ASSET PURCHASE AGREEMENT
THIS AGREEMENT dated for reference the 20th day of March, 1998
AMONG:
ALEX COMPUTER SYSTEMS, INC., a company duly incorporated
pursuant to the laws of the State of Delaware and having
its principal place of business at 000 Xxxxx Xxxx, Xxxxx
000, Xxxxxx, X.X. X.X.X. 00000
(herein called the "Vendor")
OF THE FIRST PART
AND:
ALEX INFORMATICS INC., a company duly incorporated
pursuant to the laws of the Province of Quebec and having
its principal place of business at 0000 Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxx, Xxxxxx, X0X 0X0
(herein called the "Principal")
OF THE SECOND PART
AND:
SPECTRUM SIGNAL PROCESSING INC., a company incorporated
pursuant to the laws of the Province of British Columbia
having a principal place of business at Suite 100, 0000
Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0, Xxxxxx
(herein called the "Purchaser")
OF THE THIRD PART
WITNESSES THAT WHEREAS:
A. The Vendor carries on the business comprised of the
development, marketing and sale of ADI Sharc processor based board level
products and software systems, as described in Schedule "7" - Intellectual
Property hereto, and known as "Alex Computer Systems" (the
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"Business") at or about 000 Xxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxx Xxxx, Xxxxxx
Xxxxxx of America;
B. The Purchaser is a Canadian corporation doing business in
the United States of America and intends to incorporate a wholly-owned
subsidiary corporation in the United States of America to own the assets
purchased by the Purchaser pursuant to this Agreement;
C. The Principal is the sole shareholder and owner of the Vendor
and has a substantial proprietary and financial interest in the Vendor;
D. The Vendor has agreed to sell and the Purchaser has agreed
to purchase (subject to certain exclusions hereinafter described) substantially
all the property, assets, and undertaking of the Business on the terms and
conditions herein provided;
NOW THEREFORE in consideration of the premises and the respective covenants,
agreements representations, warranties and indemnities of the parties herein
contained and for other good and valuable consideration (the receipt and
sufficiency of which is hereby acknowledged) the parties hereto covenant and
agree as follows:
1. DEFINED TERMS
1.1 For the purposes of this Agreement, unless the context
otherwise requires, the following terms shall have the respective meanings set
out below and grammatical variations of such terms shall have corresponding
meanings:
(a) "Adjustment Date" means January 31, 1998;
(b) "Affiliate" has the meaning given to that term in Rule 144
of the Securities Act of 1933 (United States), as amended;
(c) "Associate" has the meaning given to that term in the
Securities and Exchange Act of 1934 (United States), as
amended;
(d) "Assumed Indebtedness" means the aggregate
indebtedness of the Vendor owing to the creditors which is
being assumed by the Purchaser as described in Schedule "14"
hereto, but does not include the Excluded Indebtedness;
(e) "Audited Financial Statements" means the audited financial
statements of the Vendor as at and for the financial years
ended July 31, 1996 and July 31, 1997, including the notes
thereto and the report of the Vendor's auditors thereon, a
copy of which is annexed hereto as Schedule "1" - Financial
Statements;
(f) "Business" means the business carried on by the Vendor
consisting of the development, marketing and sale of ADI Sharc
processor based board level products and software systems, as
described in Schedule "7" - Intellectual Property hereto, and
known as Alex Computer Systems;
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(g) "Business Assets" means all property and assets of the
Business of every kind and description and wherever situate,
including:
(i) leasehold title to the Leased Property described in
Schedule "2" - Leased Property hereto;
(ii) all Equipment of the Business;
(iii) all Inventory of the Business;
(iv) all right, title, benefit, and interest under the
Material Contracts described in Schedule "4" - Material
Contracts hereto;
(v) all customer lists, brochures, samples, price lists,
advertising material, production records, employee
manuals, personnel records, accounting and other books
and records, and all other information, correspondence,
documents, and material exclusively relating to the
Business;
(vi) all right, title, and interest of the Vendor in and to
all the Intellectual Property Rights and the
Intellectual Property, including the Intellectual
Property described in Schedule "7" - Intellectual
Property hereto, and any and all licences,
Contracts and other agreements or instruments
exclusively relating thereto;
(vii) all permits, licences, consents, authorizations, and
approvals pertaining to the Business including those
described in Schedule "6" - Permits and Licences
hereto;
(viii) all prepaid expenses;
(ix) all accounts receivable;
(x) all computer hardware;
(xi) all cash on hand or on deposit; and
(xii) the Goodwill of the Business;
(h) "Business Day" means any day (other than a Saturday or
a Sunday) on which the main branch of the Bank of
Montreal in Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, is
open for business;
(i) "Closing" means the completion of the transactions
contemplated in this Asset Purchase Agreement;
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(j) "Closing Date" means April 24, 1998, or such other date as
the Vendor and the Purchaser may mutually determine, but in no
event will the Vendor and the Purchaser extend such date
beyond April 30, 1998;
(k) "Contract" means any agreement, indenture, contract, lease,
deed of trust, license, option, instrument or other
commitment, whether written or oral;
(l) "Employee Plans" means each employee plan, retirement,
pension, bonus, stock purchase, profit sharing, stock option,
deferred compensation, severance or termination pay,
insurance, medical, hospital, dental, vision care, drug, sick
leave, disability, salary continuation, legal benefits,
unemployment benefits, vacation, incentive or other
compensation plan or arrangement or other employee benefit
that is maintained, or otherwise contributed to or required to
be contributed to, by the Vendor relating to the Business or
the Business Assets for the benefit of employees or former
employees of the Vendor described in Schedule "5" - Employee
Matters;
(m) "Employees" means those employees of the Vendor who are
employed in the Business immediately prior to the time of
Closing;
(n) "Encumbrance" means any encumbrance, lien, charge, hypothec,
pledge, mortgage, title retention agreement, security interest
of any nature, adverse claim, exception, reservation,
easement, right of occupation, any matter capable of
registration against title, option, right of preemption,
privilege or any Contract to create any of the foregoing;
(o) "Environmental Laws" means all applicable national, state,
municipal and local laws, statutes, ordinances, by-laws and
regulations, and orders, directives and decisions rendered by
any ministry, department or administrative or regulatory
agency relating to the protection of the environment,
occupational health and safety or the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of any Hazardous Substances;
(p) "Environmental Permits" means all licences, permits,
approvals, consents, certificates, registrations and other
authorizations under Environmental Laws required for the
operation of the Business, all of which are described in
Schedule "6" - Licenses and Permits.
(q) "Equipment" means all chattels, equipment, fixtures,
furnishings, machinery, vehicles and supplies used in
connection with the Business or situate upon the Leased
Property as at the date hereof including the items described
in Schedule "3" - Machinery and Equipment hereto;
(r) "Exchange Rate" means the average of the daily closing rate
of exchange during the thirty (30) days immediately preceding
the date this Agreement is
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executed by the parties hereto for converting United States
Dollars to Canadian Dollars as published by the Bank of Canada
for each relevant day as of 4:00 p.m. E.S.T.;
(s) "Excluded Assets" means any and all accounts receivable of
the Vendor from the Principal or any Affiliate or Associate of
the Principal, all deferred income tax benefits of the Vendor,
deferred marketing costs of the Vendor and software
development costs of the Vendor;
(t) "Excluded Indebtedness" means any indebtedness of the Vendor
to the Principal or any Affiliate or Associate of the
Principal or of the Vendor and any indebtedness of the Vendor
to RPA relating to royalties payable by the Vendor to RPA and
any other indebtedness of the Vendor to RPA arising prior to
the Adjustment Date, and for greater certainty the Purchaser
shall assume and be responsible for all payments payable to
RPA (excluding royalties) after the Adjustment Date;
(u) "Financial Statements" means the Audited Financial Statements
and the Interim Financial Statements;
(v) "Goodwill" means the goodwill of the Business, together with
the exclusive right of the Purchaser to represent itself as
carrying on the Business in continuation of and in succession
to the Vendor, the exclusive right of the Purchaser to the
name "Alex Computer Systems" as part of or in connection with
the Business for the two (2) year period immediately following
the Closing Date, and all existing sales and marketing
information and material that is directly associated with the
name "Alex Computer Systems";
(w) "Hazardous Substances" means any pollutants, contaminants,
chemical or industrial toxic, or hazardous waste or
substances;
(x) "Improvements" means any and all corrections, changes,
enhancements, modifications, refinements, updates, new
functions, new features, new releases and all other
improvements to the ADI Sharc processor based board level
products and software systems or the Intellectual Property
generally;
(y) "including" means including without limitation or prejudice
to the generality of any description, definition, term or
phrase preceding that word, and the word "include" and its
derivative expressions will be construed accordingly;
(z) "Intellectual Property" means any and all ideas, concepts,
inventions, discoveries, works, trade secrets, know-how,
confidential information, processes, prototypes, devices,
samples, developments, technical advances, computer software
programs and documentation therefor, specifications and source
code listings, data or compilations of information,
algorithms, literary and artistic works, designs and all other
forms of industrial and
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intellectual property made, conceived, or actually or
constructively reduced to practice by or on behalf of the
Vendor, which are derived or arising from, or related or
ancillary to, or embodied by or in the ADI Sharc processor
based board level products and software systems and all other
industrial and intellectual property necessary to conduct the
Business and all Improvements thereto;
(aa) "Intellectual Property Rights" means all worldwide industrial
and intellectual property Rights in and to the Intellectual
Property (whether registered or unregistered and including all
goodwill attaching to any of the foregoing) and all
applications for patent, copyright, trade-xxxx, industrial
design, integrated circuit topography or other industrial or
intellectual property protection and all resulting
registrations and includes any and all rights to exploit and
commercialize the Intellectual Property, the Intellectual
Property Rights, and the ADI Sharc processor based board level
products and software systems throughout the world;
(bb) "Interim Financial Statements" means the interim unaudited
financial statements of the Vendor as at and for the periods
ended January 31, 1998 and February 28, 1998, copies of which
are annexed hereto as Schedule "1";
(cc) "Inventory" means all of the inventory set forth in
Schedule "21" - Inventory hereto;
(dd) "Leased Property" means all the leased real property that is
used in the Business and leased by the Vendor, including the
real property described in Schedule "2" - Leased Property
herein;
(ee) "Leases" means all of the leases of the Leased Property,
