Exhibit 10.2
AGREEMENT OF PURCHASE AND SALE OF STOCK
April 21, 2000
THIS AGREEMENT OF PURCHASE AND SALE OF STOCK (this "AGREEMENT"), is
dated as of the date set forth above, and is made and entered into by and among
the Pathways Group, Inc., a Delaware corporation ("Pathways"); Xxxxx Xxxxxx, Xxx
Xxxxx and Xxxx Xxxxx (collectively referred to herein as "Shareholders"); MS
Digital, Inc., a Washington corporation, ("Corporation").
RECITALS
A. Shareholders have represented they own all the outstanding
stock of Corporation.
B. Pathways desires to purchase from Shareholders, and
Shareholders desires to sell to Pathways, all the outstanding stock of
Corporation (the "Shares") in exchange for Pathways Common Stock (as defined in
Section 4.3 below) in a stock for stock transaction intended to qualify as a
tax-free reorganization under the Code (as defined in Section 1.4 below).
C. Boards of Directors of Pathways and Corporation (collectively,
the "Constituent Corporations") and the Shareholders deem it advisable and in
the best interests of the Constituent Corporations and in the best interests of
the shareholders of the Constituent Corporations that Pathways purchase all the
outstanding stock of Corporation from Shareholders.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this agreement, Pathways,
Shareholders and Corporation hereby agree as follows:
1. DEFINITIONS. The following terms when used herein have the
meanings set forth below:
1.1 "AFFILIATE" has the meaning set forth in the rules
and regulations promulgated by the Securities and
Exchange Commission under the Securities Act of 1933,
as amended.
1.2 "CLOSING" and "CLOSING DATE" have the respective
meanings set forth in SECTION 8.
1.3 "COBRA" has the meaning set forth in SECTION 3.11(c).
1.4 "CODE" means the Internal Revenue Code of 1986, as
amended.
1.5 "DOL" has the meaning set forth in SECTION 3.11(b).
1.6 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.7 "ERISA AFFILIATE" has the meaning set forth in
SECTION 3.11(a).
1.8 "ENCUMBRANCES" means, with respect to an item,
claims, liabilities, liens, pledges, mortgages,
restrictions, options, charges and encumbrances of
any kind, whether accrued, absolute, contingent or
otherwise, affecting that item.
1.9 "GAAP" means generally accepted accounting
principles, consistently applied.
1.10 "GOVERNMENT CONTRACT PARTY" means any independent or
executive agency, division, subdivision, audit group,
or procuring office of the federal government,
including any prime contractor of the federal
government and any higher level subcontractor of a
prime contractor of the federal government, and
including any employees or agents thereof, in each
case acting in such capacity.
1.11 "GOVERNMENTAL ENTITY" means any court, administrative
agency or commission or other governmental authority
or agency, domestic or foreign.
1.12 "IRS" has the meaning set forth in SECTION 3.11(b).
1.13 "LICENSED INTELLECTUAL PROPERTY" has the meaning set
forth in Section 3.10(a).
1.14 "MATERIAL ADVERSE EFFECT" with respect to an entity
means a material adverse effect on the business,
assets (including intangible assets), financial
condition, or results of operations of such entity
and its Subsidiaries, taken as a whole.
1.15 "SUBSIDIARY" means, with respect to any parent
corporation or other entity, a corporation or other
entity in which a percentage of its voting securities
sufficient to elect at least a majority of the Board
of Directors or other managers is owned or otherwise
controlled, directly or indirectly, by such parent
corporation or other entity.
1.16 "TAX" means all federal, state, local and foreign
income, property, employment, sales, use, license,
payroll, occupation, franchise, occupation,
recording, value added, transfer, excise and other
taxes, fees, levies or assessments of any nature
whatsoever (whether payable directly or by
withholding) and, with respect to such tax, any
estimated tax, interest, penalties and additions and
related charges of Governmental Entities.
2. PURCHASE AND SALE OF STOCK.
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2.1 TAX-FREE REORGANIZATION. Shareholders and Pathways adopt this
Agreement as a plan of reorganization under Code Section 368(a)(1)(B).
2.2 SALE AND TRANSFER OF SHARES. Subject to the terms and
conditions set forth in this Agreement, on the Closing Date, Shareholders will
transfer and convey the Shares to Pathways, and Pathways will acquire the Shares
from Shareholders.
2.3. CONSIDERATION AT CLOSING. As full payment for the transfer of
the Shares by Shareholders to Pathways, in accordance with the provisions of
Section 8 (Closing provisions), Pathways must deliver the following:.
2.3.1. On the Closing Date or as expeditiously as reasonably
possible, the number of shares of Pathways Common Stock, having a par
value of $0.01 per share, determined by dividing the market price of
Pathways Common Stock into One-Million Five Hundred Thousand Dollars
($1,500,000.00). The market price for the shares of Pathways Common
Stock for this purpose will be the closing price for such stock on the
NASDAQ Stock Exchange on the day immediately preceding the Closing Date
("Closing Date Market Price"). These shares shall be allocated to the
Shareholders as follows:
(a) Xxxxx Xxxxxx shall receive the number of shares of
Pathways Common Stock determined by dividing the
Closing Date Market Price of Pathways Common Stock
into One Million Twenty Thousand Dollars
($1,020,000.00). Of these shares, the number of
shares of Pathways Common Stock determined by
dividing the Closing Date Market Price into Eight
Hundred Fifty Thousand Dollars ($850,000.00) shall be
registered on Form S-3 with the Securities and
Exchange Commission ("SEC") pursuant to the
Securities Act of 1933, as amended, as expeditiously
as reasonably possible and the remaining number of
shares of Pathways Common Stock determined by
dividing the Closing Date Market Price into One
Hundred Seventy Thousand ($170,000) shall not require
the filing of a Form S-3, registration statement or
similar document. Pathways will take every reasonable
step possible to ensure that the registered shares
are filed as soon as possible after Pathways' SEC
counsel has received an executed copy of this
Agreement. .
(b) Xxx Xxxxx shall receive the number of shares of
Pathways Common Stock determined by dividing the
market price of Pathways Common Stock (as determined
above) into Four Hundred Fifty Thousand Dollars
($450,000.00). Of these shares, the number of shares
of Pathways Common Stock determined by dividing the
Closing Date Market Price into One Hundred Thousand
Dollars ($100,000.00) shall be registered on Form S-3
with the SEC pursuant to the Securities Act of 1933,
as amended, as expeditiously as reasonably possible,
and the remaining number shares determined by
dividing the Closing Date Market Price into Three
Hundred Fifty Thousand Dollars ($350,000.00) shall
not require the
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filing of a Form S-3, registration statement or
similar document. Pathways will take every reasonable
step possible to ensure that the registered shares
are filed as soon as possible after Pathways' SEC
counsel has received an executed copy of this
Agreement.
(c) Xxxx Xxxxx shall receive the number of shares of
Pathways Common Stock determined by dividing the
market price of Pathways Common Stock (as determined
above) into Thirty Thousand Dollars ($30,000.00).
None of these shares shall require the filing of a
Form S-3, registration statement or similar
document..
It is understood and agreed that none of the shares to be
registered on Form S-3 shall be issued to Shareholders until such time
as such registration statement has been declared effective by the SEC.
No fractional shares of Pathways Common Stock shall be issued
as consideration under this SECTION 2.3 of the Agreement. In the event
that such fractional shares result from the calculations described in
this SECTION 2.3, the number of shares resulting therefrom shall be
rounded down and reduced to the previous whole share.
2.3.2 On or before December 1, 2000, Xxxxx Xxxxxx shall
receive the following consideration: (i) Pathways may, at the sole
option of the Chairman of the Board of Directors of Pathways
("Chairman"), at any time after the Closing Date, issue to Xxxxx Xxxxxx
the number of shares of Pathways Common Stock determined by dividing
the closing market price on the day immediately preceding the day
Pathways decides to issue the stock ("Second Market Price") into One
Million Five Hundred Thousand Dollars ($1,500,000.00); or (ii) if
Pathways does not exercise its option to issue shares of Pathways
Common Stock, then on December 1, 2000, Pathways shall issue to Xxxxx
Xxxxxx the number of shares of Pathways Common Stock determined by
dividing the closing market price of Pathways' Common Stock on November
30, 2000, into One Million Five Hundred Thousand Dollars
($1,500,000.00). These shares shall not require the filing of a Form
S-3, registration statement or similar document.
No fractional shares of Pathways Common Stock shall be issued
as consideration under this SECTION 2.3 of the Agreement. In the event
that such fractional shares result from the calculations described in
this SECTION 2.3, the number of shares resulting therefrom shall be
rounded down and reduced to the previous whole share.
