Exhibit 10.16
SHARE SUBSCRIPTION AGREEMENT
THIS AGREEMENT made as of the 29/th/ day of September, 2000;
B E T W E E N:
CISCO SYSTEMS, INC. (hereinafter referred
to herein as "Purchaser")
- and -
IMAGICTV INC. (hereinafter referred to as the "Issuer")
WHEREAS the Issuer is authorized to issue an unlimited number of Class
A Voting Shares in the capital of the Issuer;
AND WHEREAS the Purchaser desires to subscribe for and purchase from
Treasury Class A Voting Shares of the Issuer upon and subject to the terms and
conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and the covenants and agreements herein contained the parties hereto
agree as follows:
ARTICLE ONE - INTERPRETATION
1.1 Definitions
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In this Agreement, unless something in the subject matter or context
is inconsistent therewith:
(a) "Agreement" means this agreement and all amendments made hereto by
written agreement between the Issuer and the Purchaser.
(a) "Balance Sheet" means the balance sheet of the Issuer as at the
Balance Sheet Date.
(c) "Balance Sheet Date" means February 29, 2000.
(d) "Business Day" means a day other than a Saturday, Sunday or statutory
holiday in the Province of New Brunswick.
(e) "Common Shares" means the Class A Voting shares, Class B Non-Voting
shares and Class C Non-Voting shares in the capital of the Issuer.
(f) "Financial Statements" has the meaning set out in Section 3.1(h).
(g) "Intellectual Property" means all intellectual property of the Issuer
existing as of the Time of Closing and used or currently being developed for use
by the Issuer and all rights of the Issuer therein, worldwide, whether
registered or unregistered, including without limitation:
(i) Copyrights - all copyrights used by or currently being developed
for use by the Issuer, including without limitation, all copyrights in
and to the computer software programs listed in Schedule I, including
the Software and all applications and registrations of such copyrights;
(ii) Trade-marks - all trade-marks, trade-names, service marks, brand
names, logos or the like applied or used by or currently being
developed for use by the Issuer, whether used or applied in association
with wares or services, including without limitation, those trade-marks
listed in Schedule I and all applications, registrations, renewals,
modifications and extensions of such trade-marks;
(iii) Patents - all patents, patent applications and other patent
rights, if any, including divisional and continuation patents of the
Issuer;
(iv) Technology - all technology created, developed or acquired by the
Issuer whether or not patented or patentable and whether or not fixed
in any medium whatsoever, including without limitation, all inventions,
know how, techniques, processes, procedures, methods, trade secrets,
research and technical data, records, formulae, designs, sketches,
patterns, specifications, blue prints, flow charts or sheets, equipment
and parts lists and descriptions, samples, reports, studies, findings,
algorithms, instructions, guides, manuals, and plans for new or revised
products and/or services; and
(v) Licenses - all licenses, sub-licenses and franchises used or
exploited by the Issuer in which the Issuer is a licensee or a licensor
of intellectual property of a nature described in paragraphs (i) - (iv)
above.
(a) "Operating Agreement" means the Operating Agreement dated
December 17, 1999 made among the Issues and all of its voting
shareholders.
(i) "Purchased Common Shares" has the meaning given to such term in
Section 2.1 hereof.
(j) "Software" means the computer programs known by the names as set out
in Schedule I, including all versions thereof, and all related documentation,
manuals, source code and object code, program files, data files, computer
related data, field and data
definitions and relationships, data definition specifications, data models,
program and system logic, interfaces, program modules, routines, sub-routines,
algorithms, program architecture, design concepts, system designs, program
structure, sequence and organization, screen displays and report layouts, and
all other material related to the said computer programs, all as they exist at
the Time of Closing.
(k) "Subsidiary" has the meaning given to such term in the Canada Business
Corporations Act.
(l) "Time of Closing" means 10:00 a.m. on September 29, 2000.
(m) "USA" means the unanimous shareholders' agreement dated December 17,
1999 among the Issuer and all of its shareholders.
1.2 Headings
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The division of this Agreement into Articles and Sections and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The terms "this Agreement",
"hereof", "hereunder" and similar expressions refer to this Agreement and not to
any particular Article, Section or other portion hereof and include any
agreement supplemental hereto. Unless something in the subject matter or context
is inconsistent therewith, references herein to Articles and Sections are to
Articles and Sections of this Agreement.
1.3 Extended Meanings
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In this Agreement words importing the singular number only shall include the
plural and vice versa, words importing the masculine gender shall include the
feminine and neuter genders and vice versa and words importing persons shall
include individuals, partnerships, associations, trusts, unincorporated
organizations and corporations.
1.4 Accounting Principles
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Wherever in this Agreement reference is made to a calculation to be made in
accordance with generally accepted accounting principles, such reference shall
be deemed to be to the generally accepted accounting principles from time to
time approved by the Canadian Institute of Chartered Accountants, or any
successor institute, applicable as at the date on which such calculation is made
or required to be made in accordance with generally accepted accounting
principles.
1.5 Currency
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All references to currency herein are to lawful money of the United States of
America, unless otherwise indicated.
