Exhibit 10.12
ASSET PURCHASE AGREEMENT
BY AND
BETWEEN
INTRINSIX CANADA CO.
AND
TELEXIS CORP.
December 29, 1999
TABLE OF CONTENTS
Page
ARTICLE I....................................................................5
1.1 Delivery of the Assets.................................................5
1.2 Further Assurances.....................................................6
1.3 Assumption of Liabilities; Etc.........................................6
1.4 Purchase Price.........................................................6
1.6 The Closing............................................................8
1.7 Buyer's Rights of Set-Off and Hold Back................................8
1.8 Adjustments............................................................8
1.9 Allocation of the Purchase Price.......................................8
ARTICLE II...................................................................8
2.1 Organization, Qualification and Corporate Power........................9
2.2 Authority..............................................................9
2.3 Noncontravention.......................................................9
2.4 Ownership of the Assets...............................................10
2.5 Financial Statements..................................................10
2.6 Absence of Certain Changes............................................10
2.7 Fixed Assets..........................................................10
2.8 Real Property.........................................................10
2.9 Contracts.............................................................10
2.10 Litigation...........................................................12
2.11 Warranty.............................................................12
2.12 Employees............................................................12
2.13 Intellectual Property................................................12
2.14 Permits..............................................................13
2.15 Legal Compliance.....................................................13
2.16 Year 2000............................................................13
2.18 Customers............................................................14
2.19 Prepayments..........................................................14
2.20 Completeness of Assets...............................................14
2.21 Brokers' Fees........................................................14
2.22 Real Property Leases.................................................14
2.23 Disclosure...........................................................15
ARTICLE III.................................................................15
3.1 Organization, Qualification and Corporate Power.......................15
3.2 Authority.............................................................15
3.3 Noncontravention......................................................16
3.4 Brokers' Fees.........................................................16
3.5 Disclosure............................................................16
ARTICLE IV..................................................................17
4.1 Conditions to Obligations of the Buyer................................17
4.2 Conditions to Obligations of the Seller...............................18
4.3 Covenants Relating to Closing and Termination.........................19
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ARTICLE V...................................................................20
5.1 Hired Employees.......................................................20
5.2 Sharing of Data.......................................................21
5.3 No Solicitation or Hiring of Former Employees.........................21
5.4 Cooperation in Litigation.............................................21
5.7 Warranty Obligations..................................................23
5.9 Assumed Contract Obligations..........................................23
5.10 Performance under Assumed Contracts..................................23
ARTICLE VI..................................................................23
6.1 Indemnification by the Seller.........................................23
6.2 Method of Asserting Claims............................................24
6.3 Survival..............................................................25
6.4 Limitations...........................................................26
ARTICLE VII.................................................................27
7.1 Press Releases and Announcements......................................27
7.2 Proprietary Information...............................................27
7.3 No Third Party Beneficiaries..........................................27
7.4 Entire Agreement......................................................27
7.5 Succession and Assignment.............................................27
7.6 Counterparts..........................................................28
7.7 Headings..............................................................28
7.8 Notices...............................................................28
7.9 Governing Law.........................................................28
7.10 Amendments and Waivers...............................................28
7.11 Severability.........................................................29
7.12 Expenses.............................................................29
7.13 Construction.........................................................29
7.14 Currency and Interest................................................29
7.15 Tax Aspects..........................................................29
7.16 Incorporation of Exhibits and Schedules..............................30
7.17 Guaranty of the Buyer's Obligations..................................30
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Exhibit A - Xxxx of Sale
Exhibit B - Instrument of Assumption of Liabilities
Exhibit C - Opinion of Bulger, Young, Counsel to the Seller
Exhibit D - Transition Services
Exhibit E - Transition Facility
Exhibit F - Opinion of Xxxx and Xxxx LLP, Counsel to Intrinsix Corp.
Exhibit G - Opinion of Xxxxxxx XxXxxxxx Stirling Scales, Counsel to the Buyer
Disclosure Schedule
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as of the
29th day of December, 1999, by and between Intrinsix Canada Co., a Nova Scotia
company (the "Buyer"), and Telexis Corp., a corporation continued under the laws
of Canada (the "Seller"). The Buyer and the Seller are referred to collectively
herein as the "Parties."
Preliminary Statement
The Buyer desires to purchase, and the Seller desires to sell,
substantially all of the assets and business associated with the operations of
the Consulting Engineering component of the Telecom Integration and Engineering
Services (TIES) division of the Seller (the "Business"), for the consideration
set forth below and the assumption of certain of the Seller's liabilities
associated with the Business set forth below, subject to the terms and
conditions of this Agreement. For greater certainty, the Business includes
substantially all of the assets and business associated with the operations of
the TIES division but does not include any assets relating to the OEM or
Trilogue components of the TIES division, which assets are set forth on Schedule
1.1(b).
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE I
SALE AND DELIVERY OF THE ASSETS
1.1 Delivery of the Assets.
(a) Subject to and upon the terms and conditions of this Agreement,
at the closing of the transactions contemplated by this Agreement (the
"Closing"), the Seller shall sell, transfer, convey, assign and deliver to the
Buyer, and the Buyer shall purchase from the Seller, the following properties,
assets and other claims, rights and interests:
(i) all rights of the Seller (collectively, the "Contract
Rights") under the contracts, agreements and other instruments set forth on
Schedule 1.1(a)(i) attached hereto (the "Assumed Contracts"), but not including
any accounts receivable outstanding as of the Closing Date or the value of any
uninvoiced work-in-progress under the Assumed Contracts up to the Closing Date
(which work-in-progress shall be valued, in the case of fixed contracts, based
upon the price allocations contained in the applicable statement of work or
similar benchmarks in accordance with Seller's customary income recognition
policy);
(ii) all books, records, correspondence, technical, accounting
and procedural manuals, marketing information, customer lists and databases and
client files, employment records and employee files, studies, reports or
summaries relating to the Assets (as defined below) and/or the operation of the
Business, and any confidential information which has been reduced to writing
relating to or arising out of the Business (collectively, the "Records"); and
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(iii) all of the computers (including all software installed
thereon, other than any site-licensed software), furniture and equipment, and
tangible personal property associated with the Business and owned by the Seller
on the Closing Date as set forth on Schedule 1.1(a)(iii) and used or useful in
conducting the Business (collectively, the "Fixed Assets"); and
(b) The Contract Rights, Records, and Fixed Assets described in
paragraph (a) above are hereinafter referred to collectively as the "Assets."
For greater certainty, the Assets do not include the Seller's interest, if any,
in the property described in Schedule 1.1 (b) (the "Excluded Assets").
1.2 Further Assurances. At any time and from time to time after the
Closing Date, at the Buyer's request and without further consideration, the
Seller promptly shall execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other action, as the
Buyer may reasonably request to more effectively transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the Assets, to put the
Buyer in actual possession and operating control thereof, to assist the Buyer in
exercising all rights with respect thereto and to carry out the purpose and
intent of this Agreement.
1.3 Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall execute and deliver an
Instrument of Assumption of Liabilities (the "Instrument of Assumption") in the
form attached hereto as Exhibit B, pursuant to which it shall assume and agree
to perform, pay and discharge all obligations of the Seller continuing after the
Closing under the Assumed Contracts which are to be performed after the Closing
Date, but excluding all obligations accrued on or prior to the Closing Date (the
"Assumed Liabilities").
(b) The Buyer shall not at the Closing or otherwise assume or
agree to perform, pay or discharge, and the Seller shall remain unconditionally
liable for, all obligations, liabilities and commitments, fixed or contingent,
of the Seller other than the Assumed Liabilities, provided, however, that this
clause shall not limit the obligations of the Buyer to indemnify the Seller as
set forth elsewhere in this Agreement.