2.4 APPRAISAL RIGHTS. If any holders of Corporation capital stock
exercise appraisal rights in connection with the share exchange under Washington
Law, any shares of Corporation capital stock with respect to which such rights
have been duly demanded and perfected ("DISSENTING SHARES") shall not be
converted into the right to receive the consideration described in Sections 2.3
but shall be converted into the right to receive such consideration as may be
determined to be due with respect to such Dissenting Shares pursuant to
Washington Law. Corporation shall give Pathways prompt notice of any demand
received by Corporation for
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appraisal of or payment for Corporation capital stock, and Pathways shall have
the right to participate in all negotiations and proceedings with respect to
such demand. Corporation agrees that, except with the prior written consent of
Pathways, or as required under Washington Law, it will not voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
appraisal or payment. Each holder of Dissenting Shares (a "DISSENTING
SHAREHOLDER") who, pursuant to the provisions of Washington Law, becomes
entitled to payment of the fair market value of any shares of Corporation
capital stock shall receive payment therefor (but only after the fair market
value therefor shall have been agreed upon or finally determined pursuant to
such provisions). In the event that any holder of any shares of Corporation
capital stock fails to make an effective demand for payment or otherwise loses
his status as a Dissenting Shareholder, Pathways shall, as of the later of the
Closing Date of the Agreement or the occurrence of such event, issue and
deliver, upon surrender by such Dissenting Shareholder of his certificate or
certificates representing shares of Corporation capital stock, the Consideration
to which such Dissenting Shareholder would have been entitled to under Sections
2.3 of this Agreement.
2.5 ACCOUNTING TREATMENT. The share exchange contemplated by this
Agreement is intended to be treated as a pooling of interest for accounting
purposes.
3. REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES. Except as
set forth in the Disclosure Schedule attached hereto as Exhibit A, which refers
to the Section of such representations and warranties as are thereby qualified,
Corporation and Shareholders ("Selling Parties") represent and warrant to
Pathways as set forth below.
3.1 ORGANIZATION. Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington
and has all requisite corporate power and authority to own, operate and lease
its properties and to carry on its business as it is now being conducted.
Corporation is duly qualified or licensed to do business and in good standing in
each jurisdiction in which the nature of its business or properties makes such
qualification or licensing necessary except where the lack of such qualification
or licensing (individually or in the aggregate) would not have a Material
Adverse Effect on Corporation. True, correct and complete copies of
Corporation's Articles of Incorporation and Bylaws, as in effect on the date
hereof and as will be in effect immediately prior to the Closing, have been
delivered to Pathways.
3.2 CAPITALIZATION. The issued and outstanding capital stock of
Corporation consists of, and immediately prior to the Closing will consist of
100,000 shares of Corporation's Common Stock. All such issued and outstanding
shares have been duly authorized, are validly issued, fully paid and
nonassessable and were issued and sold in compliance with all applicable
securities laws. As of the date of this Agreement there are no outstanding
options to purchase shares of Corporation's Common Stock. Except for the
foregoing, there are no outstanding rights, options, warrants, conversion rights
or other agreements for the purchase or acquisition from Corporation of any
shares of its capital stock or securities convertible into or exchangeable for
any shares of such capital stock. There are no preemptive rights to purchase or
otherwise acquire any securities of Corporation pursuant to any provisions of
law, the Articles of
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Incorporation or Bylaws of Corporation, or any agreement to which Corporation is
a party or otherwise. There is no voting or stock restriction agreement, proxy
or similar agreement to which Corporation is a party. There are no outstanding
contractual obligations, commitments, understandings or arrangements of
Corporation to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock of Corporation and, except as
contemplated by this Agreement, there are no irrevocable proxies with respect to
shares of capital stock of Corporation.
3.3 POWER, AUTHORIZATION AND VALIDITY.
(a) Corporation has the corporate right, power, legal
capacity and authority to execute and deliver, and to consummate the
transactions contemplated by this Agreement and, subject to such approval of the
same by the Corporation's shareholders as may be required by law, to perform its
obligations under this Agreement. The execution and delivery of, and the
consummation of the transactions contemplated by this Agreement has been duly
and validly approved and authorized by the Board of Directors of Corporation and
all other necessary corporate action on the part of Corporation, except for
approval by Corporation's shareholders.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Corporation in connection with the execution and delivery of,
and the consummation by Corporation of the transactions contemplated by, this
Agreement, except for the filing of appropriate documents with the relevant
authorities of other states in which Corporation is qualified to do business.
(c) Upon the execution and delivery of this Agreement by
Corporation, this Agreement will constitute a valid and binding obligation of
Corporation, enforceable against Corporation in accordance with its terms.
3.4 NO VIOLATION OF EXISTING AGREEMENTS. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, or result in any violation of or default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, (i) any provision of the Articles of Incorporation or Bylaws of
Corporation, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
to which Corporation is a party or by which Corporation or any of its properties
or assets is bound or affected, or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Corporation or its properties
or assets. The consummation of the transactions contemplated by this Agreement
will not require the consent of any third party or have a material adverse
effect upon any right, license, franchise, lease or agreement.
3.5 SUBSIDIARIES. Corporation (i) has no Subsidiaries, (ii) does
not own or control (directly or indirectly) any capital stock, bonds or other
securities of, and does not have any proprietary interest in, any other
corporation, general or limited partnership, firm, association or business
organization, entity or enterprise, and (iii) does not control (directly or
indirectly) the
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management or policies of any other corporation, partnership, firm, association
or business organization, entity or enterprise.
3.6 FINANCIAL STATEMENTS.
(a) Corporation has delivered to Pathways the
Corporation's balance sheet for the year ended December 31, 1999, and its
statements of operations and statement of cash flows for the fiscal year then
ended ("Financial Statements"). Except as expressly set forth in the notes,
exhibits or schedules thereto, the Corporation Financial Statements have been
prepared in accordance with GAAP and present fairly the financial position of
Corporation as of their respective dates and the results of operations, equity
transactions and cash flow of Corporation for the periods indicated.
(b) Corporation has no debt, liability, or obligation of
any nature, whether accrued, absolute, contingent, or otherwise, and whether due
or to become due, that is not reflected or reserved against on the Corporation
balance sheet included in the Corporation's Financial Statements (the
"CORPORATION BALANCE SHEET"), except for those that are not required by GAAP to
be included in a balance sheet or the notes thereto. The reserves, if any,
reflected on the Corporation Balance Sheet are adequate in light of the
contingencies with respect to which they are made.
(c) The accounts receivable shown on the Corporation
Balance Sheet arose in the ordinary course of business and have been collected,
or are reasonably expected to be collectible in the book amounts thereof, less
an amount not in excess of the allowance for doubtful accounts and returns
provided for in the Corporation Balance Sheet. The accounts receivable of
Corporation arising after the date of the Corporation Balance Sheet and before
the date of this Agreement are on Section 3.6(c) of the Corporation Disclosure
Schedule and arose in the ordinary course of business and have been collected or
will be collectible in the book amounts thereof, less allowances for doubtful
accounts and returns determined in accordance with the past practices of
Corporation. None of such accounts receivable is subject to any valid and
material claim of offset or recoupment or counterclaim, and Corporation has no
knowledge of any specific facts that would be likely to give rise to any such
claim; no material amount of such accounts receivable is contingent upon the
performance by Corporation of any obligation; and no agreement for deduction or
discount has been made with respect to any such accounts receivable.
(d) The inventories shown on the Corporation Balance
Sheet, or thereafter acquired by Corporation, consist of items of a quantity and
quality usable or salable in the ordinary course of Corporation's business.
Changes to the inventories of Corporation arising after the date of the
Corporation Balance Sheet and before the date of this Agreement are in Section
3.6(d) of the Corporation Disclosure Schedule. The value at which inventories
are carried reflect the inventory valuation policy of Corporation, which is
consistent with its past practice and in accordance with GAAP. Due provision has
been made on the books of Corporation, consistent with past practices, to
provide for all slow-moving, obsolete, or unusable
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inventories at their estimated useful or scrap values, and such inventory
reserves are adequate to provide for such slow-moving, obsolete or unusable
inventory and inventory shrinkage.
3.7 TAX MATTERS.
(a) Corporation has duly filed all tax returns, reports
and estimates required to be filed by it, for all years and periods (and
portions thereof) for which any such returns, reports or estimates were due on
or prior to the Closing Date. All such returns, reports and estimates, as filed,
were complete, correct and accurate in all material respects. All taxes due from
Corporation have been paid with respect to years and periods ending on or prior
to the Closing Date. Corporation has received no notice of any pending
assessments, asserted deficiencies or claims for additional taxes that are
payable and have not been paid, except to the extent that they are subject to a
bona fide dispute with the relevant taxing authority. The reserves for taxes, if
any, reflected on the Corporation Balance Sheet included in the Corporation
Financial Statements are adequate and there are no tax liens on any property or
asset of Corporation other than liens for taxes not yet due. There have been no
examinations of any of Corporation's tax returns or reports by any Governmental
Entity. There are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any tax return or report for any period and
no request for such an agreement or waiver is pending.