1.6 Schedules
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The following are the Schedules annexed hereto and incorporated by reference and
deemed to be part hereof:
Schedule A - Exceptions to Representations and Warranties
Schedule B - Rights, Privileges, Restrictions and Conditions
attached to the Common Shares;
Schedule C - Outstanding Shares and Options;
Schedule D - Intentionally Deleted;
Schedule E - Licenses and all other material agreements;
Schedule F - Intentionally Deleted;
Schedule G - Employee Indebtedness;
Schedule H - Third Party Programs;
Schedule I - Intellectual Property and Software;
Schedule J - Intentionally Deleted;
Schedule K - Intentionally Deleted;
Schedule L - USA; and
Schedule M - Operating Agreement
ARTICLE TWO - SUBSCRIPTION AND ACCEPTANCE
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2. Subscription and Acceptance
2.1 The Purchaser hereby irrevocably subscribes for 937,500 Class A Voting
Shares in the capital of the Issuer (together, the "Purchased Common Shares") at
the aggregate purchase price of $12,000,000. The Purchaser tenders herewith a
certified cheque or a wire transfer the purchase price amount in full payment
for its Purchased Common Shares.
2.2 The Issuer hereby accepts the subscription for the Purchased Common
Shares by the Purchaser in Section 2.1 above and acknowledges having received
payment in full of the purchase price for the Purchased Common Shares.
ARTICLE THREE - REPRESENTATIONS AND WARRANTIES
3.1 Issuer's Representations and Warranties
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The Issuer represents and warrants to the Purchaser, subject to those matters
specifically excluded pursuant to Schedule A attached hereto, that as at the
Time of Closing:
(a) the Issuer is a corporation duly incorporated, organized and
subsisting under the Canada Business Corporations Act, has the
corporate power to own its assets and to carry on its business
and has made all necessary filings under all applicable
corporate, securities and taxation laws or any other laws to
which it is subject and is a private company as that term is
defined under applicable securities legislation;
(b) the authorized capital of the Issuer consists of an unlimited
number of Class A Voting Shares, of which 12,900,962 have been
validly issued and are outstanding as fully paid and non-
assessable, an unlimited number of Class B Non-Voting Shares, of
which 1,500,000 have been issued and are outstanding as fully
paid and non-assessable and an unlimited number of Class C Non-
Voting Shares, of which 689,383 have been issued and are
outstanding as fully paid and non-assessable, in each case,
before giving effect to the sale of the Purchased Common Shares
contemplated herein;
(c) the rights, privileges, restrictions and conditions attached to
the Common Shares of the Issuer are as set out in Schedule B
attached hereto;
(d) Schedule C hereto accurately sets out the names of all holders of
issued shares in the capital of the Issuer and the number and
class of any shares issued to each such holder;
(e) the Issuer has good and sufficient power, authority and right to
enter into and deliver this Agreement and to issue the Purchased
Common Shares to the Purchaser free and clear of all liens,
charges, encumbrances and any other rights of others;
(f) there is no contract, option, warrants or any other right (
including pre-emptive rights or rights of first refusal) of
another binding upon or which at any time in the future may
become binding upon the Issuer to allot or issue any of the
unissued shares of the Issuer or to create any additional class
of shares other than pursuant to (i) the employee share option
plan which has been duly approved and adopted by the Issuer, a
copy of which has been delivered to the Purchaser, (ii) the
obligations of the Issuer under the USA and the Operating
Agreement, and (iii) those obligations listed in Schedule C;
(g) the entering into and the delivery of this Agreement, and the
completion of the transactions contemplated hereby by the Issuer
will not result in the violation of:
(i) any of the provisions of the constating documents or by-
laws of the Issuer,
(ii) any agreement or other instrument to which the Issuer is a
party or by which the Issuer is bound, or
(iii) any applicable law, rule or regulation;
(h) the audited financial statements of the Issuer, consisting of the
Balance Sheet and statements of loss, deficit and changes in
financial position for the period ended on the Balance Sheet
Date, together with the report of KPMG, chartered accountants,
thereon and the notes thereto (hereinafter collectively referred
to as the "Financial Statements"), a copy of which has been
provided to the Purchaser:
(i) are in accordance with the books and accounts of the Issuer
as at the Balance Sheet Date,
(ii) are true and correct and present fairly the financial
position of the Issuer as at the Balance Sheet Date,
(iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, and
(iv) present fairly all of the assets and liabilities of the
Issuer as at the Balance Sheet Date including, without
limiting the generality of the foregoing, all contingent
liabilities of the Issuer as at the Balance Sheet Date;
(i) to the best of its knowledge, information and belief, after due
enquiry, the financial position of the Issuer is at least as good
as the financial position of the Issuer as at the Balance Sheet
Date;
(j) since the Balance Sheet Date the business of the Issuer has been
carried on in its usual and ordinary course and the Issuer has
not entered into any transaction out of the usual and ordinary
course of business;
(k) to the best of its knowledge, information and belief, after due
inquiry, since the Balance Sheet Date there has been no material
adverse change in the affairs, business, prospects, operations or
condition of the Issuer, financial or otherwise, whether arising
as a result of any legislative or regulatory change, revocation
of any licence or right to do business, fire, explosion,
accident, casualty, labour dispute, flood, drought, riot, storm,
condemnation, act of God, public force or otherwise, except
