Exhibit 3.8
Xxxxxxxx.xxx Inc.
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement") is made and entered into as of
May 1, 2004 (the "Agreement Date") by and between Gateway Access Solutions,
Inc., a Nevada corporation ("Gateway"), and the persons and entities listed on
Schedule A attached hereto (the "Purelink Shareholders"), who hold in the
aggregate 100% of the issued and outstanding shares of Xxxxxxxx.xxx, Inc., a
Colorado corporation ("Purelink").
RECITALS
A. The parties intend that, subject to the terms and conditions of this
Agreement, Gateway will acquire 100% of the issued and outstanding shares of
Purelink from the Purelink Shareholders pursuant to the terms and conditions set
forth herein, solely in exchange for shares of Gateway Common Stock.
B. Upon the effectiveness of the Exchange (as defined below), all the
issued and outstanding shares of Purelink will be transferred to Gateway in
exchange for shares of Gateway Common Stock.
C. The representations and warranties of the Purelink Shareholders herein
are a material inducement to Gateway to enter into this Agreement.
D. The parties intend that the Exchange will qualify as a reorganization
under Section 368 of the U.S. Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, the parties hereby agree as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement, the following terms will
have the meanings set forth below:
1.1 "Closing" is defined in Section 7.1.
1.2 "Closing Date" is defined in Section 7.1.
1.3 "Exchange" means, collectively, the exchange of all of the issued and
outstanding Purelink Stock for the Exchange Shares contemplated by Section 2
below.
1.4 "Exchange Shares" means 2,000,000 shares of Gateway Common Stock, as
presently constituted, that will be issued under this Agreement to the Purelink
Shareholders in exchange for all of the shares of Purelink Stock that are issued
and outstanding immediately prior to the Closing.
1.5 "Shareholder Ancillary Agreements" means, collectively the Investment
Representation Letter, the Escrow Agreement, the Registration Rights Agreement,
and each other agreement, certificate or document (other than this Agreement) to
which the Purelink Shareholders is to enter into as a party thereto, or is to
otherwise execute and deliver pursuant to or in connection with this Agreement.
1.6 "Purelink Certificates" means the share certificates representing all
the Purelink Shareholder's shares of Purelink Stock.
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AGREEMENT - continued
1.7 "Purelink Shareholders" means the persons and entities listed on
Schedule A attached hereto who, immediately prior to the Closing, hold all the
shares of Purelink Stock that are issued and outstanding immediately prior to
the Closing.
1.8 "Purelink Stock" means shares in the share capital of Purelink, no par
value per share, comprising the entire issued capital of Purelink, as
constituted immediately prior to the Closing.
1.9 "Gateway Ancillary Agreements" means, collectively, each agreement,
certificate or document (other than this Agreement) which Gateway is to enter
into as a party thereto, or is to otherwise execute and deliver, pursuant to or
in connection with this Agreement.
1.10 "Gateway Common Stock" means the Common Stock, $0.001 par value per
share, of Gateway.
Other capitalized terms defined elsewhere in this Agreement and not defined
in this Section 1 shall have the meanings assigned to such terms in this
Agreement.
2. The Exchange. Subject to the terms and conditions of this Agreement, at
the Closing:
(a) the Purelink Shareholders shall irrevocably assign and transfer to
Gateway all of the issued and outstanding Purelink Stock which is owned by the
persons and in the amounts set forth in Schedule A attached hereto;
(b) Gateway shall issue to the Purelink Shareholders the Exchange Shares to
the persons and in the amounts set forth in Schedule A attached hereto.
2.1 Exchange of Shares.
2.1.1 Exchange of Purelink Stock. Subject to surrender and delivery to
Gateway by the Purelink Shareholders of the applicable Purelink Certificates at
the Closing and the accompanying Share Transfer Form, the Purelink Shareholders
shall receive one or more stock certificates for its Exchange Shares (less the
Escrow Shares, as defined below) at the Closing.
2.1.2 Fractional Shares. No fractional shares of Gateway Common Stock shall
be issued in connection with the Exchange. Instead, Gateway shall issue Gateway
Common Stock in an amount rounded up or down to the nearest whole share.
2.1.3 Registration Rights. Effective upon the Closing, the Purelink
Shareholders shall be granted registration rights under the Securities Act of
1933, as amended (the "1933 Act") on the terms and subject to the conditions and
limitations of the Registration Rights Agreement attached hereto as Exhibit
2.1.3 (the "Registration Rights Agreement").
2.2 Adjustments for Capital Changes. Notwithstanding the provisions of
Section 2.1, if at any time after the Agreement Date and prior to the Closing,
Gateway or Purelink re-capitalizes, either through a subdivision (or stock
split) of any of its issued and outstanding shares into a greater number of
shares, or a combination (or reverse stock split) of any of its issued and
outstanding shares into a lesser number of shares, or reorganizes, reclassifies
or otherwise changes its issued and outstanding shares into the same or a
different number of shares of other classes (other than through a subdivision or
combination of shares provided for in the previous clause), or declares a
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Adjustments for Capital Changes - continued
dividend on its issued and outstanding shares payable in shares or securities
convertible into shares of Gateway Common Stock (a "Capital Change"), then the
number of shares of Gateway Common Stock for which shares of Purelink Stock are
to be exchanged in the Exchange shall be appropriately, equitably and
proportionately adjusted (as agreed to in writing by Gateway and the Purelink
Shareholders if the adjustment for such Capital Change involves something other
than a mathematical adjustment) so as to maintain the proportionate interests of
the Shareholders of Purelink and the shareholders of Gateway contemplated hereby
so as to maintain the proportional interests of the holders of Purelink Stock
contemplated by this Agreement.
2.3 Escrow Agreement. At the Closing, Gateway shall withhold twenty-five
percent (25%) of the Exchange Shares (the "Escrow Shares") and will deliver
certificates representing such Escrow Shares to Carle, Mackie, Power & Xxxx LLP,
or a similar institution as agreed to in writing by the parties, as escrow agent
(the "Escrow Agent"), together with related stock transfer powers, to be held by
the Escrow Agent as security for the Purelink Shareholder's indemnification
obligations under Section 11 and pursuant to the provisions of an Escrow
Agreement (the "Escrow Agreement") in substantially the form of Exhibit 2.3. The
Escrow Shares will be represented by certificates issued in the name of the
Purelink Shareholders and will be held by the Escrow Agent during that time
period (the "Escrow Period") specified in the Escrow Agreement. The Purelink
Shareholders hereby consent to, approve and agree to be personally bound by: (i)
the indemnification provisions of Section 11 of this Agreement; (ii) all of the
terms, conditions and limitations in the Escrow Agreement; and (iii) the
appointment of Xxxxx X. Xxxxxx as the representative of the Purelink
Shareholders (the "Representative") under the Escrow Agreement and as the
attorney-in-fact and agent for and on behalf of the Purelink Shareholders as
provided in the Escrow Agreement, and the taking by the Representative of any
and all actions and the making of any and all decisions required or permitted to
be taken by the Representative under the Escrow Agreement (including, without
limitation, the exercise by the Representative of the power to: (i) authorize
delivery to Gateway of Escrow Shares in satisfaction of claims by Gateway or any
other Indemnified Person (as defined herein); (ii) agree to, negotiate and enter
into settlements and compromises of such claims, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims; (iii) arbitrate, resolve, settle or compromise any claim for indemnity
made pursuant to Section 11; and (iv) take all actions necessary in the judgment
of the Representative for the accomplishment of the foregoing). The
Representative will have unlimited authority and power to act on behalf of the
Purelink Shareholders with respect to the Escrow Agreement and the disposition,
settlement or other handling of all claims governed by the Escrow Agreement, and
all rights or obligations arising under the Escrow Agreement. The Purelink
Shareholders will be bound by all actions taken by the Representative in
connection with the Escrow Agreement, and Gateway will be entitled to rely on
any action or decision of the Representative. In performing the functions
specified in this Agreement and the Escrow Agreement, the Representative will
not be liable to the Purelink Shareholders in the absence of gross negligence or
willful misconduct on the part of the Representative. Any out-of-pocket costs
and expenses reasonably incurred by the Representative in connection with
actions taken pursuant to the terms of the Escrow Agreement will be paid by the
Purelink Shareholders.
2.4 Further Assurances. If, at any time after the Closing, the parties
hereto consider or are advised that any further instruments, deeds, assignments
or assurances are reasonably necessary or desirable to consummate the Exchange
or to carry out the purposes of this Agreement at or after the Closing, then
Gateway and the Purelink Shareholders shall execute and deliver all such proper
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Further Assurances - continued
deeds, assignments, instruments and assurances and do all other things necessary
or desirable to consummate the Exchange and to carry out the purposes and intent
of this.
2.5 Securities Laws Issues. Gateway shall issue the Exchange Shares
pursuant to an exemption from registration under Section 4(2) and/or Regulation
D promulgated under the 1933 Act. Concurrently with execution of this Agreement,
the Purelink Shareholders will execute and deliver to Gateway an Investment
Representation Letter in the form of Exhibit 2.5 hereto (the "Investment
Representation Letter").
3. Representations And Warranties of the Purelink Shareholders. The
Purelink Shareholders hereby represent and warrant to Gateway that each of the
following representations and statements in this Section 3 are true and correct.
3.1 Organization and Good Standing. Purelink is a company duly organized,
validly existing and in good standing under the laws of Colorado. Purelink has
the corporate power and authority to own, operate and lease its properties and
to carry on its business as now conducted and as proposed to be conducted, and
is duly qualified to transact business as a foreign corporation in each
jurisdiction in which its failure to be so qualified would have a Material
Adverse Effect. As used in this Agreement, the term "Material Adverse Effect"
when used with reference to Purelink, means any event, change or effect that is
(or will with the passage of time be) materially adverse to Purelink's condition
(financial or otherwise), properties, assets, liabilities, business, operations,
or results of operations, it being understood that none of the following shall
be deemed by itself or by themselves, either alone or in combination, to
constitute a Material Adverse Effect: any effect arising out of or resulting
from actions contemplated by the parties in connection with the announcement of
this Agreement and the transactions contemplated hereby.
3.2 Power, Authorization and Validity.
3.2.1 The Purelink Shareholders have the right, power, legal capacity and
authority to enter into, execute, deliver and perform such Purelink
Shareholder's obligations under this Agreement and all Shareholder Ancillary
Agreements and has the requisite power and authority to consummate the Exchange,
in each case, subject only to the regulatory approval set forth in Section
3.2.2.
3.2.2 No filing, authorization, consent, approval or order, governmental or
otherwise, is necessary or required to be made or obtained by the Purelink
Shareholders to enable the Purelink Shareholders to lawfully enter into, and to
perform his respective obligations under, this Agreement and/or the Shareholder
Ancillary Agreements.
3.2.3 This Agreement and the Shareholder Ancillary Agreements are, or when
executed by the Purelink Shareholders will be, valid and binding obligations of
such Purelink Shareholders enforceable in accordance with their respective
terms, except as to the effect, if any, of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (b) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.2.4 All representations, warranties and other statements made by the
Purelink Shareholders in the Investment Representation Letter executed and
delivered to Gateway by such Purelink Shareholders pursuant hereto (a) is now,
and at the Closing shall be true and correct, and (b) shall be deemed to be
representations and warranties made pursuant to this Section 3 for all purposes
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All representations - continued
of this Agreement (including but not limited to Section 11 hereof) and the
Escrow Agreement.
3.3 Capitalization of Purelink.
3.3.1 Authorized Share Capital. The authorized share capital of Purelink
consists entirely of 50,000,000 shares common stock, no par value per share, of
which a total of 16,422,000 shares are issued and outstanding, all of which are
now owned and held (and all of which at the Closing will be owned and held) only
by the Purelink Shareholders as set forth in Schedule A attached hereto, and
10,000,000 shares of preferred stock, no par value per share, of which no shares
are (or will at closing be) issued and outstanding. No other shares of Purelink
are (or will at Closing be) authorized, issued or outstanding. No fractional
shares of Purelink Stock are (or will at Closing be) issued or outstanding. All
issued and outstanding shares of Purelink Stock have been duly authorized and
validly issued, are fully paid and nonassessable, are not subject to any claim,
lien, preemptive right, or right of rescission, and have been offered, issued,
sold and delivered by Purelink (and, if applicable, transferred) in compliance
with all registration or qualification requirements (or applicable exemptions
therefrom) of all applicable securities laws, Purelink's Articles of
Incorporation and Bylaws and all agreements to which Purelink or the Purelink
Shareholders is/are a party.
3.3.2 No Options, Warrants or Rights. There are no options, warrants,
convertible or other securities, calls, commitments, conversion privileges,
preemptive rights or other rights or agreements outstanding to purchase or
otherwise acquire (whether directly or indirectly) any shares of Purelink's
share capital or any securities convertible into or exchangeable for any shares
of Purelink's capital stock or obligating Purelink to grant, issue, extend, or
enter into, any such option, warrant, convertible or other security, call,
commitment, conversion privilege, preemptive right or other right or agreement,
and Purelink has no liability for any dividends accrued but unpaid. No person or
entity holds or has any option, warrant or other right to acquire any issued and
outstanding shares of the capital stock of Purelink from any record or
beneficial holder of shares of the capital stock of Purelink. No shares of
Purelink Stock are reserved for issuance under any stock purchase, stock option
or other benefit plan.
3.3.3 No Voting Arrangements or Registration Rights. There are no voting
agreements, voting trusts, rights of first refusal or other restrictions (other
than normal restrictions on transfer under applicable securities laws)
applicable to any of Purelink's issued and outstanding shares of to the
conversion of any shares of Purelink Stock in the Exchange. Purelink is not
under any obligation to register under the Securities Exchange Act of 1934, as
amended or otherwise any of its presently issued and outstanding securities or
any securities that may be subsequently issued.
3.4 Subsidiaries. Purelink has never been a subsidiary of any corporation,
partnership, limited liability company, joint venture or other business entity,
other than the Purelink Shareholders. Purelink does not hold any interest,
direct or indirect, in any corporation, partnership, limited liability company,
joint venture or other business entity.
3.5 No Violation of Existing Agreements. Neither the execution and delivery
of this Agreement nor the consummation of the Exchange or any of the other
transactions contemplated hereby, nor the Purelink Shareholder's discussion or
negotiation with Gateway of the Exchange or any other transaction contemplated
hereby, will conflict with, or (with or without notice or lapse of time, or
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No Violation of Existing Agreements - continued
both) result in a termination, breach, impairment or violation of: (i) any
provision of the articles of incorporation or bylaws of Purelink as currently in
effect; (ii) any national, state, or local judgment, writ, decree, order,
statute, rule or regulation applicable to Purelink or its assets or properties;
or (iii) any material instrument, agreement, contract, letter of intent or
commitment to which Purelink is a party or by which Purelink or its assets or
properties are or were bound, except such conflicts, terminations, breaches,
impairments or violations as would not have a Material Adverse Effect.
3.6 Litigation. As of the date hereof, there is no action, suit,
arbitration, mediation, proceeding, claim or investigation pending against
Purelink (or against any officer or director of Purelink or, to the best of the
knowledge of Purelink and the Purelink Shareholders, against any employee or
agent of Purelink, in their capacity as such or relating to their employment,
services or relationship with Purelink) before any court, administrative agency
or arbitrator that, if determined adversely to Purelink (or any such officer,
director, employee or agent) may reasonably be expected to have a Material
Adverse Effect on Purelink, nor, to the best of the Purelink Shareholders'
knowledge, has any such action, suit, proceeding, arbitration, mediation, claim
or investigation been threatened. Except as would not have a Material Adverse
Effect, and save for the regulatory approvals required hereunder, there is no
basis for any person, firm, corporation or other entity, to assert a claim
against Purelink or Gateway based upon Purelink's entering into this Agreement
or consummating the Exchange; and there is no basis for any person, firm,
corporation or other entity, to assert a claim against Purelink based upon (a)
any claims of ownership, rights to ownership, or options, warrants or other
rights to acquire ownership, of any shares of the capital stock of Purelink; or
(b) any rights as a Purelink Shareholders, including any option, warrant or
preemptive rights or rights to notice or to vote. To the knowledge of Purelink,
there is no judgment, decree, injunction, rule or order of any governmental
entity or agency, court or arbitrator outstanding against Purelink.
3.7 Taxes. Purelink has timely filed all national and state tax returns
required to be filed, has timely paid or provided for all taxes required to be
paid in respect of all periods for which returns have been filed, has
established an adequate accrual or reserve for the payment of all taxes payable
in respect of the periods subsequent to the periods covered by the most recent
applicable tax returns, has made all necessary estimated tax payments, and has
no material liability for taxes in excess of the amount so paid or accruals or
reserves so established. Purelink is not delinquent in the payment of any tax or
in the filing of any tax returns, and no deficiencies for any tax have been
threatened, claimed, proposed or assessed. Purelink has not received any
notification that any issues have been raised (and are currently pending) by any
taxing authority (including but not limited to any franchise, sales or use tax
authority) regarding Purelink and no tax return of Purelink has ever been
audited by any United State or state taxing agency or authority.
