA on the terms and subject to the conditions set out
in this Plan of Arrangement, subject to any amendments or variations thereto
made in accordance with Section 11.1 of the Acquisition Agreement or this
Plan of Arrangement or made at the direction of the Court;

 

“Arrangement Resolution” means the
special resolution approving the Plan of Arrangement to be considered at the
INSINC Meeting;

 

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

 

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

 

“CBCA” means the Canada
Business Corporations Act and the regulations made thereunder, as
promulgated or amended from time to time;

 

2

 

“Certificate of Arrangement” means the
certificate of arrangement to be issued by the Director pursuant to subsection
192(7) of the CBCA giving effect to the Arrangement;

 

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

 

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

 

“Court” means the Supreme Court of
British Columbia;

 

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

 

“Depositary” means Computershare
Investor Services Inc.;

 

“Director” means the Director appointed
pursuant to section 260 of the CBCA;

 

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

 

“Dissenting Shareholder” means a holder
of INSINC Shares who has duly exercised its Dissent Rights and has not
withdrawn or been deemed to have withdrawn such exercise of Dissent Rights, but
only in respect of INSINC Shares in respect of which Dissents Rights are
validly exercised by such holder;

 

“Dobbie” means Hugh Dobbie, Jr.;

 

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

 

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

 

“Exchange” means the Toronto Stock
Exchange;

 

“Fee” means the fee payable in
accordance with Section 2.3(b) hereof;

 

“Final Order” means the final order of
the 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 any
time prior to the Effective Date in respect of which any applicable delay to
appeal has expired without appeal or, if appealed, then, unless such appeal is
withdrawn or denied, as affirmed or as amended (provided that any such
amendment is acceptable to NeuLion, INSINC and Dobbie, each acting reasonably)
on appeal;

 

“Governmental Entity” means any
government, municipality or political subdivision thereof, whether federal,
state, local, provincial, municipal or foreign, or any governmental or
quasi-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;

 

3

 

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

 

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

 

“INSINC Circular” means the notice of
the INSINC Meeting and accompanying management information circular, including
all schedules, appendices and exhibits thereto, to be sent to the INSINC
Shareholders in connection with the INSINC Meeting, as amended, supplemented or
otherwise modified from time to time;

 

“INSINC  Disclosure
Letter” means the disclosure letter dated October 5, 2009
executed and delivered by INSINC in connection with the execution of the
Acquisition Agreement;

 

“INSINC Meeting” means the special
meeting of INSINC Shareholders, including any adjournment or postponement
thereof, to be called and held in accordance with the Interim Order to consider
the Arrangement Resolution;

 

“INSINC Shareholders” means the holders
of INSINC Shares or S1 Preferred Shares;

 

“INSINC Shares” means the common shares
in the capital of INSINC;

 

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

 

“Letter of Transmittal” means the letter
of transmittal forwarded by INSINC to INSINC Shareholders in connection with
the 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., a
corporation existing under the laws of Canada;

 

“NeuLion  Disclosure
Letter” means the disclosure letter dated October 5, 2009
executed and delivered by NeuLion in connection with the execution of the
Acquisition Agreement;

 

“NeuLion
Shares” means
the common shares in the capital of NeuLion;

 

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

 

“Participating INSINC Shareholder” means
each INSINC Shareholder that has duly completed, executed and delivered a
Participation Notice to INSINC on or before the conclusion of the INSINC
Meeting wherein such INSINC Shareholder has elected to participate in the
dividend contemplated under the Plan of Arrangement and such notice is accepted
on or before such time by INSINC as a valid notice in respect of such INSINC
Shareholder;

 

4

 

“Participation Notice” means the
participation notice in respect of any INSINC Shareholder, in the form set
forth in Schedule “B” hereto;

 

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

 

“Percentage 2” means one minus
Percentage 1;

 

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

 

“Percentage 4” means one minus
Percentage 3;

 

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

 

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

 

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

 

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

 

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

 

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

 

“Subsidiary” shall mean any person of
which another person (i) (a) owns, directly or indirectly, fifty
percent (50%) or more of the outstanding voting securities or equity interests
or (b) is a general partner or managing member, or (ii) owns or
controls, directly or indirectly, securities or other ownership interests
having by their terms the power to elect a majority of the board of directors
of such person or other persons performing similar functions;

 

5

 

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

 

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

 

1.2                                                                               Interpretation Not Affected by Headings, etc.