whether as lessor or lessee leased by the Vendor as set forth
in Schedule "2" - Leased Property and all leases of personal
property as described in Schedule "4" - Material Contracts;
(ff) "Licences" means all licences, permits, approvals,
consents, certificates, registrations and authorizations
(whether governmental, regulatory, or otherwise) required for
the conduct in the ordinary course of the operations of the
Business and the uses to which the Business Assets have been
put;
(gg) "Losses" means, in respect of any matter, all claims,
demands, proceedings, losses, damages, liabilities,
deficiencies, costs and expenses (including all reasonable
legal and other professional fees and disbursements, interest,
penalties and amounts paid in settlement) arising as a
consequence of such matter;
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(hh) "Material Contracts" means all agreements, indentures,
Contracts, leases, deeds of trust, licences, options,
instruments or other commitments, whether written or oral,
including the benefit of all unfilled orders received by the
Vendor and forward commitments to purchase made by the Vendor,
which the Vendor is entitled to or possessed of in connection
with the Business and the Business Assets, including all
right, title, benefit and interest in respect of the
Contracts, leases, engagements and commitments described in
Schedule "4" - Material Contracts hereto;
(ii) "Permitted Encumbrances" means:
(i) liens for taxes, assessments and governmental
charges due and being contested in good faith
and diligently by appropriate proceedings (and
for the payment of which adequate provision
has been made);
(ii) liens for taxes either not due and payable or due
but for which notice of assessment has not been
given; and
(iii) the Encumbrances described in Schedule "8";
(jj) "Prime Rate" means the annual variable rate of interest
quoted or published from time to time by the Bank of
Montreal at its main branch in Vancouver, British
Columbia as the "prime rate" of interest charged by it
for Canadian dollar loans made in Canada to its most
credit worthy customers;
(kk) "Purchase Price" means the aggregate sum payable by the
Purchaser to the Vendor for the Business Assets plus or minus
any adjustments pursuant to Clause 5.3 hereof;
(ll) "RPA" means RPA Electronics Design, LLC;
(mm) "Rights" means any and all worldwide proprietary, possessory,
use and ownership rights, titles, and interests (whether
beneficial or legal) of all kinds whatsoever, howsoever
arising and whether partial or whole in nature, and all legal
protection recognized by law (whether by statute, common law
or otherwise) whether domestic or foreign;
(nn) "Share Price" means the average closing price of a common
share in the capital of the Purchaser on the NASDAQ National
Market System during the thirty (30) trading days prior to the
date this Agreement is executed by the parties hereto, as
published by the National Association of Securities Dealers,
Inc., rounded to the third decimal point and converted from
United States Dollars to Canadian Dollars at the Exchange
Rate;
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(oo) "Spectrum Shares" means those common shares in the capital
of the Purchaser being issued by the Purchaser as part of the
payment of the Purchase Price;
(pp) "Spectrum Warrant" means a warrant to purchase a common share
in the capital of the Purchaser at the Warrant Price, valid
for two (2) years from the Closing Date, in the form annexed
as Schedule "20" - Spectrum Warrant hereto;
(qq) "Transferred Employees" means those Employees who accept
offers of employment made by the Purchaser commencing after
the Closing Date;
(rr) "Warrant Price" means the greater of the Share Price or the
closing price of a common share in the capital of the
Purchaser on the NASDAQ National Market System at the close of
business on the trading day immediately preceding the date
this Agreement is executed by the parties hereto, as published
by the National Association of Securities Dealers, Inc., and
converted from United States Dollars to Canadian Dollars at
the Exchange Rate; and
(ss) "Warrant Shares" means those common shares in the capital of
the Purchaser issuable upon exercise of the Spectrum Warrants;
1.2 Currency
Unless otherwise indicated, all dollar amounts in this Agreement are expressed
in Canadian funds.
1.3 Sections and Headings
The division of this Agreement into Articles, sections
and subsections and the insertion of headings are for convenience of
reference only and shall not affect the interpretation of this Agreement.
Unless otherwise indicated, any reference in this Agreement to an
Article, section, subsection or Schedule refers to the specified Article,
section or subsection of or Schedule to this Agreement.
1.4 Number, Gender and Persons
In this Agreement, words importing the singular number
only shall include the plural and vice versa, words importing gender
shall include all genders and words importing persons shall include
individuals, corporations, partnerships, associations, trusts,
unincorporated organizations, governmental bodies and other legal or
business entities of any kind whatsoever.
1.5 Accounting Principles
Any reference in this Agreement to generally accepted
accounting principles refers to generally accepted accounting principles
that have been established in Canada, including those
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approved from time to time by the Canadian Institute of Chartered Accountants or
any successor body thereto.
1.6 Entire Agreement
This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether
written or oral, including, without limitation, the Purchase Offer dated
March 17, 1998. There are no conditions, covenants, agreements,
representations, warranties or other provisions, express or implied,
collateral, statutory or otherwise, relating to the subject matter hereof
except as herein provided.
1.7 Time of Essence
Time shall be of the essence of this Agreement.
1.8 Applicable Law
This Agreement shall be construed, interpreted and
enforced in accordance with, and the respective rights and obligations of
the parties shall be governed by, the laws of the Province of British
Columbia and the federal laws of Canada applicable therein, and each
party irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the courts of such province and all courts competent to
hear appeals therefrom.
1.9 Amendments and Waivers
No amendment or waiver of any provision of this
Agreement shall be binding on either party unless consented to in writing
by such party. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision, nor shall any waiver
constitute a continuing waiver unless otherwise provided.
1.10 Schedules
The following Schedules are attached to and form part
of this Agreement: All terms defined in the body of this Agreement will
have the same meaning in the Schedule attached hereto.
Schedule 1 - Financial Statements
Schedule 2 - Leased Property
Schedule 3 - Machinery and Equipment
Schedule 4 - Material Contracts
Schedule 5 - Employee Matters
Schedule 6 - Licences and Permits
Schedule 7 - Intellectual Property
Schedule 8 - Permitted Encumbrances
Schedule 9 - Insurance Policies
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Schedule 10 - Legal and Regulatory Proceedings
Schedule 11 - Consents
Schedule 12 - Environmental Matters
Schedule 13 - Non-Competition Agreement
Schedule 14 - Assumed Indebtedness
Schedule 15 - Form of Letter to regular and major customers
Schedule 16 - Major Customers
Schedule 17 - Assignment and Assumption Agreement
Schedule 18 - Non-Solicitation Agreement
Schedule 19 - Confidentiality Agreement
Schedule 20 - Spectrum Warrant
Schedule 21 - Inventory
Schedule 22 - Registration Agreement
Schedule 23 - Escrow Agreement
Schedule 24 - Assumption Agreement
Schedule 25 - Investment Representation Letter
Schedule 26 - Warrant Valuation
2. PURCHASE AND SALE
2.1 Subject to the terms and conditions of this Agreement, on the
Closing Date but with effect from the Adjustment Date, the Vendor will sell,
transfer, and assign to the Purchaser and the Purchaser agrees to purchase from
the Vendor, free and clear of all Encumbrances except as may be otherwise
specifically provided for herein as Permitted Encumbrances, the Business Assets.
2.2 The Excluded Assets and the Excluded Indebtedness are
specifically excluded from the within purchase and sale.
2.3 All quotations for the sale or purchase of Inventory or
supplies made or received by the Vendor and not confirmed to contractual
commitment will be deemed to be assigned to the Purchaser at the Closing to be
accepted, confirmed or withdrawn or otherwise acted upon by the Purchaser in its
own name, for its own account and in accordance with its own business judgment.
3. PURCHASE PRICE AND ALLOCATION
3.1 The Purchase Price payable by the Purchaser to the Vendor
for the Business Assets will be the sum of EIGHT MILLION ONE HUNDRED & SIXTY-ONE
THOUSAND ($8,161,000) DOLLARS, plus the value of the Assumed Indebtedness.
3.2 The Purchase Price will be allocated among the various items
comprising the Business Assets and the Vendor and the Purchaser agree to report
the sale and purchase of the Business Assets for all tax purposes in a manner
consistent with the following:
(a) to the Equipment, the sum of $374,278;
(b) to the Inventory, the sum of $763,840;
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(c) to the Goodwill, excluding the right to use the
"Alex Computer Systems" name, the sum of $773,410;
(d) to the prepaid expenses, the sum of $121,196;
(e) to the Accounts Receivable, the sum of $1,028,215;
(f) to the Non-Solicitation Agreements, the sum of
$600,000;
(g) to the Non-Competition Agreements, the sum of
$2,500,000;
(h) to the License Agreement respecting the name "Alex
Computer Systems", the sum of $2,000,000;
(i) to the Technology Assignment, the sum of $10.00; and
(j) to the remaining Business Assets and other ancillary
agreements, the sum of $51.00.
4. PAYMENT OF THE PURCHASE PRICE
4.1 The Purchase Price will be paid as follows:
(a) as to SEVEN MILLION ($7,000,000) DOLLARS of the Purchase
Price by delivery on the Closing Date by the Purchaser to the
Vendor or the Vendor's solicitors in trust of the number of
common shares in the capital of the Purchaser equivalent to
SEVEN MILLION ($7,000,000) DOLLARS divided by the Share Price,
entitlements to fractions of a common share in the capital of
the Purchaser so calculated will be ignored; the Spectrum
Shares shall be represented by four (4) share certificates,
each such share certificate representing twenty-five (25%) per
cent of the Spectrum Shares, or as may be reasonably directed
by the Vendor or the Vendor's solicitor in writing;
(b) as to TWO HUNDRED THOUSAND ($200,000) DOLLARS of the Purchase
Price, calculated in accordance with Schedule "26" hereto, by
delivery on the Closing Date by the Purchaser to the Vendor or
the Vendor's solicitors in trust Spectrum Warrants for the
number of common shares in the capital of the Purchaser
equivalent to ONE MILLION($1,000,000) DOLLARS divided by the
Warrant Price, entitlements to fractions of a common share in
the capital of the Purchaser so calculated will be ignored, or
as may be reasonably directed by the Vendor or the Vendor's
solicitors;
(c) as to NINE HUNDRED AND SIXTY-ONE THOUSAND ($961,000) DOLLARS
of the Purchase Price, subject to Clause 5.3, by solicitors'
trust cheque payable to the Vendor's solicitors in trust on
the Closing Date; and
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(d) as to the Assumed Indebtedness, by assumption of the
Assumed Indebtedness.
5. CLOSING, POSSESSION, AND ADJUSTMENTS
5.1 The Closing will take place at 10:00 a.m. local time,
on the Closing Date at the offices of Clark, Wilson, 800 - 885 West Georgia
Street, Vancouver, British Columbia, or at such other place, date, and time as
may be mutually agreed upon by the parties hereto.
5.2 The Vendor will deliver possession of the Business Assets,
free of any other claim to possession and any tenancies, to the Purchaser on the
Closing Date.
5.3 The Purchase Price will be reduced by the full amount of the
costs incurred by the Vendor in association with the New Jersey office of the
Principal for the months of February, March and April of 1998, as determined by
the Chief Financial Officers of the Vendor and the Principal acting reasonably.
