AGREEMENT OF PURCHASE AND SALE
BY AND BETWEEN
XXXXXX TECHNOLOGY CORPORATION
AND
PATH 1 NETWORK TECHNOLOGIES INC.
DATED AS OF APRIL 10, 2000
TABLE OF CONTENTS
Page
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ARTICLE I. PURCHASE AND SALE OF THE PATH 1 SHARES.................................................................1
1.1 Purchase and Sale of the Path 1 Shares........................................................1
1.2 Purchase Price................................................................................1
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................1
2.1 Organization and Qualification; Company Subsidiaries..........................................2
2.2 Conflicts.....................................................................................2
2.3 Capitalization................................................................................2
2.4 Reports; Financial Statements; Undisclosed Liabilities........................................3
2.5 Issuance of Path 1 Shares.....................................................................3
2.6 Absence of Certain Changes....................................................................3
2.7 Taxes.........................................................................................4
2.8 Real Property Owned or Leased.................................................................4
2.9 Title to Assets...............................................................................4
2.10 Contractual and Other Obligations.............................................................5
2.11 Employee Benefit Plans........................................................................5
2.12 Labor Relations...............................................................................5
2.13 Insurance.....................................................................................5
2.14 Litigation....................................................................................5
2.15 Permits; Compliance with Applicable Law.......................................................5
2.16 Intellectual Property.........................................................................6
2.17 Consents......................................................................................6
2.18 Foreign Person................................................................................6
2.19 Authority.....................................................................................6
2.20 Brokers and Finders...........................................................................7
2.21 Compensation..................................................................................7
2.22 Full Disclosure...............................................................................7
2.23 Investment....................................................................................7
2.24 Legend........................................................................................8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PURCHASER.........................................................10
3.1 Organization and Qualification; Purchaser Subsidiaries.......................................10
3.2 Conflicts....................................................................................10
3.3 Capitalization...............................................................................10
3.4 Financial Statements; Undisclosed Liabilities................................................10
3.5 Issuance of Xxxxxx Shares....................................................................11
3.6 Consents.....................................................................................11
3.7 Authority....................................................................................11
3.8 Reports......................................................................................11
3.9 Full Disclosure..............................................................................12
3.10 Investment...................................................................................12
3.11 Legend.......................................................................................13
3.12 Brokers and Finders..........................................................................13
TABLE OF CONTENTS
(CONTINUED)
3.13 Xxxxxx Shares................................................................................13
ARTICLE IV. ADDITIONAL COVENANTS AND AGREEMENTS..................................................................14
4.1 Interim Operations of the Company............................................................14
4.2 Alternative Proposals........................................................................16
4.3 Reasonable Best Efforts......................................................................17
4.4 Purchaser Access to Information..............................................................18
4.5 Publicity....................................................................................18
4.6 Notification of Certain Matters..............................................................18
4.7 Stock Exchange Listings and Form 10..........................................................19
4.8 Company Disclosure Schedule..................................................................19
4.9 Registration Rights..........................................................................19
ARTICLE V. CLOSING...............................................................................................20
5.1 Time and Place of Closing....................................................................20
5.2 Closing Deliveries...........................................................................20
5.3 Delivery of Path 1 Shares....................................................................21
5.4 Tax Matters..................................................................................22
ARTICLE VI. CONDITIONS TO THE PURCHASE AND SALE OF THE PATH 1 SHARES.............................................22
6.1 Conditions to Each Party's Obligations to Close..............................................22
6.2 Conditions to the Obligations of Purchaser...................................................22
6.3 Conditions to the Obligations of the Company.................................................23
ARTICLE VII. TERMINATION.........................................................................................24
7.1 Termination..................................................................................24
7.2 Effect of Termination........................................................................25
ARTICLE VIII. INDEMNIFICATION....................................................................................25
8.1 Indemnity....................................................................................25
8.2 Limitation on Indemnity......................................................................25
8.3 Procedure....................................................................................25
8.4 Remedies.....................................................................................26
8.5 Time Limit...................................................................................26
ARTICLE IX. MISCELLANEOUS AND GENERAL............................................................................26
9.1 Payment of Expenses and Other Payments.......................................................26
9.2 Survival of Representations and Warranties...................................................26
9.3 Modification or Amendment....................................................................26
9.4 Waiver of Conditions.........................................................................26
9.5 Counterparts.................................................................................27
9.6 Governing Law................................................................................27
9.7 Jurisdiction; Waiver of Trial by Jury........................................................27
9.8 Notices......................................................................................27
9.9 Entire Agreement; Assignment.................................................................28
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9.10 Parties in Interest..........................................................................28
9.11 Validity.....................................................................................28
9.12 Captions.....................................................................................29
9.13 Specific Performance.........................................................................29
9.14 "Knowledge"of the Company or Purchaser.......................................................29
ARTICLE X. DEFINITIONS...........................................................................................29
10.1 Certain Definitions..........................................................................29
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AGREEMENT OF PURCHASE AND SALE
AGREEMENT OF PURCHASE AND SALE (this "Agreement") dated as of
April 10, 2000, by and between Xxxxxx Technology Corporation, a corporation
organized under the laws of the Province of Ontario ("Purchaser"), and Path 1
Network Technologies Inc., a Delaware corporation (the "Company"). Capitalized
terms used herein and not defined in the specific Section in which they are used
shall have the meanings assigned to such terms in Article X hereof.
RECITALS
WHEREAS, the Company is engaged in the business of developing
software and hardware technologies which enable the merging of disparate digital
information over the same network infrastructure and related activities from its
headquarters in San Diego, California;
WHEREAS, Purchaser desires to acquire from the Company
1,250,000 newly issued shares of Class A common stock, $.001 par value (the
"Path 1 Class A Common Stock"), of the Company (all such 1,250,000 shares of
Path 1 Class A Common Stock being hereinafter referred to as the "Path 1
Shares") and the Company desires to sell all of the Path 1 Shares to Purchaser,
on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE PATH 1 SHARES
1.1 PURCHASE AND SALE OF THE PATH 1 SHARES. Subject to
the terms and conditions of this Agreement and on the basis of the
representations, warranties, covenants and agreements herein contained, at the
Closing (as hereinafter defined), the Company agrees to sell, assign and convey
to Purchaser, and Purchaser agrees to purchase, acquire and accept from the
Company, the Path 1 Shares.
1.2 PURCHASE PRICE. The purchase price (the "Purchase
Price") for the Path 1 Shares is Ten Million U.S. Dollars ($10,000,000) and
200,000 common shares, no par value (the "Xxxxxx Common Shares"), of Purchaser
(such 200,000 Xxxxxx Common Shares being hereinafter referred to as the "Xxxxxx
Shares"). The Purchase Price for the Path 1 Shares is payable at the Closing by
delivery to the Company of a wire transfer in immediately available funds to an
account designated by the Company in the amount of U.S. $10,000,000 and a
certificate representing the Xxxxxx Shares registered in the name of the
Company.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as
follows:
2.1 ORGANIZATION AND QUALIFICATION; COMPANY SUBSIDIARIES.
The Company is a corporation validly existing and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to own, operate and lease its assets and properties and to conduct the
businesses in which it is now engaged. The Company is duly qualified to transact
business as a foreign corporation in all jurisdictions wherein it is required to
be so qualified, except where the failure to be so qualified would not have a
Company Material Adverse Effect. The Company does not have any subsidiaries
other than as set forth in Section 2.1 of the disclosure schedule delivered to
Purchaser by the Company concurrently with the execution hereof (the "Company
Disclosure Schedule"). The Company does not own any capital stock or other
proprietary interest, directly or indirectly, in any corporation, association,
trust, partnership, joint venture, limited liability company or other Person nor
is the Company bound by any agreement to acquire any such capital stock or other
proprietary interest.
2.2 CONFLICTS. Neither the execution and delivery of this
Agreement by the Company, nor the consummation of the transactions contemplated
hereby (the "Transactions") to be consummated by the Company, (a) violates any
provision of the Certificate of Incorporation or By-laws of the Company or (b)
constitutes a violation of any Applicable Law. Except as set forth in Section
2.2 of the Company Disclosure Schedule, neither the execution and delivery of
this Agreement by the Company, nor the consummation of the Transactions
contemplated hereby to be consummated by the Company, violates, conflicts with,
results in any breach of any of the terms of, or results in the termination of
or the creation of any Lien pursuant to the terms of any material agreement,
instrument, or contract to which the Company is a party or by which it is bound,
except where such violation, conflict, breach, termination or Lien would not
have a Company Material Adverse Effect.
2.3 CAPITALIZATION. The authorized capital stock of the
Company consists of: (i) 20,000,000 shares of Path 1 Class A Common Stock, of
which, as of the date hereof, 6,462,651 shares were issued and outstanding, (ii)
10,000,000 shares of Path 1 Class B Common Stock, of which, as of the date
hereof, no shares of Path 1 Class B Common Stock were issued and outstanding and
(iii) 10 shares of Series A preferred stock, of which, as of the date hereof, no
shares were issued and outstanding. Except for (i) 897,336 options to purchase
the same number of shares of Path 1 Class A Common Stock, (ii) 642,996 options
to purchase the same number of shares of Path 1 Class B Common Stock and (iii)
up to a maximum of 650,000 options to purchase the same number of shares of Path
1 Class B Common Stock which may be granted to current or future officers,
employees or consultants of the Company, there are no outstanding options,
warrants, rights, convertible or exchangeable securities, proxy or stockholders'
agreements or agreements of any kind for the purchase or acquisition from, or
issuance by, the Company of any of its securities. Except for the Stockholders'
Agreement, there are no outstanding agreements or other arrangements to which
the Company is a party concerning the voting of any shares of capital stock of
the Company or which obligate the Company to redeem or otherwise acquire from
any Person any shares of capital stock of the Company. All outstanding shares of
capital stock of the Company are duly authorized, validly issued, fully paid and
nonassessable.
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2.4 REPORTS; FINANCIAL STATEMENTS; UNDISCLOSED
LIABILITIES.
(a) On March 23, 2000, the Company re-filed a
General Form for Registration of Securities on Form 10 (the "Form 10") with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). On the re-filing date,
the Form 10 complied in all material respects with the applicable requirements
of the Exchange Act, and the published rules and regulations of the SEC
thereunder. The Form 10 will not, on the effective date thereof, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) On the filing date, the financial statements
(including the related notes thereto) of the Company included in the Form 10
complied in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, were
prepared in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as otherwise
noted therein) and presented fairly in all material respects the financial
position of the Company as of their respective dates, and the results of its
operations and cash flows for the periods presented therein (subject, in the
case of the unaudited interim financial statements, to normal year-end
adjustments). As of the date of the Company's most recent regularly prepared
consolidated balance sheet, the Company had less than $10,000,000 of
consolidated total assets.