1.4 Purchase Price.
(a) The purchase price to be paid by the Buyer for the Assets shall
be equal to the sum of (i) $1,750,000 (the "Base Purchase Price") and (ii) the
Post-Closing Net Adjustment (as defined in Section 1.5 below) (collectively, the
"Total Purchase Price").
(b) The payment of the Total Purchase Price shall be as follows: (a)
the Buyer shall deliver the Base Purchase Price to the Seller on the Closing
Date by cashiers or certified check or by bank transfer of immediately available
funds to an account designated by the Seller, and (b) the balance of the Total
Purchase Price (the Post-Closing Net Adjustment) shall be paid within 30 days
following the sixth month anniversary of the Closing Date, by cashiers or
certified check or by bank transfer of immediately available funds to an account
designated by the Seller; provided, however, in the event that a post-closing
dispute arises relating to the determination of the Post-Closing Net Adjustment
pursuant to Section 1.5 below,
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the Buyer shall not be obligated to pay such Post-Closing Net Adjustment until
such dispute is resolved to the mutual satisfaction of both parties.
1.5 Calculation of Post-Closing Net Adjustment.
(a) Within 15 days following the date which is the later of June 30,
2000 or the sixth month anniversary of the Closing Date (the "Adjustment Date"),
the Buyer shall calculate the Post-Closing Net Adjustment as follows and deliver
a detailed written accounting of such calculation to the Seller:
Post-Closing Revenue Retention
Net Adjustment = Percent x Percent x $250,000.
(b) "Revenue Percent" shall be calculated as follows:
(i) If the gross revenue recognized consistent with Seller's
past practices (using income recognition policies consistent with those of the
Seller, which policies are attached as Schedule 1.5(b)(i)) by the Buyer under
the Assumed Contracts between the Closing Date and the Adjustment Date (the
"Actual Revenue") is equal to or less than $965,090 (the "Minimum Revenue"),
then the Revenue Percent shall be equal to zero.
(ii) If the Actual Revenue exceeds the Minimum Revenue, then
the Revenue Percent shall be equal to the lesser of (x) 100% and (y) the
quotient obtained by dividing (a) the difference between the Actual Revenue and
the Minimum Revenue, by (b) $275,740.
(c) "Retention Percent" shall be calculated as follows:
(i) If the number of Original Employees (as defined below)
retained by the Buyer at the Adjustment Date (the "Actual Headcount") is equal
to or less than seventy percent of the Original Employees (rounded down to the
next integer) (the "Minimum Headcount"), then the Retention Percent shall be
equal to zero. "Original Employees" shall mean all employees associated with the
Business who have accepted offers of employment from the Buyer as of the Closing
Date minus any employees who have been terminated by the Buyer (with or without
just cause) prior to the Adjustment Date or who have been designated in writing
as having been removed by mutual agreement of the Buyer and the Seller.
(ii) If the Actual Headcount exceeds the Minimum Headcount,
then the Retention Percent shall be equal to the lesser of (x) 100% and (y) the
quotient obtained by dividing (a) the difference between the Actual Headcount
and the Minimum Headcount, by (b) twenty per cent of the number of Original
Employees.
(d) Within 15 days following receipt of Buyer's calculation of the
Post-Closing Net Adjustment, the Seller may request that a chartered accountant
review such calculation. The Seller and the Buyer shall select a mutually
acceptable chartered accountant who shall review the Buyer's calculation and
independently determine the Post-Closing Net Adjustment in accordance with this
Agreement. The determination made by such accountant
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shall be binding on both Parties and shall be the Post-Closing Net Adjustment
for all purposes of this Agreement.
1.6 The Closing. The Closing shall take place at the offices of Bulger,
Young, Ottawa, Ontario, on such date as the parties may agree, which date shall
be as soon as practicable and no later than three business days following the
date on which all the conditions of closing set forth in Article IV have been
satisfied or waived (the "Closing Date"). At the Closing the Parties shall
execute and deliver the instruments contemplated by Article IV hereof. Such
instruments may, at the election of the Parties, be exchanged by telecopier upon
a written undertaking to provide original executed copies within one business
day following the Closing. The transfer of the Assets by the Seller and the
assumption of the Assumed Liabilities by the Buyer shall be deemed to occur at
the close of business Ottawa time on the later of December 31, 1999 or the
Closing Date.
1.7 Buyer's Rights of Set-Off and Hold Back. Notwithstanding any other
provision of this Agreement, if the Buyer has made an indemnity claim pursuant
to Article VI hereof, and such claim or claims have not been paid in full by the
Seller or otherwise resolved prior to the payment of the Post-Closing Net
Adjustment, then the Buyer may elect to retain all or a portion of the
Post-Closing Net Adjustment necessary to satisfy the amount of any unresolved
indemnification obligation as provided in Section 6.3 below. Upon the resolution
of any indemnity claim, the Buyer shall (i) retain such portion (if any) of such
amount as the Buyer is entitled to receive pursuant to the resolution of such
indemnity claim, which shall release the Seller of its obligation to pay such
amount to the Buyer under Article VI, and (ii) pay to the Seller the remaining
portion (if any) of such amount, together with interest, calculated at the prime
rate in effect from time to time at the Royal Bank of Canada for Canadian dollar
loans, from the date Post-Closing Net Adjustment was otherwise due.
1.8 Adjustments. The Base Purchase Price shall be adjusted, promptly after
Closing, to reflect any prepaid amounts or arrears which relate to the Assets,
as well as the value of any uninvoiced work-in-progress under the Assumed
Contracts as of the later of December 31, 1999 or the Closing Date, and the net
amount of such adjustment shall be paid promptly by one Party to the other Party
as appropriate. If the amount of any required adjustment is subsequently
determined to be incorrect, each Party will readjust all adjustable items and
make any corresponding payment upon demand.
1.9 Allocation of the Purchase Price. The Purchase Price shall be
allocated among the Assets in the manner provided by Schedule 1.9. Both Buyer
and Seller will file their respective tax returns in accordance with such
allocation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule attached hereto (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in sections and paragraphs
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corresponding to the numbered and lettered sections and paragraphs contained in
this Article II, and the disclosures in any section or paragraph of the
Disclosure Schedule shall qualify only the corresponding section or paragraph in
this Article II.
2.1 Organization, Qualification and Corporate Power. The Seller is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the place of its incorporation. The Seller is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification. The Seller
has all requisite corporate power and authority to carry on the business in
which it is engaged and to own and use the properties owned and used by it. The
Seller is not in default under or in violation of any provision of its charter
or By-laws.
2.2 Authority. The Seller has all requisite power and authority to execute
and deliver this Agreement and the Xxxx of Sale in the form attached hereto as
Exhibit A (the "Xxxx of Sale") and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by the Seller of this
Agreement and the Xxxx of Sale, and the consummation by the Seller of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of the Seller. This
Agreement has been, and the Xxxx of Sale will be, duly and validly executed and
delivered by the Seller and constitute valid and binding obligations of the
Seller, enforceable against the Seller in accordance with their respective
terms.
2.3 Noncontravention. The Seller has all requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by the Seller of this Agreement and the agreements
provided for herein, and the consummation by the Seller of the transactions
contemplated hereby and thereby, have been duly authorized by all requisite
corporate and stockholder action. Neither the execution and delivery of this
Agreement or the Xxxx of Sale by the Seller, nor the consummation by the Seller
of the transactions contemplated hereby and thereby, will (a) conflict with or
violate any provision of the charter or By-laws of the Seller, (b) require on
the part of the Seller any filing with, or any permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative agency or commission
or other governmental or regulatory authority or agency (a "Governmental
Entity"), (c) conflict with, result in a breach of, constitute (with or without
due notice or lapse of time or both) a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest (as defined below)
or other arrangement to which the Seller is a party or by which the Seller is
bound or to which any of its assets is subject, (d) result in the imposition of
any Security Interest upon any assets of the Seller, or (e) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Seller
or any of its properties or assets. For purposes of this Agreement, "Security
Interest" means any mortgage, pledge, security interest, encumbrance, charge or
other lien (whether arising by contract or by operation of law), other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (iii) liens arising under worker's compensation,
unemployment insurance, social security, retirement and similar legislation,
(iv) liens on goods in transit
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incurred pursuant to documentary letters of credit, (v) purchase money liens and
liens securing rental payments under capital lease arrangements, and (vi) other
liens arising in the ordinary course of business consistent with past custom and
practice (including with respect to frequency and amount) of the Seller in
connection with the Business (the "Ordinary Course of Business") and not
incurred in connection with the borrowing of money.