5.4 All revenues and expenses of the Business and relating to
the Business Assets will be adjusted between the Vendor and the Purchaser as at
the commencement of business on the Adjustment Date to the effect that in
respect of any period before that time the Vendor will bear all expenses and
receive all revenues relating to the Business and the Business Assets and that
from and after said time the Purchaser will bear all expenses and receive all
revenues relating to the Business and the Business Assets.
6. ASSUMPTION OF LIABILITY
6.1 It is understood and agreed that from and after the Closing
Date the Purchaser will assume, pay, discharge and satisfy the Assumed
Indebtedness of the Vendor to the creditors described in Schedule "14" - Assumed
Indebtedness, and that at the Closing the Vendor and the Purchaser will execute
and deliver an Assumption Agreement, in the form attached hereto as Schedule
"24", whereby the Purchaser covenants to assume and pay the Assumed Indebtedness
and to indemnify and save harmless the Vendor in respect thereof.
6.2 Subject to the provisions of this Agreement, the Purchaser
agrees to assume, pay, satisfy, discharge, perform and fulfil, from and after
the Closing Date, all obligations and liabilities of the Vendor in respect of:
(a) the Material Contracts described in Schedule "4" and
those Contracts described in Schedules "5" - Employee
Matters and Schedule "7" - Intellectual Property which
are assigned to the Purchaser as set out in the
Assignment and Assumption Agreement attached hereto as
Schedule "17";
(b) the licences, permits, approvals, consents, registrations,
certificates and other authorizations described in Schedule
"6" - Permits and Licences;
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(c) the agreements entered into by the Vendor prior to the
Closing Date in the ordinary course of the Business for the
provision of services or goods to the Vendor; and
(d) the agreements entered into by the Vendor prior to the Closing
Date in the ordinary course of the Business for the sale of
inventories by the Vendor or the provision of services by the
Vendor.
At the Closing Date, the Vendor and the Purchaser will deliver an Assignment and
Assumption Agreement whereby the Vendor assigns all right, title, benefit and
interest under the Material Contracts to the Purchaser and the Purchaser
covenants to assume, perform and discharge set obligations and liabilities from
and after the Closing Date and to indemnify and save harmless the Vendor in
respect thereof.
6.3 Both before and after the Closing Date, the Vendor and the
Purchaser will make all reasonable efforts to obtain the release of the Vendor
and as may be applicable the Principal of their obligations in respect of the
Assumed Indebtedness and the Material Contracts, and without limiting the
generality of Clause 22.1 the Vendor and the Purchaser will execute and deliver
such documents and instruments and do such acts and things as may be required
for said purposes.
6.4 Without in any way limiting Clause 9.4, the Purchaser shall
not assume, and the Vendor shall be solely responsible for and shall indemnify
and hold harmless the Purchaser from and against, all product liability, product
warranty and other claims and obligations made on or before the Adjustment Date
respecting products manufactured or sold by the Vendor in connection with the
Business up to the Adjustment Date, provided such claim shall have been
disclosed in writing to the Purchaser within 15 days of receipt of such claim
and the Vendor shall have the right to contest such claim. The Purchaser may
satisfy any such obligations not assumed by it where it is required to do so by
law or by order of any court or regulatory authority having jurisdiction over it
or where it determines in good faith to do so for valid business reasons and, in
any such case, the Vendor shall reimburse the Purchaser forthwith following
demand for all expenses incurred by the Purchaser in connection therewith
including all labour and material costs incurred in repairing or replacing
products.
7. REPRESENTATIONS AND WARRANTIES OF THE VENDOR AND THE PRINCIPAL
7.1 The Vendor and the Principal represent and warrant to the
Purchaser, with the intent that the Purchaser will rely thereon in entering into
this Agreement and in concluding the transactions contemplated hereby, that, as
at the Closing Date:
(a) the Vendor is a corporation duly incorporated, validly
existing, and in good standing under the laws of
Delaware, and has the power, authority, and capacity to
carry on the Business as presently conducted and to
enter into this Agreement and carry out its terms;
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(b) the execution and delivery of this Agreement and the
completion of the transaction contemplated hereby have been
duly and validly authorized by all necessary corporate action
on the part of the Vendor, and this Agreement constitutes a
valid and binding obligation of the Vendor enforceable against
the Vendor in accordance with its terms; except as enforcement
may be limited by bankruptcy, insolvency and other laws
affecting the rights of creditors generally and except that
equitable remedies may be granted only in the discretion of a
court of competent jurisdiction;
(c) Schedule "2" sets forth the Municipal addresses and complete
and accurate legal descriptions of all the Leased Property,
where indicated, that is used in the Business and leased by
the Vendor;
(d) the Vendor is not a party to any lease or agreement to lease
in respect of any real property, whether as lessor or lessee,
and which is in relation to the Business, other than the
Leases described in Schedule "2" Leased Property. Schedule "2"
sets out the parties to each of the leases of the Leased
Property, their dates of execution and expiry dates, any
options to renew, the locations of leased lands and premises
and the rent payable thereunder. Except as described in
Schedule "2", the Vendor occupies the Leased Property and has
the exclusive right to occupy and use the Leased Property.
Each of the Leases of both real and personal property is in
good standing and in full force and effect, and neither the
Vendor nor any other party thereto is in breach of any
covenants, conditions or obligations contained therein. The
Vendor has provided a true and complete copy of each Lease and
all amendments thereto to the Purchaser;
(e) Schedule "5" - Employee Matters, discloses all material
particulars pertaining to the employment or engagement of any
officers, directors, employees, and agents of the Vendor
including particulars of any Contracts, engagements, or
commitments, whether oral or written, respecting bonuses,
commissions, pensions, profit sharing, health benefits, group
insurance and other such benefits;
(f) the Vendor is not, nor is any employer which is associated,
related to or otherwise connected to the Vendor, a party to
any collective agreement relating to the Business with any
union, association of employees or bargaining agent, and no
part of the Business, or any associated, related or otherwise
connected business, is bound by any such collective agreement
or has been certified as a unit appropriate for collective
bargaining and there are no proceedings under any applicable
the labour relations or similar legislation or applications
for certification which are or could result in an obligation
of or be binding upon the Vendor or any employer which is
associated, related to or otherwise connected to the Vendor
and there are no circumstances under which the provisions of
the such labour relations or
15
similar legislation can apply to the transactions contemplated
by this agreement;
(g) save as disclosed to the Purchaser, the Vendor has not
received notice of any complaints filed by any of the
employees against the Vendor and is not aware of any facts or
circumstances that may give rise to any complaints claiming
that the Vendor has violated any applicable employee or human
rights or similar legislation in jurisdictions in which the
Business is conducted or any complaints or proceedings of any
kind involving the Vendor. All levies, assessments and
penalties made against the Vendor pursuant to any applicable
workers' compensation legislation have been paid by the Vendor
and the Vendor has not been reassessed under any such
legislation;
(h) all accruals for unpaid vacation pay, premiums for
unemployment insurance, health premiums, pension plan
premiums, accrued wages, salaries and commissions and
employment benefit plan payments have been reflected in the
books and records of the Vendor;
(i) except as will be remedied by the consents, approvals,
releases, and discharges described in Schedule "11" - Consents
hereto, neither the execution and delivery of this Agreement
nor the performance of the Vendor's obligations hereunder
will:
(i) violate or constitute default under the constating
documents, by-laws, or articles of the Vendor, any
order, decree, judgment, statute, by-law, rule,
regulation, or restriction applicable to the Vendor,
the Business or any of the Business Assets, or any
Contract, agreement, instrument, covenant, mortgage,
or security, including in particular the Material
Contracts, the instruments described in Schedule "14" -
Assumed Indebtedness, and the matters disclosed in
Schedule "5" - Employee Matters, to which the Vendor
is a party and which relate to the Business or which
are binding upon the Vendor and which relate to the
Business,
(ii) give any person the right to terminate or cancel any
of the Material Contracts, the instruments described
in Schedule "14" - Assumed Indebtedness, or the
employee matters disclosed in Schedule "5" - Employee
Matters,
(iii) result in any fees, duties, taxes, assessments,
penalties or other amounts becoming due or payable,
other than such as may become payable under any
national, federal, state, provincial or local tax
legislation;
16
(iv) give rise to acceleration of the time for
payment of any moneys payable or for the performance of
any obligation to be performed under the Material
Contracts, the instruments described in Schedule "14" -
Assumed Indebtedness, or the matters disclosed in
Schedule "5" - Employee Matters,
(v) give rise to the creation or imposition of any
Encumbrance on any of the Business Assets, or
(vi) violate or constitute default under any licence, permit,
approval, consent or authorization held by the Vendor
and necessary to the operation of the Business.