(c) Except (i) as set forth in Section 2.4(c) of
the Company Disclosure Schedule, (ii) as set forth in the balance sheet of the
Company as of December 31, 1999 set forth in the Form 10 (the "Balance Sheet")
and (iii) for current liabilities and obligations incurred in the ordinary
course of business consistent with past practice since December 31, 1999 (and
not materially different in type or amount), the Company does not have any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be recognized or disclosed on a
balance sheet of the Company or in the notes thereto.
2.5 ISSUANCE OF PATH 1 SHARES. When issued, sold and
delivered to Purchaser in accordance with the terms of this Agreement for the
consideration expressed herein, the Path 1 Shares shall be duly and validly
authorized, fully paid and non-assessable shares of Path 1 Class A Common Stock
free and clear of any restrictions on transfer, other than restrictions on
transfer under the Stockholders' Agreement or applicable state, foreign and
federal securities laws, and free and clear of any preemptive or similar rights.
2.6 ABSENCE OF CERTAIN CHANGES. Since the date of the
Balance Sheet, (i) the Company has conducted its business in the ordinary and
usual course consistent with past practice, and (ii) there has not occurred any
events or changes having, or reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
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2.7 TAXES. Except as set forth in Section 2.7 of the
Company Disclosure Schedule:
(a) The Company has filed or caused to be filed
on a timely basis all returns, reports or other declarations relating to Taxes
required to be filed by it (the "Tax Returns"), except for any such Tax Returns
the failure to file which would not have a Company Material Adverse Effect, and
the Company has timely paid or caused to be paid all federal, state, local,
provincial and foreign taxes (including, but not limited to, income, franchise,
property (real, tangible and intangible), sales, use, unemployment, withholding,
gross receipts, business license, transfer, capital, net worth, gains, excise,
social security and workers' compensation taxes and estimated income and
franchise tax payments, and penalties, interest and fines with respect to any
thereof) (collectively, "Taxes") payable by it with respect to the periods
covered by such Tax Returns.
(b) The Company has not received written notice
from any taxing authority of any deficiency, claim or other dispute relating to
the payment or assessment of any Taxes for any period which remains unsettled at
the date hereof.
(c) The Company has not executed any waiver of
any statute of limitations on the assessment or collection of Taxes.
(d) There are no Liens for Taxes (other than
Permitted Liens) upon or, to the Company's Knowledge threatened against any
assets of the Company, other than Liens which would not have a Company Material
Adverse Effect.
(e) The Company is not a party to any pending
or, to the Company's Knowledge, threatened action, proceeding or assessment by
any taxing authority, foreign or domestic, relating to the Company.
(f) No election under Section 341(f) of the Code
has been made to treat the Company as a "consenting corporation" as defined in
such Section 341(f).
(g) The Company is not and never has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code.
2.8 REAL PROPERTY OWNED OR LEASED. The Company does not
own any real property. Except as set forth in Section 2.8 of the Company
Disclosure Schedule, the Company enjoys peaceful and undisturbed possession
under all leases under which it is the lessee, and all said leases are valid and
subsisting and in full force and effect, except with respect to Permitted Liens,
or as could not reasonably be expected to have a Company Material Adverse
Effect.
2.9 TITLE TO ASSETS. Except as set forth in Section 2.9
of the Company Disclosure Schedule, the Company has good and merchantable title
to all of the properties and assets (tangible and intangible) which it owns and
valid and existing leaseholds, licenses or other rights to use all of the other
properties and assets which it leases, licenses or uses in the operation of its
business as currently conducted, in any case, free and clear of all Liens,
except for Permitted Liens, or as could not reasonably be expected to have a
Company Material Adverse Effect.
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2.10 CONTRACTUAL AND OTHER OBLIGATIONS. The Company does
not have and is not bound by any material contract, agreement, lease,
commitment, or proposed transaction, judgment, order, writ or decree, written or
oral, absolute or contingent, other than those that have been entered into in
the ordinary course of business or as set forth on Section 2.10 of the Company
Disclosure Schedule. The Company is not, and to the Company's Knowledge no other
Person party thereto is, in violation or default in any material respect of any
provision of any material agreement, instrument, or contract to which the
Company is a party or by which the Company is bound.
2.11 EMPLOYEE BENEFIT PLANS. Except as set forth in
Section 2.11 of the Company Disclosure Schedule, the Company does not maintain
or sponsor, nor is it required to make contributions to, any pension,
profit-sharing, bonus, incentive, welfare or other employee benefit plan within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") (such plans and related trusts, insurance and annuity
contracts, funding media and related agreements and arrangements, being
hereinafter referred to as the "Benefit Plans").
2.12 LABOR RELATIONS. Except as set forth in Section 2.12
of the Company Disclosure Schedule, there are no labor strikes, stoppages or
lockouts between the Company and its employees and the Company is not a party to
any contract or agreement with any labor organization or collective bargaining
unit.
2.13 INSURANCE. The Company carries insurance covering its
properties and business adequate and customary for the type and scope of the
properties and business.
2.14 LITIGATION. Except or as set forth in Section 2.14 of
the Company Disclosure Schedule, there is no litigation, arbitration, claim or
other legal proceeding (collectively, "Actions") pending or, to the Company's
Knowledge, threatened against the Company, or any of its properties or assets
(tangible or intangible), except Actions which, individually or in the
aggregate, could not reasonably be expected to result in a Company Material
Adverse Effect.
2.15 PERMITS; COMPLIANCE WITH APPLICABLE LAW.
(a) PERMITS. The Company has all permits,
licenses, approvals, franchises and authorizations (collectively, the "Permits")
required for the conduct of the business in which it is presently engaged,
except for such Permits which the failure to have, individually or in the
aggregate, would not have a Company Material Adverse Effect. All of the Permits
are in full force and effect, except where the failure to be in effect,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(b) APPLICABLE LAW. Except as set forth in
Section 2.15(b) of the Company Disclosure Schedule, the Company is not in
violation of any Applicable Law applicable to it, except where the failure to be
in compliance, individually or in the aggregate, could not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
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2.16 INTELLECTUAL PROPERTY. As of the date hereof, the
Company does not have any issued patents or trademarks. Section 2.16 of the
Company Disclosure Schedule sets forth a list as of the date hereof of all the
Company's pending applications for patents, all of the Company's pending
applications for trademarks, tradenames and service marks, all registrations of
copyrights and all pending applications therefor, and all licenses and
agreements in respect thereof (collectively, the "Registered Intellectual
Property"). To the Company's Knowledge, all of the patents, trademarks,
tradenames, service marks, copyrights and licenses or other agreements listed in
Section 2.16 of the Company Disclosure Schedule are valid and in full force and
effect, except as otherwise noted in Section 2.16 of the Company Disclosure
Schedule. Except as set forth in Section 2.16 of the Company Disclosure Schedule
and except as could not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, (i) to the Company's
Knowledge, the rights of the Company to the Registered Intellectual Property and
to all other intellectual property used or held for use in the business of the
Company, except commercially available over-the-counter shrink-wrapped software,
(the "Other Intellectual Property") do not conflict with or infringe on the
rights of any Person and the Company has not received any written notice
alleging that the Company has violated or, by conducting its business as
proposed, would violate the intellectual property rights of such Person, and
(ii) to the Company's Knowledge, no other Person is infringing on the rights of
the Company to its Registered Intellectual Property or the Other Intellectual
Property.
2.17 CONSENTS. Except for such filings as are required to
be made by the Company and exemptions, rulings or orders as are required under
any federal, state or foreign securities laws (all of which will be made or
obtained on or prior to the Closing) and except as set forth in Section 2.17 of
the Company Disclosure Schedule, no consents, approvals or authorizations of, or
filings with, any Governmental Authority or any other Person are required on the
part of the Company in connection with the execution and delivery of this
Agreement by the Company and the consummation of the Transactions contemplated
hereby to be consummated by the Company, except where the failure to obtain such
consents, approvals, or authorizations, or make such filings, could not,
individually or in the aggregate, have a Company Material Adverse Effect. No
security of the Company is, as of the date hereof, (i) listed on any national
securities exchange, (ii) authorized for quotation on The Nasdaq Stock Market or
(iii) held of record by more than 2,000 stockholders.
2.18 FOREIGN PERSON. The Company is not a foreign person
within the meaning of Section 1445(f)(3) of the Code.
2.19 AUTHORITY. The Company has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
Transactions. The execution, delivery and performance of this Agreement has been
duly and validly authorized by the Company's Board of Directors and no other
corporate action on the part of the Company is necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes the valid and binding agreement of
Purchaser, constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement hereof may be limited (i) by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, (ii) by general principles of equity (regardless of
whether
6
enforceability is considered in a proceeding in equity or at law) and (iii) as
to rights to indemnity that are contrary to applicable securities laws.
2.20 BROKERS AND FINDERS. Other than First Security Xxx
Xxxxxx, the Company has not entered into a written agreement with any investment
banker, broker, finder, advisor, consultant or intermediary in connection with
the Transactions which would be entitled to any investment banking, brokerage,
finders, advisory or similar fee or commission in connection with this Agreement
or the Transactions.
2.21 COMPENSATION. Except as set forth in Section 2.22 of
the Company Disclosure Schedule, the Company is not bound by any bonus plan,
incentive plan, stock option plan, stock purchase plan, severance plan or other
benefits plans or arrangements.
2.22 FULL DISCLOSURE. No representation or warranty by the
Company in this Agreement and no statement by the Company contained in any
exhibit, disclosure schedule, or certificate contemplated by this Agreement
contains or will contain any untrue statement of material fact or omits or will
omit to state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
2.23 INVESTMENT. Without limiting the effect of Article
VIII hereof:
(a) The Company understands that Purchaser
proposes to issue and deliver to the Company the Xxxxxx Shares pursuant to this
Agreement without registration under the Securities Act of 1933, as amended (the
"Securities Act") or under any other Applicable Law; that for such purpose
Purchaser will rely upon the Company's representations and warranties contained
herein; and that registration under the Securities Act may be required if such
representations and warranties are not correct.
