UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 23, 2023

 

INPIXON

(Exact name of registrant as specified in its charter)

 

Nevada   001-36404   88-0434915
(State or other jurisdiction
of incorporation)
  (Commission File Number)   (I.R.S. Employer
Identification No.)

 

2479 E. Bayshore Road, Suite 195

Palo Alto, CA

  94303
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (408) 702-2167

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered
Common Stock   INPX   The Nasdaq Stock Market LLC

 

 

 

 

 

 

Item 1.01 Entry Into a Material Agreement.

  

As previously reported, on July 24, 2023, Inpixon entered into an Agreement and Plan of Merger with XTI Aircraft Company (the “XTI Merger Agreement”). As a condition to closing the transactions contemplated by the XTI Merger Agreement (the “Proposed XTI Transaction”), Inpixon is required to complete the divestiture of its Shoom, SAVES and Game Your Game lines of business and investment securities, as applicable, by any lawful means, including a sale to one or more third parties, spin off, plan of arrangement, merger, reorganization, or any combination of the foregoing (the “Solutions Divestiture”). The Distribution (as defined below), if completed, would constitute part of the Solutions Divestiture.

 

On October 23, 2023, Inpixon entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Grafiti Holding Inc., a British Columbia corporation and newly formed wholly-owned subsidiary of Inpixon (“Grafiti”), pursuant to which Inpixon plans to transfer to Grafiti all of the outstanding shares of Inpixon Ltd., a United Kingdom (the “UK”) limited company that operates Inpixon’s SAVES line of business in the UK (“Inpixon UK”), such that Inpixon UK will become a wholly-owned subsidiary of Grafiti (the “Reorganization”). Following the Reorganization and subject to conditions in the Separation Agreement, Inpixon will spin off Grafiti (the “Spin-off”) by distributing to Inpixon stockholders and certain securities holders as of a record date to be determined (the “Participating Securityholders”) on a pro rata basis all of the outstanding common shares of Grafiti (the “Grafiti Common Shares”) owned by Inpixon (the “Distribution”), subject to certain lock-up restrictions and subject to registration of the Grafiti Common Shares pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the Securities Act of 1933, as amended (the “Securities Act”), as further described below.

 

On October 23, 2023, Inpixon entered into a Business Combination Agreement (the “Business Combination Agreement”), by and among Inpixon, Damon Motors Inc., a British Columbia corporation (“Damon”), Grafiti, and 1444842 B.C. Ltd., a British Columbia corporation and a newly formed wholly-owned subsidiary of Grafiti (“Amalco Sub”), pursuant to which it is proposed that Amalco Sub and Damon amalgamate under the laws of British Columbia, Canada with the amalgamated company (the “Damon Surviving Corporation”) continuing as a wholly-owned subsidiary of Grafiti (the “Business Combination”). The Business Combination is subject to material conditions, including approval of the Business Combination by securities holders of Damon, approval of the issuance of Grafiti Common Shares to Damon securities holders pursuant to the Business Combination Agreement by a British Columbia court after a hearing upon the fairness of the terms and conditions of the Business Combination Agreement as required by the exemption from registration provided by Section 3(a)(10) under the Securities Act, and approval of the listing of the Grafiti Common Shares on the Nasdaq Stock Market (“Nasdaq”) after giving effect to the Business Combination. Upon the consummation of the Business Combination (the “Closing”), both Inpixon UK and the Damon Surviving Corporation will be wholly-owned subsidiaries of Grafiti, which will adopt a new name as determined by Damon. Grafiti, after the Closing, is referred to herein as the “combined company.” Pursuant to the Business Combination Agreement, the parties will take all necessary action so that at the Closing, the board of directors of the combined company will consist of such directors as Damon may determine, subject to the independent requirements under the Nasdaq rules, and provided that at least one director will be nominated by Grafiti.

 

Holders of Grafiti Common Shares, including Participating Securityholders and management that hold Grafiti Common Shares immediately prior to the closing of the Business Combination, are anticipated to retain approximately 18.75% of the outstanding capital stock of the combined company determined on a fully diluted basis, which includes up to 5% in equity incentives which may be issued to Inpixon management.

 

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Inpixon expects that there will be no public trading market for the Grafiti Common Shares unless the Business Combination is consummated.

 

Transaction Documents

 

Separation Agreement

 

On October 23, 2023, Inpixon entered into the Separation Agreement with Grafiti, pursuant to which, among other things, Inpixon plans to complete the Reorganization, following which, subject to conditions in the Separation Agreement, Inpixon plans to spin off Grafiti by distributing to Inpixon Participating Securityholders on a pro rata basis all of the outstanding Grafiti Common Shares owned by Inpixon, subject to certain lock-up restrictions and subject to registration of the Grafiti Common Shares pursuant to the Exchange Act or the Securities Act.

  

The Separation Agreement also sets forth other agreements among Inpixon and Grafiti related to the Spin-off, including provisions concerning the termination of certain intercompany agreements and settlement of intercompany accounts. Grafiti will also enter into an assignment and assumption agreement and a transition services agreement with Inpixon prior to completion of the Spin-off to facilitate the separation of the Grafiti business and the operation of Grafiti and Inpixon as independent public companies.

 

Consummation of the Spin-off is subject to customary conditions, including the following material conditions, (i) the transfer of Inpixon UK and related liabilities to Grafiti in accordance with the Separation Agreement will have been completed, and (ii) the Grafiti Common Shares shall have been registered under the Exchange Act or the Securities Act in connection with the Distribution.

 

The foregoing description of the Separation Agreement is not complete and is qualified in its entirety by reference to the Separation Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K (this “Current Report”) and incorporated herein by reference.

 

Business Combination Agreement

 

Structure and Consideration

 

In accordance with a plan of arrangement under the Business Corporations Act (British Columbia), at the effective time of the Business Combination (the “Effective Time”):

 

(i) Each convertible note of Damon (“Damon Notes”) issued and outstanding immediately prior to the Effective Time shall be automatically converted into such number of common shares of Damon (“Damon Common Shares”) such that following the exchange of such Damon Common Shares by applying the Exchange Ratio (as described below) in accordance with the Business Combination Agreement, the holders of the Damon Notes will receive such number of Grafiti Common Shares that they are entitled to receive upon a Public Company Event (as such term is defined in the Damon Notes).

 

(ii) Each simple agreement for future equity of Damon (“Damon SAFE”) issued and outstanding immediately prior to the Effective Time shall be automatically converted into such number of Damon Common Shares such that following the exchange of such Damon Common Shares by applying the Exchange Ratio in accordance with the Business Combination Agreement, the holders of Damon SAFEs will each receive such number of Grafiti Common Shares that they are entitled to receive in accordance with the terms of the Damon SAFEs.

 

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(iii) Each share of Class A Series 1 preferred shares, Class A Series 2 preferred shares, Class B preferred shares, seed preferred shares of Damon and any other class or series of Damon preferred shares (collectively, the “Damon Preferred Shares”) issued and outstanding immediately prior to the Effective Time (other than Damon Preferred Shares held by dissenting holders) shall be automatically converted into such number of Damon Common Shares as set out on a schedule to be attached to the plan of arrangement.

 

(iv) All Damon Common Shares issued and outstanding immediately prior to the Effective Time, inclusive of all Damon Common Shares issued pursuant to the foregoing paragraphs (i), (ii) and (iii) (other than Damon Common Shares and Damon Preferred Shares (collectively, “Damon Shares”) held by dissenting holders) will be transferred and assigned to Grafiti in consideration for a number of Grafiti Common Shares determined by multiplying such number of Damon Common Shares by the Exchange Ratio.

 

(v) Each option (whether vested or unvested) to purchase Damon  Shares (“Damon Options”) issued and outstanding immediately prior to the Effective Time will be exchanged for an option (a “Converted Option”) (i) to acquire, subject to substantially the same terms and conditions as were applicable to the Damon Options, a number of Grafiti Common Shares (rounded down to the nearest whole share) equal to the product of (A) the number of Damon Common Shares underlying such Damon Option, multiplied by the Exchange Ratio, (ii) at an exercise price per share (rounded up to the nearest whole cent) equal to (a) the exercise price per share of such Damon Option immediately prior to the Effective Time divided by (B) the Exchange Ratio.

 

(vi) Each warrant to purchase Damon Shares (“Damon Warrant”) issued and outstanding immediately prior to the Effective Time, will be exchanged for a warrant (a “Converted Warrant”) (i) to acquire, subject to substantially the same terms and conditions as were applicable under such Damon Warrant, a number of Grafiti Common Shares (rounded down to the nearest whole share) equal to the product of (A) the number of Damon Common Shares underlying such Damon Warrant, multiplied by (B) the Exchange Ratio, (ii) at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Damon Warrant immediately prior to the Effective Time divided by (B) the Exchange Ratio.

 

(vii) Each share of Amalco Sub issued and outstanding immediately prior to the Effective Time will be exchanged into and become one newly issued, fully paid and nonassessable share of the corporate entity resulting from the amalgamation (“Damon Surviving Company”).

 

(viii) As consideration for the issuance by Grafiti of Grafiti Common Shares described in paragraph (iv), Damon Surviving Company shall issue to Grafiti one common share in its capital for each share of Grafiti Common Shares issued pursuant to the transactions described in paragraph (iv).

 

The Exchange Ratio is defined in the Business Combination Agreement as the quotient of (A) the difference of (i) the quotient of the fully diluted shares of Grafiti immediately prior to the Closing divided by 18.75% minus (ii) the fully diluted shares of Grafiti immediately prior to the Closing; divided by (B) the fully diluted shares of Damon immediately prior to the Closing.

 

Representations and Warranties & Covenants

 

Pursuant to the Business Combination Agreement, Damon, Grafiti, Amalco Sub and Inpixon each made representations and warranties, which will not survive the Effective Date.

 

In addition, the parties to the Business Combination Agreement agreed to be bound by certain covenants including, among others, that (i) Grafiti shall promptly prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement (the “Registration Statement”) to register the Grafiti Common Shares to be distributed in the Distribution, (ii) within 30 days after the execution date of the Business Combination Agreement, Damon shall obtain executed support agreements from a sufficient number of Damon securityholders to approve the Business Combination and obtain executed lock-up agreements from Damon securityholders holding at least 95% of Damon’s fully diluted shares, excluding holders of Company notes issued in the June 2023 Note Offering (as defined in the Business Combination Agreement), (iii) Grafiti shall apply substantially the same lock-up terms to Grafiti Common Shares issued in the Distribution as those contained in the Lock-up Agreements by incorporating such terms in its organization documents or through another mechanism, (iv) Damon shall hold a meeting of Damon securities holders to vote on the matters necessary for the Business Combination under a court-supervised plan of arrangement, (v) the parties shall work together to establish the terms for an equity incentive plan at Grafiti prior to filing the Registration Statement, and (vi) to establish the terms of consulting agreements with certain Grafiti management members who will provide transition services to the combined company.

 

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The covenants made under the Business Combination Agreement generally will not survive the Closing, with the exception of certain covenants and agreements that by their terms are to be performed in whole or in part after the Closing, which will survive in accordance with the terms of the Business Combination Agreement.

 

Conditions to Closing

 

The consummation of the Business Combination is subject to customary conditions, including the following material conditions: (i) the approval of the Business Combination by the Damon securityholders shall have been obtained, (ii) the Registration Statement shall have become effective under the Securities Act or the Exchange Act, (iii)  the Grafiti Common Shares to be issued pursuant to the Business Combination shall have been approved for listing on the Nasdaq Stock Market after giving effect to the Business Combination, (iv)  the interim and final orders issued by the Supreme Court of British Columbia approving the Business Combination shall have been obtained on terms consistent with the Business Combination Agreement, (v) the parties shall have obtained all the consents and approvals as may be necessary or required to consummate the Business Combination pursuant to the Competition Act (Canada) and the Investment Canada Act, (vi) Grafiti shall have received a receipt from the British Columbia Securities Commission in respect of the final non-offering prospectus, and (vii) dissent rights shall not have been exercised with respect to more than 5% of the issued and outstanding Damon Shares.

 

Damon’s obligation to consummate the Business Combination is also conditioned on the Spin-off being completed in accordance with certain terms required in the Business Combination Agreement.

 

Termination

 

The Business Combination Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including (i) by the mutual written consent of Inpixon and Damon, (ii) by Inpixon or Damon, if the Closing shall not have occurred on or before March 31, 2024, which may be extended by either party for 30 days, and thereafter by both parties for an additional 30 days, (iii) by Inpixon or Damon, if there has been any order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any governmental authority that would make the Business Combination illegal or otherwise prohibits or enjoins the Business Combination, (iv) by Inpixon or Damon, if Damon has not obtained the requisite approval from its securities holders, or (v) by Inpixon or Damon, if the other breaches certain representations, warranties, or covenants, as specified in the Business Combination Agreement, or if the other experiences a material adverse effect and that breach or material adverse effect is unable to be cured, or is not cured, within 20 days; provided that Grafiti or Damon shall pay the other side all reasonable and documented transaction expenses of the other side up to $1 million if the Business Combination Agreement is terminated pursuant to (v) above, and Damon shall pay Inpixon a termination fee of $2 million if the Business Combination Agreement is terminated pursuant to (ii), (iv) and (v) above.

 

The foregoing description of the Business Combination Agreement is not complete and is qualified in its entirety by reference to the Business Combination Agreement, which is filed as Exhibit 2.2 to this Current Report, and incorporated herein by reference.

 

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Bridge Note

 

Immediately following the execution of the Business Combination Agreement and no later than October 27, 2023, Inpixon will purchase a convertible note from Damon in an aggregate principal amount of $3 million (the “Bridge Note”) together with the Bridge Note Warrant (as defined below) pursuant to a private placement, for a purchase price of $3 million. The Bridge Note has a 12% annual interest rate, payable on the maturity date, which is twelve months from June 16, 2023. The full principal balance and interest on the Bridge Note will automatically convert into common shares of Damon upon the public listing of Damon or a successor issuer thereof on a national securities exchange (a “Public Company Event”). The number of shares issued upon conversion due to a Public Company Event will equal the quotient obtained by dividing (x) the outstanding principal and unpaid accrued interest on the date of a Public Company Event (or within ten trading days of a direct listing), if any, by (y) the lesser of the then applicable Conversion Price or Public Company Event Conversion Price, each as defined in the Bridge Note. The Bridge Note will contain customary covenants relating to Damon’s financials and operations.

 

Inpixon will receive a five-year warrant to purchase 1,096,321 Damon Common Shares in connection with the Bridge Note (“Bridge Note Warrant”) at an exercise price as defined in the Bridge Note Warrant, in each case subject to adjustments for dividends, splits and subsequent equity sales by Damon. The Bridge Note Warrant contains a cashless exercise option if the warrant shares are not covered by an effective registration statement within 180 days following the consummation of the Public Company Event, and also a full ratchet price protection feature.

 

If the Business Combination is consummated, the Bridge Note will be converted into Grafiti Common Shares upon consummation of the Business Combination and the Bridge Note Warrant will become exercisable for Grafiti Common Shares.

 

The foregoing descriptions are not complete and are qualified in their entirety by reference to the Securities Purchase Agreement, the Bridge Note and the Bridge Note Warrant, as applicable, which are filed as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report and incorporated herein by reference.

 

Certain Other Transaction Documents

 

Certain additional agreements will be entered into in connection with the transactions contemplated by the Business Combination Agreement, the Separation Agreement and the other agreements described above, including, among others:

   

  a Transition Services Agreement by and between Inpixon and Grafiti, pursuant to which each party will, on a transitional basis, provide the other party with certain support services and other assistance after the Closing.
     
  Lock-Up Agreements by and between Grafiti, Damon and Damon securityholders who are insiders (each, a “Damon Insider Lock-up Agreement”), under which such Damon securityholders will agree to certain lock-up restrictions with respect to any Grafiti securities they acquire pursuant to the Business Combination Agreement for 180 days following the Closing.
     
  Lock-Up Agreements by and between Grafiti, Damon and Damon securityholders who are not insiders (each, a “Damon Lock-up Agreement”), under which such Damon securityholders will agree to certain lock-up restrictions with respect to any Grafiti securities they acquire pursuant to the Business Combination Agreement for 180 days following the Closing, subject to the following release schedule: 20% at the Closing, 40% at 90 days following the Closing, and the remaining 40% at 180 days following the Closing; or 100% if the trading price of the common shares of the combined company reaches a certain threshold.

 

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  Securityholder Support Agreements by and among Inpixon, Grafiti, Damon and certain Damon securityholders (each, a “Support Agreement”), under which such Damon securityholders will agree, among other things, (i) approve the plan of arrangement and other transactions contemplated in the Business Combination Agreement, (ii) attend and ensure the presence of their voting securities at meetings or consent actions to establish a quorum, (iii) vote in favor of the plan of arrangement, adoption of the Business Combination Agreement, and any other matters required for the completion of the transactions, and (iv) vote against any proposals or actions that could impede, delay, or negatively affect the plan of arrangement and other transactions in the Business Combination Agreement, or breach any terms of the Business Combination Agreement.   

 

The Separation Agreement, the Business Combination Agreement, the form of the Support Agreement, the form of the Damon Insider Lock-up Agreement, the form of the Damon Lock-up Agreement, the Securities Purchase Agreement, the Bridge Note and the form of the Bridge Note Warrant have each been filed as exhibits to this Current Report, and the above descriptions have been included to provide investors and security holders with information regarding the terms of such agreements. They are not intended to provide any other factual information about Damon, Grafiti, Amalco Sub, Inpixon, any of their respective subsidiaries or affiliates. The Business Combination Agreement contains representations and warranties that Inpixon, Grafiti, and/or Amalco Sub, on the one hand, and Damon, on the other hand, have made to each other as of specific dates and/or times. The assertions embodied in those representations and warranties were made solely for purposes of the contract between the parties to the Business Combination Agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating the terms of the agreement. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a contractual standard of materiality different from those generally applicable to stockholders, or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts. For the foregoing reasons, such representations and warranties should not be relied upon as statements of factual information. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Business Combination Agreement, which subsequent information may or may not be fully reflected in public disclosures.

 

Item 7.01 Regulation FD Disclosure.

 

On October 23, 2023, Inpixon issued a press release (the “Press Release”) announcing the entry into the Separation Agreement and the Business Combination Agreement. The Press Release is attached to this Current Report as Exhibit 99.1 and incorporated by reference herein.

 

The information furnished with this Item 7.01 of this Current Report on Form 8-K and Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act, or the Exchange Act.

 

Item 8.01 Other Events.

 

On October 23, 2023, Inpixon announced in the Press Release that its board of directors had set October 24, 2023 as the record date for the stockholders entitled to vote at the special meeting in lieu of the 2023 annual meeting of stockholders of Inpixon related to the Proposed XTI Transaction.

 

Important Information about the Proposed Transaction and Where to Find It

 

In connection with the Spin-off, Grafiti will file with the SEC a registration statement registering Grafiti Common Shares. Grafiti will also file a preliminary and final non-offering prospectus with the British Columbia Securities Commission in connection with the Business Combination. This Current Report does not contain all the information that should be considered concerning the Spin-off and the Business Combination (collectively, the “Proposed Transaction”) and is not a substitute for any other documents that Inpixon or Grafiti may file with the SEC, or that Damon may send to securities holders in connection with the Business Combination. It is not intended to form the basis of any investment decision or any other decision in respect to the Proposed Transaction. Damon’s stockholders and Inpixon’s stockholders and other interested persons are advised to read, when available, the registration statement of Grafiti together with its exhibits, as these materials will contain important information about Inpixon, Grafiti, Damon, and the Proposed Transaction.

 

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The registration statement and other documents to be filed by Grafiti with the SEC will also be available free of charge, at the SEC’s website at www.sec.gov, or by directing a request to: Grafiti Holding Inc., 2479 E. Bayshore Road, Suite 195, Palo Alto, CA 94303.

 

Forward-Looking Statements Regarding the Proposed Transaction

 

This Current Report, along with the exhibits attached hereto, contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. All statements other than statements of historical fact contained in this Current Report, including statements regarding the benefits of the Proposed Transaction, the anticipated timing of the completion of the Proposed Transaction, the products under development by Damon and the markets in which it plans to operate, the advantages of Damon’s technology, Damon’s competitive landscape and positioning, and Damon’s growth plans and strategies, are forward-looking statements. Some of these forward-looking statements can be identified by the use of forward-looking words, including “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “plan,” “targets,” “projects,” “could,” “would,” “continue,” “forecast” or the negatives of these terms or variations of them or similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements are based upon estimates, forecasts and assumptions that, while considered reasonable by Inpixon and its management, and Damon and its management, as the case may be, are inherently uncertain and many factors may cause the actual results to differ materially from current expectations which include, but are not limited to:

 

the risk that the Proposed Transaction may not be completed in a timely manner or at all, which may adversely affect the price of Inpixon’s securities;
   
 

the risk that the public market valuation of the combined company following the consummation of the Business Combination may differ from the valuation range ascertained by the parties to the Business Combination and their respective financial advisors, and that the valuation to be ascertained by an independent financial advisor to Damon in connection with the Business Combination may differ from the valuation ascertained by Inpixon’s independent financial advisor;

 

  the failure to satisfy the conditions to the consummation of the Proposed Transaction, including receiving the necessary approvals from the Damon securityholders and the Supreme Court of British Columbia, Canada with respect to the plan of arrangement;

 

the occurrence of any event, change or other circumstance that could give rise to the termination of the Proposed Transaction;

 

the effect of the announcement or pendency of the Proposed Transaction on Inpixon, Grafiti and Damon’s business relationships, performance, and business generally;

 

risks that the Proposed Transaction disrupts current plans of Inpixon, Grafiti and Damon and potential difficulties in their employee retention as a result of the Proposed Transaction;

 

the outcome of any legal proceedings that may be instituted against Damon, Grafiti or Inpixon related to the Proposed Transaction;

 

failure to realize the anticipated benefits of the Proposed Transaction;

 

the inability to satisfy the initial listing criteria of Nasdaq or obtain Nasdaq approval of the initial listing of the combined company on Nasdaq;

 

the risk that the price of the securities of the combined company may be volatile due to a variety of factors, including changes in the highly competitive industries in which Grafiti and Damon operate, variations in performance across competitors, changes in laws, regulations, technologies that may impose additional costs and compliance burdens on Grafiti and Damon’s operations, global supply chain disruptions and shortages, and macro-economic and social environments affecting Grafiti and Damon’s business and changes in the combined capital structure;

 

the inability to implement business plans, forecasts, and other expectations after the completion of the Proposed Transaction, and identify and realize additional opportunities;

 

the risk that Damon has a limited operating history, has not achieved sufficient sales and production capacity at a mass-production facility, and Damon and its current and future collaborators may be unable to successfully develop and market Damon’s motorcycles or solutions, or may experience significant delays in doing so;

 

the risk that the combined company may never achieve or sustain profitability;

 

the risk that Damon and the combined company may be unable to raise additional capital on acceptable terms to finance its operations and remain a going concern;

 

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the risk that the combined company experiences difficulties in managing its growth and expanding operations;

 

  the risk that Damon’s non-binding reservations are canceled, modified, delayed or not placed and that Damon must return the refundable deposits and such reservations are not converted to sales;

 

the risks relating to Damon’s ability to satisfy the conditions and deliver on the orders and reservations, its ability to maintain quality control of its motorcycles, and Damon’s dependence on third parties for supplying components and manufacturing the motorcycles;

 

the risk that other motorcycle manufacturers develop competitive electric motorcycles or other competitive motorcycles that adversely affect Damon’s market position;

 

the risk that Damon’s patent applications may not be approved or may take longer than expected, and Damon may incur substantial costs in enforcing and protecting its intellectual property;

 

  the risk that Damon’s estimates of market demand may be inaccurate; and

 

  other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in Inpixon’s Annual Report on Form 10-K for the year ended December, 31, 2022, which was filed with the SEC on April 17, 2023 and Quarterly Report on Form 10-Q for the quarterly period thereafter, as such factors may be updated from time to time in Inpixon’s filings with the SEC, and the registration statement to be filed by Grafiti in connection with the Spin-off. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements.

 

Nothing in this Current Report should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Neither Inpixon nor Damon gives any assurance that either Inpixon or Damon or the combined company will achieve its expected results. Neither Inpixon nor Damon undertakes any duty to update these forward-looking statements, except as otherwise required by law.

 

Important Information About the Proposed XTI Transaction and Where to Find It

 

This Current Report and its exhibits, in part, relate to a proposed transaction between XTI Aircraft Company (“XTI”) and Inpixon pursuant to an agreement and plan of merger, dated as of July 24, 2023, by and among Inpixon, Superfly Merger Sub Inc. and XTI (the “Proposed XTI Transaction”). Inpixon filed a registration statement on Form S-4 with the SEC on August 14, 2023, as amended by Amendment No. 1 filed on October 6, 2023, which included a preliminary prospectus and proxy statement of Inpixon in connection with the Proposed XTI Transaction, referred to as a proxy statement/prospectus. The registration statement on Form S-4 has not yet become effective. A proxy statement/prospectus will be sent to all Inpixon stockholders as of the applicable record date established for voting on the transaction and to the stockholders of XTI. Inpixon also will file other documents regarding the Proposed XTI Transaction with the SEC.

 

Before making any voting decision, investors and security holders are urged to read the registration statement, the proxy statement/prospectus, any amendments thereto, and all other relevant documents filed or that will be filed with the SEC in connection with the Proposed XTI Transaction as they become available because they will contain important information about Inpixon, XTI and the Proposed XTI Transaction.

 

Investors and securityholders will be able to obtain free copies of the registration statement, the proxy statement/prospectus and all other relevant documents filed or that will be filed with the SEC by Inpixon through the website maintained by the SEC at www.sec.gov.

 

The documents filed by Inpixon with the SEC also may be obtained free of charge at Inpixon’s website at www.inpixon.com or upon written request to: Inpixon, 2479 E. Bayshore Road, Suite 195, Palo Alto, CA 94303.

 

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NEITHER THE SEC NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS COMMUNICATION, PASSED UPON THE MERITS OR FAIRNESS OF THE TRANSACTION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS COMMUNICATION. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

 

Forward-Looking Statements about the Proposed XTI Transaction

 

This Current Report, along with the exhibits attached hereto, contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact contained in this Current Report, including statements regarding the benefits of the Proposed XTI Transaction and the anticipated timing of the completion of the Proposed XTI Transaction, are forward-looking statements.