 

The division of this Plan
of Arrangement into articles, sections and other portions and the insertion of
headings are for reference purposes only and shall not affect the
interpretation of this Plan of Arrangement. Unless otherwise indicated, any
reference in this Plan of Arrangement to “Article” or “section” followed by a
number refers to the specified Article or section of this Plan of
Arrangement. 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 or
the Acquisition Agreement or made at the direction of the Court in the Final
Order and do not refer to any particular Article, section or other portion of
this Plan of Arrangement.

 

1.3                                                                               Rules of Construction.

 

In this Plan of
Arrangement, unless the context otherwise requires, (a) words importing
the singular number include the plural and vice versa, (b) words importing
any 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 the
essence 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 be
made hereunder are expressed in lawful money of Canada.

 

1.6                                                                               Statutes

 

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

 

ARTICLE 2

ARRANGEMENT

 

2.1                                                                               Plan of Arrangement

 

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

 

6

 

2.2                                                                               Binding Effect

 

This Plan of Arrangement will become effective at, and be binding at
and 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 any
person, except as expressly provided herein.

 

2.3                                                                               Arrangement

 

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

 

(a)                                  At the Effective Time, each INSINC
Shareholder that has not duly completed, executed and delivered a Participation
Notice that has been accepted by INSINC shall be deemed to be a
Non-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 Costs
Certificate (the “Advisor Costs”)
to the advisors specified therein;

 

(c)                                  At five minutes
following the Effective Time, the authorized capital of INSINC shall be amended
to create and authorize an unlimited number of S1 Preferred Shares and S2
Preferred Shares;

 

(d)                                 At ten minutes
following the Effective Time,

 

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

 

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

 

(e)                                  At fifteen minutes following the Effective
Time,

 

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

 

7

 

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

 

(iii)                               INSINC shall add the full amount of the
dividend 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 paid
pursuant to paragraph (e);

 

(g)                                 At five minutes following the D2 Effective
Time, a portion of the S1 Preferred Shares held by each Non-Participating
INSINC
Shareholder, equal to Percentage 1 of such holder’s S1 Preferred Shares, shall
be transferred to NeuLion in consideration for the following in respect of each
S1 Preferred Share:

 

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

 

(ii)                                  a number of Series I Warrants
determined as follows: A/B where (A) is 1,000,000 and (B) is the
Total INSINC Shares;

 

(iii)                               a number of Series II Warrants
determined as follows: A/B where (A) is 500,000 and (B) is the Total
INSINC Shares; and

 

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

 

(h)                                 At ten minutes following the D2 Effective
Time, a portion of the S1 Preferred Shares held by each Non-Participating
INSINC Shareholder, equal to Percentage 2 of such holder’s S1 Preferred Shares,
shall be transferred to NeuLion in consideration for a number of NeuLion Shares
in respect of each S1 Preferred Share determined as A/B: where (A) is
6,000,000 and (B) is the Total INSINC Shares.  The number of NeuLion Shares shall be rounded
up or down (where an interest of 0.5 or more rounds up) to the nearest whole
share, except that each Non-Participating INSINC Shareholder shall
receive no less than one NeuLion Share;

 

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

 

(j)                                     At twenty minutes following the D2
Effective Time, a portion of the INSINC Shares held by each Participating
INSINC Shareholder, equal to Percentage 3 of 

 