(b) The Company has received such information
relating to the business and affairs of Purchaser which could reasonably be
deemed necessary or appropriate by the Company, and all additional information
which is necessary to verify the accuracy of the information so received. The
Company has had the opportunity to ask questions of and receive answers from
Purchaser concerning the business and affairs of Purchaser and concerning terms
and conditions of the Transactions. On the basis of the foregoing, the Company
is familiar with the operations, business plans and financial condition of
Purchaser.
(c) The Company understands that, under the
existing rules of the SEC, the Company may be unable to sell the Xxxxxx Shares
issued to the Company pursuant to this Agreement, except to the extent that such
shares may be sold (i) pursuant to an effective registration statement covering
such sale pursuant to the Securities Act and applicable state securities laws or
an applicable exemption therefrom or (ii) in a bona fide private placement to a
purchaser who shall be subject to the same restrictions on any resale or (iii)
subject to the restrictions contained in Rule 144 under the Securities Act
("Rule 144") or (iv) outside the United States in compliance with the
requirements of Rule 904 of Regulation S under the Securities Act ("Rule 904").
7
(d) The Company is not relying on Purchaser
respecting the financial, tax and other economic considerations of an investment
in the Xxxxxx Shares issued to the Company pursuant to this Agreement, and the
Company has relied on the advice of, or has consulted with, its own advisors.
(e) The Company is familiar with the provisions
of Rule 144 and Rule 904 and the limitations upon the availability and
applicability of such rules.
(f) The Company is an "accredited investor"
within the meaning of Regulation D under the Securities Act and is a
sophisticated investor familiar with the type of risks inherent in the
acquisition of restricted securities such as the Xxxxxx Shares issued to the
Company pursuant to this Agreement, and its financial position is such that it
can afford to retain such shares for an indefinite period of time without
realizing any direct or indirect cash return on its investment.
(g) The Company has such knowledge and
experience in financial, tax and business matters so as to enable it to utilize
the information made available to it in connection with the issuance of the
Xxxxxx Shares issued to the Company pursuant to this Agreement to evaluate the
merits and risks of an investment in such shares and to make an informed
investment decision with respect thereto.
(h) The Company is acquiring the Xxxxxx Shares
issued to the Company pursuant to this Agreement as an investment for its
account, and without any present view towards the resale or other distribution
thereof.
(i) The Company has been independently advised
as to or is aware of the restrictions with respect to trading in the Xxxxxx
Shares imposed by applicable securities legislation in the jurisdiction in which
it resides and confirms that no representation has been made respecting such
restrictions with respect to trading in the Xxxxxx Shares.
(j) The Company acknowledges that the Xxxxxx
Shares are not qualified for distribution to the public in Canada. The Company
certifies that (a) the Company is not a Canadian resident nor acting for the
account or benefit of a Canadian resident; (b) the Xxxxxx Shares were not
offered to the Company in Canada, and the Company was, at the time of agreeing
to sell the Path 1 Shares, and is outside Canada; and (c) for a period ending 40
days after the date of issuance of the Xxxxxx Shares to the Company, the Company
will not resell the Xxxxxx Shares to any Canadian resident or in Canada and,
thereafter, any resale by the Company to a Canadian resident or in Canada will
be made in accordance with applicable securities laws of the provinces and
territories of Canada.
2.24 LEGEND. Each certificate representing Xxxxxx Shares
issued to the Company pursuant to this Agreement, shall contain upon its face or
upon the reverse side thereof a legend to the following effect:
"These securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or
qualified for distribution to the public in Canada or
qualified under state securities laws and may not be sold,
pledged, or otherwise
8
transferred unless (a) covered by an effective registration
statement under the Securities Act, and qualified under
applicable state securities laws; (b) sold outside the United
States in accordance with Rule 904 of Regulation S under the
Securities Act; (c) pursuant to an exemption from registration
under the Securities Act provided by Rule 144 thereunder, if
available; or (d) in compliance with certain other procedures
satisfactory to Xxxxxx Technology Corporation upon the
furnishing to Xxxxxx Technology Corporation of an opinion from
counsel of recognized national standing in form and substance
satisfactory to Xxxxxx Technology Corporation to the effect
that no registration or qualification is legally required for
such transfer. The holder hereof, by acquiring such
securities, agrees for the benefit of Xxxxxx Technology
Corporation that for a period ending 40 days after the date of
the issuance of those securities by Xxxxxx Technology
Corporation, the holder will not resell those securities to
any Canadian resident or in Canada. Delivery of this
certificate may not constitute "good delivery" in settlement
of transactions on the Toronto Stock Exchange. A new
certificate, bearing no legend, delivery of which will
constitute "good delivery", may be obtained from Xxxxxx
Technology Corporation's Transfer Agent in connection with a
sale made pursuant to Rule 904 of Regulation S at a time
Xxxxxx Technology Corporation is a "foreign private issuer" as
defined in Rule 405 under the Securities Act upon delivery of
this certificate after 40 days after the issuance of the
securities by Xxxxxx Technology Corporation and a duly
executed declaration, in a form satisfactory to such Transfer
Agent and Xxxxxx Technology Corporation, to the effect that
(A) the sale of the securities represented hereby is being
made in compliance with Rule 904 of Regulation S under the
Securities Act; and (B) certifying that (1) the buyer is not
an "Affiliate" (as defined in Rule 405 under the Securities
Act) of Xxxxxx Technology Corporation; (2) the offer of such
securities was not made to a person in the United States and
either (x) at the time the buy order was originated, the buyer
was outside the United States, or Path 1 Network Technologies,
Inc. and any person acting on its behalf reasonably believe
that the buyer was outside the United States, or (y) the
transaction was executed on or through the facilities of the
Toronto Stock Exchange and neither Path 1 Network
Technologies, Inc. nor any person acting its behalf knows that
the transaction has been prearranged with a buyer in the
United States; (3) neither Path 1 Network Technologies, Inc.
nor any person acting on its behalf engaged in any directed
selling efforts in connection with the offer and sale of such
securities; (4) the sale is bona fide and not for the purpose
of "washing off" resale restrictions imposed because the
securities are "restricted securities"; and (5) the sale is
not a
9
transaction or part of a series of transactions which,
although in technical compliance with Regulation S, is part of
a plan or scheme to evade the registration requirements of the
Securities Act. Terms used herein have the meanings given to
them by Regulation S."
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company that:
3.1 ORGANIZATION AND QUALIFICATION; PURCHASER
SUBSIDIARIES. Purchaser is validly existing, under the laws of the jurisdiction
of its organization, and has all requisite corporate power, authority and legal
right to own, operate and lease its assets and properties and to conduct the
businesses in which it is now engaged. Purchaser is duly qualified to transact
business as a foreign corporation in all jurisdictions wherein it is required to
be so qualified, except where the failure to be so qualified would not have a
Purchaser Material Adverse Effect. Copies of the Articles of Incorporation and
By-laws or other organizational documents of Purchaser have been heretofore made
available to the Company, which copies are complete and correct and include all
amendments, modifications or supplements thereto.
3.2 CONFLICTS. Neither the execution and delivery of this
Agreement by Purchaser, nor the consummation of the Transactions to be
consummated by Purchaser, (a) violates any provision of the Articles of
Incorporation or By-laws of Purchaser or (b) subject to receipt of regulatory
approvals and required filings under federal, state and provincial securities
laws and the Ontario Business Corporations Act, constitutes a violation of any
Applicable Law. Neither the execution and delivery of this Agreement by
Purchaser nor the consummation of the Transactions contemplated hereby to be
consummated by Purchaser, violates, conflicts with, results in any breach of any
of the terms of, or results in the termination of or the creation of any
material Lien pursuant to the terms of any material contract or other obligation
to which Purchaser is subject, except where such violation, conflict, breach,
termination or Lien would not have a Purchaser Material Adverse Effect.
3.3 CAPITALIZATION. The authorized capital stock of
Purchaser consists of: (i) an unlimited number of shares of Xxxxxx Common
Shares, of which, as of the date hereof, 25,071,573 shares of Xxxxxx Common
Shares were issued and outstanding and (ii) an unlimited number of preference
shares, of which, as of the date hereof, no preference shares were issued and
outstanding. All outstanding shares of capital stock of Purchaser are, and all
shares of Xxxxxx Common Shares to be issued as part of the Purchase Price will
be, when so issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
3.4 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
Purchaser has made available to the Company its audited consolidated financial
statements dated April 30, 1999 and its unaudited consolidated financial
statements (including the related notes thereto) of Purchaser for the nine
months ended January 31, 2000 which have been prepared in conformity with GAAP
in Canada applied on a consistent basis during the periods involved (except as
otherwise noted therein), and presented fairly in all material respects the
consolidated financial position of Purchaser as of their respective dates, and
the consolidated results of their operations and cash
10
flows for the periods presented therein (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments).
3.5 ISSUANCE OF XXXXXX SHARES. When issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein to the Company, the Xxxxxx Shares shall be duly and validly
authorized, fully paid and non-assessable Xxxxxx Common Shares free and clear of
any restrictions on transfer, other that the restrictions on transfer under this
Agreement, or applicable state, federal, provincial and foreign securities laws.
Prior to the date hereof, Purchaser has filed an application with The Nasdaq
Stock Market to list the Xxxxxx Common Shares thereon.
3.6 CONSENTS. Except for (i) such filings as may be
required by the By-laws, rules, regulations or policies of The Toronto Stock
Exchange in respect of Xxxxxx Common Shares to be issued as part of the Purchase
Price and the listing of such Xxxxxx Common Shares on The Toronto Stock Exchange
and (ii) such filings as are required to be made and exemption rulings or orders
as are required under the Ontario Business Corporations Act and Canadian
securities laws, no consents, approvals or authorizations of, or filings with,
any Governmental Authority or any other person or entity are required in
connection with the execution and delivery of this Agreement by Purchaser and
the consummation of the Transactions contemplated hereby to be consummated by
Purchaser, except where the failure to obtain such consents, approvals, or
authorizations, or make such filings, would not have a Purchaser Material
Adverse Effect.
3.7 AUTHORITY. Purchaser has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
Transactions. The execution, delivery and performance of this Agreement and the
consummation by Purchaser of the Transactions have been duly and validly
authorized by the Board of Directors of Purchaser, and no other corporate action
on the part of Purchaser is necessary to authorize this Agreement or to
consummate the Transactions. This Agreement has been duly and validly executed
and delivered by Purchaser and, assuming this Agreement constitutes the valid
and binding agreement of the Company, constitutes the valid and binding
agreement of Purchaser, enforceable against it in accordance with its terms,
except that the enforcement hereof may be limited (i) by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, (ii) by general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law) and (iii) as to rights to indemnity under securities laws, by Applicable
Laws.