changes occurring in the usual and ordinary course of business
which have not affected the affairs, business, prospects,
operations or condition of the Issuer, financial or otherwise;
(l) the Issuer owns, with a good and marketable title, free and clear
of all liens, charges, encumbrances and any other rights of
others, all assets shown or
reflected on the consolidated Balance Sheet including, without
limitation, the property listed on Schedule I, except only such
of the assets of the Issuer as have been disposed of in the usual
and ordinary course of business since the Balance Sheet Date, and
of all assets acquired by the Issuer since the Balance Sheet
Date;
(m) to the best of its knowledge, information and belief, after due
inquiry, all machinery and equipment owned or used by the Issuer
has been properly maintained and is in good working order for the
purposes of ongoing operation, subject to ordinary wear and tear
for machinery and equipment of comparable age;
(n) to the best of its knowledge, information and belief, after due
inquiry, all of the inventories of the Issuer are of merchantable
quality and reasonably fit for their usual purpose;
(o) there are no outstanding orders, notices or similar requirements
relating to the Issuer issued by any building, environmental,
fire, health, labour or police authorities or from any other
federal, provincial, state or municipal authority and there are
no matters under discussion with any such authorities relating to
orders, notices or similar requirements;
(p) no dividends have been declared or paid on or in respect of the
Common Shares and no other distribution on any of its securities
or shares has been made by the Issuer;
(q) the Issuer has no liability, obligation or commitment for the
payment of income taxes, corporation taxes or any other taxes or
duties of whatever nature or kind, or interest or penalties with
respect thereto, except such as are disclosed in the Financial
Statements or such taxes or duties not yet due as have arisen
since the Balance Sheet Date in the usual and ordinary course of
business and for which adequate provision in the accounts of the
Issuer has been made, and the Issuer is not in arrears with
respect to any required withholdings or installment payments of
any tax or duty of any kind and has not filed any waiver for a
taxation year of the Issuer under the Income Tax Act (Canada) or
any other legislation imposing tax on the Issuer;
(r) except as otherwise set out in the Balance Sheet, there are no
outstanding liabilities against the Issuer except trade debts
incurred in the usual and ordinary course of business;
(s) the Issuer is not a party to any contract or commitment outside
the usual and ordinary course of business nor a party to any
contract or commitment extending for a period of time longer than
three months or involving expenditures by the Issuer in the
aggregate in excess of $100,000, except such contracts or
commitments as are listed in Schedule E attached hereto;
(t) the Issuer is not in default or breach of any contract or
commitment to which it is a party and there exists no condition,
event or act which, with the giving of notice or lapse of time or
both would constitute such a default or breach and all such
contracts and commitments are in good standing and in full force
and effect without amendment thereto and the Issuer is entitled
to all benefits thereunder;
(u) the Issuer is not a party to or bound by any guarantee,
indemnification, surety or similar obligation except those listed
in Schedule A attached hereto;
(v) except as otherwise set out in Schedule A, the Issuer is not a
party to any lease or agreement in the nature of a lease for real
property, whether as lessor or lessee;
(w) the Issuer has no Subsidiaries, except for iMagicTV (US), Inc.
and ImagicTV (UK) Limited (all of the issued and outstanding
shares of which are legally and beneficially owned by the
Issuer). iMagicTV (US), Inc. was incorporated on November 17,
1999 . ImagicTV (UK) Limited was incorporated on July 17, 2000 .
There are no agreements, options or commitments to acquire any
shares or securities of the Issuer or to acquire or lease any
business operations, real property or assets;
(x) there is no agreement, option, understanding or commitment, or
any right or privilege capable of becoming an agreement, for the
purchase from the Issuer of its business or any of its assets
other than in the usual and ordinary course of business;
(y) the Issuer is not a party to or bound by any contract or
commitment to pay any royalty, licence fee or management fee
except those listed in Schedule "E attached hereto;
(z) all of the current and prior employees of the Issuer have signed
an Agreement of Confidentiality and Assignment of Invention ; and
all of the current and prior independent contractors of the
Issuer have signed Individual Secrecy of Information and Non
Disclosure Agreement;
(aa) all benefit plans of the Issuer have been duly registered where
required by, and are in good standing under, all applicable
legislation including, without limiting the generality of the
foregoing, the Income Tax Act (Canada) and the Pension Benefits
Act (New Brunswick) or similar legislation in any other
jurisdiction, and all required employer contributions under any
such plans have been made and the applicable funds have been
funded in accordance with the terms thereof of the plans and no
past service funding liabilities exist thereunder;
(bb) the Issuer is not bound by or a party to:
(i) any collective bargaining agreement, or
(ii) any benefit plan including, without limiting the generality
of the foregoing, any pension plan maintained by or on
behalf of the Issuer for any of its employees;
(cc) no trade union, council of trade unions, employee bargaining
agency or affiliated bargaining agent:
(i) holds bargaining rights with respect to the Issuer's
employees by way of certification, interim certification,
voluntary recognition, designation or successor rights,
(ii) has applied to be certified as the bargaining agent of any
of the Issuer's employees, or
(iii) has applied to have the Issuer declared a related employer