For the purposes of this Section, the terms "tax" and "taxes" include
United States and state income, alternative or add-on minimum income, gains,
franchise, excise, property, sales, use, employment, license, payroll (including
any taxes or similar payments required to be withheld from payments of salary or
other compensatory payments), ad valorem, payroll, stamp, occupation, recording,
value added or transfer taxes, governmental charges, fees, customs duties,
levies or assessments (whether payable directly or by withholding), and, with
respect to such taxes, any estimated tax, interest and penalties or additions to
tax and interest on such penalties and additions to tax.
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Taxes - continued
Gateway will not be required to deduct and withhold any amount pursuant to
Section 1445(a) of the Internal Revenue Code of 1986, as amended.
3.8 Purelink Financial Statements. Purelink was incorporated on August 26,
2002. Purelink's financial year ends on the last day of December. Purelink has
delivered to Gateway an unaudited balance sheet (the "Unaudited Balance Sheet")
as of March 31, 2004 (the "Balance Sheet Date") and an unaudited income
statement and unaudited cash flow statement, each for the three months ended
March 31, 2004 (such balance sheet, income statement and cash flow statement are
hereinafter collectively referred to as the "Purelink Financial Statements").
The Purelink Financial Statements (a) have been prepared in accordance with the
books and records of Purelink, (b) fairly present the financial condition of
Purelink at the dates therein indicated and the results of operations for the
periods therein specified; (c) have been prepared in accordance with accounting
principles applied on a consistent basis with prior periods. Purelink has no
material debt, liability or obligation of any nature (whether inter-company or
owed to third parties), whether accrued, absolute, contingent or otherwise, and
whether due or to become due, except for (i) those shown on the Unaudited
Balance Sheet and (ii) those that may have been incurred after the Balance Sheet
Date in the ordinary course of Purelink's business consistent with past
practices or in connection with the transactions contemplated by this Agreement.
All reserves established by Purelink and set forth in the Unaudited Balance
Sheet are reasonably adequate. At the Balance Sheet Date, there were no material
contingent liabilities, which are not adequately provided for in the Balance
Sheet.
3.9 Title to Properties. Purelink has good and marketable title to all of
its assets (including but not limited to those shown on the Balance Sheet), free
and clear of all liens, mortgages, security interests, claims, charges,
restrictions or encumbrances, except where the failure to hold such title would
not have a Material Adverse Effect. All machinery, vehicles, equipment and other
tangible personal property included in such assets and properties are in good
condition and repair, normal wear and tear excepted, and all leases of real or
personal property to which Purelink is a party are fully effective and afford
Purelink peaceful and undisturbed possession of the real or personal property
that is the subject of the lease. Purelink is not in violation of any zoning,
building, safety or environmental ordinance, regulation or requirement or other
law or regulation applicable to the operation of owned or leased properties (the
violation of which would have a Material Adverse Effect on its business), nor
has Purelink received any notice of violation with which it has not complied.
Purelink owns its corporate offices and surrounding land (the "Real Property").
3.10 Absence of Certain Changes. Since the Balance Sheet Date through the
date hereof, there has not been with respect to Purelink any:
(a) material adverse change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, or results of
operations of Purelink;
(b) amendments or changes in the articles of incorporation or bylaws of
Purelink;
(c) (i) incurrence, creation or assumption by Purelink of any mortgage,
security interest, pledge, lien or other encumbrance on any of the assets or
properties of Purelink or any material obligation or liability or any
indebtedness for borrowed money; or (ii) issuance or sale of, or change with
respect to the rights of, any debt or equity securities of Purelink or any
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incurrence - continued
options or other rights to acquire from Purelink, directly or indirectly, any
debt or equity securities of Purelink;
(d) payment or discharge of a lien or liability which lien or liability was
not either shown on the Balance Sheet or incurred in the ordinary course of
business after the Balance Sheet Date;
(e) purchase, license, sale or other disposition, or any agreement or other
arrangement for the purchase, license, sale or other disposition, of any of the
assets, properties or goodwill of Purelink other than in the ordinary course of
its business consistent with its past practice;
(f) damage, destruction or loss, whether or not covered by insurance,
having (or likely with the passage of time to have) a Material Adverse Effect on
Purelink;
(g) declaration, setting aside or payment of any dividend on, or the making
of any other distribution in respect of, the Purelink Stock, any split,
combination or recapitalization of the Purelink Stock or any direct or indirect
redemption, purchase or other acquisition of Purelink Stock or any change in any
rights, preferences, privileges or restrictions of any issued and outstanding
security of Purelink;
(h) change or increase in the compensation payable or to become payable to
any of the officers, employees, consultants or agents of Purelink, or in any
bonus or pension, insurance or other benefit payment or arrangement (including
without limitation stock awards, stock appreciation rights or stock option
grants) made to or with any of such officers, employees, consultants or agents
except in connection with normal salary or performance reviews or otherwise in
the ordinary course of business consistent with Purelink's past practice;
(i) change with respect to the management, supervisory or other key
personnel of Purelink;
(j) obligation or liability incurred by Purelink to any of its officers,
directors or the Purelink Shareholders except in the ordinary course of business
consistent with Purelink's past practice;
(k) making of any loan, advance or capital contribution to, or any
investment in, any officer, director or record or beneficial shareholder of
Purelink;
(l) entering into, amendment of, relinquishment, termination or non-renewal
by Purelink of any contract, lease, transaction, commitment or other right or
obligation other than in the ordinary course of its business consistent with its
past practice or, to Purelink's knowledge, any written or oral indication or
assertion by the other party thereto of problems with Purelink's services or
performance under such contract, lease, transaction, commitment or other right
or obligation or such other party's desire to so amend, relinquish, terminate or
not renew any such contract, lease, transaction, commitment or other right or
obligation;
(m) material change in the manner in which Purelink extends discounts or
credits to customers or otherwise deals with its customers;
(n) entering into by Purelink of any transaction, contract or agreement or
the conduct of business or operations other than in the ordinary course of its
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entering into by Purelink of any transaction - continued
business consistent with its past practices or in connection with the
transactions contemplated by this Agreement; or
(o) transfer or grant of a right under any Purelink IP Rights (as defined
in Section 3.13 below), other than those transferred or granted in the ordinary
course of Purelink's business consistent with Purelink's past practice.
3.11 Contracts and Commitments. Exhibit 3.11 sets forth, as of the date
hereof, a list of each of the following written or oral contracts, agreements,
commitments or other instruments to which Purelink is a party or to which it or
any of its assets or properties is bound:
(a) consulting or similar agreement under which Purelink provides any
advice or services to a customer of Purelink;
(b) continuing contract for the future purchase, sale, license, provision
or manufacture of products, material, supplies, equipment or services requiring
payment to or from Purelink in an amount in excess of $10,000 per annum which is
not terminable on 90 days' or less notice without cost or other liability to
Purelink or in which Purelink has granted or received manufacturing rights, most
favored customer pricing provisions or exclusive marketing rights relating to
any product or services, group of products or services or territory;
(c) contract providing for the acquisition of software by Purelink, for the
development of software for Purelink, or the license of software to Purelink,
which software is used or incorporated in any products currently distributed by
Purelink or services currently provided by Purelink or is contemplated to be
used or incorporated in any products to be distributed or services to be
provided by Purelink (other than software generally available to the public at a
per copy license fee of less than $10,000);
(d) joint venture or partnership contract or agreement or other agreement
which has involved or is reasonably expected to involve a sharing of profits or
losses in excess of $10,000 per annum with any other party;
(e) contract or commitment for the employment of any officer, employee or
consultant of Purelink or any other type of contract or understanding with any
officer, employee or consultant of Purelink which is not immediately terminable
by Purelink without cost or other liability, except as otherwise provided by
Colorado law;
(f) indenture, mortgage, trust deed, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money, for a
line of credit or for a leasing transaction of a type required to be capitalized
in accordance with GAAP;
(g) lease or other agreement under which Purelink is lessee of or holds or
operates any items of tangible personal property or real property owned by any
third party and under which payments to such third party exceed $10,000 per
annum;
(h) agreement or arrangement for the sale of any assets, properties,
services or rights having a value in excess of $10,000, other than in the
ordinary course of business consistent with past practice, and except as
otherwise contemplated by this Agreement;
(i) agreement which restricts Purelink from engaging in any aspect of its
business or competing in any line of business in any geographic area;
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(j) Purelink IP Rights Agreement (as defined in Section 3.13 below);
(k) agreement relating to the sale, issuance, grant, exercise, award,
purchase, repurchase or redemption of any shares of Purelink Stock or any
options, warrants or other rights to purchase or otherwise acquire any such
shares of Purelink Stock, other securities or options, warrants or other rights
therefor;
(l) contract with or commitment to any labor union; or
(m) other agreement, contract, commitment or instrument that is material to
the business of Purelink or that involves a commitment by Purelink in excess of
$10,000.
A copy of each agreement or document required by this Section to be listed
on Exhibit 3.11 (collectively, the "Purelink Material Agreements") has been
delivered to Carle, Mackie, Power & Xxxx LLP, Gateway's counsel. No consent or
approval of any third party, excepting the American Tower and Western Marquette
(505 Marquette) leases agreements, is required to ensure that, following the
Closing, any Purelink Material Agreement shall continue to be in full force and
effect without any breach or violation thereof caused by virtue of the Exchange
or by any other transaction called for by this Agreement.
3.12 No Default. Purelink is not in breach or default of any Purelink
Material Agreement. Purelink is not a party to any contract, agreement or
arrangement which has had, or could reasonably be expected to have, a Material
Adverse Effect on Purelink. Purelink does not have any material liability for
renegotiation of government contracts or subcontracts, if any.
3.13 Intellectual Property.
3.13.1 Purelink owns, or has the irrevocable right to use, sell or license
all material Intellectual Property Rights (as defined below) necessary or
required for the conduct of its business as presently conducted (such
Intellectual Property Rights being hereinafter collectively referred to as the
"Purelink IP Rights"), and such rights to use, sell or license are sufficient
for such conduct of its business.
3.13.2 The execution, delivery and performance of this Agreement and the
consummation of the Exchange and the other transactions contemplated hereby will
not constitute a material breach of or default under any instrument, contract,
license or other agreement governing any Purelink IP Right (the "Purelink IP
Rights Agreements") and will not cause the forfeiture or termination, or give
rise to a right of forfeiture or termination, of any Purelink IP Right or
materially impair the right of Purelink to use, sell, license, provide or
otherwise commercially exploit any Purelink IP Right or portion thereof (except
where such breach, forfeiture or termination would not have a Material Adverse
Effect on Purelink). There are no royalties, honoraria, fees or other payments
payable by Purelink to any person by reason of the ownership, use, license,
sale, exploitation or disposition of the Purelink IP Rights.
3.13.3 Neither the manufacture, marketing, license, sale, furnishing or
intended use of any product or service currently licensed, utilized, sold,
provided or furnished by Purelink or currently under development by Purelink has
violated or now violates any license or agreement between Purelink and any third
party or, to the knowledge of Purelink or the Purelink Shareholders infringes or
misappropriates any Intellectual Property Right of any other party; and there is
no pending or, to the best knowledge of Purelink and the Purelink Shareholders,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any Purelink IP Right nor, to the best
10
Neither the manufacture - continued
knowledge of Purelink and the Purelink Shareholders, is there any basis for any
such claim, nor has Purelink received any notice asserting that any Purelink IP
Right or the proposed use, sale, license or disposition thereof conflicts or
will conflict with the rights of any other party, nor, to the best knowledge of
Purelink and the Purelink Shareholders, is there any basis for any such
assertion. To the best knowledge of Purelink and the Purelink Shareholders, no
employee or agent of or consultant to Purelink is in violation of any term of
any employment contract, patent disclosure agreement, non-competition agreement,
non-solicitation agreement or any other contract or agreement, or any
restrictive covenant relating to the right of any such employee, agent or
consultant to be employed thereby, or to use trade secrets or proprietary
information of others, and the employment of such employees or engagement of
such agents and consultants does not subject Purelink to any liability.
3.13.4 Purelink is currently taking reasonable and practicable steps
designed to protect, preserve and maintain the secrecy and confidentiality of
all material Purelink IP Rights and all Purelink's proprietary rights therein.
All officers, employees, agents and consultants of Purelink having access to
proprietary information have executed and delivered to Purelink an agreement
regarding the protection of such proprietary information and the assignment of
inventions to Purelink in the form provided to counsel for Gateway and copies of
all such agreements, executed by all such persons, have been delivered to
Gateway's counsel.
3.13.5 Exhibit 3.13 contains a list of all Purelink IP Rights and all
applications, registrations, filings and other formal actions made or taken
pursuant to national, state and foreign laws by Purelink to secure, perfect or
protect its interest in Purelink IP Rights, including, without limitation, all
patents, patent applications, copyrights (whether or not registered), copyright
applications, trademarks, service marks and trade names (whether or not
registered) and trademark, service xxxx and trade name applications.
3.13.6 As used herein, the term "Intellectual Property Rights" means,
collectively, all worldwide industrial and intellectual property rights,
including, without limitation, patents, patent applications, patent rights,
trademarks, trademark applications, trade dress rights, trade names, service
marks, service xxxx applications, copyrights, copyright applications, mask work
rights, mask work registrations, franchises, licenses, inventions, trade
secrets, know-how, customer lists, proprietary processes and formulae, software
source and object code, algorithms, architecture, structure, display screens,
layouts, inventions, development tools and all documentation and media
constituting, describing or relating to the above, including, without
limitation, manuals, memoranda and records.
3.14 Compliance with Laws. Purelink has complied, and is now and at the
Closing Date will be in compliance, in all material respects, with all
applicable national, state, or local laws, ordinances, regulations, and rules,
and all orders, writs, injunctions, awards, judgments, and decrees applicable to
Purelink or to Purelink's assets, properties, and business, except where the
failure to so comply would not have a Material Adverse Effect. Purelink holds
all permits, licenses and approvals from, and has made all filings with, third
parties, including government agencies and authorities, that are necessary in
connection with Purelink's present business, except those where failure to do so
would not have a Material Adverse Effect.
3.15 Certain Transactions and Agreements. None of the officers, directors
or the Purelink Shareholders of Purelink, nor any member of their immediate
families, has any direct or indirect ownership interest in any firm or
11
Certain Transactions and Agreements - continued
corporation that competes with, or does business with, or has any contractual
arrangement with Purelink (except with respect to any interest in less than one
percent (1%) of the stock of any corporation whose stock is publicly traded).
None of said officers, directors, employees or the Purelink Shareholders or any
member of their immediate families, is directly or indirectly interested in any
contract or informal arrangement with Purelink, except for normal compensation
for services as an officer, director or employee thereof that have been
disclosed to Gateway. Except as contemplated by this Agreement, none of said
officers, directors, employees or the Purelink Shareholders or family members
has any interest in any property, real or personal, tangible or intangible
(including but not limited to any Purelink IP Rights or any other Intellectual
Property Rights) that is used in or that pertains to the business of Purelink,
except for the normal rights of a shareholder.
3.16 Employees.
3.16.1 Purelink is in compliance in all material respects with all
applicable laws, agreements and contracts relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including, but
not limited to, employee compensation matters in each of the jurisdictions in
which it conducts business. A list of all employees, officers and consultants of
Purelink, their title, date of hire, employer entity and current compensation is
set forth on Exhibit 3.16.1, which has been delivered to Gateway. Purelink does
not have any employment contracts or consulting agreements currently in effect
that are not terminable at will (other than agreements with the sole purpose of
providing for the confidentiality of proprietary information or assignment of
inventions).
3.16.2 Purelink (i) has never been and is not now subject to a union
organizing effort, (ii) is not subject to any collective bargaining agreement
with respect to any of its employees, (iii) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization, and (iv) does not have any current labor disputes.
Purelink has good labor relations, and has no knowledge of any facts indicating
that the consummation of the transactions contemplated hereby will have a
material adverse effect on such labor relations. As of the date hereof, neither
Purelink nor the Purelink Shareholders has any knowledge that any key employee
of Purelink intends to leave the employ of Purelink.
3.16.3 Purelink does not have any "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Purelink has no pension plan which constitutes, or has since the
enactment of ERISA constituted, a "multi-employer plan" as defined in Section
3(37) of ERISA. No Purelink pension plans are subject to Title IV of ERISA.
3.16.4 Exhibit 3.16.4 lists each employment, severance or other similar
contract, arrangement or policy, each "employee benefit plan" as defined in
Section 3(3) of ERISA (if any) and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' benefits, vacation benefits, severance benefits, disability benefits,
death benefits, hospitalization benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or
postretirement insurance, compensation or benefits for employees, consultants or
directors which is entered into, maintained or contributed to by Purelink and
covers any employee or former employee or consultant or former consultant of
Purelink. Such contracts, plans and arrangements as are described in this
Section 3.16.4 are hereinafter collectively referred to as the "Purelink Benefit
12
Exhibit 3.16.4 lists - continued
Arrangements." The Purelink Benefit Arrangement has been maintained in
compliance in all material respects with its terms and with the requirements
prescribed by any and all laws, statutes, orders, rules and regulations that are
applicable to such Purelink Benefit Arrangement. Purelink has delivered to
Gateway and its counsel, Carle, Mackie, Power & Xxxx LLP, a complete and correct
copy and summary description of the Purelink Benefit Arrangement.