2.4 Ownership of the Assets. There are no mortgages, liens, pledges,
Security Interests, restrictions or similar encumbrances affecting the Assets.
The Seller is the true and lawful owner of the Assets, and has the right to sell
and transfer to the Buyer good, clear and marketable title to the Assets, free
and clear of all claims, liabilities, liens, pledges, Security Interests or
encumbrances of any kind. The delivery to the Buyer of the instruments of
conveyance contemplated by this Agreement will vest good and marketable title to
the Assets in the Buyer, free and clear of all claims, liabilities, liens,
pledges, Security Interests or encumbrances of any kind.
2.5 Financial Statements. The Seller has provided to the Buyer
documentation relating to the Business, including without limitation (a) the
Annual Budgets and Expenditures for the Business for fiscal 1997, 1998 and 1999,
(b) the monthly line item expenditures by Seller relating to the Business for
fiscal 1999 and (c) a proposed Year 2000 budget for the Business. The foregoing
financial statements have been prepared in accordance with the Seller's past
practice throughout the periods covered thereby and are consistent with the
books and internal records of the Seller.
2.6 Absence of Certain Changes. Since December 7, 1999, there has not been
any adverse change in the assets, employees, business, financial condition or
results of operations of the Business, nor has there occurred any event or
development which could reasonably be foreseen to result in such an adverse
change in the future. Without limiting the foregoing, since December 7, 1999,
the Seller has continued to operate the Business as it has done in the past and
has not engaged in any transactions outside of the Ordinary Course of Business.
2.7 Fixed Assets. Section 1.1(a)(iii) of the Disclosure Schedule sets
forth a true, correct and complete list of all Fixed Assets as of the Closing
Date, including a description thereof and the aggregate net book value thereof.
All of the Fixed Assets are in good operating condition and repair, normal wear
and tear excepted, are currently used by the Seller in the Ordinary Course of
Business and normal maintenance has been consistently performed with respect to
such Fixed Assets. The Fixed Assets constitute substantially all of the fixed
assets currently used in the Business.
2.8 Real Property. There is no real property included in the Assets. The
Buyer will not have any liabilities, obligations or commitments relating to any
real property owned or otherwise used by the Seller after the Closing, except as
provided in the Shared Facility License Agreement.
2.9 Contracts.
(a) Section 2.9 of the Disclosure Schedule lists the following
agreements relating to the Business to which the Seller is a party:
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(i) any agreement concerning confidentiality, non-competition
or non-solicitation (other than confidentiality agreements with customers or
employees of the Seller set forth in the Seller's standard terms and conditions
of sale or standard form of employment agreement, copies of which have
previously been delivered to the Buyer);
(ii) any agreement under which the consequences of a default
or termination could have a material adverse effect on the assets, business,
financial condition, results of operations or future prospects of the Business
or the ability of the Parties to consummate the transactions contemplated by
this Agreement and the Xxxx of Sale;
(iii) any agreement which requires or contemplates the
performance of services by the Buyer as a result of the completion of this
transaction; and
(iv) any other agreement reflecting or relating to the
Contract Rights or the Assumed Contracts.
(b) Section 2.9 of the Disclosure Schedule accurately discloses with
respect to each Assumed Contract which is with a Governmental Entity (i) the
project name; (ii) the date of the Contract and the term of the Contract; (iii)
the customer name and address and customer contact person and phone number; (iv)
the contract amount or, if the contract amount is not fixed, a good faith,
reasonable estimate of the contract amount; (v) the estimated contract amount
most recently communicated to the customer; (vi) the total xxxxxxxx to date
under such Contract; (vii) the estimated completion dates therefor; (viii)
whether or not the Seller has any reason to believe that the revenue to be
received with respect to such Contract might be less than it has customarily
been in the past for similar contracts; and (ix) whether or not such Contract is
included within the Assets to be acquired by the Buyer under this Agreement.
Section 2.9 of the Disclosure Schedule accurately discloses with respect to each
Assumed Contract which is with a commercial customer (i) the name of the
customer; (ii) the address of the customer; (iii) the contact person and phone
number; (iv) a description of the work; (v) the Contract number; (vi) the date
of the Contract; (vii) the estimated completion date therefor; and (viii) the
Contract amount.
(c) The Seller has delivered to the Buyer a correct and complete
copy of each Assumed Contract as amended to date. With respect to each Assumed
Contract: (i) the Assumed Contract is legal, valid, binding and enforceable
against the Seller and in full force and effect; (ii) to the knowledge of the
Seller, the Assumed Contract is legal, valid, binding and enforceable against
the other party thereto; (iii) the Assumed Contract will continue to be legal,
valid, binding and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect prior to
the Closing; and (iv) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or default
or permit termination, modification or acceleration, under the Assumed Contract.
(d) Except as set forth on Schedule 2.9, the Seller is not a party
to oral contracts which, if reduced to written form, would be required to be
listed in Section 2.9 of the Disclosure Schedule under the terms of this Section
2.9. The Seller is not a party to any arrangement relating to the Business (i)
to perform services which is expected to be performed
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at, or to result in, a loss, or (ii) which requires the performance of services
by the Seller at a fixed price. The Seller is not restricted by any Assumed
Contract from carrying on the Business anywhere in the world.
2.10 Litigation. Section 2.10 of the Disclosure Schedule identifies, and
contains a brief description of, (a) any unsatisfied judgment, order, decree,
stipulation or injunction and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or before
any arbitrator to which the Seller or any employee of the Seller (including any
former employees employed by the Seller within the past two years) is a party
or, to the Seller's knowledge, is threatened to be made a party and which relate
directly or indirectly to the Business (collectively, "Litigation"). None of the
complaints, actions, suits, proceedings, hearings and investigations set forth
in Section 2.10 of the Disclosure Schedule, if any, could have a material
adverse effect on the Assets or the Business.
2.11 Warranty. No product or service manufactured, sold, licensed, leased,
delivered or otherwise provided by the Seller is subject to any guaranty,
warranty, right of return or other indemnity, except for Seller's standard
customer warranty in Customer's standard customer contract.
2.12 Employees. Except as set forth in Section 2.12 of the Disclosure
Schedule, each employee of the Seller providing services primarily on behalf of
the Business (an "Employee") has entered into the Seller's standard form of
confidentiality and non-competition agreement with the Seller. None of such
Employees is a party to an employment agreement or contract with the Seller that
provides them with employment other than on an indefinite basis or with any
express severance provision. The Seller is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Seller has no knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to Employees of the
Seller. For purposes of this Agreement, the term "Employee" shall be construed
to include sales agents and other independent contractors who spend a majority
of their working time on the business of the Seller (each of whom shall be so
identified in Section 2.12 of the Disclosure Schedule). Section 2.12 of the
Disclosure Schedule contains a brief description of all Employee Benefit Plans
(as defined in Section 6.1) of the Seller pursuant to which the Employees are
entitled to benefits. The Seller has fulfilled all of its obligations to the
Employees under such Employee Benefit Plans.
2.13 Intellectual Property.
(a) Except as provided for in Schedule 2.13, the Buyer will not have
any liabilities, obligations or commitments relating to any Intellectual
Property utilized, directly or indirectly, by the Business prior to the Closing.
