STOCK PURCHASE AGREEMENT
Exhibit
10.10
This
Stock Purchase Agreement (this “Agreement”)
is
entered into as of March 4th,
2005,
between 6351352
Canada Inc.,
a Canada
corporation (“Buyer”),
and
Xxxxxxx Ventures, Inc., a Utah corporation (“Seller”).
Buyer
and Seller are referred to collectively herein as the “Parties.”
Seller
owns all of the outstanding capital stock of ClearOne Communications of Canada,
Inc., a New Brunswick corporation (“Target”),
and
Target owns all of the outstanding capital stock of Stechyson Electronics Ltd.,
a Canada corporation (“Sub”).
This
Agreement contemplates a transaction in which Buyer will purchase from Seller,
and Seller will sell to Buyer, all of the outstanding capital stock of Target
in
return for the Purchase Price (as hereinafter defined).
Now,
therefore, in consideration of the premises and the mutual promises herein
made,
and in consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows.
1. Definitions.
“$”
means
United States dollars.
“Adverse
Consequences”
means
all actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, reasonable amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys’ fees and expenses, but does not include
special, consequential or punitive damages.
“Affiliate”
has
the
meaning set forth in Rule
12b-2 of the regulations promulgated under the Securities Exchange
Act.
“Business”
means
the business currently carried on by the Target including procurement and sale
of room based audio visual equipment and post sales equipment service and
support.
“Buyer”
has
the
meaning set forth in the preface above.
“Change
of Control Transaction”
means
(A) a transaction in which any person (as that term is used in Rule 13d-5 under
the Securities Exchange Act of 1934) or group (as that term is used in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934) other than Buyer
becomes the beneficial owner of securities of Sub representing 50% or more
of
the combined voting power of Sub’s then outstanding securities; (B) a merger or
consolidation of Sub with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of Sub outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 50% of the combined voting power of the voting securities
of
Sub or such surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement a
recapitalization of Sub (or similar transaction) in which no person
1
acquires
more than 50% of the combined voting power of Sub’s then outstanding securities;
or (C) the sale or disposition by Sub of all or substantially all of its
assets.
“Closing”
has
the
meaning set forth in Section
2
below.
“Closing
Amount”
has
the
meaning set forth in Section
2
below.
“Closing
Date”
has
the
meaning set forth in Section
2
below.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Confidential
Information”
means
any information concerning the businesses and affairs of Target and Sub that
is
not already generally available to the public.
“Determination
Date”
means
December 31, 2004.
“Disclosure
Schedule”
has
the
meaning set forth in Section 4
below.
“Earn
Out Amount”
has
the
meaning set forth in Section
2
below.
“Earn
Out Calculation Period”
has
the
meaning set forth in Section
2
below.
“Earn
Out Period”
has
the
meaning set forth in Section
2
below.
“Environmental,
Health, and Safety Requirements”
shall
mean all Canadian federal, provincial, or local statutes, statutes, regulations,
and ordinances concerning public health and safety, worker health and safety,
and pollution or protection of the environment, including all those relating
to
the presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances, or wastes, as such requirements are enacted and in effect on or
prior to the Closing Date.
“Gross
Revenues”
means
the aggregate of all revenue in the ordinary course of the
Business.
“Income
Tax”
means
any federal, provincial, state, local, provincial or foreign income tax measured
by or imposed on net income, including any interest, penalty, or addition
thereto, whether disputed or not.
“Income
Tax Return”
means
any return, declaration, report, claim for refund, or information return or
statement relating to Income Taxes, including any schedule or attachment
thereto.
“Indemnified
Party”
has
the
meaning set forth in Section
8(e)(i)
below.
“Indemnifying
Party” has the meaning set forth in Section
8(e)(i)
below.
2
“Knowledge”
means
actual knowledge without
independent investigation. Knowledge, with respect to a particular fact or
matter, will be imputed to the Seller if any individual who is serving as an
officer of any of Seller, Target, or Sub has Knowledge of such fact
or
matter.
“Lease”
means
that certain real property lease dated August 1, 2000 between Commercial
Property Developments and Sub pertain to premises located in the City of Nepean,
Province of Ontario.