(b) All taxes that Corporation has been required to
collect or withhold have been duly collected or withheld and, to the extent
required, have been paid to the proper taxing authority.
(c) Corporation is not a party to any tax-sharing
agreement or similar arrangement with any other party.
(d) At no time has Corporation been included in the
federal consolidated income tax return of any affiliated group of corporations.
(e) Corporation is not obligated to make any "parachute
payment," as defined in Section 280G of the Code.
(f) Corporation will not be required to include any
material adjustment in taxable income for any tax period (or portion thereof)
ending after the Closing Date pursuant to Section 481(c) of the Code or any
provision of the tax laws of any jurisdiction requiring tax adjustments as a
result of a change in method of accounting implemented by Corporation prior to
the Closing Date for any tax period (or portion thereof) ending on or before the
Closing Date or pursuant to the provisions of any agreement entered into by
Corporation prior to the Closing Date with any taxing authority with regard to
the tax liability of Corporation for any tax period (or portion thereof) ending
on or before the Closing Date.
(g) Corporation is not under any contractual obligation
to pay any tax obligations of any other person, or any tax obligation with
respect to any transaction of any other person or to indemnify any other person
with respect to any tax.
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(h) Corporation has not at any time filed a consent to
the application of Section 341(f)(2) of the Code to
any property or assets held, acquired or to be
acquired by it, and will not file any such consent
before the Closing Date.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1999,
Corporation has conducted its business in the ordinary and usual course and,
without limiting the generality of the foregoing, has not:
(a) suffered any event or occurrence that has had a
Material Adverse Effect on Corporation;
(b) suffered any damage, destruction or loss, whether or
not covered by insurance, that had a Material Adverse Effect on Corporation;
(c) granted any increase in the compensation payable or
to become payable by Corporation to its officers or employees;
(d) declared, set aside or paid any dividend or made any
other distribution on or in respect of the shares of its capital stock or
declared any direct or indirect redemption, retirement, purchase or other
acquisition of such shares;
(e) made any change in the accounting methods or
practices it follows, whether for general financial or tax purposes, or any
change in depreciation or amortization policies or rates except as may be
required by any modification or change in GAAP;
(f) sold, assigned, transferred, or otherwise disposed of
any patent, trademark, tradename, brand name, copyright (or pending application
for any patent, trademark or copyright), invention, process, know-how, formula
or trade secret or interest therein or other intangible asset or licensed any of
the foregoing;
(g) suffered any labor dispute;
(h) entered into any material commitment or obligation,
except with Pathways;
(i) incurred any material liability (including, without
limitation, any contingent liability with respect to the obligation of others),
except in connection with the transactions contemplated by this Agreement;
(j) permitted or allowed any of its property or assets to
be subjected to any Encumbrance, except in the ordinary course of its business
and except for liens of current taxes not yet due;
(k) made any capital expenditure or commitment for
additions to property, plant or equipment in excess of $10,000 in the aggregate;
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(l) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets to, or entered into any agreement
or arrangement with, any of its Affiliates, officers, employees, directors or
shareholders or any Affiliate of any of the foregoing, other than salary or
benefits to Corporation employees in the ordinary course of business; or
(m) agreed to take any action described in this Section
3.8 or outside of the ordinary course of its business or that would constitute a
breach of any of the representations or warranties of Corporation contained in
this Agreement.
3.9 TITLE AND RELATED MATTERS; PROPERTY.
(a) Corporation has good and marketable title to all the
properties and assets, real and personal, reflected on the Corporation Balance
Sheet included in the Corporation Financial Statements or acquired after the
date of such Corporation Balance Sheet (except properties and assets sold or
otherwise disposed of since the date of such balance sheet in the ordinary
course of business or property which is leased), free and clear of all
Encumbrances, except for purchase money security interests and the lien of
current taxes not yet due and payable and Encumbrances which are immaterial in
the aggregate. Section 3.9(a) of the Corporation Disclosure Schedule lists all
material items of equipment owed or leased by Corporation, and such equipment is
(i) adequate for the conduct of the business of Corporation as currently
conducted and as proposed to be conducted, and (ii) in good operating condition,
regularly and properly maintained, subject to normal wear and tear.
(b) All real and personal property leases to which
Corporation is a party are valid, binding, enforceable and effective in
accordance with their respective terms. There is not any existing default by
Corporation under any of such leases or any event of default or event that,
with notice or lapse of time or both, would constitute an event of default by
Corporation or, to Corporation's knowledge, by any other party to any of such
leases which could be expected to have a Material Adverse Effect on
Corporation. True, correct and complete copies of each Corporation lease
described in this Section 3.9(b) have been provided to Pathways.
3.10 INTELLECTUAL PROPERTY.
(a) Corporation owns, or is licensed (including pursuant
to licenses, sublicenses or other agreements, collectively referred to herein as
"LICENSED INTELLECTUAL PROPERTY") or otherwise possesses a legal right to use,
all (i) issued patents and patent applications, (ii) all trademarks, trade
names, service marks and domain names, (iii) copyrights and mask works, and (iv)
other processes, formulae, methods, schematics, technology, know-how, inventions
(whether or not patentable), computer software programs or applications,
tangible or intangible proprietary and confidential information or materials and
trade secrets, to the extent any of such rights are material to the conduct of
the business of Corporation as currently conducted or as proposed to be
conducted (all of which are referred to as the "CORPORATION INTELLECTUAL
PROPERTY RIGHTS")
(b) Section 3.10(b) of the Corporation Disclosure
Schedule contains an accurate and complete list of (i) all patents and patent
applications and all trademarks, trade
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names, service marks and registered copyrights, included in the Corporation
Intellectual Property Rights, including the jurisdictions in which each such
Corporation Intellectual Property Right has been issued or registered or in
which any such application for such issuance and registration has been filed,
(ii) all licenses, sublicenses, distribution agreements and other agreements to
which Corporation is a party and pursuant to which any person is authorized to
use any Corporation Intellectual Property Rights or has the right to
manufacture, reproduce, market or exploit any products or services of
Corporation that have been and are currently being distributed or provided by
Corporation, and all products currently under development by Corporation
("Corporation Product") or any adaptation, translation or derivative work based
on any Corporation Product or any portion thereof, (iii) all licenses,
sublicenses and other agreements to which Corporation is a party and pursuant to
which Corporation is authorized to use any Licensed Intellectual Property, which
is incorporated in or forms a part of any Corporation Product, (iv) all joint
development or joint venture agreements to which Corporation is a party, and (v)
all agreements with Governmental Entities or other third parties pursuant to
which Corporation has obtained funding for research and development activities.
(c) Corporation is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Corporation Intellectual Property Rights or Licensed
Intellectual Property.
(d) Corporation: (i) has not received notice that it has
been sued in any suit, action or proceedings which involves a claim of
infringement or misappropriation of any patent, trademark, service xxxx,
copyright, trade secret or other proprietary right of any third party; (ii) has
not received any communications alleging that Corporation has violated, or by
conducting its business as proposed, would violate any patent, trademark,
service xxxx, copyright, trade secret or other proprietary right of any third
party; (iii) has no reason to believe that the manufacturing, marketing,
licensing or sale of any Corporation Product or the provision of services in the
course of Corporation's business infringes or misappropriates any patent,
trademark, service xxxx, copyright, trade secret or other proprietary right of
any third party; and (iv) has no knowledge of any claim challenging or
questioning the validity or effectiveness of any license or agreement relating
to any Corporation Intellectual Property Rights or Licensed Intellectual
Property.
(e) All designs, drawings, specifications, source code,
object code, documentation, flow charts and diagrams incorporating, embodying or
reflecting any of the Corporation Products at any stage of their development
(the "CORPORATION COMPONENTS") were written, developed and created solely and
exclusively by employees of Corporation without the assistance of any third
party or were created by third parties who assigned exclusive ownership of all
their rights to Corporation pursuant to valid and enforceable agreements. Each
person currently or formerly employed by Corporation (including independent
contractors, if any) that has or had access to confidential information of
Corporation has executed and delivered to Corporation a confidentiality and
non-disclosure agreement substantially in the form previously provided to
Pathways. Corporation has at all times used commercially reasonable efforts to
treat the Corporation Products and Corporation Components as containing trade
secrets and have not
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disclosed or otherwise dealt with such items in such a manner as to cause the
loss of such trade secrets by their release into the public domain. Corporation
has taken all reasonable steps that are required to protect Corporation's rights
in confidential information and trade secrets of Corporation or provided by any
other person to Corporation.
(f) Neither the execution and delivery of any such
agreement, nor the carrying on of Corporation's business as currently conducted
and as currently proposed to be conducted by any such person as an employee,
consultant or independent contractor, as the case may be, has conflicted or will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such persons is obligated.
(g) To the knowledge of Corporation, no person is
infringing or misappropriating any Corporation Intellectual Property Rights.