 

Some of these forward-looking statements can be identified by the use of forward-looking words, including “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “plan,” “targets,” “projects,” “could,” “would,” “continue,” “forecast” or the negatives of these terms or variations of them or similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements are based upon estimates, forecasts and assumptions that, while considered reasonable by Inpixon and its management, and XTI and its management, as the case may be, are inherently uncertain and many factors may cause the actual results to differ materially from current expectations which include, but are not limited to:

 

  the risk that the Proposed XTI Transaction may not be completed in a timely manner or at all, which may adversely affect the price of Inpixon’s securities;

 

  the failure to satisfy the conditions to the consummation of the Proposed XTI Transaction, including the adoption of the merger agreement by the shareholders of Inpixon;

 

  the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement;

 

  the adjustments permitted under the merger agreement to the exchange ratio that could result in XTI shareholders or Inpixon shareholders owning less of the post-combination company than expected;

 

  the effect of the announcement or pendency of the Proposed XTI Transaction on Inpixon’s and XTI’s business relationships, performance, and business generally;

 

  the risks that the Proposed XTI Transaction disrupts current plans of Inpixon and XTI and potential difficulties in Inpixon’s and XTI’s employee retention as a result of the Proposed XTI Transaction;

 

 

the outcome of any legal proceedings instituted against XTI or against Inpixon related to the merger agreement or the Proposed XTI Transaction;

 

  failure to realize the anticipated benefits of the Proposed XTI Transaction;

 

  the inability to meet and maintain the listing of Inpixon’s securities (or the securities of the post-combination company) on Nasdaq;

 

  the risk that the price of Inpixon’s securities (or the securities of the post-combination company) may be volatile due to a variety of factors, including changes in the highly competitive industries in which Inpixon and XTI operate,

 

  the inability to implement business plans, forecasts, and other expectations after the completion of the Proposed XTI Transaction, and identify and realize additional opportunities;

 

9

 

 

  variations in performance across competitors, changes in laws, regulations, technologies that may impose additional costs and compliance burdens on Inpixon and XTI’s operations, global supply chain disruptions and shortages,

 

  national security tensions, and macro-economic and social environments affecting Inpixon and XTI’s business and changes in the combined capital structure;

 

  the risk that XTI has a limited operating history, has not yet manufactured any non-prototype aircraft or delivered any aircraft to a customer, and XTI and its current and future collaborators may be unable to successfully develop and market XTI’s aircraft or solutions, or may experience significant delays in doing so;

 

  the risk that XTI is subject to the uncertainties associated with the regulatory approvals of its aircraft including the certification by the Federal Aviation Administration, which is a lengthy and costly process;

 

  the risk that the post-combination company may never achieve or sustain profitability;

 

  the risk that XTI, Inpixon and the post-combination company may be unable to raise additional capital on acceptable terms to finance its operations and remain a going concern;

 

  the risk that the post-combination company experiences difficulties in managing its growth and expanding operations;

 

  the risk that XTI’s conditional pre-orders (which include conditional aircraft purchase agreements, non-binding reservations, and options) are canceled, modified, delayed or not placed and that XTI must return the refundable deposits;

 

  the risks relating to long development and sales cycles, XTI’s ability to satisfy the conditions and deliver on the orders and reservations, its ability to maintain quality control of its aircraft, and XTI’s dependence on third parties for supplying components and potentially manufacturing the aircraft;

 

  the risk that other aircraft manufacturers develop competitive VTOL aircraft or other competitive aircraft that adversely affect XTI’s market position;

 

  the risk that XTI’s future patent applications may not be approved or may take longer than expected, and XTI may incur substantial costs in enforcing and protecting its intellectual property;

 

  the risk that XTI’s estimates of market demand may be inaccurate;

 

  the risk that XTI’s ability to sell its aircraft may be limited by circumstances beyond its control, such as a shortage of pilots and mechanics who meet the training standards, high maintenance frequencies and costs for the sold aircraft, and any accidents or incidents involving VTOL aircraft that may harm customer confidence; and

 

  other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in Inpixon’s Annual Report on Form 10-K for the year ended December, 31, 2022, which was filed with the SEC on April 17, 2023 (the “2022 Form 10-K”), the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 filed on May 16, 2023, the Current Report on Form 8-K filed on July 25, 2023, the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 filed on August 18, 2023, and in the section entitled “Risk Factors” in XTI’s periodic reports filed pursuant to Regulation A of the Securities Act including XTI’s Annual Report on Form 1-K for the year ended December 31, 2022, which was filed with the SEC on July 13, 2023 (the “2022 Form 1-K”), as such factors may be updated from time to time in Inpixon’s and XTI’s filings with the SEC, the registration statement on Form S-4 and the proxy statement/prospectus contained therein. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements.

 

Nothing in this Current Report on Form 8-K should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Neither Inpixon nor XTI gives any assurance that either Inpixon or XTI or the post-combination company will achieve its expected results. Neither Inpixon nor XTI undertakes any duty to update these forward-looking statements, except as otherwise required by law.

 

10

 

 

Participants in the Solicitation

 

XTI and Inpixon and their respective directors and officers and other members of management may, under SEC rules, be deemed to be participants in the solicitation of proxies from Inpixon’s stockholders with the Proposed XTI Transaction and the other matters set forth in the registration statement. Information about Inpixon’s and XTI’s directors and executive officers is set forth in Inpixon’s filings and XTI’s filings with the SEC, including Inpixon’s 2022 Form 10-K and XTI’s 2022 Form 1-K. Additional information regarding the direct and indirect interests, by security holdings or otherwise, of those persons and other persons who may be deemed participants in the Proposed XTI Transaction may be obtained by reading the proxy statement/prospectus regarding the Proposed XTI Transaction when it becomes available. You may obtain free copies of these documents as described above under “Important Information About the Proposed Transaction and Where to Find It.”

 

No Offer or Solicitation

 

This Current Report on Form 8-K is not a proxy statement or solicitation of a proxy, consent or authorization with respect to any securities or in respect of the proposed transactions and is not intended to and does not constitute an offer to sell or the solicitation of an offer to buy, sell or solicit any securities or any proxy, vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be deemed to be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.

 

Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.   Description
2.1*   Separation Agreement, dated as of October 23, 2023, by and between Inpixon and Grafiti Holding Inc.
     
2.2*   Business Combination Agreement, dated as of October 23, 2023, by and among Inpixon, Grafiti Holding Inc., 1444842 B.C. Ltd. and Damon Motors Inc.
     
10.1   Form of Securities Purchase Agreement by and between Damon Motors Inc. and Inpixon.
     
10.2   Form of Convertible Promissory Note to be issued by Damon Motors Inc. to Inpixon.
     
10.3   Form of Common Share Purchase Warrant to be issued by Damon Motors Inc. to Inpixon.
     
10.4   Form of Securityholder Support Agreement by and among Inpixon, Grafiti Holding Inc., Damon Motors Inc. and certain securityholders.
     
10.5   Form of Lockup Agreement by and among Grafiti Holding Inc., Damon Motors and certain securityholders who are insiders.
     
10.6   Form of Lockup Agreement by and among Grafiti Holding Inc., Damon Motors and certain securityholders who are not insiders.
     
99.1   Press Release dated October 23, 2023.
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

*Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. Inpixon agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.

 

11

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  INPIXON
   
Date: October 23, 2023 By: /s/ Nadir Ali
  Name:  Nadir Ali
  Title: Chief Executive Officer

 

 

12

 

 

Exhibit 2.1

 

Execution Version

 

 

 

 

 

 

 

 

 

SEPARATION AND DISTRIBUTION AGREEMENT

 

BY AND BETWEEN

 

INPIXON

 

AND

 

GRAFITI HOLDING INC.

 

DATED AS OF October 23, 2023

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
ARTICLE I DEFINITIONS 1
   
ARTICLE II THE SEPARATION 1
  11
  2.1 Transfer of Assets and Assumption of Liabilities 13
  2.2 Grafiti Assets; Parent Assets 14
  2.3 Grafiti Liabilities; Parent Liabilities 15
  2.4 Approvals and Notifications 15
  2.5 Assignment and Novation of Liabilities 18
  2.6 Termination of Agreements 19
  2.7 Bank Accounts; Cash Balances 20
  2.8 Ancillary Agreements 21
  2.9 Disclaimer of Representatins and Warranties 21
       
ARTICLE III THE DISTRIBUTION 22
   
  3.1 Sole and Absolute Discretion; Cooperation 22
  3.2 Actions Prior to the Distribution 22
  3.3 Conditions to the Distribution 23
  3.4 The Distribution 24
       
ARTICLE IV MUTUAL RELEASES 25
   
  4.1 Release of Pre-Distribution Claims 25
  4.2 Covenant Not to Sue 27
       

ARTICLE V CERTAIN OTHER MATTERS

28
   
  5.1 Insurance Matters 28
  5.2 Late Payments 30
  5.3 Inducement 30
  5.4 Post-Effective Time Conduct 30
  5.5 Tax Cooperation 30

ARTICLE VI EXCHANGE OF INFORMATION; CONFIDENTIALITY

31
   
  6.1 Agreement for Exchange of Information 31
  6.2 Ownership of Information 32
  6.3 Compensation for Providing Information 32
  6.4 Record Retention 32
  6.5 Limitations of Liability 32
  6.6 Other Agreements Providing for Exchange of Information 32
  6.7 Production of Witnesses; Records; Cooperation 32
  6.8 Privileged Matters 33

 

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TABLE OF CONTENTS

(continued)

 

    Page
  6.9 Confidentiality 35
  6.10 Protective Arrangements 36
  6.11 Security 36
       

ARTICLE VII DISPUTE RESOLUTION

37
 
  7.1 Good Faith Offer Negotiation 37
  7.2 Good-Faith Negotiation 37
  7.3 Arbitration 38
  7.4 Litigation and Unilateral Commencement of Arbitration 39
  7.5 Conduct During Dispute Resolution Process 39
       
ARTICLE VIII FURTHER ASSURANCES AND ADDITIONAL COVENANTS 45 39
   
  8.1 Further Assurances 39
       
ARTICLE IX TERMINATION 40
   
  9.1 Termination 40
  9.2 Effect of Termination 40
       
ARTICLE X MISCELLANEOUS 40
   
  10.1 Counterparts; Entire Agreement; Corporate Power 40
  10.2 Governing Law 41
  10.3 Assignability 41
  10.4 Third-Party Beneficiaries 41
  10.5 Notices 42
  10.6 Severability 42
  10.7 Force Majeure 43
  10.8 No Set-Off 43
  10.9 Expenses 43
  10.10 Headings 43
  10.11 Survival of Covenants 43
  10.12 Waivers of Default 43
  10.13 Specific Performance 44
  10.14 Amendments 44
  10.15 Interpretation 44
  10.16 Limitations of Liability 45
  10.17 Performance 45
  10.18 Mutual Drafting 45

 

ii

 

 

TABLE OF CONTENTS

(continued)

 

SCHEDULES   Page
Schedule 1.2 Other Parent Securities
Schedule 1.3 Grafiti Contracts
Schedule 1.4 Grafiti Real Property (Leases) Schedule 2.2(b)(vi) Parent Assets
Schedule 2.3(a) Grafiti Liabilities
Schedule 2.3(b) Parent Liabilities
Schedule 2.6(b)(ii) Intercompany Agreements (Non-Termination) EXHIBIT
Exhibit A Articles of Grafiti 48

 

iii

 

 

SEPARATION AND DISTRIBUTION AGREEMENT

 

This SEPARATION AND DISTRIBUTION AGREEMENT, dated as of October 23, 2023 (this “Agreement”), is by and between Inpixon, a Nevada corporation (“Parent” or “Inpixon”), and Grafiti Holding Inc., a British Columbia corporation and a wholly-owned subsidiary of Inpixon (“Grafiti”). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I.

 

RECITALS

 

WHEREAS, the board of directors of Parent (the “Parent Board”) has determined that it is in the best interests of Parent and its stockholders to separate the assets and liabilities relating to its SAVES line of business as conducted by Inpixon Ltd., a United Kingdom limited company(the “Grafiti Business”), from the Parent Business (the “Separation”) and, following the Separation, make a distribution on a pro rata basis, to holders on the Record Date of Parent Shares and Other Parent Securities, of all of the outstanding Grafiti Shares owned by Parent (the “Distribution”);

 

WHEREAS, immediately following the Distribution, Parent will hold none of the outstanding Grafiti Shares;

 

WHEREAS, Parent and Grafiti will prepare, and Grafiti will file with the SEC, the Form S-1 or the Form 10, which will set forth information and financial statements required under the Securities Act or the Exchange Act concerning Grafiti, the Separation, the Distribution and such other items required by the Securities Act, Exchange Act, Form S-1 or Form 10 to be included therein;

 

WHEREAS, (i) the Parent Board has (x) determined that the transactions contemplated by this Agreement and the Ancillary Agreements are in the best interests of Inpixon and its stockholders and (y) approved this Agreement and each of the Ancillary Agreements, and (ii) the Board of Directors of Grafiti has approved this Agreement and each of the Ancillary Agreements (to the extent Grafiti is a party thereto);

 

WHEREAS, the Parties desire to set forth the principal corporate transactions required to effect the Separation and the Distribution, and certain other agreements relating to the relationship between the Parties;

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE I DEFINITIONS

 

For the purpose of this Agreement, the following terms shall have the following meanings:

 

“Action” shall mean any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.

 

1

 

 

“Affiliate” shall mean, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including, with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, prior to, at and after the Effective Time, for purposes of this Agreement and the Ancillary Agreements, (a) no member of the Grafiti Group shall be deemed to be an Affiliate of any member of the Parent Group and (b) no member of the Parent Group shall be deemed to be an Affiliate of any member of the Grafiti Group.

 

“Agent” shall mean the entity duly appointed by Parent to act as distribution agent, transfer agent and registrar for the Grafiti Shares in connection with the Distribution.

 

“Agreement” shall have the meaning set forth in the Preamble.

 

“Ancillary Agreements” shall mean all agreements (other than this Agreement) entered into by the Parties or the members of their respective Groups (but as to which no Third Party is a party) in connection with the Separation, the Distribution, or the other transactions contemplated by this Agreement, including the Transition Services Agreement and the Transfer Documents.

 

“Approvals or Notifications” shall mean any consents, waivers, approvals, permits or authorizations to be obtained from, notices, registrations or reports to be submitted to, or other filings to be made with, any third Person, including any Governmental Authority.

 

“Arbitration Request” shall have the meaning set forth in Section 7.3(a).

 

“Assets” shall mean, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other third Persons or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including rights and benefits pursuant to any contract, license, permit, indenture, note, bond, mortgage, agreement, concession, franchise, instrument, undertaking, commitment, understanding or other arrangement.

 

“Balance Sheet” shall have the meaning set forth in Section 2.7(f).

 

“CEO Negotiation Request” shall have the meaning set forth in Section 7.2. “Delayed Parent Asset” shall have the meaning set forth in Section 2.4(h).

 

2

 

 

“Delayed Parent Liability” shall have the meaning set forth in Section 2.4(h).

 

“Delayed Grafiti Asset” shall have the meaning set forth in Section 2.4(c).

 

“Delayed Grafiti Liability” shall have the meaning set forth in Section 2.4(c).

 

“Dispute” shall have the meaning set forth in Section 7.1.

 

“Distribution” shall have the meaning set forth in the Recitals.

 

“Distribution Date” shall mean the date of the consummation of the Distribution, which shall be determined by the Parent Board in its sole and absolute discretion.

 

“Effective Time” shall mean 12:01 a.m., Eastern standard time, on the Distribution Date. “Environmental Law” shall mean any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, including the use, handling, transportation, treatment, storage, disposal, Release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.

 

“Environmental Liabilities” shall mean all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any product take back requirements or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.

 

“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

 

“Final Cash Balance” shall have the meaning set forth in Section 2.7(f).

 

“Force Majeure” shall mean, with respect to a Party, an event beyond the reasonable control of such Party (or any Person acting on its behalf), which event (a) does not arise or result from the fault or negligence of such Party (or any Person acting on its behalf) and (b) by its nature would not reasonably have been foreseen by such Party (or such Person), or, if it would reasonably have been foreseen, was unavoidable, and includes acts of God, acts of civil or military authority, embargoes, epidemics, pandemic, war, riots, insurrections, acts of terrorism, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any significant and prolonged failure in electrical or air conditioning equipment. Notwithstanding the foregoing, the receipt by a Party of an unsolicited takeover offer or other acquisition proposal, even if unforeseen or unavoidable, and such Party’s response thereto shall not be deemed an event of Force Majeure.

 

“Form 10” shall mean the registration statement on Form 10 as may be filed by Grafiti with the SEC to effect the registration of Grafiti Shares pursuant to the Exchange Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time prior to the Distribution.

 

3

 

 

“Form S-1” shall mean the registration statement on Form S-1 as may be filed by Grafiti with the SEC to effect the registration of Grafiti Shares pursuant to the Securities Act in connection with the Distribution, and the prospectus included therein, as such registration statement and prospectus may be amended or supplemented from time to time prior to the Distribution.

 

“GAAP” means United States generally accepted accounting principles, consistently applied.

 

“Governmental Approvals” shall mean any Approvals or Notifications to be made to, or obtained from, any Governmental Authority.

 

“Governmental Authority” shall mean any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, a government and any executive official thereof, and any self-regulatory organization regulated by a Governmental Authority, including The Nasdaq Stock Market LLC.

 

“Grafiti” shall have the meaning set forth in the Preamble.

 

“Grafiti Accounts” shall have the meaning set forth in Section 2.7(a).

 

“Grafiti Assets” shall have the meaning set forth in Section 2.2(a).

 

“Grafiti Balance Sheet” shall mean the pro forma combined balance sheet of the Grafiti Business, including any notes and subledgers thereto, as of June 30, 2023, as included in the Form S-1 or only in case of and in connection with the Form 10 filing, the Information Statement mailed to the Record Holders.

 

“Grafiti Business” shall mean the business resulting from the comprehensive set of data analytics and statistical visualization solutions for engineers and scientists of the Transferred Entity referred to as “SAVES”.

 

“Grafiti Articles” shall mean the Articles of Grafiti, substantially in the form of Exhibit A. “Grafiti Contracts” shall mean the following contracts and agreements to which either Party or any member of its Group is a party or by which it or any member of its Group or any of their respective Assets is bound, whether or not in writing; provided that Grafiti Contracts shall not include any contract or agreement that is contemplated to be retained by Parent or any member of the Parent Group from and after the Effective Time pursuant to any provision of this Agreement or any Ancillary Agreement:

 

(a)  (i) any customer, reseller, licensing, distributor or development contract or agreement entered into prior to the Effective Time exclusively related to the Grafiti Business and (ii) with respect to any customer, reseller, licensing, distributor or development contract or agreement entered into prior to the Effective Time that relates to the Grafiti Business but is not exclusively related to the Grafiti Business, that portion of any such contract or agreement that primarily relates to the Grafiti Business;

 

4

 

 

(b)  (i) any supply or vendor contract or agreement entered into prior to the Effective Time exclusively related to the Grafiti Business and (ii) with respect to any supply or vendor contract or agreement entered into prior to the Effective Time that relates to the Grafiti Business but is not exclusively related to the Grafiti Business, that portion of any such contract or agreement that primarily relates to the Grafiti Business;

 

(c)  any joint venture or partnership contract or agreement that relates primarily to the Grafiti Business as of the Effective Time;

 

(d)  any guarantee, indemnity, representation, covenant, warranty or other Liability of either Party or any member of its Group in respect of any other Grafiti Contract, any Grafiti Liability or the Grafiti Business;

 

(e)  any proprietary information and inventions agreement or similar Intellectual Property assignment or license agreement with any current or former Grafiti Group employee, Parent Group employee, consultant of the Grafiti Group or consultant of the Parent Group, in each case entered into prior to the Effective Time (i) that is exclusively related to the Grafiti Business or (ii) if not exclusively related to the Grafiti Business, that portion of any such agreement that primarily relates to the Grafiti Business;

 

(f)  any contract or agreement that is expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be assigned to, or be a contract or agreement in the name of, Grafiti or any member of the Grafiti Group;

 

(g)  any interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements exclusively related to the Grafiti Business;

 

(h)  any credit or other financing agreement entered into by Grafiti or any member of the Grafiti Group in connection with the Separation;

 

(i)  any contract or agreement entered into in the name of, or expressly on behalf of, any division, business unit or member of the Grafiti Group;

 

(j)  any other contract or agreement exclusively related to the Grafiti Business or Grafiti Assets;

 

(k) Grafiti Leases; and

 

(l)  any contracts, agreements or settlements set forth on Schedule 1.3, including the right to recover any amounts under such contracts, agreements, leases or settlements.

 

“Grafiti Designees” shall mean any and all entities (including corporations, general or limited partnerships, trusts, joint ventures, unincorporated organizations, limited liability entities or other entities) designated by Parent that will be members of the Grafiti Group as of immediately prior to the Effective Time.

 

5

 

 

“Grafiti Group” shall mean (a) prior to the Effective Time, Grafiti and each Person that will be a Subsidiary of Grafiti as of immediately after the Effective Time, including the Transferred Entity, even if, prior to the Effective Time, such Person is not a Subsidiary of Grafiti; and (b) on and after the Effective Time, Grafiti and each Person that is a Subsidiary of Grafiti.

 

“Grafiti Leases” shall mean the real property leases to which Grafiti or a member of the Grafiti Group is party as of the Effective Time set forth on Schedule 1.4.

 

“Grafiti Liabilities” shall have the meaning set forth in Section 2.3(a).

 

“Grafiti Permits” shall mean all Permits owned or licensed by either Party or any member of its Group primarily used or primarily held for use in the Grafiti Business as of the Effective Time.

 

“Grafiti Shares” shall mean common shares of Grafiti.

 

“Group” shall mean either the Grafiti Group or the Parent Group, as the context requires.

 

“Hazardous Materials” shall mean any chemical, material, substance, waste, pollutant, emission, discharge, release or contaminant that could result in Liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law, and any natural or artificial substance (whether solid, liquid or gas, noise, ion, vapor or electromagnetic) that could cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances.

 

“Information Statement” shall mean in connection with the Form 10 filing (if applicable), the information statement to be made available to the holders of Parent Shares and Other Parent Securities in connection with the Distribution, as such information statement may be amended or supplemented from time to time prior to the Distribution.

 

“Information Technology” shall mean all hardware, computers, servers, workstations, routers, hubs, switches, data communication lines, network and telecommunications equipment, Internet-related information technology infrastructure, and other information technology equipment, in each case, other than Software.

 

“Insurance Proceeds” shall mean those monies: (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of the insured, in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof; provided, however, that with respect to a captive insurance arrangement, Insurance Proceeds shall only include amounts received by the captive insurer in respect of any reinsurance arrangement.

 

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“Intellectual Property” shall mean all of the following whether arising under the Laws of the United States (or any state or other jurisdiction thereof) or of any other foreign or multinational jurisdiction: (a) patents, (b) trademarks, (c) copyrights, (d) any other intellectual property rights arising from or in respect of any Technology or Software, and (e) any claims for damages by reason of past infringement, misappropriation, or other unauthorized use of any of the foregoing, with the right to sue for and collect the same.

 

“Law” shall mean any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any Tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

 

“Liabilities” shall mean all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations of any nature or kind, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any Third- Party Claim), demand, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any fines, damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.

 

“Losses” shall mean actual losses (including any diminution in value), costs, damages, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

 

“Nasdaq” shall mean the Nasdaq Capital Market.

 

“Offer Negotiation Request” shall have the meaning set forth in Section 7.1.

 

“Other Parent Securities” shall mean the other outstanding securities of the Parent described on Schedule 1.2 which are entitled to participate in the distribution of the Grafiti Shares on a pro rata basis together with the holders of Parent Shares as of the Record Date.

 

“Parent” shall have the meaning set forth in the Preamble.

 

“Parent Accounts” shall have the meaning set forth in Section 2.7(a).

 

“Parent Assets” shall have the meaning set forth in Section 2.2(b).

 

“Parent Board” shall have the meaning set forth in the Recitals.

 

“Parent Business” shall mean (i) the Industrial Internet of Things business line of Parent Group; (ii) the comprehensive set of data analytics and statistical visualization solutions for engineers and scientists of Parent or any of its Subsidiaries referred to as “SAVES”; to the extent not conducted by the Transferred Entity; (iii) the advertising management platform of Parent Group consisting of digital solutions (eTearsheets; eInvoice, adDelivery) and cloud-based applications and analytics for the advertising, media and publishing industries, collectively referred to as “Shoom”; and (iv) Parent Group’s set of applications, technology and data analytics related to Parent Group’s provision of sports performance enhancing solutions referred to publicly by Parent Group as Game Your Game (GYG); and (v) all other businesses, operations and activities conducted at any time prior to the Effective Time by either Party or any member of its Group, other than the Grafiti Business.

 

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“Parent Group” shall mean Parent and each Person that is a Subsidiary of Parent (other than Grafiti and any other member of the Grafiti Group).

 

“Parent Liabilities” shall have the meaning set forth in Section 2.3(b).

 

“Parent Name and Parent Marks” shall mean all the names, marks, trade dress, logos, monograms, domain names and other source or business identifiers of either Party or any member of its Group or otherwise identify Parent as a whole, either alone or in combination with other words or elements, and all names, marks, trade dress, logos, monograms, domain names and other source or business identifiers confusingly similar to or embodying any of the foregoing, either alone or in combination with other words or elements, together with (y) any common law rights in and to any of the foregoing, any registrations or applications for registration of any of the foregoing, any rights in and to any of the foregoing provided by international treaties or conventions, and any reissues, extensions or renewals of any of the foregoing and (z) the goodwill associated with any of the foregoing.

 

“Parent Shares” shall mean shares of Parent common stock, par value $0.001 per share.

 

“Parties” shall mean Parent and Grafiti, collectively, or the singular “Party” shall mean Parent or Grafiti, as applicable.

 

“Permits” shall mean permits, approvals, authorizations, consents, licenses or certificates issued by any Governmental Authority.

 

“Person” shall mean an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

 

“Policies” shall mean insurance policies and insurance contracts of any kind, including property, excess and umbrella, commercial general liability, director and officer liability, fiduciary liability, cyber technology professional liability, libel liability, employment practices liability, automobile, aircraft, marine, workers’ compensation and employers’ liability, employee dishonesty/crime/fidelity, foreign, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits, privileges and obligations thereunder.

 

“Prime Rate” shall mean the rate that Bloomberg displays as “Prime Rate by Country United States” or “Prime Rate By Country US-BB Comp” at http://www.bloomberg.com/quote/PRIME:IND.

 

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“Privileged Information” shall mean any information, in written, oral, electronic or other tangible or intangible forms, including any communications by or to attorneys (including attorney- client privileged communications), memoranda and other materials protected by the work product doctrine, as to which a Party or any member of its Group would be entitled to assert or have asserted a privilege or other protection, including the attorney-client and work product privileges.

 

“Real Property Leases” shall mean all leases to real property and, to the extent covered by such leases, any and all buildings, structures, improvements and fixtures located thereon.

 

“Record Date” shall mean the close of business on the date to be determined by the Parent Board as the record date for determining holders of Parent Shares and Other Parent Securities entitled to receive Grafiti Shares pursuant to the Distribution.

 

“Record Holders” shall mean the holders of record of Parent Shares and holders of Other Parent Securities as of the Record Date.

 

“Release” shall mean any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including, ambient air, surface water, groundwater and surface or subsurface strata).

 

“Representatives” shall mean, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

 

“SEC” shall mean the U.S. Securities and Exchange Commission.

 

“Securities Act” shall mean the U.S. Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

 

“Section 1542” shall have the meaning set forth in Section 4.1(c).

 

“Security Interest” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.

 

“Security Requirements” shall have the meaning set forth in Section 6.11(a). “Separation” shall have the meaning set forth in the Recitals.

 

“Software” shall mean any and all (a) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (c) descriptions, flow charts and other work products used to design, plan, organize and develop any of the foregoing, (d) screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons and (e) documentation, including user manuals and other training documentation, relating to any of the foregoing.

 

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“Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than 50% of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

 

“Systems” shall have the meaning set forth in Section 6.11(a).

 

“Tangible Information” shall mean information that is contained in written, electronic or other tangible forms.