“Lien”
means
any mortgage, pledge, lien, encumbrance, charge, or other security interest,
other than (a) liens for taxes not yet due and payable, (b) purchase money
liens
and liens securing rental payments under capital lease arrangements, and (c)
other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
“Material
Adverse Effect”
or
“Material
Adverse Change”
means
any effect or change that would be materially adverse to the Business
of
Target and Sub, taken as a whole, or on the ability of any Party to consummate
timely the transactions contemplated hereby; provided that none of the following
shall be deemed to constitute, and none of the following shall be taken into
account in determining whether there has been, a Material Adverse Effect or
Material Adverse Change: (a) any adverse change, event, development, or effect
arising from or relating to (1) general business or economic conditions,
including such conditions related to the Business
of
Target and Sub, (2) national or international political or social conditions,
including the engagement by the United States or Canada in hostilities, whether
or not pursuant to the declaration of a national emergency or war, or the
occurrence of any military or terrorist attack upon Canada or the United States,
or any of its territories, possessions, or diplomatic or consular offices or
upon any military installation, equipment or personnel of the United States
or
Canada, (3) financial, banking, or securities markets (including any disruption
thereof and any decline in the price of any security or any market index),
(4)
changes in Canadian or United States generally accepted accounting principles,
(5) changes in law, rules, regulations, orders, or other binding directives
issued by any governmental entity, or (6) the taking of any action contemplated
by this Agreement and the other agreements contemplated hereby, and
(b)
any
existing
event, occurrence, or circumstance with respect to which Buyer has knowledge
as
of the date hereof, and (c) any adverse
change in or effect on the Business
of
Target and Sub that is cured by Seller before the earlier of (1) the Closing
Date and (2) the date on which this Agreement is terminated pursuant to
Section
9
hereof.
“Note”
has
the
meaning set forth in Section
2(b)(iii).
“Ordinary
Course of Business”
means
the ordinary course of business consistent with past custom and practice
(including with respect to quantity and frequency).
“Party”
has
the
meaning set forth in the preface above.
“Person”
means
an individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, any other business entity or a governmental entity (or any
department, agency, or political subdivision thereof).
3
“Purchase
Price”
has
the
meaning set forth in Section 2(b)
below.
“Securities
Act”
means
the Securities
Act of
1933,
as amended.
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“Seller”
has
the
meaning set forth in the preface above.
“Special
Accountants”
has
the
meaning set forth in Section
2(c)(ii)
below.
“Sub”
has
the
meaning set forth in the preface above.
“Subsidiary”
means,
with respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of
directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation),
a
majority of partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or
more
Subsidiaries of that Person or a combination thereof and for this purpose,
a
Person or Persons owns a majority ownership interest in such a business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of such business entity’s gains or losses or shall be or control any
managing director or general partner of such business entity (other than a
corporation). The term “Subsidiary” shall include all Subsidiaries of such
Subsidiary.
“Target”
has
the
meaning set forth in the preface above.
“Target
Share”
means
any share of the common stock, no par value, of Target.
“Tax”
or
“Taxes”
means
any federal,
provincial, state, local,
provincial or foreign income,
gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including
taxes under Code §59A or a similar provision under Canadian federal tax
legislation),
customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on
minimum, estimated,
or other tax of
any
kind whatsoever, including
any
interest, penalty, or addition thereto, whether disputed or not.
“Tax
Return”
means any
return, declaration, report, claim
for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment
thereof.
“Third
Party Claim”
has
the
meaning set forth in Section
8(e)(i)
below.
4
2. Purchase
and Sale of Target Shares.
(a) Basic
Transaction.
On and
subject to the terms and conditions of this Agreement, Buyer agrees to purchase
from Seller, and Seller agrees to sell to Buyer, all of Seller’s Target Shares
for the consideration specified below in this Section
2.
(b) Purchase
Price.
The
consideration to be paid by Buyer to Seller for Seller’s Target Shares (the
“Purchase Price”) shall be paid by the Buyer in the following
manner:
(i) By
delivery to Seller of a deposit of US$25,000
upon execution of this Agreement;
(ii) By
delivery to the Seller at Closing of US$175,000
in cash
(the “Closing Amount”), payable by wire transfer or delivery of other
immediately available funds.
(iii) By
delivery by the Buyer to the Seller of a secured promissory note in the form
attached hereto as Exhibit A
(the
“Note”), the principal amount of which shall equal to US$1,256,000;
and
(iv) By
payment of the Earn Out Amounts described in Section
2(c)
below.
(c) Earn
Out Amounts.
(i) Earn
Out Periods and Amounts.