(h) Each (i) patent, (ii) trademark, (iii) copyright,
(iv) service xxxx or (v) other Corporation Intellectual Property Right that has
been registered, filed, certified or otherwise perfected by recordation with any
Governmental Entity ("CORPORATION REGISTERED INTELLECTUAL PROPERTY") is valid
and subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Corporation Registered Intellectual Property which are due
before the Closing have been or will be paid prior to the Closing and all
necessary documents and certificates in connection with such Corporation
Registered Intellectual Property which are due before the Closing have been or
will be filed prior to the Closing with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Corporation Registered
Intellectual Property. For each product, technology or service of Corporation
that constitutes or includes a copyrightable work, Corporation has registered
the copyright in the latest version of such work with the United States
Copyright Office. In each case in which Corporation has acquired any Corporation
Intellectual Property rights from any person, Corporation has obtained a valid
assignment sufficient to irrevocably transfer all rights in such Corporation
Intellectual Property Rights (including the right to seek past and future
damages with respect thereto) to Corporation and, to the maximum extent provided
for by, and in accordance with, applicable laws and regulations, Corporation has
recorded each such assignment with the relevant governmental authorities,
including the United States Patent and Trademark Office, the U.S. Copyright
Office, or their respective equivalents in any relevant foreign jurisdiction, as
the case may be.
(i) There are no contracts, licenses or agreements
between Corporation and any other person with respect to Corporation
Intellectual Property Rights under which there is any dispute known to
Corporation regarding the scope of such agreement, or performance under such
agreement including with respect to any payments to be made or received by
Corporation.
3.11 EMPLOYEE BENEFIT PLANS.
(a) Section 3.11 of the Corporation Disclosure Schedule
lists, with respect to Corporation and any trade or business (whether or not
incorporated) which is treated as a single employer with Corporation (an "ERISA
AFFILIATE") within the meaning of Section 414(b), (c),
12
(m) or (o) of the Code, each plan, program, policy, practice, contract,
agreement or other arrangement providing for employment, compensation,
severance, relocation, termination pay, deferred compensation, sabbatical,
performance awards, bonus, stock or stock-related awards, fringe benefit,
cafeteria benefit, dependent care, including, without limitation, each "employee
benefit plan" as defined in Section 3(3) of ERISA which is maintained,
contributed to, or required to be contributed to by Corporation or any ERISA
Affiliate or with respect to which Corporation or any ERISA Affiliate has or may
have any liability (collectively, the "CORPORATION EMPLOYEE PLAN(S)"). None of
the Corporation Employee Plans promise or provide retiree medical or other
retiree welfare benefits to any person. Corporation does not have any plan or
commitment to establish any new Corporation Employee Plans or amend any
Corporation Employee Plan which would materially increase the expense of
maintaining such Plan above the level of expense incurred with respect to that
Plan for the most recent fiscal year included in Corporation's Financial
Statements, except for such amendments as may be required by law.
(b) DOCUMENTS. Except for such items the nondisclosure of
which would not have a Material Adverse Effect on Corporation, Corporation has
furnished to Pathways true and complete copies of the current documents relating
to each of the Corporation Employee Plans, including (without limitation) plan
documents, trust documents, the most recent determination or opinion letter
issued by the Internal Revenue Service ("IRS"), group annuity contracts, plan
amendments that have not yet been incorporated into the current version of a
restated plan document, insurance policies or contracts, employee booklets,
administrative service agreements, summary plan descriptions, Form 5500 reports
filed for the last three plan years, standard COBRA forms and notices, all
registration statements and prospectuses, any correspondence or inquiry by the
IRS (other than that relating to any determination letter application) or
Department of Labor ("DOL"), and any material employee communications relating
to any Corporation Employee Plan that is materially inconsistent with the terms
of any Corporation Employee Plan.
(c) COMPLIANCE. Each Corporation Employee Plan has been
administered in accordance with its terms and is in material compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code) in all material respects, and Corporation and
each ERISA Affiliate have performed all material obligations required to be
performed by them under, are not in material default under or in violation of
and have no knowledge of any material default or violation by any other party
to, any of the Corporation Employee Plans. Any Corporation Employee Plan
intended to be qualified under Section 401(a) of the Code has obtained from the
Internal Revenue Service a favorable determination letter or opinion letter as
to its qualified status under the Code and nothing has occurred since the
issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Corporation Employee Plan subject to
Code Section 401(a). There are no suits, administrative proceedings, including
any audit or inquiry by the IRS or DOL, actions or other litigation pending, or
to the knowledge of Corporation threatened against or with respect to any
Corporation Employee Plan, other than routine claims for benefits and those
relating to Qualified Domestic Relations Orders. Corporation and each of its
United States subsidiaries have complied in all material respects with the
health care continuation and notice provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA"), or any applicable
13
state continuation coverage requirements, the Family and Medical Leave Act of
1993, the Health Insurance Portability and Accountability Act and the Cancer
Rights Act of 1998.
(d) NO TITLE IV OR MULTIEMPLOYER PLAN. Corporation does
not now, nor has it ever, maintained, established, sponsored, participated in,
or contributed to, any pension plan which is subject to Title IV of ERISA or
Section 412 of the Code. Neither Corporation nor any ERISA Affiliate is a party
to, has made or is required to make any contribution to, or otherwise incurred
any obligation or liability under any "multiemployer plan" as defined in Section
3(37) of ERISA. Neither Corporation nor any ERISA Affiliate has any actual or
potential withdrawal liability for any complete or partial withdrawal from any
multiemployer plan.
(e) EFFECT OF TRANSACTION. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or other service provider of Corporation to severance benefits
or any other payment (including, without limitation, unemployment compensation,
golden parachute or bonus) or (ii) accelerate the time of payment or vesting of
any such benefits, or increase the amount of compensation due any such employee
or service provider. No benefit payable or which may become payable by
Corporation pursuant to any Corporation Employee Plan or as a result of or
arising under this Agreement shall constitute an "excess parachute payment" (as
defined in Section 280G(b)(1) of the Code) which is subject to the imposition of
an excise tax under Section 4999 of the Code or the deduction for which would be
disallowed by reason of Section 280G of the Code.
3.12 CONTRACTS.
(a) Except as set forth in the Corporation Disclosure
Schedule, Corporation is not a party or subject to any agreement, obligation or
commitment, written or oral:
(i) that calls for any fixed or contingent
payment or expenditure or any related series of fixed and/or contingent payments
or expenditures by or to Corporation totaling more than $10,000 in any year;
(ii) with agents, advisors, salesmen, sales
representatives, independent contractors or consultants that are not cancelable
by it on no more than thirty (30) days' notice and without liability, penalty or
premium;
(iii) to provide funds to or to make any
investment in any other person or entity (in the form of a loan, capital
contribution or otherwise);
(iv) with respect to obligations as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any other person or entity;
(v) for any line of credit, standby financing,
revolving credit or other similar financing arrangement;
14
(vi) for the sale or lease of any real property
involving more than $10,000 per annum;
(vii) to provide any warranty or indemnity
relating to products or services provided by Corporation, other than any
warranties or indemnities contained in Corporation's standard terms and
conditions of sale provided to Pathways' legal counsel and warranties implied by
law; or
(viii) with any distributor, original equipment
manufacturer, value added remarketer or other person for the distribution of any
of the Corporation Products.
(b) To Corporation's knowledge, no party to any such
contract, agreement or instrument intends to cancel, withdraw, modify or amend
such contract, agreement or instrument.
(c) Section 3.12(c) of the Corporation Disclosure
Schedule lists each vendor that (i) manufactures for or supplies to Corporation
any material product or component of any Corporation Product and to which
Corporation paid more than $50,000 in 1997, 1998 or 1999, or (ii) is the sole
source for any product or component of any Corporation Product.
(d) Corporation is not in default under or in breach or
violation of, nor, to Corporation's knowledge, is there any valid basis for any
claim of default by Corporation under, or breach or violation by Corporation of,
any contract, commitment or restriction to which Corporation is a party or by
which it or any of its properties or assets is bound or affected, where such
defaults, breaches, or violations would, in the aggregate, have a Material
Adverse Effect on Corporation. To Corporation's knowledge, no other party is in
default under or in breach or violation of, nor, to Corporation's knowledge, is
there any valid basis for any claim of default by any other party under, or any
breach or violation by any other party of, any contract, commitment, or
restriction to which Corporation is a party or by which any of its properties or
assets is bound or affected, where such defaults, breaches, or violations would,
individually or in the aggregate, have a Material Adverse Effect on Corporation.
3.13 COMPLIANCE WITH LAW. Corporation possesses all regulatory
consents, authorizations, approvals, licenses and permits required by any
Governmental Entity in connection with the conduct of all aspects of its
business as presently conducted. Corporation has complied with all such
consents, authorizations, approvals, licenses and permits and with all
applicable laws, regulations and other requirements of each Governmental Entity
having jurisdiction over Corporation. Corporation has not received any (i)
notification of any asserted present or past failure by Corporation to comply
with such laws, rules or regulations, or (ii) written complaint, inquiry or
request for information from any Governmental Entity relating thereto.
