Asset Purchase Agreement
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1.
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Purchase and
Sale of Assets
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1.1
Description of Assets
1.2 Exclusions
1.3 Intellectual Property Certifications
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2.
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Purchase
Price and Allocation
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3.
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Payment of
the Purchase Price and Adjustments to the Purchase
Price
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3.1
Payment of the Purchase Price
3.2 Adjustments to the Purchase Price
3.3 Holdback
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4.
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Assumption
of Liabilities
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4.1
Assumed Indebtedness
4.2 Other Obligations
4.3 Release of Vendor
4.4 Vendor’s Obligations and Liabilities
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5.
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Representations and Warranties of the Vendor and
Wave Wireless
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5.1
Capacity to Sell
5.2 Authority to Sell
5.3 Sale Will Not Cause Default
5.4 Assets
5.5 Books and Records
5.6 Material Change
5.7 Litigation
5.8 Conformity with Laws
5.9 Forward Commitments
5.10 Terms of Employment
5.11 Material Contracts
5.12 No Defaults
5.13 Accuracy of Representations
5.14 Non-Canadian Resident
5.15 Warranty Obligations
5.16 Ownership of Assets
5.17 Vendor’s GST Number
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6.
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Covenants of
the Vendor
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6.1
Determination of Net Book Values
6.2 Conduct of Business
6.3 Change of Name
6.4 Access by Purchaser
6.5 Procure Consents
6.6 Covenant of Indemnity
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7.
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Representations and Warranties of the
Purchaser
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7.1
Status of Purchaser
7.2 Authority to Purchase
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8.
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Covenants of
the Purchaser
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8.1
Offer Employment
8.2 Social Services Tax, Goods and Services Tax and the Income
Tax Act
8.3 Consents
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9.
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Conditions
Precedent to the Obligations of the Purchaser
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9.1
Vendor’s and Wave Wireless’ Representations and
Warranties
9.2 Vendor’s and Wave Wireless’ Covenants
9.3 Vendor’s and Wave Wireless’ Certificate
9.4 Consents
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10.
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Conditions
Precedent to the Obligations of the Vendor and Wave
Wireless
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10.1
Purchaser’s Representations and Warranties
10.2 Purchaser’s Covenants
10.3 Consents of Third Parties
11.1
Time and Place of Closing
11.2 Documents to be Delivered by the Vendor
11.3 Documents to be Delivered by the Purchaser
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15.
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Accounting
Principles
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21.
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Successors
and Assigns
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Schedule of
Capital Assets, Operational Assets, Machinery &
Equipment
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Schedule of
Intangible Property
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Schedule of
Material Contracts
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Schedule of
Employees Vendor’s Closing Certificate
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THIS AGREEMENT is made the 17
th day of October, 2006.
BETWEEN:
WaveRider Communications Inc., a Nevada
Corporation, having a principal place of
business at 255 Consumers Road, Suite 500, Toronto, Ontario,
M2J 1R4.
(the
“Vendor”)
AND:
Wave
Wireless Corporation, a Delaware Corporation, which is the parent
company of
the
Vendor, having a principal place of business at 255 Consumers Road,
Suite 500, Toronto, Ontario, M2J 1R4.
(“Wave Wireless”)
AND: VCom Inc., a Canadian
Corporation having a place of business at 4210 Commerce Circle,
Victoria, BC, Canada, V8Z 6N6.
(“VCom” or the
“Purchaser”)
BACKGROUND
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A.
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The Vendor
carries on business which includes the sales, marketing and
distribution of a line of 900 MHz radios and related products and
peripheral equipment and holds other assets not directly related to
the 900 MHz radios and related products and peripheral equipment
(the “Vendor’s Business”).
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B.
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The Vendor is a
wholly owned subsidiary of Wave Wireless.
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C.
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VCom supplies
the Vendor and Wave Wireless with products pursuant to a supply
agreement dated July 1, 2006 and entered into by VCom and Wave
Wireless (the “Supply Agreement”).
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D.