For purposes of this Agreement, "Intellectual Property" means all (i)
trademarks, service marks, trade dress, logos, trade names and corporate names
and registrations and applications for registration thereof, (ii) copyrights and
registrations and applications for registration thereof, (iii) computer
software, data and documentation, (iv) trade secrets and confidential business
information, whether patentable or unpatentable and whether or not reduced to
practice, know-how, manufacturing and production processes and techniques,
research and development information, copyrightable works, integrated circuit
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topography rights, patent rights, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information, (v) other proprietary rights relating to any of
the foregoing, and (vi) copies and tangible embodiments thereof.
(b) To the best of Seller's knowledge, none of the activities or
business conducted by the Seller in connection with the Business infringes,
violates or constitutes a misappropriation of (or in the past infringed,
violated or constituted a misappropriation of) any Intellectual Property rights
of any other person or Business Entity. The Seller has not received any
complaint, claim or notice alleging any such infringement, violation or
misappropriation, and to the knowledge of the Seller, there is no basis for any
such complaint, claim or notice.
(c) The Intellectual Property owned or licensed by the Seller is
sufficient to conduct the Business as presently conducted and, when transferred
to the Buyer pursuant to this Agreement, will be sufficient to permit the Buyer
to conduct the Business as presently conducted by the Seller.
(d) As used herein, the term "Business Entity" shall mean any
corporation, partnership, limited liability company or other form of business
association.
2.14 Permits. The Seller holds all permits, licenses, registrations,
certificates, orders or approvals from any Governmental Entity ("Permits")
required for the Seller to conduct the Business as presently conducted or as
proposed to be conducted. Each such Permit is in full force and effect and, to
the best of the knowledge of the Seller, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such Permit will
not be renewable upon expiration. Each such Permit, (with the exception of the
Seller's security clearance for the site facility, which the Buyer will have to
renew ) will continue in full force and effect following the Closing.
2.15 Legal Compliance. The Seller, and the conduct and operations of its
business, is and has been in compliance with each law (including rules and
regulations thereunder) of any federal, provincial, local or foreign government,
or any Governmental Entity, which (a) affects or relates to this Agreement or
the Xxxx of Sale or the transactions contemplated hereby or thereby or (b) is
applicable to the Business.
2.16 Year 2000. The Seller recognizes that the Year 2000 poses a challenge
to the entire information technology industry. In order to address these
concerns, Seller has made commercially reasonable efforts to determine that all
hardware, software, firmware, systems, files, applications, interfaces,
databases and other computer-related materials (the "Internal Systems")
associated with the Business are Y2K Compliant. "Y2K Compliant" means that
Internal Systems are designed to be used prior to, during and after the calendar
year 2000 A.D. and each will operate during each such time period without error
relating to or caused by date data, including any error relating to, or the
product of, date data which represents, is generated in or references more than
one century ("Century-Based Data"). Specifically, the Internal Systems will
operate prior to, during and after the calendar year 2000 A.D., both on a
stand-alone basis and when interacting or interoperating with third-party
hardware, software and systems, without error and without human intervention,
other than original data entry. The Seller's efforts have
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been in accordance with commercially reasonable standards and practices, and
have been reviewed by external auditors, whose report has been provided to the
Buyer. To the best of Seller's knowledge, neither the occurrence of any date nor
the change of century will adversely affect the processing, calculating,
comparing, sequencing or other use of data by the Business including without
limitation causing (i) any error relating to or resulting from Century-Based
Data; (ii) any abnormal ending or provision of invalid or incorrect results as a
result of any Century-Based Data; and (iii) any error relating to century
recognition or calculations accommodating Century-Based Data, values or
formulae.
2.17 Books and Records. The books and records of the Seller pertaining to
the Business, including without limitation the Records, accurately reflect the
assets, liabilities, business, financial condition and results of operations of
the Business and have been maintained in accordance with good business and
bookkeeping practices.
2.18 Customers. No party to the Contracts has indicated that it will stop,
or decrease the rate of, buying materials or services from the Seller. The
Seller has good customer relations with the customers of the Business, and none
of such customers has notified the Seller that it intends to discontinue its
relationship with the Seller.
2.19 Prepayments. The Seller has not received or submitted any invoices or
requests for any prepayment or deposits from customers for products to be
shipped, or services to be performed after the Closing Date otherwise than as
adjusted for.
2.20 Completeness of Assets. Except as disclosed on Schedule 1.1(b), the
Assets are, when utilized by a labor force substantially similar to that
employed by the Seller on the date hereof, adequate to conduct the Business as
currently conducted by the Seller. Except for the Excluded Assets, the Assets
comprise substantially all of the assets of the Business.
2.21 Brokers' Fees. The Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.22 Real Property Leases. Section 2.22 of the Disclosure Schedule lists
and describes briefly all real property leased or subleased to the Seller
relating to the Business and lists the term of such lease, any extension and
expansion options, and the rent payable thereunder. The Seller has delivered to
the Buyer correct and complete copies of the leases and subleases (as amended to
date) listed in Section 2.22 of the Disclosure Schedule. With respect to each
lease and sublease listed in Section 2.22 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and
in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing;
(c) neither the Seller nor, to the knowledge of the Seller, any
other party to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of
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time, would constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(d) there are no disputes, oral agreements or forbearance programs
in effect as to the lease or sublease;
(e) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold;
(f) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities as
conducted during the period covered by the Financial Statements; and
(g) no construction, alteration or other leasehold improvement work
with respect to the lease or sublease remains to be paid for or performed by the
Seller.
2.23 Disclosure. No representation or warranty by the Seller contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered to or to be delivered
by or on behalf of the Seller pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or, coupled with the Exhibits
and the Disclosure Schedule attached hereto, omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
The Seller has disclosed to the Buyer all material information relating to the
Business and the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
3.1 Organization, Qualification and Corporate Power. The Buyer is an
unlimited company duly organized, validly existing and in corporate and tax good
standing under the laws of the Province of Nova Scotia. The Buyer is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification. The Buyer
has all requisite corporate power and authority to carry on the business in
which it is engaged and to own and use the properties owned and used by it. The
Buyer is not in default under or in violation of any provision of its Articles
of Association, its Memorandum of Association or By-laws.
3.2 Authority. The Buyer has all requisite corporate power and authority
to execute and deliver this Agreement and the Instrument of Assumption of
Liabilities in the form attached hereto as Exhibit B (the "Instrument of
Assumption") and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by the Buyer of this Agreement and
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the Instrument of Assumption and the consummation by the Buyer of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement has been, and the Instrument of Assumption will be, duly and validly
executed and delivered by the Buyer and constitute valid and binding obligations
of the Buyer, enforceable against the Buyer in accordance with their respective
terms.
3.3 Noncontravention. Neither the execution and delivery of this Agreement
or the Instrument of Assumption by the Buyer, nor the consummation by the Buyer
of the transactions contemplated hereby and thereby, will (a) conflict with or
violate any provision of the charter or By-laws of the Buyer, (b) require on the
part of the Buyer any filing with, or any permit, authorization, consent or
approval of, any Governmental Entity, (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the Buyer is a
party or by which the Buyer is bound or to which any of its assets is subject,
or (d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Buyer or any of its properties or assets.