8

 

such
holder’s INSINC Shares, shall be transferred to NeuLion in consideration for
the following in respect of each INSINC Share:

 

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

 

(ii)                                  a number of Series I Warrants
determined as follows: A/B where (A) is 1,000,000 and (B) is the
Total INSINC Shares;

 

(iii)                               a number of Series II Warrants
determined as follows: A/B where (A) is 500,000 and (B) is the Total
INSINC Shares; and

 

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

 

(k)                                  At twenty-five minutes following the D2
Effective Time, a portion of the INSINC Shares held by each Participating
INSINC Shareholder, equal to Percentage 4 of such holder’s INSINC Shares, shall
be transferred to NeuLion in consideration for a number of NeuLion Shares in
respect of each INSINC Share determined as A/B: 
where (A) is 6,000,000 and (B) is the Total INSINC
Shares.  The number of NeuLion Shares
shall be rounded up or down (where an interest of 0.5 or more rounds up) to the
nearest whole share, except that each Participating INSINC Shareholder shall
receive no less than one NeuLion Share;

 

(l)                                     All INSINC Shares, S1 Preferred Shares, and
S2 Preferred Shares acquired hereunder by NeuLion shall be transferred to
NeuLion free and clear of all Liens, claims and encumbrances;

 

(m)                               At thirty minutes following the D2
Effective Time, the NeuLion Shares issued in the Arrangement to Dobbie shall
become eligible for resale, in compliance with Laws and Regulations, in two
instalments according to the following schedule:

 

(i)                                     50% (rounded down to the nearest whole
NeuLion Share) on the 180th day after the
Effective Date; and

 

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

 

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

 

(n)                                 At
thirty-five minutes  following the D2 Effective
Time, the directors of INSINC will resign and the persons whose names appear
below, shall hold office until the next annual meeting of shareholders of
INSINC or until their successors are elected or appointed:

 

9

 

	
  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 transferred
pursuant to Section 2.3 will be adjusted to reflect fully the effect of
any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into INSINC Shares other than stock
dividends paid in lieu of ordinary course dividends), consolidation,
reorganization, recapitalization or other like change with respect to INSINC
Shares effected in accordance with the terms of the Acquisition Agreement
occurring after the date of the Acquisition Agreement and prior to the
Effective Time.

 

ARTICLE 3

RIGHTS OF DISSENT

 

3.1                                                                               Rights of Dissent

 

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

 

(a)                                  are ultimately determined to be entitled to
be 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 referred
to in Section 2.3(d)(i), without any further act or formality and free and
clear of all Liens, claims and encumbrances, to NeuLion; or

 

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

 

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

 

10

 

3.2                                                                               Dissent Right Availability

 

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

 

ARTICLE 4

CERTIFICATES AND PAYMENTS

 

4.1                                                                               Payment of Consideration

 

(a)                                  Following
receipt of the Final Order and prior to the filing of the Articles of
Arrangement with the Director in accordance with the terms of the Acquisition
Agreement, NeuLion shall deposit, for the benefit of INSINC Shareholders, cash
with the Depositary in the aggregate amount equal to the payments in respect
thereof required by the Plan of Arrangement, with the amount per INSINC Share
in respect of which Dissent Rights have been exercised being deemed to be the
Consideration 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)                                 Upon
surrender to the Depositary for cancellation of a certificate which immediately
prior to the time described in Section 2.3(d)(i) represented
outstanding INSINC Shares and were transferred pursuant to Section 2.3(d)(i),
together with a duly completed and executed Letter of Transmittal and such
additional documents and instruments as the Depositary may reasonably require,
the holder of INSINC Shares represented by such surrendered certificate shall
be entitled to receive in exchange therefor, and the Depositary shall deliver
to such holder, the Consideration contemplated by Section 2.3, as applicable, and
the 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 so
surrendered shall forthwith be cancelled.