pursuant to the Industrial Relations Act (New Brunswick) or
similar legislation in any other jurisdiction or taken
substantially similar action in any other jurisdiction in
which the Issuer conducts its business;
(dd) except for remuneration paid to employees in the usual and
ordinary course of business and made at current rates of
remuneration, no payments have been made or authorized since the
Balance Sheet Date by the Issuer to officers, directors or
employees of the Issuer;
(ee) no director, former director, officer, shareholder or employee of
the Issuer or any person not dealing at arm's length within the
meaning of the Income Tax Act (Canada) with any such person is
indebted to the Issuer;
(ff) there are no actions, suits or proceedings (whether or not
purportedly on behalf of the Issuer) pending or threatened
against or adversely affecting, or which could adversely affect,
the Issuer or any of its assets or before or by any federal,
provincial, municipal or other governmental court, department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, whether or not insured, and which might involve the
possibility of any judgment or liability against the Issuer;
(gg) the Issuer is conducting its business in compliance with all
applicable laws, rules, regulations, notices, approvals and
orders of Canada and any other jurisdiction in which the business
of the Issuer is carried on, is not in breach of any such laws,
rules, regulations, notices, approvals or orders and is duly
licensed, registered or qualified, and duly possesses all permits
and quotas, in each of the jurisdictions in which the Issuer
carries on its business to enable its
business to be carried on as now conducted and its assets to be
owned, leased and operated, and all such licences, registrations,
qualifications, permits and quotas are valid and subsisting and
in good standing and none of the same contains or is subject to
any term, provision, condition or limitation which has or may
have an adverse effect on the operation of its business or which
may adversely change or terminate such licence, registration,
qualification, permit or quota by virtue of the completion of the
transactions contemplated hereby;
(hh) all insurance policies maintained by the Issuer are in good
standing;
(ii) no consent, authorization or approval is required from any
person, government, agency, office, bureau or authority in
connection with the entry by the Issuer into this Agreement and
completion of the transactions contemplated hereby;
(jj) attached hereto as Schedule I is a list of all Intellectual
Property; the Intellectual Property is in good standing and duly
registered in all appropriate offices to preserve the right
thereof and thereto;
(kk) no conduct of the Issuer and none of the Issuer's products
infringes (i) upon the trademarks, trade names or copyright of
any other person registered in Canada or the United States, (ii)
to the best of its knowledge and belief, after due inquiry, upon
any registered patent of any other person in Canada or the United
States, or any unregistered trademarks, trade names, or
copyrights of any other person in Canada or the United States, or
(iii) to the best of its knowledge and belief, after due inquiry,
upon any trade marks, trade names, patents, or copyrights of any
other person in any part of the world, outside of Canada and the
United States, where the Issuer conducts its business;
(ll) the Intellectual Property is all of the intellectual property
used in, or required for the proper carrying on of, the Issuer's
business. The Issuer owns all the Intellectual Property, except
that portion which is the Third Party Programs. The Issuer is the
sole and exclusive owner of, with all right, title and interest
in and to (free and clear of any liens or encumbrances), the
Intellectual Property, and has sole and exclusive rights (and is
not contractually obligated to pay any compensation to any third
party in respect thereof) to the use thereof or the material
covered thereby, except that portion which is the Third Party
Programs. There is no and has not been any unauthorized use,
infringement or misappropriation of the Intellectual Property by
any person, former employee or other third party to the best of
the Issuer's information and belief after due inquiry;
(mm) except for the third party software ("Third Party Programs")
listed in Schedule H, the Software was written only by
individuals (the "Developers") who were employed by the Issuer or
contracted by the Issuer whereby such individuals were obligated
to assign all their right, title and interest in and to
any developed work to the Issuer, other than minor components of the
Software which, in the aggregate, do not comprise more than 1% of the
source code for the current version of the Software;
(nn) all employees (including managers and officers) and independent
contractors, and former employees and independent contractors, of the
Issuer who either alone or in concert with others developed,
invented, discovered, designed, modified or corrected any of the
Intellectual Property or wrote any of the Software have irrevocably
and unconditionally assigned their intellectual property rights in
the Software to the Issuer pursuant to written agreements;
(oo) all employees (including managers and officers) and independent
contractors, and former employees and independent contractors, of the
Issuer have waived in writing their moral rights in the Intellectual
Property;
(pp) the Software neither contains nor embodies nor uses nor requires for
its full and proper operation any third party software, including
development tools and utilities except that software and hardware
identified by the Issuer as required for the operating platform of
the Software to function in accordance with its product description,
and the Software, together with the Third Party Programs, contains
all materials necessary for the continued maintenance and development
of the Software;
(qq) copies of all the license and maintenance agreements for the Third
Party Programs have been provided by the Issuer to the Purchaser,