 

“Technology” shall mean all technology, know-how and information, including sales methodologies and processes, training protocols and similar methods and processes, algorithms, APIs, apparatus, circuit designs and assemblies, gate arrays, net lists, test vectors, diagrams, models, formulae, inventions, discoveries, innovations, products, services, ideas, concepts, designs, drawings, methods, network configurations and architectures, processes, confidential or proprietary information, trade secrets, protocols, schematics, specifications, subroutines, techniques, URLs, web sites, works of authorship and other forms of technology, in each case whether or not patentable, copyrightable or otherwise registerable, whether or not embodied in any tangible form and including all tangible embodiments of any of the foregoing, including documents, reports, records, instruction manuals, laboratory notebooks, prototypes, samples, surveys, studies and summaries; provided, however, that Technology shall not include any Software.

 

“Third Party” shall mean any Person other than the Parties or any members of their respective Groups.

 

“Third-Party Claim” shall have the meaning set forth in Section 4.5(a).

 

“Transaction Accounting Principles” means GAAP applied on a basis consistent with the accounting principles, practices, methodologies and policies used in preparing the Grafiti Balance Sheet.

 

“Transfer Documents” shall have the meaning set forth in Section 2.1(b). “Transferred Entity” shall mean Inpixon Ltd., a United Kingdom limited company.

 

“Transition Services Agreement” shall mean the Transition Services Agreement to be entered into by and between Parent and Grafiti in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement, as it may be amended from time to time.

 

“Unreleased Parent Liability” shall have the meaning set forth in Section 2.5(b)(ii).

 

“Unreleased Grafiti Liability” shall have the meaning set forth in Section 2.5(a)(ii).

 

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ARTICLE II THE SEPARATION

 

2.1Transfer of Assets and Assumption of Liabilities.

 

(a)On or prior to the Effective Time, but in any case prior to the Distribution:

 

(i) Transfer and Assignment of Grafiti Assets. Parent shall, and shall cause the applicable members of its Group to, contribute, assign, transfer, convey and deliver to Grafiti, or the applicable Grafiti Designees, and Grafiti or such Grafiti Designees shall accept from Parent and the applicable members of the Parent Group, all of Parent’s and such Parent Group member’s respective direct or indirect right, title and interest in and to all of the Grafiti Assets (it being understood that if any Grafiti Asset shall be held by the Transferred Entity or a wholly owned Subsidiary of the Transferred Entity, such Grafiti Asset may be assigned, transferred, conveyed and delivered to Grafiti as a result of the transfer of all of the equity interests in the Transferred Entity from Parent or the applicable members of the Parent Group to Grafiti or the applicable Grafiti Designee);

 

(ii)  Acceptance and Assumption of Grafiti Liabilities. Grafiti and the applicable Grafiti Designees shall accept, assume and agree faithfully to perform, discharge and fulfill all the Grafiti Liabilities, as described in Section 2.3(a) below, including Grafiti Liabilities held by Parent or any Parent Designee, and Grafiti and the applicable members of the Grafiti Group shall be responsible for all Grafiti Liabilities in accordance with their respective terms (it being understood that if any Grafiti Liability is a liability of the Transferred Entity or a wholly owned Subsidiary of the Transferred Entity, such Grafiti Liability may be assumed by Grafiti as a result of the transfer of all of the equity interests in the Transferred Entity from Parent or the applicable members of the Parent Group to Grafiti or the applicable Grafiti Designee). Grafiti and such Grafiti Designees shall be responsible for all Grafiti Liabilities, regardless of when or where such Grafiti Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Grafiti Liabilities are asserted or determined (including any Grafiti Liabilities arising out of claims made by Parent’s or Grafiti’s respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the Parent Group or the Grafiti Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Parent Group or the Grafiti Group, or any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates;

 

(iii)  Transfer and Assignment of Parent Assets. Parent and Grafiti shall cause Grafiti and the Grafiti Designees to contribute, assign, transfer, convey and deliver to Parent or certain members of the Parent Group designated by Parent, and Parent or such other members of the Parent Group shall accept from Grafiti and the Grafiti Designees, all of Grafiti’s and such Grafiti Designees’ respective direct or indirect right, title and interest in and to all Parent Assets held by Grafiti or a Grafiti Designee; and

 

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(iv)  Acceptance and Assumption of Parent Liabilities. Parent and certain of members of the Parent Group designated by Parent shall accept and assume and agree faithfully to perform, discharge and fulfill all of the Parent Liabilities, as described in Section 2.3(b) below, including Parent Liabilities held by Grafiti or any Grafiti Designee, and Parent and the applicable members of the Parent Group shall be responsible for all Parent Liabilities in accordance with their respective terms, regardless of when or where such Parent Liabilities arose or arise, whether the facts on which they are based occurred prior to or subsequent to the Effective Time, where or against whom such Parent Liabilities are asserted or determined (including any such Parent Liabilities arising out of claims made by Parent’s or Grafiti’s respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the Parent Group or the Grafiti Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Parent Group or the Grafiti Group, or any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates.

 

(b) Transfer Documents. In furtherance of the contribution, assignment, transfer, conveyance and delivery of the Assets and the assumption of the Liabilities in accordance with Section 2.1(a), (i) each Party shall execute and deliver, and shall cause the applicable members of its Group to execute and deliver, to the other Party, such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of such Party’s and the applicable members of its Group’s right, title and interest in and to such Assets to the other Party and the applicable members of its Group in accordance with Section 2.1(a), and (ii) each Party shall execute and deliver, and shall cause the applicable members of its Group to execute and deliver, to the other Party, such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Liabilities by such Party and the applicable members of its Group in accordance with Section 2.1(a). All of the foregoing documents contemplated by this Section 2.1(b) shall be referred to collectively herein as the “Transfer Documents.” The Transfer Documents shall effect certain of the transactions contemplated by this Agreement and, notwithstanding anything in this Agreement to the contrary, shall not expand or limit any of the obligations, covenants or agreements in this Agreement. It is expressly agreed that in the event of any conflict between the terms of the Transfer Documents and the terms of this Agreement, the terms of this Agreement shall control.

 

(c)  Misallocations. In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party (or any member of such Party’s Group) shall receive or otherwise possess any Asset that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement, such Party shall promptly transfer, or cause to be transferred, such Asset to the Party so entitled thereto (or to any member of such Party’s Group), and such Party (or member of such Party’s Group) shall accept such Asset. Prior to any such transfer, the Person receiving or possessing such Asset shall hold such Asset in trust for such other Person. In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party hereto (or any member of such Party’s Group) shall be liable for or otherwise assume any Liability that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement, such other Party shall promptly assume, or cause to be assumed, such Liability and agree to faithfully perform such Liability.

 

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(d)Intellectual Property Rights.

 

(i)  If and to the extent that, as a matter of Law in any jurisdiction, Parent or the applicable members of its Group cannot assign, transfer or convey any of Parent’s or such Parent Group members’ respective direct or indirect right, title and interest in and to any Technology, Software or Intellectual Property included in the Grafiti Assets, then, to the extent possible, Parent shall, and shall cause the applicable members of its Group to, irrevocably grant to Grafiti, or the applicable Grafiti Designees, an exclusive, irrevocable, assignable, transferable, sublicenseable, worldwide, perpetual, royalty-free license to use, exploit and commercialize in any manner now known or in the future discovered and for whatever purpose, any such right, title or interest.

 

(ii)  If and to the extent that, as a matter of Law in any jurisdiction, Grafiti or the applicable members of its Group cannot assign, transfer or convey any of Grafiti’s or such Grafiti Group members’ respective direct or indirect right, title and interest in and to any Technology, Software or Intellectual Property included in the Parent Assets, then, to the extent possible, Grafiti shall, and shall cause the applicable members of its Group to, irrevocably grant to Parent, or the applicable Parent Designees, an exclusive, irrevocable, assignable, transferable, sublicenseable, worldwide, perpetual, royalty-free license to use, exploit and commercialize in any manner now known or in the future discovered and for whatever purpose, any such right, title or interest.

 

2.2Grafiti Assets; Parent Assets.

 

(a)  Grafiti Assets. For purposes of this Agreement, “Grafiti Assets” shall mean all issued and outstanding capital stock or other equity interests of the Transferred Entity that are owned by either Party or any members of its Group as of the Effective Time.

 

Notwithstanding the foregoing, the Grafiti Assets shall not in any event include any Asset referred to in clauses (i) through (vi) of Section 2.2(b).

 

(b)  Parent Assets. For the purposes of this Agreement, “Parent Assets” shall mean all Assets of either Party or the members of its Group as of the Effective Time, other than the Grafiti Assets. Notwithstanding anything herein to the contrary, the Parent Assets shall include:

 

(i)  all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by Parent or any other member of the Parent Group;

 

(ii)  all contracts and agreements of either Party or any of the members of its Group as of the Effective Time (other than the Grafiti Contracts);

 

(iii)  all Permits of either Party or any of the members of its Group as of the Effective Time (other than the Grafiti Permits);

 

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(iv)  all cash and cash equivalents of either Party or any of the members of its Group as of the Effective Time that are not designated as Grafiti Assets;

 

(v) the Parent Name and Parent Marks; and

 

(vi) any and all Assets set forth on Schedule 2.2(b)(vi).

 

2.3Grafiti Liabilities; Parent Liabilities.

 

(a)  Grafiti Liabilities. For the purposes of this Agreement, “Grafiti Liabilities” shall mean the following Liabilities of either Party or any of the members of its Group:

 

(i)  all Liabilities included or reflected as liabilities or obligations of Grafiti or the members of the Grafiti Group on the Grafiti Balance Sheet, subject to any discharge of such Liabilities subsequent to the date of the Grafiti Balance Sheet; provided that the amounts set forth on the Grafiti Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of Grafiti Liabilities pursuant to this clause (i);

 

(ii)  all Liabilities as of the Effective Time that are of a nature or type that would have resulted in such Liabilities being included or reflected as liabilities or obligations of Grafiti or the members of the Grafiti Group on a pro forma combined balance sheet of the Grafiti Group or any notes or subledgers thereto as of the Effective Time (were such balance sheet, notes and subledgers to be prepared on a basis consistent with the determination of the Liabilities included on the Grafiti Balance Sheet ), it being understood that (x) the Grafiti Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Liabilities that are included in the definition of Grafiti Liabilities pursuant to this clause (ii); and (y) the amounts set forth on the Grafiti Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of Grafiti Liabilities pursuant to this clause (ii);

 

(iii)  all Liabilities relating to, arising out of or resulting from the actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, at or after the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent that such Liabilities relate to, arise out of or result from the Grafiti Business or a Grafiti Asset;

 

(iv)  any and all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by Grafiti or any other member of the Grafiti Group, and all agreements, obligations and Liabilities of any member of the Grafiti Group under this Agreement or any of the Ancillary Agreements;

 

(v)  any and all Liabilities relating to, arising out of or resulting from the Grafiti Contracts, or the Grafiti Permits;

 

(vi) any and all Liabilities set forth on Schedule 2.3(a); and

 

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(vii) all Liabilities arising out of claims made by any Third Party (including Parent’s or Grafiti’s respective directors, officers, stockholders, employees and agents) against any member of the Parent Group or the Grafiti Group to the extent relating to, arising out of or resulting from the Grafiti Business or the Grafiti Assets or the other business, operations, activities or Liabilities referred to in clauses (i) through (vi) above;

 

provided that, notwithstanding the foregoing, the Parties agree that the Liabilities set forth on Schedule 2.3(b) shall not be Grafiti Liabilities but instead shall be Parent Liabilities.

 

(b) Parent Liabilities. For the purposes of this Agreement, “Parent Liabilities” shall mean the following Liabilities of either Party or any of the members of its Group:

 

(i) all Liabilities relating to, arising out of or resulting from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, at or after the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time) of any member of the Parent Group and, prior to the Effective Time, any member of the Grafiti Group, in each case, to the extent that such Liabilities are not Grafiti Liabilities;

 

(ii) all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by Parent or any other member of the Parent Group, and all agreements, obligations and Liabilities of any member of the Parent Group under this Agreement or any of the Ancillary Agreements;

 

(iii) all Liabilities set forth on Schedule 2.3(b); and

 

(iv) all Liabilities arising out of claims made by any Third Party (including Parent’s or Grafiti’s respective directors, officers, stockholders, employees and agents) against any member of the Parent Group or the Grafiti Group to the extent relating to, arising out of or resulting from the Parent Business or the Parent Assets, or the other business, operations, activities or Liabilities referred to in clauses (i) through (iii) above.

 

2.4Approvals and Notifications.

 

(a) Approvals and Notifications for Grafiti Assets. To the extent that the transfer or assignment of any Grafiti Asset, the assumption of any Grafiti Liability, the Separation, the Distribution or any other transaction contemplated under this Agreement requires any Approvals or Notifications, the Parties shall use their commercially reasonable efforts to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided, however, that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between Parent and Grafiti, neither Parent nor Grafiti shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.

 

(b) Delayed Grafiti Transfers. If and to the extent that the valid, complete and perfected transfer or assignment to the Grafiti Group of any Grafiti Asset or assumption by the Grafiti Group of any Grafiti Liability in connection with the Separation or the Distribution would be a violation of applicable Law or require any Approvals or Notifications that have not been obtained or made by the Effective Time then, unless the Parties mutually shall otherwise determine, the transfer or assignment to the Grafiti Group of such Grafiti Assets or the assumption by the Grafiti Group of such Grafiti Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approvals or Notifications have been obtained or made. Notwithstanding the foregoing, any such Grafiti Assets or Grafiti Liabilities shall continue to constitute Grafiti Assets and Grafiti Liabilities for all other purposes of this Agreement.

 

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(c) Treatment of Delayed Grafiti Assets and Delayed Grafiti Liabilities. If any transfer or assignment of any Grafiti Asset (or a portion thereof) or any assumption of any Grafiti Liability (or a portion thereof) intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated on or prior to the Effective Time, whether as a result of the provisions of Section 2.4(b) or for any other reason (any such Grafiti Asset (or a portion thereof), a “Delayed Grafiti Asset” and any such Grafiti Liability (or a portion thereof), a “Delayed Grafiti Liability”), then, insofar as reasonably possible and subject to applicable Law, the member of the Parent Group retaining such Delayed Grafiti Asset or such Delayed Grafiti Liability, as the case may be, shall thereafter hold such Delayed Grafiti Asset or Delayed Grafiti Liability for the use and benefit (or the performance and obligation, in the case of a Liability) of the member of the Grafiti Group entitled thereto (at the expense of the member of the Grafiti Group entitled thereto). In addition, the member of the Parent Group retaining such Delayed Grafiti Asset or such Delayed Grafiti Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Delayed Grafiti Asset or Delayed Grafiti Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the member of the Grafiti Group to whom such Delayed Grafiti Asset is to be transferred or assigned, or which will assume such Delayed Grafiti Liability, as the case may be, in order to place such member of the Grafiti Group in a substantially similar position as if such Delayed Grafiti Asset or Delayed Grafiti Liability had been transferred, assigned or assumed as contemplated hereby and so that all the benefits and burdens relating to such Delayed Grafiti Asset or Delayed Grafiti Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such Delayed Grafiti Asset or Delayed Grafiti Liability, as the case may be, and all costs and expenses related thereto, shall inure from and after the Effective Time to the Grafiti Group.

 

(d) Transfer of Delayed Grafiti Assets and Delayed Grafiti Liabilities. If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any Delayed Grafiti Asset or the deferral of assumption of any Delayed Grafiti Liability pursuant to Section 2.4(b), are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any Delayed Grafiti Asset or the assumption of any Delayed Grafiti Liability have been removed, the transfer or assignment of the applicable Delayed Grafiti Asset or the assumption of the applicable Delayed Grafiti Liability, as the case may be, shall be effected in accordance with the terms of this Agreement or the applicable Ancillary Agreement.

 

(e) Costs for Delayed Grafiti Assets and Delayed Grafiti Liabilities. Except as otherwise agreed in writing between the Parties, any member of the Parent Group retaining a Delayed Grafiti Asset or Delayed Grafiti Liability due to the deferral of the transfer or assignment of such Delayed Grafiti Asset or the deferral of the assumption of such Delayed Grafiti Liability, as the case may be, shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced (or otherwise made available) by Grafiti or the member of the Grafiti Group entitled to the Delayed Grafiti Asset or Delayed Grafiti Liability, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by Grafiti or the member of the Grafiti Group entitled to such Delayed Grafiti Asset or Delayed Grafiti Liability; provided, however, that the Parent Group shall not knowingly allow the loss or diminution in value of any Delayed Grafiti Asset without first providing the Grafiti Group commercially reasonable notice of such potential loss or diminution in value and afford the Grafiti Group commercially reasonable opportunity to take action to prevent such loss or diminution.

 

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(f) Approvals and Notifications for Parent Assets. To the extent that the transfer or assignment of any Parent Asset, the assumption of any Parent Liability, the Separation or the Distribution requires any Approvals or Notifications, the Parties shall use their commercially reasonable efforts to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided, however, that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between Parent and Grafiti, neither Parent nor Grafiti shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.

 

(g) Delayed Parent Transfers. If and to the extent that the valid, complete and perfected transfer or assignment to the Parent Group of any Parent Asset or assumption by the Parent Group of any Parent Liability in connection with the Separation or the Distribution would be a violation of applicable Law or require any Approvals or Notifications that have not been obtained or made by the Effective Time then, unless the Parties mutually shall otherwise determine, the transfer or assignment to the Parent Group of such Parent Assets or the assumption by the Parent Group of such Parent Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approvals or Notifications have been obtained or made. Notwithstanding the foregoing, any such Parent Assets or Parent Liabilities shall continue to constitute Parent Assets and Parent Liabilities for all other purposes of this Agreement.

 

(h) Treatment of Delayed Parent Assets and Delayed Parent Liabilities. If any transfer or assignment of any Parent Asset (or a portion thereof) or any assumption of any Parent Liability (or a portion thereof) intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated on or prior to the Effective Time whether as a result of the provisions of Section 2.4(g) or for any other reason (any such Parent Asset (or a portion thereof), a “Delayed Parent Asset” and any such Parent Liability (or a portion thereof), a “Delayed Parent Liability”), then, insofar as reasonably possible and subject to applicable Law, the member of the Grafiti Group retaining such Delayed Parent Asset or such Delayed Parent Liability, as the case may be, shall thereafter hold such Delayed Parent Asset or Delayed Parent Liability for the use and benefit (or the performance or obligation, in the case of a Liability) of the member of the Parent Group entitled thereto (at the expense of the member of the Parent Group entitled thereto). In addition, the member of the Grafiti Group retaining such Delayed Parent Asset or such Delayed Parent Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Delayed Parent Asset or Delayed Parent Liability in the ordinary course of business in accordance with past practice. Such member of the Grafiti Group shall also take such other actions as may be reasonably requested by the member of the Parent Group to which such Delayed Parent Asset is to be transferred or assigned, or which will assume such Delayed Parent Liability, as the case may be, in order to place such member of the Parent Group in a substantially similar position as if such Delayed Parent Asset or Delayed Parent Liability had been transferred, assigned or assumed and so that all the benefits and burdens relating to such Delayed Parent Asset or Delayed Parent Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such Delayed Parent Asset or Delayed Parent Liability, as the case may be, and all costs and expenses related thereto, shall inure from and after the Effective Time to the Parent Group.

 

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(i) Transfer of Delayed Parent Assets and Delayed Parent Liabilities. If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any Delayed Parent Asset or the deferral of assumption of any Delayed Parent Liability pursuant to Section 2.4(g), are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any Delayed Parent Asset or the assumption of any Delayed Parent Liability have been removed, the transfer or assignment of the applicable Delayed Parent Asset or the assumption of the applicable Delayed Parent Liability, as the case may be, shall be effected in accordance with the terms of this Agreement or the applicable Ancillary Agreement.

 

(j) Costs for Delayed Parent Assets and Delayed Parent Liabilities. Except as otherwise agreed in writing between the Parties, any member of the Grafiti Group retaining a Delayed Parent Asset or Delayed Parent Liability due to the deferral of the transfer or assignment of such Delayed Parent Asset or the deferral of the assumption of such Delayed Parent Liability, as the case may be, shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced (or otherwise made available) by Parent or the member of the Parent Group entitled to the Delayed Parent Asset or Delayed Parent Liability, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by Parent or the member of the Parent Group entitled to such Delayed Parent Asset or Delayed Parent Liability; provided, however, that the Grafiti Group shall not knowingly allow the loss or diminution in value of any Delayed Parent Asset without first providing the Parent Group commercially reasonable notice of such potential loss or diminution in value and affording the Parent Group commercially reasonable opportunity to take action to prevent such loss or diminution in value.

 

2.5Assignment and Novation of Liabilities.

 

(a)Assignment and Novation of Grafiti Liabilities.

 

(i)  Each of Parent and Grafiti, at the request of the other, shall use its commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all Grafiti Liabilities and obtain in writing the unconditional release of each member of the Parent Group that is a party to any such arrangements, so that, in any such case, the members of the Grafiti Group shall be solely responsible for such Grafiti Liabilities; provided, however, that, except as otherwise expressly provided in this Agreement or any of the Ancillary Agreements, neither Parent nor Grafiti shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.

 

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(ii)  If Parent or Grafiti is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the Parent Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “Unreleased Grafiti Liability”), Grafiti shall, except to the extent not prohibited by Law, indemnify or guarantee fully all the obligations or other Liabilities of such member of the Parent Group that constitute Unreleased Grafiti Liabilities from and after the Effective Time. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased Grafiti Liabilities shall otherwise become assignable or able to be novated, Parent shall promptly assign or novate, or cause to be assigned or novated, and Grafiti or the applicable Grafiti Group member shall assume, such Unreleased Grafiti Liabilities without exchange of further consideration.

 

(b)Assignment and Novation of Parent Liabilities.

 

(i)  Each of Parent and Grafiti, at the request of the other, shall use its commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all Parent Liabilities and obtain in writing the unconditional release of each member of the Grafiti Group that is a party to any such arrangements, so that, in any such case, the members of the Parent Group shall be solely responsible for such Parent Liabilities; provided, however, that, except as otherwise expressly provided in this Agreement or any of the Ancillary Agreements, neither Parent nor Grafiti shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.

 

(ii)  If Parent or Grafiti is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the Grafiti Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “Unreleased Parent Liability”), Parent shall, except to the extent not prohibited by Law, indemnify or guarantee fully all the obligations or other Liabilities of such member of the Grafiti Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased Parent Liabilities shall otherwise become assignable or able to be novated, Grafiti shall promptly assign or novate, or cause to be assigned or novated, and Parent or the applicable Parent Group member shall assume, such Unreleased Parent Liabilities without exchange of further consideration.

 

2.6Termination of Agreements.

 

(a)  Except as set forth in Section 2.6(b), in furtherance of the releases and other provisions of Section 4.1, Grafiti and each member of the Grafiti Group, on the one hand, and Parent and each member of the Parent Group, on the other hand, hereby terminate any and all agreements, arrangements, commitments or understandings, whether or not in writing, between or among Grafiti or any member of the Grafiti Group, on the one hand, and Parent or any member of the Parent Group, on the other hand, effective as of the Effective Time. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Effective Time. Each Party shall, at the reasonable request of the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.

 

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(b)  The provisions of Section 2.6(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof):

 

(i) this Agreement and the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of the Parties or any of the members of their respective Groups or to be continued from and after the Effective Time); (ii) any agreements, arrangements, commitments or understandings listed or described on Schedule 2.6(b)(ii); (iii) any agreements, arrangements, commitments or understandings to which any Third Party is a party thereto; and (iv) any intercompany accounts payable or accounts receivable accrued as of the Effective Time that are reflected in the books and records of the Parties or otherwise documented in writing in accordance with past practices, which shall be settled in the manner contemplated by Section 2.6(c).

 

(c)  All of the intercompany accounts receivable and accounts payable between any member of the Parent Group, on the one hand, and any member of the Grafiti Group, on the other hand, outstanding as of the Effective Time and arising out of the contracts or agreements described in Section 2.6(b) or out of the provision, prior to the Effective Time, of the services to be provided following the Effective Time pursuant to the Ancillary Agreements shall be repaid or settled following the Effective Time in the ordinary course of business or, if otherwise mutually agreed prior to the Effective Time by duly authorized representatives of Parent and Grafiti, cancelled. All other intercompany accounts receivable and accounts payable between any member of the Parent Group, on the one hand, and any member of the Grafiti Group, on the other hand, outstanding as of the Effective Time shall be repaid or settled immediately prior to or as promptly as practicable after the Effective Time.

 

2.7Bank Accounts; Cash Balances.

 

(a)  Each Party agrees to take, or cause the members of its Group to take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary to amend all contracts or agreements governing each bank and brokerage account owned by Grafiti or any other member of the Grafiti Group (collectively, the “Grafiti Accounts”) and all contracts or agreements governing each bank or brokerage account owned by Parent or any other member of the Parent Group (collectively, the “Parent Accounts”) so that each such Grafiti Account and Parent Account, if currently linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to) to any Parent Account or Grafiti Account, respectively, is de-linked from such Parent Account or Grafiti Account, respectively.

 

(b)  It is intended that, following consummation of the actions contemplated by Section 2.7(a), there will be in place a cash management process pursuant to which the Grafiti Accounts will be managed and funds collected will be transferred into one or more accounts maintained by Grafiti or a member of the Grafiti Group.

 

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(c)  It is intended that, following consummation of the actions contemplated by Section 2.7(a), there will continue to be in place a cash management process pursuant to which the Parent Accounts will be managed and funds collected will be transferred into one or more accounts maintained by Parent or a member of the Parent Group.

 

(d)  With respect to any outstanding checks issued or payments initiated by Parent, Grafiti, or any of the members of their respective Groups prior to the Effective Time, such outstanding checks and payments shall be honored following the Effective Time by the Person or Group owning the account on which the check is drawn or from which the payment was initiated, respectively.

 

(e)  As between Parent and Grafiti (and the members of their respective Groups), all payments made and reimbursements received after the Effective Time by either Party (or member of its Group) that relate to a business, Asset or Liability of the other Party (or member of its Group), shall be held by such Party in trust for the use and benefit of the Party entitled thereto and, promptly following receipt by such Party of any such payment or reimbursement, such Party shall pay over, or shall cause the applicable member of its Group to pay over to the other Party the amount of such payment or reimbursement without right of set-off.

 

(f)  Within 30 days after the Distribution Date, Grafiti shall cause to be prepared in good faith and delivered to Parent a balance sheet (the “Balance Sheet”) setting forth cash and cash equivalents held by each member of the Grafiti Group as of the Effective Time (the aggregate amount of such cash and cash equivalents the “Final Cash Balance”). For a period of 60 days following delivery by Grafiti of the Balance Sheet or such longer period as Parent is disputing the amount of cash or cash equivalents reflected in the Balance Sheet, Parent may review and analyze the Balance Sheet and Grafiti shall cooperate with and make available to Parent and its Representatives all information, records, data and working papers, in each case, to the extent related to the determination of the amount of cash and cash equivalents held by the members of the Grafiti Group as of the Effective Time, and Grafiti shall permit access to its facilities and personnel, as may be reasonably required in connection with the review and analysis of the Balance Sheet.

 

(g)  If Parent disagrees with the amount of cash or cash equivalents reflected in the Balance Sheet, Parent and Grafiti shall attempt to resolve the dispute in good faith for 30 days following the delivery to Parent of the Balance Sheet. Following such 30 day period, Parent shall be entitled to dispute such amount or amounts pursuant to Article VII and shall be entitled to make an Arbitration Request without first complying with Section 7.1 or Section 7.2.