3.16.5 There has been no amendment to, written interpretation or
announcement (whether or not written) by Purelink relating to, or change in
employee participation or coverage under, any Purelink Benefit Arrangement that
would increase materially the expense of maintaining such Purelink Benefit
Arrangement above the level of the expense incurred in respect thereof for
Purelink's fiscal year ended December 31, 2003.
3.16.6 The group health plans (as defined in Section 4980B(g) of the Code)
that benefit employees of Purelink are in compliance, in all material respects,
with the continuation coverage requirements of Section 4980B of the Code as such
requirements affect Purelink and its employees. As of the Closing Date, there
will be no material outstanding, uncorrected violations under the Consolidation
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), with respect to
any of the Purelink Benefit Arrangements, covered employees, or qualified
beneficiaries that could result in a Material Adverse Effect on Purelink, or in
a material adverse effect on the business, operations or financial condition of
Gateway as its successor. Purelink has provided, or shall have provided prior to
the Closing, to individuals entitled thereto, all required notices and coverage
pursuant to Section 4980B of COBRA, with respect to any "qualifying event" (as
defined in Section 4980B(f)(3) of the Code) occurring prior to and including the
Closing Date, and no material amount payable on account of Section 4980B of the
Code has been incurred with respect to any current or former employees of
Purelink (or their beneficiaries).
3.16.7 No benefit payable or which may become payable by Purelink pursuant
to any Purelink Benefit Arrangement 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 which would not be deductible by reason of
Section 280G of the Code. Purelink is not a party to any (a) agreement (other
than as described in (b) below) with any executive officer or other key employee
thereof (i) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Purelink in
the nature of any of the transactions contemplated by this Agreement, (ii)
providing any term of employment or compensation guarantee, or (iii) providing
severance benefits or other benefits after the termination of employment of such
employee regardless of the reason for such termination of employment, or (b)
agreement or plan, including, without limitation, any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of which
will be materially increased, or the vesting of benefits of which will be
materially accelerated, by the occurrence of the Exchange or any of the other
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.
3.17 Insurance. Exhibit 3.17 hereto lists all fire and casualty, general
liability, business interruption, product liability, errors and omissions, and
sprinkler and water damage insurance maintained by Purelink.
13
3.18 Environmental Matters.
3.18.1 During the period that Purelink has leased or owned its respective
properties or owned or operated any facilities, there have been no disposals,
releases or threatened releases of Hazardous Materials (as defined below) on,
from or under such properties or facilities that resulted from any act or
omission of Purelink or any of its employees, agents or invitees. The Purelink
Shareholders has no knowledge of any presence, disposals, releases or threatened
releases of Hazardous Materials on, from or under any of such properties or
facilities, which may have occurred prior to Purelink having taken possession of
any of such properties or facilities. For the purposes of this Agreement, the
terms "disposal," "release," and "threatened release" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., as amended ("CERCLA"). For
the purposes of this Agreement "Hazardous Materials" shall mean any hazardous or
toxic substance, material or waste which is or becomes prior to the Closing
regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous materials," "toxic substance" or
"hazardous chemical" under (a) CERCLA; (b) any similar federal, state or local
law; or (c) regulations promulgated under any of the above laws or statutes.
3.18.2 None of the properties or facilities of Purelink is in violation of
any national or provincial, ordinance, regulation or order relating to
industrial hygiene or to the environmental conditions on, under or about such
properties or facilities, including, but not limited to, soil and ground water
condition, except for such violations as would not have a Material Adverse
Effect. During the time that Purelink has owned or leased its properties and
facilities, neither Purelink nor, to the best knowledge of Purelink and the
Purelink Shareholders, any third party, has used, generated, manufactured or
stored on, under or about such properties or facilities or transported to or
from such properties or facilities any Hazardous Materials, other than
Purelink's lawful use of standard office supplies customarily used in office
environments that contain legally permitted amounts of Hazardous Materials that
would have no Material Adverse Effect.
3.18.3 During the time that Purelink has owned or leased its properties and
facilities, there has been no litigation brought or threatened against Purelink,
or, to the best knowledge of Purelink and the Purelink Shareholders, against any
lessor or owner of real property leased by Purelink, or any settlement reached
by Purelink or the Purelink Shareholders with any party or parties alleging the
presence, disposal, release or threatened release of any hazardous materials on,
from or under any of such properties or facilities.
3.19 Product Warranties and Product Liability Claims.
(a) All products sold, serviced or distributed by Purelink and all services
provide by Purelink at any time prior to the Closing Date have been in
conformance in all material respects with all applicable contractual commitments
and all express or implied warranties of Purelink and no material liability
exists for replacement thereof or other damages in connection with such sales or
deliveries or services at any time prior to the Closing Date (except as may be
reflected or expressly reserved for in the Latest Balance Sheet).
(b) The warranty and repair Claims with respect to the products made,
designed and sold by Purelink and all services provided by Purelink as part of
the Business prior to the Closing Date have been administered by Purelink and
have consisted solely of routine warranty and repair Claims for the return of
defective or nonconforming merchandise, which Claims have individually and in
the aggregate been of an immaterial nature. There exist no Claims against
Purelink and, to the knowledge of the Purelink Shareholders, there exists no
14
The warranty and repair - continued
reasonable basis for any Claims against Purelink for injury to Persons or
property suffered by any Person as a result of the sale or use of any product
made, designed or sold by Purelink or any service provided by Purelink prior to
the Closing Date, including, but not limited to, Claims arising out of the
defective or unsafe nature of any products.
4. Representations And Warranties Of Gateway. Gateway hereby represents and
warrants each of the following representations and statements in this Section 4
are true and correct:
4.1 Organization and Good Standing. Gateway is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, and has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as proposed to be
conducted.
4.2 Power, Authorization and Validity.
4.2.1 Gateway has the right, power and authority to enter into, execute and
perform its obligations under this Agreement and the Gateway Ancillary
Agreements and to consummate the Exchange. The execution, delivery and
performance of this Agreement and the Gateway Ancillary Agreements by Gateway
have been duly and validly approved and authorized by all necessary action on
the part of Gateway and Gateway's Board of Directors.
4.2.2 No filing, authorization, consent, approval or order, governmental or
otherwise, is necessary or required to enable Gateway to enter into this
Agreement and the Gateway Ancillary Agreements and consummate the Exchange. No
filing, authorization, consent, approval or order, governmental or otherwise, is
necessary or required to enable Gateway to perform those obligations under this
Agreement and the Gateway Ancillary Agreements that are to be performed after
the consummation of the Exchange except for (a) any filings with the Securities
and Exchange Commission and other applicable securities authorities contemplated
by the Registration Rights Agreement attached hereto as Exhibit 2.1.3, and (b)
such filings as may be required to comply with applicable securities laws in
connection with the Exchange itself.
4.2.3 This Agreement and the Gateway Ancillary Agreements are, or when
executed by Gateway will be, valid and binding obligations of Gateway,
enforceable in accordance with their respective terms, except as to the effect,
if any, of (a) applicable bankruptcy and other similar laws affecting the rights
of creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies.
4.3 No Violation of Material Agreements. Neither the execution and delivery
of this Agreement nor any Gateway Ancillary Agreement, nor the consummation of
the transactions contemplated hereby, will conflict with, or (with or without
notice or lapse of time, or both) result in: (a) a termination, breach,
impairment or violation of (i) any provision of the Articles of Incorporation or
Bylaws of Gateway, as currently in effect or (ii) any federal, state, or local
judgment, writ, decree, order, statute, rule or regulation to which Gateway or
its assets or properties is subject; or (b) a termination, or a material breach,
impairment or violation, of any material instrument or contract to which Gateway
is a party or by which Gateway or its properties are bound. Gateway is not
required to obtain the consent of any third party to consummate the Exchange.
15
4.4 Disclosure. Gateway has made available to Purelink a disclosure package
consisting of Gateway's SB-2 filing with the Securities and Exchange Commission
("SEC"), which is currently under review by the SEC (the "Gateway Disclosure
Package"). As of their respective filing dates, documents filed by Gateway with
the SEC including, without limitation, any financial statements or schedules
included or incorporated therein and included in the Gateway Disclosure Package
complied in all material respects with the requirements of the 1933 Act or the
1934 Act, as the case may be. The consolidated financial statements of Gateway
included in such SEC documents have been prepared in accordance with the books
and records of Gateway and fairly present the financial condition of Gateway and
its consolidated subsidiaries as of such date and the consolidated results of
operations and cash flows for the periods then ended. The consolidated financial
statements in such SEC documents have been prepared in accordance with United
States generally accepted accounting principles consistently applied during the
periods involved, except as otherwise disclosed in the notes to such financial
statements. The Gateway Disclosure Package, this Agreement, the exhibits and
schedules hereto, and any certificates or documents to be delivered to Purelink
pursuant to this Agreement, when taken together, do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading.
4.5 Financial Condition. There has been no material adverse change in the
financial condition or business of Gateway, taken as whole, since the date of
the most recent financial statements included in the Gateway Disclosure Package.
4.6 Validity of Shares. The shares of Gateway Common Stock to be issued
pursuant to the Exchange shall, when issued: (a) be duly authorized, validly
issued, fully paid and nonassessable and free of liens and encumbrances created
by Gateway, and (b) be free and clear of any transfer restrictions, liens and
encumbrances except for restrictions on transfer under applicable United States
securities laws, including Rule 144 promulgated under the 1933 Act.
5. Covenants of The Purelink Shareholders. During the period from the
Agreement Date until the earlier to occur of (i) the Closing or (ii) the
termination of this Agreement in accordance with Section 10, the Purelink
Shareholders hereby covenants and agrees with Gateway as follows:
5.1 Advice of Changes. The Purelink Shareholders will promptly advise
Gateway in writing (a) of any event occurring subsequent to the date of this
Agreement that would render any representation or warranty of the Purelink
Shareholders contained in Section 3 of this Agreement, if made on or as of the
date of such event or the Closing Date, untrue or inaccurate in any material
respect and (b) of any material adverse change in Purelink's assets, business,
results of operations or financial condition.
5.2 Maintenance of Business. The Purelink Shareholders shall cause Purelink
to carry on and preserve its business and its relationships with customers,
suppliers, employees, consultants and others in substantially the same manner as
it has prior to the date hereof. If the Purelink Shareholders becomes aware of a
material deterioration in the relationship of Purelink with any customer,
supplier, key employee, consultant or business partner, he will promptly bring
such information to the attention of Gateway in writing and, if requested by
Gateway, will exert his best efforts to restore the relationship.
5.3 Conduct of Business. The Purelink Shareholders shall cause Purelink to
continue to conduct its business and maintain its business relationships in the
ordinary and usual course and to not, other than in connection with the
transactions contemplated by this Agreement, without the prior written consent
of the CEO of Gateway:
16
Conduct of Business - continued
(a) borrow or lend any money other than advances to in the ordinary course
of Purelink's business consistent with Purelink's past practice;
(b) purchase or sell shares or other equity interest in any corporation or
other business or enter into any transaction or agreement not in the ordinary
course of Purelink's business consistent with Purelink's past practice;
(c) encumber, or permit to be encumbered, any of its assets;
(d) sell, transfer or dispose of any of its assets except in the ordinary
course of Purelink's business consistent with Purelink's past practice;
(e) enter into any material lease or contract for the purchase or sale of
any property, whether real or personal, tangible or intangible, except as
otherwise contemplated by this Agreement, or except in the ordinary course of
business and consistent with past practice;
(f) pay any bonus, increased salary or special remuneration to any officer,
employee or consultant (except for normal salary increases consistent with past
practices not to exceed 5% of such officer's, employee's or consultant's base
annual compensation, except pursuant to existing arrangements previously
disclosed to and approved in writing by Gateway) or enter into any new
employment or consulting agreement with any such person;
(g) change any of its accounting;
(h) declare, set aside or pay any cash or stock dividend or other
distribution in respect of any of its shares, redeem, repurchase or otherwise
acquire any of its capital stock or other securities, pay or distribute any cash
or property to any Purelink shareholder or security holder or make any other
cash payment to any shareholder or security holder of Purelink that is unusual,
extraordinary, or not made in the ordinary course of Purelink's business
consistent with Purelink's past practice;
(i) amend or terminate any contract, agreement or license to which it is a
party;
(j) guarantee or act as a surety for any obligation of any third party;
(k) waive or release any material right or claim except in the ordinary
course of business, consistent with past practice or agree to any audit
assessment by any tax authority or file any federal or state income or franchise
tax return unless copies of such returns have been delivered to Gateway for its
review prior to filing;
(l) issue, sell, create or authorize any shares of its capital stock of any
class or series or any other of its securities, or issue, grant or create any
warrants, obligations, subscriptions, options, convertible securities, or other
commitments to issue shares of its capital stock or securities ultimately
exchangeable for, or convertible into, shares of its capital stock;
(m) subdivide or split or combine or reverse split the issued and
outstanding shares of its capital stock of any class or enter into any
recapitalization affecting the number of issued and outstanding shares of its
capital stock of any class or affecting any other of its securities;
(n) merge, consolidate or reorganize with, or acquire, any entity or enter
into any negotiations, discussions or agreement for such purpose;
17
Conduct of Business - continued
(o) amend its articles of incorporation or bylaws;
(p) enter into any license or agreement to license any of its technology or
Intellectual Property Rights;
(q) change any insurance;
(r) agree to do any of the things described in the preceding clauses 5.3(a)
through 5.3(q).
5.4 Regulatory Approvals. The Purelink Shareholders shall cause Purelink to
and the Purelink Shareholders will, promptly 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
body, federal, state, or local, which may be reasonably required, or which
Gateway may reasonably request, in connection with the consummation of the
transactions contemplated by this Agreement, provided that Gateway shall pay the
costs associated with such filings or applications. The Purelink Shareholders
shall cause Purelink, its officers, directors and employees to, and the Purelink
Shareholders, will use their respective best efforts to promptly obtain, and to
cooperate with Gateway to promptly obtain, all such authorizations, approvals
and consents.
5.5 Necessary Consents. The Purelink Shareholders shall cause Purelink, its
officers and directors to, and the Purelink Shareholders will, use their
respective best efforts to promptly obtain such written consents and take such
other actions as may be necessary or appropriate in addition to those set forth
in Section 5.4 to allow the consummation of the transactions contemplated hereby
and to allow Gateway to carry on Purelink's business after the Closing.
5.6 Litigation. The Purelink Shareholders shall cause Purelink to notify
Gateway in writing promptly after learning of any action, suit, arbitration,
mediation, proceeding or investigation by or before any court, arbitrator or
arbitration panel, board or governmental agency, initiated by or against it, or
known by it to be threatened against it or any of its directors, officers,
employees or consultant in their capacity as such.
5.7 No Other Negotiations. From the Agreement Date until the earlier of
termination of this Agreement in accordance with Section 10 or the consummation
of the Exchange, the Purelink Shareholders shall cause Purelink, its officers,
directors and employees and the Purelink Shareholders will not, and will not
authorize, encourage or permit, any officer, director, employee, shareholder or
affiliate of Purelink, or any other person, on its or their behalf to, directly
or indirectly, solicit or encourage any offer from any party or consider any
inquiries or proposals received from any other party, participate in any
negotiations regarding, or furnish to any person any information with respect
to, or otherwise cooperate with, facilitate or encourage any effort or attempt
by any person (other than Gateway), concerning any agreement or transaction
regarding the possible disposition of all or any substantial portion of the
business, assets or capital stock of Purelink by merger, consolidation,
reorganization, sale of assets, sale of stock, exchange, tender offer or any
other form of business combination ("Alternative Transaction"). The Purelink
Shareholders will, and will cause Purelink to, promptly notify Gateway orally
and in writing of any such inquiries or proposals. In addition, neither
Purelink, nor the Purelink Shareholders, shall execute, enter into or become
bound by (a) any letter of intent or agreement or commitment between Purelink
and/or the Purelink Shareholders, on the one hand, and any third party, on the
other hand, that is related to an Alternative Transaction or (b) any agreement
18
No Other Negotiations - continued
or commitment between Purelink and/or the Purelink Shareholders, on the one
hand, and a third party, on the other hand, providing for an Alternative
Transaction.
5.8 Access to Information. Until the Closing, the Purelink Shareholders
shall cause Purelink to allow Gateway and its agents reasonable access to the
files, books, records and offices of Purelink, including, without limitation,
any and all information relating to Purelink's taxes, commitments, contracts,
leases, licenses, and real, personal and intangible property and financial
condition, and subject to Purelink's confidentiality obligations to third
parties. The Purelink Shareholders shall cause Purelink to cause its accountants
to cooperate with Gateway and its agents in making available all financial and
tax information reasonably requested, including without limitation the right to
examine all working papers pertaining to all financial statements and tax
returns, prepared or audited by such accountants, provided that such access to
information does not unreasonably interfere with the operations of Purelink.