 

(c)                                  Until
surrendered as contemplated by this Section 4.1, each certificate that
immediately prior to the time described in Section 2.3(d)(i) represented
INSINC Shares shall be deemed after the time described in Section 2.3(d)(i) to
represent only the right to receive upon such surrender the Consideration contemplated by Section 2.3 or a cash
payment as contemplated in Section 3.1, less any amounts withheld pursuant
to Section 4.3. Any such certificate formerly representing INSINC Shares
not duly surrendered on or before the sixth  anniversary of
the Effective Date shall cease to represent a claim by or interest of any
former holder of INSINC Shares of any kind or nature against or in INSINC or
NeuLion (or any successor). On such date, all cash to which such former holder
was entitled shall be deemed to have been surrendered to NeuLion or any
successor.

 

(d)                                 Any
payment made by way of cheque by the Depositary pursuant to the Plan of
Arrangement that has not been deposited or has been returned to the Depositary
or that otherwise remains
unclaimed, in each case, on or before the sixth anniversary 

 

11

 

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 to
represent a right or claim of any kind or nature and the right of the holder to
receive the consideration for INSINC Shares (or S1 Preferred
Shares substituted therefor)
pursuant to this Plan of Arrangement shall terminate and be deemed to be
surrendered and forfeited to NeuLion or any successor, for no consideration.

 

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

 

4.2                                                                               Lost Certificates

 

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

 

4.3                                                                               Withholding Rights

 

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

 

12

 

ARTICLE 5

AMENDMENTS

 

5.1                                                                               Amendments to Plan of Arrangement

 

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

 

(i)                                     set out in writing;

 

(ii)                                  approved by NeuLion;

 

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

 

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

 

(b)                                 Any amendment, modification or
supplement to this Plan of Arrangement may be proposed by INSINC at any time
prior to the INSINC Meeting (provided that NeuLion shall have consented
thereto) with or without any other prior notice or communication, and if so
proposed and accepted by the persons voting at the INSINC Meeting (other than
as may be required under the Interim Order), shall become part of this Plan of
Arrangement for all purposes.

 

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

 

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

 

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

 

ARTICLE 6

FURTHER ASSURANCES

 

6.1                                                                               Further Assurances

 

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

 

13

 

6.2                                                                               Paramountcy

 

From and after the Effective Time:

 

(a)                                  this Plan of Arrangement shall
take precedence and priority over any and all rights related to INSINC Shares
issued prior to the Effective Time;

 

(b)                                 the rights and obligations of
the 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 previously
asserted) based on or in any way relating to INSINC Shares, other shares issued
by INSINC, or INSINC shall be deemed to have been settled, compromised,
released and determined without liability except as set forth herein.

 

14

 

SCHEDULE
A

 

INSINC Series 1
Preferred Shares

 

1.                                       PREAMBLE

 

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

 

2.                                       DIVIDENDS

 

Payment
of Dividends:  The holders of the Series 1 Preferred Shares will be
entitled to receive dividends if, as and when declared by the board of
directors of the Corporation out of the assets of the Corporation properly
applicable to the payment of dividends in such amounts and payable in such
manner as the board of directors may from time to time determine.  Subject
to the rights of the holders of any other class of shares of the Corporation
entitled to receive dividends in priority to or concurrently with the holders
of the Series 1 Preferred Shares, the board of directors may in its sole
discretion declare dividends on the Series 1 Preferred Shares to the
exclusion of any other class of shares of the Corporation.

 

3.                                       LIQUIDATION, ETC.

 

Participation
upon Liquidation, Dissolution or Winding Up:  In the event of the liquidation,
dissolution or winding up of the Corporation or other distribution of assets of
the Corporation among its shareholders for the purpose of winding up its
affairs, the holders of the Series 1 Preferred Shares will be entitled to
receive from the assets of the Corporation a sum equivalent to the aggregate
Redemption Amount (as hereinafter defined) of all Series 1 Preferred
Shares held by them respectively before any amount is paid or any assets of the
Corporation are distributed to the holders of any Series 2 Preferred
Shares, common shares or shares of any other class ranking junior to the Series 1
Preferred Shares.  After payment to the holders of the Series 1
Preferred Shares of the amount so payable to them as above provided they will
not be entitled to share in any further distribution of assets of the
Corporation among its shareholders for the purpose of winding up its affairs.