3.8 REPORTS. Purchaser is a reporting issuer under the
Securities Act (Ontario) (the "Ontario Securities Act"), is not on the list of
defaulting reporting issuers maintained under the Ontario Securities Act, and
has made available to the Company a true and complete copy of each quarterly,
annual or other form, report, filing or document filed by Purchaser with the
Governmental Authorities under the Ontario Securities Act, or under the rules,
policies, listing agreements or other requirements of The Toronto Stock Exchange
("Exchange Filing Requirements"), since July 9, 1999 which are all the forms,
reports, filing or documents (other than preliminary material) that Purchaser
was required to file with the Governmental Authorities under the Ontario
Securities Act, or pursuant to Exchange Filing Requirements, since July 9,
11
1999. All of such forms, reports, filing or documents filed prior to the date of
this Agreement are hereinafter referred to as the "Purchaser Disclosure
Documents."
(b) As of their respective filing dates, the
Purchaser Disclosure Documents complied in all material respects with the
requirements of the Ontario Securities Act, the rules and regulations of
Governmental Authorities under the Ontario Securities Act, other Applicable Law,
and the Exchange Filing Requirements. As of their filing dates or effective
dates (whichever is later), none of the Purchaser Disclosure Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.9 FULL DISCLOSURE. No representation or warranty by
Purchaser in this Agreement and no statement by Purchaser contained in any
exhibit, disclosure schedule, or certificate contemplated by this Agreement
contains or will contain any untrue statement of material fact or omits or will
omit to state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
3.10 INVESTMENT. Without limiting the effect of Article
VIII hereof:
(a) Purchaser understands that the Company
proposes to issue and deliver to Purchaser Path 1 Shares pursuant to this
Agreement without registration under the Securities Act; that for such purpose
the Company will rely upon Purchaser's representations and warranties contained
herein; and that registration under the Securities Act may be required if such
representations and warranties are not correct.
(b) Purchaser has received such information
relating to the business and affairs of the Company which Purchaser has
requested, and all additional information which Purchaser has considered
necessary to verify the accuracy of the information so received. Purchaser has
had the opportunity to ask questions of and receive answers from the Company
concerning the business and affairs of the Company and concerning terms and
conditions of the Transactions. On the basis of the foregoing, Purchaser is
familiar with the operations, business plans and financial condition of the
Company.
(c) Purchaser understands that, under the
existing rules of the SEC, Purchaser may be unable to sell the Path 1 Shares
issued to Purchaser pursuant to this Agreement, except to the extent that such
shares may be sold (i) pursuant to an effective registration statement covering
such sale pursuant to the Securities Act and applicable state securities laws or
an applicable exemption therefrom, (ii) in a bona fide private placement to a
purchaser who shall be subject to the same restrictions on any resale or (iii)
subject to the restrictions contained in Rule 144.
(d) Purchaser is not relying on the Company
respecting the financial, tax and other economic considerations of an investment
in the Path 1 Shares issued to Purchaser pursuant to this Agreement, and
Purchaser has relied on the advice of, or has consulted with, its own advisors.
12
(e) Purchaser is familiar with the provisions of
Rule 144 and the limitations upon the availability and applicability of such
rules.
(f) Purchaser is an "accredited investor" within
the meaning of Regulation D under the Securities Act and is a sophisticated
investor familiar with the type of risks inherent in the acquisition of
restricted securities such as the Path 1 Shares issued to Purchaser pursuant to
this Agreement, and its financial position is such that it can afford to retain
such shares for an indefinite period of time without realizing any direct or
indirect cash return on its investment.
(g) Purchaser has such knowledge and experience
in financial, tax and business matters so as to enable it to utilize the
information made available to it in connection with the issuance of the Path 1
Shares issued to Purchaser pursuant to this Agreement to evaluate the merits and
risks of an investment in such shares and to make an informed investment
decision with respect thereto.
(h) Purchaser is acquiring the Path 1 Shares
issued to Purchaser pursuant to this Agreement as an investment for its account,
and without any present view towards the resale or other distribution thereof.
(i) Purchaser has been independently advised as
to or is aware of the restrictions with respect to trading in the Path 1 Shares
imposed by applicable securities legislation in the jurisdiction in which it
resides and confirms that no representation has been made respecting such
restrictions with respect to trading in the Path 1 Shares.
3.11 LEGEND. Each certificate representing Path 1 Shares
issued to Purchaser pursuant to this Agreement, shall contain upon its face or
upon the reverse side thereof a legend as required by the Stockholders'
Agreement.
3.12 BROKERS AND FINDERS. Other than Yorkton Securities
Inc., Purchaser has not employed any investment banker, broker, finder, advisor,
consultant or intermediary in connection with the Transactions which would be
entitled to any investment banking, brokerage, finder's, advisory or similar fee
or commission in connection with this Agreement or the Transactions and the
Company does not, nor will it, have any obligation to pay Yorkton Securities
Inc. any fee or commission in connection with this Agreement or the consummation
of the Transactions.
3.13 XXXXXX SHARES. Assuming (i) the accuracy of the
Company's representations and warranties as set forth in Section 2.23 hereof,
(ii) the Company's compliance with the requirements contained in the legend as
set forth in Section 2.24 hereof and (iii) that the Company does not hold, alone
or in combination with others, more than 20% of the outstanding voting
securities of Purchaser and does not otherwise hold a sufficient number of any
securities of Purchaser which would affect materially the control of Purchaser,
then the Xxxxxx Shares will be freely tradeable through an appropriately
registered dealer in Canada.
13
ARTICLE IV.
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 INTERIM OPERATIONS OF THE COMPANY. Except with
respect to (i) the investment in the Company of up to $5 million by certain
investors currently contemplated by the Company, (ii) all contracts, options,
bonuses, stock purchase agreements or other compensation and other arrangements
made with respect to Xxxxxxx X. Xxxxxxx and [****] and (iii) bonuses
not to exceed $50,000 and option grants not to exceed 50,000 shares of capital
stock of the Company made to certain employees or consultants, other than
Xxxxxxx X. Xxxxxxx and [****], and except as set forth in Section 4.1
of the Company Disclosure Schedule, during the period from the date of this
Agreement to the date of Closing or termination of this Agreement pursuant to
Article VII hereof (unless Purchaser shall otherwise agree in writing and except
as otherwise contemplated by this Agreement), the Company shall conduct its
operations according to its ordinary and usual course of business in
substantially the same manner as heretofore conducted and use its reasonable
best efforts to preserve intact its current business organization, keep
available the services of its current officers and subject to the prudent
management of workforce needs, its employees and preserve its relationships with
customers, suppliers and others having business dealings with it. Without
limiting the generality of the foregoing, and except as otherwise contemplated
by this Agreement or as set forth in Section 4.1 of the Company Disclosure
Schedule, the Company shall not without the prior written consent of Purchaser:
(i) directly or indirectly, amend its
Certificate of Incorporation or By-laws or similar organizational documents;
(ii) (A) declare, set aside or pay any dividend
or other distribution payable in cash, stock or property with respect to the
Company's capital stock, (B) redeem, purchase or otherwise acquire directly or
indirectly any shares of any class or series of the Company's capital stock or
any instrument or security which consists of or includes a right to acquire such
shares; (C) issue, sell, transfer, pledge, dispose of or encumber any shares of
any class or series of the Company's capital stock or voting debt, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of any class or series of the
Company's capital stock or voting debt, other than (x) shares of Path 1 Class A
Common Stock and/or Path 1 Class B Common Stock issued upon the exercise of
options or other rights outstanding on the date hereof and (y) the issuance of
options to employees or consultants to the Company in the ordinary course of
business; or (D) split, combine or reclassify the outstanding capital stock of
the Company;
(iii) acquire or agree to acquire by merging or
consolidating with, or by purchasing an equity interest in a substantial portion
of the assets of, or by any other manner, any business or any Person or other
business organization or division thereof;
(iv) alter (through merger, liquidation,
reorganization, restructuring or in any other fashion), the corporate structure
or ownership of the Company;
(v) make any new capital expenditures outside
the ordinary course of business;
14
(vi) amend or terminate any material contract or
enter into any agreement which would constitute a material contract, except, in
any case, in the ordinary course of business consistent with past practice;
PROVIDED that any such amendment or termination does not have a Company Material
Adverse Effect, or waive, release or assign any material rights or claims;
(vii) transfer, lease, license, sell or dispose of
any of their respective assets other than dispositions in the ordinary course of
business and consistent with past practice; PROVIDED that the fair market value
of assets sold does not exceed $100,000 in any single transaction or $500,000 in
the aggregate;
(viii) mortgage, pledge or encumber any of their
respective assets, except, in any case, in the ordinary course of business
consistent with past practice; PROVIDED that any such actions would not have a
Company Material Adverse Effect.