5.9 Satisfaction of Conditions Precedent. The Purelink Shareholders shall
cause Purelink, its and directors and officers to, and the Purelink Shareholders
will, use their respective best efforts to satisfy or cause to be satisfied all
the conditions precedent which are set forth in Section 9, and the Purelink
Shareholders shall cause Purelink, its directors and officers to, and the
Purelink Shareholders will, use their respective best efforts 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 that may be necessary or reasonably required on
Purelink's part in order to effect the transactions contemplated hereby.
5.10 Securities Laws. The Purelink Shareholders shall cause Purelink to,
and the Purelink Shareholders shall, use their best efforts to assist Gateway to
the extent necessary to comply with the securities laws of all jurisdictions
which are applicable in connection with the Exchange, provided that all costs
associated with such compliance shall be borne by Gateway.
5.11 Termination of Registration and Voting Rights. The Purelink
Shareholders shall cause all registration rights agreements and voting
agreements applicable to or affecting any issued and outstanding shares or other
securities of Purelink (if any) to be duly terminated and canceled by Purelink
by no later than the Closing.
5.12 Invention Assignment and Confidentiality Agreements. The Purelink
Shareholders shall cause Purelink to obtain from each employee, agent and
consultant of Purelink who has had access to any software, technology or
copyrightable, patentable or other proprietary works or intellectual property
owned or developed by Purelink or other Intellectual Property Rights, or to any
other confidential or proprietary information of Purelink or its clients, an
invention assignment and confidentiality agreement in substantially the form of
the agreement provided to counsel to Gateway, duly executed by such employee,
agent or consultant and delivered to Purelink.
5.13 Non-Competition and Consulting Agreements. The Purelink Shareholders
shall cause Purelink to use its commercially reasonable efforts to cause Xxxxx
X. Xxxxxx to execute and deliver to Gateway at the Closing a Non Competition
Agreement in favor of Gateway in the form attached hereto as Exhibit 5.13 (the
"Non-Competition Agreement").
19
5.14 Closing of Exchange. The Purelink Shareholders shall cause Purelink
not to, and the Purelink Shareholders shall not, refuse to effect the Exchange
if, on or before the Closing Date, all the conditions precedent to their
obligations to effect the Exchange under Section 8 hereof have been satisfied
or, in their sole discretion, been waived by them.
6. Gateway Covenants. During the period from the Agreement Date until the
earlier to occur of (i) the Closing or (ii) the termination of this Agreement in
accordance with Section 10, Gateway covenants and agrees as follows:
6.1 Advice of Changes. Gateway will promptly advise the Purelink
Shareholders in writing (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of Gateway
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect and (b) of any
material adverse change in Gateway's business, results of operations or
financial condition.
6.2 Regulatory Approvals. Gateway 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
body, federal, state, or local, which may be reasonably required, in connection
with the consummation of the transactions contemplated by this Agreement in
accordance with the terms of this Agreement. Gateway will use its best efforts
to obtain all such authorizations, approvals and consents.
6.3 Satisfaction of Conditions Precedent. Gateway will use its best efforts
to satisfy or cause to be satisfied all the conditions precedent which are set
forth in Section 8, and Gateway will use its best efforts to cause the Exchange
and the transactions contemplated by this Agreement to be consummated in
accordance with the terms of this Agreement, 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
that may be necessary or reasonably required on its part in order to effect the
transactions contemplated hereby.
6.4 Securities Laws. Gateway shall take such steps as may be necessary to
comply with the securities and Blue Sky laws of all jurisdictions which are
applicable in connection with the Exchange, with the cooperation and assistance
of Purelink and the Purelink Shareholders.
6.5 Employee Benefits. As soon as practicable after the Agreement Date,
Gateway and Purelink shall confer and work in good faith to agree upon a plan
under which Purelink employees will be covered either by (a) Gateway's employee
benefits plans or (b) Purelink's employee benefit plans, with such decision to
be made no later than six (6) months following the Closing, in a manner that
results in minimal disruption to the continuing operations of Purelink, and
minimal cost to Gateway.
6.6 Closing of Exchange. Gateway shall not refuse to effect the Exchange
if, on or before the Closing Date, all the conditions precedent to their
obligations to effect the Exchange under Section 9 hereof have been satisfied
or, in its sole discretion, been waived by it.
7. Closing Matters.
7.1 The Closing. Subject to termination of this Agreement as provided in
Section 10 below, the closing of the transactions for consummation of the
Exchange (the "Closing") will take place at the offices of Carle, Mackie, Power
20
Closing Matters - continued
& Xxxx LLP, 000 X Xxxxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx 00000 at 10:00 a.m.,
Pacific Standard Time on May __, 2004 or on such other date on or before the
Termination Date (as defined in Section 10.1.2) as Gateway and the Purelink
Shareholders may mutually agree upon in writing after which the satisfaction or
waiver of the conditions to Closing set forth in Sections 8 and 9 hereof have
been satisfied and/or waived in accordance with this Agreement (the "Closing
Date").
7.2 Exchanges at the Closing.
7.2.1 At the Closing, the Purelink Certificates shall be exchanged for the
Exchange Shares, evidenced by the certificates therefore, as provided in Section
2 hereof.
7.2.2 At the Closing, the Escrow Shares shall be delivered to the Escrow
Agent by Gateway or Gateway's transfer agent as provided in Section 2.3 hereof.
7.2.3 The Purelink Shareholders understand and agree that stop transfer
instructions will be given to Gateway's transfer agent with respect to
certificates evidencing the Exchange Shares to assure compliance with the
provisions of the Investment Representation Letter and that there will be placed
on the certificates evidencing such Exchange Shares legends as specified in the
Investment Representation Letter.
7.2.4 After the Closing there will be no further registration of transfers
on the share register of Purelink or its transfer agent or company secretary of
the Purelink Stock that was issued and outstanding immediately prior to the
Closing. If, after the Closing, Purelink Certificates are presented for any
reason, they will be canceled.
8. Conditions to Obligations of Purelink and the Purelink Shareholders. The
obligations of the Purelink Shareholders to consummate the Exchange are subject
to the fulfillment or satisfaction, on and as of the Closing, of each of the
following conditions (any one or more of which may be waived by Purelink and the
Purelink Shareholders in their sole discretion, but only in a writing signed by
Purelink and the Purelink Shareholder):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Gateway set forth in Section 4 shall be true and accurate in every
material respect on and as of the Closing with the same force and effect as if
they had been made at the Closing, and Purelink shall have received a
certificate to such effect executed by Gateway's President or Chief Financial
Officer.
8.2 Covenants. Gateway shall have performed and complied in all material
respects with all of its covenants contained in Section 6 on or before the
Closing, and the Purelink Shareholders shall have received a certificate to such
effect signed by Gateway's President or Chief Financial Officer.
8.3 Compliance with Law; No Legal Restraints. There shall not be
outstanding or threatened, or enacted or adopted, any order, decree, temporary,
preliminary or permanent injunction, legislative enactment, statute, regulation,
action, proceeding or any judgment or ruling by any court, arbitrator,
governmental agency, authority or entity, or any other fact or circumstance
(other than any such matter initiated by Purelink, its officers or directors or
the Purelink Shareholder), that, directly or indirectly, challenges, threatens,
prohibits, enjoins, restrains, suspends, delays, conditions or renders illegal
21
Compliance with Law - continued
or imposes limitations on (or is likely to result in a challenge, threat to, or
a prohibition, injunction, restraint, suspension, delay or illegality of, or to
impose limitations on): (i) the Exchange or any other transaction contemplated
by this Agreement.
8.4 Government Consents. There shall have been obtained at or prior to the
Closing Date such permits and/or authorizations, and there shall have been taken
such other action by any regulatory authority having jurisdiction over the
parties and the actions herein proposed to be taken, as may be required to
lawfully consummate the Exchange, including but not limited to requirements
under applicable U.S. and state securities and corporations laws.
8.5 Documents. Gateway shall have executed and delivered to the Purelink
Shareholders the Gateway Ancillary Agreements. Gateway shall have delivered a
certificate representing the Exchange Shares (less any Escrow Shares) to the
Purelink Shareholders and shall have delivered the Escrow Shares to the Escrow
Agent. Purelink shall have received all written consents, assignments, waivers,
authorizations or other certificates reasonably deemed necessary by Purelink's
legal counsel for Purelink to lawfully consummate the transactions contemplated
hereby.
8.7 No Litigation. No litigation or proceeding (other than any litigation
or proceeding initiated by Purelink, its Board of Directors, Purelink
Shareholders or officers or the Purelink Shareholders) shall be threatened or
pending for the purpose or with the probable effect of enjoining or preventing
the consummation of the Exchange or any of the other transactions contemplated
by this Agreement, or which could be reasonably expected to have a material
adverse effect on the present or future operations or financial condition of
Gateway.
8.8 Instructions to Transfer Agent; Deliveries. Gateway shall have issued
irrevocable instructions to its transfer agent to authorize the issuance of
Gateway Common Stock in the Exchange consistent with Section 2 hereof. Gateway
shall have made the other deliveries contemplated by Section 2 hereof.
8.9 Satisfactory Form of Legal Matters. The form, scope and substance of
all legal and accounting matters contemplated hereby and all closing documents
and other papers delivered hereunder shall be reasonably acceptable to the
Purelink Shareholder's counsel.
9. Conditions to Obligations of Gateway. The obligations of Gateway
hereunder are subject to the fulfillment or satisfaction, on and as of the
Closing, of each of the following conditions (any one or more of which may be
waived by Gateway in its sole discretion, but only in a writing signed by
Gateway):
9.1 Accuracy of Representations and Warranties. The representations and
warranties of the Purelink Shareholders set forth in Section 3 and in the
Investment Representation Letters shall each be true and accurate in every
material respect on and as of the Closing with the same force and effect as if
they had been made at the Closing, except, in each case, where the failure to be
true and correct would not reasonably be expected to have a Material Adverse
Effect, and Gateway shall have received certificates to such effect executed by
the Purelink Shareholders.
9.2 Covenants. The Purelink Shareholders shall have performed and complied
in all material respects with all of its respective covenants contained in
Section 5 on or before the Closing except, in each case, where the failure to so
22
Covenants - continued
perform or comply would not reasonably be expected to have a Material Adverse
Effect, and Gateway shall have received certificates to such effect signed by
the Purelink Shareholders.
9.3 Compliance with Law; No Legal Restraints. There shall not be
outstanding, or enacted or adopted, any order, decree, temporary, preliminary or
permanent injunction, legislative enactment, statute, regulation, action,
proceeding or any judgment or ruling by any court, arbitrator, governmental
agency, authority or entity (other than any such matter initiated by Gateway or
its officers or directors), that, directly or indirectly, challenges, threatens,
prohibits, enjoins, restrains, suspends, delays, conditions, or renders illegal
or imposes limitations on (or is likely to result in a challenge, threat to, or
a prohibition, injunction, restraint, suspension, delay or illegality of, or to
impose limitations on): (i) the Exchange or any other transaction contemplated
by this Agreement.
9.4 Government Consents. There shall have been obtained at or prior to the
Closing Date such permits or authorizations from, and there shall have been
taken such other action, as may be required to lawfully consummate the Exchange
by, any governmental or regulatory authority having jurisdiction over any of the
parties, and/or the actions herein proposed to be taken, including but not
limited to requirements under applicable U.S. and state securities and corporate
laws.
9.5 Documents and Consents. The Purelink Shareholders shall have executed
and delivered to Gateway all the Shareholder Ancillary Agreements. The Purelink
Shareholders shall have delivered to Gateway Purelink Certificates representing
100% of the issued and outstanding shares of Purelink together with the other
deliverables specified in Section 2.1.1 hereof. Gateway shall have received duly
executed copies of all third-party consents, approvals, assignments, waivers,
authorizations or other certificates contemplated by this Agreement or
reasonably deemed necessary by Gateway's legal counsel to provide for the
continuation in full force and effect of any and all material contracts,
agreements and leases of Purelink and the preservation of Purelink's IP Rights
and other assets and properties and for Gateway to consummate the transactions
contemplated hereby, in form and substance reasonably satisfactory to Gateway,
except for such thereof as the failure to so obtain would not have a Material
Adverse Effect, or that Gateway and Purelink shall have agreed in writing need
not be obtained.
9.6 No Litigation. No litigation or proceeding (other than any litigation
or proceeding initiated by Gateway, its Board of Directors, its shareholders, or
its officers) shall be pending which could be reasonably expected to have a
Material Adverse Effect on the present or future operations or financial
condition of Purelink.
9.7 Non-Competition Agreement. Gateway shall have received a fully executed
copy of a Non-Competition Agreement in the form of Exhibit 5.13.
9.8 Escrow Agreement. Gateway shall have received a fully executed copy of
the Escrow Agreement in the form of Exhibit 2.4 executed by the Escrow Agent,
the Representative and the Purelink Shareholders.
9.9 Appointment of New Directors and Officers. The directors and officers
of Purelink in office immediately prior to the Closing of the Exchange shall
have resigned effective as of the Closing, unless otherwise directed by Gateway,
and designees of Gateway shall have been named as the sole directors and
23
Appointment of New Directors and Officers - continued
officers of Purelink prior to Closing, subject to any requirements of applicable
state law.
9.10 No Material Adverse Change. There shall not have been any material
adverse change in the financial condition, properties, assets, liabilities,
business, results of operations or operations of Purelink, that would constitute
a Material Adverse Effect.
9.12 Satisfactory Form of Legal and Accounting Matters. The form, scope and
substance of all legal and accounting matters contemplated hereby and all
closing documents and other papers delivered hereunder shall be reasonably
acceptable to Gateway's counsel and independent public accountants.
10. Termination of Agreement.
10.1 Prior to or at the Closing.
10.1.1 This Agreement may be terminated at any time prior to or at the
Closing by the mutual written consent of Gateway and the Purelink Shareholders.
10.1.2 This Agreement may be terminated after the Termination Date by
Gateway if the conditions precedent set forth in Section 9 shall have not been
complied with, waived or performed and such noncompliance or nonperformance
shall not have been cured or eliminated (or by its nature cannot be cured or
eliminated) by Purelink and/or the Purelink Shareholders on or before Midnight,
Pacific Time on May 31, 2004 (the "Termination Date").
10.1.3 This Agreement may be terminated after the Termination Date by the
Purelink Shareholders if the conditions precedent set forth in Section 8 shall
have not been complied with, waived or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Gateway on or before the Termination Date.
10.1.4 Gateway may terminate this Agreement at any time prior to or at the
Closing if any of the representations and warranties of the Purelink
Shareholders in Section 3 of this Agreement were incorrect, untrue or false in
any material respect as of the Agreement Date or are incorrect, untrue or false
in any material respect as of the proposed Closing Date or the Purelink
Shareholders has breached any of his respective covenants under Section 5 of
this Agreement, but in any case, only to the extent that such incorrectness,
untruth, falsity or breach shall cause the condition contained in Section 9.1
and/or 9.2 hereof to have failed, and the Purelink Shareholders has not cured
such breach prior to the earlier of (i) the Closing, (ii) thirty (30) days after
Gateway has given the Purelink Shareholders written notice of its intention to
terminate this Agreement pursuant to this subsection or (iii) the Termination
Date.
10.1.5 The Purelink Shareholders may terminate this Agreement at any time
prior to or at the Closing if any of the representations and warranties of
Gateway in Section 4 of this Agreement were incorrect, untrue or false in any
material respect as of the Agreement Date or are incorrect, untrue or false in
any material respect as of the proposed Closing Date or Gateway has breached any
of its covenants under Section 6 of this Agreement, and Gateway has not cured
such breach prior to the earlier of (i) the Closing, (ii) thirty (30) days after
the Purelink Shareholders has given Gateway written notice of their intention to
terminate this Agreement pursuant to this subsection or (iii) the Termination
Date.
24
Termination of Agreement - continued
Any termination of this Agreement under this Section 10 will be effective
by the delivery of notice of the terminating party to the other parties hereto.
10.2 No Liability for Proper Termination. Any termination of this Agreement
in accordance with this Section 10 will be without further obligation or
liability upon any party in favor of the other party hereto or to its
stockholders, directors or officers, other than the obligations provided in the
Confidentiality Agreement; provided, however, that nothing herein will limit the
obligation of the Purelink Shareholders and Gateway for any willful breach
hereof or failure to use their best efforts to cause the Exchange to be
consummated, as set forth in Sections 5.9 and 6.3 hereof, respectively. In the
event of the termination of this Agreement pursuant to this Section 10, this
Agreement shall thereafter become void and have no effect and each party shall
be responsible for its own expenses incurred in connection herewith.
11. Survival of Representations, Indemnification and Remedies, Continuing
Covenants.
11.1 Survival of Representations. All representations, warranties and
covenants of the Purelink Shareholders contained in this Agreement will remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of Gateway, until that date ("Escrow Release Date") which is the
earlier of (i) the termination of this Agreement or (ii) twelve (12) months
after the Closing Date.