(j) except as will be remedied by the releases and
discharges described in Schedule "11", the Vendor owns
and possesses and has good and marketable title to the
Business Assets free and clear of all Encumbrances of
every kind and nature whatsoever except as disclosed in
Schedule "8" - Permitted Encumbrances, hereto;
(k) except as otherwise disclosed in Schedule "3" - Machinery and
Equipment, and reasonable wear and tear excepted, the Business
Assets are in good working order and in a functional state of
repair and to the best of the knowledge of the Vendor there
are no latent defects thereto;
(l) the Business Assets comprise all property and assets used
by the Vendor in connection with the Business;
(m) except as disclosed in Schedule "8" - Permitted Encumbrances,
hereto, the Vendor does not have any indebtedness which might
by operation of law or otherwise now or hereafter constitute
an Encumbrance upon any of the Business Assets;
(n) no person other than the Purchaser has any written or oral
agreement or option or any right or privilege (whether by law,
preemptive or contractual) capable of becoming an agreement or
option for the purchase or acquisition from the Vendor of any
of the Business Assets, other than pursuant to purchase orders
accepted by the Vendor in the ordinary course of the Business;
(o) the Vendor has the exclusive right to possess, use and
occupy the Leased Property. All buildings, structures,
improvements and appurtenances situated on the Leased Property
are in good operating condition and in a state of good
maintenance and repair and are adequate and suitable for the
purposes for which they are currently being used, and the
Vendor has adequate rights of ingress and egress for the
operation of the Business in the ordinary course. Without
limiting the generality of the foregoing:
17
(i) all accounts for work and services performed and
materials placed or furnished upon or in respect
of the Leased Property at the request of the Vendor
have been fully paid and satisfied, and no person is
entitled to claim a lien under any builders' or
mechanics' lien or similar legislation against the
Leased Property or any part thereof, other than current
accounts in respect of which the payment due date has
not yet passed;
(ii) there is nothing owing in respect of the Leased Property
by the Vendor to any municipal corporation or to any
other corporation or commission owning or operating a
utility for water, gas, electrical power or energy,
steam or hot water, or for the use thereof, other than
current accounts in respect of which the payment due
date has not yet passed; and
(iii) there are no outstanding levies, charges or fees
assessed against the Leased Property by any public
authority (including development or improvement levies,
charges or fees);
(p) except as otherwise provided in this Agreement,
Schedule "4" - Material Contracts, discloses all
Contracts, engagements, and commitments, whether oral
or written, relating to the Business or the Business
Assets including in particular Contracts, engagements,
and commitments:
(i) out of the ordinary course of Business,
(ii) which entail the payment of in excess of $5,000.00
during any one year period,
(iii) respecting ownership of or title to any interest or
claim in or to any real or personal property making up
the Business Assets,
(iv) respecting the Intellectual Property;
(v) respecting any agreement of guarantee, support,
indemnification, assumption or endorsement of, or any
similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or
otherwise) or indebtedness of any other
person except for cheques endorsed for collection in
the ordinary course of the Business;
(vi) any employment or consulting Contracts or any other
Contract with any officer, employee or consultant,
other than oral Contracts of indefinite hire terminable
by the Vendor without cause on reasonable notice;
18
(vii) any profit-sharing, bonus, stock option, pension,
retirement, disability, stock purchase, medical,
dental, hospitalization, insurance or similar plan or
agreement providing benefits to any current or former
director, officer, employee or consultant;
(viii) any trust indenture, mortgage, promissory note, loan
agreement, guarantee or other Contracts for the
borrowing of money or a leasing transaction of the type
required to be capitalized in accordance with generally
accepted accounting principles;
(ix) any Contracts for capital expenditures in excess of
$25,000 in the aggregate;
(x) any Contract for the sale of any assets other than
sales of inventory to customers in the ordinary course
of the Business;
(xi) any Contract pursuant to which the Vendor is a lessor
of any machinery, equipment, motor vehicles,
furniture, fixtures or other personal property;
(xii) any confidentiality, secrecy or non-disclosure
Contract, (whether the Vendor is a beneficiary or
obligant thereunder) relating to any proprietary or
confidential information or any non-competition or
similar Contract;
(q) Schedule "4" - Material Contracts, contains an accurate
and complete description of all material particulars
respecting the Material Contracts and except as
disclosed in said Schedule:
(i) there has not been any default in any obligation or
liability in respect of the Material Contracts by the
Vendor and the Vendor has performed all of the
obligations required to be performed by it and is
entitled to all benefits under the Material Contracts;
(ii) there has not been any amendment, modification,
variation, surrender, or release of the Material
Contracts, and
(iii) each of said Material Contracts is in good standing
and in full force and effect and the Vendor has
performed all of the obligations required to be
performed by it and is entitled to all benefits
thereunder, and is not in default or alleged to be in
default in respect of any Material Contract or any
other Contracts, engagements or commitments provided
for in this Agreement, to which the Vendor is a party
or by which it is bound;
19
(r) Schedule "14" - Assumed Indebtedness, contains an
accurate and complete description of all instruments
evidencing or pertaining to and all material
particulars respecting the Assumed Indebtedness
including the amounts thereof as at the dates therein
specified (or where the exact amount cannot be
obtained, reasonably accurate estimates thereof) and
the material terms of repayment and interest rates
applicable thereto;
(s) the amount of Assumed Indebtedness at the Closing Date
will not exceed $1,500,000;
(t) all Licences required for the conduct in the
ordinary course of the operations of the Business and the uses
to which the Business Assets have been put have been obtained
and are in good standing and such conduct and uses are in
compliance with such licences and permits and with all laws,
zoning and other bylaws, building and other restrictions,
rules, regulations, and ordinances applicable to the Business
and the Business Assets and neither the execution and delivery
of this Agreement nor the completion of the purchase and sale
hereby contemplated will give any person the right to
terminate or cancel the said licenses or permits or affect
such compliance;
(u) except as disclosed in Schedule "10" - Legal and Regulatory
Proceedings, there are no actions, suits, proceedings,
investigations, complaints, orders, directives, or notices of
defect or non-compliance by or before any court, governmental
or domestic commission, department, board, tribunal, or
authority, or administrative, licensing, or regulatory agency,
body, or officer issued, pending, and to the best of the
Vendor's knowledge threatened against or affecting the Vendor
or in respect of the Business or any of the Business Assets
and which would have a material adverse affect on the
Business;
(v) the Financial Statements of the Vendor attached hereto
as Schedule "1" - Financial Statements, were prepared in
accordance with generally accepted accounting principles
consistently applied and are true and correct and present
fairly and completely the assets, liabilities (whether
accrued, absolute, contingent or otherwise), and the financial
condition of the Vendor and the results of the operation of
the Business for the periods reported thereby. The financial
position and condition of the Vendor is now at least as good
as that shown on or reflected in the interim financial
statements provided to the Purchaser;
(w) the books and records of the Vendor present fairly and
completely in all material respects, in accordance with
generally accepted accounting practices consistently applied,
the matters which said books and records purport to present,
and all material financial transactions of the Vendor relating
to the Business have been accurately recorded in said books
and records;
20
(x) there is no requirement to make any filing with, give any
notice to or to obtain any licence, permit, certificate,
registration, authorization, consent or approval of, any
governmental or regulatory authority as a condition to the
lawful consummation of the transactions contemplated by this
Agreement, except for the filings, notifications, licences,
permits, certificates, registrations, consents and approvals
described in Schedule "11" - Consents, or that relate solely
to the identity of the Purchaser or the nature of any business
carried on by the Purchaser. There is no requirement under any
Material Contract relating to the Business or the Business
Assets to which the Vendor is a party or by which it is bound
to give any notice to, or to obtain the consent or approval
of, any party to such agreement, instrument or commitment
relating to the consummation of the transactions contemplated
by this Agreement except for the notifications, consents and
approvals described in Schedule "11" - Consents;
(y) since the Adjustment Date, the Business has been carried
on only in the ordinary and normal course consistent with past
practices and there has not been:
(i) any change, event, or circumstance which would
materially adversely affect the affairs,
assets, liabilities, earnings, prospects,
operation, or condition of the Business,
(ii) any Loss, damage, or destruction, whether or not
covered by insurance, which would materially
adversely affect the affairs, prospects, operations,
or condition of the Business or the Business
Assets;
(iii) any material increase in the compensation or benefits
payable or to become payable by the Vendor to any
of its officers, directors, employees, or agents;
(iv) any obligation or liability (whether absolute,
accrued, contingent or otherwise and whether due
or to become due) incurred by the Vendor in connection
with the Business, other than those incurred in the
ordinary and normal course of the Business and
consistent with past practice;
(v) any licence, sale, assignment, transfer, disposition,
pledge, mortgage or granting of a security interest
or other Encumbrance on or over any of the Business
Assets, other than sales of inventory to customers
in the ordinary and normal course of the Business;
(vi) any capital expenditures or commitments relating to
the Business or Business Assets in excess of $10,000;
or
21
(vii) any change in the accounting or tax practices followed
by the Vendor;
(z) the Vendor has duly filed on a timely basis all tax returns
and reports required to be filed by it including all national,
state and local income tax returns and has paid all taxes that
are due and payable, and all assessments, re-assessments,
governmental charges, penalties, interest and fines due and
payable by it prior to the Closing Date. The Vendor has made
adequate provision for taxes payable in respect of the
Business for the current period and any previous period for
which tax returns are not yet required to be filed. The Vendor
has withheld from each payment made to any of its past or
present employees and officers or directors, the amount of all
taxes and other deductions required to be withheld therefrom,
and has paid the same to the proper tax or other receiving
officers within the time required under any applicable
legislation;
(aa) all required tax returns have been filed and are true,
complete and correct, and all taxes and other government
charges including all income, excise, sales, business and
property taxes and other rates, charges, assessments, levies,
duties, taxes, contributions, fees and licenses required to be
paid have been paid for all periods prior to the Closing Date
and the Vendor does not have any deferred tax liability except
as expressly stated in the Financial Statements;
(bb) there are no agreements, waivers or other arrangements
providing for an extension of time with respect to the filing
of any tax return by or payment of any tax, governmental
charge or deficiency by the Vendor, and to the knowledge of
the Vendor there are no contingent tax liabilities or any
grounds which would prompt a reassessment, including
aggressive treatment of income and expenses in filing earlier
tax returns;
(cc) the Vendor, in respect of the Business and the Business
Assets, has been and is in compliance with all Environmental
Laws;
(dd) the Vendor has obtained all necessary Environmental
Permits. Each Environmental Permit is valid, subsisting and in
good standing, and the Vendor is not in default or breach of
any Environmental Permit and no proceeding is pending or
threatened to revoke or limit any Environmental Permit;
(ee) the Vendor has never received any notice of or been prosecuted
for non-compliance with any Environmental Laws, nor has the
Vendor settled any allegation of non-compliance short of
prosecution. There are no orders or directions relating to
environmental matters requiring any work, repairs or
construction or capital expenditures to be made with respect
to the
22
Business or the Business Assets, nor has the Vendor
received notice of any of the same;
(ff) the Vendor has not received any notice that the Vendor is
potentially responsible for national, state, municipal or
local clean-up site or corrective action under any
Environmental Laws in connection with the Business. The
Vendor, in connection with the Business, has not received any
request for information in connection with any national,
state, municipal or local inquiries as to disposal sites;
(gg) Schedule "7" - Intellectual Property, sets out:
(i) all worldwide registrations of and
applications for patent, copyright,
trade-xxxx, industrial design, integrated
circuit topography or other industrial or
intellectual property protection of the
Intellectual Property and the ADI Sharc
processor based board level products and
software systems in general;
(ii) all licences, agreements and other Contracts
that comprise or relate to the ADI Sharc processor
based board level products and software systems and the
Intellectual Property in general;
(iii) all trade or brand names, business names, trade-marks
and service marks of the Vendor used in association
with the ADI Sharc processor based board level
products and software systems and the Intellectual
Property in general; and
(iv) all other industrial or intellectual property necessary
to conduct the Business;
(hh) except as set forth in Schedule "7" - Intellectual Property
hereto, the Vendor is the legal and beneficial owner of the
Intellectual Property Rights and the Intellectual Property,
including that set out in Schedule "7" - Intellectual Property
hereto, free and clear of all Encumbrances, and is not a party
to or bound by any Contract or any other obligation whatsoever
that limits or impairs its ability to sell, transfer, assign
or convey, or that otherwise affects, the Intellectual
Property Rights or the Intellectual Property. No person has
been granted any interest in or right to use all or any
portion of the Intellectual Property;
(ii) the Intellectual Property was created as original works by
employees of the Vendor in the course of their employment, was
created as original works by independent contractors hired by
the Vendor, or was legally obtained by the Vendor from third
parties. The Vendor has obtained written assignments of the
Intellectual Property and the Intellectual Property Rights
from RPA and all other independent contractors involved in the
creation of the Intellectual
23
Property. As at the Closing Date, the Vendor will have
obtained waivers of moral rights from all employees,
independent contractors and third parties involved in the
creation of the Intellectual Property;
(jj) as at the Closing Date, there are no royalties owing,
due, accruing due or payable by the Vendor to RPA with respect
to any of the Intellectual Property;
(kk) to the knowledge of the Vendor, the conduct of the Business,
including the use of the Intellectual Property, does not
infringe upon the industrial or intellectual property rights,
domestic or foreign, of any other person. The Vendor is not
aware of a claim of any infringement or breach of any
industrial or intellectual property rights of any other
person, nor has the Vendor received any notice that the
conduct of the Business, including the use of the Intellectual
Property, infringes upon or breaches any industrial or
intellectual property rights of any other person, and the
Vendor, after due inquiry, has no knowledge of any
infringement or violation of any of its Intellectual Property
Rights;
(ll) the Vendor is not aware of any state of facts that casts
doubt on the validity or enforceability of any of the
Intellectual Property Rights. The Vendor has provided to the
Purchaser a true and complete copy of all Contracts and
amendments thereto that comprise or relate to the Intellectual
Property and the Intellectual Property Rights;
(mm) the Vendor has the Business Assets insured against Loss or
damage by all insurable hazards or risks on a replacement cost
basis and such insurance coverage will be continued in full
force and effect to and including the Closing Date;
(nn) with respect to the Business:
(i) the Vendor has not since January 31, 1998 made any
payment or loan to, or borrowed any moneys from or is
otherwise indebted to, any officer, director, employee,
shareholder or any other person not dealing at arm's
length with the Vendor or any Affiliate or Associate
of any of the foregoing, except as disclosed in the
Financial Statements and except for usual employee
reimbursements and compensation paid in the ordinary
course of the Business; and
(ii) except for Contracts of employment described in
Schedule "5" - Employee Matters, hereto, the
Vendor is not a party to any Contract with
any officer, director, employee, shareholder or
any other person not dealing at arm's length
with the Vendor or any Affiliate or Associate of
any of the foregoing.