3.14 LABOR DIFFICULTIES. To Corporation's knowledge, Corporation is
not engaged in any unfair labor practice and is not in violation of any
applicable laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours. There are no proceedings pending
or, to Corporation's knowledge, reasonably expected or threatened, between
Corporation and any of its current or former employees. There are no claims
pending
15
or, to Corporation's knowledge, reasonably expected or threatened,
against Corporation under any workers' compensation or disability plan or
policy. Corporation has provided all employees with all wages, benefits and
compensation earned up through the date of this Agreement. There is no unfair
labor practice complaint against Corporation pending, or, to Corporation's
knowledge, threatened, nor are there any grievances which could form the basis
for such a complaint before the National Labor Relations Board. To Corporation's
knowledge, (i) the consummation of the transactions contemplated by the
Transaction Documents will not have a Material Adverse Effect on its relations
with Corporation employees, and (ii) none of the Corporation employees intends
to leave its employment, whether as a result of the transactions contemplated by
the Transaction Documents or otherwise.
3.15 CERTAIN TRANSACTIONS.
(a) No Affiliate of Corporation has any interest in (i)
any material equipment or other property or asset, real or personal, tangible or
intangible, including, without limitation, any of the Corporation Intellectual
Property Rights, used in connection with or pertaining to the business of
Corporation, (ii) any creditor, supplier, customer, manufacturer, agent,
representative, or distributor of any of the Corporation Products, (iii) any
entity that competes with Corporation, or with which Corporation is affiliated
or has a business relationship, or (iv) any agreement, obligation or commitment,
written or oral, to which Corporation is a party; PROVIDED, HOWEVER, that no
Affiliate of Corporation or other person shall be deemed to have such an
interest solely by virtue of the ownership of less than 5% of the outstanding
stock or debt securities of any publicly held company, the stock or debt
securities of which are traded on a recognized stock exchange or quoted on
NASDAQ.
(b) Corporation is not a party to any (i) agreement with
any officer or other employee of Corporation (x) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Corporation in the nature of any of the transactions
contemplated by this Agreement, (y) providing any term of employment or
compensation guaranty, or (z) providing severance benefits or other benefits
after the termination of employment of such officer or other employee regardless
of the reason for such termination of employment, or (ii) agreement or plan,
including, without limitation, any stock option plan, stock appreciation right
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
3.16 EMPLOYEES AND CONSULTANTS. True, correct and complete copies
of all written agreements and descriptions of all oral agreements with
individual employees and consultants to which Corporation is a party have been
delivered to Pathways. The Corporation Disclosure Schedule lists the names of
all Corporation employees.
3.17 INSURANCE. Section 3.17 of the Corporation Disclosure Schedule
lists all forms of insurance held by Corporation. To Corporation's knowledge,
Corporation has not done anything, either by way of action or inaction, that
would invalidate any insurance policies and
16
other forms of insurance held by Corporation in whole or in part. There is no
claim by Corporation pending under any of such policies.
3.18 LITIGATION. There is no action, proceeding, claim or
investigation pending against Corporation or affecting any of its properties,
assets or operations before any court or administrative agency, and, to
Corporation's knowledge, no such action, proceeding, claim or investigation has
been threatened, nor is there any reasonable basis therefor. Without limiting
the generality of the preceding sentence, there is no basis for any shareholder
or former shareholder of Corporation, or any other person, firm, corporation or
entity, to assert a claim against Corporation, Shareholder, or Pathways based
upon (i) issuance or rights to issuance by Corporation of any shares of
Corporation capital stock, (ii) any rights as a Corporation Shareholder,
including any option or preemptive rights or rights to notice or to vote, or
(iii) any rights under any agreement between Corporation and any of its
shareholders or former shareholders, or option holders or former option holders
in their capacity as such. There is no judgment, decree, injunction, rule or
order of any Governmental Entity outstanding against Corporation or, to
Corporation's knowledge, affecting any of its properties, assets or operations.
No product liability or warranty claim has been asserted or threatened against
Corporation nor, to Corporation's knowledge, is there any specific situation,
set of facts or occurrence that provides a basis for any such claim.
3.19 CORPORATE MINUTES, ETC. Corporation has made available to
counsel for Pathways true, correct and complete copies of (i) its minute book
containing complete records of all proceedings, consents, actions, and meetings
of its shareholders, Board of Directors and any committees thereof, (ii) all
material permits, orders, and consents issued by any Governmental Entity with
respect to Corporation, or any securities of Corporation, and all applications
for such permits, orders, and consents, and (iii) the stock certificate and
transfer books and the stock register of Corporation setting forth all issuances
and transfers of any capital stock of Corporation. The corporate minute books,
stock certificate books, stock registers and other corporate records of
Corporation and the copies thereof provided to counsel for Pathways are complete
and accurate in all material respects, and the signatures appearing on all
documents contained therein are the true signatures of the persons purporting to
have signed the same.
3.20 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. Corporation has
complied with and not violated any laws, regulations or requirements of any
Governmental Entity related to pollution or protection of the environment,
including those relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials,
substances, or wastes into air, surface water, groundwater, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials, substances, or wastes. To Corporation's knowledge,
there are no conditions, circumstances, activities, practices, incidents, or
actions which are likely to form the basis of any claim, action, suit,
proceeding, hearing or investigation against Corporation based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic materials, substances or wastes.
17
3.21 NO BROKERS. Corporation is not obligated for the payment of
fees or expenses of any broker, finder or other person in connection with the
origination, negotiation or execution of this Agreement or in connection with
any transaction contemplated hereby.
3.22 GOVERNMENT CONTRACTS. All agreements pursuant to which
Corporation has sold or licensed any of its products to, or performed services
for, any Government Contract Party are listed in Section 3.22 of the Corporation
Disclosure Schedule. All of Corporation's technical data and computer software
was developed exclusively at private expense.
3.23 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for Agreements
with Pathways, there is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which Corporation is a party or
otherwise binding upon Corporation which has or may reasonably be expected to
have the effect of prohibiting or impairing any business practice of
Corporation, any acquisition of property (tangible or intangible) by
Corporation, the conduct of business by Corporation or otherwise limiting the
freedom of Corporation to engage in any line of business or to compete with any
person. Without limiting the generality of the foregoing, Corporation has not
entered into any agreement under which Corporation is restricted from selling,
licensing or otherwise distributing any of its technology or products to or
providing services to, customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
3.25 DISCLOSURE. Corporation has delivered to Pathways a true,
complete and correct copy of each document referred to in the Corporation
Disclosure Schedule or otherwise required by this Section 3 to be delivered.
3.26 NO MATERIAL ADVERSE EFFECT. There has been no Material Adverse
Effect on Corporation since March 21, 2000, and to Corporation's knowledge,
since March 21, 2000 there has not occurred any event which could reasonably be
expected to have a Material Adverse Effect on Corporation.
3.27 NO MISREPRESENTATION. No representation or warranty by
Corporation in this Agreement, or any statement, certificate or schedule
furnished or to be furnished by Corporation pursuant to this Agreement, when
taken together, contains or shall contain any untrue statement of a material
fact or omits or shall omit to state a material fact required to be stated
therein or necessary in order to make such statements, in light of the
circumstances under which they were made, not misleading.
3.28 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.
With respect to the Non-Registered Pathways Common Stock, Shareholders hereby
further represents and warrants to Pathways that:
A. PURCHASE ENTIRELY FOR OWN ACCOUNT. Shareholders
hereby confirm that the Pathways Common Stock to be acquired under the
terms and conditions of this Agreement will be acquired for investment
for the account of the Shareholders, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that
such Shareholders have no present intention of selling, granting any
participation in,
18
or otherwise distributing the same. The Shareholders further represent
that such Shareholders do not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such persons or to any third person, with respect to
the Pathways Common Stock. The Shareholders represent that they have
full power and authority to execute this Agreement.
B. DISCLOSURE OF INFORMATION. The Shareholders have had
an opportunity to discuss Pathways' business, management, financial
affairs and the terms and conditions of this Agreement with Pathways'
management and has had an opportunity to review Pathways' facilities.
Shareholders understand that such information provided in this
Agreement and other material provided by Pathways' to Shareholders was
intended to describe the aspects of Pathways' business that Pathways
believes to be material. Shareholders acknowledge that no form of
public solicitation or advertisement was used in connection with the
offer and sale of the stock, and by reason of his or her business or
financial experience, or the business or financial experience of his or
her professional advisor, has the capacity to protect his or her own
interest in connection with the offer and sale of the stock.