For
each consecutive 3-month period (each an “Earn
Out
Calculation Period”) during a period of 5
years
commencing on January 1, 2006 (the “Earn Out Period”), Buyer shall pay to Seller
an earn out amount (“Earn Out Amount”) equal to 4%
of
Sub’s Gross Revenues the first year and 3% of Sub’s Gross Revenues for each year
thereafter that have accrued
for the
same period, and each Earn Out Amount payable hereunder shall be paid by Buyer
to Seller in
United
States dollars within
60
days following the end of any Earn Out Calculation Period, such amount payable
by wire transfer as per instructions provided to Buyer by Seller or its
Affiliate. It
is
understood and agreed that Earn Out Amounts will be initially calculated in
Canadian dollars and such amounts will be converted into United States dollars
at the exchange rate quoted by the Bank of Canada on the last business day
of
each relevant Earn Out Calculation Period.
(ii) Records
and Verification of Earn Out Amounts.
Buyer
shall provide to Seller such accounting and other records as Seller may request
from time to time to verify the computation of Sub’s Gross
Revenues
for any
Earn Out Calculation Period. In the event that Seller disputes the amount of
an
Earn Out Amount for a specific Earn Out Calculation Period, Seller shall
promptly notify Buyer of such dispute. If within 30 days of such notification,
Buyer and Seller are unable to reach agreement with respect to such amount,
the
disputed Earn Out Amount shall be submitted to a mutually agreeable third party
firm of chartered accountants (“Special Accountants”) for determination, whose
determination shall be binding and conclusive upon the parties. If
the
Special
Accountants determine that the disputed Earn Out Amount has
5
been
understated by ten (10%) percent or more, then Buyer shall pay
the
Special Accountant’s fees, costs and expenses and shall promptly remit the
deficiency in the Earn Out Amount to Seller. If the Special Accountants
determine that the disputed Earn Out Amount has not been understated or has
been
understated by less than ten (10%) percent, then Seller shall pay
the
Special Accountant’s fees, costs and expenses, and Buyer shall promptly remit
any deficiency in the Earn Out Amount to Seller.
(iii) Change
of Control Transaction.
In the
event of a Change of Control Transaction before the end of the Earn Out Period,
then Buyer shall provide written notice to Seller prior to the effective date
of
such Change of Control Transaction and shall pay to Seller, within 10 days
following such effective date, a sum equal to the aggregate Earn Out Amounts
that would have been paid in respect of the Earn Out Calculation Periods
remaining in the Earn Out Period. Any Earn Out Amount payable pursuant to this
Section
2(c)(iii) shall be based on Sub’s projected Gross
Revenues
which
shall equal, with respect to each Earn Out Calculation Period, Sub’s average
Gross
Revenues
for the
12-month period prior to the commencement each Earn Out Calculation Period,
plus
a cumulative premium of 10% for each year remaining in the Earn Out Period
at
the time the Change of Control Transaction is concluded.
(iv) Guarantee.
Buyer
agrees that it shall cause Sub to guarantee the obligations of Buyer pursuant
to
this Section 2(c) and the Note (the “Sub” Guarantee”).
(v) Security
Interest.
Buyer
agrees that any Earn Out Amounts payable hereunder and under the Sub Guarantee
shall be secured by the charges on the assets of Buyer and Sub,
respectively.
(d) Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place at the offices of Xxxxxxx Xxxxx & Xxxxxxx, in Salt Lake City,
Utah or at such other place as the Parties may agree, commencing at such time
and on such date as Buyer and Seller may mutually determine (the “Closing
Date”); provided, however, that the Closing Date shall be no later than March
4,
2005.
(e) Deliveries
at Closing.
At the
Closing, (i) Seller shall deliver to Buyer the various certificates,
instruments,
and
documents referred to in Section
7(a)
below, (ii) Buyer will deliver to Seller the various certificates, instruments,
and documents referred to in Section
7(b)
below, (iii) Seller will deliver to Buyer one or more stock certificates
representing all of Seller’s Target Shares, endorsed in blank or accompanied by
duly executed stock powers, and (iv) Buyer will deliver to
Seller the
Closing Amount specified in Section
2(b)
above.
3. Representations
and Warranties Concerning Transaction.
(a) Seller’s
Representations and Warranties.
Seller
represents and warrants to Buyer that the statements contained in this
Section
3(a)
are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this
Section
3(a)).
6
(i) Organization
of Seller.
Seller
is duly organized, validly existing, and in good standing under the laws of
the
jurisdiction of its incorporation.
(ii) Authorization
of Transaction.
Seller
has full power and authority (including full corporate or other entity power
and
authority) to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of Seller, enforceable in accordance with its terms and conditions.
Seller
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement and all other agreements contemplated
hereby have been duly authorized by Seller.