except in respect of Third Party Programs that are "shrink-wrap" or
"web-wrap" software and that are purchased off-the-shelf by the
Issuer;
(rr) only object code versions of the Software have been provided to those
licensee customers of the Software (including licensees for testing
and evaluation purposes), and no person except for such licensees has
been provided with a copy of the object code of the Software;
(ss) except for the arrangements described in Schedule A, the source code
for the Software has not been delivered or made available to any
person and the Issuer has not agreed to or undertaken to or in any
other way promised to provide such source code to any person. The
source code is being developed in Saint Xxxx, New Brunswick and will
be stored in the offices of the Issuer in Saint Xxxx, New Brunswick;
(tt) Schedule E lists all licenses, maintenance or support agreements,
development contracts and all other material agreements (other than
RFP's and proposals which are referred to in such agreements) between
the Issuer and any third party, whether at arm's length to the Issuer
and its principals or otherwise, copies of each of which have been
supplied to the Purchaser;
(uu) to the best of its knowledge, information and belief, after due
inquiry, there are no material problems or defects in the Software
including bugs, logic errors and the failure of the Software to
operate as described in the related documentation;
(vv) there are no distributors, sales agents, representatives or any other
persons, including VARs, OEMs or resellers, who have or had rights to
market or license the Software or any of the Intellectual Property or
who have been otherwise utilized by the Issuer to assist in selling
the Issuer's products or services, except those persons identified in
Schedule A; and
(a) each shareholder of the Issuer and holder of rights or options to
acquire shares of the Issuer, excluding the Purchaser, is a signatory
to the USA and has been advised to obtain independent legal advice in
connection with the entry by such shareholder or holder, as
applicable, into the USA. A copy of the USA is attached as Schedule
L.
(a) each voting shareholder of the Issuer and holder of rights or options
to acquire voting shares of the Issuer, excluding the Purchaser, is a
signatory to the Operating Agreement and has been advised to obtain
independent legal advice in connection with the entry by such
shareholder or holder, as applicable, into the Operating Agreement. A
copy of the Operating Agreement is attached as Schedule M.
(a) no single capital expenditure in excess of $150,000 Canadian or
capital expenditures in the aggregate in excess of $350,000 Canadian
have been made or authorized by the Issuer since the Balance Sheet
Date.
(a) the Issuer has not engaged in the past three (3) months in any
discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Issuer with
or into any such corporation or corporations, (ii) with any
corporation, partnership, association or other business entity or any
individual regarding the sale, conveyance or disposition of all or
substantially all of the assets of the Issuer or a transaction or
series of related transactions in which more than fifty percent (50%)
of the voting power of the Issuer is disposed of, or (iii) regarding
any other form of acquisition, liquidation, dissolution or winding up
of the Issuer.
(b) The Issuer has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity. Except
as contemplated in the Operating Agreement and the USA, no
shareholders of the Issuer have entered into any agreements with
respect to the voting shares of the Issuer
3.2 Survival of Issuer's Representations, Warranties and Covenants
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(a) The representations and warranties of the Issuer set forth in Section
3.1 shall survive this subscription for the Purchased Common Shares
herein provided for and:
(i) the representations and warranties of the Issuer set out
in subsection 3.1(q) , unless such representations and
warranties prove to be false as a result of any
misrepresentation made or fraud committed in filing a
return or supplying information for the purposes of the
Income Tax Act (Canada) or any other legislation imposing
tax on the Issuer, continue in full force and effect for
the benefit of the Purchaser until the expiration of the
last of the limitation periods contained in the Income Tax
Act (Canada) and any other legislation imposing tax on the
Issuer subsequent to the expiration of which an
assessment, reassessment or other form or recognized
document assessing liability for tax, interest or
penalties thereunder for the period ended on the Balance
Sheet Date cannot be issued to the Issuer;
(i) the representations and warranties of the Issuer set out
in subsection 3.1(q) which prove to be false as a result
of any misrepresentation made or fraud committed in filing
a return or in supplying information for the purposes of
the Income Tax Act (Canada) or any other legislation
imposing tax on the Issuer shall continue in full force
and effect for the benefit of the Purchaser and be
unlimited as to duration; and
(i) the remaining representations and warranties of the Issuer
set forth in Section 3.1 shall continue in full force and
effect for the benefit of the Purchaser for a period of
five years from the date hereof except for the
representation and warranty in section 3.1(b) which shall
survive indefinitively.
(a) The covenants of the Issuer set forth in this Agreement shall survive
this subscription for the Purchased Common Shares herein provided for
and, shall continue in full force and effect for the benefit of the
Purchaser in accordance with the terms thereof.
3.3 Purchaser's Representations and Warranties
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The Purchaser represents and warrants to the Issuer that:
(a) it is a corporation duly incorporated, organized and subsisting under
the laws of its jurisdiction of organization; and
(a) it has good and sufficient power, authority and right to enter into
and deliver this Agreement and to complete the transactions to be
completed by it contemplated hereby.