24
No officer, director or shareholder of the Vendor and no
entity that is an Affiliate or Associate of one or more of
such individuals:
(iii) owns, directly or indirectly, any interest in
(except for shares representing less than one per cent
of the outstanding shares of any class or series of any
publicly traded company), or is an officer, director,
employee or consultant of, any person that is, or is
engaged in business as, a competitor of the
Business or a lessor, lessee, supplier, distributor,
sales agent or customer of the Business;
(iv) owns, directly or indirectly, in whole or in part,
any property that the Vendor uses in the operations
of the Business; or
(v) has any cause of action or other claim whatsoever
against, or owes any amount to, the Vendor in
connection with the Business, except for any
liabilities reflected in the Financial Statements
and claims in the ordinary course of business such as
for accrued vacation pay and accrued benefits under
Employee Plans;
(oo) Schedule "16" - Major Customers, sets out the major
customers of the Business and there has been no
termination or cancellation of, and no modification or
change in, the Vendor's business relationship with any
major customer or group of major customers. The Vendor
has no reason to believe that the benefits of any
relationship with any of the major customers or
suppliers of the Business will not continue after the
Closing Date in substantially the same manner as prior
to the date of this Agreement;
(pp) except as disclosed in Schedule "5" - Employee Matters,
there are no Employee Plans with respect to the employees of
the Vendor;
(qq) there are no liabilities of the Vendor or its Associates
or Affiliates, whether or not accrued and whether or not
determined or determinable, in respect of which the Purchaser
may become liable on or after the Closing Date, other than the
Assumed Indebtedness; and
(rr) neither this Agreement nor any document to be delivered by
the Vendor nor any certificate, report, statement or other
documents furnished by the Vendor in connection with the
negotiation of this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statement
contained herein or therein not misleading. The Vendor had
disclosed to the Purchaser everything material or cogent in
connection with the business and affairs of the Vendor and its
status, and nothing stated to the Purchaser has been
misleading.
25
8. REPRESENTATIONS OF THE PURCHASER
8.1 The Purchaser represents and warrants to the Vendor as
follows, with the intent that the Vendor will rely thereon in entering into this
Agreement and in concluding the purchase and sale contemplated hereby,
that:
(a) the Purchaser is a corporation duly incorporated,
validly existing, and in good standing under the laws
of British Columbia and has the power, authority, and
capacity to enter into this Agreement and to carry out
its terms;
(b) the execution and delivery of this Agreement and the
completion of the transactions contemplated hereby has been
duly and validly authorized by all necessary corporate action
on the part of the Purchaser, and this Agreement constitutes a
valid and binding obligation of the Purchaser in accordance
with its terms;
(c) as at the Closing Date, all necessary steps and corporate
proceedings will have been taken by the Purchaser to duly
create and issue the Spectrum Shares and the Spectrum Warrants
and to reserve the Warrant Shares;
(d) as at the Closing Date, the Spectrum Shares will be duly and
validly created, issued and registered in the name of the
Vendor, or such other name as the Vendor may direct the
Purchaser in writing, and will be outstanding as fully paid
and non-assessable, but will be subject to the Registration
Agreement, the Escrow Agreement and any obligations or
requirements imposed on the Vendor by any and all applicable
securities legislation or securities exchange commission;
(e) as at the Closing Date, all documents will have been filed,
all proceedings will have been taken and all legal
requirements imposed upon the Purchaser will have been
fulfilled under the securities legislation in the Province of
British Columbia and the State of New York to permit the
issuance and sale by the Purchaser and the purchase by the
Vendor of the Spectrum Shares and the Spectrum Warrants and to
reserve the Warrant Shares, subject to the filing by the
Purchaser, within the prescribed time periods, of such reports
as are required under applicable securities legislation;
(f) the Purchaser is a reporting issuer in good standing for the
purposes of the Securities Act (British Columbia) and the
Securities Act (Ontario);
(g) as at the Closing Date, subject in part to the
representations of the Vendor contained in the letter referred
to in Clause 12.1(k)(v), all documents will have been filed,
all requisite proceedings will have been taken, and all
approvals, permits, exemptions, consents, orders and
authorizations required under all applicable securities
legislation and in accordance with the
26
requirements of the NASDAQ Stock Market and The Toronto Stock
Exchange imposed on the Purchaser will have been obtained for
the valid issuance, delivery, distribution and sale of the
Spectrum Shares and the Spectrum Warrants and the reservation
of the Warrant Shares by the Purchaser and that the Spectrum
Shares will be approved for listing on the NASDAQ Stock Market
and The Toronto Stock Exchange;
(h) the Spectrum Shares, the Spectrum Warrants and the Warrant
Shares are being issued pursuant to certain exemptions from
the registration and prospectus requirements of the Securities
Act (British Columbia) as a result of which the Spectrum
Shares, the Spectrum Warrants and the Warrant Shares will be
restricted from resale within the province of British Columbia
for a period of 12 months from the Closing Date such
restrictions do not however preclude the resale of such
securities outside of British Columbia during the restricted
period;
(i) as of the date of this Agreement, the Purchaser is in good
standing with respect to the filing of annual returns under
the Companies Act (British Columbia);
(j) as at the date of execution of this Agreement, the authorized
capital of the Purchaser consists of 50,000,000 Common Shares,
of which 9,459,397 Common Shares are issued and outstanding as
fully paid and non-assessable; and
(k) to the Purchaser's knowledge, the obligations of the Purchaser
under this Agreement and all agreements referred to herein,
and the creation and issue of the Spectrum Shares and the
Spectrum Warrants will not conflict with the constating
documents of the Purchaser, any existing law applicable to the
Purchaser, and any agreement to which the Purchaser is a
party.
9. COVENANTS OF THE VENDOR
9.1 Between the date of this Agreement and the Closing Date,
the Vendor:
(a) will not sell or dispose of any of the Business Assets,
except only the sale of Inventory in the ordinary
course of business and will preserve the Business
Assets intact without any further Encumbrances;
(b) will not make or agree to make any payment to any of the
officers, directors, employees, or agents of the Vendor except
in the ordinary course of business and at the regular rates of
compensation now in effect or as reasonable reimbursement for
expenses incurred by such persons in connection with the
Business;
27
(c) will conduct the Business diligently and only in
the ordinary course consistent with past practice, keep the
Business Assets in their present state, and endeavour to
preserve the organization of the Business intact and the
goodwill of the suppliers and customers and others having
business relations with the Vendor relating to the Business;
(d) will maintain insurance coverage of the scope and in the
amounts presently held in full force and effect and shall take
out, at the expense of the Purchaser, such additional
insurance as may reasonably be requested by the Purchaser and
shall give all notices and present all claims under all
policies of insurance in a due and timely fashion;
(e) will afford the Purchaser and its authorized representatives
full access during normal business hours to the Business
Assets and all other property and assets utilized in the
Business and without limitation all title documents, abstracts
of title, deeds, leases, Contracts, financial statements,
policies, reports, licenses, books, records, and other such
material relating to the Business, and furnish such copies
thereof and other information, as the Purchaser may reasonably
request;
(f) will use its best efforts to procure and obtain at or prior
to the Closing Date all such consents, approvals, releases,
and discharges as may be required to effect the transactions
contemplated hereby from all national, state, municipal or
other governmental or regulatory bodies and from all other
third parties as necessary;
(g) will, forthwith upon the execution hereof, deliver to the
Purchaser true copies of the Material Contracts and full
particulars of and true copies of all instruments evidencing
or pertaining to the Assumed Indebtedness;
(h) will, at the request of the Purchaser execute such consents,
authorizations and directions as may be necessary to permit
any inspection of the Business or any of the Business Assets
or to enable the Purchaser or its authorized representatives
to obtain full access to all files and records relating to the
Business or the Business Assets maintained by government or
other public authorities;
(i) will permit the Purchaser's representatives or consultants
to conduct all such testing and inspection in respect of
environmental matters at such locations of the Business as the
Purchaser may determine, in its sole discretion, as may be
required to satisfy the Purchaser in respect of such matters;
(j) will pay and discharge the liabilities of the Vendor
relating to the Business in the ordinary course and consistent
with the previous practice of the Vendor, except those
contested in good faith by the Vendor;
28
(k) will use its best efforts to take or cause to be taken all
necessary corporate action, steps and proceedings to approve
and authorize validly and effectively the transfer of the
Business Assets to the Purchaser and the execution and
delivery of this Agreement and any other Agreements or
documents contemplated hereby including the passing of a
special resolution of shareholders required by Section 271 of
the General Corporation law of the State of Delaware and to
cause all necessary meetings of directors and shareholders of
the Vendor to be held for such purpose; and
(l) will not, without the prior written consent of the Purchaser,
enter into any transaction or refrain from doing any action
that, if effected before the date of this Agreement, would
constitute a breach of any representation, warranty, covenant
or other obligation of the Vendor contained herein, and the
Vendor shall not enter into any material supply agreements
relating to the Business or make any material decisions or
enter into any material Contracts with respect to the Business
without the consent of the Purchaser, which consent shall not
be unreasonably withheld.