(iii) Non-contravention.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Seller
is
subject or, any provision of its charter, bylaws, or other governing documents,
or (B) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which Seller is a party or by
which
it is bound or to which any of its assets is subject.
(iv) Brokers’
Fees.
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.
(v) Target
Shares.
Seller
holds of record and owns beneficially all of the issued and outstanding Target
Shares, free and clear of any encumbrances or restrictions on transfer (other
than any restrictions under the Securities Act and applicable state and
provincial securities laws). Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require Seller to
sell, transfer, or otherwise dispose of any capital stock of Target (other
than
this Agreement). Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock
of
Target.
(b) Buyer’s
Representations and Warranties.
Buyer
represents and warrants to Seller that the statements contained in this
Section
3(b)
are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this
Section
3(b)).
(i) Accredited
Investor.
Buyer
is purchasing the Target Shares as principal and is an “accredited investor” as
defined in Ontario Securities Commission Rule 45-501.
7
(ii) Organization
of Buyer.
Buyer
is a corporation (or other entity) duly organized, validly existing, and in
good
standing under the laws of the jurisdiction of its incorporation (or other
formation).
(iii) Authorization
of Transaction.
Buyer
has full power and authority (including full corporate or other entity power
and
authority) to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of Buyer, enforceable in accordance with its terms and conditions.
Buyer
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement and all other agreements contemplated
hereby have been duly authorized by Buyer.
(iv) Non-contravention.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Buyer
is
subject or any provision of its charter, bylaws, or other governing documents
or
(B) conflict with, result in a breach of, constitute a default under, result
in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which Buyer is a party or by which
it is bound or to which any of its assets is subject.
(v) Brokers’
Fees.
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.
(vi) Investment.
Buyer
is not acquiring the Target Shares with a view to or for sale in connection
with
any distribution thereof within the meaning of the Securities Act.
4. Representations
and Warranties Concerning Target and Sub.
Seller
represents and warrants to Buyer that the statements contained in this
Section
4
are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this
Section
4),
except as set forth in the disclosure schedule,
delivered
by Seller to Buyer on the date hereof and initialed by the Parties (the
“Disclosure Schedule”).
(a) Organization,
Qualification, and Corporate Power.
Each of
Target and Sub are corporations duly organized, validly existing, and in good
standing under the laws of the jurisdiction of their incorporation. Each of
Target and Sub are duly authorized
to
conduct Business
and are
in good standing under the laws of each jurisdiction where such qualification
is
required,
except
where the lack of such qualification would not have a Material Adverse
Effect.
Each of
Target and Sub have full corporate power and authority to carry on the
businesses in
8
which
they are engaged
and to own and use the properties owned and used by them.
Section
4(a)
of
the Disclosure Schedule lists the directors and officers of Target and
Sub
(b) Capitalization.
The
entire authorized capital stock of Target consists of an unlimited number of
Target Shares, of which 100 Target Shares are issued and outstanding. All of
the
issued and outstanding Target Shares are owned by Seller, have been duly
authorized, are validly issued, and are fully paid, and non-assessable. There
are no outstanding or authorized options or rights that could require Target
to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Target. The authorized capital,
as well as the issued and outstanding shares of Sub (the “Sub Shares”), are as
set out in Schedule 1 hereto. All of the Sub Shares are
owned
by Target, have been duly authorized, are validly issued, and are fully paid,
and non-assessable. There are no outstanding or authorized options or rights
that could require Sub to issue, sell, or otherwise cause to become outstanding
any of its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to Sub
(c) Non-contravention.
To the
Knowledge of the Seller, neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any contract,
constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government,
governmental agency, party , or court to which Target and Sub are subject or
any
provision of the articles
or
bylaws of Target and Sub,
except
where the violation would not have a Material Adverse Effect.
To the
Knowledge of Seller,
neither
Target nor Sub needs to give any notice to, make any filing with, or obtain
any
authorization, consent, or
approval of any
government, governmental agency or party in order for the Parties to consummate
the transactions contemplated by this Agreement,
except
where the failure to give notice, to file, or to obtain any authorization,
consent, or approval would not have a Material Adverse Effect
(d) Brokers’
Fees.
Neither
Target nor Sub has any liability or obligation to pay any fees or commissions
to
any broker, finder, or agent with respect to the transactions contemplated
by
this Agreement.
(e) Title
to Tangible Assets.
Target
and Sub have good
title
to, or a valid leasehold interest in, the material
tangible
assets they use regularly
in
the
conduct of their Business.
(f) Subsidiaries.