(b) Purchaser is purchasing the Purchased Common Shares as principal for
its own account and not for the benefit of any other person and not
with a view to any resale, distribution or other disposition of the
Purchased Common Shares;
(c) Purchaser has such knowledge and experience in financial and business
matters that Purchaser is capable of evaluating the merits and risks
of purchasing the Purchased Common Shares and is able to bear the
economic loss of its entire investment;
(d) Purchaser is an "accredited investor", as such term is defined in
Rule 501(a) under the Securities Act. Purchaser, acting for its own
account, owns at least $100 million in securities of issuers that are
not affiliated with Purchaser (calculated in the manner described in
Rule 144A of the Securities Acg of 1933, as amended) and has invested
on a discretionary basis such amount in such securities during the
current calendar year and in each of the three prior fiscal years.
(e) Purchaser has had access to such financial and other information and
has had the opportunity to ask questions of and receive answers from
the Issuer as Purchaser deems necessary in connection with its
decision to purchase the Purchased Common Shares;
(f) Purchaser was offered the Purchased Common Shares in the United
States, executed this Subscription Agreement in the United States and
is not purchasing the Purchased Common Shares as the result of any
general solicitation or general advertising, including
advertisements, articles, notices or other communications published
in any newspaper, magazine or similar media or broadcast over radio
or television, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising;
(g) Purchaser understands and acknowledges that the Purchased Common
Shares will not be and have not been registered under the Act or the
securities laws of any state of the United States and are being
offered only in a transaction not involving any public offering
within the meaning of the Act and in compliance with applicable local
laws and regulations, and are therefore "restricted securities"
within the meaning of Rule 144 under the Act, and that if in the
future it shall decide to resell, pledge or otherwise transfer such
Purchased Common Shares, the same may be resold, pledged or otherwise
transferred only (A) to the Issuer or any of its subsidiaries, (B) to
a subsidiary of the Purchaser, (C) in an offshore transaction meeting
the requirements of Rule 903 or 904 of Regulation S under the Act and
in compliance with applicable local laws and regulations, (D) in a
transaction meeting the requirements of Rule 144 under the Act (and
based upon an opinion of counsel and other information acceptable to
the Issuer), (E) in accordance with another exemption (if available)
from the registration requirements of the Act (and based upon an
opinion of counsel and other information acceptable to the Issuer) or
(F) pursuant to an effective registration statement under the Act,
and, in each case, in compliance with all applicable state securities
laws of the United States;
(h) Purchaser understands and acknowledges that the Issuer is not
obligated to file and has no present intention of filing with the
U.S. Securities and Exchange Commission (the "Commission") or with
any state securities administrator any registration statement in
respect of resales of the Purchased Common Shares in the United
States;
(i) Purchaser understands and acknowledges that the Issuer has the right
to instruct the transfer agent of the Purchased Common Shares not to
record a transfer by it without first being notified by the Issuer
that it is satisfied that such transfer is exempt from or not subject
to registration under the Act and any applicable state securities
laws;
(j) Purchaser is not, and is not acquiring the Purchased Common Shares
with the assets of, or for or on behalf of, any employee benefit plan
(a "Plan") (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or other
arrangement that is subject to ERISA or Section 4975 of the U.S.
Internal Revenue Code of 1986, as amended (the "Code"), or any entity
whose underlying assets include assets of a Plan pursuant to 29
C.F.R. Section 2510.3-101 or otherwise, except to the extent that the
acquisition of the Purchased Common Shares:
(1) (i) is made with the assets of a bank collective
investment fund and (ii) satisfies the applicable
requirements and conditions of Prohibited Transaction
Class Exemption 91-38 issued by the U.S. Department of
Labor;
(2) (i) is made with assets of an insurance company pooled
separate account and (ii) satisfies the applicable
requirements and conditions of Prohibited Transaction
Class Exemption 90-1 issued by the U.S. Department of
Labor;
(3) (i) is made with assets managed by a qualified
professional asset manager and (ii) satisfies the
applicable requirements and conditions of Prohibited
Transaction Class Exemption 84-14 issued by the U.S.
Department of Labor;
(4) is made with the assets of a governmental plan as
defined in Section 3(32) of ERISA which is not subject
to the provisions of Section 401 of the Code;
(5) (i) is made with the assets of an insurance company
general account and (ii) satisfies the applicable
requirements and conditions of Prohibited Transaction
Class Exemption 95-60 issued by the U.S. Department of
Labor; and/or
(6) (i) is made with the assets managed by an in-house
asset manager and (ii) satisfies the applicable
requirements and
conditions of Prohibited Transaction Class Exemption
96-23 issued by the U.S. Department of Labor; and
(l) Purchaser understands that, until registered under the Act, the Purchased
Common Shares will bear a legend to the following effect unless otherwise agreed
between the Issuer and the holder thereof:
"THE COMMON SHARES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
UNDER ANY STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED
UNDER THE SECURITIES ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION.
3.4 Survival of Purchaser's Representations, Warranties and Covenants
-----------------------------------------------------------------
(a) The representations and warranties of the Purchaser set forth in
Section 3.3 shall survive the subscription for the Purchased Common
Shares herein provided for and, notwithstanding such completion,
shall continue in full force and effect for the benefit of the Issuer
for a period of five years from the date hereof.
(a) The covenants of the Purchaser set forth in this Agreement shall
survive the subscription for the Shares herein provided for and,
notwithstanding such completion, shall continue in full force and
effect for the benefit of the Issuer in accordance with the terms
thereof.