9.2 For a reasonable period after the Closing Date, the Vendor
will, at the request of the Purchaser, allow and execute such consents,
authorizations and directions as may be necessary to permit the Purchaser
or its authorized representatives full access to all corporate, financial
and other files and records of the Vendor relating to the Business or the
Business Assets and such files and records relating to the Business or
the Business Assets as are maintained by government or other public
authorities.
9.3 The Vendor will within 30 days after the Closing Date,
change its name to a name dissimilar to the Business name, but the
Purchaser recognizes the existing and future right of the Principal and
Associates and Affiliates of the Principal to use names which include the
word "Alex". However, the Vendor and the Principal hereby agree that they
will not, and they will cause their Associates and Affiliates not to, use
the word "Alex" or the name "Alex Computer Systems", or any variation
thereof, as a corporate name, business name, trade name or trade-xxxx in
the Digital Signal Processor ("DSP") marketplace or in connection with
DSPs.
9.4 The Vendor and the Principal covenant and agree to indemnify
and hold harmless the Purchaser from and against:
(a) except as to the Assumed Indebtedness which by the
terms hereof are specifically to be assumed or paid by
the Purchaser, any and all debts, obligations, and
liabilities, whether accrued, absolute, contingent, or
otherwise, existing immediately prior to the Adjustment
Date, respecting the Business or the Business Assets
and any amount by which the Assumed Indebtedness
exceeds the sum of $1,500,000; and the Purchaser may,
but will not be bound to, pay or perform same and all
moneys so paid by the Purchaser in doing so will
constitute indebtedness of the Vendor to the Purchaser
hereunder;
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(b) any and all damage or deficiency resulting from any
misrepresentation, misstatement, breach of warranty, or the
non-fulfilment of any covenant on the part of the Vendor under
this Agreement or under any document or instrument delivered
pursuant hereto or in connection herewith;
(c) any and all claims, actions, suits, proceedings, demands,
assessments, judgments, charges, penalties, costs, and
expenses (including the full amount of all reasonable legal
expenses invoiced to the Purchaser) which arise or are made or
claimed against or are suffered or incurred by the Purchaser
in respect of any of the foregoing; and
(d) any and all Losses suffered or incurred by the Purchaser as a
result of or arising directly or indirectly out of or in
connection with the operation of the Business up to the
Closing Date.
9.5 The Vendor, the Principal and the Purchaser acknowledge and
agree that the aggregate liability of the Vendor and the Principal to the
Purchaser in respect of indemnification claims made by the Purchaser
under Clause 9.4 shall not exceed the aggregate amount of EIGHT MILLION
NINE HUNDRED AND SIXTY-ONE THOUSAND ($8,961,000) Dollars, and that no
claims for indemnification may be made by the Purchaser against the
Vendor or the Principal pursuant to Clause 9.4 unless and until said
claims exceed FIFTY THOUSAND ($50,000) Dollars in the aggregate, in which
event the amount of all such claims may, subject to the terms and
conditions hereof, be recovered by the Purchaser.
9.6 The Vendor will, effective the Closing Date, terminate the
employment of all employees of the Business and will be responsible for all
wages, salaries, bonuses, benefits, termination or severance pay, holiday pay,
and all other compensation and benefits owing to said employees and all
remittances payable to the Internal Revenue Service, any workers compensation
authority, Medical or Health Plans and all Employee Plans, and other such
remittances, in respect of any period up to and including the Closing Date or
which become payable by reason of the purchase and sale contemplated hereby. The
Vendor will not be liable for any employee liabilities arising after the Closing
Date except those employee liabilities associated with employees of the Vendor
who do not accept employment with the Purchaser.
9.7 The exercise of any rights or inspection by or on behalf of
the Purchaser under Clause 9.1 shall not mitigate or otherwise affect any of the
representations and warranties of the Vendor and the Principal hereunder which
shall continue in full force and effect as provided in Clause 7.1.
10. COVENANTS OF THE PURCHASER
10.1 Between the date of this Agreement and the Closing Date, the
Purchaser will make all reasonable efforts to obtain and procure in
co-operation with the Vendor all consents, approvals, releases, and
discharges required to effect the transactions contemplated hereby.
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10.2 Without limiting the provisions of Clauses 6.1 and 6.2
hereof, the Purchaser will, from and after the Closing Date, pay as and when
same become due and payable all debts and liabilities of the Business which
relate to any period after the Adjustment Date and punctually observe and
perform all obligations to be performed in respect of the Business which relate
to any period after said date. The Purchaser will indemnify and save harmless
the Vendor from and against:
(a) all claims, actions, suits, proceedings, demands,
assessments, judgments, charges, penalties, costs, and
expenses (including the full amount of all reasonable
legal expenses invoiced to the Vendor) which arise or
are made or claimed against or suffered or incurred by
the Vendor as a result of the Purchaser's failure to so
pay, observe, or perform including the Purchaser's
failure to pay, satisfy, discharge, perform or fulfil
any of the Assumed Indebtedness;
(b) any breach by the Purchaser of or any inaccuracy of any
representation or warranty contained in this Agreement or in
any agreement, instrument, certificate or other document
delivered pursuant hereto; and
(c) any breach or non-performance by the Purchaser of any
covenant to be performed by it that is contained in this
Agreement or in any agreement, certificate or other document
delivered pursuant hereto.
10.3 The Purchaser undertakes to offer employment to all of the
Vendor's employees on terms at least as favourable as the terms under which said
employees are currently employed by the Vendor. The Purchaser covenants to
assume all employee expenses as of the Adjustment Date and employee liabilities
as of the Closing Date for those employees of the Vendor who accept employment
with the Purchaser.
10.4 The Vendor, the Principal and the Purchaser acknowledge
and agree that the aggregate liability of the Purchaser in respect of
indemnification claims made by the Vendor under Clause 10.2 shall not exceed the
aggregate amount of TWO MILLION ($2,000,000) Dollars, and that no claims for
indemnification may be made by the Vendor against the Purchaser pursuant to
Clause 10.2 unless and until said claims exceed FIFTY THOUSAND ($50,000) Dollars
in the aggregate, in which event the amount of all such claims may, subject to
the terms and conditions hereof, be recovered by the Vendor.
11. NON MERGER
11.1 The representations, warranties, covenants, and agreements
of the Vendor and the Principal contained herein and those contained in the
documents and instruments delivered pursuant hereto or in connection herewith
will survive the Closing Date for a period of two (2) years, with the exception
of those representations, warranties, covenants, and agreements of the Vendor
with respect to title to the Business Assets, the Intellectual Property and all
environmental matters all of which shall survive the Closing Date indefinitely,
and notwithstanding the completion of the transactions contemplated hereby, the
waiver of any condition contained herein (unless such waiver
31
expressly releases the Vendor and the Principal of such representation,
warranty, covenant, or agreement), or any investigation by the Purchaser, same
will remain in full force and effect.
11.2 The representations, warranties, covenants, and
agreements of the Purchaser contained herein and those contained in the
documents and instruments delivered pursuant hereto or in connection herewith
will survive the Closing Date for a period of two (2) years, and notwithstanding
the completion of the transactions contemplated hereby, the waiver of any
condition contained herein (unless such waiver expressly releases the Purchaser
of such representation, warranty, covenant, or agreement), or any investigation
by the Vendor, same will remain in full force and effect.
12. CONDITIONS PRECEDENT
12.1 The obligation of the Purchaser to consummate the transactions
herein contemplated is subject to the fulfilment of each of the following
conditions precedent at the times stipulated:
(a) that the representations and warranties of the Vendor
and the Principal contained herein are true and correct
on and as at the Closing Date with the same force and
effect as if such representations and warranties were
made as at the Closing Date, except as may be in
writing disclosed to and approved by the Purchaser;
(b) that all the terms, covenants, conditions, agreements, and
obligations hereunder on the part of the Vendor to be
performed or complied with at or prior to the Closing Date,
including in particular the Vendor's and the Principal's
obligations to deliver the documents and instruments herein
provided for in Clauses 13 and 14 respectively, have been
performed and complied with as at the Closing Date;
(c) that between the date hereof and the Closing Date no change,
event, or circumstance has occurred which materially adversely
affects the Business Assets or the prospects, operation, or
condition of the Business or which, significantly reduces the
value of the Business or the Business Assets to the Purchaser;
(d) that between the date hereof and the Closing Date there
has not been any substantial Loss, damage, or destruction,
whether or not covered by insurance, to any of the Business
Assets;
(e) no legal or regulatory action or proceeding shall
be pending or threatened by any person to enjoin, restrict or
prohibit the purchase and sale of the Business Assets
contemplated hereby;
(f) that at the Closing Date, there shall have been obtained
from all appropriate national, state, municipal or other
governmental or administrative bodies such licences, permits,
consents, approvals, certificates, registrations and
32
authorizations as are required to be obtained by the Vendor to
permit the change of ownership of the Business Assets
contemplated hereby, and all notices, consents and approvals
with respect to the transfer or assignment of the Material
Contracts, including those described in Schedule "4" hereof
have been obtained;
(g) that at the Closing Date, there shall have been
delivered to the Purchaser an opinion of Vendor's
counsel in form and content satisfactory to Purchaser's
counsel;
(h) that at the Closing Date, the Vendor shall have given
or obtained the notices, consents and approvals
described in Schedule "11" - Consents, including the
consent of Softech, Inc. to the transaction
contemplated by this Agreement, in each case in form
and substance satisfactory to the Purchaser, acting
reasonably;
(i) that at the Closing Date, the Purchaser will have completed
a due diligence review of the Vendor and the Business Assets
to the Purchaser's satisfaction;
(j) that at the Closing Date, the Vendor and the Principal
will have executed and delivered, in a form satisfactory to
the Purchaser:
(i) a Non-Competition Agreement in the form attached as
Schedule "13" - Non-Competition Agreement hereto;
(ii) a Non-Solicitation Agreement in the form attached as
Schedule "18" - Non-Solicitation Agreement hereto;
(iii) a Confidentiality Agreement in the form attached as
Schedule "19" - Confidentiality Agreement hereto;
(iv) the Escrow Agreement in substantially the form
attached as Schedule "21" - Escrow Agreement hereto; and
(v) an investment representation letter in substantially
the form attached as Schedule "25" hereto;
(k) that at the Closing Date, an employment agreement and a
non-competition agreement satisfactory to the Purchaser
will have been executed by Mr. Xxxxxx Xxxxxx;
(l) that at the Closing Date, a two year engineering consulting
services agreement satisfactory to the Purchaser will have
been executed by RPA;
(m) that the Board of Directors of the Purchaser has approved the
transactions contemplated herein;
33
(n) that at the Closing Date, all necessary regulatory
authorities have approved or consented to the issuance of the
Spectrum Shares and the Spectrum Warrants.