3.4 Brokers' Fees. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3.5 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in any other document, certificate or
other instrument delivered to or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omit or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
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ARTICLE IV
CONDITIONS TO PURCHASE OF THE ASSETS
4.1 Conditions to Obligations of the Buyer. The obligations of the Buyer
under this Agreement are subject to the satisfaction of the following
conditions:
(a) the Seller shall have obtained all of the waivers, permits,
consents, approvals and other authorizations, and effected all of the
registrations, filings and notices, from third parties and Governmental Entities
(including without limitation all consents to the assignment of the Assumed
Contracts) necessary to effect the transactions contemplated by this Agreement;
(b) [intentionally omitted];
(c) the representations and warranties of the Seller set forth in
Article II shall be true and correct in all material respects as of the Closing
Date, except for representations and warranties made as of a specific date,
which shall be true and correct as of such date;
(d) the Seller shall have performed or complied with its agreements
and covenants required to be performed or complied with under this Agreement and
any other agreements between the Parties as of or prior to the Closing Date;
(e) no action, suit or proceeding shall be pending or threatened as
of the Closing Date before any Governmental Entity wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely the right of the Buyer to own,
operate or control the Assets or the Business, and no such judgment, order,
decree, stipulation or injunction shall be in effect;
(f) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified in clauses (a), (c), (d) and (i) of
this Section 4.1 are satisfied in all respects as of the Closing Date;
(g) the Buyer shall have received an opinion of Bulger, Young,
counsel to the Seller, dated as of the Closing Date, in the form attached hereto
as Exhibit C;
(h) the Buyer shall have entered into employment agreements
reasonably satisfactory in form to the Buyer with each of the following
individuals: Xxxxxx Xxxxxxxx, Sanjay Xxxxxxxx, Xxxx Siemens and Xxxxx Xxxxxxxx;
(i) all corporate and other proceedings required to be taken on the
part of the Seller to authorize or carry out this Agreement and to convey,
assign, transfer and deliver the Assets shall have been taken;
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(j) on the Closing Date the Buyer shall receive good, clear, and
marketable title to the Assets, free and clear of all liens, liabilities,
Security Interests and encumbrances of any nature whatsoever;
(k) the Buyer shall have received at or prior to the Closing Date
each of the following documents:
(i) the Xxxx of Sale;
(ii) the Records, all in form and substance satisfactory to
the Buyer;
(iii) such contracts, files and other data and documents
pertaining to the Assets or the Business as the Buyer may reasonably request
(including without limitation the Assumed Contracts);
(iv) a certificate of Industry Canada as to the legal
existence and good standing of the Seller in Canada;
(v) certificates of the Secretary of the Seller attesting to
the incumbency of the Seller's officers and the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement; and
(vi) a cross receipt executed by the Buyer and the Seller.
(l) the Buyer shall have completed its due diligence review relating
to the Assets and shall be satisfied, in Buyer's sole discretion, with the
results of such investigation; and
(m) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Buyer.
4.2 Conditions to Obligations of the Seller. The obligations of the Seller
under this Agreement are subject to the satisfaction of the following
conditions:
(a) the representations and warranties of the Buyer set forth in
Article III shall be true and correct in all material respects as of the Closing
Date, except for representations and warranties made as of a specific date,
which shall be true and correct as of such date;
(b) the Buyer shall have performed or complied with its agreements
and covenants required to be performed or complied with under this Agreement as
of or prior to the Closing Date;
(c) the Seller shall have received at or prior to the Closing each
of the following documents:
(i) the Instrument of Assumption;
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(ii) payment of the Base Purchase Price pursuant to Section
1.4; and
(iii) a cross receipt executed by the Buyer and the Seller;
(d) all actions to be taken by the Buyer in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Seller;
(e) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified in clauses (a), (b) and (g) of this
Section 4.2 is satisfied in all respects;
(f) the Seller shall have received an opinion from Xxxx and Xxxx
LLP, general counsel to Intrinsix Corp., the sole stockholder of the Buyer,
dated as of the Closing Date, in the form attached hereto as Exhibit F and an
opinion from Xxxxxxx XxXxxxxx Stirling Scales, special counsel to the Buyer,
dated as of the Closing Date, in the form attached hereto as Exhibit G;
(g) all corporate and other proceedings required to be taken on the
part of the Buyer to authorize or carry out this Agreement shall have been
taken; and
(h) the Buyer shall have delivered to the Seller a certificate of
the Secretary of the Buyer attesting to the incumbency of the Buyer's officers
and the authenticity of the resolutions authorizing the transactions
contemplated by this Agreement.
4.3 Covenants Relating to Closing and Termination.
(a) Each of the Parties will use its best efforts to take, or cause
to be taken, all action, and to do, or cause to be done, as soon as possible,
all things necessary proper or advisable under applicable laws and regulations
to consummate the transactions contemplated by this Agreement, including using
its best efforts to ensure the satisfaction of the conditions precedent to each
party's obligations under this Agreement.
(b) In the event that the Closing shall not have occurred on or
before January 6, 2000 due to the failure of any closing condition to be (x)
satisfied or (y) waived by the party whose obligation to perform under this
Agreement is contingent upon the satisfaction of such condition, this Agreement
may be terminated by either Buyer or Seller without any further liability or
obligation; provided, however, that the right to terminate this Agreement
pursuant to this Section 4.3(b) shall not be available to any party whose
failure to comply with Section 4.3(a) hereto has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date.
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ARTICLE V
POST-CLOSING COVENANTS
5.1 Hired Employees.
(a) On or after the execution of this Agreement, the Buyer or a
subsidiary of the Buyer shall offer employment to those Employees identified on
Schedule 5.1 attached hereto (the "Hired Employees"), and, for those Hired
Employees who accept the Buyer's offer of employment within two weeks of the
Closing Date, provide such Hired Employees with benefit programs substantially
similar in the aggregate to those provided to similarly situated employees of
the Seller; provided however, that if such offers are delivered prior to
Closing, such offers shall be expressly conditional upon the Closing of this
transaction.
(b) The Seller shall, within seven calendar days following the
Closing Date, issue to each individual employed by the Seller in connection with
the Business immediately prior to the Closing a final paycheck, which paycheck
shall include payment for all salary, bonus, accrued vacation, sickness and
disability and other financial obligations due to such employees for all periods
through the later of December 31, 1999 and the Closing Date. The Seller hereby
consents to the hiring of the Hired Employees by the Buyer and waives, with
respect to the employment by the Buyer of such employees, any claims or rights
the Seller may have against the Buyer or any such employee under any
non-competition, confidentiality or employment agreement.
(c) The Seller shall offer all Hired Employees who accept the
Buyer's offer of employment, the right to retain equity options to purchase
shares of the Seller and the right for each of such options to continue to vest
as if such Hired Employees remained employees of the Seller, provided that such
Hired Employees continue to be employed by the Buyer during the applicable
vesting period. The Parties hereby agree that the Hired Employees shall be
express third party beneficiaries of this Section 5.1(c) and the Seller agrees
that the Buyer shall have the right to enforce this Section 5.1(c) against the
Seller. The Buyer will advise Seller forthwith upon any Hired Employee ceasing
to be employed by the Buyer or its subsidiary during the applicable vesting
period.
(d) The Seller will pay all severance amounts due to employees of
the Business (other than Hired Employees); and
(e) The Buyer agrees to indemnify the Seller against all claims and
demands by Hired Employees who accept the Buyer's offer of employment, which
claims and demands are based on events arising after the Closing Date (including
termination of such employees from employment by the Buyer). Without limiting
the generality of the foregoing, such indemnity shall include any claims or
demands based on events arising after the Closing Date by such employees with
respect to wages, severance pay, notice of termination or pay in lieu thereof,
benefits, damages for wrongful dismissal or other employee benefits or claims
under the Employment Standards Act or at common law and including any costs or
expenses incurred by the Seller in defending any such claim or demand; provided,
however, that the Buyer shall not be
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required to indemnify the Seller for any claims by Hired Employees which arise
out of any breach by the Seller of this Agreement.