Target
has no Subsidiaries other than Sub. Neither Target nor Sub owns or has any
right
to acquire, directly or indirectly, any outstanding capital stock of, or other
equity interests in, any Person.
(g) Tax
Matters.
Target
and Sub have filed all Income Tax, sales tax, employment and payroll related
tax
that they were required to file, and have paid all Taxes shown thereon as owing,
except where the failure to file Income Tax Returns or to pay Income Taxes
would
not have a Material Adverse Effect.
9
(h) Litigation.
Section
4(h)
of the
Disclosure Schedule sets forth each instance in which Target or Sub (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction,
except
where the injunction, judgment, order, decree, ruling, action, suit, proceeding,
hearing, or investigation would not have a Material Adverse Effect.
(i) Environmental,
Health, and Safety Matters.
To the
Knowledge
of Seller, Target and Sub are in compliance with Environmental, Health, and
Safety Requirements, except for such non-compliance as would not have a Material
Adverse Effect.
(j) Disclaimer
of Other Representations and Warranties.
Except
as expressly set forth in Section 3 and this Section 4, Seller makes no
representation or warranty, express or implied, at law or in equity, in respect
of Target or Sub or any of their respective assets, liabilities or operations,
including with respect to merchantability or fitness for any particular purpose,
and any such other representations or warranties are hereby expressly
disclaimed. Buyer hereby acknowledges and agrees that, except to the extent
specifically set forth in Section 3 and this Section 4, Buyer is purchasing
the
Target Shares on an “as-is, where-is” basis.
5. Pre-Closing
Covenants.
The
Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing.
(a) General.
Each of
the Parties will use his, her, or its reasonable best efforts to take all action
and to do all things necessary in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the Closing conditions set forth in Section
7
below).
(b) Notices
and Consents.
Each of
the Parties will (and Seller will cause Target and Sub to) give any notices
to,
make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
required in connection with the matters referred to in Section
3(a)(ii),
Section
3(b)(ii)
and Section
4(d)
above.
(c) Operation
of Business.
Seller
will not cause or permit Target or Sub to engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of
Business.
(d) Notice
of Developments.
(i) Seller
shall
notify
Buyer of
any
development causing a breach of any of the representations and warranties in
Section
4
above.
Unless Buyer has the right to terminate this Agreement pursuant to Section
9(a)(ii)
below by reason of the development and exercises that right within the period
of
5 business days referred to in Section
9(a)(ii)
below, the written notice pursuant to this Section
5(d)(i)
will be deemed to have amended the Disclosure Schedule, to have qualified the
representations and warranties contained in §4 above, and to have
10
cured
any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
(ii) Each
Party will give prompt written notice to the others of any material adverse
development causing a breach of any of his or its own representations and
warranties in §3 above. No disclosure by any Party pursuant to this Section
5(d)(ii),
however, shall be deemed to amend or supplement the Disclosure Schedule or
to
prevent or cure any misrepresentation or breach of warranty.
(e) Treatment
of Confidential Information.
Irrespective of any terms and conditions of any nondisclosure agreement entered
into between Buyer and Seller or its Affiliate, Buyer will treat and hold as
such any Confidential Information it receives from any of Seller, Target or
Sub
in the course of any due diligence review conducted by it in anticipation of
the
transactions contemplated by this Agreement, will not use any of the
Confidential Information except in connection with this Agreement, and if this
Agreement is terminated for any reason whatsoever, will return to Seller, Target
and Sub all tangible embodiments (and all copies) of the Confidential
Information which are in its possession.
6. Post-Closing
Matters.
(a) General.
In case
at any time after the Closing any further action is necessary to carry out
the
purposes of this Agreement, including the specific matters referred to in
Section
6(b)-(d)
and any Canadian tax matters, each of the Parties will take such further action
(including the execution and delivery of such further instruments and documents)
as any other Party reasonably may request, all at the sole cost and expense
of
the requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section
8
below).
(b) Security
Filings.
Buyer
agrees to execute, and cause Sub to execute, and cooperate with Seller in filing
any and all appropriate documentation to secure financing statements and all
other forms and documentation Seller deems necessary to create, preserve,
perfect or otherwise protect the security interests created in connection with
Buyer’s obligations pursuant to the Note and under §2(c), and Sub’s obligations
under the Sub Guarantee, which documentation shall be in form acceptable to
Seller, in Seller’s sole and absolute discretion..
(c) Name
Change of Target.