 

4.                                       REDEMPTION AND RETRACTION

 

Redemption
by Corporation:  The Corporation may, upon giving notice as hereinafter
provided, redeem at any time the whole or from time to time any part of the
then outstanding Series 1 Preferred Shares from any one or more of the
holders thereof as the board of directors of the Corporation may in its sole
discretion determine on payment of the Redemption Amount for each share to be
redeemed.

 

 

Redemption
by Holder: 
A holder may, upon giving notice to the Corporation at its registered office or
other premises, call for the redemption of all or a portion of its Series 1
Preferred Shares on a redemption date to be set by the holder, which date is
not less than 10 days following the date a redemption notice is given to the
Corporation.  Such a holder’s Series 1
Preferred Shares shall be redeemed by the Corporation upon payment of the
Redemption Amount for each such share.

 

The “Redemption Amount” shall be equal to the Redemption Price
plus the amount of any declared and unpaid dividends on the relevant
shares.  The “Redemption
Price” means the sum of A, B, and C divided by E, where (A) is
equal to the Cash Consideration, (B) is $650,000, and (C) is the
product of 6,000,000 and the trading price of a NeuLion Share on the Toronto
Stock Exchange on the last trading day prior to the Effective Date, and (E) is
equal to the Total INSINC Shares. 
Capitalized terms not otherwise defined herein shall have the meaning
ascribed thereto in the Articles of Arrangement of the Corporation filed on ·.

 

In the
case of redemption of the Series 1 Preferred Shares by the Corporation
under the provisions of Section 4 hereof, the Corporation will at least 21
days (or, if all of the holders of the Series 1 Preferred Shares to be
redeemed consent, such shorter period to which they may consent) before the
date specified for redemption mail (or, with the consent of any particular
holder, otherwise deliver) a notice in writing of the intention of the Corporation
to redeem such Series 1 Preferred Shares to each person who at the record
date for the determination of shareholders entitled to receive notice is a
holder of the Series 1 Preferred Shares to be redeemed.  Such notice will (subject to the consent of
any 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 the
records of the Corporation or in the event of the address of any such holder
not 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 such
holders will not affect the validity of such redemption.  Such notice will set out the Redemption
Amount and the date on which redemption is to take place and if part only of
the shares held by the person to whom it is addressed is to be redeemed the
number thereof so to be redeemed.

 

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

 

2

 

the
Redemption Amount is not made upon presentation of certificates in accordance
with the foregoing provisions, in which case the rights of the holders of the
said Series 1 Preferred Shares will remain unaffected.

 

The
Corporation will have the right at any time after the mailing (or delivery, as
the case may be) of notice of its intention to redeem any Series 1
Preferred Shares to deposit the Redemption Amount of the shares so called for
redemption or of such of the said shares represented by certificates as have not
at the date of such deposit been surrendered by the holders thereof in
connection with such redemption to a special account in any chartered bank or
in any trust company in Canada, named in such notice, to be paid without
interest to or to the order of the respective holders of such Series 1
Preferred Shares called for redemption upon presentation and surrender to such
bank or trust company of the certificates representing the same, and upon such
deposit being made or upon the date specified for redemption in such notice,
whichever is the later, the Series 1 Preferred Shares in respect whereof
such deposit has been made will be redeemed and the rights of the holders
thereof after such deposit or such redemption date, as the case may be, will be
limited to receiving without interest their proportionate part of the total
Redemption Amount so deposited against presentation and surrender of the said
certificates held by them respectively and any interest allowed on such deposit
will belong to the Corporation.