C. RESTRICTED SECURITIES. Shareholders understand that
Pathways Common Stock has not been registered under the Securities Act,
by reason of a specific exemption from the registration provisions of
the Securities Act which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of the
Shareholders' representations as expressed herein. The Shareholders
understand that the Pathways Common Stock is characterized as
"restricted securities" under the federal securities laws inasmuch as
they are being acquired from Pathways in a transaction not involving a
public offering and that under such laws and applicable regulations
such Pathways Common Stock may be resold without registration under the
Securities Act only in certain limited circumstances. Shareholders
acknowledge that the Pathways Common Stock must be held indefinitely
unless subsequently registered under the Securities Act or an exemption
from such registration is available. Shareholders are aware of the
provisions of Rule 144 promulgated under the Securities Act which
permits limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the
availability of certain current public information about Pathways, the
resale occurring not less than a specified number of years after a
party has purchased and paid for the security to be sold, the sale
being effected through a "broker's transaction" or in transactions
directly with a "market maker" (as provided by Rule 144(f)) and the
number of shares being sold during any three-month period not exceeding
specified limitations.
D. LEGENDS. The Shareholders understand that the shares
of Pathways Common Stock, and any securities issued in respect thereof
or exchange therefor, may bear one or all of the following legends:
(1) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
19
AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
(2) THE ADMINISTRATOR OF SECURITIES OF THE STATE OF
WASHINGTON HAS NOT REVIEWED THIS OFFERING OR THIS
PRIVATE PLACEMENT MEMORANDUM. THE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
WASHINGTON, CHAPTER 21.20.040 RWC (THE "WASHINGTON
ACT"), AND THEREFORE, CANNOT BE TRANSFERRED OR RESOLD
UNLESS THEY ARE REGISTERED UNDER THE WASHINGTON ACT
OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
(3) Any legend required by the blue sky laws of any state
to the extent such laws are applicable to the shares
represented by the certificate so legended.
E. INDEMNIFICATION. Shareholders acknowledge that they
understand the meaning and consequences of the representations and
warranties of this Section 3 hereof and Shareholders hereby agree to
indemnify and hold harmless Pathways, its shareholders, officers,
directors, agents and employees and attorneys thereof, from and against
any and all loss, damage or liability due to or arising out of a breach
of any such representations or warranties. Notwithstanding the
foregoing, however, no representation, warranty, acknowledgment or
agreement made herein by Shareholders shall in any manner be deemed to
constitute a waiver of any rights granted to Shareholders under federal
or state securities laws.
3.29. AUTHORIZATION. Shareholders have full power and authority to
submit, sell, assign and transfer the Shares represented by the certificate(s)
submitted on the Closing Date (described in Section 8), free and clear of all
liens, encumbrances and claims of others. All obligations and agreements set
forth in this Agreement shall survive the death or incapacity of Shareholders
and shall be binding upon the personal representatives, estates, successors and
assigns of Shareholders. Shareholders will, upon request, execute and deliver
any additional documents necessary or desirable to complete the surrender of
such Shares.
4. REPRESENTATIONS AND WARRANTIES OF PATHWAYS. Except as
specifically disclosed in Pathways' Disclosure Schedule attached HERETO AS
EXHIBIT C, Pathways represents and warrants to Corporation for the benefit of
all Corporation's shareholders that:
4.1 ORGANIZATION AND GOOD STANDING. Pathways is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and
20
have all requisite corporate power and authority to carry on its business as it
is now being conducted. Pathways is duly qualified or licensed to do business
and in good standing in each jurisdiction in which the nature of its business or
properties makes such qualification or licensing necessary, except where the
lack of such qualification or licensing (individually or in the aggregate) would
not have a Material Adverse Effect on Pathways.
4.2 POWER, AUTHORIZATION AND VALIDITY.
(a) Pathways has the corporate right, power, legal
capacity and authority to execute and deliver, and to consummate the
transactions contemplated by this Agreement and to perform its obligations under
it. The execution and delivery of, and the consummation of the transactions
contemplated by this Agreement is or will be validly approved and authorized by
all necessary corporate action.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Pathways in connection with the execution and delivery of,
and the consummation by it of the transactions contemplated by this Agreement,
except for such filings under federal and state securities laws as have already
been completed or which are not yet due.
(c) Upon the execution and delivery of this Agreement by
Pathways will have been, this Agreement will constitute a valid and binding
obligation of Pathways, enforceable in accordance with its terms.
4.3 CAPITALIZATION. The authorized capital stock of Pathways
consists of Fifty Million (50,000,000) shares of Common Stock, $0.01 par value
per share ("PATHWAYS COMMON STOCK"), of which Fourteen Million Six Hundred
Thirteen Thousand One Hundred Sixty Two (14,613,162) shares are issued and
outstanding, and One Million (1,000,000) shares of Preferred Stock, $0.01 par
value per share ("PATHWAYS PREFERRED STOCK"), Three Hundred Thousand (300,000)
of which shares have been designated.
4.4 NO VIOLATION OF EXISTING AGREEMENTS. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, or result in any violation of or default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, (i) any provision of the Certificate of Incorporation or Bylaws
of Pathways, as currently in effect, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license to which Pathways is a party or by which
Pathways or any of its properties or assets is bound or affected, or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Pathways or its properties or assets.
4.5 NO BROKERS. Pathways is not obligated for the payment of fees
or expenses of any broker or finder in connection with the origination,
negotiation or execution of this Agreement or in connection with any transaction
contemplated hereby.
21
4.6 LITIGATION. There is no litigation pending, or to the
knowledge of Pathways threatened, against Pathways or any of its officers and
directors which, if determined adversely, have an adverse effect on Pathways'
ability to deliver the Consideration.
4.7 DISCLOSURE. Pathways has hereto delivered to Corporation for
distribution to Corporation's shareholders each of the following:
(a) Annual report of Pathway on Form 10-K as filed with
the Securities and Exchange Commission ("SEC") for
Pathway's fiscal year ended on December 31, 1999; and
(b) Quarterly reports of the Pathways on Form 10-Q as
filed with the SEC as filed with the SEC for each of
the three 1999 fiscal quarters of Pathways through
September 30, 1999.
Other than as contemplated or caused by this Agreement, there has not
been any Material Adverse Effect on Pathways since December 31, 1999, and to
Pathways' knowledge, since December 31, 1999 there has not occurred any event
that could reasonably be expected to have a Material Adverse Effect on Pathways.
5. COVENANTS OF SELLING PARTIES. Shareholders and Corporation
covenant to and agree with Pathways as follows:
5.1 CONDUCT OF BUSINESS; INTERIM OPERATIONS. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement, Corporation agrees, subject to the limitations
described in Section 5.1(r) below, to carry on its business in the usual,
regular and ordinary course in substantially the same manner as previously
conducted, to pay its debts and taxes when due, subject to good faith disputes
over such debts or taxes, to pay or perform its other obligations when due, and,
to the extent consistent with such business, to use all commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and key employees, and (iii) preserve its relationships with customers,
suppliers, distributors, licensors, licensees and others having business
dealings with it. Corporation shall promptly notify Pathways of any event or
occurrence where such event or occurrence would result in a breach of any
covenant of Corporation set forth in this Agreement or cause any representation
or warranty of Corporation set forth in this Agreement to be untrue as of the
date of, or giving effect to, such event or occurrence. Except as expressly
contemplated by this Agreement, Corporation shall not, without the prior written
consent of Pathways:
(a) transfer or license to any person or entity or
otherwise extend, amend or modify any rights to the Corporation Intellectual
Property Rights;
(b) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu
22
of or in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination of
service by such party;
(c) issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities (except
upon the exercise or conversion of securities outstanding on the date of this
Agreement);
(d) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership or other business organization or division;
(e) sell, lease, license or otherwise dispose of any of
its properties or assets except for transactions entered into in the ordinary
course of business consistent with past practice;
(f) take any action to: (i) increase or agree to increase
the compensation payable or to become payable to its officers or employees, (ii)
grant any severance or termination pay to, or enter into any employment or
severance agreements with, any officer or employee, (iii) enter into any
collective bargaining agreement, or (iv) establish, adopt, enter into or amend
in any material respect any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(g) revalue any of its assets, including writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business consistent with past practice or as required by
GAAP;
(h) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities or guarantee any debt securities of
others, other than indebtedness incurred under outstanding lines of credit in
the ordinary course of business consistent with past practice;
(i) amend or propose to amend its Articles of
Incorporation or Bylaws;
(j) incur or commit to incur any individual capital
expenditure in excess of $5,000 or aggregate capital expenditures in excess of
$10,000;
(k) amend or terminate any material contract, agreement
or license to which it is a party except in the ordinary course of business;
(l) waive or release any material right or claim, except
in the ordinary course of business;
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(m) initiate any litigation or arbitration proceeding;
(n) accelerate, amend or change the period of
exercisability of any options or restricted stock granted to employees of
Corporation or authorize cash payments in exchange for any options granted under
any of such plans;
(o) compromise or otherwise settle or adjust any
assertion or claim of a deficiency in taxes (or interest thereon or penalties in
connection therewith), extend the statute of limitations with any tax authority
or file any pleading in court in any tax litigation or any appeal from an
asserted deficiency;
(p) change any of Corporation's accounting policies or
practices except as may be required by any modification or change in GAAP;
(q) change any of Corporation's personnel policies in any
material respect (except for changes contemplated by the Severance Plan);
(r) grant any person a power of attorney or similar
authority; or
(s) agree in writing or otherwise to take any of the
actions described in subsections (a) through (r) above, or any action which is
reasonably likely to make any of its representations or warranties contained in
this Agreement untrue or incorrect in any material respect on the date made (to
the extent so limited) or as of the Closing Date.