ARTICLE FOUR - COVENANTS
------------------------
4.1 Intentionally Deleted.
---------------------
4.2 Covenants of Purchaser
----------------------
(a) At the Time of Closing, the Purchaser will deliver an agreement
whereby the Purchaser agrees to be bound by the terms and conditions
of the USA and the Operating Agreement, as required by provisions of
the USA and the Operating Agreement.
(a) Intentionally Deleted
ARTICLE FIVE - GENERAL
----------------------
5.1 Further Assurances
------------------
The Issuer and the Purchaser shall from time to time execute and deliver all
such further documents and instruments and do all acts and things as the other
party may, after the date hereof, reasonably require to effectively carry out or
better evidence or perfect the full intent and meaning of this Agreement.
5.2 Benefit of the Agreement
------------------------
This Agreement shall enure to the benefit of and be binding upon the respective
administrators, successors and permitted assigns of the parties hereto.
5.3 Entire Agreement
----------------
This Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and cancels and supersedes any prior
understandings and agreements between the parties hereto with respect thereto.
There are no representations, warranties, terms, conditions, undertakings or
collateral agreements, express, implied or statutory, between the parties other
than as expressly set forth in this Agreement.
17
5.4 Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the laws of
the Province of New Brunswick and the laws of Canada applicable therein.
18
IN WITNESS WHEREOF the parties have executed this Agreement as of the date first
hereinabove written.
IMAGICTV INC.
Per: _______________________________
Authorized Signatory c/s
Per: _______________________________
Authorized Signatory
CISCO SYSTEMS, INC.
Per: _______________________________
Authorized Signatory c/s
Per: _______________________________
Authorized Signatory
19
Index of Schedules
Schedule A Exceptions to representations and warranties
Schedule B Schedule I to ImagicTV's amended articles of incorporation filed
on June 30, 1998, relating to the rights, privileges,
restrictions and conditions of the common shares
Schedule C Shareholder and optionholder list
Schedule D [Intentionally deleted]
Schedule E List of licenses and other material agreements
Schedule F [Intentionally deleted]
Schedule G List of employee indebtedness
Schedule H Third party software / programs
Schedule I List of ImagicTV's intellectual property and software
Schedule J [Intentionally deleted]
Schedule K [Intentionally deleted]
Schedule L Form of Unanimous Shareholders Agreement
Schedule M Form of Operating Agreement
20
ImagicTV Inc.
Xxx Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxx, Xxx Xxxxxxxxx X0X 0X0
Xxxxxx
October 4, 2000
as of September 29, 2000
Cisco Systems, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Re: Share Subscription Agreement
Ladies and Gentlemen:
Reference is hereby made to the Share Subscription Agreement (the
"Agreement"), made as of September 29, 2000, between ImagicTV, Inc. and Cisco
Systems, Inc. All terms used herein shall have the meaning attributed to them in
the Agreement.
It is hereby agreed that the Agreement shall be amended as follows:
1. Section 3.1 is amended to add the following representation and
warranty by the Issuer as subsection (b) thereof:
(b) The offer, sale and issuance to the Purchaser of the Purchased
Common Shares is exempt from the registration requirement of
Section 5 of the Securities Act of 1933, as amended.
2. Section 3.3(e) is amended to add the following sentence:
In determining the amount of the securities owned by the Purchaser and
in which the Purchaser has invested on a discretionary basis,
securities have been valued at cost in accordance with Rule 144A.
3. Subpart (B) of Section 3.3(h) is amended to read:
(B) a wholly owned subsidiary of the Purchaser in a transaction (i) in
which the subsidiary takes subject to the same representations and
warranties set forth in this Section 3.3 and (ii) which the Purchaser
confirms in writing to the Issuer, within a reasonable time following
the transfer, that such transfer is exempt from the registration
requirements of the Act,
The parties hereto hereby acknowledge and confirm that the Agreement, as amended
hereby, is, and shall continue to be, in full force and effect.
If the foregoing is acceptable to you, please indicate your acceptance in the
space indicated below.
21
Very truly yours,
IMAGICTV INC.
By:__________________________________
Name:________________________________
Title:_______________________________
AGREED AND ACCEPTED:
CISCO SYSTEMS, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
22
September 29, 2000
Cisco Systems, Inc.