 

5.                                       VOTING

 

Voting
Rights: 
The holders of the Series 1 Preferred Shares will not be entitled to
receive notice of or to attend any meeting of the shareholders of the
Corporation and will not be entitled to vote at any such meeting.

 

3

 

INSINC Series 2
Preferred Shares

 

1.                                       PREAMBLE

 

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

 

2.                                       DIVIDENDS

 

Payment
of Dividends:  The holders of the Series 2 Preferred Shares will be
entitled to receive dividends if, as and when declared by the board of
directors of the Corporation out of the assets of the Corporation properly
applicable to the payment of dividends in such amounts and payable in such
manner as the board of directors may from time to time determine.  Subject
to the rights of the holders of any other class of shares of the Corporation
entitled to receive dividends in priority to or concurrently with the holders
of the Series 2 Preferred Shares, the board of directors may in its sole
discretion declare dividends on the Series 2 Preferred Shares to the
exclusion of any other class of shares of the Corporation.

 

3.                                       LIQUIDATION, ETC.

 

Participation
upon Liquidation, Dissolution or Winding Up:  In the event of the liquidation,
dissolution or winding up of the Corporation or other distribution of assets of
the Corporation among its shareholders for the purpose of winding up its
affairs, the holders of the Series 2 Preferred Shares will be entitled to
receive from the assets of the Corporation a sum equivalent to the aggregate
Redemption Amount (as hereinafter defined) of all Series 2 Preferred
Shares held by them respectively after the holders of Series 1 Preferred
Shares have received their liquidation entitlement, but before any amount is
paid to holders of common shares or shares of any other class ranking junior to
the Series 2 Preferred Shares.  After payment to the holders of the Series 2
Preferred Shares of the amount so payable to them as above provided they will
not be entitled to share in any further distribution of assets of the
Corporation among its shareholders for the purpose of winding up its affairs.

 

4.                                       REDEMPTION AND RETRACTION

 

Redemption
by Corporation:  The Corporation may, upon giving notice as hereinafter
provided, redeem at any time the whole or from time to time any part of the
then outstanding Series 2 Preferred Shares from any one or more of the
holders thereof as the board of directors of the Corporation may in its sole
discretion determine on payment of the Redemption Amount for each share to be
redeemed.

 

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

 

4

 

its Series 2
Preferred Shares on a redemption date to be set by the holder, which date is
not less than 10 days following the date a redemption notice is given to the
Corporation.  Such a holder’s Series 2
Preferred Shares shall be redeemed by the Corporation upon payment of the
Redemption Amount for each such share.

 

The “Redemption Amount” shall be equal to the Redemption Price
plus the amount of any declared and unpaid dividends on the relevant
shares.  The “Redemption
Price” means $1.00 per share. 
Capitalized terms not otherwise defined herein shall have the meaning
ascribed thereto in the Articles of Arrangement of the Corporation filed on ·.

 

In the
case of redemption of the Series 2 Preferred Shares by the Corporation
under the provisions of Section 4 hereof, the Corporation will at least 21
days (or, if all of the holders of the Series 2 Preferred Shares to be
redeemed consent, such shorter period to which they may consent) before the
date specified for redemption mail (or, with the consent of any particular
holder, otherwise deliver) a notice in writing of the intention of the
Corporation to redeem such Series 2 Preferred Shares to each person who at
the record date for the determination of shareholders entitled to receive
notice is a holder of the Series 2 Preferred Shares to be redeemed.  Such notice will (subject to the consent of
any 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 the
records of the Corporation or in the event of the address of any such holder
not 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 such
holders will not affect the validity of such redemption.  Such notice will set out the Redemption
Amount and the date on which redemption is to take place and if part only of
the shares held by the person to whom it is addressed is to be redeemed the
number thereof so to be redeemed.