 

2.8  Ancillary Agreements. Effective on or prior to the Effective Time, each of Parent, Grafiti will, or will cause the applicable members of their Groups to, execute and deliver all Ancillary Agreements to which it is a party.

 

2.9Disclaimer of Representations and Warranties.

 

(a)EACH OF PARENT (ON BEHALF OF ITSELF AND EACH MEMBER OF THE PARENT GROUP), GRAFITI (ON BEHALF OF ITSELF AND EACH MEMBER OF THE GRAFITI GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR APPROVALS REQUIRED IN CONNECTION THEREWITH (INCLUDING GOVERNMENTAL APPROVALS OR PERMITS OF ANY KIND), AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

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(b)Each of Parent (on behalf of itself and each member of the Parent Group), Grafiti (on behalf of itself and each member of the Grafiti Group) further understands and agrees that if the disclaimer of express or implied representations and warranties contained in Section 2.13(a) is held unenforceable or is unavailable for any reason under the Laws of any jurisdiction outside the United States or if, under the Laws of a jurisdiction outside the United States, both Parent or any member of the Parent Group, on the one hand, and Grafiti or any member of the Grafiti Group, on the other hand, are jointly or severally liable for any Parent Liability, then, the Parties intend that, notwithstanding any provision to the contrary under the Laws of such foreign jurisdictions, the provisions of this Agreement, and the Ancillary Agreements (including the disclaimer of all representations and warranties (except as otherwise provided in any such agreements), allocation of Liabilities among the Parties and their respective Subsidiaries, releases, indemnification and contribution of Liabilities) shall prevail for any and all purposes among the Parties and their respective Group.

 

ARTICLE III THE DISTRIBUTION

 

3.1Sole and Absolute Discretion; Cooperation.

 

(a)  Parent shall, in its sole and absolute discretion, determine the terms of the Distribution, including the form, structure and terms of any transaction(s) or offering(s) to effect the Distribution and the timing and conditions to the consummation of the Distribution. In addition, Parent may, at any time and from time to time until the consummation of the Distribution, modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution. Nothing shall in any way limit Parent’s right to terminate this Agreement or the Distribution as set forth in Article IX or alter the consequences of any such termination from those specified in Article IX.

 

(b)  Grafiti shall cooperate with Parent to accomplish the Distribution and shall, at Parent’s direction, promptly take any and all actions necessary or desirable to effect the Distribution, including in respect of registration of the Grafiti Shares under the Securities Act or the Exchange Act. Parent shall select any investment bank or manager in connection with the Distribution, as well as any financial printer, solicitation or exchange agent and financial, legal, accounting and other advisors for Parent. Grafiti and Parent, as the case may be, will provide to the Agent any information required in order to complete the Distribution.

 

3.2  Actions Prior to the Distribution. Prior to the Effective Time and subject to the terms and conditions set forth herein, the Parties shall take, or cause to be taken, the following actions in connection with the Distribution:

 

(a)  Notice of Record Date to Nasdaq. Parent shall, to the extent possible, give Nasdaq not less than 10 days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act.

 

(b)  Grafiti Directors and Officers. On or prior to the Distribution Date, Parent and Grafiti shall take all necessary actions so that as of the Effective Time: (i) the directors and executive officers of Grafiti shall be those set forth in the Form S-1 or only in case of and in connection with the Form 10 filing, the Information Statement made available to the Record Holders prior to the Distribution Date, unless otherwise agreed by the Parties; and (ii) Grafiti shall have such other officers as Grafiti shall appoint.

 

(c)  Securities Law Matters. Grafiti shall file any amendments or supplements to the Form S-1 or Form 10 as may be necessary or advisable in order to cause the Form S-1 or Form 10 to become and remain effective as required by the SEC and federal state or other applicable securities Laws. Parent and Grafiti shall cooperate in preparing, filing with the SEC and causing to become effective registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other compensatory plans necessary or advisable in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. Parent and Grafiti will prepare, and Grafiti will, to the extent required under applicable Law, file with the SEC, any such documentation and any requisite no- action letters which Parent reasonably determines are necessary or desirable to effectuate the Distribution, and Parent and Grafiti shall each use reasonable best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable. Parent and Grafiti shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Distribution.

 

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(d)  Availability of Prospectus or Information Statement. Parent shall, as soon as is reasonably practicable after the Form S-1 is declared effective under the Securities Act and the Parent Board has approved the Distribution, cause the prospectus included in the Form S-1 to be filed pursuant to Rule 424(b) under the Securities Act, or in the case of Form 10, as soon as is reasonably practicable after the Form 10 is declared effective under the Exchange Act and the Parent Board has approved the Distribution, cause the Information Statement to be mailed to the Record Holders.

 

(e)  The Distribution Agent. Parent shall enter into a distribution agent agreement with the Agent or otherwise provide instructions to the Agent regarding the Distribution.

 

3.3Conditions to the Distribution.

 

(a)  The consummation of the Distribution will be subject to the satisfaction, or waiver by Parent in its sole and absolute discretion, of the following conditions:

 

(i)  The Form S-1 shall have become effective under the Securities Act or the SEC shall have declared effective the Form 10; no order suspending the effectiveness of the Form S-1 or the Form 10 shall be in effect; and no proceedings for such purposes shall have been instituted or threatened by the SEC.

 

(ii)  In the case of Form 10, the Information Statement shall have been mailed to Record Holder.

 

(iii)  The transfer of the Grafiti Assets (other than any Delayed Grafiti Asset) and Grafiti Liabilities (other than any Delayed Grafiti Liability) contemplated to be transferred from Parent to Grafiti on or prior to the Distribution shall have occurred as contemplated by Section 2.1, and the transfer of the Parent Assets (other than any Delayed Parent Asset) and Parent Liabilities (other than any Delayed Parent Liability) contemplated to be transferred from Grafiti to Parent on or prior to the Distribution Date shall have occurred as contemplated by Section 2.1.

 

(iv) The actions and filings necessary or appropriate under applicable U .S. federal, U.S. state or other securities Laws or blue sky Laws and the rules and regulations thereunder shall have been taken or made, and, where applicable, have become effective or been accepted by the applicable Governmental Authority.

 

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(v)  Any required approvals of any Governmental Authority necessary to consummate the transactions contemplated by this Agreement and the Ancillary Agreements shall have been obtained and be in full force and effect;

 

(vi) Each of the Ancillary Agreements shall have been duly executed and delivered.

 

(vii) No order, injunction or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Separation, the Distribution or any of the transactions related thereto shall be in effect.

 

(viii)  No other events or developments shall exist or shall have occurred that, in the judgment of the Parent Board, in its sole and absolute discretion, makes it inadvisable to effect the Separation, the Distribution or the transactions contemplated by this Agreement or any Ancillary Agreement.

 

(b)  The foregoing conditions are for the sole benefit of Parent and shall not give rise to or create any duty on the part of Parent or the Parent Board to waive or not waive any such condition or in any way limit Parent’s right to terminate this Agreement as set forth in Article IX or alter the consequences of any such termination from those specified in Article IX. Any determination made by the Parent Board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in Section 3.3(a) shall be conclusive and binding on the Parties. If Parent waives any material condition, it shall promptly issue a press release disclosing such fact and file a Current Report on Form 8-K with the SEC describing such waiver.

 

3.4The Distribution.

 

(a)  Subject to Section 3.3, on or prior to the Effective Time, Grafiti will deliver to the Agent, for the benefit of the Record Holders, book-entry transfer authorizations for such number of the outstanding Grafiti Shares as is necessary to effect the Distribution, and shall cause the transfer agent for the Parent Shares to instruct the Agent to distribute at the Effective Time the appropriate number of Grafiti Shares to each such holder or designated transferee or transferees of such holder by way of direct registration in book-entry form. Grafiti will not issue paper stock certificates in respect of the Grafiti Shares. The Distribution shall be effective at the Effective Time.

 

(b)  Subject to Sections 3.3, and 3.4(d), each Record Holder will be entitled to receive in the Distribution one Grafiti Share for a number of Parent Shares held by such Record Holder on the Record Date or issuable to such Record Holder upon complete conversion or exercise of the Other Parent Securities, as applicable. Such number of Parent Shares shall be calculated as follows: (1) 4,615,385 minus the number of the incentive shares allocated to Parent or Grafiti’s management pursuant to any Grafiti’s employee benefit and other compensatory plan; divided by (2) the number of the issued and outstanding Parent Shares, plus the number of Parent Shares underlying the Other Parent Securities as of the Record Date.

 

(c)  No fractional shares will be distributed or credited to book-entry accounts in connection with the Distribution, and any such fractional share interests to which a Record Holder would otherwise be entitled shall not entitle such Record Holder to vote or to any other rights as a stockholder of Grafiti. In lieu of any such fractional shares, Parent will, in its sole discretion, either round up fractional shares that recipients of Grafiti Shares will otherwise be entitled to receive, but for the provisions of this Section 3.4(c) or pay cash, without any interest thereon, as hereinafter provided. If Parent determines to pay cash for fractional shares, as soon as practicable after the Effective Time, Parent shall direct the Agent to determine the number of whole and fractional Grafiti Shares allocable to each Record Holder, to aggregate all such fractional shares into whole shares, and to sell the whole shares obtained thereby in the open market at the then-prevailing prices on behalf of each Record Holder who otherwise would be entitled to receive fractional share interests (with the Agent, in its sole and absolute discretion, determining when, how and through which broker-dealer and at what price to make such sales), and to cause to be distributed to each such Record Holder, in lieu of any fractional share, such Record Holder’s or owner’s ratable share of the total proceeds of such sale, after deducting any Taxes required to be withheld and applicable transfer Taxes, and after deducting the costs and expenses of such sale and distribution, including brokers fees and commissions. None of Parent, Grafiti or the Agent will be required to guarantee any minimum sale price for the fractional Grafiti Shares sold in accordance with this Section 3.4(c). Neither Parent nor Grafiti will be required to pay any interest on the proceeds from the sale of fractional shares. Neither the Agent nor the broker-dealers through which the aggregated fractional shares are sold shall be Affiliates of Parent or Grafiti. Solely for purposes of computing fractional share interests pursuant to this Section 3.4(c) and Section 3.4(d), the beneficial owner of Parent Shares and Other Parent Securities held of record in the name of a nominee in any nominee account shall be treated as the Record Holder with respect to such shares.

 

(d)  Any Grafiti Shares or cash in lieu of fractional shares (if applicable) with respect to Grafiti Shares that remain unclaimed by any Record Holder 180 days after the Distribution Date shall be delivered to Grafiti, and Grafiti or its transfer agent on its behalf shall hold such Grafiti Shares or cash for the account of such Record Holder, and the Parties agree that all obligations to provide such Grafiti Shares and cash, if any, in lieu of fractional share interests shall be obligations of Grafiti, subject in each case to applicable escheat or other abandoned property Laws, and Parent shall have no Liability with respect thereto.

 

(e) Until the Grafiti Shares are duly transferred in accordance with this Section3 .4 and applicable Law, from and after the Effective Time, Grafiti will regard the Persons entitled to receive such Grafiti Shares as record holders of Grafiti Shares in accordance with the terms of the Distribution without requiring any action on the part of such Persons. Grafiti agrees that, subject to any transfers of such shares, from and after the Effective Time (i) each such holder will be entitled to receive all dividends, if any, payable on, and exercise voting rights and all other rights and privileges with respect to, the Grafiti Shares then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive evidence of ownership of the Grafiti Shares then held by such holder.

 

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ARTICLE IV MUTUAL RELEASES

 

4.1 Release of Pre-Distribution Claims.

 

(a) Grafiti Release of Parent. Except as provided in Sections 4.1(c) and 4.1(e), effective as of the Effective Time, Grafiti does hereby, for itself and each other member of the Grafiti Group, and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Grafiti Group (in each case, in their respective capacities as such), remise, release and forever discharge (i) Parent and the members of the Parent Group, and their respective successors and assigns, (ii) all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Parent Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, and (iii) all Persons who at any time prior to the Effective Time are or have been stockholders, directors, officers, agents or employees of the Transferred Entity and who are not, as of immediately following the Effective Time, directors, officers or employees of Grafiti or a member of the Grafiti Group, in each case from: (A) all Grafiti Liabilities, (B) all Liabilities arising from or in connection with the transactions and all other activities to implement the Separation and the Distribution (for the avoidance of doubt this clause (B) shall not limit or affect indemnification obligations of the Parties set forth in this Agreement or any Ancillary Agreement) and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the Grafiti Business, the Grafiti Assets or the Grafiti Liabilities but excluding any Liabilities resulting from actions by any member of the Parent Group that are the result of intentional misconduct, wrongdoing, fraud or misrepresentation by such member of the Parent Group.

 

(b)  Parent Release of Grafiti. Except as provided in Sections 4.1(c) and 4.1(e), effective as of the Effective Time, Parent does hereby, for itself and each other member of the Parent Group and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Parent Group (in each case, in their respective capacities as such), remise, release and forever discharge (i) Grafiti and the members of the Grafiti Group and their respective successors and assigns, and (ii) all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Grafiti Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from (A) all Parent Liabilities, (B) all Liabilities arising from or in connection with the transactions contemplated hereby and all other activities to implement the Separation and the Distribution (for the avoidance of doubt this clause (B) shall not limit or affect indemnification obligations of the Parties set forth in this Agreement or any Ancillary Agreement) and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the Parent Business, the Parent Assets or the Parent Liabilities but excluding any Liabilities resulting from actions by any member of the Grafiti Group that are the result of intentional misconduct, wrongdoing, fraud or misrepresentation by such member of the Grafiti Group.

 

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(c)  Acknowledgment of Unknown Losses or Claims. The Parties expressly understand and acknowledge that it is possible that unknown losses or claims exist or might come to exist or that present losses may have been underestimated in amount, severity, or both. Accordingly, the Parties are deemed expressly to understand provisions and principles of law such as Section 1542 of the Civil Code of the State of California (“Section 1542”) (as well as any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar or comparable to Section 1542), which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. The Parties are hereby deemed to agree that the provisions of Section 1542 and all similar federal or state laws, rights, rules, or legal principles of California or any other jurisdiction that may be applicable herein, are hereby knowingly and voluntarily waived and relinquished with respect to the releases in Section 4.1(a) and Section 4.1(b).

 

(d)  Obligations Not Affected. Nothing contained in Section 4.1(a) or 4.1(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings that are specified in Section 2.6(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, in each case in accordance with its terms. Nothing contained in Section 4.1(a) or 4.1(b) shall release any Person from:

 

(i)  any Liability provided in or resulting from any agreement among any members of the Parent Group or any members of the Grafiti Group that is specified in Section 2.6(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, or any other Liability specified in Section 2.6(b) as not to terminate as of the Effective Time;

 

(ii)  any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any Ancillary Agreement;

 

(iii)  any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of the other Group prior to the Effective Time;

 

(iv)  any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value received basis for work done by a member of one Group at the request or on behalf of a member of the other Group;

 

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(v)  any Liability provided in or resulting from any Contract or understanding that is entered into after the Effective Time between any Party (or a member of such Party’s Group), on the one hand, and any other Party (or a member of the other Party’s Group), on the other hand;

 

(vi)  any Liability that the Parties may have with respect to any indemnification or contribution or other obligation pursuant to this Agreement, any Ancillary Agreement or otherwise for claims brought against the Parties by third Persons, which Liability shall be governed by the provisions of this Article IV and Article V and, if applicable, the appropriate provisions of the Ancillary Agreements; or

 

(vii)  any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 4.1.

 

In addition, nothing contained in Section 4.1(a) shall release any member of the Parent Group from honoring its existing obligations to indemnify any director, officer or employee of Grafiti who was a director, officer or employee of any member of the Parent Group on or prior to the Effective Time, to the extent such director, officer or employee becomes a named defendant in any Action with respect to which such director, officer or employee was entitled to such indemnification pursuant to such existing obligations; it being understood that, if the underlying obligation giving rise to such Action is a Grafiti Liability, Grafiti shall indemnify Parent for such Liability (including Parent’s costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article IV.

 

(e)  No Claims. Grafiti shall not make, and shall not permit any other member of the Grafiti Group to make, any claim or demand, or commence any Action asserting any claim or demand, against Parent or any other member of the Parent Group, or any other Person released pursuant to Section 4.1(a), with respect to any Liabilities released pursuant to Section 4.1(a). Parent shall not make, and shall not permit any other member of the Parent Group to make, any claim or demand, or commence any Action asserting any claim or demand, against Grafiti or any other member of the Grafiti Group, or any other Person released pursuant to Section 4.1(b), with respect to any Liabilities released pursuant to Section 4.1(b).

 

(f)  Execution of Further Releases. At any time at or after the Effective Time, at the request of either Party, the other Party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions of this Section 4.1.

 

4.2  Covenant Not to Sue. Each Party hereby covenants and agrees that none of it, the members of such Party’s Group or any Person claiming through it shall bring suit or otherwise assert any claim against any Party, or assert a defense against any claim asserted by any Party, before any court, arbitrator, mediator or administrative agency anywhere in the world, alleging that: (a) the assumption of any Grafiti Liabilities by Grafiti or a member of the Grafiti Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason; (b) the retention of any Parent Liabilities by Parent or a member of the Parent Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason; or (c) the provisions of this Article IV are void or unenforceable for any reason.

 

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ARTICLE V CERTAIN OTHER MATTERS

 

5.1Insurance Matters.

 

(a)  Parent and Grafiti agree to cooperate in good faith to provide for an orderly transition of insurance coverage from the date hereof through the Effective Time. In no event shall Parent, any other member of the Parent Group have Liability or obligation whatsoever to any member of the Grafiti Group in the event that any insurance policy or insurance policy related contract shall be terminated or otherwise cease to be in effect for any reason, shall be unavailable or inadequate to cover any Liability of any member of the Grafiti Group for any reason whatsoever or shall not be renewed or extended beyond the current expiration date.

 

(b)  From and after the Effective Time, with respect to any losses, damages and Liability incurred by any member of the Grafiti Group prior to the Effective Time, Parent will pursue claims, at Grafiti’s sole cost and expense on behalf of Grafiti (with Grafiti entitled to all Insurance Proceeds resulting from or arising out of any such claims) under Parent’s Policies in place immediately prior to the Effective Time (and any extended reporting periods for claims made Policies) and Parent’s historical Policies, but solely to the extent that such Policies provided coverage for members of the Grafiti Group or the Grafiti Business prior to the Effective Time; provided that such right to require Parent to make claims on behalf of Grafiti under such Policies shall be subject to the terms, conditions and exclusions of such Policies, including any limits on coverage or scope, any deductibles, self-insured retentions and other fees and expenses, and shall be subject to the following additional conditions:

 

(i)  Grafiti shall provide written notification to Parent of any request for Parent to pursue a claim on behalf Grafiti pursuant to this Section 5.1(b), and Parent shall use commercially reasonable efforts to pursue such claim, at Grafiti’s sole cost and expense, as promptly as is reasonably practicable;

 

(ii)  Grafiti and the members of the Grafiti Group shall indemnify, hold harmless and reimburse Parent and the members of the Parent Group for any deductibles, self- insured retention, fees, indemnity payments, settlements, judgments, legal fees, allocated claims expenses and claim handling fees, and other expenses incurred by Parent or any members of the Parent Group to the extent resulting from any pursuit of claims on behalf of Grafiti or any other members of the Grafiti Group under any insurance provided pursuant to this Section 5.1(b), whether such claims are pursued on behalf of Grafiti, its employees or third Persons; and

 

(iii)  Grafiti shall exclusively bear (and neither Parent nor any members of the Parent Group shall have any obligation to repay or reimburse Grafiti or any member of the Grafiti Group for) and shall be liable for all excluded, uninsured, uncovered, unavailable or uncollectible amounts of all such claims pursued on behalf of Grafiti or any member of the Grafiti Group under the Policies as provided for in this Section 5.1(b).

 

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In the event that any member of the Parent Group incurs any losses, damages or Liability prior to or in respect of the period prior to the Effective Time for which such member of the Parent Group is entitled to coverage under Grafiti’s third-party Policies, the same process pursuant to this Section 5.1(b) shall apply, substituting “Parent” for “Grafiti” and “Grafiti” for “Parent”, including for purposes of the first sentence of Section 5.1(e).

 

(c)  Except as provided in Section 5.1(b), from and after the Effective Time, neither Grafiti nor any member of the Grafiti Group shall have any rights to or under any of the Policies of Parent or any other member of the Parent Group. At the Effective Time, Grafiti shall have in effect all insurance programs required to comply with Grafiti’s contractual obligations and such other Policies required by Law or as reasonably necessary or appropriate for companies operating a business similar to Grafiti’s.

 

(d)  In connection with Parent’s pursuit of a claim on behalf of Grafiti or a member of the Grafiti Group under any insurance policy of Parent or any member of the Parent Group pursuant to this Section 5.1, Parent shall not be required to take any action that would be reasonably likely to (i) have a material and adverse impact on the then-current relationship between Parent or any member of the Parent Group, on the one hand, and the applicable insurance company, on the other hand; (ii) result in the applicable insurance company terminating or materially reducing coverage, or materially increasing the amount of any premium owed by Parent or any member of the Parent Group under the applicable insurance policy; or (iii) otherwise compromise, jeopardize or interfere in any material respect with the rights of Parent or any member of the Parent Group under the applicable insurance policy.

 

(e)  All payments and reimbursements by Grafiti pursuant to this Section 5.1 will be made within 45 days after Grafiti’s receipt of an invoice therefor from Parent. Parent shall retain the exclusive right to control its Policies and programs, including the right to exhaust, settle, release, commute, buy-back or otherwise resolve disputes with respect to any of its Policies and programs and to amend, modify or waive any rights under any such Policies and programs, notwithstanding whether any such Policies or programs apply to any Grafiti Liabilities or claims Grafiti has made or could make in the future, and no member of the Grafiti Group shall erode, exhaust, settle, release, commute, buyback or otherwise resolve disputes with Parent’s insurers with respect to any of Parent’s Policies and programs, or amend, modify or waive any rights under any such Policies and programs. Grafiti shall cooperate with Parent and share such information as is reasonably necessary in order to permit Parent to manage and conduct its insurance matters as Parent deems appropriate. Neither Parent nor any member of the Parent Group shall have any obligation to secure extended reporting for any claims under any Policies of Parent or any member of the Parent Group for any acts or omissions by any member of the Grafiti Group incurred prior to the Effective Time. For the avoidance of doubt, each Party and any member of its applicable Group has the sole right to settle or otherwise resolve third party claims made against it or any member of its applicable Group covered under an applicable insurance Policy.

 

(f)  This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the Parent Group in respect of any insurance policy or any other contract or policy of insurance.

 

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(g)  Grafiti does hereby, for itself and each other member of the Grafiti Group, agree that no member of the Parent Group shall have any Liability whatsoever as a result of the Policies and practices of Parent and the members of the Parent Group as in effect at any time, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, or the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

 

(h)  For 5 years after the Effective Time, each of Parent and Grafiti shall cause to be maintained in effect the same or no less favorable (in the aggregate) provisions in its respective articles of incorporation and bylaws or comparable governing documents in effect as of the Effective Time regarding elimination of liability, indemnification of officers and directors and advancement of expenses; provided that this clause (h) shall not be deemed to prevent any merger, liquidation or similar transaction.

 

5.2  Late Payments. Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, or as otherwise agreed in writing by the Parties, any amount not paid when due pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within 45 days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus 1%, provided that notice of any such late payment has been provided and the other Party has been provided 15 days to cure any such late payment.

 

5.3  Inducement. Grafiti acknowledges and agrees that Parent’s willingness to cause, effect and consummate the Separation and the Distribution has been conditioned upon and induced by Grafiti’s covenants and agreements in this Agreement and the Ancillary Agreements, including Grafiti’s assumption of the Grafiti Liabilities pursuant to the Separation and the provisions of this Agreement and Grafiti’s covenants and agreements contained in Article IV.

 

5.4  Post-Effective Time Conduct. The Parties acknowledge that, after the Effective Time, each Party shall be independent of the other Party, with responsibility for its own actions and inactions and its own Liabilities relating to, arising out of or resulting from the conduct of its business, operations and activities following the Effective Time, except as may otherwise be provided in any Ancillary Agreement, and each Party shall (except as otherwise provided in Article IV) use commercially reasonable efforts to prevent such Liabilities from being inappropriately borne by the other Party.

 

5.5  Tax Cooperation. After the Distribution, the Parties agree to provide (and to cause their Affiliates to provide) each other with such cooperation and information (including access to books and records, financial statements and copies of relevant tax returns or portions thereof, together with accompanying schedules) relating to the Transferred Entity that are in such party’s possession for any tax period (or portion thereof) ending on or prior to the date of the Distribution (a “Tax Period”) as any other party may reasonably request in connection with (i) preparing and filing any tax return, amended tax return or other ax filing for a Tax Period, (ii) conducting or defending any tax audit, exam or other proceeding for a Tax Period, or (iii) effectuating the terms of this Agreement and the Distribution from a tax perspective.

 

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ARTICLE VI

 

EXCHANGE OF INFORMATION; CONFIDENTIALITY

 

6.1Agreement for Exchange of Information.

 

(a)  Subject to Section 6.9 and any other applicable confidentiality obligations, each of Parent and Grafiti, on behalf of itself and each member of its Group, agrees to use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other Party and the members of such other Party’s Group, at any time before, on or after the Effective Time, as soon as reasonably practicable after written request therefor is received by such Party, any information (or a copy thereof) in the possession or under the control of such Party or its Group which the requesting Party requests to the extent that (i) such information relates to the Grafiti Business, or any Grafiti Asset or Grafiti Liability, if Grafiti is the requesting Party, or to the Parent Business, or any Parent Asset or Parent Liability, if Parent is the requesting Party; (ii) such information is required by the requesting Party to comply with its obligations under this Agreement or any Ancillary Agreement; or (iii) such information is required by the requesting Party to comply with any obligation imposed by any Governmental Authority or under any securities exchange or marketplace rule; provided, however, that, in the event that the Party to whom the request has been made determines that any such provision of information could be detrimental to the Party providing the information, violate any Law or agreement, or waive any privilege available under applicable Law, including any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit compliance with such obligations to the extent and in a manner that avoids any such harm or consequence. The Party providing information pursuant to this Section 6.1 shall only be obligated to provide such information in the form, condition and format in which it then exists, and in no event shall such Party be required to perform any improvement, modification, conversion, updating or reformatting of any such information, and nothing in this Section 6.1 shall expand the obligations of a Party under Section 6.4.

 

(b)  Without limiting the generality of the foregoing, until December 31, 2023 which is the end of Grafiti’s 2023 fiscal year (and for a reasonable period of time afterwards as required for each Party to prepare consolidated financial statements or complete a financial statement audit for such fiscal year), each Party shall use its commercially reasonable efforts to cooperate with the other Party’s information requests to enable (i) the other Party to meet its timetable for dissemination of its earnings releases, financial statements and management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K promulgated under the Exchange Act; and (ii) the other Party’s accountants to timely complete their review of the quarterly financial statements and audit of the annual financial statements, including, to the extent applicable to such Party, its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the SEC’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder and any other applicable Laws.

 

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6.2 Ownership of Information. The provision of any information pursuant to Section 6.1 or Section 6.7 shall not affect the ownership of such information (which shall be determined solely in accordance with the terms of this Agreement and the Ancillary Agreements), or constitute a grant of rights in or to any such information.