c/o Messrs. Xxxxxxx Phleger & Xxxxxxxx
0 Xxxxxxxxxxx Xxxxx
0000 Xxxx Xxxx
Xxxx Xxxx XX 00000
Re: Board Observation Rights and Right of First Negotiation
Ladies and Gentlemen:
This letter will confirm our agreement that pursuant to the purchase 937,500
Class A Common Voting Shares of ImagicTV Inc. (the "Company") by Cisco Systems,
Inc. ("Cisco"), Cisco will have the following contractual board observation
rights and the rights of first negotiation:
Board Observation Rights
------------------------
Cisco and its affiliates shall have the right to appoint one representative
to attend all meetings of the Board of Directors of the Company in a nonvoting
observer capacity. Such representative shall initially be Xxxx Xxxxxxxx or a
substitute designated by Cisco. The Company shall provide to Cisco copies of all
notices, minutes, consents, and other material that it provides to its
directors; provided, however, that the Company reserves the right to exclude
such representative from access to any material or meeting or portion thereof if
a majority of the members of the Board of Directors believes in good faith that
access to such information or attendance at such meeting or portion thereof
would result in disclosure of highly confidential proprietary information on
matters in which there is a substantial likelihood that Cisco or its
representative may have a conflict of interest with the Company, or is necessary
for other similar reasons. Such representative may participate in discussions of
matters brought to the Board of Directors. Cisco agrees to hold in confidence
and trust and not use or disclose any confidential information provided
to or learned by it in connection with its rights hereunder. Any representative
of Cisco shall enter into a confidentiality agreement with the Company on a form
to be provided by the Company and reasonably acceptable to Cisco.
Right of First Negotiation
--------------------------
In the event that the Board of Directors of the Company (i) receives from
one of the persons or entities listed in Schedule A hereto (a "Potential
Acquiror"), a bona fide offer to be acquired by means of (x) a merger,
consolidation or other business combination pursuant to which the stockholders
of the Company immediately prior to the effective date of such transaction have
beneficial ownership of less than fifty percent (50%) of the total combined
voting power for election of directors of the surviving corporation immediately
following such transaction, or (y) the sale of all or substantially all of the
assets of the Company, or (ii) votes to initiate a sale to a Potential Acquiror
of (xx) securities, where, as a result of the sale, such person or entity will
have beneficial ownership of twenty-five percent (25%) or more of the total
voting power of the Company, or (yy) all or substantially all of the Company's
assets, prior to accepting such acquisition proposal or initiating such sale,
the Company shall provide to Cisco written notice within 24 hours (the "Notice")
of the proposed terms of such acquisition proposal or sale. The Notice shall
include the specific terms (other than the identity of the party or information
that may reveal the identity of the party) of the acquisition proposal or the
initiation of a sale of the Company. Further, the Company shall provide a
written summary of the material terms thereof, as well as access to (and copies
of, if requested) all documents containing nonpublic information of the Company
that are or have been supplied to the party making the acquisition proposal.
Cisco shall have ten (10) business days (which time period may be extended
by mutual written agreement) following its receipt of the Notice ("the
Negotiation Period") in which to present an offer to acquire the Company (the
"Offer"). In the event that the Company accepts Cisco's offer, such Offer shall
be subject to the terms and conditions of Section 3.5 of the Operating Agreement
dated as of December 17, 1999 between the Company and its voting shareholders.
If the Company elects to pursue the Offer, then the Company will provide Cisco
written acknowledgment of such election. The parties agree to negotiate in good
faith for a period of ten (10) business days (which may be extended by mutual
written agreement) after Cisco's receipt of the Company's written acknowledgment
to pursue Cisco's Offer, to reach agreement on mutually agreeable terms.
In the event that:
(i) Cisco does not deliver an Offer to the Company within ten (10)
business days (or other mutually agreed upon time period, as set forth above),
after its receipt of the Notice;
(ii) the Company elects not to accept Cisco's Offer; or
(iii) within the ten (10) business days (or other mutually agreed
upon time period, as set forth above) following the Company's acknowledgment of
its desire to pursue the Offer, Cisco and the Company do not mutually agree to
the terms of an agreement for an acquisition of the Company,
then, and only then, the right of first negotiation of Cisco shall expire with
respect to such acquisition proposal or initiation of a sale and the Company
shall be free thereafter to enter into a definitive agreement with a Potential
Acquiror for an acquisition or sale of the Company.
Cisco agrees, and any representative of Cisco will agree, to hold in
confidence and trust and not use or disclose any confidential information
provided to or learned by it in connection with its rights hereunder
The Right of First Negotiation described herein shall terminate and be of no
further force or effect, with respect to any person or entity (i) other than
with respect to a Potential Acquiror, upon the consummation of the Company's
first firm commitment underwritten public offering of its common shares
registered under the Securities Act of 1933, (ii) in the event that Cisco or an
affiliate of Cisco shall own less than fifty percent (50%) of the Class A Voting
Shares (as adjusted for any stock dividends, combinations, splits or
recapitalizations) purchased by Cisco pursuant to the Subscription Agreement
dated September 29, 2000 by and between the Company and Cisco or (iii) upon the
date of the closing of the acquisition of all or substantially all of the assets
of the Company or an acquisition of the Company by another corporation or entity
by consolidation, merger or other reorganization in which the holders of the
Company's outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) of the voting power of the corporation or other entity surviving
such transaction, provided that this provision shall not apply to a merger
effected exclusively for the purpose of changing the domicile of the Company.
The confidentiality provisions hereof will survive any such termination.
Very truly yours,
Imagictv INC.
By:_______________________________
Name:_____________________________
Title:____________________________
AGREED AND ACCEPTED THIS 29th DAY OF SEPTEMBER, 2000
Cisco Systems, Inc.
By:_________________________
Name:_______________________
Title:______________________
Index of Schedules
Schedule A List of Persons or Entities