11.2 Agreement to Indemnify. The Purelink Shareholders agrees to indemnify
and hold harmless Gateway and its officers, directors, agents, shareholders and
employees, and each person, if any, who controls or may control Gateway within
the meaning of the 1933 Act or the 1934 Act (each hereinafter referred to
individually as an "Indemnified Person" and collectively as "Indemnified
Persons") from and against any and all claims, demands, suits, actions, causes
of actions, losses, costs, damages, liabilities and expenses including, without
limitation, reasonable attorneys' fees, other professionals' and experts'
reasonable fees and court or arbitration costs (hereinafter collectively
referred to as "Damages") incurred and arising out of any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants given or made by Purelink and/or the Purelink
Shareholders in this Agreement or in any certificate delivered by or on behalf
of Purelink pursuant hereto (if such inaccuracy, misrepresentation, breach or
default existed at the Closing Date). Any claim of indemnity made by an
Indemnified Person under this Section 11.2 must be asserted in a writing
delivered to the Escrow Agent by no later than the Escrow Release Date.
11.3 Limitation. Notwithstanding anything herein to the contrary, in
seeking indemnification for Damages under Section 11.2, the Indemnified Persons
shall exercise their remedies only with respect to the Escrow Shares and any
other assets deposited in escrow pursuant to the Escrow Agreement. Except for
breaches of the representations and warranties contained in Section 3.2.1 and
except as provided in Section 11.5: (i) Purelink Shareholders shall not have any
liability to an Indemnified Person under this Agreement except to the extent of
the Escrow Shares and any other assets deposited under the Escrow Agreement and
(ii) the remedies set forth in this Section 11.3 and the Escrow Agreement shall
be the exclusive remedies of Gateway and the other Indemnified Persons under
this Agreement or in any cause of action based thereon (subject to the
exceptions in the last sentence of this Section 11.3) against the Purelink
Shareholders for any inaccuracy, misrepresentation, breach of, or default in,
any of the representations, warranties or covenants given or made by Purelink or
the Purelink Shareholders in this Agreement or in any certificate, document or
25
Limitation - continued
instrument delivered by or on behalf of Purelink or the Purelink Shareholders
pursuant hereto or in any cause of action based thereon (subject to the
exceptions in the last sentence of this Section 11.3). In addition, the
indemnification provided for in Section 11.2 shall not apply unless and until
the aggregate Damages for which one or more Indemnified Persons seeks or has
sought indemnification hereunder exceeds a cumulative aggregate of Twenty-Five
Thousand Dollars ($25,000.00) (the "Basket"), in which event the Purelink
Shareholders shall, subject to the foregoing limitations, be liable to indemnify
the Indemnified Persons for all Damages in excess of the Basket. The limitations
set forth in this Section 11.3 shall not be applicable to Misconduct Damages (as
defined below). As used herein, "Misconduct Damages" means Damages resulting
from breach of any provisions of the Investment Representation Letter.
11.4 Notice. Promptly after Gateway becomes aware of the existence of any
potential claim by an Indemnified Person for indemnity from the Purelink
Shareholders under Section 11.2, Gateway will notify the Purelink Shareholders
of such potential claim in accordance with the Escrow Agreement. The Purelink
Shareholders shall be entitled to participate in and, to the extent the Purelink
Shareholders elects by written notice to Gateway within 30 days after receipt by
the Purelink Shareholders of notice of such claim, to assume the defense of such
claim at its own expense, with counsel chosen by the Purelink Shareholders.
Notwithstanding that the Purelink Shareholders shall have elected by such
written notice to assume the defense of any claim, any Indemnified Party shall
have the right to participate in the investigation and defense thereof with
separate counsel chosen by such Indemnified Party, but in such event the fees
and expenses of such counsel shall be paid by such Indemnified Party. Failure of
Gateway to give such notice shall not affect any rights or remedies of an
Indemnified Party hereunder with respect to indemnification for Damages except
to the extent the Purelink Shareholders is materially prejudiced thereby. Prior
to the settlement of any claim for which Gateway seeks indemnity from the
Purelink Shareholders, Gateway will provide the Purelink Shareholders with the
terms of the proposed settlement and a reasonable opportunity to comment on such
terms in accordance with the Escrow Agreement. Nothing in this Section is
intended to preclude the Representative of the Purelink Shareholders from
contesting a claim for indemnification hereunder in accordance with the terms
and conditions of the Escrow Agreement.
11.5 Title Indemnity. In addition to, and separate from, the foregoing
agreement to indemnify set forth in Section 11.2, the Purelink Shareholders
agrees, to defend and indemnify Gateway and each other Indemnified Person from
and against any and all claims, demands, suits, actions, causes of actions,
losses, costs, damages, liabilities and expenses including, without limitation,
reasonable attorneys' fees, other professionals' and experts' reasonable fees
and court or arbitration costs incurred and arising out of any failure of such
Purelink Shareholders to have good, valid and marketable title to any issued and
outstanding shares of Purelink Stock held (or asserted to have been held) by
such Purelink Shareholders, free and clear of all liens, claims and
encumbrances, or to have the full right, capacity and authority to enter into
this Agreement and consummate the Exchange and any other transactions
contemplated by this Agreement, and any failure of the Purelink Shareholders to
own, of record and beneficially, 100% of the issued and outstanding shares of
Purelink. A Purelink shareholder's liability under the indemnification provided
for in this Section 11.5 shall be in addition to any liability of such Purelink
shareholder under Section 11.2 and shall not be subject to the limitations on
the Purelink Shareholder's liability set forth in Section 11.3 and shall not be
limited to such Purelink Shareholder's Escrow Shares.
26
12. Miscellaneous.
12.1 Governing Law/Jurisdiction. This Agreement, the Gateway Ancillary
Agreements (collectively the "Transaction Agreements") and the Shareholder
Ancillary Agreements shall be governed and construed in accordance with the laws
of the State of Colorado without regard to conflicts of laws principles thereof
and all questions concerning the validity and construction hereof shall be
determined in accordance with the laws of the State of Colorado.
12.2 Assignment; Binding Upon Successors and Assigns. No party hereto may
assign any of its rights or obligations hereunder without the prior written
consent of the other parties hereto, except that Gateway may assign its
respective rights to any wholly-owned subsidiary of Gateway, provided that, in
the event of such assignment, Gateway shall remain primarily liable for the
performance of its obligations hereunder. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.3 Severability. If any provision of this Agreement, or the application
thereof, will 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 will be interpreted so as reasonably to 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
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
12.5 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the exercise of any other.
12.6 Amendment and Waivers. Any term or provision of this Agreement may be
amended prior to the Closing by the written consent of Gateway, the Purelink
Shareholders, and, after the Closing by Gateway and the Purelink Shareholders
(or their successors in interest). The observance of any term, condition or
provision 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 or for whose benefit such condition was provided.
The waiver by a party of any breach hereof or default in the performance hereof
will not be deemed to constitute a waiver of any other default or any succeeding
breach or default. In addition, at any time prior to the Closing, the Purelink
Shareholders and Gateway (by action taken by its Board of Directors) may, to the
extent legally allowed: (i) extend the time for the performance of any of the
obligations or other acts of the other; (ii) waive any inaccuracies in the
representations and warranties made to it contained herein or in any document
delivered pursuant hereto; and (iii) waive compliance with any of the agreements
or conditions for its benefit contained herein. No such waiver or extension
shall be effective unless signed in writing by the party against whom such
waiver or extension is asserted. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions or any other provisions.
27
12.7 Expenses. Each party will bear its respective expenses and legal fees
incurred with respect to this Agreement, and the transactions contemplated
hereby.
12.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including without limitation, costs, expenses and fees on
any appeal). The prevailing party will be entitled to recover its costs of suit,
regardless of whether such suit proceeds to final judgment.
12.9 Notices. All notices and other communications required or permitted
under this Agreement will be in writing and will be either hand delivered in
person, sent by telecopier or sent by internationally recognized express courier
service. Such notices and other communications will be effective upon receipt if
hand delivered or sent by telecopier, and three (3) days after dispatch if sent
by express courier, to the following addresses, or to such other addresses or
fax number as any party may notify the other parties in accordance with this
Section:
If to Gateway,
Gateway Access Solutions, Inc.
000 Xxxxx Xxxx., #000-000
Xxxxxxx Xxxxxxx, XX 00000
Telephone: 000-000-0000
With a copy to:
Xxx X. Xxxxxx, Esq.
Carle, Mackie, Power & Xxxx LLP
000 X Xxxxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Telephone: 000-000-0000
If to the Purelink Shareholders
Xxxxx X. Xxxxxx
5 Green Spruce
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
With a copy to counsel for Purelink:
Xxxxxxxx X. Xxxxx
Xxxxxxx Xxxxx Xxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
12.10 Construction of Agreement. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof will not
be construed for or against either party. A reference to a Section or an exhibit
will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
28
12.11 No Joint Venture. Nothing contained in this Agreement will 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 will have the
power to control the activities and operations of any other party and their
status is, and at all times will continue to be, that of independent contractors
with respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
12.12 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 evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
12.13 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner, employee, agent, consultant or any
party hereto or any other person or entity unless specifically provided
otherwise herein, and, except as so provided, all provisions hereof will be
personal solely between the parties to this Agreement.
12.14 Public Announcement. Upon execution of this Agreement, Gateway and
Purelink will issue a press release approved by Gateway and the Purelink
Shareholders announcing the Exchange. Thereafter, Gateway may issue such press
releases, and make such other disclosures regarding the Exchange, as it
determines are required under applicable securities laws or regulatory rules,
but shall first consult with the Purelink Shareholders and provide the Purelink
Shareholders with an opportunity to comment on any such press release. Prior to
the publication of the press release issued upon execution of this Agreement
(unless this Agreement has been terminated), no party hereto shall make any
public announcement relating to this Agreement or the transactions contemplated
hereby.
12.15 Confidentiality. The Purelink Shareholders shall cause Purelink to
confirm and Gateway shall confirm that they have entered into the
Confidentiality Agreement and that they are each bound by, and will abide by,
the provisions of such Confidentiality Agreement. If this Agreement is
terminated, all copies of documents containing confidential information of a
disclosing party shall be returned by the receiving party to the disclosing
party or be destroyed, as provided in the Confidentiality Agreement.
12.16 Entire Agreement. This Agreement and the exhibits hereto constitute
the entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto other than the Confidentiality
Agreement. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
GATEWAY ACCESS SOLUTIONS, INC.
/s/ Xxxxxx Xxxxxx
------------------------------------
By: Xxxxxx Xxxxxx, Its CEO
PURELINK SHAREHOLDERS
Anchor Bay Corporation
/s/ Xxxxx Xxxxxxx
------------------------------------
By: Xxxxx Xxxxxxx, Its President
Xxxxx X. Xxxxxx
B&R Xxxxxx Trust
/s/ Xxxxxxx X Xxxxxx
------------------------------------
By: Xxxxxxx X Xxxxxx, Its Trustee
T3B Advisor Group LLC
/s/ Xxxxx X Xxxxxx
------------------------------------
By: Xxxxx X Xxxxxx, Its Manager
/s/ Xxxxxx Xxxxx
------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxx Xxxxxxxxx
------------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxx
------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxx Xxxxxxxx
------------------------------------
Xxxxx Xxxxxxxx
/s/ Xxx Xxxxxx
------------------------------------
Xxx Xxxxxx
30
List of Schedules and Exhibits
Schedule A List of Purelink Shareholders
Exhibit 2.1.3 Registration Rights Agreement
Exhibit 2.3 Escrow Agreement
Exhibit 2.5 Investor Representation Letter
Exhibit 3.1.1 List of Contracts and Commitments
Exhibit 3.13 List of Purelink IP Rights
Exhibit 3.16.1 List of Purelink Employees, Officers and Consultants
Exhibit 3.16.4 List of Employee Benefit Plans
Exhibit 3.17 List of Purelink Insurance Policies
Exhibit 5.13 Non-Competition Agreement
31
SCHEDULE A
PURELINK SHAREHOLDERS
Shares to be
Purelink Exchange Escrowed Issued at
Shares Shares Shares Closing
--------------- ------------ ------------- -------------
Anchor Bay 11,622,000 1,415,418 353,855 1,061,563
Xxxxx X. Xxxxxx 3,050,000 369,626 92,407 277,219
B&R Xxxxxx Trust 200,000 24,358 6,090 18,268
T3B Advisor Group LLC 400,000 48,715 12,179 36,536
Xxxxxx Xxxxx 720,000 89,270 22,318 66,952
Xxxxxx Xxxxxxxxx 70,000 8,769 2,192 6,577
Xxxxxx Xxxxx 60,000 7,307 1,827 5,480
Xxxxx Xxxxxxxx 150,000 18,268 4,567 13,701
Xxx Xxxxxx 150,000 18,268 4,567 13,701
--------------- ------------ ------------- -------------
16,422,000 1,999,999 500,002 1,499,997
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of May 1, 2004 by and among Gateway Access Solutions, Inc., a Nevada
corporation ("Gateway"), and the persons and entities listed on Schedule A
attached hereto (the "Purelink Shareholders").
RECITALS
A. The Purelink Shareholders hold 2,000,000 shares of Gateway common stock
(the "Common Stock") which they received pursuant to the terms and conditions of
that certain Exchange Agreement by and among Gateway and the Purelink
Shareholders dated of even date herewith (the "Exchange Agreement"), pursuant to
which the Purelink Shareholders exchanged 100% of the issued and outstanding
shares of Purelink for their shares of Gateway common stock.
B. The obligations of Gateway and the Purelink Shareholders under the
Exchange Agreement are conditioned upon the execution and delivery by the
Purelink Shareholders and Gateway of this Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties further agree as follows:
AGREEMENT
1. Restrictions On Transferability Of Securities; Registration Rights.
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
(a) "Closing" shall mean the closing date under the Exchange
Agreement.
(b) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and
32
Exchange Act - continued
regulations thereunder, all as the same shall be in effect from time to
time.
(d) "Holder" shall mean any Investor who holds Registrable Securities
and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with
Section 1.2 and Section 1.12 hereof.
(e) "Initiating Holders" shall mean any Holder or Holders who in the
aggregate hold not less than twenty percent (20%) of the outstanding
Registrable Securities.
(f) "Investors" shall mean the Purelink Shareholders.
(g) "Other Stockholders" shall mean persons other than Holders who, by
virtue of agreements with Gateway, are entitled to include their securities
in certain registrations hereunder.
(h) "Registrable Securities" shall mean (i) the Shares and (ii) any
common stock of Gateway issued as a dividend or other distribution with
respect to or in exchange for or in replacement of the shares referenced in
(i) above, provided, however, that Registrable Securities shall not include
any shares of common stock which have previously been registered or which
have been sold to the public either pursuant to a registration statement or
Rule 144 or which have been sold in a private transaction in which the
transferor's rights under this Agreement are not assigned.
(i) The terms "register," "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement
in compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
(j) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for Gateway, blue
sky fees and expenses, and expenses of any regular or special audits
incident to or required by any such registration, but shall not include
Selling Expenses, fees and disbursements of counsel for the Holders and the
compensation of regular employees of Gateway, which shall be paid in any
event by Gateway.
(k) "Restricted Securities" shall mean any Registrable Securities
required to bear the legend set forth in Section 1.2(b) hereof.
(l) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
(m) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
(n) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
33
(o) "Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any holder (other than
the fees and disbursements of counsel included in Registration Expenses).
(p) "Shares" shall mean the Common Stock.
1.2 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities unless and until: (1) there is then
in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement; or (2) the transferee has agreed in writing for the
benefit of Gateway to be bound by this Section 1.2, provided and to the
extent such Section is then applicable, and:
(i) (A) Such Holder shall have notified Gateway of the proposed
disposition and shall have furnished Gateway with a detailed statement of
the circumstances surrounding the proposed disposition, and (B) if
reasonably requested by Gateway, such Holder shall have furnished Gateway
with an opinion of counsel, reasonably satisfactory to Gateway, that such
disposition will not require registration of such shares under the
Securities Act.
(ii) Notwithstanding the provisions of paragraph (i) above, no such
registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is (A) a partnership to its partners or retired
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance
with their interest in the limited liability company, or (D) to the
Holder's family member or trust for the benefit of an individual Holder,
provided the transferee will be subject to the terms of this Section 1.2 to
the same extent as if such transferee were an original Holder hereunder.
(b) Each certificate representing Registrable Securities shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following
(in addition to any legend required under applicable state securities
laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT OR UNLESS GATEWAY HAS RECEIVED AN OPINION OF
COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO GATEWAY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) Gateway shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel at such Holder's expense (which counsel may
be counsel to Gateway) reasonably acceptable to Gateway to the effect that
the securities proposed to be disposed of may lawfully be so disposed of
without registration, qualification or legend.
34
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by Gateway of an opinion of
counsel at such Holder's expense (which counsel may be counsel to Gateway)
reasonably acceptable to Gateway to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
1.3 [This section has been deliberately left blank to preserve numbering of
subsequent sections.]