5.2 ACCESS TO INFORMATION. Until the Closing, Corporation will
allow Pathways and its agents free access upon reasonable notice and during
normal working hours to its files, books, records, and offices, including,
without limitation, any and all information relating to taxes, commitments,
contracts, leases, licenses, Corporation Intellectual Property Rights, personal
property and financial condition. Until the Closing, Corporation shall cause its
accountants to cooperate with Pathways and its agents in making available all
financial information reasonably requested, including, without limitation, the
right to examine all working papers pertaining to Corporation in the possession,
custody or control of such accountants, subject to the execution by Pathways of
a customary agreement with such accountants with respect to the use of such
working papers.
5.3 SHAREHOLDERS CONSENT. Corporation shall promptly after the
date hereof take all action necessary in accordance with Washington Law and its
Articles of Incorporation and Bylaws to solicit and obtain shareholder consent
and approval to consummate the transactions contemplated by this Agreement.
Corporation shall use commercially reasonable efforts to solicit such consent
and approval from the shareholders of Corporation at the earliest practicable
date and not later than April 12, 2000. The Board of Directors of Corporation
will recommend to the Corporation's shareholders that the transactions
contemplated by this Agreement be approved and will use commercially reasonable
efforts to solicit the approval of such matters by the Corporation's
shareholders. Corporation will provide to Pathways copies of all documents and
other information furnished to the shareholders of Corporation, if applicable,
in connection with such solicitation.
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5.4 REGULATORY APPROVALS. Prior to the Closing, Corporation will
execute and file, or join in the execution and filing of, any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any Governmental Entity that may be reasonably required
in connection with the consummation of the transactions contemplated by this
Agreement. Corporation will use commercially reasonable efforts to obtain or, as
applicable, to assist Pathways in obtaining all such authorizations, approvals
and consents.
5.5 SATISFACTION OF CONDITIONS PRECEDENT. Corporation will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent that are set forth in Sections 9.1 and 2 and to cause the
transactions contemplated by this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties which may be necessary or reasonably required on its
part in order to effect the transactions contemplated hereby.
5.6 OTHER NEGOTIATIONS. From and after the date of this Agreement
until the termination of this Agreement by its terms, Corporation shall not,
directly or indirectly through any officer, director, employee, representative
or agent of Corporation or otherwise, (i) solicit, initiate, or encourage any
inquiries or proposals that constitute, or could reasonably be expected to lead
to, a proposal or offer for a merger, consolidation, share exchange, business
combination, sale of all or a material portion of assets, sale of shares of
capital stock (including without limitation by way of a tender offer) or similar
transactions involving Corporation other than the transactions contemplated by
this Agreement (any of the foregoing inquiries or proposals being referred to in
this Agreement as an "ACQUISITION PROPOSAL"), (ii) engage or participate in
negotiations or discussions concerning, or provide any information to any person
or entity relating to, any Acquisition Proposal, or (iii) agree to, enter into,
accept, approve or recommend any Acquisition Proposal.Shareholders and
Corporation ("Selling Parties"), jointly and severally, warrant that:
6 CONDITIONS PRECEDENT TO PATHWAYS' PERFORMANCE. The obligations
of Pathways to purchase the Shares under this Agreement are subject to the
satisfaction, at or before the closing, of all the conditions set out in this
Agreement. Pathways may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition will
constitute a waiver by Pathways of any of its other rights or remedies, at law
or in equity, if Shareholders or Corporation are in default of any of their
representations, warranties, or covenants under this Agreement.
6.1 ACCURACY OF SELLING PARTIES' WARRANTIES. Except as otherwise
permitted by this Agreement, all warranties by each of the Selling Parties in
this Agreement, or in any written statement that will be delivered to Pathways
by any of them under this Agreement, must be true on the closing date as though
made at this time.
6.2 PERFORMANCE BY SELLING PARTIES. Selling Parties must have
performed, satisfied, and complied with all covenants, agreements, and
conditions required by this agreement to be performed or complied with by them,
or any of them, by the closing date.
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6.3 NO MATERIAL ADVERSE CHANGE. During the period from the date of
this Agreement to the closing date, there will not have been any material
adverse change in the financial condition or the results of operations of the
Corporation, and Corporation will not have sustained any insured or uninsured
loss or damage to its assets that materially affects its ability to conduct a
material part of its business.
6.4 OPINION OF SELLING PARTIES' COUNSEL. Pathways will have
received from counsel for Selling Parties, an opinion dated the closing date, in
a form approved by counsel for Pathways, that:
6.4.1 Corporation is duly incorporated, validly existing,
and in good standing under the laws of the State of Washington, and each has all
necessary corporate power to own its properties as now owned and operate its
business as now operated.
6.4.2 The authorized capital stock of Corporation consists
of 100,000 shares of common stock, of which, based solely on a review of the
stock journal, stock ledger, and the stock books of the Corporation, 100,000
shares are issued and outstanding. All outstanding shares are validly issued,
fully paid, and nonassessable. To the best knowledge of counsel, there are no
outstanding subscriptions, options, rights, warrants, convertible securities, or
other agreements or commitments obligating Corporation to issue or transfer from
treasury any additional shares of its capital stock of any class.
6.4.3 This Agreement has been duly and validly authorized
and, when executed and delivered by the Selling Parties, will be valid, binding,
and enforceable against each of them in accordance with its terms, except as
limited by bankruptcy and insolvency laws and by other laws and equitable
principles affecting the rights of creditors generally.
6.4.4 There is no suit, action, arbitration, or legal,
administrative, or other proceeding or governmental investigation pending or
threatened against or affecting Corporation, Shareholders, or any of their
businesses or properties or financial or other condition.
6.4.5 The Shares to be issued and delivered to Pathways
under this Agreement will be, when delivered, validly issued, fully paid, and
nonassessable. The Shares have been issued in compliance with registration
requirements of federal and state securities laws, or are exempt from the
registration requirements of federal and state securities laws.
6.5 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions, and other documents delivered to Pathways
under this Agreement will be satisfactory in all reasonable respects to Pathways
and its counsel.
7 CONDITIONS PRECEDENT TO SELLING PARTIES' PERFORMANCE. The
obligations of Shareholders to sell and transfer the Shares under this Agreement
are subject to the satisfaction, at or before the closing, of all the conditions
set out in this Agreement. Shareholders may waive any or all of these conditions
in whole or in part without prior notice; provided, however, that no such waiver
of a condition will constitute a waiver by Shareholders of any of their other
rights or
26
remedies, at law or in equity, if Pathways is in default of any of its
representations, warranties, or covenants under this Agreement.
7.1 ACCURACY OF PATHWAYS' WARRANTIES. Except as otherwise
permitted by this Agreement, all warranties by Pathways in this Agreement, or in
any written statement that delivered by Pathways under this Agreement, must be
true on the closing date as though made at that time.
7.2 PERFORMANCE BY PATHWAYS. Pathways must have performed,
satisfied, and complied with all covenants, agreements, and conditions required
by this agreement to be performed or complied with by it by the closing date.
7.3 PATHWAYS' STOCK VALIDLY ISSUED. The shares of Pathways Common
Stock to be issued and delivered under this Agreement will be, when delivered,
validly issued, fully paid, and nonassessable.
7.4 PATHWAYS' CORPORATE APPROVAL. The board of directors of
Pathways will have duly authorized and approved the execution and delivery of
this Agreement and all corporate action necessary or proper to fulfill Pathways'
obligations to be performed under this Agreement on or before the closing date.
8 CLOSING. The transfer of the Shares by Shareholders to
Pathways ("Closing") will take place at the offices of Pathways, 00000 Xxxxxxxxx
000xx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxxx 00000 at 10:00 a.m. local time, on April
19, 2000, or at such other time and place as the parties may agree to in writing
("Closing Date").
8.1 SELLING PARTIES' OBLIGATIONS AT CLOSING. At closing,
Shareholders and Corporation must deliver to Pathways the following instruments,
in form and substance satisfactory to Pathways and its counsel, the following:
8.1.1 A certificate or certificates representing the
Shares, registered in the name of Shareholders, duly endorsed by Shareholders
for transfer or accompanied by an assignment of the Shares duly executed by
Shareholders, with signatures guaranteed by a member of the New York Stock
Exchange or by a bank or trust company, and with all required documentary stock
transfer stamps affixed or accompanied by Shareholders' personal check for the
amount of these stamps. On submission of that certificate or certificates to
Corporation for transfer, Corporation will issue to Pathways a certificate
representing the Shares, registered in Pathways' name.