(ix) except the employment agreement to be
entered into between the Company and Xxxxxxx X. Xxxxxxx, enter into any
employment or severance agreement with or grant any severance or termination pay
to any officer or director of the Company;
(x) except in the ordinary and usual course of
business, as required to comply with Applicable Law or expressly provided in
this Agreement, (A) adopt, enter into, amend or increase the amount or
accelerate the payment or vesting of any benefit or award or amount payable
under, any Benefit Plan or other contract, agreement, commitment, arrangement,
plan, trust, fund or policy maintained by, contributed to or entered into by the
Company for the current or future benefit or welfare of any director, officer or
current or former employee, except to the extent necessary to coordinate any
such Benefit Plans with the terms of this Agreement, (B) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any director,
officer or employee or consultant of the Company (other than normal recurring
increases in wages to employees who are not officers or directors or Affiliates
in the ordinary course of business consistent with past practice), (C) pay any
benefit not provided for under any Benefit Plan, (D) grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement or
Benefit Plan (including the grant of stock options, stock appreciation rights,
stock based or stock related awards, performance units or restricted stock, or
the removal of existing restrictions in any Benefit Plans or agreements or
awards made thereunder, except, in the case of stock grants or option grants to
employees of or consultants to the Company made in the ordinary course of
business) or (E) take any action to fund or in any other way secure the payment
of compensation or benefits under any employee plan, agreement, contract or
arrangement or Benefit Plan;
(xi) (A) incur or assume any long term
indebtedness, or except in the ordinary course of business, incur or assume any
short term indebtedness in amounts inconsistent with past practice (provided,
that such short-term indebtedness outstanding does not exceed $25,000 at any
given time), (B) modify the terms of any indebtedness or other liability, except
as set forth in Section 4.1 of the Company Disclosure Schedule, (C) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person (except for
checks endorsed for collection in the ordinary course of business) or (D) make
any loans, advances or capital contributions to, or investments
15
in, any other Person other than (x) travel and other expense advances to
employees in the ordinary course of business and (y) investments in publicly
traded securities constituting less than 1.0% of the outstanding equity of the
issuing entity);
(xii) change any of the accounting methods used by
it unless required by GAAP;
(xiii) make any material election relating to
Taxes, change any material election relating to Taxes already made, adopt any
material accounting method relating to Taxes, change any material accounting
method relating to Taxes unless required by GAAP, enter into any closing
agreement relating to Taxes, settle any claim or assessment relating to Taxes or
consent to any claim or assessment relating to Taxes or any waiver of the
statute of limitations for any such claim or assessment;
(xiv) pay, settle, release, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise, including without limitation, the
Litigation), other than the payment or satisfaction of any such claims,
liabilities or obligations, in the ordinary course of business and consistent
with past practice, and of claims, liabilities or obligations reflected or
reserved against in, or contemplated by, the consolidated financial statements
(or the notes thereto) of the Company;
(xv) amend in any material respect, renew,
terminate or cause to be extended any material lease, agreement or arrangement
relating to any of its leased properties or enter into any material lease,
agreement or arrangement with respect to any real property;
(xvi) permit any insurance policy having the
Company as a beneficiary or a loss payable payee to be cancelled or terminated
unless comparable replacement coverage is obtained; and
(xvii) take, or agree or commit to take, any action
that would or is reasonably likely to result in any of the conditions to the
consummation of the Transactions set forth in Article VI hereof not being
satisfied, or would make any representation or warranty of the Company contained
herein inaccurate in any respect at, or as of any time prior to, the Closing, or
that would materially impair the ability of the Company or Purchaser to
consummate the Transactions in accordance with the terms hereof or delay such
consummation.
4.2 ALTERNATIVE PROPOSALS.
(a) Neither the Company nor any Affiliate shall
(and the Company shall use its reasonable best efforts to cause the officers,
directors, employees, representatives and agents of the Company, and each of its
Affiliates, including, but not limited to, investment bankers, attorneys and
accountants, not to), directly or indirectly, solicit, participate in,
encourage, or initiate discussions or negotiations with, or provide any
information to, any Person (other than Purchaser, any of its Affiliates or
representatives) concerning or which would reasonably facilitate or be expected
to lead to any Takeover Proposal, except that nothing contained in this Section
4.2 or any other provision hereof shall prohibit the Company or the Company's
Board of Directors from making such disclosure to the Company's stockholders as,
in the good faith judgment of the Company's Board of Directors, after receiving
advice from
16
outside counsel, is required under Applicable Law, provided that the Company may
not, approve or recommend, or propose to approve or recommend, any Takeover
Proposal, or enter into any letter of interest, agreement or other arrangement
with respect to any Takeover Proposal. Upon execution of this Agreement, the
Company will immediately cease any existing activities, discussions or
negotiations with any Persons conducted heretofore with respect to any of the
foregoing. Notwithstanding the foregoing, prior to the Closing, the Company may
furnish information concerning its business, properties or assets to any Person
or group and may negotiate and participate in discussions and negotiations with
such Person or group concerning a Takeover Proposal if: the Company's Board of
Directors determines in good faith, after consultation with outside legal
counsel that such action is necessary for it to comply with its fiduciary duty
under Applicable Law.
The Company will promptly notify Purchaser of the existence of
any proposal, discussion, negotiation or inquiry received by the Company
regarding any Takeover Proposal, and the Company will promptly communicate to
Purchaser the terms of any proposal, discussion, negotiation or inquiry which it
may receive (and will promptly provide to Purchaser copies of any written
materials received by the Company in connection with such proposal, discussion,
negotiation or inquiry) regarding any Takeover Proposal and the identity of the
party making such proposal or inquiry or engaging in such discussion or
negotiation. The Company will promptly provide to Purchaser any non-public
information concerning the Company provided to any other Person which was not
previously provided to Purchaser. The Company will keep Purchaser informed of
the status and details of any such Takeover Proposal and of any amendments or
proposed amendments to any Takeover Proposal and will promptly (but in no case
later than 24 hours) notify Purchaser of any determination by the Company's
Board of Directors that it is considering accepting a Takeover Proposal.
4.3 REASONABLE BEST EFFORTS.
(i) Prior to the Closing, upon the terms and
subject to the conditions of this Agreement, Purchaser and the Company agree to
use their respective reasonable best efforts (x) to take, or cause to be taken,
all actions, and (y) to do, or cause to be done, all things necessary, proper or
advisable (subject to any Applicable Law) to consummate the Transactions as
promptly as practicable including, but not limited to (i) the preparation and
filing of all forms, registrations and notices required to be filed to
consummate the Transactions and the taking of such actions as are necessary to
obtain any requisite approvals, consents, orders, exemptions or waivers by any
third party or Governmental Entity and (ii) the satisfaction of the other
parties' conditions to effect the Transactions. In addition, no party hereto
shall take any action after the date hereof that would reasonably be expected to
delay the obtaining of, or result in not obtaining, any permission, approval or
consent from any Governmental Entity necessary to be obtained prior to the
Closing.
(b) Prior to the Closing, subject to Applicable
Law, each party shall promptly consult with the other parties hereto with
respect to, provide any necessary information with respect to, and provide the
other parties (or their respective counsel) with copies of, all filings made by
such party with any Governmental Entity or any other information supplied by
such party to a Governmental Entity in connection with this Agreement, and the
Transactions. Each party hereto shall promptly inform the other parties of any
communication from any
17
Governmental Entity regarding any of the Transactions. If any party hereto or
Affiliate thereof receives a request for additional information or documentary
material from any such Governmental Entity with respect to any of the
Transactions, then such party shall endeavor in good faith to make, or cause to
be made, as soon as reasonably practicable and after consultation with the other
parties, an appropriate response in compliance with such request.
(c) Notwithstanding the foregoing, nothing
contained in this Agreement shall be deemed to require the Company or Purchaser
to commence any litigation against any Person in order to facilitate the
consummation of any of the Transactions or, except for the Company, to defend
against any litigation brought by any Governmental Entity seeking to prevent the
consummation of any of the Transactions.
4.4 PURCHASER ACCESS TO INFORMATION. Upon reasonable
notice, the Company shall, afford to the officers, employees, accountants,
counsel, financing sources and other representatives of Purchaser, access,
during normal business hours during the period prior to the Closing, to all its
properties, books, contracts, commitments, records and employees and, during
such period, the Company shall (and shall cause its employees to), (1) furnish
promptly to Purchaser (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of the federal securities laws and (b) all other information
concerning its business, properties and personnel as Purchaser may reasonably
request. Until the Closing, unless otherwise required by Applicable Law or in
order to comply with disclosure requirements applicable to any filings or
communications with Governmental Entities and stock exchanges, Purchaser will
hold any such information which is nonpublic in confidence.
4.5 PUBLICITY. The initial press release with respect to
the execution of this Agreement shall be a joint press release acceptable to
Purchaser and the Company. Thereafter, until the Closing or the date the
Transactions are terminated or abandoned, neither the Company, Purchaser nor any
of their respective Affiliates shall issue or cause the publication of any press
release or other announcement with respect to this Agreement or the other
Transactions without prior consultation with the other parties, except in order
to comply with fiduciary obligations or as may be required by Applicable law,
the rules and regulations of any national or other securities exchange or
over-the-counter market or by any listing agreement with a national or other
securities exchange or over-the-counter market.
4.6 NOTIFICATION OF CERTAIN MATTERS.The Company shall
give prompt notice to Purchaser of (i) the occurrence or non-occurrence of any
event known to the Company which would cause any representation or warranty of
the Company contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing and (ii) any material failure of the
Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such Person hereunder; PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 4.6 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
(b) Purchaser shall give prompt notice to the
Company of (i) the occurrence or non-occurrence of any event known to Purchaser
which would cause any representation or warranty of Purchaser contained in this
Agreement to be untrue or inaccurate in
18
any material respect at or prior to the Closing and (ii) any material failure of
Purchaser to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to this Section 4.6 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
4.7 STOCK EXCHANGE LISTINGS AND FORM 10. Purchaser shall
use its reasonable best efforts to promptly cause the Xxxxxx Shares to be issued
pursuant to this Agreement to be approved for listing on The Toronto Stock
Exchange, subject to official notice of issuance, prior to the Closing, and, if
such listing shall not have occurred prior to the Closing, Purchaser shall use
its reasonable best efforts to cause such shares to be listed on The Toronto
Stock Exchange within 90 days after the Closing.
(b) Purchaser shall use its reasonable best
efforts to cause the Xxxxxx Shares to be issued pursuant to this Agreement to be
approved for listing on The Nasdaq Stock Market as soon as reasonably
practicable after the Closing.
(c) The Company shall use its reasonable best
efforts to cause the Form 10 to be declared effective by the SEC as soon as
reasonably practicable after the Closing.
4.8 COMPANY DISCLOSURE SCHEDULE. The Company shall
deliver to Purchaser the Company Disclosure Schedule no later than 5:00 P.M.
(San Diego time) on April 14, 2000. Purchaser shall notify the Company of (a)
its acceptance of the Company Disclosure Schedule or (b) its rejection of the
Company Disclosure Schedule, in any case, within three (3) Business Days after
receipt thereof, provided, however, that Purchaser may reject the Company
Disclosure Schedule only in accordance with Section 6.2(viii) hereof.
4.9 REGISTRATION RIGHTS. In the event that the Xxxxxx
Shares are not freely tradeable after 40 days after the date of issuance of the
Xxxxxx Shares to the Company and the Company has used its best efforts to ensure
that the assumptions described above in Section 2.23 at the time of resale are
correct and the Company has used its best efforts to comply with the
requirements as set out in the legend in section 2.24, the Company, upon written
notice to Purchaser, may require Purchaser to use its reasonable best efforts to
qualify all, but not less than all, of the Xxxxxx Shares for distribution in
Ontario (the "Distribution"), subject to the following terms and conditions:
(a) Purchaser will so qualify the Xxxxxx Shares
for Distribution by way of a secondary offering only, or if Purchaser shall
determine in its sole discretion, by way of a primary offering and secondary
offering.