5.2 Sharing of Data. The Parties agree and covenant that:
(a) The Seller shall have the right for a period of three years
following the Closing Date to have reasonable access to such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other similar information as are transferred to
the Buyer pursuant to the terms of this Agreement for the limited purposes of
concluding its involvement in the Business prior to the Closing Date and for
complying with its obligations under applicable securities, tax, environmental,
employment or other laws and regulations. The Buyer shall have the right for a
period of three years following the Closing Date to have reasonable access to
those books, records and accounts, including financial and tax information,
correspondence, production records, employment records and other records which
are retained by the Seller pursuant to the terms of this Agreement to the extent
that any of the foregoing relates to the Business transferred to the Buyer
hereunder or is otherwise needed by the Buyer in order to comply with its
obligations under applicable securities, tax, environmental, employment or other
laws and regulations. Prior to the seventh-month anniversary of the Closing
Date, the Seller shall also have access to all books, records, accounts,
contracts and other data relating to the calculation of the Post-Closing Net
Adjustment.
(b) The parties agree that from and after the Closing Date they
shall cooperate fully with each other to facilitate the transfer of the Assets
from the Seller to the Buyer and the operation thereof by the Buyer.
5.3 No Solicitation or Hiring of Former Employees. For a period of three
years after the Closing Date, the Seller shall not directly or indirectly
recruit, solicit or induce any person who was an employee or subcontractor of
the Buyer or any of the Buyer's subsidiaries or the Business on the date hereof
or the Closing Date to terminate his or her employment with, or otherwise cease
their relationship with, the Buyer or any such subsidiary or to become an
employee of the Seller or an Affiliate of the Seller. In addition, without the
prior consent of the Buyer, the Seller shall not hire or employ or use in any
subcontracting arrangement any present or former employee of the Business, the
Buyer or any subsidiary of the Buyer.
5.4 Cooperation in Litigation. From and after the Closing Date, the Buyer
and the Seller shall each fully cooperate with the other in the defense or
prosecution of any litigation or proceeding already instituted or which may be
instituted hereafter against or by such other party relating to or arising out
of the conduct of the Business prior to or after the Closing Date (other than
litigation arising out of the transactions contemplated by this Agreement). The
party requesting such cooperation shall pay the reasonable out-of-pocket
expenses incurred in providing such cooperation (including legal fees and
disbursements) by the party providing such cooperation and by its officers,
directors, employees and agents, but shall not be responsible to such party or
its officers, directors, employees and agents, for their time spent in such
cooperation.
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5.5 Transition Services.
(a) Seller agrees to provide Buyer with those services described in
Exhibit D (the "Transition Services"), on the terms and for the duration
specified in Exhibit D and in this Section 5.5. The Transition Services listed
and described in Exhibit D are based on the parties' understanding of the
support and other services reasonably required to be provided by the Seller to
Buyer immediately following the Closing in order to assure the uninterrupted
operation of the Business during the transition period in which the Buyer shall
make such arrangements as may be necessary to assume such responsibilities on a
permanent basis. If, following the Closing, either party reasonably determines
that additional services should be provided by the Seller to the Buyer, the
Parties agree to negotiate in good faith to appropriately modify this Agreement
with respect to such additional services; provided, however, that any such
additional services shall be provided on a basis substantially consistent with
the recent historical practices of the Seller.
(b) All individuals providing Transition Services on behalf of the
Seller pursuant to this Agreement shall remain employees of the Seller. The
Buyer shall have no liability to such individuals with respect to any matter
arising out of or relating to their employment by the Seller, including, without
limitation, claims for wages, salaries, benefits or severance. The Seller agrees
to indemnify and hold harmless the Buyer and its officers, directors, employees
and agents from and against any claims by the Seller's employees against any of
them, except claims for which the Buyer is required to indemnify Seller's
employees pursuant to Article VI hereof or claims based upon or arising out of
Buyer's recklessness or willful misconduct. The Seller shall have no liability
to the Buyer for any errors, omissions or other negligence (other than
recklessness or wilful misconduct) of individuals providing Transition Services
to the Buyer.
(c) The Transition Services shall be performed in a timely,
efficient and workmanlike manner. The Seller shall use commercially reasonable
efforts to make available to the Buyer the services which it is obligated to
provide under this Agreement in substantially the same manner as it makes
similar services available for its own operations.
5.6 Access to Facility. Seller agrees to provide Buyer with access to the
facility described in Exhibit E (the "Facility"), on the terms and for the
duration specified in Exhibit E and in this Section 5.6. During the term therein
specified, each Party covenants and agrees that it will not (and will instruct
all of its employees, agents and representatives who have access to the Facility
not to) (i) interfere with the business or property of the each Party, except as
expressly provided herein or in Exhibit E, (ii) disclose any confidential
information which was made available to it as a result of its access to the
Facility pursuant to this Agreement or (iii) make any material alterations to
the Facility without the prior written consent of the Other Party. Either Party
will be entitled to an injunction, restraining order or other equitable relief
from any court of competent jurisdiction in the event of any breach by the
Seller of this Section 5.6. Rights and remedies provided by this Section 5.6 are
cumulative and in addition to any other rights and remedies either Party may
have at law or equity.
5.7 No Solicitation of Seller's Employees. For a period of three years
after the Closing Date, the Buyer shall not directly or indirectly recruit,
solicit or induce any person who was an employee or subcontractor of the Seller
or any of the Seller's subsidiaries on the date
- 22 -
hereof or the Closing Date to terminate his or her employment with, or otherwise
cease their relationship with, the Seller or any such subsidiary or to become an
employee of the Buyer or an Affiliate of the Buyer. In addition, without the
prior consent of the Seller, the Buyer shall not hire or employ or use in any
subcontracting arrangement any present or former employee of the Seller or any
subsidiary of the Seller.
5.8 Warranty Obligations. The Seller shall be responsible, and shall
indemnify the Buyer, for any warranty obligations or errors and omissions claims
which relate to services provided by or on behalf of the Seller on or before the
Closing Date. The Buyer agrees that, upon Seller's request and after reasonable
notice, it shall provide, at its then current rates, the services of former
employees of the Seller as needed by the Seller to satisfy any warranty
obligations arising out of services provided by or on behalf of the Seller on or
prior to the Closing Date.
5.9 Assumed Contract Obligations. The Buyer shall be responsible, and
shall indemnify the Seller for any errors or omissions claims or warranty
obligations which relate to services provided or which ought to have been
provided by the Buyer under the Assumed Contracts after the Closing Date.
5.10 Performance under Assumed Contracts. The Buyer will use commercially
reasonable efforts to perform the Seller's obligations under the Assumed
Contracts from and after the Closing Date in accordance with the provisions
thereof, and will use such efforts to complete the Assumed Contracts quickly and
expeditiously in order to maximize the Actual Revenue.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Seller. The Seller hereby agrees to defend,
indemnify and hold harmless the Buyer, its directors, officers, affiliates,
successors and assigns, from and against any and all claims, losses, damages,
liabilities, costs and expenses (including legal fees and disbursements)
(collectively, "Damages") resulting from, consisting of or arising out of or in
connection with (a) any misrepresentation, breach of representation or warranty
or failure to perform any covenant or agreement of the Seller in this Agreement
or in any of the agreements, schedules or exhibits contemplated herein; (b) any
warranty claim or product liability claim relating to services provided or
products distributed or sold by the Seller prior to the Closing Date; (c) any
liabilities or obligations of the Seller for Taxes (as defined below); (d) the
failure of the Buyer to obtain protections afforded by compliance with the
notification and other requirements of the bulk sales laws in force in the
jurisdictions in which such laws may be applicable to either the Seller or the
transactions contemplated by this Agreement; (e) any claims against, or
liabilities or obligations of, the Seller with respect to obligations under any
Employee Benefit Plan (as defined below) other than claims of Hired Employees
arising after the Closing Date; (f) any claims of Hired Employees arising from
actions of the Seller or any of its Affiliates (as such term is defined in the
Securities Exchange Act of 1934, as amended, and the rules and
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regulations promulgated thereunder) or agents prior to the Closing Date; (g) any
third-party litigation, suit, action, investigation, proceeding or controversy
arising out of the Seller's actions prior to the Closing Date; (h) any
liabilities, obligations or commitments, fixed or contingent, of the Seller
other than the Assumed Liabilities; (i) any liability arising from the Seller's
failure to qualify to do business in any jurisdiction prior to the Closing Date;
and (j) any liability arising from Seller's failure to obtain consents to the
assignment of the Assumed Contracts to the Buyer. For purposes of this
Agreement, (i) "Taxes" includes federal, state, provincial, local, municipal,
foreign and other net income, gross income, gross receipts, sales, goods and
services, use, business and occupation, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall profits,
customs, duties or other taxes, fees, assessments or charges of any kind
whatever, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and (ii) "Employee Benefit Plan" means
any written or oral plan, agreement or arrangement involving direct or indirect
compensation, including without limitation insurance coverage, severance
benefits, disability benefits, deferred compensation, bonuses, stock options,
stock purchase, phantom stock, stock appreciation or other forms of incentive
compensation, post-retirement compensation, vacations, leaves of absence or
similar practices.