1.4 Company Registration.
(a) At any time beginning one year after the date of this Agreement,
if Gateway shall determine to register any of its securities either for its
own account or the account of a security holder or holders exercising their
respective demand registration rights (other than pursuant to Section 1.6
hereof), other than a registration relating solely to employee benefit
plans, or a registration relating to a corporate reorganization or other
transaction under Rule 145, or a registration on any registration form that
does not permit secondary sales, Gateway will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), except as
set forth in Section 1.4(b) below, and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder and received by Gateway within ten (10) days
after the written notice from Gateway described in clause (i) above is
mailed or delivered by Gateway. Such written request may specify all or a
part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which Gateway gives notice is
for a registered public offering involving an underwriting, Gateway shall
so advise the Holders as a part of the written notice given pursuant to
Section 1.4(a)(i). In such event, the right of any Holder to registration
pursuant to this Section 1.4 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with Gateway and the other holders of
securities of Gateway with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by Gateway.
Notwithstanding any other provision of this Section 1.4, if the
representative of the underwriters advises Gateway in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the registration and underwriting. Gateway shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated first to Gateway for securities being sold for its own
account and thereafter as set forth in Section 1.14. If any person does not
agree to the terms of any such underwriting, he shall be excluded therefrom by
written notice from Gateway or the underwriter. Any Registrable Securities or
35
Company Registration - continued
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
If shares are so withdrawn from the registration or if the number of shares
of Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, Gateway shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion in accordance with
Section 1.14 hereof.
1.5 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.4 and 1.6 hereof, shall be borne by Gateway. All Selling Expenses
relating to securities so registered shall be borne by the holders of such
securities pro rata on the basis of the number of shares of securities so
registered on their behalf, as shall any other expenses in connection with the
registration required to be borne by the Holders of such securities.
1.6 Registration on Form S-3.
(a) After it becomes a reporting issuer pursuant to Section 13 or
15(d) of the Exchange Act, Gateway shall use its best efforts to qualify
for registration on Form S-3 or any comparable or successor form or forms.
After Gateway has qualified for the use of Form S-3, in addition to the
rights contained in the foregoing provisions of this Section 1, at any time
beginning one year after the date of this Agreement, the Holders of
Registrable Securities shall have the right to request registrations on
Form S-3 (such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended methods
of disposition of such shares by such Holder or Holders), provided,
however, that Gateway shall not be obligated to effect any such
registration if (i) the Holders, together with the holders of any other
securities of Gateway entitled to inclusion in such registration, propose
to sell Registrable Securities and such other securities (if any) on Form
S-3 at an aggregate price to the public of less than $1,000,000, or (ii) in
the event that Gateway shall furnish the certification described in
paragraph 1.6(b)(ii) (but subject to the limitations set forth therein) or
(iii) in a given twelve-month period, Gateway has effected two (2) such
registrations in such period or (iv) it is to be effected more than five
(5) years after Gateway becomes a reporting issuer pursuant to Section 13
or 15(d) of the Exchange Act.
(b) If a request complying with the requirements of Section 1.6(a)
hereof is delivered to Gateway, the Company will:
(i) promptly give written notice of the proposed registration to all
other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other
state securities laws, and appropriate compliance with the Securities Act)
and as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a written
36
Registration on Form S-3 - continued
request received by the Company within twenty (20) days after such written
notice from the Company is mailed or delivered.
(c) The Company shall file a registration statement covering the
Registrable Securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Initiating Holders;
provided, however, that if (i) in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously detrimental
to the Company and the Board of Directors of the Company concludes, as a
result, that it is essential to defer the filing of such registration
statement at such time, and (ii) the Company shall furnish to such Holders
a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such registration statement to be
filed in the near future and that it is, therefore, essential to defer the
filing of such registration statement, then the Company shall have the
right to defer such filing for a period of not more than one hundred eighty
(180) days after receipt of the request of the Initiating Holders, and,
provided further, that the Company shall not defer its obligation in this
manner more than once in any twelve-month period.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Sections 1.6(c) and 1.14 hereof,
include other securities of the Company, with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.
(d) Underwriting. If the registration is for an underwritten offering,
the right of any Holder to registration pursuant to Section 1.6 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he holds.
(e) Procedures. If the Company shall request inclusion in any
registration pursuant to Section 1.6 of securities being sold for its own
account, or if other persons shall request inclusion in any registration
pursuant to Section 1.6, the Initiating Holders shall, on behalf of all
Holders, offer to include such securities in the underwriting and may
condition such offer on their acceptance of the further applicable
provisions of this Section 1 (including Section 1.13). The Company shall
(together with all Holders and other persons proposing to distribute their
securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter or
underwriters selected for such underwriting by a majority in interest of
the Initiating Holders, which underwriters are reasonably acceptable to the
Company. Notwithstanding any other provision of this Section 1.6, if the
representative of the underwriters advises the Initiating Holders in
writing that marketing factors require a limitation on the number of shares
to be underwritten, the number of shares to be included in the underwriting
or registration shall be allocated as set forth in Section 1.14 hereof. If
a person who has requested inclusion in such registration as provided above
does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company, the underwriter or
the Initiating Holders. The securities so excluded shall also be withdrawn
from registration. Any Registrable Securities or other securities excluded
37
Registration on Form S-3 - continued
or withdrawn from such underwriting shall also be withdrawn from such
registration. If shares are so withdrawn from the registration and if the
number of shares to be included in such registration was previously reduced
as a result of marketing factors pursuant to this Section 1.6(e), then the
Company shall offer to all holders who have retained rights to include
securities in the registration the right to include additional securities
in the registration in an aggregate amount equal to the number of shares so
withdrawn, with such shares to be allocated among such Holders requesting
additional inclusion in accordance with Section 1.14.
1.7 Registration Procedures. In the case of each registration effected by
Gateway pursuant to Section 1, Gateway will keep each Holder advised in writing
as to the initiation of each registration and as to the completion thereof. At
its expense, Gateway will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that (i) such 120-day period
shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of Gateway;
and (ii) in the case of any registration of Registrable Securities on Form
S-3 which are intended to be offered on a continuous or delayed basis, such
120-day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold,
provided that Rule 415, or any successor rule under the Securities Act,
permits an offering on a continuous or delayed basis, and provided further
that applicable rules under the Securities Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment that (i) includes any prospectus required by Section 10(a)(3) of
the Securities Act or (ii) reflects facts or events representing a material
or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (i) and (ii) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the registration
statement;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a
Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in
the light of the circumstances then existing, and at the request of any
such seller, prepare and furnish to such seller a reasonable number of
38
Registration Procedures - continued
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
shares, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in
the light of the circumstances then existing:
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by Gateway are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration;
(g) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first month after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act; and
(h) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to this Agreement, Gateway will enter
into an underwriting agreement in form reasonably necessary to effect the
offer and sale of Common Stock, provided such underwriting agreement
contains customary underwriting provisions and provided further that if the
underwriter so requests the underwriting agreement will contain customary
contribution provisions.
1.8 Indemnification.
(a) Gateway will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities
Act, with respect to which registration, qualification, or compliance has
been effected pursuant to this Section 1, and each underwriter, if any, and
each person who controls within the meaning of Section 15 of the Securities
Act any underwriter, against all expenses, claims, losses, damages, and
liabilities (or actions, proceedings, or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering
circular, or other document (including any related registration statement,
notification, or the like) incident to any such registration,
qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation
by Gateway of the Securities Act or any rule or regulation thereunder
applicable to Gateway and relating to action or inaction required of
Gateway in connection with any such registration, qualification, or
compliance, and will reimburse each such Holder, each of its officers,
directors, partners, legal counsel, and accountants and each person
controlling such Holder, each such underwriter, and each person who
controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action, provided that
39
Indemnification - continued
Gateway will not be liable in any such case to the extent that any such
claim, loss, damage, liability, or expense arises out of or is based on any
untrue statement or omission based upon written information furnished to
Gateway by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this
Section 1.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of Gateway (which consent has not been unreasonably
withheld).
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify Gateway, each of
its directors, officers, partners, legal counsel, and accountants and each
underwriter, if any, of Gateway's securities covered by such a registration
statement, each person who controls Gateway or such underwriter within the
meaning of Section 15 of the Securities Act, each other such Holder and
Other Stockholder, and each of their officers, directors, and partners, and
each person controlling such Holder or Other Stockholder, against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse Gateway and such Holders, Other Stockholders, directors,
officers, partners, legal counsel, and accountants, persons, underwriters,
or control persons for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus,
offering circular, or other document in reliance upon and in conformity
with written information furnished to Gateway by such Holder and stated to
be specifically for use therein provided, however, that the obligations of
such Holder hereunder shall not apply to amounts paid in settlement of any
such claims, losses, damages, or liabilities (or actions in respect
thereof) if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld); and provided that in no
event shall any indemnity under this Section 1.8 exceed the gross proceeds
from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section 1.8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 1.8, to the extent such failure is not prejudicial. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an
40
Indemnification - continued - continued
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim
or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.8 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
1.9 Information by Holder. Each Holder of Registrable Securities shall
furnish to Gateway such information regarding such Holder and the distribution
proposed by such Holder as Gateway may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification,
or compliance referred to in this Section 1.
1.10 Deleted.
1.11 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, Gateway agrees to use
its best efforts to:
(a) Make and keep public information regarding Gateway available as
those terms are understood and defined in Rule 144 under the Securities
Act, at all times from and after ninety (90) days following the date that
Gateway becomes a reporting issuer pursuant to Section 13 or 15(d) of the
Exchange Act;
(b) File with the Commission in a timely manner all reports and other
documents required of Gateway under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements;
(c) So long as a Holder owns any Restricted Securities, furnish to the
Holder forthwith upon written request a written statement by Gateway as to
41
Rule 144 Reporting - continued
its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following the date that Gateway becomes a
reporting issuer pursuant to Section 13 or 15(d) of the Exchange Act), and
of the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual
or quarterly report of Gateway, and such other reports and documents so
filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
1.12 Transfer or Assignment of Registration Rights. The rights to cause
Gateway to register securities granted to a Holder by Gateway under this Section
1 may be transferred or assigned by a Holder only to a transferee or assignee of
not less than 50,000 shares of Registrable Securities (as presently constituted
and subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits, and the like), provided that Gateway is given written notice at
the time of or within a reasonable time after said transfer or assignment,
stating the name and address of the transferee or assignee and identifying the
Registrable Securities with respect to which such registration rights are being
transferred or assigned, and, provided further, that the transferee or assignee
of such rights assumes in writing the obligations of such Holder under this
Section 1.
1.13 "Market Stand-Off' Agreement. If requested by Gateway and an
underwriter of Common Stock (or other securities) of Gateway, a Stockholder
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of Gateway held by such Stockholder (other than those included in
the registration) during the one hundred eighty (180) day period following the
effective date of a registration statement of Gateway filed under the Securities
Act.
The obligations described in this Section 1.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. Gateway may impose stop-transfer
instructions with respect to the shares of Common Stock (or other securities)
subject to the foregoing restriction until the end of said one hundred eighty
(180) day period.
1.14 Allocation of Registration Opportunities. In any circumstance in which
all of the Registrable Securities and other shares of Common Stock of Gateway
(including shares of Common Stock issued or issuable upon conversion of shares
of any currently unissued series of Preferred Stock of Gateway) with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or other selling stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and other selling stockholders requesting
inclusion of shares pro rata on the basis of the number of shares of Registrable
Securities and Other Shares that would be held by such Holders and other selling
stockholders assuming conversion; provided, however, that such allocation shall
not operate to reduce the aggregate number of Registrable Securities and Other
Shares to be included in such registration, if any Holder or other selling
stockholder does not request inclusion of the maximum number of shares of
Registrable Securities and Other Shares allocated to him pursuant to the
above-described procedure, the remaining portion of his allocation shall be
42
Allocation of Registration Opportunities - continued
reallocated among those requesting Holders and other selling stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares which would be held by such
Holders and other selling stockholders, assuming conversion, and this procedure
shall be repeated until all of the shares of Registrable Securities and Other
Shares which may be included in the registration on behalf of the Holders and
other selling stockholders have been so allocated. Gateway shall not limit the
number of Registrable Securities to be included in a registration pursuant to
this Agreement in order to include shares held by stockholders with no
registration rights or any other shares of stock issued to employees, officers,
directors, or consultants pursuant to Gateway's equity incentive options, or
with respect to registrations under Section 1.6, in order to include in such
registration securities registered for Gateway's own account.
1.15 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.16 Termination of Registration Rights. The right of any Holder to request
registration or inclusion in any registration pursuant to Section 1.4 or 1.6
shall terminate if all shares of Registrable Securities held by such Holder may
immediately be sold under Rule 144(k).
2. Miscellaneous.
2.1 Entire Agreement. This Agreement contains the entire agreement between
the parties, and supersedes all prior negotiations, drafts, and other
understandings which the parties may have had concerning the subject matter
hereof.
2.2 Waiver. The holders of at least a majority of the shares of Registrable
Securities then outstanding, by vote or written consent may waive any provision
or condition of this Agreement. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
2.3 Successors. The provisions of this Agreement shall inure to the benefit
of, and shall be binding upon, the heirs, successors, executors, administrators
and assigns of the parties hereto.
2.4 Amendments. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated, except by a written instrument signed by
Gateway and the holders of at least fifty percent (50%) of the Registrable
Securities and any such amendment, waiver, discharge or termination shall be
binding on all the holders, but in no event shall the obligation of any holder
hereunder be materially increased, except upon the written consent of such
holder.
2.5 Severability. Whenever possible, each provision of this Agreement shall
be interpreted so as to be effective and valid under applicable law. If any
provision of this Agreement is held to be prohibited by, or invalid under,
applicable law, the remainder of this Agreement and any other application of
such provision shall not be affected thereby.
43
2.6 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument. All such counterparts together shall constitute one and the same
Agreement.
2.7 Notice. All notices and other communications required or permitted
under this Agreement will be in writing and will be either hand delivered in
person, sent by telecopier or sent by internationally recognized express courier
service. Such notices and other communications will be effective upon receipt if
hand delivered or sent by telecopier, and three (3) days after dispatch if sent
by express courier, to the following addresses, or to such other addresses or
fax number as any party may notify the other parties in accordance with this
Section:
If to Gateway,
Gateway Access Solutions, Inc.
000 Xxxxx Xxxx., #000-000
Xxxxxxx Xxxxxxx, XX 00000
Telephone: 000-000-0000
With a copy to:
Xxx X. Xxxxxx, Esq.
Carle, Mackie, Power & Xxxx LLP
000 X Xxxxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Telephone: 000-000-0000
If to the Purelink Shareholders
Xxxxx X. Xxxxxx
5 Green Spruce
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
With a copy to counsel for Purelink:
Xxxxxxxx X. Xxxxx
Xxxxxxx Xxxxx Xxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
2.8 Fax Transmission. The facsimile transmission of a signed copy of this
Agreement or any amendment thereto to the other party or his agent, followed by
faxed acknowledgment of receipt, shall constitute delivery of the such document.
2.9 Headings. The titles and headings of the various sections of this
Agreement have been inserted only for convenience of reference. They are not
part of this Agreement and may not be used to construe or interpret any of the
terms hereof.
2.10 Expense of Enforcement. If any action, proceeding or litigation is
commenced to enforce any provision of this Agreement, then the prevailing party
shall be entitled to be reimbursed by the unsuccessful party for all costs
incurred in connection with such action, proceeding or litigation, including a
reasonable allowance for attorneys' fees and costs, which amount shall be added
to and become part of the final decision in such matter.
44
2.11 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of Colorado, without giving effect to
principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement effective as of the day and year first above written.
GATEWAY ACCESS SOLUTIONS, INC.
/s/ Xxxxxx Xxxxxx
----------------------------------
By: Xxxxxx Xxxxxx, Its CEO
PURELINK SHAREHOLDERS
Anchor Bay Corporation
/s/ Xxxxx Xxxxxxx
----------------------------------
By: Xxxxx Xxxxxxx, Its President
Xxxxx X. Xxxxxx
B&R Xxxxxx Trust
/s/ Xxxxxxx Xxxxxx
----------------------------------
By: Xxxxxxx Xxxxxx, Its Trustee
T3B Advisor Group LLC
/s/ Xxxxx Xxxxxx
----------------------------------
By: Xxxxx Xxxxxx, Its Manager
/s/ Xxxxxx Xxxxx
----------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxx Xxxxxxxxx
----------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxx
----------------------------------
Xxxxxx Xxxxx
/s/ Xxxxx Xxxxxxxx
----------------------------------
Xxxxx Xxxxxxxx
/s/ Xxx Xxxxxx
----------------------------------
Xxx Xxxxxx
45
SCHEDULE A
PURELINK SHAREHOLDERS
Gateway Common
Stock
--------------
Anchor Bay 1,415,418
Xxxxx X. Xxxxxx
369,626
B&R Xxxxxx Trust
24,358
T3B Advisor Group LLC
48,715
Xxxxxx Xxxxx
89,270
Xxxxxx Xxxxxxxxx
8,769
Xxxxxx Xxxxx
7,307
Xxxxx Xxxxxxxx
18,268
Xxx Xxxxxx
18,268
--------------
1,999,999
46
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of May 1, 2004 (the "Closing
Date"), by and among Gateway Access Solutions, Inc., a Nevada corporation
("Gateway"), the persons and entities listed on Schedule A attached hereto who
are all of the former shareholders of Xxxxxxxx.xxx, Inc., a Colorado corporation
(the "Company") (the "Purelink Shareholders"), Xxxxx X. Xxxxxx, as agent of the
Purelink Shareholders (the "Representative"); and Carle, Mackie, Power & Xxxx
LLP (the "Escrow Agent").