(b) The Company agrees that it will comply with
all regulatory requirements in connection with the Distribution and agrees to
furnish to Purchaser and any underwriters all necessary, normal and customary
documents and information required in connection with the Distribution.
(c) The rights of the Company to qualification
pursuant to this Section shall be conditioned upon the Company's participation
in any underwriting relating to the Distribution. The Company shall (together
with Purchaser) enter into an underwriting agreement in normal and customary
form with the underwriter or underwriters selected by Purchaser.
19
Notwithstanding any provision of this Section, if the underwriter, in its sole
discretion, determines that marketing factors require a limitation of the number
of securities to be underwritten, the underwriter may exclude some or all of the
Xxxxxx Shares for which the Company seeks qualification from inclusion in the
Distribution. The Company may not request Purchaser qualify some or all of the
Xxxxxx Shares excluded from the Distribution under this Section 4.9(c) more than
once in any 12 month period.
(d) If Purchaser shall furnish to the Company, a
certificate signed by the Chief Executive Officer of Purchaser stating that, in
the good faith judgement of the board of directors of Purchaser, it would be
seriously detrimental to Purchaser and its shareholders for the Xxxxxx Shares to
be qualified for Distribution and it its therefore in the best interests of
Purchaser to defer the qualification of the Xxxxxx Shares, then Purchaser may
delay the qualification of the Xxxxxx Shares, once but not more than once, for a
period not in excess of one hundred twenty (120) days.
(e) Purchaser shall have no obligation under
this Section 4.9 to qualify for distribution any Xxxxxx Shares if Purchaser
shall deliver to the Company an opinion of its Canadian counsel to the effect
that the proposed sale or disposition for which qualification was requested does
not require qualification under applicable Ontario laws.
(f) The costs and expenses (other than
underwriting discounts or commissions and fees and disbursements of counsel of
the Company) relating to the Distribution, and of all other actions that
Purchaser is required to take or effect pursuant to this Section 4.9, shall be
paid by Purchaser.
ARTICLE V.
CLOSING
5.1 TIME AND PLACE OF CLOSING. The closing of the
purchase and sale of the Path 1 Shares as set forth herein (the "Closing") shall
be held at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 00000 Xx Xxxxxx Xxxx,
Xxx Xxxxx, Xxxxxxxxxx, 00000 at 10:00 A.M., local time, on the date specified in
writing by Purchaser to the Company on which all conditions precedent set forth
in Article VI have been satisfied, or at such other time and place as agreed to
in writing by Purchaser and the Company.
5.2 CLOSING DELIVERIES. On or prior to the Closing,
(a) Purchaser shall have delivered, or cause to
be delivered to the Company, the following:
(i) the cash portion of the Purchase
Price, by wire transfer in immediately available funds to an account designated
by the Company;
(ii) a certificate representing the
Xxxxxx Shares registered in the name of the Company;
20
(iii) a certificate of an officer of
Purchaser, in form and substance reasonably satisfactory to the Company and its
counsel, to evidence compliance with Section 6.3(i);
(iv) resolutions of the Board of
Directors of Purchaser and complete and correct copies of Purchaser's
certificate of incorporation and by-laws, or other charter documents, as
applicable, including all amendments, modifications or supplements thereto, to
evidence compliance with Section 6.3(ii), together with a certificate of an
officer of Purchaser; and
(v) the Stockholders' Agreement duly
executed by Purchaser on or before the Closing; and
(vi) such other documents as the Company
may reasonably request for the purpose of facilitating the consummation of the
Transactions.
(b) the Company shall have delivered, or cause
to be delivered to Purchaser, the following:
(i) a certificate representing the Path
1 Shares registered in the name of Purchaser;
(ii) a certificate of an officer of the
Company, in form and substance reasonably satisfactory to Purchaser and its
counsel, to evidence compliance with Section 6.2(i);
(iii) the License Agreement duly executed
by the Company on or before the Closing;
(iv) resolutions of the Company's Board
of Directors and complete and correct copies of the Company's certificate of
incorporation and by-laws, including all amendments, modifications or
supplements thereto, to evidence compliance with Section 6.2(iii), together with
a certificate of an officer of the Company; and
(v) the Stockholders' Agreement duly
executed by the Company on or before the Closing;
(vi) the Company Disclosure Schedule in
form and substance reasonably satisfactory to Purchaser; and
(vii) such other documents as Purchaser
may reasonably request for the purpose of facilitating the consummation of the
Transactions.
5.3 DELIVERY OF PATH 1 SHARES. Delivery of the Path 1
Shares shall be made by the Company to Purchaser at the Closing by delivering
one or more certificates in negotiable form representing the Path 1 Shares, each
such certificate to be accompanied by any requisite documentary or stock
transfer taxes.
21
5.4 TAX MATTERS. All transfer, documentary, sales, use,
stamp, registration, value added and other such taxes and fees (including any
penalties and interest) incurred in connection with this Agreement shall be
borne and paid by the Company when due, and the Company will, at its own
expense, file all necessary tax returns and other documentation with respect to
all such taxes and fees, and, if required by applicable law, Purchaser will join
in the execution of any such tax returns and other documentation.
ARTICLE VI.
CONDITIONS TO THE PURCHASE AND SALE OF THE PATH 1 SHARES
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CLOSE. The
respective obligations of each party to consummate the Transactions are subject
to the satisfaction at or prior to the Closing of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company or Purchaser, as the case may be, to the extent permitted by Applicable
Law:
(i) all regulatory approvals
required to consummate the Transactions shall have been obtained and are in
full force and effect; and
(ii) there shall not be in effect any
Applicable Law, executive order, decree, ruling or injunction or other order
of any Governmental Entity directing that the Transactions contemplated
herein not be consummated.
6.2 CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The
obligations of Purchaser to consummate the Transactions are subject to the
satisfaction (or waiver by Purchaser in its sole discretion) of the following
further conditions:
(i) the Company shall have performed
in all material respects all of their obligations hereunder required to be
performed by it at or prior to the Effective Time, the representations and
warranties of the Company contained in this Agreement shall be true in all
material respects at and as of the Closing as if made at and as of such time,
and Purchaser shall have received a certificate signed by an executive
officer of the Company to the foregoing effect;
(ii) Purchaser shall have consummated
the transactions contemplated by the Xxxxx Agreement;
(iii) Purchaser shall have received a
copy of the resolutions of the Company's Board of Directors authorizing the
Transactions, the Stockholders' Agreement (including the election of
Purchaser's nominees to the Company's Board of Directors and the amendment of
the Company's By-laws as required thereby) and the Licensing Agreement, and
complete and correct copies of the Company's certificate of incorporation and
by-laws, including all amendments, modifications or supplements thereto
(including the amendments to the By-laws contemplated by the Stockholders'
Agreement) which copies shall be certified by an executive officer of the
Company;
(iv) All litigation claims or
disputes set forth in, related to or arising out of the complaint filed by
the Company against Xxxxx Xxxxx and Xxxx Xxxxx and other
22
defendants in San Diego County Superior Court on September 20, 1999 (Case No.
GIC 735665) including any cross-complaints filed by Xxxxx Xxxxx and Xxxx Xxxxx
or others against the Company and the proceedings commenced by any of the
defendants in the Delaware Chancery Court on November 9, 1999, shall have been
settled or otherwise resolved and dismissed with prejudice in a manner and on
terms satisfactory to Purchaser in its sole discretion;
(v) the Company shall have entered
into the License Agreement on or before the Closing;
(vi) the Company shall have entered
into the Stockholders' Agreement (and shall have amended the By-laws in the
form attached as an exhibit thereto concurrently with the Closing) on or
before the Closing;
(vii) on or prior to the Closing,
Purchasers' two designees to be appointed to the Company's Board of Directors
in accordance with the provisions of the Stockholders' Agreement shall have
been so appointed;
(viii) Purchaser shall have received
the Company Disclosure Schedule in accordance with Section 4.8 hereof, in
which event such Company Disclosure Schedule shall be deemed accepted by
Purchaser and this condition to Closing shall be deemed satisfied; provided,
however, that the Company Disclosure Schedule shall not be deemed accepted
and this condition to Closing shall not be deemed satisfied to the extent it
contains, and only with respect to, disclosures (x) regarding the Company's
Registered Intellectual Property which would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect
or (y) which would materially limit Purchaser from enjoying the benefits of
the License Agreement; and
(ix) Purchaser shall have completed
to its satisfaction its financial and legal due diligence of the Company.
6.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Transactions are subject to the
satisfaction (or waiver by the Company in its sole discretion) of the following
further conditions:
(i) Purchaser shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Closing, the representations and warranties of Purchaser
contained in this Agreement shall be true in all material respects at and as of
the Closing as if made at and as of such time, and the Company shall have
received a certificate signed by an executive officer of Purchaser to the
foregoing effect;
(ii) the Company shall have received a copy of
the resolutions of the Board of Directors of Purchaser authorizing the
Transactions, and complete and correct copies of Purchaser's certificate of
incorporation and by-laws, or other charter documents, as applicable, including
all amendments, modifications or supplements thereto which copies shall be
certified by an executive officer of Purchaser;
23
(iii) Purchaser shall have entered into the
Stockholders' Agreement and the License Agreement, on or before the Closing; and
(iv) all litigation claims or disputes set
forth in, related to or arising out of the complaint filed by the Company
against Xxxxx Xxxxx and Xxxx Xxxxx in San Diego County Superior Court on
September 20, 1999 (Case No. GIC 735665) including any cross-complaints filed
by Xxxxx Xxxxx and Xxxx Xxxxx against the Company and the proceedings
commenced by any of the defendants in the Delaware Chancery Court on November
9, 1999, shall have been settled or otherwise resolved and dismissed with
prejudice in a manner and on terms satisfactory to the Company.
ARTICLE VII.