Buyer
agrees to cause Target to change its name immediately following Closing, to
cease use of the name “ClearOne” or any logos, trade-marks or derivatives
thereof in the representation or conduct of its business and to file articles
of
amendment and such other documentation as is necessary to effect such name
change with the Director under the Business
Corporations Act
(New
Brunswick), and to register such name change with the Canada Revenue Agency
and
all other appropriate Canadian government entities.
(d) Non-Compete.
For a
period of three years, the Seller shall not, either directly or indirectly
as a
stockholder, investor or partner (i) participate in the Business except as
a
manufacturing reseller. This paragraph does not prevent seller from selling
its
products through normal distributor and reseller relationships nor does it
prevent seller from performing post sales
11
equipment
service and support or to provide maintenance contracts directly or through
those distributor and reseller relationships.
7. Conditions
to Obligation to Close.
(a) Conditions
to Buyer’s Obligation.
Buyer’s
obligation to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following
conditions:
(i) the
representations and warranties set forth in Section
3(a)
and
Section
4
above
shall be true and correct in all material respects at and as of the Closing
Date, except to the extent that such representations and warranties are
qualified by terms such as “material” and “Material Adverse Effect,” in which
case such representations and warranties shall be true and correct in all
respects at and as of the Closing Date;
(ii) Seller
shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing, except to the extent that such covenants
are qualified by terms such as “material” and “Material Adverse Effect,” in
which case Seller shall have performed and complied with all of such covenants
in all respects through the Closing;
(iii) there
shall not be any injunction, judgment, order, decree, ruling, or charge in
effect preventing consummation of any of the transactions contemplated by this
Agreement;
(iv) Seller
shall have delivered to Buyer a certificate to the effect that each of the
conditions specified above in Section
7(a)(i)-(iii)
is satisfied in all respects;
(v) the
Parties, Target, and Sub shall have received any authorizations, consents
and
approvals of governments and governmental agencies referred to in Section
3(a)(ii),
Section
3(b)(ii),
and Section
4(c)
above;
(vi) all
actions to be taken by Seller in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby,
including resignations of current directors and officers of Target and Sub,
will
be reasonably satisfactory in form and substance to Buyer.
Buyer
may
waive any condition specified in this Section
7(a)
if
it executes a writing so stating at or prior to the Closing.
(b) Conditions
to Seller’s Obligation.
Seller’s obligation to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the
representations and warranties set forth in Section
3(b)
above shall be true and correct in all material respects at and as of the
Closing Date, except to the extent
12
that
such
representations and warranties are qualified by terms such as “material” and
“Material Adverse Effect,” in which case such representations and warranties
shall be true and correct in all respects at and as of the Closing
Date;
(ii) Buyer
shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing, except to the extent that such covenants
are qualified by terms such as “material” and “Material Adverse Effect,” in
which case Buyer shall have performed and complied with all of such covenants
in
all respects through the Closing;
(iii) there
shall not be any injunction, judgment, order, decree, ruling, or charge in
effect preventing consummation of any of the transactions contemplated by this
Agreement;
(iv) Buyer
shall have delivered to Seller a certificate to the effect that each of the
conditions specified above in Section
7(b)(i)-(iii)
is satisfied in all respects;
(v) the
Parties, Target, and Sub shall have received any authorizations, consents,
and
approvals of governments and governmental agencies referred to in Section
3(a)(ii),
Section
3(b)(ii),
and Section
4(c)
above; and
(vi) all
actions to be taken by Buyer in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby, including
any
documents referred to in Section
6(b) and
(c), will be reasonably satisfactory in form and substance to
Seller.
Seller
may waive any condition specified in this Section
7(b)
if
it executes a writing so stating at or prior to the Closing.
8. Remedies
for Breaches of This Agreement.
(a) Survival
of Representations and Warranties.
The
representations and warranties of Seller contained in Section
4
above
shall survive the Closing hereunder for a
period
of six (6) months All
of
the representations and warranties of the Parties contained in Section
3
above
shall survive the Closing (unless the damaged Party knew or had reason to know
of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect thereafter, subject to any applicable statutes
of limitations.
(b) Indemnification
Provisions for Buyer’s Benefit.
(i) In
the
event Seller breaches its representations, warranties, and covenants contained
herein, and,
provided that Buyer makes a written claim for indemnification against Seller
pursuant to Section
8(e)
below
within the survival period (if there is an applicable survival period pursuant
to Section
8(a)
above), then Seller shall indemnify Buyer,
Target
and Sub
from and
against any Adverse Consequences Buyer,
Target
and Sub
shall
suffer (but
13
excluding
any Adverse Consequences Buyer,
Target
and Sub
shall
suffer after the end of any applicable survival period) caused by the breach.