The foregoing conditions of this Clause 12.1 are for the exclusive benefit of
the Purchaser and may be waived in whole or in part by the Purchaser at any
time. If any of the conditions contained in this Clause 12.1 shall not be
performed or fulfilled at or prior to the Closing Date to the satisfaction of
the Purchaser, acting reasonably, the Purchaser, may, by notice to the Vendor,
terminate this Agreement and the obligations of the Vendor and the Purchaser
under this agreement, provided that the Purchaser may also bring an action
pursuant to Clause 9.4 against the Vendor and the Principal for damages suffered
by the Purchaser where the non-performance or non-fulfilment of the relevant
condition is as a result of a breach of covenant, representation or warranty by
the Vendor or the Principal.
12.2 The obligation of the Vendor to consummate the transactions
herein contemplated is subject to the fulfilment of each of the following
conditions precedent at the times stipulated:
(a) that the representations and warranties of the
Purchaser contained herein are true and correct on and
as of the Closing Date with the same force and effect
as if such representations and warranties were made as
at the Closing Date, except as may be in writing
disclosed to and approved by the Vendor;
(b) that all terms, covenants, conditions, agreements, and
obligations hereunder on the part of the Purchaser to be
performed or complied with at or prior to the Closing,
including in particular the Purchaser's obligation to deliver
the documents and instruments herein provided for in Clause
15, have been performed and complied with as at the Closing;
(c) that at the Closing Date, there shall have been delivered
to the Vendor an opinion of Purchaser's counsel in form and
content satisfactory to Vendor's counsel that, inter alia:
(i) the Purchaser is in good standing,
(ii) the Agreement is not in conflict with the Purchaser's
constating documents,
(iii) the execution, delivery and performance of this
Agreement has been authorized by all necessary
corporate action, and
(iv) the Spectrum Shares have been duly and validly created,
authorized, allotted and issued as fully paid and
non-assessable shares; and
(d)
34
(e) that at the Closing Date, all necessary authorities have
approved or consented to the issuance of the Spectrum Shares
and the Spectrum Warrants.
The foregoing conditions of this Clause 12.2 are for the exclusive benefit of
the Vendor and may be waived in whole or in part by the Vendor at any time. If
any of the conditions contained in this Clause 12.2 shall not be performed or
fulfilled at or prior to the Closing Date to the satisfaction of the Vendor
acting reasonably, the Vendor may, by notice to the Purchaser, terminate this
Agreement and the obligations of the Vendor and the Purchaser under this
Agreement, provided that the Vendor may also bring an action pursuant to Clause
10.2 against the Purchaser for damages suffered by it where the non-performance
or non-fulfilment of the relevant condition is as a result of a breach of
covenant, representation or a warranty by the Purchaser.
13. TRANSACTIONS OF THE VENDOR AT THE CLOSING
13.1 At the Closing Date, the Vendor will execute and deliver or
cause to be executed and delivered all deeds, conveyances, bills of sale,
transfers, assignments, agreements, certificates, documents, and instruments as
may be necessary to effectively vest good and marketable title to the Business
Assets in the Purchaser free and clear of any Encumbrances (except the Permitted
Encumbrances or as may be otherwise specifically provided herein) and without
limiting the foregoing, will execute and deliver or cause to be executed and
delivered:
(a) an assignment of the leasehold estate in and to the Leased
Property;
(b) the Assignment and Assumption Agreement described in Clause
6.2 hereof;
(c) a xxxx of sale (Absolute) for the Equipment;
(d) a general conveyance of the Business Assets;
(e) all consents, approvals, releases, and discharges as may be
required to effect the transactions contemplated hereby,
including in particular those described in Schedule "11" -
Consents;
(f) signed letters on the Vendor's letterhead in the
form attached hereto as Schedule "15" and addressed envelopes
directed to each of the regular customers of the Business;
(g) a certified copy of a resolution of the Directors of the
Vendor duly passed authorizing the execution and delivery of
this Agreement and the completion of the transactions
contemplated hereby;
(h) a certified copy of a special resolution of the shareholders
of the Vendor duly passed authorizing and approving the sale
of the Business Assets as contemplated hereby pursuant to
Section o 271 of the General Corporation Law of the State of
Delaware;
35
(i) a certificate of an officer of the Vendor dated
the Closing, acceptable in form and content to the solicitors
for the Purchaser, certifying that the conditions set out in
Clause 12.1 have been satisfied;
(j) for the purposes of Clauses 6.1 hereof, a certificate of an
officer of the Vendor setting forth the names and addresses of
the creditors pertaining to the Assumed Indebtedness and the
amount of the indebtedness or liability due or payable to each
such creditor;
(k) certificates of payment issued by the appropriate government
authorities certifying that all requisite taxes under
national, state and local tax legislation owing by the Vendor
have been paid;
(l) the favourable legal opinion of the solicitors for the Vendor,
in form satisfactory to solicitors for the Purchaser, to the
effect that all necessary steps and corporate proceedings have
been taken by the Vendor to permit the sale of the Business
and the Business Assets as contemplated hereby, that this
Agreement and all documents and instruments delivered pursuant
hereto have been duly and validly authorized, executed, and
delivered by the Vendor and will constitute valid and legally
binding obligations of the Vendor, and confirming such other
matters as the Purchaser's solicitors may reasonably require;
(m) a Non-Competition Agreement in the form attached hereto as
Schedule "13", duly executed by the Vendor and the Principal;
(n) a Non-Solicitation Agreement in the form attached as
Schedule "18", duly executed by the Vendor and the Principal;
(o) a Confidentiality Agreement in the form attached as
Schedule "19", duly executed by the Vendor and the Principal;
(p) an investment letter in substantially the form attached hereto
as Schedule "25", duly executed by the Vendor;
(q) all such documents and instruments as may be necessary to
transfer or assign the Intellectual Property;
(r) executed releases by any third parties which have any
Encumbrances against the Business Assets other than the
Permitted Encumbrances;
(s) certified copies of any and all insurance policies relating to
the Business and Business Assets with transfer and consent
forms duly endorsed;
36
(t) executed assignments of all Leases described under the heading
Leased Property in Schedule "2" and all leases of personal
property as described in Schedule "4" - Material Contracts;
(u) the License Agreement respecting the grant to the
Purchaser of the right to use the "Alex Computer Systems"
name;
(v) an executed Escrow Agreement in substantially the form
attached as Schedule "21" - Escrow Agreement hereto; and
(w) all such other documents and instruments as the Purchaser's
solicitors may reasonably require.
14. TRANSACTIONS OF THE PRINCIPAL AT THE CLOSING
14.1 At the Closing Date, the Principal will execute and deliver
or cause to be executed and delivered all certificates, documents, and
instruments as may be necessary and consistent with its representations and
covenants contained herein, and without limiting the foregoing, will execute and
deliver or cause to be executed and delivered:
(a) the consent of Softech, Inc. to the transaction contemplated
by this Agreement;
(b) a Non-Competition Agreement in the form attached hereto as
Schedule "13", duly executed by the Vendor and the Principal;
(c) a Non-Solicitation Agreement in the form attached as
Schedule "18", duly executed by the Vendor and the Principal;
(d) a Confidentiality Agreement in the form attached as
Schedule "19", duly executed by the Vendor and the Principal;
(e) the License Agreement respecting the grant to the
Purchaser of the right to use the "Alex Computer Systems"
name;
(f) all such other documents and instruments as the Purchaser's
solicitors may reasonably require.
15. TRANSACTIONS OF THE PURCHASER AT THE CLOSING
15.1 At the Closing the Purchaser will deliver or cause to be
delivered to the Vendor:
(a) the Spectrum Shares;
(b) the Spectrum Warrants;
(c) the Assumption Agreement described in Clause 6.1 hereof;
37
(d) a solicitors' trust account cheque payable to the Vendor's
solicitors in trust for the balance of the Purchase Price;
(e) a certified copy of a resolution of the Directors of the
Purchaser duly passed authorizing the execution and delivery
of this Agreement and the completion of the transactions
contemplated hereby;
(f) a certified copy of a resolution of the Directors of the
Purchaser duly passed authorizing the allotment and issuance
of the Spectrum Shares and the Spectrum Warrants and reserving
the Warrant Shares;
(g) a certificate of the secretary of the Purchaser dated as of
the Closing Date, acceptable in form and content to the
solicitors for the Vendor, certifying that the conditions
precedent set out in Clause 12.2 have been satisfied;
(h) the favourable legal opinion of the solicitors for the
Purchaser, in form satisfactory to solicitors for the Vendor
and the Principal, to the effect that all necessary steps and
corporate proceedings have been taken by the Purchaser to
permit the purchase of the Business and the Business Assets as
contemplated hereby, that this Agreement and all documents and
instruments delivered pursuant hereto have been duly and
validly authorized, executed, and delivered by the Purchaser
and will constitute valid and legally binding obligations of
the Purchaser, and confirming such other matters as the
Vendor's and the Principal's solicitors may reasonably
require;
(i) the Assignment and Assumption Agreement described in Clause
6.2 hereof;
(j) confirmation from the British Columbia and Ontario Securities
Commissions that the Purchaser is a reporting issuer in good
standing;
(k) The Toronto Stock Exchange acceptance letter regarding the
Spectrum Shares; and
(l) all such other documents and instruments as the Vendor or its
solicitors may reasonably require.
16. BULK SALES COMPLIANCE
16.1 The Purchaser hereby waives compliance by the Vendor with the
provisions of the bulk sales laws of any state of the United States of America,
and the Vendor warrants and agrees to pay and discharge when due all claims of
creditors that could be asserted against the Purchaser by reason of such
non-compliance to the extent such liabilities are not specifically assumed by
the Purchaser pursuant hereto. Notwithstanding Clause 9.5 hereof, the Vendor
hereby agrees to indemnify and hold the Purchaser harmless from, against and in
respect of (and shall on demand reimburse the Purchaser for) any Losses suffered
or incurred by the Purchaser by reason of the failure of the Vendor to pay or
discharge any such claim.