TERMINATION
7.1 TERMINATION. This Agreement may be terminated and
the Transactions contemplated hereby may be abandoned at any time prior to
the Closing:
(i) by mutual written consent of Purchaser
and the Company;
(ii) by either the Company or Purchaser, if
the Closing has not occurred by June 30, 2000 (provided that the right to
terminate this Agreement under this clause shall not be available to any
party whose failure to fulfill any of its obligations under this Agreement
has been the cause of or resulted in the failure to consummate the
Transactions by such date);
(iii) by either the Company or Purchaser, if
there shall be any Applicable Law that makes consummation of the Transactions
illegal or otherwise prohibited or if any judgment, injunction, order or
decree of a court of competent jurisdiction shall restrain or prohibit the
consummation of the Transactions, and such judgment, injunction, order or
decree shall become final and nonappealable;
(iv) by either the Company or Purchaser, if
there has been a breach by the other party of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have a Purchaser Material Adverse Effect or Company Material Adverse Effect,
as the case may be; or
(v) by Purchaser if:
(A) there shall have been a material
breach of any provision of Section 4.2;
(B) any Person or "group" (within
the meaning of Section 13(d)(3) of the Exchange Act), other than Purchaser,
or its Affiliates or any group of which any of them is a member, shall have
acquired or announced its intention to acquire beneficial ownership (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 25%
or more of the shares of Path 1 Class A Common Stock or of any other class of
voting capital stock of the Company; or
24
(C) if the Company receives a Takeover
Proposal from any Person (other than Purchaser) and the Company's Board of
Directors shall have recommended or approved such Takeover Proposal or takes
a neutral position or makes no recommendation with respect to such Takeover
Proposal after a reasonable amount of time (and in no event more than ten
Business Days following such receipt) has elapsed for the Company's Board of
Directors to review and make a recommendation with respect to such Takeover
Proposal or the Company has entered into an agreement with respect to a
Takeover Proposal.
7.2 EFFECT OF TERMINATION. In the event of the
termination of this Agreement as provided in Section 7.1 hereof, written
notice thereof shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination is made,
and this Agreement shall forthwith become null and void, and there shall be
no liability on the part of Purchaser, the Company or their respective
directors, officers, employees, representatives, agents, advisors or
stockholders other than the obligations pursuant to this Section 7.2, except
that the agreements contained in Article IX hereof shall survive the
termination hereof. Nothing contained in this Section 7.2 or in Article VIII
shall relieve any party from liability for fraud or for willful breach of
this Agreement.
ARTICLE VIII.
INDEMNIFICATION
8.1 INDEMNITY. Subject to the terms and conditions of
this Article VIII, from and after the Closing, the Company shall indemnify
and hold harmless Purchaser from and against any and all Damages resulting
from or arising out of any misrepresentation, breach or failure of any
representation or warranty made by the Company in this Agreement; and (b)
subject to the terms and conditions of this Article VIII, from and after the
Closing, Purchaser shall indemnify and hold harmless the Company from and
against any and all Damages resulting from or arising out of any
misrepresentation, breach or failure of any representation or warranty made
by Purchaser in this Agreement.
8.2 LIMITATION ON INDEMNITY
(a) Neither the Company nor Purchaser shall
have liability for amounts payable pursuant to their respective
indemnification obligations in this Article VIII until the total of all
Damages incurred by Purchaser or the Company, respectively, exceeds Two
Hundred and Fifty Thousand Dollars (U.S. $250,000) in the aggregate (the
"Threshold Amount"), after which the indemnification obligations of the
Company or Purchaser, as the case may be, shall, subject to subsection (b)
below, only include all such Damages in excess of the Threshold Amount.
(b) Neither the Company nor Purchaser shall
have liability pursuant to its indemnification obligations in this Article
VIII to the extent that the total of all Damages suffered by Purchaser or the
Company, respectively, exceeds an aggregate of Ten Million Dollars
($10,000,000).
8.3 PROCEDURE. With respect to any Damages, whether a
claim, the commencement of any proceeding, any written demand, or the
occurrence of any other
25
similar event, any of which may constitute a separate matter or series of
matters ("Indemnification Matter") against which Purchaser or the Company (such
applicable party referred to as the "Indemnitee") is indemnified under this
Article VIII:
(a) Within 30 days after the Indemnitee
receives written notice pertaining to the demand or proceeding underlying
such Indemnification Matter, or, if such Indemnification Matter does not
involve a third party demand or claim, within 30 days after the Indemnitee
first has actual knowledge of such Indemnification Matter, the Indemnitee
shall give notice to the Company or Purchaser, as the case may be, of the
nature of such Indemnification Matter and the amount demanded or claimed in
connection therewith. Such notice shall be a condition precedent to any
indemnification liability under this Article VIII, but the Indemnitee shall
not lose its right to indemnification other than under this Article VIII as a
result of the failure to give such notice in a timely manner.
8.4 REMEDIES. Notwithstanding anything in this
Agreement to the contrary, following the Closing, the rights of
indemnification under this Article VIII are the sole and exclusive remedy of
Purchaser or the Company, as the case may be, with respect to any and all
matters covered in Section 8.1 above, except that, notwithstanding the
foregoing and Section 8.5 below, Purchaser or the Company, as the case may
be, shall be entitled to all remedies which are available under Applicable
Law for fraudulent conduct and under Section 10(b) of the Exchange Act and
the rules and regulations of the SEC thereunder.
8.5 TIME LIMIT. Damages to be indemnified under this
Article VIII must be claimed within one year after the Closing, except for
Damages resulting from or arising out of Indemnification Matters for which
proper notice under Section 8.3 above shall have been given prior to the
expiration of such one-year period.
ARTICLE IX.
MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES AND OTHER PAYMENTS.. All fees
and expenses incurred in connection with this Agreement and the Transactions
shall be paid by the party incurring such fees or expenses, whether or not
the Transactions are consummated.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
earlier of termination of this Agreement, subject to Section 8.5 above, or
one year from the date of Closing. This Section 9.2 shall not limit any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Closing.
9.3 MODIFICATION OR AMENDMENT. Subject to the
compliance with Applicable Law, at any time prior to the Closing, the parties
hereto may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of the respective parties.
9.4 WAIVER OF CONDITIONS. Except as otherwise provided
in this Agreement, any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the
party or parties entitled to the benefits thereof only by a written
26
instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
9.5 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties (including by telecopy) and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.6 GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
without giving effect to the principles of conflicts of law thereof.
9.7 JURISDICTION; WAIVER OF TRIAL BY JURY. THE PARTIES
HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE OR
UNITED STATES FEDERAL COURT SITTING IN THE CITY OF NEW YORK OVER ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND HEREBY
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE PARTIES
AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT
OR IN ANY OTHER MANNER PROVIDED BY LAW. THE PARTIES FURTHER WAIVE TRIAL BY
JURY, ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO ANY ACTION OR
PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS. THE PARTIES
FURTHER AGREE THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT SHALL BE BROUGHT ONLY IN A NEW YORK STATE OR UNITED STATES
FEDERAL COURT SITTING IN NEW YORK COUNTY.
9.8 NOTICES. Any notice, request, instruction or other
document to be given hereunder by any party to the other parties shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid, or by nationally recognized overnight courier, or by
telecopy, as follows:
If to the Company, to
0000 Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
27
with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Telecopy: (000) 000-0000
If to Purchaser, to
00 Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: Reg X. Xxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Torys
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Cost, Esq.
Telecopy: (000) 000-0000
All such notices and communications shall be deemed to have
been duly given at the time delivered by hand, if personally delivered, upon
receipt, if sent by telecopy, on the next Business Day, if sent by a
nationally recognized courier, or three (3) Business Days after being
deposited in the mail, if sent by registered or certified mail. Any party
may, upon written notice to the other parties hereto, change the address to
which notices or other communications to such party are to be delivered or
mailed.
9.9 ENTIRE AGREEMENT; ASSIGNMENT This Agreement (a)
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and (b) shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties. This Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective permitted successors and
assigns.
9.10 PARTIES IN INTEREST Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of
this Agreement.
9.11 VALIDITY If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired
28
or invalidated so long as the economic or legal substance of the Transactions
is not affected in any manner materially adverse to any party.
9.12 CAPTIONS. The Article, Section and paragraph
captions herein are for convenience of reference only, do not constitute part
of this Agreement and shall not be deemed to limit or otherwise affect any of
the provisions hereof.
9.13 SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement,
each non-breaching party would be irreparably and immediately harmed and
could not be made whole by monetary damages. It is accordingly agreed that
the parties hereto (a) will waive, in any action for specific performance,
the defense of adequacy of a remedy at law and (b) shall be entitled, in
addition to any other remedy to which they may be entitled at law or in
equity, to compel specific performance of this Agreement in any action
instituted in a court of competent jurisdiction.
9.14 "KNOWLEDGE" OF THE COMPANY OR PURCHASER. For
purposes of this Agreement, unless otherwise expressly provided where the
term is used, "knowledge" of the Company, or Purchaser, as the case may be,
will be deemed to mean the actual knowledge of any director or executive
officer of the Company or Purchaser, as the case may be, after reasonable
inquiry.
ARTICLE X.
DEFINITIONS
10.1 CERTAIN DEFINITIONS. The following terms when used
herein shall have the meanings assigned to them below (certain other terms
are defined elsewhere herein):
"Actions" shall have the meaning set forth in Section 2.14
hereof.
"Affiliate" means a Person who directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, another person.
"Agreement" shall have the meaning set forth in the
recitals hereof.
"Applicable Law" shall mean the collective reference to any
federal, state, local, provincial or foreign law, rule, regulation,
ordinance, writ, judgment, injunction, decree, determination, award or other
order of any Governmental Authority or stock exchange, in each case excluding
any and all Environmental Laws.
"Balance Sheet" shall have the meaning set forth in Section
2.4(c) hereof.
"Benefit Plan" shall have the meaning set forth in Section
2.11 hereof.
"Xxxxx Agreement" shall mean the Stock Purchase Agreement,
dated as of March 10, 2000, by and among Purchaser, Xxxxx Xxxxx and Xxxx
Xxxxx, together with any amendment or supplement thereto.
29
"Business Day" shall mean a day other than a Saturday or
Sunday or other day on which commercial banks in New York, New York are
authorized or required to close."
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company Board" shall have the meaning set forth in Section
2.20 hereof.
"Company Disclosure Schedule" shall have the meaning set
forth in Section 2.1 hereof.
"Company Material Adverse Effect" shall mean any change,
circumstance or fact that (i) is reasonably likely to be materially adverse
to the business, condition (financial or otherwise) or results of operations
of the Company provided that the term "Company Material Adverse Effect" as
used herein shall not include any effect attributable to (a) changes in the
economy generally or (b) changes or circumstances affecting the industries in
which the Company engages, which change, circumstance or effect (in the case
of clause (b)) does not affect the Company, disproportionately relative to
other entities operating in such industries, or (ii) would materially impair
the ability of the Company to perform its obligations under this Agreement.
"Damages" shall mean all losses, liabilities, damages,
costs and expenses (including, without limitation, reasonable attorneys' fees
(including those incurred in connection with a dispute among the parties (or
any of them) hereto), investigation expenses, court costs, interest and
penalties) actually incurred in connection with any matter for which
indemnification is provided under Article VIII hereof.