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The Vendor has
agreed to sell, and the Purchaser has agreed to purchase, subject
to certain exceptions listed in this Agreement, the assets of the
Vendor’s Business related to the 900 MHz radios and related
products and peripheral equipment (the “900 MHz Product
Line”), on the terms and subject to the conditions provided
in this Agreement.
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E.
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Wave Wireless
is the parent company of the Vendor, is the registered holder in
trust for the Vendor of certain intellectual property associated
with 900 MHz Product Line, and has become a party to this Agreement
for the purpose of making representations and warranties with
respect to the Vendor’s Business and the transactions
contemplated by this Agreement jointly and severally with the
Vendor.
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TERMS OF
AGREEMENT
In
consideration of the premises and the covenants, agreements,
representations, warranties and payments contained in this
Agreement, the parties agree with the others as follows:
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1.
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Purchase and
Sale of Assets
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1.1 Description of
Assets
Upon the terms and subject to the
conditions of this Agreement, the Vendor agrees to sell, assign and
transfer to the Purchaser, and the Purchaser agrees to purchase
from the Vendor, at closing, the undertaking and all the property
and assets of the Vendor’s Business related to the 900 MHz
Product Line. For greater clarity, such property and assets shall
be defined as:
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(a)
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the capital
assets described in the Schedule of Capital Assets, Operational
Assets, Machinery & Equipment;
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(b)
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all inventories
(the “Inventories”);
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(c)
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the trade
accounts receivable and other debts owing to the Vendor in
connection with the 900 MHz Product Line, and the full benefit of
all securities for cash accounts, notes or debts (the
“Receivables”);
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(e)
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the benefit of
all unfilled orders received by the Vendor in connection with the
Vendor’s Business, and all right, title and interest of the
Vendor in, to and under the sales, reseller and other contracts,
engagements or commitments in connection with the 900 MHz Product
Line as set forth in the Schedule of Material Contracts (the
“Material Contracts”);
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(f)
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all right and
interest of the Vendor to all registered and unregistered
trademarks, trade or brand names, copyrights, designs, restrictive
covenants and other industrial or intellectual property used in
connection with the 900 MHz Product Line (the “Intangible
Property”), including, without limitation, the WaveRider
website and domain name
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including all associated content, books and
records, product manuals as well as all other marketing and
technical materials with respect to the 900 MHz Product Line and
the intangible property described in the Schedule of Intangible
Property;
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(g)
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the goodwill of
the 900 MHz Product Line and the right of the Purchaser to
represent itself as carrying on the 900 MHz Product Line in
continuation of and in succession to the Vendor and the right to
use the name “WaveRider”or any variation thereof as
part of or in connection with the 900 MHz Product Line (the
“Goodwill”);
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all of which are collectively
called the “Assets”.
1.2 Exclusions
(i) Cash on hand or on
deposit, (ii) amounts due and payable to Vendor or Wave
Wireless from Wayne Anderson related to the sale of WaveRider
Communications (Australia) Pty Ltd, (iii) the amounts held
back in relation to the share purchase agreement between Wave
Wireless and VCom, dated July 1, 2006 (the “Share
Purchase Agreement”) and (iv) any other assets or claims
of Vendor unrelated to the 900 MHz Product Line or not contemplated
by the terms of this Agreement, shall be specifically excluded from
the purchase and sale in this Agreement, and from the
Assets.
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1.3
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Intellectual
Property Registrations
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The Vendor and Wave Wireless
acknowledge that certain registrations in respect of the Intangible
Property, including Federal Communications Commission and Industry
Canada certifications, 900 MHz Product Line manuals and software
licence agreements (collectively the “IP
Certifications”), are registered in the name of Wave
Wireless. Wave Wireless acknowledges that it holds the IP
Certifications in trust for the Vendor. The Vendor agrees that its
beneficial interest in the IP Certifications shall form part of the
Assets sold to the Purchaser pursuant to this Agreement. Wave
Wireless will use its best efforts to transfer its legal interest
in the IP Certifications to the Purchaser at closing. In the event
that the IP Certifications are not transferred by Wave Wireless to
the Purchaser at closing, Wave Wireless agrees that the Purchaser
shall be entitled to use the IP Certifications after closing. Wave
Wireless further agrees that in the event that the IP
Certifications are not transferred by Wave Wireless to the
Purchaser at closing it will, post closing, provide such further
and other documents and do such further and other things as may be
required to transfer IP Certifications to the Purchaser.