8.1.2 The stock books, stock ledgers, minute books, and
corporate seals of Corporation.
8.1.3 The opinion of counsel as provided in paragraph 6.5
of this Agreement.
8.1.4 Except as otherwise specified by Pathways, the
written resignations of all the officers and directors of Corporation.
27
8.2. EFFECTIVE TIME OF SHARE EXCHANGE. Subject to the terms and
conditions of this Agreement and the plan of share exchange ("Plan of Share
Exchange") and articles of share exchange ("Articles of Share Exchange"), all
the outstanding shares of Corporation shall be exchanged for Pathways Common
Stock in accordance with Washington Law. The Plan of Share Exchange and Articles
of Share Exchange will be executed by the parties prior to the Closing Date.
Subject to the terms of this Agreement and the Plan of Share Exchange or
Articles of Share Exchange, on the Closing Date, the Plan of Share Exchange,
together with the Articles of Share Exchange shall be duly executed and filed
with the Washington Secretary of State. The share exchange contemplated by this
Agreement ("Share Exchange") shall be effective upon the filing of the Plan of
Share Exchange and the Articles of Share Exchange with the Washington Secretary
of State.
9. SELLING PARTIES' INDEMNITY. Shareholders and Corporation will
indemnify, defend, and hold harmless Pathways against and in respect of all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries, and deficiencies, including interest, penalties, and reasonable
attorneys' fees, that Pathways may incur or suffer, which arise, result from, or
relating to any breach of, or failure by Selling Parties to perform, any of
their representations, warranties, covenants, or agreements in this Agreement or
in any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by Selling Parties under this Agreement.
10. MISCELLANEOUS.
10.1 GOVERNING LAWS. It is the intention of the parties hereto that
the internal laws of the State of Washington (irrespective of its choice of law
principles) shall govern the validity of this Agreement, the construction of its
terms, and the interpretation and enforcement of the rights and duties of the
parties hereto.
10.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless
otherwise provided in, this Agreement, each and all of the covenants, terms,
provisions, and agreements contained herein shall be binding upon, and inure to
the benefit of, the permitted successors, executors, heirs, representatives,
administrators and assigns of the parties hereto.
10.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall be interpreted so as best to reasonably
effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision which will achieve, to the extent possible, the economic,
business and other purposes of the void or unenforceable provision.
10.4 ENTIRE AGREEMENT. This Agreement, the exhibits hereto, the
documents referenced herein, and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied,
28
written or oral, between the parties with respect hereto and thereto. The
express terms hereof control and supersede any course of performance or usage
of the trade inconsistent with any of the terms hereof.
10.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
10.6 AMENDMENT AND WAIVERS. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
10.7 SURVIVAL OF AGREEMENTS. Except as set forth below in this
SECTION 10.7, all covenants, agreements, representations and warranties made
herein shall survive the consummation of the transactions contemplated hereby
notwithstanding any investigation of the parties hereto.
10.8 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
10.9 ATTORNEY FEES. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party shall be entitled to recover,
as an element of the costs of suit and not as damages, reasonable attorney fees
to be fixed by the court (including without limitation, costs, expenses and fees
on any appeal). The prevailing party shall be the party entitled to recover its
costs of suit, regardless of whether such suit proceeds to final judgment. A
party not entitled to recover its costs shall not be entitled to recover
attorney fees. No sum for attorney fees shall be counted in calculating the
amount of a judgment for purposes of determining if a party is entitled to
recover costs or attorney fees.
10.10 NOTICES. Any notice provided for or permitted under this
Agreement will be treated as having been given when (a) delivered personally,
(b) sent by confirmed telex or telecopy, (c) sent by commercial overnight
courier with written verification of receipt, or (d) mailed postage prepaid by
certified or registered mail, return receipt requested, to the party to be
notified, at the address set forth below, or at such other place of which the
other party has been notified in accordance with the provisions of this SECTION
10.10.
Pathways: Xx. Xxxxxx X. Xxxxxx, Executive Vice President
The Pathways Group, Inc.
00000 X.X. 000xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxx 00000
29
Shareholders: Xxxxx Xxxxxx
00000-00xx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
Xxx Xxxxx
00000 00xx Xxxxxx X.X., #0X
Xxxxxxx, XX 00000
Xxxx Xxxxx
00000 XX Xxxxxx Xxx
Xxxxxxxxx, XX 00000
Corporation: MS Digital, Inc.
00000-00xx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
Any notice provided in any other manner will be treated as having been received
only upon actual receipt of the party to be notified.
10.11 TIME. Time is of the essence of this Agreement.
10.12 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated
by the respective parties hereto and their attorneys and the language hereof
shall not be construed for or against any party. The titles and headings herein
are for reference purposes only and shall not in any manner limit the
construction of this Agreement which shall be considered as a whole.
10.13 NO JOINT VENTURE. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other party. No party shall hold itself out as having any authority
or relationship in contravention of this SECTION 10.
10.14 PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
10.15 FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
30
10.16 ABSENCE OF THIRD-PARTY BENEFICIARY RIGHTS. No provisions of
this Agreement are intended, nor shall be interpreted, to provide or create any
third-party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, Shareholders, partner of any party hereto or any other
person or entity except employees and Shareholders specifically referred to
herein, and, except as so provided, all provisions hereof shall be personal
solely between the parties to this Agreement.
10.17 DISPUTE RESOLUTION. ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, SHALL BE RESOLVED ONLY BY BINDING ARBITRATION,
CONDUCTED BY THE JUDICIAL ARBITRATION AND MEDIATION SERVICE (JAMS) (OR THEIR
SUCCESSOR AND IF NO SUCCESSOR, THEN BY THE AMERICAN ARBITRATION ASSOCIATION), IN
SEATTLE, WASHINGTON. WRITTEN NOTICE OF THE DEMAND FOR ARBITRATION SHALL BE
SERVED ON THE OTHER PARTY TO THIS AGREEMENT AND FILED WITH THE ARBITRATION
SERVICE. THE DEMAND FOR ARBITRATION SHALL BE MADE WITHIN A REASONABLE TIME AFTER
THE DISPUTE HAS ARISEN, AND IN NO EVENT SHALL IT BE MADE AFTER THE DATE UPON
WHICH IT WOULD HAVE BEEN BARRED BY THE TERMS OF THIS AGREEMENT OR APPLICABLE
LAW. EACH ARBITRATOR MUST BE EXPERIENCED IN THE SUBJECT MATTER OF THE
ARBITRATION. ARBITRATION SHALL BE COMPLETED NOT LATER THAN 180 DAYS FOLLOWING
ITS INITIATION. IN REACHING THEIR AWARD, THE ARBITRATORS SHALL FOLLOW AND BE
BOUND BY SUBSTANTIVE WASHINGTON STATE LAW, AS IF THEY WERE JUDGES SITTING IN A
WASHINGTON STATE COURT OF LAW. HOWEVER, ARBITRATORS SHALL IN NO MANNER AWARD
PUNITIVE DAMAGES (OR DAMAGES CALCULATED BY APPLYING A MULTIPLIER) OR DAMAGES FOR
EMOTIONAL DISTRESS. THE AWARD SHALL BE IN WRITING AND SHALL CONTAIN FINDINGS OF
FACT AND CONCLUSION OF LAW AND SHALL SET FORTH THE NATURE, AMOUNT AND MANNER OF
CALCULATION OF ALL DAMAGES. THE AWARD SHALL BE FINAL AND BINDING, AND JUDGMENT
MAY BE ENTERED UPON IT IN ANY COURT HAVING JURISDICTION. THIS PROVISION HAS BEEN
EXPRESSLY AGREED TO BY THE PARTIES WITH FULL UNDERSTANDING THAT IT ACTS TO WAIVE
THEIR RESPECTIVE CONSTITUTIONAL RIGHTS TO A TRIAL BY JUDGE OR JURY AND THEIR
RESPECTIVE RIGHTS TO PUNITIVE OR EMOTIONAL DISTRESS DAMAGES.
10.18 AUTHORITY TO SIGN. Each of the persons signing below on behalf
of any party hereby represents and warrants that he or she is signing with full
and complete authority to bind the party on whose behalf of whom he or she is
signing, to each and every term of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first set forth above.
MS DIGITAL, INC., THE PATHWAYS GROUP, INC.
(a Washington corporation) (a Delaware corporation)
By: /s/ XXXXX XXXXXX By: /s/ XXXXX X. XXXX, XX
----------------------------------------- --------------------------
Chief Executive Officer Chief Executive Officer
SHAREHOLDERS
/s/ XXXXX XXXXXX
-----------------------------------------
Xxxxx Xxxxxx
/s/ XXX XXXXX
-----------------------------------------
Xxx Xxxxx
/s/ XXXX XXXXX
-----------------------------------------
Xxxx Xxxxx
32