 

6.3  Compensation for Providing Information. The Party requesting information agrees to reimburse the other Party for the reasonable costs, if any, of creating, gathering, copying, transporting and otherwise complying with the request with respect to such information (including any reasonable costs and expenses incurred in any review of information for purposes of protecting the Privileged Information of the providing Party or in connection with the restoration of backup media for purposes of providing the requested information). Except as may be otherwise specifically provided elsewhere in this Agreement, any Ancillary Agreement or any other agreement between the Parties, such costs shall be computed in accordance with the providing Party’s standard methodology and procedures.

 

6.4  Record Retention. To facilitate the possible exchange of information pursuant to this Article VI and other provisions of this Agreement after the Effective Time, the Parties agree to use their commercially reasonable efforts, which shall be no less rigorous than those used for retention of such Party’s own information, to retain all information in their respective possession or control at the Effective Time in accordance with their respective policies regarding retention of records; provided, however, that in the case of any information relating to Taxes, such retention period shall be extended to the expiration of the applicable statute of limitations (giving effect to any extensions thereof).

 

6.5  Limitations of Liability. Neither Party shall have any Liability to the other Party in the event that any information exchanged or provided pursuant to this Agreement is found to be inaccurate in the absence of gross negligence, bad faith or willful misconduct by the Party providing such information. Neither Party shall have any Liability to any other Party if any information is destroyed after commercially reasonable efforts by such Party to comply with the provisions of Section 6.4.

 

6.6 Other Agreements Providing for Exchange of Information.

 

(a)  The rights and obligations granted under this Article VI are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention, destruction or confidential treatment of information set forth in any Ancillary Agreement.

 

(b)  Any party that receives, pursuant to a request for information in accordance with this Article VI, Tangible Information that is not relevant to its request shall, at the request of the providing Party, (i) return it to the providing Party or, at the providing Party’s request, destroy such Tangible Information; and (ii) deliver to the providing Party written confirmation that such Tangible Information was returned or destroyed, as the case may be, which confirmation shall be signed by an authorized representative of the requesting Party.

 

6.7 Production of Witnesses; Records; Cooperation.

 

(a)  After the Effective Time, except in the case of a Dispute between Parent and Grafiti, or any members of their respective Groups, each Party shall use its commercially reasonable efforts to make available to the other Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available without undue burden, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting Party (or member of its Group) may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The requesting Party shall bear all costs and expenses in connection therewith.

 

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(b)  If a Party chooses to defend or to seek to compromise or settle any Third- Party Claim, the other Party shall make available to such Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available without undue burden, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be.

 

(c)  Without limiting the foregoing, the Parties shall cooperate and consult to the extent reasonably necessary with respect to any Actions.

 

(d)  Without limiting any provision of this Section 6.7, each of the Parties agrees to cooperate, and to cause each member of its respective Group to cooperate, with each other in the defense of any infringement or similar claim with respect to any Intellectual Property and shall not claim to acknowledge, or permit any member of its respective Group to claim to acknowledge, the validity or infringing use of any Intellectual Property of a third Person in a manner that would hamper or undermine the defense of such infringement or similar claim.

 

(e) The obligation of the Parties to provide witnesses pursuant to this Section 6.7 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to provide as witnesses directors, officers, employees, other personnel and agents without regard to whether such person or the employer of such person could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 6.7(a)).

 

6.8Privileged Matters.

 

(a)  The Parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been and will be rendered for the collective benefit of each of the members of the Parent Group and the Grafiti Group, and that each of the members of the Parent Group and the Grafiti Group should be deemed to be the client with respect to such services for the purposes of asserting all privileges which may be asserted under applicable Law in connection therewith. The Parties recognize that legal and other professional services will be provided following the Effective Time, which services will be rendered solely for the benefit of the Parent Group or the Grafiti Group, as the case may be. In furtherance of the foregoing, each Party shall authorize the delivery to or retention by the other Party of materials existing as of the Effective Time that are necessary for such other Party to perform such services.

 

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(b) The Parties agree as follows:

 

(i)  Parent shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the Parent Business and not to the Grafiti Business, whether or not the Privileged Information is in the possession or under the control of any member of the Parent Group or any member of the Grafiti Group. Parent shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any Parent Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of any member of the Parent Group or any member of the Grafiti Group;

 

(ii)  Grafiti shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the Grafiti Business and not to the Parent Business, whether or not the Privileged Information is in the possession or under the control of any member of the Grafiti Group or any member of the Parent Group. Grafiti shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any Grafiti Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of any member of the Grafiti Group or any member of the Parent Group; and

 

(iii)  if the Parties do not agree as to whether certain information is Privileged Information, then such information shall be treated as Privileged Information, and the Party that believes that such information is Privileged Information shall be entitled to control the assertion or waiver of all privileges and immunities in connection with any such information unless the Parties otherwise agree. The Parties shall use the procedures set forth in Article VII to resolve any disputes as to whether any information relates solely to the Parent Business, solely to the Grafiti Business, or to both the Parent Business and the Grafiti Business.

 

(c)  Subject to the remaining provisions of this Section 6.8, the Parties agree that they shall have a shared privilege or immunity with respect to all privileges and immunities not allocated pursuant to Section 6.8(b) and all privileges and immunities relating to any Actions or other matters that involve both Parties (or one or more members of their respective Groups) and in respect of which both Parties have Liabilities under this Agreement, and that no such shared privilege or immunity may be waived by either Party without the prior written consent of the other Party.

 

(d)  If any Dispute arises between the Parties or any members of their respective Groups regarding whether a privilege or immunity should be waived to protect or advance the interests of either Party or any member of their respective Groups, each Party agrees that it shall (i) negotiate with the other Party in good faith; (ii) endeavor to minimize any prejudice to the rights of the other Party; and (iii) not unreasonably withhold consent to any request for waiver by the other Party. Further, each Party specifically agrees that it shall not withhold its consent to the waiver of a privilege or immunity for any purpose except in good faith to protect its own legitimate interests.

 

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(e)  In the event of any Dispute between Parent and Grafiti, or any members of their respective Groups, either Party may waive a privilege in which the other Party or member of such other Party’s Group has a shared privilege, without obtaining prior written consent pursuant to Section 6.8(c); provided that the Parties intend such waiver of a shared privilege to be effective only as to the use of information with respect to the Action between the Parties or the applicable members of their respective Groups, and is not intended to operate as a waiver of the shared privilege with respect to any Third Party.

 

(f)  Upon receipt by either Party, or by any member of its respective Group, of any subpoena, discovery or other request that may reasonably be expected to result in the production or disclosure of Privileged Information subject to a shared privilege or immunity or as to which another Party has the sole right hereunder to assert a privilege or immunity, or if either Party obtains knowledge that any of its, or any member of its respective Group’s, current or former directors, officers, agents or employees have received any subpoena, discovery or other requests that may reasonably be expected to result in the production or disclosure of such Privileged Information, such Party shall promptly notify the other Party of the existence of the request (which notice shall be delivered to such other Party no later than 5 business days following the receipt of any such subpoena, discovery or other request) and shall provide the other Party a reasonable opportunity to review the Privileged Information and to assert any rights it or they may have under this Section 6.8 or otherwise, to prevent the production or disclosure of such Privileged Information.

 

(g)  Any furnishing of, or access or transfer of, any information pursuant to this Agreement is made in reliance on the agreement of Parent and Grafiti set forth in this Section 6.8 and in Section 6.9 to maintain the confidentiality of Privileged Information and to assert and maintain all applicable privileges and immunities. The Parties agree that their respective rights to any access to information, witnesses and other Persons, the furnishing of notices and documents and other cooperative efforts between the Parties contemplated by this Agreement, and the transfer of Privileged Information between the Parties and members of their respective Groups as needed pursuant to this Agreement, is not intended to be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise.

 

(h)  In connection with any matter contemplated by Section 6.7 or this Section 6.8, the Parties agree to, and to cause the applicable members of their Group to, use commercially reasonable efforts to maintain their respective separate and joint privileges and immunities, including by executing joint defense or common interest agreements where necessary or useful for this purpose.

 

6.9 Confidentiality.

 

(a)  Confidentiality. Subject to Section 6.10, from and after the Effective Time each of Parent and Grafiti, on behalf of itself and each member of its respective Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to Parent’s confidential and proprietary information pursuant to policies in effect as of the Effective Time, all confidential and proprietary information concerning the other Party or any member of the other Party’s Group or their respective businesses (giving effect to the Separation and Distribution) that is either in its possession (including confidential and proprietary information in its possession prior to the date hereof) or furnished by any such other Party or any member of such Party’s Group or their respective Representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not use any such confidential and proprietary information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such confidential and proprietary information has been (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any member of such Party’s Group or any of their respective Representatives in violation of this Agreement, (ii) later lawfully acquired from other sources by such Party (or any member of such Party’s Group) which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary information, or (iii) independently developed or generated without reference to or use of any proprietary or confidential information of the other Party or any member of such Party’s Group. If any confidential and proprietary information of one Party or any member of its Group is disclosed to the other Party or any member of such other Party’s Group in connection with providing services to such first Party or any member of such first Party’s Group under this Agreement or any Ancillary Agreement, then such disclosed confidential and proprietary information shall be used only as required to perform such services.

 

(b)  No Release; Return or Destruction. Each Party agrees not to release or disclose, or permit to be released or disclosed, any information addressed in Section 6.9(a) to any other Person, except its Representatives who need to know such information in their capacities as such (who shall be advised of their obligations hereunder with respect to such information), and except in compliance with Section 6.10. Without limiting the foregoing, when any such information is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, and is no longer subject to any legal hold or other document preservation obligation, each Party will promptly after request of the other Party either return to the other Party all such information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or notify the other Party in writing that it has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon); provided, that the Parties may retain electronic back-up versions of such information maintained on routine computer system backup tapes, disks or other backup storage devices; provided further, that any such information so retained shall remain subject to the confidentiality provisions of this Agreement or any Ancillary Agreement. Each Party agrees to comply with all applicable privacy, data protection, data security or other applicable Laws, policies and contracts with regard to the collection, maintenance, disclosure, retention or destruction of the personal information in its possession, custody or control.

 

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(c)  Third-Party Information; Privacy or Data Protection Laws. Each Party acknowledges that it and members of its Group may presently have and, following the Effective Time, may gain access to or possession of confidential or proprietary information of, or legally- protected personal information relating to, Third Parties (i) that was received under privacy policies or confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other Party or members of such other Party’s Group, on the other hand, prior to the Effective Time; or (ii) that, as between the two Parties, was originally collected by the other Party or members of such other Party’s Group and that may be subject to and protected by privacy policies, as well as privacy, data protection or other applicable Laws. Each Party agrees that it shall hold, protect and use, and shall cause the members of its Group and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary information of, or legally-protected personal information relating to, Third Parties in accordance with privacy policies and privacy, data protection, data security or other applicable Laws and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other Party or members of the other Party’s Group, on the one hand, and such Third Parties, on the other hand. With respect to legally-protected personal information received from consumers before the Effective Time, each Party agrees that it will not use data in a manner that is materially inconsistent with promises made at the time the data was collected unless it first obtains affirmative express consent from the relevant consumer.

 

6.10  Protective Arrangements. In the event that a Party or any member of its Group either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority or securities exchange or marketplace to disclose or provide information of the other Party (or any member of the other Party’s Group) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the circumstances prior to disclosing or providing such information and shall cooperate, at the expense of the other Party, in seeking any appropriate protective order requested by the other Party. In the event that such other Party fails to receive such appropriate protective order in a timely manner, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.

 

6.11 Security.

 

(a)  If either Party is given access to the other Party’s (or its Affiliate’s) computer systems or Software (collectively, the “Systems”) or physical facilities in connection with the exchange of Information under this Agreement, such Party shall comply with all of the other Party’s reasonable policies, procedures and requirements in relation to Systems or physical facilities (collectively, “Security Requirements”) and will not tamper with, compromise, attempt to circumvent or circumvent any security or audit measures employed by such other Party. In the event of any conflict between this Agreement and any Security Requirements, this Agreement will govern. Each Party shall access and use only those Systems of the other Party for which it has been granted the right to access and use, and only to the extent reasonably necessary in connection with the provision or receipt, as applicable, of Information. Each Party shall be responsible for its employees’ compliance with the confidentiality provisions of this Agreement in connection with such access, including access to comingled or sensitive Information.

 

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(b)  Each Party will ensure that only those of its personnel who are specifically authorized to have access to the Systems or physical facilities of the other Party (or its Affiliates) gain such access, and will prohibit the unauthorized access, use, destruction, alteration or loss of Information or other property contained therein, including notifying its personnel of the restrictions set forth in this Agreement and of the Security Requirements.

 

(c)  If, at any time, either Party determines that (i) any of its personnel has sought to circumvent, or has circumvented, the Security Requirements of the other Party, (ii) any unauthorized personnel of such Party has accessed the Systems or physical facilities of the other Party, or (iii) any of the personnel of such Party has engaged in activities that may lead or leads to the unauthorized access, use, destruction, alteration or loss of Information or Software, such Party shall immediately terminate any such personnel’s access to the Systems or physical facilities of the other Party and immediately notify the other Party. In addition, each Party shall have the right to deny the personnel of the other Party access to any Systems or physical facilities upon written notice to the other Party in the event that such Party reasonably believes that such personnel have engaged in any of the activities set forth above in this Section 6.11(c). Each Party will cooperate with the other Party in investigating any apparent unauthorized access to the Systems or facilities of the other Party.

 

ARTICLE VII

 

DISPUTE RESOLUTION

 

7.1  Good Faith Offer Negotiation. Subject to Section 7.4, either Party seeking resolution of any dispute, controversy or claim arising out of or relating to this Agreement or any Ancillary Agreement (including regarding whether any Assets are Grafiti Assets, any Liabilities are Grafiti Liabilities or the validity, interpretation, breach or termination of this Agreement or any Ancillary Agreement) (a “Dispute”), shall provide written notice thereof to the other Party (the “Offer Negotiation Request”). Within 15 days of the delivery of the Offer Negotiation Request, the Parties shall attempt to resolve the Dispute through good faith negotiation. All such negotiations shall be conducted by executives who hold, at a minimum, the title of Senior Vice President, Chief Financial Officer or Chief Operating Officer and who have authority to settle the Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. If the Parties are unable for any reason to resolve a Dispute within 30 days of receipt of the Offer Negotiation Request, and such 30 day period is not extended by mutual written consent of the Parties, the Chief Executive Officers of the Parties shall enter into good faith negotiations in accordance with Section 7.2.

 

7.2  Good-Faith Negotiation. If any Dispute is not resolved pursuant to Section 7.1, the Party that delivered the Offer Negotiation Request shall provide written notice of such Dispute to the Chief Executive Officer of each Party (a “CEO Negotiation Request”). As soon as reasonably practicable following receipt of a CEO Negotiation Request, the Chief Executive Officers of the Parties shall begin conducting good-faith negotiations with respect to such Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. If the Chief Executive Officers of the Parties are unable for any reason to resolve a Dispute within 30 days of receipt of a CEO Negotiation Request, and such 30 day period is not extended by mutual written consent of the Parties, the Dispute shall be submitted to arbitration in accordance with Section 7.3.

 

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7.3 Arbitration.

 

(a)  In the event that a Dispute has not been resolved within 30 days of the receipt of a CEO Negotiation Request in accordance with Section 7.2, or within such longer period as the Parties may agree to in writing, then such Dispute shall, upon the written request of a Party (the “Arbitration Request”) be submitted to be finally resolved by binding arbitration in accordance with the then current International Institute for Conflict Prevention and Resolution (“CPR”) arbitration procedure, except as modified herein. The arbitration shall be held in (i) Palo Alto, California, or (ii) such other place as the Parties may mutually agree in writing. Unless otherwise agreed by the Parties in writing, any Dispute to be decided pursuant to this Section 7.3 will be decided (i) before a sole arbitrator if the amount in dispute, inclusive of all claims and counterclaims, totals less than $1 million; or (ii) by a panel of 3 arbitrators if the amount in dispute, inclusive of all claims and counterclaims, totals $1 million or more.

 

(b)  The panel of 3 arbitrators will be chosen as follows: (i) within 15 days from the date of the receipt of the Arbitration Request, each Party will name an arbitrator; and (ii) the 2 Party-appointed arbitrators will thereafter, within 30 days from the date on which the second of the 2 arbitrators was named, name a third, independent arbitrator who will act as chairperson of the arbitral tribunal. In the event that either Party fails to name an arbitrator within 15 days from the date of receipt of the Arbitration Request, then upon written application by either Party, that arbitrator shall be appointed pursuant to the CPR arbitration procedure. In the event that the 2 Party-appointed arbitrators fail to appoint the third, then the third, independent arbitrator will be appointed pursuant to the CPR arbitration procedure. If the arbitration will be before a sole independent arbitrator, then the sole independent arbitrator will be appointed by agreement of the Parties within 15 days of the date of receipt of the Arbitration Request. If the Parties cannot agree to a sole independent arbitrator during such 15 day period, then upon written application by either party, the sole independent arbitrator will be appointed pursuant to the CPR arbitration procedure.

 

(c)  The arbitrator(s) will have the right to award, on an interim basis, or include in the final award, any relief which it deems proper in the circumstances, including money damages (with interest on unpaid amounts from the due date), injunctive relief (including specific performance) and attorneys’ fees and costs; provided that the arbitrator(s) will not award any relief not specifically requested by the Parties and, in any event, will not award any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim). Upon selection of the arbitrator(s) following any grant of interim relief by a special arbitrator or court pursuant to Section 7.4, the arbitrator(s) may affirm or disaffirm that relief, and the Parties will seek modification or rescission of the order entered by the court as necessary to accord with the decision of the arbitrator(s). The award of the arbitrator(s) shall be final and binding on the Parties, and may be enforced in any court of competent jurisdiction. The initiation of arbitration pursuant to this Article VII will toll the applicable statute of limitations for the duration of any such proceedings.

 

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7.4  Litigation and Unilateral Commencement of Arbitration. Notwithstanding the foregoing provisions of this Article VII, (a) a Party may seek preliminary provisional or injunctive judicial relief with respect to a Dispute without first complying with the procedures set forth in Section 7.1, Section 7.2 and Section 7.3 if such action is reasonably necessary to avoid irreparable damage and (b) either Party may initiate arbitration before the expiration of the periods specified in Section 7.1, Section 7.2 or Section 7.3 if such Party has submitted an Offer Negotiation Request, a CEO Negotiation Request or an Arbitration Request and the other Party has failed to comply with Section 7.1, Section 7.2 or Section 7.3 in good faith with respect to such negotiation or the commencement and engagement in arbitration. In such event, the other Party may commence and prosecute such arbitration unilaterally in accordance with the CPR arbitration procedure.

 

7.5  Conduct During Dispute Resolution Process. Unless otherwise agreed in writing, the Parties shall, and shall cause the respective members of their Groups to, continue to honor all commitments under this Agreement and each Ancillary Agreement to the extent required by such agreements during the course of dispute resolution pursuant to the provisions of this Article VII, unless such commitments are the specific subject of the Dispute at issue.

 

ARTICLE VIII

 

FURTHER ASSURANCES AND ADDITIONAL COVENANTS

 

8.1 Further Assurances.

 

(a)  In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties shall use its reasonable best efforts, prior to, on and after the Effective Time, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

 

(b)  Without limiting the foregoing, prior to, on and after the Effective Time, each Party hereto shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all Approvals or Notifications of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the Grafiti Assets and the Parent Assets and the assignment and assumption of the Grafiti Liabilities and the Parent Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each Party will, at the reasonable request, cost and expense of the other Party, take such other actions as may be reasonably necessary to vest in such other Party good and marketable title to the Assets allocated to such Party under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest, if and to the extent it is practicable to do so.

 

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(c)  On or prior to the Effective Time, Parent and Grafiti, in their respective capacities as direct and indirect stockholders of the members of their Groups, shall each ratify any actions which are reasonably necessary or desirable to be taken by Parent, Grafiti or any of the members of their respective Groups, as the case may be, to effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.

 

ARTICLE IX TERMINATION

 

9.1 Termination. This Agreement and all Ancillary Agreements may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Effective Time by Parent, in its sole and absolute discretion, without the approval or consent of any other Person, including Grafiti. After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by a duly authorized officer of each of the Parties.

 

9.2  Effect of Termination. In the event of any termination of this Agreement prior to the Effective Time, no Party (nor any of its directors, officers or employees) shall have any Liability or further obligation to the other Party by reason of this Agreement.

 

ARTICLE X MISCELLANEOUS

 

10.1 Counterparts; Entire Agreement; Corporate Power.

 

(a)  This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties.

 

(b)  This Agreement, the Ancillary Agreements and the Exhibits, Schedules and appendices hereto and thereto contain the entire agreement between and among the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between and among the Parties other than those set forth or referred to herein or therein. This Agreement and the Ancillary Agreements together govern the arrangements in connection with the Separation and Distribution and would not have been entered independently.

 

(c)  Parent represents on behalf of itself and each other member of the Parent Group, and Grafiti represents on behalf of itself and each other member of the Grafiti Group, as follows:

 

(i)  each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

 

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(ii)  this Agreement and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

(d)  Each Party acknowledges that it and each other Party is executing certain of the Ancillary Agreements by facsimile, stamp, electronic (including via DocuSign) or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement or any Ancillary Agreement (whether executed by manual, stamp, electronic (including via DocuSign) or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement or any Ancillary Agreement. Each Party expressly adopts and confirms each such facsimile, stamp, electronic (including via DocuSign) or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause each such Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

 

10.2  Governing Law. This Agreement and, unless expressly provided therein, each Ancillary Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any Party to enter herein and therein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Nevada irrespective of the choice of laws principles of the State of Nevada including all matters of validity, construction, effect, enforceability, performance and remedies.

 

10.3  Assignability. Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the Parties and the parties thereto, respectively, and their respective successors and permitted assigns; provided, however, that neither Party nor any such party thereto may assign its rights or delegate its obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other Party hereto or other parties thereto, as applicable. Notwithstanding the foregoing, no such consent shall be required for the assignment of a party’s rights and obligations under this Agreement and the Ancillary Agreements (except as may be otherwise provided in any such Ancillary Agreement) in whole (i.e., the assignment of a party’s rights and obligations under this Agreement and all Ancillary Agreements all at the same time) in connection with a change of control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party.

 

10.4  Third-Party Beneficiaries. The provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and there are no third-party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any third person with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

 

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10.5  Notices. All notices, requests, claims, demands or other communications under this Agreement and, to the extent, applicable and unless otherwise provided therein, under each of the Ancillary Agreements shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, or by facsimile with receipt confirmed, to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.5):

 

If to Parent, to:

 

Inpixon

2479 E. Bayshore Road, Suite 195

Palo Alto, California 94303

Attn.: Chief Executive Officer

 

with a copy to (which will not constitute notice):

 

Kevin Friedmann, Esq.

Norton Rose Fulbright US LLP

1045 W. Fulton Market, Suite 1200

Chicago, IL 60607

 

If to Graffiti, to:

 

Grafiti Holding Inc.

2479 E. Bayshore Road, Suite 195

Palo Alto, California 94303

Attn.: Chief Executive Officer

 

with a copy to (which will not constitute notice):

 

Daniel Steiner, Esq.

Norton Rose Fulbright Canada llp

510 West Georgia Street, Suite 1800

Vancouver, British Columbia

V6B 0M3 Canada

 

A Party may, by notice to the other Party, change the address to which such notices are to be given.

 

10.6  Severability. If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

 

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10.7  Force Majeure. No Party shall be deemed in default of this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance of such obligations (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement and the Ancillary Agreements, as applicable, as soon as reasonably practicable.

 

10.8  No Set-Off. Except as expressly set forth in any Ancillary Agreement or as otherwise mutually agreed to in writing by the Parties, neither Party nor any member of such Party’s Group shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement or any Ancillary Agreement; or (b) any other amounts claimed to be owed to the other Party or any member of its Group arising out of this Agreement or any Ancillary Agreement.

 

10.9  Expenses. Except as otherwise expressly set forth in this Agreement or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, all fees, costs and expenses incurred on or prior to the Effective Time in connection with the preparation, execution, delivery and implementation of this Agreement, including the Separation and the Distribution, and any Ancillary Agreement, the Form S-1 or the Form 10, and the consummation of the transactions contemplated hereby and thereby, will be borne by Parent.

 

10.10  Headings. The article, section and paragraph headings contained in this Agreement and in the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.

 

10.11  Survival of Covenants. Except as expressly set forth in this Agreement or any Ancillary Agreement, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and Liability for the breach of any obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect.

 

10.12  Waivers of Default. Waiver by a Party of any default by the other Party of any provision of this Agreement or any Ancillary Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by a Party in exercising any right, power or privilege under this Agreement or any Ancillary Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

 

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10.13  Specific Performance. Subject to the provisions of Article VII, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

 

10.14  Amendments. No provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

 

10.15  Interpretation. In this Agreement and any Ancillary Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement (or the applicable Ancillary Agreement) as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement (or such Ancillary Agreement); (c) Article, Section, Schedule, Exhibit and Appendix references are to the Articles, Sections, Schedules, Exhibits and Appendices to this Agreement (or the applicable Ancillary Agreement) unless otherwise specified; (d) unless otherwise stated, all references to any agreement (including this Agreement and each Ancillary Agreement) shall be deemed to include the exhibits, schedules and annexes (including all Schedules, Exhibits and Appendixes) to such agreement; (e) the word “including” and words of similar import when used in this Agreement (or the applicable Ancillary Agreement) shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or New York, New York; (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (j) unless expressly stated to the contrary in this Agreement or in any Ancillary Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and”hereupon” and words of similar import shall all be references to the date set forth in the introductory paragraph of this Agreement.

 

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10.16  Limitations of Liability. Notwithstanding anything in this Agreement to the contrary, neither Grafiti or any member of the Grafiti Group, on the one hand, nor Parent or any member of the Parent Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim).

 

10.17  Performance. Parent will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the Parent Group. Grafiti will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the Grafiti Group. Each Party (including its permitted successors and assigns) further agree that they will (a) give timely notice of the terms, conditions and continuing obligations contained in this Agreement and any applicable Ancillary Agreement to all of the other members of their respective Group and (b) cause all of the other members of their respective Group not to take any action or fail to take any such action inconsistent with such Party’s obligations under this Agreement, any Ancillary Agreement or the transactions contemplated hereby or thereby.

 

10.18  Mutual Drafting. This Agreement and the Ancillary Agreements shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

 

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IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives as of the date first written above.

 

INPIXON
     
  By: /s/ Nadir Ali
    Nadir Ali, Chief Executive Officer
     
GRAFITI HOLDING INC.
     
  By: /s/ Nadir Ali
    Nadir Ali, Chief Executive Officer

 

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Schedules to Separation and Distribution Agreement

 

(See Attached)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit A

 

Articles of Grafiti

 

(See Attached)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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GRAFITI HOLDING INC.

(the “Company”)

 

The Company has as its articles the following articles.

  

Full name and signature of each incorporator Date of signing

BHT CORPORATE SERVICES INC.