6.2 Indemnification by the Buyer. The Buyer hereby agrees to defend,
indemnify and hold harmless the Seller, its directors, officers, affiliates,
successors and assigns, from and against any and all claims, losses, damages,
liabilities, costs and expenses (including legal fees and disbursements)
resulting from, consisting of or arising out of or in connection with any
misrepresentation, breach of representation or warranty or failure to perform
any covenant or agreement of the Buyer in this Agreement or in any of the
agreements, schedules or exhibits contemplated herein.
6.3 Method of Asserting Claims.
(a) If the a Party has incurred or suffered Damages for which it is
entitled to indemnification under this Article VI, such Party (the "Indemnified
Party") shall, prior to the expiration of the representation, warranty, covenant
or agreement to which such claim relates, give written notice of such claim (a
"Claim Notice") to the other Party (the "Indemnifying Party"). Each Claim Notice
shall state the amount of claimed Damages (the "Claimed Amount"), if known, and
the basis for such claim.
(b) Within 20 days after delivery of a Claim Notice, the
Indemnifying Party shall provide to the Indemnified Party a written response
(the "Response Notice") in which the Indemnifying Party shall: (i) agree that
all of the Claimed Amount is owed to the Indemnified Party, (ii) agree that
part, but not all, of the Claimed Amount (the "Agreed Amount") is owed to the
Indemnified Party, or (iii) contest that any of the Claimed Amount is owed to
the Indemnified Party. The Indemnifying Party may contest the payment of all or
a portion of the Claimed Amount only based upon a good faith belief that all or
such portion of the Claimed Amount does not constitute Damages for which the
Indemnified Party is entitled to indemnification under this Article VI. If no
Response Notice is delivered by the Indemnifying Party within such 20-day
period, the Indemnifying Party shall be deemed to have agreed that all of the
Claimed Amount is owed to the Indemnified Party.
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(c) If the Indemnifying Party in the Response Notice agrees (or is
deemed to have agreed) that all of the Claimed Amount is owed to the Indemnified
Party, the Indemnifying Party shall promptly pay to the Indemnified Party an
amount equal to the Claimed Amount. If the Indemnifying Party in the Response
Notice agrees that part, but not all, of the Claimed Amount is owed to the
Indemnified Party, the Indemnifying Party shall promptly pay to the Indemnified
Party an amount equal to the Agreed Amount set forth in such Response Notice.
Acceptance by the Indemnified Party of part payment of any Claimed Amount shall
be without prejudice to the Indemnified Party's right to claim the balance of
any such Claimed Amount. Notwithstanding the foregoing, the Indemnified Party
shall have the right, at its option, to elect to satisfy any obligation of the
Seller under this subsection (c) pursuant to the provisions of Section 1.7
hereof by deducting such funds from any unpaid portion of the Post-Closing Net
Adjustment. The Indemnified Party shall not, however, have any right to offset
or deduct any such claims from any sum owed to Seller with respect to the
occupancy of the Facility in accordance with Exhibit E.
(d) The Indemnified Party shall give prompt written notification to
the Indemnifying Party of the commencement of any action, suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Article VI may be sought. Within 20 days after delivery of such notification,
the Indemnifying Party may, upon written notice thereof to the Indemnified
Party, assume control of the defense of such action, suit or proceeding with
counsel reasonably satisfactory to the Indemnified Party, provided the
Indemnifying Party acknowledges in writing to the Indemnified Party that any
damages, fines, costs or other liabilities that may be assessed against the
Indemnified Party in connection with such action, suit or proceeding constitute
Damages for which the Indemnified Party shall be entitled to indemnification
pursuant to this Article VI. If the Indemnifying Party does not so assume
control of such defense, the Indemnified Party shall control such defense. The
party not controlling such defense may participate therein at its own expense;
provided that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes that the Indemnifying Party and the
Indemnified Party have conflicting interests or different defenses available
with respect to such action, suit or proceeding, the reasonable fees and
expenses of counsel to the Indemnified Party shall be considered "Damages" for
purposes of this Agreement. The party controlling such defense shall keep the
other party advised of the status of such action, suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
other party with respect thereto. The Indemnified Party shall not agree to any
settlement of such action, suit or proceeding without the prior written consent
of the Indemnifying Party, which shall not be unreasonably withheld. The
Indemnifying Party shall not agree to any settlement of such action, suit or
proceeding without the prior written consent of the Indemnified Party, which
shall not be unreasonably withheld (it being understood that it is reasonable to
withhold such consent if, among other things, the settlement or the entry of
judgment (A) lacks a complete release of the Indemnified Party for all liability
with respect thereto or (B) imposes any liability or obligation on the
Indemnified Party).
6.4 Survival.
(a) Unless otherwise specified in this Section 6.4 or elsewhere in
this Agreement, all provisions of this Agreement shall survive the Closing and
the consummation of
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the transactions contemplated hereby and shall continue forever in full force
and effect in accordance with their terms.
(b) The representations and warranties of the Seller set forth in
Article II and the indemnification obligations set forth in this Article VI:
(i) shall survive the Closing and the consummation of the
transactions contemplated hereby and continue until the second anniversary of
the Closing Date; and
(ii) shall not be affected by any examination made for or on
behalf of the Buyer or the knowledge of any of the Buyer's officers, directors,
stockholders, employees or agents.
Notwithstanding the foregoing, the indemnification obligations set forth in
Section 6.1(c), (e), (f), (g) and (h) shall survive the Closing and the
consummation of the transactions contemplated thereby and continue until the
expiration of the applicable statute of limitations.
(c) The date on which any particular representation, warranty or
indemnification obligation of the Seller or the Buyer terminates shall be
referred to herein as the "Termination Date." If a notice of a claim is given in
accordance with the notice provisions of this Agreement before the Termination
Date, then (notwithstanding the occurrence of the Termination Date) the
representation, warranty or indemnification obligation applicable to such claim
shall survive until, but only for purposes of, the resolution of such claim.
(d) The representations and warranties of the Buyer set forth in
Article III above or in any other location in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby and shall
continue until the second anniversary of the Closing Date.
6.5 Limitations.
(a) Notwithstanding anything to the contrary herein, except as
provided in this Section 6.5, no Indemnifying Party shall be liable under this
Article VI unless and until the aggregate Damages exceed $10,000 (at which point
such Indemnifying Party shall become liable for the aggregate Damages, not just
amounts in excess of $10,000) provided, however that the amount of any liability
attributable to Taxes shall not be so limited.
(b) The amount of any Damages which may be claimed by the
Indemnified Party shall be calculated to be the cost or loss to the Indemnified
Party after giving effect to:
(i) any insurance proceeds available to the Indemnified
Party or any Affiliate without adverse financial
consequences to such Indemnified Party or any Affiliate
in relation to the matter which is the subject of the
claim;
(ii) the value of any related, determinable tax benefits
realized, or which will (with reasonable certainty) be
realized within a two-year period following the date of
incurring such cost or loss, by the Indemnified
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Party or any Affiliate of such Indemnified Party in
relation to the matter which is the subject of the
claim; and
(iii) in the case of the Seller, any reduction in the amount
of the Post-Closing Net Adjustment payable to the Seller
which results from the subject-matter of the claim.