RECITALS
A. Gateway and the Purelink Shareholders have entered into an Exchange
Agreement dated as of May 1,2004 (the "Exchange Agreement"), pursuant to which
the Purelink Shareholders exchanged 100% of the issued and outstanding shares of
the Company for 2,000,000 shares of Gateway common stock ("Gateway Common
Stock").
B. The Exchange Agreement contemplates the establishment of an escrow
arrangement to secure the indemnification and other obligations of the Purelink
Shareholders under the Exchange Agreement.
The parties to this Escrow Agreement, intending to be legally bound, agree
as follows:
AGREEMENT
1. Defined Terms. Capitalized terms used and not otherwise defined in this
Escrow Agreement shall have the meanings assigned to them in the Exchange
Agreement.
2. Consent of the Purelink Shareholders of the Company. Pursuant to Section
2.3 of the Exchange Agreement, the Purelink Shareholders have consented to (i)
the establishment of an escrow (the "Escrow") pursuant to this Agreement to
secure the indemnification obligations of the Purelink Shareholders under
Section 11 of the Exchange Agreement, (ii) the appointment of the Representative
as agent for the Purelink Shareholders in all respects as set forth in Section
2.3 of the Exchange Agreement, (iii) the taking by the Representative of any and
all actions, including the execution by the Representative of any and all
agreements, instruments or other documents, and (iv) all of the other terms and
conditions of this Agreement.
3. Escrow.
3.1 Shares and Stock Powers to be Placed in Escrow. Gateway shall issue
certificates for twenty-five (25%) of the Exchange Shares in the name of the
Purelink Shareholders (the "Escrow Shares") and shall deliver such certificates
to the Escrow Agent. The Purelink Shareholders will execute and deliver blank
stock powers to the Escrow Agent. The Escrow Shares and the stock powers shall
be held by the Escrow Agent in the Escrow in accordance with the provisions of
this Escrow Agreement and shall not be subject to any lien, attachment, trustee
process or any other judicial process of any creditor of any party hereto or the
Purelink Shareholders.
3.2 Indemnification. The Purelink Shareholders have agreed in Section 11 of
the Exchange Agreement that each of the Indemnified Persons shall be held
harmless and indemnified from and against, and shall be compensated and
reimbursed for, any Damages incurred as set forth in Section 11 of the Exchange
Agreement. The Representative on behalf of the Purelink Shareholders, expressly
agree that the Escrow Shares (i) shall be security for such indemnity
47
Indemnification - continued
obligation, subject to the limitations and in the manner provided for in this
Agreement and (ii) are subject to release to Gateway or other Indemnified Person
upon the terms set forth herein.
3.3 Voting of Shares. The Purelink Shareholders shall be entitled to vote
their Escrow Shares. Gateway shall give the Purelink Shareholders at least as
much notice of meetings of shareholders as it gives its shareholders generally.
The Representative shall have no obligation to solicit consents or proxies from
the Purelink Shareholders for purposes of any such vote.
3.4 Dividends, Etc. Any cash, securities or other property distributable
(whether by way of dividend, stock split or otherwise) in respect of or in
exchange for any Escrow Shares shall not be distributed to the Representative or
the Purelink Shareholders, but rather shall be deposited by Gateway with the
Escrow Agent to be held in the Escrow. At the time any Escrow Shares are
required to be released from the Escrow to any Person pursuant to this Escrow
Agreement, any cash, securities or other property previously distributed in
respect of or in exchange for such Escrow Shares shall be released from the
Escrow to such Person.
3.5 Transferability. The interests of the Representative and the Purelink
Shareholders in the Escrow and in the Escrow Shares shall not be assignable or
transferable, other than by operation of law. No transfer of any of such
interests by operation of law shall be recognized or given effect until Gateway
shall have received written notice of such transfer.
3.6 Fractional Shares. No fractional shares of Gateway Common Stock shall
be retained in or released from the Escrow pursuant to this Escrow Agreement. In
connection with any release of Escrow Shares from the Escrow, Gateway shall
issue Gateway Common Stock in an amount rounded up or down to the nearest whole
share.
4. Claim Procedures
4.1 Claim Notice. If any Indemnified Person determines in good faith that
there is an indemnification obligation under Section 11 of the Exchange
Agreement (collectively, an "Indemnification Event"), and such Indemnified
Person wishes to make a claim against the Escrow with respect to such possible
Indemnification Event, then such Indemnified Person may deliver to each of the
Representative and the Escrow Agent a written notice of such possible
Indemnification Event (a "Claim Notice") setting forth (i) a brief description
of the circumstances supporting such Indemnified Person's belief that such
possible Indemnification Event exists or has occurred, and (ii) a non-binding,
preliminary estimate of the aggregate dollar amount of all Damages that have
arisen and may arise as a direct or indirect result of such possible
Indemnification Event (such aggregate amount being referred to as the "Claim
Amount").
4.2 Response Notice. Within 15 days after the delivery of a Claim Notice to
the Representative, the Representative shall deliver to the Escrow Agent (with a
copy to Gateway) a written notice (the "Response Notice") containing: (i)
instructions to the effect that Escrow Shares having a Fair Market Value (as
defined in Section 6) equal to the entire Claim Amount set forth in such Claim
Notice are to be released from the Escrow to such Indemnified Person; OR (ii)
instructions to the effect that Escrow Shares having a Fair Market Value equal
to a specified portion (but not the entire amount) of the Claim Amount set forth
in such Claim Notice are to be released from the Escrow to such Indemnified
Person, together with a statement that the remaining portion of such Claim
48
Response Notice - continued
Amount is being disputed; OR (iii) a statement that the entire Claim Amount set
forth in such Claim Notice is being disputed. If no Response Notice is received
by the Escrow Agent from the Representative within 30 days after the delivery of
a Claim Notice to the Representative, then the Representative shall be deemed to
have given instructions to the Escrow Agent that Escrow Shares having a Fair
Market Value equal to the entire Claim Amount set forth in such Claim Notice are
to be released to such Indemnified Person from the Escrow.
4.3 Release of Escrow Shares to Indemnified Persons.
(a) If the Representative gives (or is deemed to have given)
instructions that Escrow Shares having a Fair Market Value equal to the
entire Claim Amount set forth in a Claim Notice are to be released from the
Escrow to an Indemnified Person, then the Escrow Agent shall be authorized
to transfer to such Indemnified Person, from the Escrow, Escrow Shares
having a Fair Market Value equal to such Claim Amount.
(b) If a Response Notice delivered by the Representative in response
to a Claim Notice contains instructions to the effect that Escrow Shares
having a Fair Market Value equal to a specified portion (but not the entire
amount) of the Claim Amount set forth in such Claim Notice are to be
released from the Escrow to an Indemnified Person, then (i) the Escrow
Agent shall be authorized to transfer to such Indemnified Person, from the
Escrow, Escrow Shares having a Fair Market Value equal to such specified
portion of such Claim Amount, and (ii) the procedures set forth in Section
4.3(c) shall be followed with respect to the remaining portion of such
Claim Amount.
(c) If a Response Notice delivered by the Representative in response
to a Claim Notice contains a statement that all or a portion of the Claim
Amount set forth in such Claim Notice is being disputed (such Claim Amount
or the disputed portion thereof being referred to as the "Disputed
Amount"), then, notwithstanding anything contained in Section 5, the Escrow
Agent shall continue to hold in the Escrow (in addition to any other Escrow
Shares permitted to be retained in the Escrow, whether in connection with
any other dispute or otherwise), Escrow Shares having a Fair Market Value
equal to 125% of the Disputed Amount. Such Escrow Shares shall continue to
be held in the Escrow until such time as (i) the applicable Indemnified
Person and the Representative execute a settlement agreement containing
instructions regarding the release of such shares, or (ii) the Escrow Agent
receives a copy of a court order containing instructions to the Escrow
Agent regarding the release of such Escrow Shares. The Escrow Agent shall
thereupon release such Escrow Shares from the Escrow in accordance with the
instructions set forth in such settlement agreement or court order. (The
parties acknowledge that it is appropriate to retain more than 100% of the
Claim Amount in the Escrow in recognition of the fact that the Indemnified
Person may have underestimated the aggregate amount of the actual and
potential Damages arising from a particular Indemnification Event.)
(d) Notwithstanding the foregoing, if the Indemnified Person is not
Gateway itself, the Escrow Shares may not be transferred unless there is
then in effect a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), covering such transfer and such transfer
is made in accordance with such registration statement or Escrow Agent has
received an opinion of counsel or other evidence, satisfactory to Escrow
Agent and its counsel, that such registration is not required. In the event
that neither registration nor an exemption from registration is available,
then the Escrow Agent shall hold the Escrow Shares for the benefit of the
49
Release of Escrow Shares to Indemnified Persons - continued
Indemnified Person until such time as the Escrow Shares may be transferred
in accordance with the Securities Act.
5. Release of Shares to Purelink Shareholders
5.1 Shares To Be Released. On the date 12 months after the Closing Date
(the "Escrow Release Date"), the Escrow Agent shall release to the Purelink
Shareholders from the Escrow all Escrow Shares then held in the Escrow, other
than any Escrow Shares that are to be retained in the Escrow in accordance with
Section 4.3(c). From and after the Escrow Release Date and upon the resolution
of a dispute (and the release of Escrow Shares to Indemnified Persons in respect
of such dispute, if any) in accordance with Section 4.3(c), Gateway shall
release to the Purelink Shareholders any Escrow Shares remaining in the Escrow
in respect of such dispute.
5.2 Procedures For Releasing Shares.
(a) In the event that the Escrow Agent is to release Escrow Shares to
the Purelink Shareholders in accordance with Section 5.1, the Escrow Agent
shall be authorized to transfer to each Shareholder, and shall so transfer
and release to each Shareholder, such number of Escrow Shares, subject to
Section 3.6, as shall equal the total number of Escrow Shares to be so
transferred and released multiplied by the fraction (i) having a numerator
equal to the number of shares of Gateway Common Stock set forth opposite
such Shareholder's name on Schedule A hereto and (ii) having a denominator
equal to the total number of Escrow Shares listed on Schedule A.
(b) Any release of shares to the Purelink Shareholders pursuant to
Section 5.1 may be effected by mailing a stock certificate to the Purelink
Shareholders certified mail, return receipt requested.
6. Valuation Of Shares Held In Escrow. For purposes of this Escrow
Agreement, the "Fair Market Value" of the Escrow Shares as of any date shall be
deemed to be equal to the number of Escrow Shares (adjusted as appropriate to
reflect any reverse stock split, stock dividend or similar transaction effected
by Gateway after the Closing Date) multiplied by the following:
(a) in the event that a public trading market exists in Gateway's
common stock, the average closing price of Gateway's common stock for the
ten trading days ending two trading days before such date;
(b) in the event that a public trading market does not exist in
Gateway's common stock, than the greater of (i) the most recent price for
which Gateway common stock was issued by Gateway to an independent third
party in an arm's length transaction not subject to the registration
requirements of the Securities Act, or (ii) $0.15 per share (adjusted as
appropriate to reflect any reverse stock split, stock dividend or similar
transaction effected by Gateway after the Closing Date).
7. Fees And Expenses.
7.1 Escrow Agent Fees And Expenses. Upon execution of this Escrow Agreement
and initial deposit of the Escrow Shares, an acceptance fee of $1,000 will be
payable to the Escrow Agent. This acceptance fee will cover the first year of
the Escrow. Thereafter, an annual administrative fee will be payable in
accordance with the Escrow Agent's fee schedules in effect from time to time.
The Escrow Agent will also be entitled to reimbursement for extraordinary
expenses incurred in performance of its duties hereunder.
50
7.2 Payment Of Escrow Agent. Gateway shall pay the fees and expenses of the
Escrow Agent for the services to be rendered by the Escrow Agent hereunder.
Gateway shall be entitled to reimbursement of one-half of such fees and expenses
from the Purelink Shareholders.
7.3 Representative's Fees And Expenses. All reasonable expenses (including
attorneys' fees) incurred by the Representative in connection with the
performance of its duties hereunder shall be reimbursed to the Representative by
the Purelink Shareholders. Gateway shall not be obligated to reimburse the
Representative for any fees charged or expenses (including attorneys' fees)
incurred by the Representative in connection with the Representative's
performance of his duties hereunder. The Representative hereby agrees that he
shall not seek payment or reimbursement of any such fees and expenses, if any,
from Gateway or the Company, and that the Representative shall only seek payment
or reimbursement of all such fees and expenses from the Purelink Shareholders.
7.4 Reimbursement Procedures. Upon a notice in writing delivered to the
Escrow Agent by Gateway in respect of Section 7.2 or Section 8.2, or by the
Representative in respect of Section 7.3, the Escrow Agent shall hold, as
security for reimbursement of fees and expenses pursuant to Section 7.2, Section
7.3 or Section 8.2, such number of Escrow Shares held in the Escrow Account
which have a Fair Market Value equal to the amount to be reimbursed. The Escrow
Agent shall not release such Escrow Shares from the Escrow Account until (a) the
Escrow Agent has received notice from Gateway or the Representative that the
fees and expenses have been paid in cash (with respect to Section 7.2 or 7.3
respectively, or (b) the Escrow Agent has itself been paid in cash with respect
to Section 8.2. .
8. Limitation Of Escrow Agent's Liability.
8.1 Limitation. The Escrow Agent shall incur no liability with respect to
any action taken or suffered by it in reliance upon any notice, direction,
instruction, consent, statement or other documents believed by it to be genuine
and duly authorized, nor for other action or inaction except its own willful
misconduct or negligence. The Escrow Agent shall not be responsible for the
validity or sufficiency of this Agreement. In all questions arising under the
Escrow Agreement, the Escrow Agent may rely on the advice of counsel, and for
anything done, omitted or suffered in good faith by the Escrow Agent based on
such advice the Escrow Agent shall not be liable to anyone. The Escrow Agent
shall not be required to take any action hereunder involving any expense unless
the payment of such expense is made or provided for in a manner reasonably
satisfactory to it.
8.2 Indemnification Of Escrow Agent. Gateway and the Purelink Shareholders,
jointly and severally, shall indemnify the Escrow Agent for, and hold it
harmless against, any loss, liability or expense incurred without negligence or
willful misconduct on the part of Escrow Agent, arising out of or in connection
with its carrying out of its duties hereunder. As among themselves, each of (i)
Gateway and (ii) the Purelink Shareholders shall be liable for one-half (1/2) of
such amounts and Gateway shall be entitled to reimbursement from the Escrow
Shares of the Purelink Shareholders' share of any such loss, liability or
expense.
9. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by giving
resignation to the parties to this Escrow Agreement, specifying not less than 60
days' prior written notice of the date when such resignation shall take effect.
Gateway may appoint a successor Escrow Agent without the consent of the
Representative so long as such successor is a bank with assets of at least $100
51
Successor Escrow Agent - continued
million, and may appoint any other successor Escrow Agent with the consent of
the Representative, which consent shall not be unreasonably withheld. If, within
such notice period, Gateway provides to the Escrow Agent written instructions
with respect to the appointment of a successor Escrow Agent and directions for
the transfer of any Escrow Shares then held by the Escrow Agent to such
successor, the Escrow Agent shall act in accordance with such instructions and
promptly transfer such Escrow Shares to such designated successor.
10. General
10.1 Other Agreements. Nothing in this Escrow Agreement is intended to
limit any of Gateway's or any other Indemnified Person's rights, or any
obligation of the Company or any Purelink Shareholder, under the Exchange
Agreement or under any other agreement entered into in connection with the
transactions contemplated by the Exchange Agreement.
10.2 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Escrow Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
If to Gateway,
Gateway Access Solutions, Inc.
000 Xxxxx Xxxx., #000-000
Xxxxxxx Xxxxxxx, XX 00000
Telephone: 000-000-0000
With a copy to:
Xxx X. Xxxxxx, Esq.
Carle, Mackie, Power & Xxxx LLP
000 X Xxxxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Telephone: 000-000-0000
If to the Representative:
Xxxxx X. Xxxxxx
5 Green Spruce
Xxxxxxxxx, XX 00000
Telephone: 000.000.0000
With a copy to counsel for the Company:
Xxxxxxxx X. Xxxxx
Xxxxxxx Xxxxx Xxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
52
Notices - continued
If to the Escrow Agent:
Xxx X. Xxxxxx, Esq.
Carle, Mackie, Power & Xxxx LLP
000 X Xxxxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Telephone: 000-000-0000
10.3 Counterparts. This Escrow Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
10.4 Headings. The underlined headings contained in this Escrow Agreement
are for convenience of reference only, shall not be deemed to be a part of this
Escrow Agreement and shall not be referred to in connection with the
construction or interpretation of this Escrow Agreement.
10.5 Governing Law; Venue. This Escrow Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of Colorado (without giving effect to principles of conflicts of laws).