"ERISA" shall have the meaning set forth in Section
2.11(a) hereof.
"Exchange Act" shall have the meaning set forth in Section
2.4(a) hereof.
"Form 10" shall have the meaning set forth in Section
2.4(a) hereof.
"GAAP" shall have the meaning set forth in Section 2.4(b)
hereof.
"Governmental Authority" or "Governmental Entity" shall
mean the collective reference to any court, administrative agency, tribunal,
authority, commission or other foreign or domestic, whether federal, state,
provincial or local governmental authority or instrumentality.
"Indemnification Matter" shall have the meaning set forth
in Section 8.3 hereof.
"Indemnitee" shall have the meaning set forth in Section
8.3 hereof.
"License Agreement" shall mean that certain Joint Product
Development and License Agreement between Purchaser and the Company to be
executed on or before the Closing in form and substance mutually agreed upon
by Purchaser and the Company.
"Lien" shall mean any mortgage, pledge, encumbrance, charge
or other security interest of any kind or nature whatsoever.
30
"Other Intellectual Property" shall have the meaning set
forth in Section 2.17 hereof.
"Path 1 Class A Common Stock" shall have the meaning set
forth in the recitals hereof.
"Path 1 Class B Common Stock" shall have the meaning set
forth in Section 2.3 hereof.
"Permits" shall have the meaning set forth in Section
2.15(b) hereof.
"Permitted Liens" shall mean:
(a) Liens for Taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided that adequate
reserves with respect to contested Taxes are maintained on the books of the
Company or Purchaser, as applicable;
(b) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other social security legislation;
(c) easements, rights-of-way, restrictions and other
similar encumbrances previously incurred in the ordinary course of business
which, in respect of properties or assets of the Company or Purchaser or any
Purchaser Subsidiary, as applicable, are not material, and which, in the case
of such encumbrances on the assets or properties of the Company or Purchaser
or any Purchaser Subsidiary, as applicable, do not materially detract from
the value of any such properties or assets or materially interfere with any
present use of such properties or assets;
(d) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary course
of business which are not overdue for a period of more than 90 days or which
are being contested in good faith by appropriate proceedings;
(e) deposits to secure the performance of bids,
contracts (other than for borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(f) statutory and contractual Liens on the property of
the Company or Purchaser or any Purchaser Subsidiary, as applicable, in favor
of landlords securing leases; and
(g) Liens in existence at the Effective Time listed in
Section 2.9 to the Company Disclosure Schedule.
"Person" means an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality thereof.
"Purchaser" shall have the meaning set forth in the
recitals hereof.
31
"Purchaser Material Adverse Effect" shall mean any change,
circumstance or fact that (i)is reasonably likely to be materially adverse to
the business, condition (financial or otherwise) or results of operations of
Purchaser and its subsidiaries, taken as a whole, provided that the term
"Purchaser Material Adverse Effect" as used herein shall not include any
effect attributable to (a) changes in the economy generally or (b) changes or
circumstances affecting the industries in which Purchaser and its
subsidiaries engage, which change, circumstance or effect (in the case of
clause (b)) does not affect Purchaser disproportionately relative to other
entities operating in such industries, or (ii) would materially impair the
ability of Purchaser to perform its obligations under this Agreement.
"Registered Intellectual Property" shall have the meaning
set forth in Section 2.17 hereof.
"SEC" shall have the meaning set forth in the Section
2.4(a) hereof.
"Stockholders' Agreement" shall mean that certain
Stockholders' Agreement by and among the Company, Purchaser, Xxxxxx X.
Xxxxxxx, Xxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxx to be executed on or before
the Closing in the form of Exhibit A hereto.
"Takeover Proposal" means any bona fide proposal or offer,
whether in writing or otherwise, from any Person (other than Purchaser or any
Affiliates thereof) (a "Third Party") to acquire beneficial ownership (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of all
or a material portion of the assets of the Company or 25% or more of any
class of equity securities of the Company pursuant to a merger, consolidation
or other business combination, sale of shares of capital stock, sale of
assets, tender offer, exchange offer or similar transaction with respect to
the Company, including any single or multi-step transaction or series of
related transactions, which is structured to permit such Third Party to
acquire beneficial ownership of any material portion of the assets of or 25%
or more of the equity interest in the Company.
"Taxes" shall have the meaning set forth in Section 2.7
hereof.
"Tax Returns" shall have the meaning set forth in
Section 2.7 hereof.
"Transactions" shall have the meaning set forth in Section
2.2 hereof.
* * *
32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
PATH 1 NETWORK TECHNOLOGIES INC.
By: /s/ Xxxx Xxxxx
----------------------------
Name:
Title:
XXXXXX TECHNOLOGY CORPORATION
By: /s/ Xxxx X. XxxXxxxxx
----------------------------
Name:
Title:
By: /s/ Xxxxxxxx X. Xxxxxxx
----------------------------
Name:
Title:
33
COMPANY DISCLOSURE SCHEDULE
Inclusion of information on this Company Disclosure Schedule does not
constitute an admission by the Company that the information is material. The
Company's approach has been to try to err on the side of over-inclusiveness and
over-disclosure.
SECTION 2.1
The Company is not qualified to do business as a foreign corporation in
California. The Company intends to become qualified forthwith and does not
believe that any past or future non-qualification would cause a Company Material
Adverse Effect.
On March 16, 1998, the Company entered into an agreement with Jyra Research,
Inc. ("Jyra") providing for the Company to make a strategic investment in Jyra
and for Jyra to make a strategic investment in the Company. Under this
agreement, the Company exchanged ten shares of its Series A Preferred Stock for
16,000 restricted common shares of Jyra, which the Company still holds.
SECTION 2.3
On April 10, 2000, the Board approved Xxxxxxx Xxxxxxx as its Chief Executive
Officer. In connection with that, Xx. Xxxxxxx will receive options to purchase
up to 400,000 shares of the Company's Class B Common Stock.
The Company is contemplating hiring [****] to become its Chief
Financial Officer. In connection with that, the Company may grant [****]
options to purchase up to 250,000 shares of Class B Common Stock.
The Company has made informal commitments to grant options to purchase up to
approximately 50,000 shares of Class B Common Stock to certain current or future
employees, consultants, and/or advisors of the Company.
The Company may sell up to another $5 million of its Class A Common Stock to
certain investors before its ongoing stock offering is completed.
SECTION 2.4
The Company may have a material liability or obligation with respect to the
pending and threatened litigation involving Xx. Xxxxxx (including for
indemnification of individuals sued or threatened by him).
Note also Xxxxxxx and Xxxxx Xxxxx'claim for indemnification and advancement of
expenses.
SECTION 2.6
The Company's Form 10 (general form for registration of securities under the
Securities Exchange Act of 1934) has not been declared effective. As a result,
as of March 2000, the Company's securities have been removed from the OTC
Bulletin Board.
The Company has received $3.8 million pursuant to subscription agreements for
its Class A Common Stock.
The Company has also received a subscription agreement for 125,000 shares of its
Class A Common Stock at $8 per share.
The Company may sell up to another $5 million of its Class A Common Stock to
certain investors before its ongoing stock offering is completed.
See the Section 2.4 disclosure.
SECTION 2.7
The Company failed to timely pay its annual Delaware state franchise tax for
fiscal year 1999. The Company has directed its outside tax advisor to file, with
payment, the necessary documentation as promptly as possible.
SECTION 2.10
Lease Agreement between the Company and Xxxxxxx Properties, L.P. dated April 10,
1999.
Agreement with Doctor Design, Inc. dated June 4, 1999.
The Company is negotiating a proposed agreement with [****].
Xxxxx Settlement Agreement dated April 2000.
The Company has also received a subscription agreement for 125,000 shares of its
Class A Common Stock at $8 per share.
SECTION 2.11
The Company maintains a medical and dental plan.
The Company has a stock option plan.
SECTION 2.14
The Company and its indemnifiable officials are being sued and threatened by Xx.
Xxxxxx. Note also Xxxxxxx and Xxxxx Xxxxx' claim in Delaware for indemnification
and advancement of expenses.
SECTION 2.15
The Company does not have any permits, certificates or other authorization from
the Federal Communications Commission, Underwriters Laboratories or any European
Union agency which may be required in order to sell certain products.
As of March 2000, the Company's securities have been removed from the OTC
Bulletin Board, which does not relate directly to the conduct of the Company's
business
SECTION 2.16
--------------------------------------------------------------------------------
PENDING TRADEMARKS AND PATENTS
--------------------------------------------------------------------------------
------------------- ---------------------------------- -------------- ----------------------- ---------------
MATTER FILING
TYPE TITLE DATE APPLICATION NO. STATUS
------------------- ---------------------------------- -------------- ----------------------- ---------------
Trademark TRUECIRCUIT 12/11/98 75/605,234 Pending
------------------- ---------------------------------- -------------- ----------------------- ---------------
Trademark DOTCAM 11/29/99 75/859,744 Pending
------------------- ---------------------------------- -------------- ----------------------- ---------------
Patent (U.S.) [****] 12/29/98 [****] Pending
------------------- ---------------------------------- -------------- ----------------------- ---------------
Patent (PCT) [****] 11/3/99 [****] Pending
------------------- ---------------------------------- -------------- ----------------------- ---------------
Patent (U.S.) Methods and Apparatus for 8/19/98 [****] Pending
[****]
------------------- ---------------------------------- -------------- ----------------------- ---------------
Patent (PCT) Methods and Apparatus for 8/18/99 [****] Pending
[****]
------------------- ---------------------------------- -------------- ----------------------- ---------------
Patent (U.S.) Methods and Apparatus for 12/31/98 [****] Pending
[****]
------------------- ---------------------------------- -------------- ----------------------- ---------------
None of the above are "valid and in full force and effect," because they are
merely applications. They are valid and legitimate applications.
SECTION 2.22 (RELATING TO SECTION 2.21)
Xxxxxxx Xxxxxxx, as Chief Executive Officer, will receive an employment
agreement and options to purchase up to 400,000 shares of the Company's Class B
Common Stock.
The Company may hire [****] to become its Chief Financial Officer. In
connection with that, the Company may grant [****] options to purchase up
to 250,000 shares of Class B Common Stock.
The Company has made informal commitments to grant options to purchase up to
approximately 50,000 shares of Class B Common Stock to certain current or future
employees, consultants, and/or advisors of the Company.
The Company has a stock option plan.