ARTICLE VII
MISCELLANEOUS
7.1 Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other Party; provided, however, that any Party
may make any public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing Party shall advise the other Party and
provide it with a copy of the proposed disclosure prior to making the
disclosure); and provided further that on and after the Closing Date the Buyer
may issue any press release or announcement relating to the subject matter of
this Agreement without the prior approval of the Seller.
7.2 Proprietary Information. The Seller agrees that from and after the
Closing Date the Seller and its Affiliates shall hold in confidence and shall
use its best efforts to have all officers, directors and personnel who continue
after the Closing to be employed by the Seller or any such Affiliate to hold in
confidence all knowledge and information of a secret or confidential nature with
respect to the Business and not to disclose, publish or make use of the same
without the consent of the Buyer, except to the extent that such information
shall have become public knowledge other than by breach of this Agreement by the
Seller or its Affiliates.
7.3 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns, except as set forth in Section 5.1(c) with
respect to the Hired Employees.
7.4 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, that may have related in any way to the subject matter hereof,
including without limitation any agreement relating to nonsolicitation of
employees.
7.5 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. The Buyer may assign its rights, interests and
obligations hereunder to any wholly-owned subsidiary of the Buyer. Upon such
assignment the assignee shall be deemed to be the "Buyer" for purposes of this
Agreement, provided however, that notwithstanding such assignment the Buyer
shall remain liable to the Seller for the performance of all of the obligations
of the Buyer contained herein. Subject to the foregoing, no Party may assign
either this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Party.
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7.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.7 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.8 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered three business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent via a reputable overnight
courier service, in each case to the intended recipient as set forth below:
If to the Seller: Copy to:
Telexis Corp. Xxxxxx, Xxxxx
Xxxxx X, Xxxxx 000 000-000 Xxxxxxxxx Xxxxxx
000 Xxxxxx Xxxxx Xxxxxx, Xxxxxxx
Xxxxxx, Xxxxxxx X0X 0X0 K2A 3X9
Attention: President Attention: Xxxxxx X. Xxxxxx
If to the Buyer: Copy to:
Intrinsix Canada Co. Xxxx and Xxxx LLP
c/o Intrinsix Corp. 00 Xxxxx Xxxxxx
00 Xxxxx Xxxxxx Xxxxxx, XX 00000
Xxxxxxxx, XX 00000 Attention: Xxxxxxx X. Xxxxxxxx
Attention: President
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims and other communications hereunder are to be delivered
by giving the other Party or Parties notice in the manner herein set forth.
7.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the Province
of Ontario.
7.10 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. No waiver by any Party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default,
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misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
7.11 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
7.12 Expenses. Except as otherwise expressly provided herein, each of the
Buyer, on the one hand, and the Seller, on the other hand, will pay its own fees
and expenses (including, without limitation, legal and accounting fees and
expenses) incurred by it in connection with the transactions contemplated
hereby.
7.13 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any reference
to any federal, state, local, provincial or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
7.14 Currency and Interest. All references to currency in this Agreement
(or any exhibit or schedule hereto) shall be deemed to refer to Canadian
dollars. In the event that either of the Parties defaults in its obligation to
make any payment hereunder, the defaulting Party shall pay the other Party
interest at the prime rate in effect from time to time at the Royal Bank of
Canada for Canadian dollar loans, plus two percent. Rights and remedies provided
to the nondefaulting Party by this Section 7.14 are cumulative and in addition
to any other rights and remedies which such Party may have at law or equity.
7.15 Tax Aspects. The Buyer shall be liable for and shall pay all
applicable federal and provincial sales taxes, land transfer taxes, goods and
services taxes, excise taxes and all other taxes (other than income taxes of the
Seller), duties and other like charges properly payable on and in connection
with the conveyance and transfer of the Assets to the Buyer. The Seller will do
and cause to be done such things as are reasonably requested to enable the Buyer
to comply with such obligations in an efficient manner.
The Total Purchase Price shall not include, and Seller shall have no
liability for, any goods and services taxes, nor any tax imposed upon the Buyer
in connection with the transactions contemplated herein by any jurisdiction. The
Parties shall use commercially reasonable efforts to obtain the benefit of s.
167(1) of the Excise Tax Act, R.S.C. 1985, c. E-15 (Canada), as from time to
time amended, including the execution of a joint election in the
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prescribed form containing the prescribed information and the filing of such
joint election within the prescribed time and in the prescribed manner.
In this regard,
(1) The Seller represents and warrants to the Buyer that:
(a) the Seller is registered for purposes of Part IX of the Excise
Tax Act R.S.C. 1985, c.E-15 (Canada) (the "GST Legislation");
and
(b) the Business is a "commercial activity" for the purposes of
the GST Legislation.
(2) The Buyer hereby represents and warrants to the Seller that the
Buyer is a registrant for the purposes of the GST Legislation; and
(3) The Buyer will indemnify the Seller against any tax, interest or
penalties assessed against the Seller as a result of a determination
that the election pursuant to s. 167(1) of the Excise Tax Act
(Canada) was not available for any reason other than the inaccuracy
of any of the representations and warranties made by the Seller
pursuant to paragraph (1) of this section.
7.16 Incorporation of Exhibits and Schedules. If the provisions of any
Exhibit or Schedule to this Agreement are inconsistent with the provisions of
this Agreement, the provisions of the Agreement shall prevail. The Exhibits and
Schedules attached hereto or to be attached hereafter are hereby incorporated as
integral parts of this Agreement.
7.17 Guaranty of the Buyer's Obligations. Intrinsix Corp., a Massachusetts
corporation and the sole stockholder of the Buyer ("Parent"), irrevocably and
unconditionally guaranties in full the due and prompt payment of all liabilities
and obligations of the Buyer to the Seller set forth in this Agreement and the
Shared Facility License Agreement (the "Guarantied Obligations"). This guaranty
is a continuing guaranty and shall apply to all Guarantied Obligations and any
ultimate unpaid balance thereof. This guaranty is in no way conditioned upon any
requirement that the Seller first attempt to collect or enforce any Guarantied
Obligation from or against the Buyer provided, however, that the Seller has
first requested payment from the Buyer in writing, has not refused payment, and
has not received payment from the Buyer within 10 business days following
request by the Seller. Except as set forth in the preceding sentence and so long
as any Guarantied Obligation remains unpaid, the liability of Parent shall be
payable promptly upon written demand delivered to Parent at the addresss and in
the manner set forth in Section 7.8 of this Agreement. Parent hereby waives all
special suretyship defenses, and protest, notice of protest, demand for
performance, diligence, notice of any other action at any time taken or omitted
to be taken by the Seller and, generally, all demands and notices of every kind
(other than as set forth in the preceding sentence) in connection with this
Section 7.17. If any of the
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obligations of Parent or waivers set forth in this Section 7.17 is
determined by a Governmental Entity to be contrary to any applicable law or
public policy, such obligations and/or waivers shall be effective only to the
extent permitted by law.
[Remainder of page intentionally blank.]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
BUYER:
INTRINSIX CANADA CO.
By: /s/ Xxx Xxxxx
--------------------------------
Title: President
-----------------------------
SELLER:
TELEXIS CORP.
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Title: /s/ VP, Finance and CFO
-----------------------------
By: /s/ [signature illegible]
--------------------------------
Title: VP & GM
-----------------------------
In accordance with and subject to the terms of Section 7.17 of this Agreement,
the obligations of Intrinsix Canada Co. are hereby irrevocably guarantied in
full.
INTRINSIX CORP.
By:/s/ Xxx Xxxxx
--------------------------
Title: President
----------------------
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