October 17 , 2023

 

Incorporation number: BC1444838

 

 

 

 

ARTICLES

 

1.INTERPRETATION 1
     
  1.1 Definitions 1
  1.2 Business Corporations Act and Interpretation Act Definitions Applicable 1
       
2. SHARES AND SHARE CERTIFICATES 1
     
  2.1 Authorized Share Structure 1
  2.2 Form of Share Certificate 1
  2.3 Share Certificate or Acknowledgment 1
  2.4 Delivery by Mail 2
  2.5 Replacement of Worn Out or Defaced Certificate or Acknowledgement 2
  2.6 Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment 2
  2.7 Splitting Share Certificates 2
  2.8 Certificate Fee 2
  2.9 Recognition of Trusts 2
       
3. ISSUE OF SHARES 3
     
  3.1 Directors Authorized 3
  3.2 Commissions and Discounts 3
  3.3 Brokerage 3
  3.4 Conditions of Issue 3
  3.5 Share’ Purchase Warrants and Rights 3
     
4. SHARE REGISTERS 4
     
  4.1 Central Securities Register 4
  4.2 Closing Register 4

 

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5. SHARE TRANSFERS 4
       
  5.1 Registering Transfers 4
  5.2 Form of Instrument of Transfer 4
  5.3 Transferor Remains Shareholder 4
  5.4 Signing of Instrument of Transfer 4
  5.5 Enquiry as to Title Not Required 5
  5.6 Transfer Fee 5
       
6. TRANSMISSION OF SHARES 5
       
  6.1 Legal Personal Representative Recognized on Death. 5
  6.2 Rights of Legal Personal Representative 5
       
7. PURCHASE OF SHARES 5
       
  7.1 Company Authorized to Purchase Shares 5
  7.2 Purchase When lnsolvent 5
  7.3 Sale and Voting of Purchased Shares 6
       
8. BORROWING POWERS 6
     
9. ALTERATIONS 6
       
  9.1 Alteration of Authorized Share Structure 6
  9.2 Special Rights and Restrictions 7
  9.3 Change of Name 7
  9.4 Other Alterations 7
     
10. MEETINGS OF SHAREHOLDERS 7
       
  10.1 Annual General Meetings 7
  10.2 Resolution Instead of Annual General Meeting 7
  10.3 Calling of Meetings of Shareholders 7
  10.4 Notice for Meetings of Shareholders 7
  10.5 Record Date for Notice 8
  10.6 Record Date for Voting 8
  10.7 Failure to Give Notice and Waiver of Notice 8
  10.8 Notice of Special Business at Meetings of Shareholders 8
       
11. PROCEEDINGS AT MEETINGS OF SHAREHOLDERS 9
       
  11.1 Special Business 9
  11.2 Special Majority 9
  11.3 Quorum 9
  11.4 One Shareholder May Constitute Quorum 9
  11.5 Other Persons May Attend 10
  11.6 Requirement of Quorum 10
  11.7 Lack of Quorum 10
  11.8 Lack of Quorum at Succeeding Meeting 10
  11.9 Chair 10
  11.10 Selection of Alternate Chair 10
  11.11 Adjournments 10

 

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  11.12 Notice of Adjourned Meeting 11
  11.13 Decisions by Show of Hands or Poll 11
  11.14 Declaration of Result 11
  11.15 Motion Need Not be Seconded 11
  11.16 Casting Vote 11
  11.17 Manner of Taking Poll. 11
  11.18 Demand for Poll on Adjournment 11
  11.19 Chair Must Resolve Dispute 12
  11.20 Casting of Votes 12
  11.21 Demand for Poll 12
  11.22 Demand for Poll Notto Prevent Continuance of Meeting 12
  11.23 Retention of Ballots and Proxies 12
       
12.VOTES OF SHAREHOLDERS 12
       
  12.1 Number of Votes by Shareholder or by Shares 12
  12.2 Votes of Persons in Representative Capacity 12
  12.3 Votes by Joint Holders 12
  12.4 Legal Personal Representatives as Joint Shareholders 13
  12.5 Representative of a Corporate Shareholder. 13
  12.6 Proxy Provisions Do Not Apply to All Companies 13
  12.7 Appointment of Proxy Holders 13
  12.8 Alternate Proxy Holders 13
  12.9 When Proxy Holder Need Not Be Shareholder 14
  12.10 Deposit of Proxy 14
  12.11 Validity of Proxy Vote 14
  12.12 Form of Proxy 14
  12.13 Revocation of Proxy 15
  12.14 Revocation of Proxy Must Be Signed 15
  12.15 Production of Evidence of Authority to Vote 15
     
13. DIRECTORS 15
       
  13.1 First Directors; Number of Directors 15
  13.2 Change in Number of Directors 16
  13.3 Directors’ Acts Valid Despite Vacancy 16
  13.4 Qualifications of Directors 16
  13.5 Remuneration of Directors 16
  13.6 Reimbursement of Expenses of Directors 16
  13.7 Special Remuneration for Directors 16
  13.8 Gratuity, Pension or Allowance on Retirement of Director 16
       
14. ELECTION AND REMOVAL OF DIRECTORS 17
      17
  14.1 Election at Annual General Meeting 17
  14.2 Consent to be a Director 17
  14.3 Failure to Elect or Appoint Directors 17
  14.4 Places of Retiring Directors Not Filled 17
  14.5 Directors May Fill Casual Vacancies 18

 

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  14.6 Remaining Directors Power to Act. 18
  14.7 Shareholders May Fill Vacancies 18
  14.8 Additional Directors 18
  14.9 Ceasing to be a Director 18
  14.10 Removal of Director by Shareholders 18
  14.11 Removal of Director by Directors 18
       
15. ALTERNATE DIRECTORS 19
     
  15.1 Appointment of Alternate Director 19
  15.2 Notice of Meetings 19
  15.3 Alternate for More Than One Director Attending Meetings 19
  15.4 Consent Resolutions 19
  15.5 Alternate Director Not an Agent. 19
  15.6 Revocation of Appointment of Alternate Director 20
  15.7 Ceasing to be an Alternate Director 20
  15.8 Remuneration and Expenses of Alternate Director 20
       
16. POWERS AND DUTIES OF DIRECTORS 20
     
  16.1 Powers of Management 20
  16.2 Appointment of Attorney of Company 20
  16.3 Setting the Remuneration of Auditors 20
       
17.DISCLOSURE OF INTEREST OF DIRECTORS 21
  
  17.1 Obligation to Account for Profits 21
  17.2 Restrictions on Voting by Reason of Interest 21
  17.3 Interested Director Counted in Quorum 21
  17.4 Disclosure of Conflict of Interest or Property 21
  17.5 Director Holding Other Office in the Company 21
  17.6 No Disqualification 21
  17.7 Professional Services by Director or Officer. 21
  17.8 Director or Officer in Other Corporations 21
       
18. PROCEEDINGS OF DIRECTORS 22
   
  18.1 Meetings of Directors 22
  18.2 Voting at Meetings 22
  18.3 Chair of Meetings 22
  18.4 Meetings by Telephone or Other Communications Medium 22
  18.5 Calling of Meetings 22
  18.6 Notice of Meetings 23
  18.7 When Notice Not Required 23
  18.8 Meeting Valid Despite Failure to Give Notice 23
  18.9 Waiver of Notice of Meetings 23
  18.10 Quorum 23
  18.11 Validity of Acts Where Appointment Defective 23
  18.12 Consent Resolutions in Writing 23

 

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19. EXECUTIVE AND OTHER COMMITTEES 24
     
  19.1 Appointment and Powers of Executive Committee 24
  19.2 Appointment and Powers of Other Committees 24
  19.3 Obligations of Committees 24
  19.4 Powers of Board 25
  19.5 Committee Meetings 25
       
20. OFFICERS 25
  20.1 Directors May Appoint Officers 25
  20.2 Functions, Duties and Powers of Officers 25
  20.3 Qualifications 25
  20.4 Remuneration and Terms of Appointment 26
       
21. INDEMNIFICATION 26
       
  21.1 Definitions 26
  21.2 Mandatory Indemnification of Directors, Former Directors and Officers Prior to October 17, 2028 26
  21.3 Mandatory Indemnification of Directors and Former Directors After October 17, 2028 26
  21.4 Indemnification of Other Persons 27
  21.5 Non-Compliance with Business Corporations Act. 27
  21.6 Company May Purchase Insurance 27
       
22. DIVIDENDS 27
       
  22.1 Payment of Dividends Subject to Special Rights 27
  22.2 Declaration of Dividends 27
  22.3 No Notice Required 27
  22.4 Record Date 27
  22.5 Manner of Paying Dividend 28
  22.6 Settlement of Difficulties 28
  22.7 When Dividend Payable 28
  22.8 Dividends to be Paid in Accordance with Number of Shares 28
  22.9 Receipt by Joint Shareholders 28
  22.10 Dividend Bears No Interest. 2
  22.11 Fractional Dividends 28
  22.12 Payment of Dividends 28
  22.13 Capitalization of Surplus 29
       
23. DOCUMENTS, RECORDS AND REPORTS 29
     
  23.1 Recording of Financial Affairs 29
  23.2 Inspection of Accounting Records 29
       
24. NOTICES  29
     
  24.1 Method of Giving Notice 29
  24.2 Deemed Receipt of Mailing 30
  24.3 Certificate of Sending 30
  24.4 Notice to Joint Shareholders 30
  24.5 Notice to Trustee 30
       
25. SEAL 30
     
  25.1 Who May Attest Seal 30
  25.2 Sealing Copies 31
  25.3 Mechanical Reproduction of Seal 31
       
26. PROHIBITIONS 31
     
  26.1 Definitions 31
  26.2 Application 31
  26.3 Consent Required for Transfer of Shares or Designated Securities 31

 

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PROVINCE OF BRITISH COLUMBIA

BUSINESS CORPORATIONS ACT

ARTICLES OF

GRAFITI HOLDING INC.

 

1.INTERPRETATION

 

1.1Definitions

 

In these Articles, unless the context otherwise requires:

 

(1)“board of directors”, “directors” and “board” mean the directors or sole director of the Company for the time being;

 

(2)“Business Corporations Acf’ means the Business Corporations Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;

 

(3)“legal personal representative” means the personal or other legal representative of the shareholder;

 

(4)“registered address” of a shareholder means the shareholder’s address as recorded in the central securities register;

 

(5)“seal” means the seal of the Company, if any.

 

1.2Business Corporations Act and Interpretation Act Definitions Applicable

 

The definitions in the Business Corporations Act and the definitions and rules of construction in the Interpretation Act, with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Business Corporations Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Business Corporations Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Business Corporations Act, the Business Corporations Act will prevail.

 

2.SHARES AND SHARE CERTIFICATES

 

2.1Authorized Share Structure

 

The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the.Company.

 

2.2Form of Share Certificate

 

Each share certificate issued by the Company must comply with, and be signed as required by, the Business Corporations Act.

 

2.3Share Certificate or Acknowledgment

 

Unless the directors, by resolution, provide otherwise each shareholder is entitled, without charge, to (a) one share certificate representing the shares of each class or series of shares registered in the shareholder’s name or (b) a non-transferable written acknowledgment of the shareholder’s right to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate and delivery of a share certificate for a share to one of several joint shareholders or to one of the shareholders’ duly authorized agents will be sufficient delivery to all.

 

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2.4Delivery by Mail

 

Any share certificate or non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate may be sent to the shareholder by mail at the shareholder’s registered address and neither the Company nor any director, officer or agent of the Company is liable for any loss to the shareholder because the share certificate or acknowledgement is lost in the mail or stolen.

 

2.5Replacement of Worn Out or Defaced Certificate or Acknowledgement

 

If the directors are satisfied that a share certificate or a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate is worn out or defaced, they must, on production to them of the share certificate or acknowledgment, as the case may be, and on such other terms, if any, as they think fit:

 

(1)order the share certificate or acknowledgment, as the case may be, to be cancelled; and

 

(2)issue a replacement share certificate or acknowledgment, as the case may be.

 

2.6Replacement of lost, Stolen or Destroyed Certificate or Acknowledgment

 

If a share certificate or a non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgment, as the case may be, must be issued to the person entitled to that share certificate or acknowledgment, as the case may be, if the directors receive:

 

(1)proof satisfactory to them that the share certificate or acknowledgment is lost, stolen or destroyed; and

 

(2)any indemnity the directors consider adequate.

 

2.7Splitting Share Certificates

 

If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholder’s name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.

 

2.8Certificate Fee

 

There must be paid to the Company, in relation to the issue of any share certificate under Articles 2.5, 2.6 or 2.7, the amount, if any and which must not exceed the amount prescribed under the Business Corporations Act, determined by the directors.

 

2.9Recognition of Trusts

 

Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or (except as by law or statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.

 

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3.ISSUE OF SHARES

 

3.1Directors Authorized

 

Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, sell or otherwise.dispose of the unissued shares, and issued shares held by the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share.

 

3.2Commissions and Discounts

 

The Company may at any time pay a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person or procuring or agreeing to procure purchasers for shares of the Company.

 

3.3Brokerage

 

The Company may pay such brokerage fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.

 

3.4Conditions of Issue

 

Except as provided for by the Business Corporations Act, no share may be issued until it is fully paid. A share is fully paid when:

 

(1)consideration is provided to the Company for the issue of the share by one or more of the following:

 

(a)past services performed for the Company;

 

(b)property;

 

(c)money; and

 

(d)the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1.

 

3.5Share Purchase Warrants and Rights

 

Subject to the Business Corporations Act, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.

 

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4.SHARE REGISTERS

 

4.1Central Securities Register

 

As required by and subject to the Business Corporations Act, the Company must maintain in British Columbia a central securities register. The directors may, subject to the Business Corporations Act, appoint an agent to maintain the central securities register. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as the case may be. The directors may terminate such appointment of ariy agent at any time and may appoint another agent in its place.

 

4.2Closing Register

 

The Company must not at any time close its central securities register.

 

5.SHARE TRANSFERS

 

5.1Registering Transfers

 

A transfer of a share of the Company must not be registered unless:

 

(1)a duly signed instrument of transfer in respect of the share has been received by the Company;

 

(2)if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company; and

 

(3)if a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgment has been surrendered to the Company.

 

5.2Form of Instrument of Transfer

 

The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Company’s share certificates or in any other form that may be acceptable to the directors from time to time.

 

5.3Transferor Remains Shareholder

 

Except to the extent that the Business Corporations Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company in respect of the transfer.

 

5.4Signing of Instrument of Transfer

 

If a shareholder, or his or her duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificates or set out in the written acknowledgments deposited with the instrument of transfer:

 

(1)in the name of the person named as transferee in that instrument of transfer; or

 

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(2)if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered.

 

5.5Enquiry as to Title Not Required

 

Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate owner or holder of the shares, of any interest in the shares, of any share certificate representing such shares or of any written acknowledgment of a right to obtain a share certificate for such shares.

 

5.6Transfer Fee

 

There must be paid to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors.

 

6.TRANSMISSION OF SHARES

 

6.1legal Personal Representative Recognized on Death

 

In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, the surviving joint holder, will be the only person recognized by the Company as having any title to the shareholder’s interest in the shares. Before recognizing a person as a legal personal representative, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.

 

6.2Rights of Legal Personal Representative

 

The legal personal representative has the same rights, privileges and obligations that attach to the shares held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Business Corporations Act and the directors have been deposited with the Company.

 

7.PURCHASE OF SHARES

 

7.1Company Authorized to Purchase Shares

 

Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series and the Business Corporations Act, the Company may, if authorized by the directors, purchase or otherwise acquire any of its shares at the price and upon the terms specified in such resolution.

 

7.2Purchase When Insolvent

 

The Company must not make a payment or provide any other consideration to purchase or otherwise acquire any of its shares if there are reasonable grounds for believing that:

 

(1)the Company is insolvent; or

 

(2)making the payment or providing the consideration would render the Company insolvent.

 

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7.3Sale and Voting of Purchased Shares

 

If the Company retains a share redeemed, purchased or otherwise acquired by it, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:

 

(1)is not entitled to vote the share at a meeting of its shareholders;

 

(2)must not pay a dividend in respect of the share; and

 

(3)must not make any other distribution in respect of the share.

 

8.BORROWING POWERS

 

The Company, if authorized by the directors, may:

 

(1)borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;

 

(2)issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;

 

(3)guarantee the repayment of money by any other person or the performance of any obligation of any other person; and

 

(4)mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

 

9.ALTERATIONS

 

9.1Alteration of Authorized Share Structure

 

Subject to Article 9.2 and the Business Corporations Act, the Company may by special resolution:

 

(1)create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;

 

(2)increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established;

 

(3)subdivide or consolidate all or any of its unissued, or fully paid issued, shares;

 

(4)if the Company is authorized to issue shares of a class of shares with par value:

 

(a)decrease the par value of those shares; or

 

(b)if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;

 

(5)change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value;

 

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(6)alter the identifying name of any of its shares; or

 

(7)otherwise alter its shares or authorized share structure when required or permitted to do so by the Business Corporations Act.

 

9.2Special Rights and Restrictions

 

Subject to the Business Corporations Act, the Company may by special resolution:

 

(1)create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or

 

(2)vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued.

 

9.3Change of Name

 

The Company may by special resolution authorize an alteration of its Notice of Articles in order to change its name.

 

9.4Other Alterations

 

If the Business Corporations Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by special resolution alter these Articles.

 

10.MEETINGS OF SHAREHOLDERS

 

10.1Annual General Meetings

 

Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors.

 

10.2Resolution Instead of Annual General Meeting

 

If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Business Corporations Act to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Company’s annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.

 

10.3Calling of Meetings of Shareholders

 

The directors may, whenever they think fit, call a meeting of shareholders.

 

10.4Notice for Meetings of Shareholders

 

The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:

 

(1)if and for so long as the Company is a public company, 21 days;

 

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(2)otherwise, 10 days.

 

10.5Record Date for Notice

 

The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

 

(1)if and for so long as the Company is a public company, 21 days;

 

(2)otherwise, 10 days.

 

If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

 

10.6Record Date for Voting

 

The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

 

10.7Failure to Give Notice and Waiver of Notice

 

The accidental omission to send notice of any meeting to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive or redu.ce the period of notice of such meeting.

 

10.8Notice of Special Business at Meetings of Shareholders

 

If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must:

 

(1)state the general nature of the special business; and

 

(2)if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders:

 

(a)at the Company’s records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and

 

(b)during statutory business hours on any one or more specified days before the day set for the holding of the meeting.

 

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11.PROCEEDINGS AT MEETINGS OF SHAREHOLDERS

 

11.1Special Business

 

At a meeting of shareholders, the following business is special business:

 

(1)at a meeting of shareholders that is not an annual general meeting, ;:ill business is special business except business relating to the conduct of or voting at the meeting;

 

(2)at an annual general meeting, all business is special business except for the following:

 

(a)business relating to the conduct of or voting at the meeting;

 

(b)consideration of any financial statements of the Company presented to the meeting;

 

(c)consideration of any reports of the directors or auditor;

 

(d)the setting or changing of the number of directors;

 

(e)the election or appointment of directors;

 

(f)the appointment of an auditor;

 

(g)the setting of the remuneration of an auditor;

 

(h)business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution;

 

(i)any other business which, under these Articles or the Business Corporations Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.

 

11.2Special Majority

 

The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.

 

11.3Quorum

 

Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting.

 

11.4One Shareholder May Constitute Quorum

 

If there is only one shareholder entitled to vote at a meeting of shareholders:

 

(1)the quorum is one person who is, or who represents by proxy, that shareholder, and

 

(2)that shareholder, present in person or by proxy, may constitute the meeting.

 

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11.5Other Persons May Attend

 

The directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.

 

11.6Requirement of Quorum

 

No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.

 

11.7Lack of Quorum

 

If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

 

(1)in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and

 

(2)in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.

 

11.8Lack of Quorum at Succeeding Meeting

 

If, at the meeting to which the meeting referred to in Article 11.7(2) was adjourned, a quorum is not present within one-half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.

 

11.9Chair

 

The following individual is entitled to preside as chair at a meeting of shareholders:

 

(1)the chair of the board, if any; or

 

(2)if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any.

 

11.10Selection of Alternate Chair

 

If, at any meeting of shareholders, there is no chair of the board or president present within 15 minutes after the time set for holding the meeting, or if the chair of the board and the president are unwilling to act as chair of the meeting, or if the chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present must choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.

 

11.11Adjournments

 

The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

 

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11.12Notice of Adjourned Meeting

 

It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.

 

11.13Decisions by Show of Hands or Poll

 

Subject to the Business Corporations Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.

 

11.14Declaration of Result

 

The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.

 

11.15Motion Need Not be Seconded

 

No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.

 

11.16Casting Vote

 

In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.

 

11.17Manner of Taking Poll

 

Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:

 

(1)the poll must be taken:

 

(a)at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and

 

(b)in the manner, at the time and at the place that the chair of the meeting directs;

 

(2)the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and

 

(3)the demand for the poll may be withdrawn by the person who demanded it.

 

11.18Demand for Poll on Adjournment

 

A poll demand.ad at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.

 

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11.19Chair Must Resolve Dispute

 

In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and his or her determination made in good faith is final and conclusive.

 

11.20Casting of Votes

 

On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

 

11.21Demand for Poll

 

No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

 

11.22Demand for Poll Not to Prevent Continuance of Meeting

 

The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.

 

11.23Retention of Ballots and Proxies

 

The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxyholder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.

 

12.VOTES OF SHAREHOLDERS

 

12.1Number of Votes by Shareholder or by Shares

 

Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:

 

(1)on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and

 

(2)on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

 

12.2Votes of Persons in Representative Capacity

 

A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, ·or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.

 

12.3Votes by Joint Holders

 

If there are joint shareholders registered in respect of any share:

 

(1)any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or

 

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(2)if more than one of the joint shareholders is present at any meeting, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted.

 

12.4Legal Personal Representatives as Joint Shareholders

 

Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders.

 

12.5Representative of a Corporate Shareholder

 

If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:

 

(1)for that purpose, the instrumenl appointing a representative must:

 

(a)be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no riumber of days is specified, two business days before the day set for the holding of the meeting; or

 

(b)be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting;

 

(2)if a representative is appointed under this Article 12.5:

 

(a)the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and

 

(b)the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting.

 

Evidence of the appointment of any such representative may be sent to the •Company by written instrument, fax or any other method of transmitting legibly recorded messages.

 

12.6Proxy Provisions Do Not Apply to All Companies

 

Articles 12.7 to 12.10 and Article 12.12 do not apply to the Company if and for so long as it is a public company.

 

12.7Appointment of Proxy Holders

 

Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy.

 

12.8Alternate Proxy Holders

 

A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.

 

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12.9When Proxy Holder Need Not Be Shareholder

 

A person must not be appointed as a proxy holder unless the person is a shareholder, although a person who is not a shareholder may be appointed as a proxy holder if:

 

(1)the person appointing the proxy holder is a corpo’ration or a representative of a corporation appointed under Article 12.5;

 

(2)the Company has at the time of the meeting for which the proxy holder is to be appointed only one shareholder entitled to vote at the meeting; or

 

(3)the shareholders present in person or by proxy at and entitled to vote at the meeting for which the proxy holder is to be appointed, by a resolution on which the proxy holder is not entitled to vote but in respect of which the proxy holder is to be counted in the quorum, permit the proxy holder to attend and vote at the meeting.

 

12.10Deposit of Proxy

 

A proxy for a meeting of shareholders must:

 

(1)be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of t_he meeting; or

 

(2)unless the notice provides otherwise, be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting.

 

A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

 

12.11Validity of Proxy Vote

 

A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given, unless notice in writing of that death, incapacity or revocation is received:

 

(1)at the registered office of the Company, at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or

 

(2)by the chair of the meeting, before the vote is taken.

 

12.12Form of Proxy

 

A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:

 

name of company

(the “Company”)

 

The undersigned, being a shareholder of the Company, hereby appoints [name] or, failing that person, [name], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned at the meeting of shareholders of the Company to be held on [month, day, year] and at any adjournment of that meeting.

 

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Number of shares in respect of which this proxy is given (if no number is specified, then this proxy is given in respect of all shares registered in the name of the shareholder):

 

   
  Signed [month, day, year]
   
  [Signature of shareholder]
   
  [Name of shareholder-printed]
   

 

12.13Revocation of Proxy

 

Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is:

 

(1)received at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or

 

(2)provided, at the meeting, to the chair of the meeting.

 

12.14Revocation of Proxy Must Be Signed

 

An instrument referred to in Article 12.13 must be signed as follows:

 

(1)if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy;

 

(2)if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5.

 

12.15Production of Evidence of Authority to Vote

 

The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.

 

13.DIRECTORS

 

13.1First Directors; Number of Directors

 

The first directors are the persons designated as directors of the Company in the Notice of Articles that applies to the Company when it is recognized under the Business Corporations Act. The number of directors, excluding additional directors appointed under Article 14.8, is set at:

 

(1)subject to paragraphs (2) and (3), the number of directors that is equal to the number of the Company’s first directors;

 

(2)if the Company is a public company, the greater of three and the most recently set of:

 

(a)the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

 

(b)the number of directors set under Article 14.4;

 

(3)if the Company is not a public company, the most recently set of:

 

(a)the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

 

(b)the number of directors set under Article 14.4.

 

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13.2Change in Number of Directors

 

If the number of directors is set under Articles 13.1(2}(a) or 13.1(3)(a):

 

(1)the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number;

 

(2)if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

 

13.3Directors’ Acts Valid Despite Vacancy

 

An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.

 

13.4Qualifications of Directors

 

A director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Business Corporations Act to become, act or continue to act as a director.

 

13.5Remuneration of Directors

 

The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of the directors, if any, will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.

 

13.6Reimbursement of Expenses of Directors

 

The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company.

 

13.7Special Remuneration for Directors

 

If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

 

13.8Gratuity, Pension or Allowance on Retirement of Director

 

Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

 

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14.ELECTION AND REMOVAL OF DIRECTORS

 

14.1Election at Annual General Meeting .

 

At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:

 

(1)the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and

 

(2)all the directors cease to hold office immediately before the election or appointment of directors under paragraph (1), but are eligible for re-election or re-appointment.

 

14.2Consent to be a Director

 

No election, appointment or designation of an individual as a director is valid unless:

 

(1)that individual consents to be a director in the manner provided for in the Business Corporations Act;

 

(2)that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director; or

 

(3)with respect to first directors, the designation is otherwise valid under the Business Corporations Act.

 

14.3Failure to Elect or Appoint Directors

 

If:

 

(1)the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Business Corporations Act; or

 

(2)the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors;

 

then each director then in office continues to hold office until the earlier of:

 

(3)the date on which his or her successor is elected or appointed; and

 

(4)the date on which he or she otherwise ceases to hold office under the Business Corporations Act or these Articles.

 

14.4Places of Retiring Directors Not Filled

 

If, at any meeting of shareholders at which there should .be an election of directors, the places of any of the retiring directors are not filled by that election, those retiring directors who are not re-elected and who are asked by the newly elected directors to continue in office will, if willing to do so, continue in office to complete the number of directors for the time being set pursuant to these Articles until further new directors are elected at a meeting of shareholders convened for that purpose. If any such election or continuance of directors does not result in the election or continuance of the number of directors for the time being set pursuant to these Articles, the number of directors of the Company is deemed to be set at the number of directors actually elected or continued in office.

 

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14.5Directors May Fill Casual Vacancies

 

Any casual vacancy occurring in the board of directors may be filled by the directors.

 

14.6Remaining Directors Power to Act

 

The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the directors may only act for the purpose of appointing directors up to that number or of summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Business Corporations Act, for any other purpose.

 

14.7Shareholders May Fill Vacancies

 

If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the shareholders may elect or appoint directors to fill any vacancies on the board of directors.

 

14.8Additional Directors

 

Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.8 must not at any time exceed:

 

(1)one-third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or

 

(2)in any other case, one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8.