(ii) Notwithstanding
the foregoing, (A) Seller shall not have any obligation to indemnify Buyer
from
and against any Adverse Consequences caused by the breach of any representation
or warranty or covenant of Seller contained in this Agreement until Buyer has
suffered Adverse Consequences by reason of all such breaches in excess of a
$10,000 aggregate deductible, and (B) the maximum aggregate amount of Adverse
Consequences caused by the breach of any representation or warranty of Seller
contained in this Agreement for which Seller shall have any obligation hereunder
to indemnify Buyer shall be the amount of the Purchase Price (after which point
Seller will have no obligation to indemnify Buyer from and against further
such
Adverse Consequences).
(c) Indemnification
Provisions for Seller’s Benefit.
In the
event Buyer breaches any of its representations, warranties, and covenants
contained herein, and provided that any Seller makes a written claim for
indemnification against Buyer pursuant to Section
8(e)
below
within the survival period (if there is an applicable survival period pursuant
to Section
8(a)
above), then Buyer shall indemnify each Seller from and against the entirety
of
any Adverse Consequences suffered (but excluding any Adverse Consequences
suffered after the end of any applicable survival period) caused by the
breach.
(d) Matters
Involving Third Parties.
(i) If
any
third party shall notify any Party (the “Indemnified Party”) with respect to any
matter (a “Third Party Claim”) which may give rise to a claim for
indemnification against any other Party (the “Indemnifying Party”) under this
Section
8,
then
the Indemnified Party shall promptly (and in any event within five business
days
after receiving notice of the Third Party Claim) notify each Indemnifying Party
thereof in writing.
(ii) Any
Indemnifying Party will have the right at any time to assume and thereafter
conduct the defense of the Third Party Claim with counsel of his or its choice
reasonably satisfactory to the Indemnified Party; provided however, that the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of money damages
and
does not impose an injunction or other equitable relief upon the Indemnified
Party.
(iii) Unless
and until an Indemnifying Party assumes the defense of the Third Party Claim
as
provided in Section
8(d)(ii)
above, however, the Indemnified Party may defend against the Third Party Claim
in any manner he, she, or it reasonably may deem appropriate.
(iv) In
no
event will the Indemnified Party consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of each of the Indemnifying Parties.
14
(e) Determination
of Adverse Consequences.
All
indemnification payments under this §8 shall be paid by the Indemnifying Party
net of any Tax benefits and insurance coverage that may be available to the
Indemnified Party.
(f)Exclusive
Remedy.
Buyer
and Seller acknowledge and agree that the foregoing indemnification provisions
in this §8 shall be the exclusive remedy of Buyer and Seller with respect to
Target, Sub, and the transactions contemplated by this Agreement.
Without
limiting the generality of the foregoing, Buyer
acknowledges and agrees that it shall not have any remedy after the Closing
for
any breach of the representations and warranties in §4 above.
9. Termination.
(a) Termination
of Agreement.
Buyer
and Seller may terminate this Agreement as provided below:
(i) Buyer
and
Seller may terminate this Agreement by mutual written consent at any time prior
to the Closing;
(ii) Buyer
may
terminate this Agreement by giving written notice to Seller at any time prior
to
the Closing in the event:
(A)
Seller has within the previous
5 business days given Buyer any notice pursuant to Section
5(d)(i)
above
and (B) the development that is the subject of the notice has had a Material
Adverse Effect
(iii) Buyer
may
terminate this Agreement by giving written notice to Seller at any time prior
to
the Closing (A) in the event Seller has breached any material representation,
warranty, or covenant contained in this Agreement (other than the
representations and warranties in Section
4
above)
in any material respect, Buyer has notified Seller of the breach, and the breach
has continued without cure for a period of 30 days after the notice of
breach
(iv) Seller
may terminate this Agreement by giving written notice to Buyer (A) at any time
prior to the Closing in the event Buyer has breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, Seller has notified Buyer in
writing of
the
breach, and the breach has continued without cure for a period of 30 days,
or
(B) at Closing in the event any of the conditions contained in Section
7(b)
have not been or are not satisfied.
(b) Effect
of Termination.
If any
Party terminates this Agreement pursuant to Section
9(a)
above, all rights and obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party (except for any liability
of any Party then in breach); provided, however, that the confidentiality
provisions contained in Section
5(e)
above shall survive termination.
15
10. Miscellaneous.
(a) Press
Releases and Public Announcements.