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17. TAXES
17.1 The Purchaser shall be liable for and shall pay all national,
federal, state and provincial sales taxes (including any retail sales taxes and
land transfer taxes) and all other taxes, duties, fees or other like charges of
any jurisdiction properly payable in connection with the transfer of the
Business Assets by the Vendor to the Purchaser or the transaction contemplated
by this Agreement, excepting any and all income or corporate taxes of the Vendor
and the Principal.
17.2 The Purchaser acknowledges that the Purchaser shall pay
all taxes with respect to the ownership, use and operation of the Business
Assets after the Closing Date.
18. ASSETS AT RISK
18.1 From the date hereof to the Closing Date, the Business Assets
will remain at the risk of the Vendor. If any of the Business Assets are lost,
damaged, or destroyed prior to the time of Closing, the Purchaser may in lieu of
terminating this Agreement pursuant to Clause 12.1 elect by notice in writing to
the Vendor to complete the purchase to the extent possible, and at the option of
the Purchaser, either:
(a) the Purchase Price will be reduced by an amount equal
to the cost of making good such Loss, damage, or
destruction; or
(b) the Vendor will assign and pay over to the Purchaser all
insurance moneys payable in respect of such Loss, damage, or
destruction.
19. COSTS, PENALTIES AND LIQUIDATED DAMAGES
19.1 Subject to Clause 19.2, each of the Vendor, the Principal
and the Purchaser will bear its own costs with respect to the transactions
contemplated by this Agreement.
19.2 Notwithstanding Clause 19.1, the costs related to the
registration of the Spectrum Shares and the Spectrum Warrants only with the
Securities and Exchange Commission will be borne as follows:
(a) by the Purchaser, reasonable legal and accounting fees to a
maximum of NINETEEN THOUSAND ($19,000) DOLLARS; and
(b) by the Vendor, all legal and accounting fees in excess of
NINETEEN THOUSAND ($19,000) DOLLARS.
19.3 If the condition precedent in Clause 12.1(h) of this
Agreement is not satisfied as at the Closing Date and the transaction
contemplated by this Agreement is not completed:
(a) the Vendor will, forthwith upon receiving a statement
thereof from the Purchaser, indemnify the Purchaser for
the full amount of all costs and expenses reasonably
incurred by the Purchaser in pursuing the transaction
contemplated by this Agreement, including, all auditing
costs, legal costs
39
and expenses (on a solicitor and own client basis) and the
costs of due diligence, arising between March 12, 1998 and the
Closing Date, or such other date as the failure to complete
the transaction contemplated by this Agreement is acknowledged
in writing by the Purchaser and the Principal; and
(b) the Principal will forthwith pay to the Purchaser the sum of
ONE HUNDRED THOUSAND ($100,000) DOLLARS, which sum the
Principal expressly agrees is not a penalty but rather is a
genuine pre-estimate of the liquidated damages that the
Purchaser will suffer (in excess of the costs indemnified by
the Vendor pursuant to Clause 19.3(a) of this Agreement) as a
result of the Principal's failure to satisfy the condition
precedent in Clause 12.1(h) of this Agreement.
19.4 If the Purchaser fails to file a registration statement in
accordance with Clause 20.1 of this Agreement, within the time limit set out
therein, then the Purchaser will pay to the Principal the sum of ONE HUNDRED
THOUSAND ($100,000) DOLLARS, which sum the Purchaser expressly agrees is not a
penalty but rather is a genuine pre-estimate of the liquidated damages that the
Principal will suffer as a result of the Purchaser's failure to comply with
Clause 20.1 of this Agreement, provided that such failure to file is not due in
any way to any act, error or omission of the Vendor or the Principal.
Notwithstanding such payment by the Purchaser, the obligation of the Purchaser
pursuant to Clause 20.1 to file a registration statement shall continue. The
Vendor acknowledges that the Purchaser may be required to prepare or obtain
certain financial statements of the Vendor in order to file or submit such
registration statement with or to the U.S. Securities and Exchange Commission,
and the Vendor agrees to fully co-operate and assist the Purchaser in preparing
such financial statements.
20. REGISTRATION AND HOLDBACK AGREEMENTS
20.1 In accordance with the Registration Agreement attached as
Schedule "22" - Registration Agreement hereto, the Purchaser will file, as soon
as is reasonably practical but within sixty (60) days after the Closing Date, a
single demand registration of the Spectrum Shares and the Spectrum Warrants by
filing a registration statement with the United States Securities and Exchange
Commission, which registration will remain effective for a period of one (1)
year from the Closing Date.
20.2 The Vendor will not sell or transfer more than twenty-five
(25%) per cent of the Spectrum Shares held by the Vendor in a calendar quarter,
for a period of eighteen (18) months from the Closing Date, and will enter into
an escrow agreement on terms and conditions to the reasonable satisfaction of
the Purchaser, the Vendor and the Principal.
20.3 The Vendor and the Principal have agreed to a holdback equal
to seven and one-half (7-1/2%) percent of the Spectrum Shares to be held by an
escrow agent as indemnification for and in respect of losses suffered or
incurred by the Purchaser for which the Vendor or Principal are obligated to
indemnify the Purchaser pursuant to Clause 9.4 hereof and in accordance with the
provisions of an escrow agreement which shall be on terms and conditions to the
reasonable
40
satisfaction of the Purchaser, the Vendor and the Principal, and in
accordance with the terms described in that certain letter dated April 13, 1998
from the Purchaser to the Principal and accepted by the Principal on April 13,
1998, and which is annexed hereto as Schedule "23".
21. AGENTS
21.1 The Vendor warrants to the Purchaser that no agent or other
intermediary has been engaged by the Vendor in connection with the
purchase and sale herein contemplated, and if there are any agent's
commissions which become due and payable such costs and expenses will be
the sole liability of the Vendor.
22. FURTHER ASSURANCES
22.1 From time to time subsequent to the Closing Date, the parties
covenant and agree, at the expense of the requesting party, to promptly
execute and deliver all such further documents and instruments and do all
such further acts and things as may be required to carry out the full
intent and meaning of this Agreement and to effect the transactions
contemplated hereby.
23. PAYMENT
23.1 If this Agreement contains subject conditions then
notwithstanding anything to the contrary contained herein the Purchaser will pay
the Vendor as outright and non-refundable consideration, the sum of $100.00 upon
the Vendor signing this Agreement and in consideration therefor the Vendor
covenants and agrees not to withdraw its acceptance of the offer constituted by
this Agreement, prior to the time for removal of any subject conditions
contained herein.
24. ASSIGNMENT
24.1 This Agreement may not be assigned by any party hereto
without the prior written consent of the other parties hereto.
25. SUCCESSORS AND ASSIGNS
25.1 This Agreement will enure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
26. JOINT AND SEVERAL COVENANTS
26.1 All representations, warranties, covenants, agreements,
liabilities, and obligations entered into or imposed upon the Vendor or the
Principal hereunder will be deemed to be both joint and several as between the
Vendor and the Principal.
27. COUNTERPARTS
27.1 This Agreement may be executed in several counterparts, each
of which will be deemed to be an original and all of which will together
constitute one and the same instrument.
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28. NOTICES
28.1 Any notice required or permitted to be given under this
Agreement will be in writing and may be given by personal service or by prepaid
registered mail, posted in Canada, and addressed to the proper party at the
address stated below:
(a) if to the Vendor:
Xxxxxxx, Xxxxxxxx and Xxxxxxxx
0000 XxXxxx Xxxxxxx Xxxxxx - 26th Floor
Montreal, PQ X0X 0X0
XXXXXX
Attention: Xxxxxx Xxxxxx
------------------------
(b) if to the Principal:
ALEX INFORMATICS INC.
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX X0X 0X0
XXXXXX
Attention: Xxxx X. Xxxxxxxx
---------------------------
(c) if to the Purchaser:
SPECTRUM SIGNAL PROCESSING INC., Suite 100, 0000 Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
XXXXXX
Attention: General Counsel
--------------------------
or to such other address as any party may specify by notice. Any notice sent by
registered mail as aforesaid will be deemed conclusively to have been
effectively given on the fifth business day after posting; but if at the time of
posting or between the time of posting and the third business day thereafter
there is a strike, lockout or other labour disturbance affecting postal service,
then such notice will not be effectively given until actually received.
29. TENDER
29.1 Tender may be made upon the Vendor or Purchaser or upon the
solicitors for the Vendor or Purchaser and money may be tendered by bank draft
issued by a Canadian chartered bank. If the Vendor or the Purchaser is comprised
of more than one person, then tender on any one person will be sufficient.
42
30. REFERENCE DATE
30.1 This Agreement is dated for reference the 20th day of
March, 1998, but will become binding as of the date of execution and delivery by
all parties hereto and subject to compliance with the terms and conditions
hereof, the transfer and possession of the Business Assets shall be deemed to
take effect as at the close of business on the Closing Date.
31. REFERENCES TO AGREEMENT
31.1 The terms "this Agreement", "hereof", "herein", "hereby",
"hereto", and similar terms refer to this Agreement and not to any particular
clause, paragraph or other part of this Agreement. References to particular
clauses are to clauses of this Agreement unless another document is specified.
IN WITNESS WHEREOF the parties have executed and delivered these presents
on the 17th day of April, 1998.
THE CORPORATE SEAL OF SPECTRUM SIGNAL PROCESSING INC. was )
hereunto affixed in the presence of: )
)
/s/ Xxxxx Xxxxx )
-------------------------------------- )
Authorized Signatory )
) C/S
-------------------------------------- )
Authorized Signatory )
)
THE CORPORATE SEAL OF ALEX COMPUTER SYSTEMS, INC. was )
hereunto affixed in the presence of: )
)
/s/ Xxxxxx Xxxxxx )
-------------------------------------- )
Authorized Signatory )
) C/S
-------------------------------------- )
Authorized Signatory )
)
43
THE CORPORATE SEAL OF ALEX INFORMATICS INC. was hereunto )
affixed in the presence of: )
)
/s/ Xxxxxx Xxxxxx )
-------------------------------------- )
Authorized Signatory )
) C/S
-------------------------------------- )
Authorized Signatory )
)
LIST OF SCHEDULES
Schedule Description
1 Financial Statements
2 Leased Property
3 Machinery and Equipment
4 Material Contracts
5 Employee Matters
6 Licences and Permits
7 Intellectual Property
8 Permitted Encumbrances
9 Insurance Policies
10 Legal and Regulatory Proceedings
11 Consents
12 Environmental Matters
13 Non-Competition Agreement
14 Assumed Indebtedness
15 Form of Letter to regular and major customers
16 Major Customers
17 Assignment and Assumption Agreement
18 Non-Solicitation Agreement
19 Confidentiality Agreement
20 Spectrum Warrant
21 Inventory
22 Registration Agreement
23 Escrow Agreement
24 Assumption Agreement
25 Investment Representation Letter
26 Warrant Valuation