 

Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(1), but is eligible for re-election or re-appointment.

 

14.9Ceasing to be a Director

 

A director ceases to be a director when:

 

(1)the term of office of the director expires;

 

(2)the director dies;

 

(3)the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or

 

(4)the director is removed from office pursuant to Articles 14.10 or 14.11.

 

14.10Removal of Director by Shareholders

 

The Company may remove any director before the expiration of his or her term of office by special resolution. In that event, the shareholders may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy. If the shareholders do not elect or appoint a director to fill the resulting vacancy contemporaneously with the removal, then the directors may appoint or the shareholders may elect, or appoint by ordinary resolution, a director to fill that vacancy.

 

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14.11Removal of Director by Directors

 

The directors may remove any director before the expiration of his or her term of office if the director is convicted of an indictable offence, or if the director ceases to be.qualified to act as a director of a company and does not promptly resign, and the directors may appoint a director to fill the resulting vacancy.

 

15.ALTERNATE DIRECTORS

 

15.1Appointment of Alternate Director

 

Any director (an “appointor”) may by notice in writing received by the Company appoint any person (an “appointee”) who is qualified to act as a director to be his or her alternate to act in his or her place at meetings of the directors or committees of the directors at which the appointor is not present unless (in the case of an appointee who is not a director) the directors have reasonably disapproved the appointment of such person as an alternate director and have given notice to that effect to his or her appointor within a reasonable time after the notice of appointment is received by the Company.

 

15.2Notice of Meetings

 

Every alternate director so appointed is entitled to notice of meetings of the directors and of committees of the directors of which his or her appointor is a member and to attend and vote as a director at any such meetings at which his or her appointor is not present.

 

15.3Alternate for More Than One Director Attending Meetings

 

A person may be appointed as an alternate director by more than one director, and an alternate director:

 

(1)will be counted in determining the quorum for a meeting of directors once for each of his or her appointors and, in the case of an appointee who is also a director, once more in that capacity;

 

(2)has a separate vote at a meeting of directors for each of his or her appointors and, in the case of an appointee who is also a director, an additional vote in that capacity;

 

(3)will be counted in determining the quorum for a meeting of a committee of directors once for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, once more in that capacity;

 

(4)has a separate vote at a meeting of a committee of directors for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, an additional vote in that capacity.

 

15.4Consent Resolutions

 

Every alternate director, if authorized by the notice appointing him or her, may sign in place of his or her appointor any resolutions to be consented to in writing.

 

15.5Alternate Director Not an Agent

 

Every alternate director is deemed not to be the agent of his or her appointor.

 

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15.6Revocation of Appointment of Alternate Director

 

An appointor may at any time, by notice in writing received by the Company, reyoke the appointment of an alternate director appointed by him or her.

 

15.7Ceasing to be an Alternate Director

 

The appointment of an alternate director ceases when:

 

(1)his or her appointor ceases to be a director and is not promptly re-elected or re-appointed;

 

(2)the alternate director dies;

 

(3)the alternate director resigns as an alternate director by notice in writing provided to the Company or a lawyer for the Company;

 

(4)the alternate director ceases to be qualified to act as a director; or

 

(5)his or her appointor revokes the appointment of the alternate director.

 

15.8Remuneration and Expenses of Alternate Director

 

The Company may reimburse an alternate director for the reasonable expenses that would be properly reimbursed if he or she were a director, and the alternate director is entitled to receive from the Company such proportion, if any, of the remuneration otherwise payable to the appointor as the appointor may from time to time direct.

 

16.POWERS AND DUTIES OF DIRECTORS

 

16.1Powers of Management

 

The directors must, subject to the Business Corporations Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company.

 

16.2Appointment of Attorney of Company

 

The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in him or her.

 

16.3Setting the Remuneration of Auditors

 

The directors may from time to time set the remuneration of the auditors of the Company.

 

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17.DISCLOSURE OF INTEREST OF DIRECTORS

 

17.1Obligation to Account for Profits

 

A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Business Corporations Act.

 

17.2Restrictions on Voting by Reason of Interest

 

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.

 

17.3Interested Director Counted in Quorum

 

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

 

17.4Disclosure of Conflict of Interest or Property

 

A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act.

 

17.5Director Holding Other Office in the Company

 

A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.

 

17.6No Disqualification

 

No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.

 

17.7Professional Services by Director or Officer

 

Subject to the Business Corporations Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.

 

17.8Director or Officer in Other Corporations

 

A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Business Corporations Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other person.

 

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18.PROCEEDINGS OF DIRECTORS

 

18.1Meetings of Directors

 

The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at the place, at the time and on the notice, if any, as the directors may from time to time determine.

 

18.2Voting at Meetings

 

Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

 

18.3Chair of Meetings

 

The following individual is entitled to preside as chair at a meeting of directors:

 

(1)the chair of the board, if any;

 

(2)in the absence of the chair of the board, the president, if any, if the president is a director; or

 

(3)any other director chosen by the directors if:

 

(a)neither the chair of the board nor the president, if a director, is present at the meeting within 15 minutes after the time set for holding the meeting;

 

(b)neither the chair of the board nor the president, if a director, is willing to chair the meeting; or

 

(c)the chair of the board and the president, if a director, have advised the secretary, if any, or any other director, that they will not be present at the meeting.

 

18.4Meetings by Telephone or Other Communications Medium

 

A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director may participate in a meeting of the directors or of any committee of the directors by a communications medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other and if all directors who wish to participate in the meeting agree to such participation. A director who participates in a meeting in a manner contemplated by this Article 18.4 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

 

18.5Calling of Meetings

 

A director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.

 

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18.6Notice of Meetings

 

Other than for meetings held at regular intervals as determined by the directors pursuant to Article 18.1, reasonable notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors .and the alternate directors by any method set out in Article 24.1 or orally or by telephone.

 

18.7When Notice Not Required

 

It is not necessary to give notice of a meeting of the directors to a director br an alternat director if:

 

(1)the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or

 

(2)the director or alternate director, as the case may be, has waived notice of the meeting.

 

18.8Meeting Valid Despite Failure to Give Notice

 

The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director or alternate director, does not invalidate any proceedings at that meeting.

 

18.9Waiver of Notice of Meetings

 

Any director or alternate director may send to the Company a document signed by him or her waiving notice of any past, present or future meeting or meetings of the directors and.may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to that director and, unless the director otherwise requires by notice in writing to the Company, to his or her alternate director, and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director or alternate director.

 

18.10Quorum

 

The quorum necessary for the transaction of the business of the directors may be set by the directors and, if not so set, is deemed to be set at two directors or, if the number of directors is set at one, is deemed to be set at one director, and that director may constitute a meeting.

 

18.11Validity of Acts Where Appointment Defective

 

Subject to the Business Corporations Act, an act of a director or officer is not invalid merely because of an irregularity in. the election or appointment or a defect in the qualification of that director or officer.

 

18.12Consent Resolutions in Writing

 

A resolution of the directors or of any committee of the directors may be passed without a meeting:

 

(1)in all cases, if each of the directors entitled to vote on the resolution consents to it in writing; or

 

(2)in the case of a resolution to approve a contract or transaction in respect of which a director has disclosed that he or she has or may have a disclosable interest, if each of the other directors who are entitled to vote on the resolution consents to it in writing.

 

A consent in writing under this Article may be by signed document, fax, email or any other method of transmitting legibly recorded messages. A consent in writing may be in two or more counterparts which together are deemed to constitute one consent in writing. A resolution of the directors or of any committee of the directors passed in accordance with this Article 18.12 is effective on the date stated in the consent in writing or on the latest date stated on any counterpart and is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Business Corporations Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.

 

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19.EXECUTIVE AND OTHER COMMITTEES

 

19.1Appointment and Powers of Executive Committee

 

The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors’ powers, except:

 

(1)the power to fill vacancies in the board of directors;

 

(2)the power to remove a director;

 

(3)the power to change the membership of, or fill vacancies in, any committee of the directors; and

 

(4)such other powers, if any, as may be set out in the resolution or any subsequent directors’ resolution.

 

19.2Appointment and Powers of Other Committees

 

The directors may, by resolution:

 

(1)appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate;

 

(2)delegate to a committee appointed under paragraph (1) any of the directors’ powers, except:

 

(a)the power to fill vacancies in the board of directors;

 

(b)the power to remove a director;

 

(c)the power to change the membership of, or ·fill vacancies in, any committee of the directors; and

 

(d)the power to appoint or remove officers appointed by the directors; and

 

(3)make any delegation referred to in paragr,aph (2) subject to the conditions set out in the resolution or any subsequent directors’ resolution.

 

19.3Obligations of Committees

 

Any committee appointed under Articles 19.1 or 19.2, in the exercise of the powers delegated to it, must:

 

(1)conform to any rules that may from time to time be imposed on it by the directors; and

 

(2)report every act or thing done in exercise of those powers at such times as the directors may require.

 

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19.4Powers of Board

 

The directors may, at any time, with respect to a committee appointed under Articles 19.1 or 19.2:

 

(1)revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding;

 

(2)terminate the appointment of, or change the membership of, the committee; and

 

(3)fill vacancies in the committee.

 

19.5Committee Meetings

 

Subject to Article 19.3(1) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Articles 19.1 or 19.2:

 

(1)the committee may meet and adjourn as it thinks proper;

 

(2)the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting;

 

(3)a majority of the members of the committee constitutes a quorum of the committee; and

 

(4)questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote.

 

20.OFFICERS

 

20.1Directors May Appoint Officers

 

The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.

 

20.2Functions, Duties and Powers of Officers

 

The directors may, for each officer:

 

(1)determine the functions and duties of the officer;

 

(2)entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and

 

(3)revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.

 

20.3Qualifications

 

No officer may be appointed unless that officer is qualified in accordance with the Business Corporations Act. One person may hold more than one position as an officer of the Company. Any person appointed as the chair of the board or as a managing director must be a director. Any other officer need not be a director.

 

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20.4Remuneration and Terms of Appointment

 

All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors thinks fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.

 

21.INDEMNIFICATION

 

21.1Definitions

 

In this Article 21:

 

(1)“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;

 

(2)“eligible proceeding” means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which a director, former director or alternate director of the Company (an “eligible party”) or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director or alternate director of the Company:

 

(a)is or may be joined as a party; or

 

(b)is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;

 

(3)“expenses” has the meaning set out in the Business Corporations Act.

 

21.2Mandatory Indemnification of Directors, Former Directors and Officers Prior to October 17, 2028

 

Until October 17, 2028, and subject to the Business Corporations Act, the Company must indemnify and use commercially reasonable efforts to purchase and maintain insurance for the benefit of its director, former directors, alternate directors or officers of the Company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, in advance of the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding provided that this Article 21.2 shall not be deemed to prevent any merger, liquidation or similar transaction. Each director, alternate director and officer is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 21.2.

 

21.3Mandatory Indemnification of Directors and Former Directors After October 17, 2028

 

Following October 17, 2028, and subject to the Business Corporations Act, the Company must indemnify a director, former directors or alternate director of the Company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director, alternate director and officer is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 21.3.

 

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21.4Indemnification of Other Persons

 

Subject to any restrictions in the Business Corporations Act, the Company may indemnify any person.

 

21.5Non-Compliance with Business Corporations Act

 

The failure of a director, alternate director or officer of the Company to comply with the Business Corporations Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Part.

 

21.6Company May Purchal?e Insurance

 

Notwithstanding the obligations of the Company under the foregoing Article 21.2, the Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:

 

(1)is or was a director, alternate director, officer, employee or agent of the Company;

 

(2)is or was a director, alternate director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;

 

(3)at the request of the Company, is or was a director, alternate director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity;

 

(4)at the request of the Company, holds or held a position equivalent to that of a director, alternate director or officer of a partnership, trust, joint venture or other unincorporated entity;

 

against any liability incurred by him or her as such director, alternate director, officer, employee or agent or person who holds or held such equivalent position.

 

22.DIVIDENDS

 

22.1Payment of Dividends Subject to Special Rights

 

The provisions of this Article 22 are subject to the rights, if any, of shareholders holding shares with special rights as to dividends.

 

22.2Declaration of Dividends

 

Subject to the Business Corporations Act, the directors may from time to time declare and authorize payment of such dividends as they may deem advisable.

 

22.3No Notice Required

 

The directors need not give notice to any shareholder of any declaration under Article 22.2.

 

22.4Record Date

 

The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more than two months. If no record date is set, the record date is 5 p.m. on the date on which the directors pass the resolution declaring the dividend.

 

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22.5Manner of Paying Dividend

 

A resolution declaring a dividend may direct payment of the dividend wholly or partly by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company, or in any one or more of those ways.

 

22.6Settlement of Difficulties

 

If any difficulty arises in regard to a distribution under Article 22.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:

 

(1)set the value for distribution of specific assets;

 

(2)determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and

 

(3)vest any such specific assets in trustees for the persons entitled to the dividend.

 

22.7When Dividend Payable

 

Any dividend may be made payable on such date as is fixed by the directors.

 

22.8Dividends to be Paid in Accordance with Number of Shares

 

All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.

 

22.9Receipt by Joint Shareholders

 

If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.

 

22.10Dividend Bears No Interest

 

No dividend bears interest against the Company.

 

22.11Fractional Dividends

 

If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.

 

22.12Payment of Dividends

 

Any dividend or other distribution payable in cash in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed to the address of the shareholder, or in the case of joint shareholders, to the address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing. The mailing of such.cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid ori presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.

 

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22.13Capitalizat’ion of Surplus

 

Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the surplus or any part of the surplus.

 

23.DOCUMENTS, RECORDS AND REPORTS

 

23.1Recording of Financial Affairs

 

The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Business Corporations Act.

 

23.2Inspection of Accounting Records

 

Unless the directors determine otherwise, or unless otherwise determined by ordinary resolution, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.

 

24.NOTICES

 

24.1Method of Giving Notice

 

Unless the Business Corporations Act or these Articles provides otherwise, a notice, statement, report or other record required or permitted by the Business Corporations Act or these Articles to be sent by or to a person may be sent by any one of the following methods:

 

(1)mail addressed to the person at the applicable address for that person as follows:

 

(a)for a record mailed to a shareholder, the shareholder’s registered address;

 

(b)for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class;

 

(c)in any other case, the mailing address of the intended recipient;

 

(2)delivery at the applicable address for that person as follows, addressed to the person:

 

(a)for a record delivered to a shareholder, the shareholder’s registered address;

 

(b)for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class;

 

(c)in any other case, the delivery address of the intended recipient;

 

(3)sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class;

 

(4)sending the record by email to the email address provided by the intended recipient for the sending of that record or records of that class;

 

(5)physical delivery to the intended recipient.

 

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24.2Deemed Receipt of Mailing

 

A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 24.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing.

 

24.3Certificate of Sending

 

A certificate signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that behalf for the Company stating that a notice, statement, report or other record was addressed as required by Article 24.1, prepaid and mailed or otherwise sent as permitted by Article 24.1 is conclusive evidence of that fact.

 

24.4Notice to Joint Shareholders

 

A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the notice to the joint shareholder first named in the central securities register in respect of the share.

 

24.5Notice to Trustees

 

A notice, statement, report or other record may be provided by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a shareholder by:

 

(1)mailing the record, addressed to them:

 

(a)by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and

 

(b)at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or

 

(2)if an address referred to in paragraph (1)(b) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred.

 

25.SEAL

 

25.1Who May Attest Seal

 

Except as provided in Articles 25.2 and 25.3, the Company’s seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:

 

(1)any two directors;

 

(2)any officer, together with any director;

 

(3)if the Company only has one director, that director; or

 

(4)any one or more directors or officers or persons as may be determined by the directors.

 

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25.2Sealing Copies

 

For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 25.1, the impression of the seal may be attested by the signature of any director or officer.

 

25.3Mechanical Reproduction of Seal

 

The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company, whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Business Corporations Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and the chair of the board or any senior officer together with the secretary, treasurer, secretary-treasurer, an assistant secretary, an assistant treasurer or an assistant secretary-treasurer may in writing authorize such person to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.

 

26.PROHIBITIONS

 

26.1Definitions

 

In this Article 26:

 

(1)“designated security” means:

 

(a)a voting security of the Company;

 

(b)a security of the Company that is not a debt security and that carries a residual right to participate in the earnings of the Company or, on the liquidation or winding up of the Company, in its assets; or

 

(c)a security of the Company convertible, directly or indirectly, into a security described in paragraph (a) or (b);

 

(2)“security” has the meaning assigned in the Securities Act (British Columbia);

 

(3)“voting security” means a security of the Company that:

 

(a)is not a debt security, and

 

(b)carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing.

 

26.2Application

 

Article 26.3 does not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

 

26.3Consent Required for Transfer of Shares or Designated Securities

 

No share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition.

 

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Exhibit 2.2

 

 

 

 

 

 

 

 

BUSINESS COMBINATION AGREEMENT

 

by and among

 

INPIXON

 

GRAFITI HOLDING INC.

 

1444842 B.C. LTD.

 

and

 

DAMON MOTORS INC.

 

Dated as of October 23, 2023

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
Article I PLAN OF ARRANGEMENT 3
  1.1 Plan of Arrangement 3
  1.2 Interim Order 4
  1.3 The Company Meeting 5
  1.4 The Company Circular 6
  1.5 Final Order 7
  1.6 Court Proceedings 7
  1.7 Spinout 8
  1.8 Arrangement and Effective Date 8
  1.9 Effect of the Arrangement 8
  1.10 Organizational Documents 9
  1.11 Directors and Officers 9
  1.12 Amalgamation Consideration 9
  1.13 Effect of Arrangement and Amalgamation 9
  1.14 Effective Date 12
  1.15 Name Change 12
  1.16 Effecting the Amalgamation 12
  1.17 Treasury Stock 12
  1.18 Surrender of Company Securities; Payment of Amalgamation Consideration 13
  1.19 Withholding 15
  1.20 U.S. Securities Laws 15
  1.21 Taking of Necessary Action; Further Action 17
       
Article II REPRESENTATIONS AND WARRANTIES OF THE Parent 17
  2.1 Organization and Standing 17
  2.2 Authorization; Binding Agreement 18
  2.3 Governmental Approvals 18
  2.4 Non-Contravention 19
  2.5 Finders and Brokers 19
  2.6 Independent Investigation 19
  2.7 Information Supplied 20
       
Article III REPRESENTATIONS AND WARRANTIES OF Spinco 20
  3.1 Organization and Standing; Spinco Activities 20
  3.2 Authorization; Binding Agreement 21
  3.3 Capitalization 21
  3.4 Subsidiaries 22
  3.5 Governmental Approvals 22
  3.6 Non-Contravention 23
  3.7 Financial Statements 23
  3.8 Absence of Certain Changes 24
  3.9 Compliance with Laws 25
  3.10 Spinco Permits 25
  3.11 Litigation 25
  3.12 Material Contracts 25
  3.13 Intellectual Property 26
  3.14 Taxes and Returns 27
  3.15 Real Property 28

 

- i -

 

 

TABLE OF CONTENTS

 

      Page
       
  3.16 Personal Property; Condition of Personal Property 29
  3.17 Title to and Sufficiency of Assets 29
  3.18 Employee Matters 30
  3.19 Benefit Plans 31
  3.20 Environmental Matters 33
  3.21 Transactions with Affiliates 33
  3.22 Insurance 34
  3.23 Books and Records 34
  3.24 Certain Business Practices 34
  3.25 Compliance with Privacy Laws, Privacy Policies and Certain Contracts 35
  3.26 Investment Company Act 35
  3.27 Finders and Brokers 36
  3.28 Ownership of Amalgamation Consideration 36
       
Article IV REPRESENTATIONS AND WARRANTIES OF AMALCO SUB 36
  4.1 Organization and Standing 36
  4.2 Authorization; Binding Agreement 36
  4.3 Governmental Approvals 37
  4.4 Non-Contravention 37
  4.5 Capitalization 37
  4.6 Amalco Sub Activities 38
  4.7 Compliance with Laws 38
  4.8 Actions; Orders 38
  4.9 Transactions with Affiliates 38
  4.10 Finders and Brokers 39
  4.11 Investment Company Act 39
  4.12 Taxes 39
       
Article V REPRESENTATIONS AND WARRANTIES OF THE COMPANY 39
  5.1 Organization and Standing 39
  5.2 Authorization; Binding Agreement 40
  5.3 Capitalization 40
  5.4 Subsidiaries 42
  5.5 Governmental Approvals 42
  5.6 Non-Contravention 43
  5.7 Financial Statements 43
  5.8 Absence of Certain Changes 45
  5.9 Compliance with Laws 45
  5.10 Company Permits 45
  5.11 Litigation 45
  5.12 Material Contracts 46
  5.13 Intellectual Property 46
  5.14 Taxes and Returns 47
  5.15 Real Property 49
  5.16 Personal Property; Condition of Personal Property 50
  5.17 Title to and Sufficiency of Assets 50
  5.18 Employee Matters 50
  5.19 Benefit Plans 52
  5.20 Environmental Matters 53
  5.21 Transactions with Affiliates 53

 

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TABLE OF CONTENTS

 

      Page
       
  5.22 Insurance 54
  5.23 Books and Records 54
  5.24 Certain Business Practices 54
  5.25 Compliance with Privacy Laws, Privacy Policies and Certain Contracts 55
  5.26 Investment Company Act 56
  5.27 Finders and Brokers 56
  5.28 Independent Investigation 56
  5.29 Information Supplied 56
       
Article VI COVENANTS 57
  6.1 Access and Information 57
  6.2 Conduct of Business of the Company 58
  6.3 Conduct of Business of Spinco 60
  6.4 Financial Statements and Internal Controls 62
  6.5 Spinco Stock Exchange Listing Application 64
  6.6 Fairness Opinions 64
  6.7 No Solicitation 65
  6.8 No Trading 66
  6.9 Notification of Certain Matters 66
  6.10 Efforts 67
  6.11 Tax Matters 68
  6.12 The Registration Statement 69
  6.13 Public Announcements 70
  6.14 Confidential Information 71
  6.15 Post-Closing Board of Directors and Executive Officers; Employment Agreements; Related Party Transactions 72
  6.16 Indemnification of Directors and Officers 73
  6.17 Incentive Plan 74
  6.18 Consulting Agreements 74
  6.19 Company Support Agreements and Company Lock-Up Agreements 74
  6.20 Spinco Lock-Up Restrictions 75
  6.21 Inpixon Note Acquisition 75
       
Article VII NO SURVIVAL 75
  7.1 No Survival 75
       
Article VIII CLOSING CONDITIONS 75
  8.1 Conditions to Each Party’s Obligations 75
  8.2 Conditions to Obligations of the Company 77
  8.3 Conditions to Obligations of Spinco 78
  8.4 Frustration of Conditions 80
  8.5 Dissent Rights 80
       
Article IX TERMINATION AND EXPENSES 80
  9.1 Termination 80
  9.2 Effect of Termination 81
  9.3 Fees and Expenses 82

 

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TABLE OF CONTENTS

 

  Page
   
Article X MISCELLANEOUS 83
  10.1 Notices 83
  10.2 Binding Effect; Assignment 84
  10.3 Third Parties 84
  10.4 Governing Law; Jurisdiction 84
  10.5 Waiver of Jury Trial 84
  10.6 Remedies; Specific Performance 85
  10.7 Severability 85
  10.8 Amendment 85
  10.9 Waiver 85
  10.10 Entire Agreement 86
  10.11 Interpretation 86
  10.12 Counterparts 87
       
Article XI DEFINITIONS 87
  11.1 Certain Definitions 87

 

INDEX OF EXHIBITS

 

Exhibit A Plan of Arrangement
Exhibit B Company Support Agreement
Exhibit C-1 Company Insider Lock-Up Agreement
Exhibit C-2 Company Lock-Up Agreement
Exhibit D Arrangement Resolution
Exhibit E Company Insiders and Company Securities
Exhibit F Illustration of Calculation of Exchange Ratio

 

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BUSINESS COMBINATION AGREEMENT

 

THIS BUSINESS COMBINATION AGREEMENT (this “Agreement”) is made and entered into as of October 23, 2023 by and among:

 

A. Inpixon, a Nevada corporation (the “Parent”);

 

B. Grafiti Holding Inc., a British Columbia company (“Spinco”);

 

C. 1444842 B.C. Ltd., a British Columbia company (“Amalco Sub”); and

 

D. Damon Motors Inc., a British Columbia company (the “Company”).

 

The Parent, Spinco, Amalco Sub and the Company are sometimes referred to herein individually as a “Party” and, collectively, as the “Parties.” Capitalized terms used and not otherwise defined herein have the meaning set forth in Article XI.

 

RECITALS:

 

WHEREAS, the Parent was incorporated under the laws of the State of Nevada on April 8, 1999, and is in the business of providing technology solutions to organizations;

 

WHEREAS, the Parent will contribute the Spinout Assets to Spinco, following which Spinco Common Shares will be distributed to the shareholders of the Parent (the “Spinout”);

 

WHEREAS, Amalco Sub is a wholly-owned, direct Subsidiary of Spinco, and was newly formed for the sole purpose of consummating the transactions contemplated by this Agreement, including the Amalgamation;

 

WHEREAS, the Parties intend to carry out a business combination by way of an arrangement on the terms and subject to the conditions set forth in a plan of arrangement under Part 9 Division 5 of the Business Corporations Act (British Columbia) (“BCBCA”), substantially in the form attached hereto as Exhibit A (the “Plan of Arrangement”), and in accordance with the terms of this Agreement, subject to any amendments or variations to the Plan of Arrangement made in accordance with the terms of this Agreement and the Plan of Arrangement, or made at the direction of the Court in the Final Order with the prior written consent of the Company and the Parent, each acting reasonably (such arrangement, the “Arrangement”);

 

WHEREAS, on the terms and subject to the conditions of this Agreement and the Plan of Arrangement and in accordance with the applicable provisions of the BCBCA, Amalco Sub and the Company will amalgamate and continue as one corporate entity pursuant to Section 276 of the BCBCA (the “Amalgamation”), and in connection with the Arrangement and the Amalgamation, (i) each Company Note issued and outstanding immediately prior to the Effective Time will automatically be exchanged for such number Company Common Shares as set out in Section 1.13; (ii) each Company SAFE issued and outstanding immediately prior to the Effective Time will automatically be exchanged for such number Company Common Shares as set out in Section 1.13; (iii) each Company Preferred Share issued and outstanding immediately prior to the Effective Time will be automatically exchanged for such number Company Common Shares as set out in Section 1.13, (iv) each Company Common Share (including Company Common Shares issued pursuant to items (i), (ii) and (iii) above) issued and outstanding immediately prior to the Effective Time will be automatically exchanged for the number of Spinco Common Shares as set forth in Section 1.13; (iv) each Company Option issued and outstanding immediately prior to the Effective Time will be exchanged for a Converted Option of Spinco as set forth in Section 1.13, and iv) each Company Warrant issued and outstanding immediately prior to the Effective Time will be exchanged for a Converted Warrant of Spinco as set forth in Section 1.13.