10.6 Successors And Assigns; Parties In Interest.
(a) Subject to Sections 3.5 and 10.6(b), this Escrow Agreement shall
be binding upon: the Representative and the shareholders of the Company and
their respective estates, successors and assigns (if any); and Gateway and
its successors and assigns (if any). This Escrow Agreement shall inure to
the benefit of: the Company; the Purelink Shareholders; Gateway; the other
Indemnified Persons; and the respective successors (if any) of the
foregoing.
(b) Gateway may freely assign any or all of its rights under this
Escrow Agreement, in whole or in part, to any other Person without
obtaining the consent or approval of any other party hereto or of any other
Person. None of the Purelink Shareholders, the Representative or the
Company shall be permitted to assign any of his, her or its rights or
delegate any of his, her or its obligations under this Escrow Agreement
without Gateway's prior written consent.
10.7 Waiver.
(a) No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Escrow Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under
this Escrow Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Escrow Agreement, or any power, right, privilege or remedy under this
Escrow Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it
is given.
53
10.8 Amendments. This Escrow Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Gateway, the Representative and the Escrow
Agent.
10.9 Severability. In the event that any provision of this Escrow
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Escrow Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
10.10 Entire Agreement. This Escrow Agreement and the Exchange Agreement
and the other agreements contemplated in the Exchange Agreement set forth the
entire understanding of the parties relating to the subject matter hereof and
thereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of the
date first above written.
GATEWAY ACCESS SOLUTIONS, INC.
/s/ Xxxxxx Xxxxxx
----------------------------------
By: Xxxxxx Xxxxxx, Its CEO
PURELINK SHAREHOLDERS
Anchor Bay Corporation
/s/ Xxxxx Xxxxxxx
----------------------------------
By: Xxxxx Xxxxxxx, Its President
/s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx
B&R Xxxxxx Trust
/s/ Xxxxxxx Xxxxxx
----------------------------------
By: Xxxxxxx Xxxxxx, Its Trustee
T3B Advisor Group LLC
/s/ Xxxxx X. Xxxxxx
----------------------------------
By: Xxxxx X. Xxxxxx, Its Manager
54
/s/ Xxxxxx Xxxxx
----------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxx Xxxxxxxxx
----------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxx
----------------------------------
Xxxxxx Xxxxx
/s/ Xxxxx Xxxxxxxx
----------------------------------
Xxxxx Xxxxxxxx
/s/ Xxx Xxxxxx
----------------------------------
Xxx Xxxxxx
REPRESENTATIVE:
/s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx
ESCROW AGENT:
By: , Its
---------------------- ------------
55
SCHEDULE A
PURELINK SHAREHOLDERS
Escrowed Shares
------------------
Anchor Bay Corporation 353,855
Xxxxx X. Xxxxxx 92,407
B&R Xxxxxx Trust 6,090
T3B Advisor Group LLC 12,179
Xxxxxx Xxxxx 22,318
Xxxxxx Xxxxxxxxx 2,192
Xxxxxx Xxxxx 1,827
Xxxxx Xxxxxxxx 4,567
Xxx Xxxxxx 4,567
------------------
500,002
56
INVESTOR REPRESENTATION LETTER
The undersigned Shareholder ("Shareholder") of Xxxxxxxx.xxx, Inc., a
Colorado corporation ("Purelink"), hereby makes the following representations to
Gateway Access Solutions, Inc., a Nevada corporation ("Gateway") in connection
with the exchange of shares of common stock in Purelink owned by Shareholder for
shares common stock in Gateway (the "Shares") pursuant to that certain Exchange
Agreement by and among Gateway and the shareholders of Purelink of even date
herewith (the "Exchange").
Shareholder hereby represents and warrants that:
1. Purchase Entirely for Own Account. The Shareholder is acquiring the
Shares for investment for the Shareholder's own account, not as a nominee or
agent and not with a view to the resale or distribution of any part thereof, and
that the Shareholder has no present intention of selling, granting any
participation in, or otherwise distributing any of the same. Unless subject to
any requirement of law, the Shareholder represents that the disposition of the
Shares shall at all times be within its control. The Shareholder further
represents that the Shareholder does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares.
2. Disclosure of Information. The Shareholder received and read a copy of
Gateway's preliminary filing with the Securities and Exchange Commission on Form
SB-2. The Shareholder further represents that such Shareholder has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the Exchange. The Shareholder further represents and
acknowledges that such Shareholder has been solely responsible for its own due
diligence investigation of the Company and for its own analysis of the terms,
merits and risks of this investment, that in taking any action or performing any
role relative to the arranging of the proposed investment, the Shareholder has
acted solely in its own interest, and that the Shareholder (or any of its agents
or employees) has not acted as an agent, employee, partner or fiduciary of any
other Shareholder, or as an agent of the Company, or as an underwriter, broker,
dealer or investment adviser relative to this investment.
3. Investment Experience. The Shareholder has invested in securities of
early stage companies and represents that such Shareholder has the knowledge and
experience in financial or business matters such that the Shareholder is capable
of evaluating the merits and risks of the investment in the Shares, has the
capacity to protect the Shareholder's own interests in connection with the
investment in the Shares, and can bear the economic risk of its investment. If
other than a natural person, the Shareholder has not been organized for the
purpose of acquiring the Shares.
4. Restricted Securities. The Shareholder understands that the shares of
Shares such Shareholder is receiving in the Exchange are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Act only in certain circumstances. In this
connection, the Shareholder represents that such Shareholder is familiar with
SEC Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act of 1933, as amended (the "Act").
5. Further Limitations on Disposition. The Shareholder further agrees not
to make any disposition of all or any portion of the Shares unless and until:
57
Further Limitations on Disposition - continued
(a) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) The Shareholder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement
of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, the Shareholder shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such shares
under the Act. It is agreed that the Company will not require an
Shareholder to furnish an opinion of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of subsections (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for
a transfer by an Shareholder to any affiliate of the Shareholder, a
transfer by an Shareholder which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner or the
transfer by gift, will or intestate succession of any partner to his spouse
or lineal descendants or ancestors, if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if he or she were an
original Shareholder hereunder.
6. Legends. It is understood that the certificates evidencing the Shares
may bear either or both of the following legends:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE LAW,
AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION INVOLVING THESE SECURITIES OR (B) THIS
CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE
SECURITIES (CONCURRED IN BY LEGAL COUNSEL FOR THIS CORPORATION) STATING
THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION OR THIS CORPORATION
OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION."
(b) Any legend required by the laws of any other applicable
jurisdiction.
7. Shareholder acknowledges that the tax consequences to Shareholder of the
Exchange will depend on Shareholder's particular circumstances, and neither
Gateway, the directors, the officers, nor the shareholders, employees, agents,
affiliates, or consultants of any of them, will be responsible or liable for the
tax consequences to Shareholder from the Exchange. Shareholder will look solely
to, and rely upon, his or her own advisors with respect to the tax consequences
of the Exchange.
Dated Effective: May __, 2004
By:
-----------------------------------------
58
NON-COMPETITION AGREEMENT
THIS AGREEMENT ("Agreement") is made as of May 1, 2004, by and between
Gateway Access Solutions, Inc., a Nevada corporation ("Gateway"), and Xxxxx X.
Xxxxxx ("Xxxxxx"), an individual, and a former shareholder of Xxxxxxxx.xxx,
Inc., a Colorado corporation (the "Purelink").
RECITALS
A. Gateway and Xxxxxx are parties to that certain Exchange Agreement dated
of even date herewith by and among Gateway and all of the shareholders of
Purelink including Xxxxxx (the "Exchange Agreement"), pursuant to which Xxxxxx
has agreed to exchange all of his shares of Purelink for shares of common stock
of Gateway on the terms and conditions set forth therein.
B. The Exchange Agreement provides, as a condition to the closing
thereunder, that Xxxxxx shall execute and deliver this Agreement;
C. The agreements of Xxxxxx hereunder are an important aspect of the
transactions under the Exchange Agreement, and Gateway would not consummate such
transactions absent the execution and delivery by Xxxxxx of this Agreement;
D. Gateway provides tailored broadband data, voice, video and Internet
access solutions using a combination of licensed radio spectrum, unlicensed
radio spectrum and fiber optic cable in medium and small markets (the
"Business") in the United States of America (the "Territory");
X. Xxxxxx has experience in the Business and the ability to operate a
business or businesses that could compete with Gateway in the Business or in
related businesses following the Closing; and
F. The agreements of Xxxxxx hereunder are reasonable and necessary, both in
scope and duration, to protect the business and goodwill of Purelink that will
be acquired pursuant to the Exchange Agreement, and Gateway would suffer
damages, including the loss of profits, if Xxxxxx or any of Xxxxxx'x affiliates
engaged, directly or indirectly, in a competing business with Gateway.
NOW, THEREFORE for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained herein, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and upon the terms and subject to the conditions
hereinafter set forth, the parties do hereby agree as follows:
1. Non-Competition. Xxxxxx agrees that for a period of three years (3)
years from the date hereof, Xxxxxx shall not:
(i) Call upon, solicit, divert, take away or attempt to call upon,
solicit, divert or take away any past, existing or potential customers,
suppliers, businesses, or accounts of Purelink or Gateway in connection
with any business substantially similar to the Business in the Territory;
(ii) Hire, attempt to hire, contact or solicit with respect to hiring
for Xxxxxx or on behalf of any other person any present or future employee
of Purelink or Gateway in the Business;
(iii) Engage in, or give any advice to any person, firm, partnership,
association, venture, corporation or other entity engaged in, a business
substantially similar to the Business in the Territory;
59
Non-Competition - continued
(iv) Lend credit, money or reputation for the purpose of establishing
or operating a business substantially similar to the Business in the
Territory;
(v) Do any act that Xxxxxx knew or reasonably should have known might
injure Purelink or Gateway; and
(vi) Without limiting the generality of the foregoing provisions,
conduct a business substantially similar to the Business in the Territory.
The covenants in subsections (i) through (vi) are intended to restrict Xxxxxx
from competing in any manner with Purelink or the Business in the activities
that have heretofore been carried on by Purelink and Gateway. The obligations
set forth in subsections (i) through (vi) above shall apply to actions by
Xxxxxx, through any form of ownership, and whether as principal, officer,
director, agent, employee, employer, consultant, shareholder or holder of any
equity security (beneficially or as trustee of any trust), lender, partner,
joint venturer or in any other individual or representative or affiliated
capacity whatsoever.
2. Disclosure of Information. Xxxxxx agrees that for a period of three (3)
years from the date hereof, without the prior written consent of Gateway, Xxxxxx
shall not, directly or indirectly, through any form of ownership, in any
individual or representative or affiliated capacity whatsoever, except as may be
required by law, reveal, divulge, disclose or communicate to any person, firm,
association, corporation or other entity in any manner whatsoever information of
any kind, nature or description concerning: (i) the names of any prior or
present suppliers or customers of Purelink or Gateway, (ii) the prices for which
Purelink or Gateway obtains or has obtained products or services, (iii) the
names of the personnel of Purelink or Gateway, (iv) the manner of operation of
Purelink or Gateway, (v) the plans, trade secrets, or other confidential or
proprietary data of any kind, nature or description, whether tangible or
intangible, of Purelink or Gateway, or (vi) any other financial, statistical or
other information that Purelink or Gateway designates or treats as confidential
or proprietary. The agreements set forth herein shall not apply to any
information that at the time of disclosure or thereafter is generally available
to and known by the public (other than as a result of a disclosure directly or
indirectly by Xxxxxx in violation of this Agreement), the disclosure of which is
required by law, regulation, order, decree or process or is otherwise approved
by Purelink or Gateway. Without regard to whether any or all of the foregoing
matters would be deemed confidential, material or important, the parties hereto
stipulate that as between them, the same are important, material and
confidential and gravely affect the effective and successful conduct of the
Business and its goodwill.
3. Consideration. In consideration for the covenants contained herein,
Gateway shall pay Xxxxxx the sum of One Hundred Dollars ($100.00) upon the
execution of this Agreement by Xxxxxx.
4. Enforcement of Covenants.
4.1 Xxxxxx acknowledges that a violation or attempted violation of any of
the covenants and agreements in Sections 1 and 2 above will cause such damage to
Gateway and Purelink as will be irreparable, the exact amount of which would be
difficult to ascertain and for which there will be no adequate remedy at law,
and accordingly, Xxxxxx agrees that Gateway and Purelink shall be entitled as a
matter of right to an injunction issued by any court of competent jurisdiction,
restraining such violation or attempted violation of such covenants and
60
Enforcement of Covenants - continued
agreements by Xxxxxx, or the affiliates, partners or agents of such Xxxxxx, as
well as recover from Xxxxxx any and all costs and expenses sustained or incurred
by Gateway and Purelink in obtaining such an injunction, including, without
limitation, reasonable attorneys' fees. Xxxxxx agrees that no bond or other
security shall be required in connection with such injunction. Xxxxxx further
agrees that the periods of restriction set forth in Sections 1 and 2 above shall
be tolled during any period of violation thereof by Xxxxxx. Any exercise by
Gateway or Purelink of their respective rights pursuant to this Section 4 shall
be cumulative and in addition to any other remedies to which Gateway or Purelink
may be entitled. Each party represents and warrants that it has been represented
by counsel in the negotiation and execution of this Agreement, including without
limitation the provisions set forth above in this Section 4.1 concerning the
recovery of attorney's fees.
4.2 Xxxxxx understands and acknowledges that each of Gateway and Purelink
shall have the right, in its sole discretion, to reduce the scope of any
covenants set forth in Sections 1 and 2, or any portion thereof, without
Xxxxxx'x consent, effective immediately upon receipt by Xxxxxx of written notice
thereof; and Xxxxxx agrees that Xxxxxx shall comply forthwith with any covenant
as so modified, which shall be fully enforceable as so revised in accordance
with the terms of this Agreement.
5. Intellectual Property. Xxxxxx recognizes and agrees that, on and after
the date hereof, Xxxxxx will not have the right to use for Xxxxxx'x own account
any of the service marks, trademarks, trade names, licenses, procedures,
processes, labels, trade secrets or customer lists owned by or licensed to
Purelink.
6. Validity. To the extent permitted by applicable law, if it should ever
be held that any provision contained herein does not contain reasonable
limitations as to time, geographical area or scope of activity to be restrained,
then the court so holding shall at the request of Gateway or Purelink reform
such provisions to the extent necessary to cause them to contain reasonable
limitations as to time, geographical area and scope of activity to be restrained
and to give the maximum permissible effect to the intentions of the parties as
set forth herein; and the court shall enforce such provisions as so reformed.
If, notwithstanding the foregoing, any provision hereof is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
hereof, such provision shall be fully severable; this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or enforceable provision or by its severance here from. Furthermore, in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically by Gateway or Purelink as a part hereof a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable, and the parties hereby agree to such provision.
7. General Provisions.
7.1 Entire Agreement. This Agreement contains the entire agreement between
the parties, and supersedes all prior negotiations, drafts, and other
understandings which the parties may have had concerning the subject matter
hereof.
7.2 Time. Time is of the essence of this Agreement.
61
7.3 Successors. This provisions Agreement shall be binding upon the
successors and assigns of Xxxxxx and shall inure to the benefit of Gateway's
successors and assigns.
7.4 Amendments. This Agreement may not be amended or modified except by
written documents signed by all parties.
7.5 Severability. Whenever possible, each provision of this Agreement shall
be interpreted so as to be effective and valid under applicable law. If any
provision of this Agreement is held to be prohibited by, or invalid under,
applicable law, the remainder of this Agreement and any other application of
such provision shall not be affected thereby.
7.6 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument. All such counterparts together shall constitute one and the same
Agreement.
7.7 Notice. Any notice, demand, request, consent or other communication
which either party desires or is required to give to any other party shall be in
writing and shall be deemed to have been given when either: (a) delivered in
person or by facsimile transfer, or (b) sent by overnight courier or first-class
registered or certified mail, postage pre-paid, return receipt requested,
addressed to such party at the address set forth following each party's
signature to this Agreement. Either party may designate another address for
itself at any time upon written notice to the other party.
7.8 Fax Transmission. The facsimile transmission of a signed copy of this
Agreement or any amendment thereto to the other party or his agent, followed by
faxed acknowledgment of receipt, shall constitute delivery of such document.
7.9 Headings. The titles and headings of the various sections of this
Agreement have been inserted only for convenience of reference. They are not
part of this Agreement and may not be used to construe or interpret any of the
terms hereof.
7.10 Expense of Enforcement. If any action, proceeding or litigation is
commenced to enforce any provision of this Agreement, then the prevailing party
shall be entitled to be reimbursed by the unsuccessful party for all costs
incurred in connection with such action, proceeding or litigation, including a
reasonable allowance for attorneys' fees and costs, which amount shall be added
to and become part of the final decision in such matter.
7.11 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of Colorado, without giving effect to
principles of conflict of laws.
62
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.
GATEWAY ACCESS SOLUTIONS, INC.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------------
Xxxxxx Xxxxxx, Its CEO
Address for notice:
Gateway Access Solutions, Inc.
000 Xxxxx Xxxx., #000-000
Xxxxxxx Xxxxxxx, XX 00000
Telephone: 000-000-0000
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Xxxxx X. Xxxxxx
Address for notice:
0 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
63