 

On or
after the date so specified for redemption, the Corporation will pay or cause
to be paid to or to the order of the holders of the Series 2 Preferred
Shares to be redeemed the Redemption Amount thereof on presentation and surrender
at the registered office of the Corporation or any other place designated in
such notice of the certificates representing the Series 2 Preferred Shares
called for redemption.  Such payment will
be made by cheque payable at par at any branch of the Corporation’s bankers in
Canada (or, with the consent of any particular holder, by any other
means).  If a part only of the shares
represented by any certificate are redeemed a new certificate for the balance
will be issued at the expense of the Corporation.  From and after the date specified for
redemption in any such notice the holders of the Series 2 Preferred Shares
called for redemption will cease to be entitled to dividends and will not be
entitled to exercise any of the rights of holders of Series 2 Preferred
Shares in respect thereof unless payment of the Redemption Amount is not made
upon presentation of certificates in accordance with the foregoing provisions,
in which case the rights of the holders of the said Series 2 Preferred
Shares will remain unaffected.

 

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

 

5

 

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

 

5.                                       VOTING

 

Voting
Rights: 
The holders of the Series 2 Preferred Shares will not be entitled to
receive notice of or to attend any meeting of the shareholders of the
Corporation and will not be entitled to vote at any such meeting.

 

6

 

SCHEDULE
B

PARTICIPATION NOTICE

 

PARTICIPATION
NOTICE

PLAN
OF ARRANGEMENT

INVOLVING

INTERACTIVE NETCASTING SYSTEMS INC. AND

NEULION, INC.

 

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

 

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

 

Option 1

 

The Arrangement provides that INSINC will pay a
capital dividend to those INSINC shareholders who elect to be Participating
INSINC Shareholders and, accordingly, the Participating INSINC Shareholders
will effectively receive part of the cash consideration to be paid to them for
their INSINC shares as a capital dividend. 
It is INSINC’s understanding that if a valid capital dividend election
is filed in the manner prescribed under the Income Tax Act (Canada)  (the “Tax Act”) the
capital dividend will be tax free to Canadian resident shareholders who
participate in the dividend.  Should the
Canada Revenue Agency determine that the actual amount of INSINC’s capital
dividend account is less than the amount of the dividend provided for in the
Arrangement, 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 excess
capital dividend election.  The effect of
such a subsequent election would be to convert the excess amount to a taxable
dividend.

 

INSINC shareholders who elect Option 1 elect to
participate in the Arrangement as Participating INSINC Shareholders and to
participate 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 under
ss.184(3) and (4) of the Tax Act and related regulations to treat any
excess portion of the capital dividend as a taxable dividend.

 

Option 2

 

INSINC shareholders who elect Option 2 will not
receive the capital dividend in accordance with the Arrangement and will
receive all of the cash consideration to be paid to them for their INSINC
shares as proceeds of disposition.

 

 

Election

 

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

 

[please
check 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, signed
and returned to INSINC by completion of the meeting of INSINC shareholders to
be 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:

  

 

 

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 Information
Circular (the “Circular”) of INSINC dated October 8,
2009 accompanying the notice of this meeting (as the Arrangement may be
modified or amended), is hereby authorized, approved and adopted;

 

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

 

3.                                       The payment of the dividend to
Participating INSINC Shareholders as contemplated by the Plan of Arrangement
and the filing of an election pursuant to subsection 83(2) of the Tax Act
in 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 actions
of the directors of INSINC in approving the Arrangement and the actions of the
officers of INSINC in executing and delivering the Acquisition Agreement and
any amendments thereto are hereby ratified and approved;

 

5.                                       Notwithstanding that this
resolution has been passed (and the Arrangement adopted) by the securityholders
of INSINC or that the Arrangement has been approved by the Supreme Court of
British Columbia, the directors of INSINC are hereby authorized and empowered
without further notice to, or approval of, the securityholders of INSINC to
amend the Acquisition Agreement or the Plan of Arrangement to the extent
permitted by the Acquisition Agreement or the Plan of Arrangement; and

 

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

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