 

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WHEREAS, for U.S. federal and state income tax purposes, (i) each of Spinco, Amalco Sub and the Company hereby intends that, to the greatest extent permitted by Law, the Amalgamation will qualify as a “reorganization” within the meaning of Sections 368(a) of the Code and the Treasury Regulations promulgated thereunder (the “Intended Tax Treatment”), (ii) each of Spinco, Amalco Sub and the Company will be a party to the reorganization under Section 368(b) of the Code, and (iii) this Agreement be, and hereby is, adopted as a “plan of reorganization” for the purposes of Section 368 of the Code and Treasury Regulations Section 1.368-2(g) and 1.368-3(a);

 

WHEREAS, the Parties desire for the provisions of subsection 87(9) and section 51, as applicable, of the ITA to apply to the Arrangement;

 

WHEREAS, the Parent Board has unanimously (i) determined that it is in the best interests of the Parent and its stockholders, and declared it advisable, to enter into this Agreement and the Ancillary Documents to which it is a party, and (ii) approved, among other things, this Agreement and the Ancillary Documents to which it is a party and the transactions contemplated hereunder and thereby, including the Spinout and the Amalgamation, on the terms and subject to the conditions of this Agreement;

 

WHEREAS, the Company Board has unanimously (i) determined that it is fair to and in the best interests of the Company and the Company Shareholders, and declared it advisable, to enter into this Agreement and the Ancillary Documents to which it is a party, (ii) approved this Agreement, the Ancillary Documents to which it is a party, and the transactions contemplated hereunder and thereunder, including the Amalgamation, on the terms and subject to the conditions of this Agreement, and (iii) agreed to recommend that the Company Shareholders vote in favor of the Arrangement Resolution;

 

WHEREAS, as a condition and inducement to Spinco’s willingness to enter into this Agreement, simultaneously with the execution and delivery of this Agreement, Jay Giraud, the Company’s Chief Executive Officer, has executed and delivered to the Parent and Spinco a support agreement, substantially in the form attached hereto as Exhibit B (the “Company Support Agreement”), pursuant to which Mr. Giraud has agreed to vote any Company Securities held by him in favor of the Company Shareholder Approval Matters, on the terms and subject to the conditions set forth therein;

 

WHEREAS, pursuant to Section 6.19(a) and Section 6.19(b) of this Agreement, the Company has agreed to obtain additional Company Support Agreements from certain other Company Securityholders, pursuant to which each such Company Securityholder will agree to vote any Company Securities held by him, her or it in favor of the Company Shareholder Approval Matters, on the terms and subject to the conditions set forth therein;

 

WHEREAS, as a condition and inducement to Spinco’s willingness to enter into this Agreement, simultaneously with the execution and delivery of this Agreement, each Company Insider has executed and delivered to the Parent and Spinco a lock-up agreement, substantially in the form attached hereto as Exhibit C-1 (the “Company Insider Lock-Up Agreement”), pursuant to which such Company Insider has agreed, effective as of the Closing, to certain lock-up restrictions with respect to any Spinco securities to be received by him, her or it hereunder, on the terms and subject to the conditions set forth therein;

 

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WHEREAS, pursuant to Section 6.19(c) of this Agreement, the Company has agreed to obtain lock-up agreements, substantially in the form attached hereto as Exhibit C-2 (the “Company Lock-Up Agreement”), from certain other Company Securityholders, pursuant to which each such Company Securityholder will agree, effective as of the Closing, to certain lock-up restrictions with respect to any Spinco securities to be received by him, her or it hereunder, on the terms and subject to the conditions set forth therein;

 

WHEREAS, pursuant to Section 6.20 of this Agreement, the Parties shall cause the Spinco Organizational Documents to be amended and restated to contain lock-up restrictions on the Spinco Shareholders, with respect to their Spinco Common Shares, effective as of the time of receiving such Spinco Common Shares, on substantially the same terms contained in the Company Lock-Up Agreement, or alternatively the Parties shall apply such lock-up restrictions to the Spinco Shareholders’ Spinco Common Shares through another mechanism reasonably acceptable to Spinco and the Company; and

 

WHEREAS, immediately following the execution of this Agreement, the Parent will purchase a Company Note in the original principal amount of $3,000,000 (the “Parent Note”) together with certain Company Warrants pursuant to June 2023 Note Offering.

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, and agreements set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:

 

Article I
PLAN OF ARRANGEMENT

 

1.1Plan of Arrangement.

 

The Parties agree that the Arrangement will be implemented in accordance with and subject to the terms and conditions of this Agreement and the Plan of Arrangement. In the event of any conflict between the terms of this Agreement and the Plan of Arrangement, the Plan of Arrangement shall govern. The Parties shall each effect and carry out the steps, actions or transactions to be carried out by them pursuant to the Plan of Arrangement.

 

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1.2Interim Order.

 

No later than three (3) Business Days after the Registration Statement has been declared effective by the SEC, the Company shall apply in a manner reasonably acceptable to the Parent pursuant to Part 9 Division 5 of the BCBCA and, in cooperation with Spinco and the Parent, prepare, file and diligently pursue a motion for the Interim Order, which must provide, among other things:

 

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

 

(b)that the required level of approval for the Arrangement Resolution shall be (i) two-thirds of the votes cast on such resolution by the Company Shareholders present in person or represented by proxy at the Company Meeting; (ii) two-thirds of the votes cast on such resolution by the holders of Company Class B Preferred Shares and Class A Series 2 Company Preferred Shares, voting together as a single class on an as converted basis; (iii) two-thirds of the votes cast on such resolution by the holders of Company Warrants; (iv) two-thirds of the votes cast on such resolution by the holders of Company Options; (v) three-quarters of the underlying value of the votes cast on such resolution by the holders of Company Notes and a majority of the holders of Company Notes; and (vii) any approval requirements as may be imposed by the Court.

 

(c)that the record date for the Company Shareholders entitled to receive notice of and to vote at the Company Meeting will not change in respect or as a consequence of any adjournment(s) or postponement(s) of the Company Meeting, unless required by Law;

 

(d)that, in all other respects, the terms, restrictions and conditions of the Company’s Organizational Documents, including quorum requirements and all other matters, shall apply in respect of the Company Meeting;

 

(e)for the grant of Dissent Rights to those Company Shareholders who are registered Company Shareholders as contemplated in the Plan of Arrangement;

 

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

 

(g)that the Company Meeting may be adjourned or postponed from time to time by the Company in accordance with the terms of this Agreement without the need for additional approval of the Court;

 

(h)that it is the Company’s intention to rely upon the exemption from registration provided by Section 3(a)(10) of the Securities Act with respect to the issuance of Spinco Common Shares and other securities of Spinco as described herein to be issued pursuant to the Arrangement to Company Securityholders upon completion of the Arrangement, based on the Court’s determination that the Arrangement is substantially and procedurally fair and reasonable to the Company Shareholders participating in the Arrangement; and

 

(i)for such other matters as the Parent or Spinco may reasonably require, subject to obtaining the prior consent of the Company, acting reasonably.

 

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1.3The Company Meeting.

 

The Company shall:

 

(a)subject to and in accordance with the terms of this Agreement, the Interim Order, the Company’s Organizational Documents and Law, convene and conduct the Company Meeting as soon as reasonably practicable (and no later than within twenty (20) days following receipt of the Interim Order), and set the record date for the Company Shareholders entitled to vote at the Company Meeting as promptly as practicable, and not adjourn, postpone or cancel (or propose the adjournment, postponement or cancellation of) the Company Meeting without the prior written consent of Spinco, acting reasonably, or as required by Law or by a Governmental Authority;

 

(b)subject to the terms of this Agreement and compliance by the directors and officers of the Company with their fiduciary duties, use commercially reasonable efforts to solicit proxies in favor of the approval of the Arrangement Resolution and against any resolution submitted by any Person that is inconsistent with the Arrangement Resolution and the completion of any of the transactions contemplated by this Agreement;

 

(c)give notice to Spinco of the Company Meeting and allow Spinco’s representatives and legal counsel to attend the Company Meeting;

 

(d)as promptly as reasonably practicable, advise Spinco, at such times as Spinco may reasonably request and at least on a daily basis on each of the last ten Business Days prior to the date of the Company Meeting, and promptly following receipt of proxy tallies over the last three Business Days prior to the date of the Company Meeting, as to the aggregate tally of the proxies received by the Company in respect of the Arrangement Resolution and provide the right to Spinco to demand postponement or adjournment of the Company Meeting if, based on the tally of proxies, the Company will not receive the Required Company Shareholder Approval; provided that the Company Meeting, so postponed or adjourned, shall not be later than five (5) Business Days prior to the Outside Date;

 

(e)promptly advise Spinco of any material communication (written or oral) from or claims brought by (or threatened to be brought by) any Person in opposition to the Arrangement and any purported exercise or withdrawal of Dissent Rights by Company Shareholders; and

 

(f)not make any payment or settlement offer, or agree to any payment or settlement with respect to Dissent Rights, without the prior written consent of Spinco, acting reasonably.

 

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1.4The Company Circular.

 

(a)Subject to Spinco’s compliance with Section 1.4(c), the Company shall as promptly as reasonably practicable prepare and complete, in consultation with Spinco as contemplated by this Section 1.4(a), the Company Circular together with any other documents required by Law in connection with the Company Meeting, and the Company shall, promptly after obtaining the Interim Order, cause the Company Circular and such other documents to be filed and sent to each Company Shareholder and other Persons as required by the Interim Order and Law, in each case so as to permit the Company Meeting to be held by the date specified in Section 1.3.

 

(b)The Company shall ensure that the Company Circular complies in all material respects with Law, does not contain any misrepresentation (provided that the Company shall not be responsible for the accuracy of any information furnished by the Parent for purposes of inclusion in the Company Circular pursuant to Section 1.4(c)) and provides the Company Shareholders with sufficient information to permit them to form a reasoned judgement concerning the matters to be placed before the Company Meeting. Without limiting the generality of the foregoing, the Company Circular must include: (i) a statement that the Company Board has determined that the Arrangement is in the best interests of the Company and is fair to the Company Shareholders and the Company Board unanimously recommends that Company Shareholders vote in favor of the Arrangement Resolution (the “Company Board Recommendation”); and (ii) a statement that each executive officer and director of the Company who owns Company Shares or holds Company Options intends to vote all of such Person’s Company Shares (including any Company Shares issued upon the exercise of any Company Options) in favor of the Arrangement Resolution.

 

(c)The Company shall give Spinco and its legal counsel a reasonable opportunity to review and comment on drafts of the Company Circular and other related documents, and shall accept the reasonable comments made by Spinco and its legal counsel, and agrees that all information relating solely to Spinco or any of its affiliates included in the Company Circular must be in a form consistent with the information provided to the Company by the Parent. The Company shall provide Spinco with a final copy of the Company Circular in connection with its mailing to Company Shareholders,

 

(d)Spinco shall provide to the Company all information regarding the Parent and its affiliates as required by the Interim Order or Laws for inclusion in the Company Circular or in any amendments or supplements to such Company Circular. The Parent shall ensure that such information does not include any material misrepresentation concerning the Parent or its affiliates.

 

(e)Each Party shall promptly notify the other Parties if it becomes aware that the Company Circular contains a misrepresentation, or otherwise requires an amendment or supplement. The Parties shall cooperate in the preparation of any such amendment or supplement as required or appropriate, and the Company shall promptly mail, file or otherwise publicly disseminate any such amendment or supplement to the Company Shareholders and, if required by the Court or by Law, file the same with any other Governmental Authority.

 

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1.5Final Order.

 

(a)If the Interim Order is obtained and the Arrangement Resolution is passed at the Company Meeting as provided for in the Interim Order, the Company shall take all steps necessary or desirable to submit the Arrangement to the Court and diligently pursue an application for the Final Order pursuant to Part 9 Division 5 of the BCBCA, as soon as reasonably practicable, but in any event not later than three (3) Business Days after the date on which the Arrangement Resolution is passed at the Company Meeting as provided for in the Interim Order.

 

1.6Court Proceedings.

 

(a)In connection with all Court proceedings relating to obtaining the Interim Order and the Final Order, the Company shall diligently pursue, and cooperate with Spinco in diligently pursuing, the Interim Order and the Final Order, and the Company will provide Spinco and its legal counsel with reasonable opportunity to review and comment upon drafts of all materials to be filed with the Court in connection with the Arrangement, prior to the service and filing of such materials, and will accept the reasonable comments of Spinco and its legal counsel with respect to any information required to be supplied by Spinco and included in such materials. The Company will not file any material with the Court in connection with the Plan of Arrangement or serve any such material, and will not agree to modify or amend any materials so filed or served, except as contemplated by this Agreement or with Spinco’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed, provided that Spinco is not required to agree or consent to any increase or variation in the form of the consideration payable hereunder or other modification or amendment to such filed or served materials that expands or increases its obligations, or diminishes or limits its rights, set forth in any such filed or served materials or under this Agreement or the Plan of Arrangement. In addition, the Company will not object to legal counsel to Spinco making such submissions on the motion for the Interim Order and the application for the Final Order as such counsel considers appropriate, acting reasonably, provided Spinco advises the Company of the nature of any such submissions prior to the hearing and such submissions are consistent with this Agreement and the Plan of Arrangement. The Company will also provide legal counsel to Spinco with copies of any notice and evidence served on the Company or its legal counsel in respect of the application for the Final Order or any appeal therefrom, and any notice, written or oral, indicating the intention of any Person to appeal, or oppose the granting of, the Interim Order or Final Order. The Company shall also oppose any proposal from any party that the Final Order contain any provision inconsistent with this Agreement and the Plan of Arrangement and, if at any time after the issuance of the Final Order and prior to the Effective Date, the Company is required by the terms of the Final Order or by Law to return to Court with respect to the Final Order, it shall do so after notice to, and in consultation and cooperation with, Spinco.

 

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1.7Spinout.

 

Prior to the Closing, the Parent will consummate the Spinout by contributing the Spinout Assets to Spinco and issuing Spinout Common Shares to the Parent Securityholders in accordance with the terms and conditions of the Separation and Distribution Agreement. Prior to consummating the Spinout, the Parent will allow the Company reasonable time to review and comment on the documents needed to effectuate the Spinout.

 

1.8Arrangement and Effective Date.

 

(a)At the reasonable request of Spinco at any time and from time to time prior to the Effective Date, the Company shall amend the Plan of Arrangement, provided that no such amendment (i) is inconsistent with the Interim Order, the Final Order or this Agreement, (ii) is prejudicial to the Company or Company Shareholders or (iii) creates a reasonable risk of delaying, impairing or impeding in any material respect any conditions set forth in Article VIII.

 

(b)Subject to the satisfaction or waiver of the conditions set forth in Article VIII or unless this Agreement is earlier terminated in accordance with Article IX, the Effective Date will occur on the date upon which the Parties agree in writing as the date upon which the Arrangement becomes effective, which date shall be no later than the second (2nd) Business Day after all the closing conditions to this Agreement have been satisfied or, if permissible, waived (other than those conditions that by their nature are required to be satisfied at the Effective Date, it being understood that the occurrence of the closing shall remain subject to the satisfaction, or if permissible, waiver of such conditions at the closing), or at such other date, time as the Parties may mutually agree, and the Arrangement shall be effective at the Effective Time on the Effective Date and will have all of the effects provided by applicable law.

 

(c)The closing of the Arrangement will take place via electronic document exchange or at the offices of Gowling WLG (Canada) LLP in Vancouver, British Columbia, or at such other location as may be agreed upon by the Parties.

 

1.9Effect of the Arrangement.

 

At the Effective Time, the effect of the Amalgamation shall be as provided in this Agreement, the Plan of Arrangement and the applicable provisions of the BCBCA. The Amalgamation shall occur pursuant to subsection 87(9) of the ITA. The exchange of each Company Note and Company Preferred Share into Company Common Shares shall occur pursuant to section 51 of the ITA. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, agreements, powers and franchises, debts, Liabilities, duties and obligations of Amalco Sub and the Company shall be the property, rights, privileges, agreements, powers and franchises, debts, Liabilities, duties and obligations of the Damon Surviving Company, which shall include the assumption by the Damon Surviving Company of any and all agreements, covenants, duties and obligations of Amalco Sub and the Company set forth in this Agreement to be performed after the Effective Time.

 

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1.10Organizational Documents.

 

(a)At the Effective Time, by virtue of the Amalgamation, the Company Organizational Documents, each as in effect immediately prior to the Effective Time, shall become the Organizational Documents of the Damon Surviving Company.

 

(b)The Parties shall cause the Spinco Organizational Documents to be amended and restated as of immediately prior to the Spinout on mutually-agreeable terms not inconsistent with the other terms of this Agreement.

 

1.11Directors and Officers

 

(a)At the Effective Time, by virtue of the Amalgamation, (i) the directors of the Company immediately prior to the Effective Time shall be the directors of the Damon Surviving Company, with each such director to hold office in accordance with the Organizational Documents of the Damon Surviving Company, and (ii) the officers of the Company immediately prior to the Effective Time shall be the officers of the Damon Surviving Company, with each such officer to hold office in accordance with the Organizational Documents of the Damon Surviving Company

 

(b)The Parties shall cause the board of directors of Spinco as of immediately following the Effective Time to consist of those individuals contemplated by Section 6.15(a), each to hold office in accordance with the BCBCA and the Spinco Organizational Documents until their respective successors are, in the case of the directors, duly elected or appointed and qualified and, in the case of the officers, duly appointed.

 

1.12Amalgamation Consideration.

 

As consideration for the Amalgamation, Spinco shall issue, and the Company Securityholders collectively shall be entitled to receive, in accordance with Section 1.13, an amount of Spinco Common Shares, including those underlying the Converted Options and Converted Warrants, equal to the Amalgamation Consideration.

 

1.13Effect of Arrangement and Amalgamation.

 

In accordance with the Plan of Arrangement, commencing at the Effective Time, the following transactions will occur and will be deemed to occur in the order set out below without any further authorization, act or formality required on the part of any Person, except as otherwise expressly provided herein:

 

(a)Without any action on the part of any Person, the Company Notes issued and outstanding immediately prior to the Effective Time will be automatically converted into such number of Company Common Shares such that upon the Amalgamation, pursuant to Section 1.13(d)(i), the holders of Company Notes will each receive such number of Spinco Common Shares that they are entitled to receive in accordance with the terms of the Company Notes upon a Public Company Event (as such term is defined in the Company Notes);

 

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(b)Without any action on the part of any Person, the Company SAFEs issued and outstanding immediately prior to the Effective Time will be automatically converted into such number of Company Common Shares such that upon the Amalgamation, pursuant to Section 1.13(d)(i), the holders of Company SAFEs will each receive such number of Spinco Common Shares that they are entitled to receive in accordance with the terms of the Company SAFEs; and

 

(c)Without any action on the part of any Person, the Company Preferred Shares issued and outstanding immediately prior to the Effective Time (other than Company Preferred Shares held by a Company Dissenting Shareholder) will be automatically exchanged for such number of Company Common Shares as set out in Schedule “A” to the Plan of Arrangement;

 

(d)Amalco Sub shall amalgamate with the Company to form a new company (“Damon Surviving Company”) under section 276 of the BCBCA, which Amalgamation shall be consummated by filing an Amalgamation Application (the “Amalgamation Application”) resulting in the issuance of the Certificate of Amalgamation. As a result of the Amalgamation:

 

(i)Without any action on the part of any Person, all Company Common Shares issued and outstanding immediately prior to the Effective Time, inclusive of all Company Common Shares issued pursuant to Sections 1.13(a), 1.13(b) and 1.13(c) (other than Company Shares held by a Company Dissenting Shareholder) will be transferred and assigned to Spinco free and clear of all Liens in consideration for a number of Spinco Common Shares determined by multiplying such number of Company Common Shares by the Exchange Ratio;

 

(ii)Upon the Amalgamation, the name of each Company Shareholder will be removed as the registered holder of Company Shares from the applicable central securities register of the Company maintained by or on behalf of the Company and added as a registered holder of Spinco Common Shares, as applicable, on the applicable central securities registers of Spinco maintained by or on behalf of Spinco;

 

(iii)Spinco will be recorded as the registered holder of the Company Shares so transferred and acquired in accordance with this Section 1.13(d) and will be deemed to be the legal and beneficial owner thereof free and clear of all Liens;

 

(iv)Upon the Amalgamation, without any action on the part of any Person, Damon Surviving Company shall issue to Spinco one common share of Damon Surviving Company for each Spinco Common Share issued in Section 1.13(d)(i) above and Spinco will be added to the central securities register of holders of Damon Surviving Company common shares and the Company Shares so exchanged will be cancelled without any repayment of capital;

 

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(v)Upon the Amalgamation, each share of Amalco Sub issued and outstanding will be exchanged for one common share of Damon Surviving Company, the holder such Damon Surviving Company share will be added to the register of holders of Damon Surviving Company shares and the Amalco Sub shares so exchanged will be cancelled without any repayment of capital;

 

(vi)Without any action on the part of any Person, each Company Option issued and outstanding immediately prior to the Effective Time will be exchanged for a Spinco option (a “Converted Option”) (i) to acquire, subject to substantially the same terms and conditions as were applicable under such Company Option and the Company Stock Option Plan, a number of Spinco Common Shares (rounded down to the nearest whole share) equal to the product of (A) the number of Company Common Shares underlying such Company Option, multiplied by (B) the Exchange Ratio, (ii) at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Company Option immediately prior to the Effective Time divided by (B) the Exchange Ratio. For the avoidance of doubt, each Converted Option shall be subject to the terms and conditions of the Incentive Plan.

 

(vii)As soon as practicable after the Effective Time, Spinco shall deliver to the holders of Converted Options appropriate notices (the form and substance of which notices shall be subject to review and approval of the Parent) setting forth such holders’ rights, and the agreements evidencing the grants of such Converted Options in exchange for Company Options (subject to the adjustments required by this 1.13 after giving effect to the Arrangement).

 

(viii)Without any action on the part of any Person, each Company Warrant issued and outstanding immediately prior to the Effective Time will be exchanged for a Spinco warrant (a “Converted Warrant”) (i) to acquire, subject to substantially the same terms and conditions as were applicable under such Company Warrant, a number of Spinco Common Shares (rounded down to the nearest whole share) equal to the product of (A) the number of Company Common Shares underlying such Company Warrant, multiplied by (B) the Exchange Ratio, (ii) at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Company Warrant immediately prior to the Effective Time divided by (B) the Exchange Ratio.

 

(ix)As soon as practicable after the Effective Time, Spinco shall deliver to the holders of Converted Warrants appropriate notices (the form and substance of which notices shall be subject to review and approval of the Parent) setting forth such holders’ rights, and the agreements evidencing the grants of such Converted Warrants in exchange for Company Warrants (subject to the adjustments required by this 1.13 after giving effect to the Arrangement).

 

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(x)Upon the Amalgamation, the capital of the common shares of Damon Surviving Company will be the sum of: (i) the aggregate paid-up capital (as such term is defined in the ITA) of the Company Shares immediately prior to the Amalgamation (which in each case, for greater certainty, does not include any paid-up capital attributable to the Company Shares of Company Dissenting Shareholders); and (ii) the aggregate paid-up capital (as such term is defined in the ITA) of the Amalco Sub shares immediately prior to the Amalgamation;

 

(xi)Upon the Amalgamation, the capital of the Spinco Common Shares will be increased by an amount equal to the aggregate paid-up capital (as such term is defined in the ITA) of the Company Shares immediately prior to the Amalgamation (which, for greater certainty, does not include any paid-up capital attributable to the Company Shares held by Company Dissenting Shareholders).

 

(xii)Damon Surviving Company will become a wholly-owned subsidiary of the Spinco.

 

1.14Effective Date.

 

The Amalgamation shall be completed on the Effective Date and shall be effective at the Effective Time.

 

1.15Name Change.

 

The name of Spinco following the Effective Time shall be as determined by the Company in its sole discretion.

 

1.16Effecting the Amalgamation.

 

Subject to the rights of termination contained in this Agreement, upon the approval of the Company Shareholders and the shareholders of Amalco Sub being obtained, and the other conditions contained in this Agreement being complied with or waived, Amalco Sub and the Company shall file the Amalgamation Application and deliver such other documents as may be required in order to effect the Amalgamation.

 

1.17Treasury Stock.

 

At the Effective Time, if there are any Company Securities that are owned by the Company as treasury securities, such securities shall be canceled without any conversion or exchange thereof and no payment or distribution shall be made with respect thereto.

 

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1.18Surrender of Company Securities; Payment of Amalgamation Consideration.

 

(a)At or prior to the Effective Time, Spinco shall (i) appoint Computershare Trust Company of Canada, or such other transfer agent as is mutually agreeable between the parties, as transfer agent (the “Exchange Agent”) for the purposes set forth in this Section 1.18 and (ii) deposit, or cause to be deposited, with the Exchange Agent, the Amalgamation Consideration to be issued pursuant to the Amalgamation.

 

(b)At or prior to the Effective Time, Spinco shall send, or shall cause the Exchange Agent to send, to each holder of Company Notes, Company SAFEs and Company Shares evidenced by Certificates (the “Certificates”) or represented by book-entry (the “Book-Entry Shares”) and not held by the Depository Trust Company (“DTC”) or the Canadian Depository for Securities (“CDS”), a letter of transmittal for use in such exchange, in a form to be mutually agreed upon by the Parties (the “Letter of Transmittal”) (which shall specify that the delivery of the exchanged Spinco Common Shares shall be effected, and risk of loss and title shall pass, only upon proper delivery of a properly completed and duly executed Letter of Transmittal and appropriate Certificates, if any (or a Lost Certificate Affidavit)), to the Exchange Agent for use in such exchange.

 

(c)With respect to Book-Entry Shares, including the Spinco Common Shares, held through the DTC or CDS, Spinco and the Company shall cooperate to establish procedures with the Exchange Agent, DTC or CDS to ensure that the Exchange Agent will transmit to DTC or CDS, as the case may be (or their respective nominees) as soon as reasonably practicable on or after the Effective Date, upon surrender of Book-Entry Shares held of record by DTC or CDS (or their respective nominees) in accordance with customary surrender procedures, the applicable Spinco Common Shares to be exchanged for such Book-Entry Shares held through the DTC or CDS, as applicable.

 

(d)Each holder of Company Shares, Company Notes and Company SAFEs shall be entitled to receive its share of the Amalgamation Consideration in respect of the Company Securities tendered for exchange, within 30 days after the Effective Time, but subject to the delivery to the Exchange Agent of the following items prior thereto (collectively, the “Transmittal Documents”): (i) the Company Certificate(s), if any, for its Company Shares (or a Lost Certificate Affidavit), or a properly completed and duly executed Letter of Transmittal and (ii) such other documents as may be reasonably requested by the Exchange Agent or Spinco. Until so surrendered, each Company Certificate shall represent after the Effective Time for all purposes only the right to receive such portion of the Amalgamation Consideration attributable to such Company Certificate.

 

(e)If any portion of the Amalgamation Consideration is to be delivered or issued to a Person other than the Person in whose name the surrendered Company Certificate is registered immediately prior to the Effective Time, it shall be a condition to such delivery that: (i) the transfer of such Company Shares shall have been permitted in accordance with the terms of the Company’s Organizational Documents and any shareholders agreement with respect to the Company, each as in effect immediately prior to the Effective Time, (ii) such Company Certificate shall be properly endorsed or shall otherwise be in proper form for transfer, (iii) the recipient of such portion of the Amalgamation Consideration, or the Person in whose name such portion of the Amalgamation Consideration is delivered or issued, shall have already executed and delivered such other Transmittal Documents as are reasonably deemed necessary by the Exchange Agent or Spinco, and (iv) the Person requesting such delivery shall pay to the Exchange Agent any transfer or other Taxes required as a result of such delivery to a Person other than the registered holder of such Company Certificate or establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.

 

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