No
Party shall issue any press release or make any public announcement relating
to
the subject matter of this Agreement prior to the Closing without the prior
written approval the other Party; provided, however, that any Party may make
any
public disclosure it believes in good faith is required by applicable law or
any
listing or trading agreement concerning its publicly-traded securities (in
which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).
(b) 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.
(c) Entire
Agreement.
This
Agreement (including the documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the extent
they
relate in any way to the subject matter hereof.
(d) 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. No Party may
assign either this Agreement or any of his, her, or its rights, interests,
or
obligations hereunder without the prior written approval of the other Party
hereto; provided, however, that Buyer may (i) upon written notice of same to
Seller, assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases Buyer nonetheless shall
remain responsible for the performance of all of its obligations
hereunder).
(e) Counterparts.
This
Agreement may be executed in one or more counterparts (including by means of
facsimile), each of which shall be deemed an original but all of which together
will constitute one and the same instrument.
(f) 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.
(g) Notices.
All
notices, requests, demands, claims, and other communications hereunder will
be
in writing. Any notice, request, demand, claim, or other communication hereunder
shall be deemed duly given (i) when delivered personally to the recipient,
(ii)
one business day after being sent to the recipient by reputable overnight
courier service (charges prepaid), (iii) one business day after being sent
to
the recipient by facsimile transmission or electronic mail, or (iv) four
business days after being mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid, and addressed to the
intended recipient as set forth below:
16
|
If to Seller:
|
Copy
to:
|
|
Xxxxxxx
Ventures, Inc.
|
Xxxxxxxx X. Xxxxxx, Esq. |
| c/o ClearOne Communications, Inc. | Xxxxxxx Xxxxx & Xxxxxxx |
| 0000 Xxxxxxxx Xxx | 1800 - 000 Xxxxx Xxxx Xxxxxx |
| Xxxx Xxxx Xxxx, Xxxx 00000 | Xxxx Xxxx Xxxx, Xxxx 00000 |
| Fax: (000) 000-0000 | Fax: (000) 000-0000 |
| Attn: Chief Financial Officer | |
| If to Buyer: | Copy to: |
|
6351352 Canada Inc.
|
|
| c/oWilliam Xxxxxxx | Xxxxxx Xxxx |
| Suite PH2-55 Elm Drive West | Suite 0000-00 Xxxxxxxxxx Xxxxxx Xxxx |
| Xxxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 000 | Xxx 00, Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 |
Any
Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) Governing
Law.
This
Agreement shall be governed by and construed in
accordance with the laws of the State
of
Utah, including those laws governing conflicts of law. Except as specifically
provided in § 2(b)(ii) herein, any dispute, disagreement or difference arising
in connection with this Agreement or any breach thereof, which cannot be settled
between the parties hereto by mutual negotiation in good faith, shall be settled
by arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The arbitration shall take place in the State
of Utah
(i) Amendments
and Waivers.
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by Buyer and Seller. No waiver by any Party
of
any provision of this Agreement or any default, misrepresentation, or breach
of
warranty or covenant hereunder, whether intentional or not, shall be valid
unless the same shall be in writing and signed by the Party making such waiver,
nor shall such waiver be deemed to extend to any prior or subsequent default,
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.
(j) 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.
(k) Expenses.
Each
of Buyer, Seller, Target, and Sub will bear his, her, or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
Without
limiting the generality of the foregoing, all transfer, documentary, sales,
use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with the consummation of the transactions contemplated
by
this
17
Agreement
shall be paid by Buyer when due, and Buyer shall, at its own expense, file
all
necessary Tax Returns and other documentation with respect to all such Taxes,
fees and charges, and, if required by applicable law, the Parties will, and
will
cause their Affiliates to, join in the execution of any such Tax Returns and
other documentation.
(l) Construction.
Any
reference to any federal, provincial state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word “ including” shall
mean including without limitation.
(m) Incorporation
of Exhibits, Annexes, and Schedules.
The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(n) Governing
Language.
This
Agreement has been negotiated and executed by the Parties in English. In the
event any translation of this Agreement is prepared for convenience or any
other
purpose, the provisions of the English version shall prevail.
[SIGNATURE
PAGE FOLLOWS]
18
*
* * *
*
IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date
first above written.
|
6351352
CANADA INC.
|
XXXXXXX
VENTURES, INC.
|
|
By:
/s/ Xxxxxxx Xxxxxxx
|
By:
/s/ Xxxxxx X Xxxxxxxxx
|
|
Title:
Vice President
|
Title:
Vice President
|
19