2. Purchase Price and
Allocation
The
purchase price payable by the Purchaser to the Vendor for the
Assets will be US$1,250,000 as adjusted under section 3.2, and
shall be allocated as follows:
(a) to the capital assets,
operational assets, machinery and equipment US$190,999;
(b) to the Inventories US$467,000, subject to adjustment in
accordance with section 6.1;
(c) to the Receivables US$592,000 subject to adjustment in
accordance with section 6.1; and
(d) to the Intangible Property, the Material Contracts and
Goodwill, US$1.00.
3. Payment of the
Purchase Price and Adjustments to Purchase Price
3.1 Payment of Purchase
Price
The purchase price shall be paid
and satisfied as follows:
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in repayment to
VCom of the monies owing by Wave Wireless or its affiliates to
VCom
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(the
“Wave Wireless Account Payable”) for 900 MHz Product
Line products invoiced by
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VCom to Wave
Wireless pursuant to the Supply Agreement provided, however,
such
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amount shall be
agreed to by the parties;
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any applicable
tax and similar withholdings;
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any other
adjustments contemplated in section 3.2 provided, however,
such amount
shall
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be agreed to by
the parties; and
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as to the
balance of the purchase price, by wire transfer to the Vendor
delivered at
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closing.
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Adjustments
to Purchase Price
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The Purchase Price will be
adjusted at closing to reflect changes from the financial
information with respect to the 900 MHz Product Line provided by
Wave Wireless to VCom as of September 7, 2006 (the
“September 7, 2006 Operating Statements”) to
reflect the net changes in the items in 3.2(a) and (b) below
between September 7, 2006 and September 30,
2006.
The Purchase Price will
be:
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(a)
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adjusted,
dollar for dollar, for the difference between the amount of the
good and collectible accounts receivable of the Business as at
September 30, 2006 and $592,000. Any accounts receivable which
have been outstanding for greater than 90 days as at the
Closing date shall be deemed to be uncollectible receivables (the
“Uncollectible Receivable”) for the purposes of this
provision, provided that if the Purchaser receives any funds on
account of Uncollectible Receivables, the Purchaser shall
immediately release these funds to the Vendor.
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(b)
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adjusted,
dollar for dollar, for the difference in the value of the inventory
as at September 30, 2006 and US$467,000.
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The
Vendor and Wave Wireless agree that the amount currently held back
by VCom pursuant to the Share Purchase Agreement (the “Share
Purchase Holdback”), net of any amounts to be retained by
VCom pursuant to section 10.4 of the Share Purchase Agreement,
shall represent the holdback to be retained by VCom in respect of
this Asset Purchase Agreement (the “Asset Purchase
Holdback”) and released by VCom to the Vendor pursuant to
this section.
The
Asset Purchase Holdback will be released by the Purchaser to the
Vendor on the following terms:
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(a)
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Subject to
section 3.3(c), if a Clearance Certificate fixing an amount equal
to the portion of the Purchase Price is provided by the Vendor to
the Purchaser within 90 days from Closing:
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(i)
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the Purchaser
shall immediately release that portion of the Asset Purchase
Holdback which exceeds 10% of the Purchase Price to the Vendor,
subject to a dollar for dollar reduction for any amounts paid by
the Purchaser to the Receiver General of Canada in satisfaction of
the Purchaser’s withholding tax liability hereunder pursuant
to Section 116 of the Tax Act; and
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(ii)
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the Purchaser
shall release the balance of the Asset Purchase Holdback to the
Vendor, subject to (a) a dollar for dollar reduction for any
amounts paid by the Purchaser to the Receiver General of Canada in
satisfaction of the Purchaser’s withholding tax liability
hereunder pursuant to Section 116 of the Tax Act in addition
to any such funds so paid by the Purchaser to the Receiver General
of Canada pursuant to section 3.3(a)(i); and (b) a dollar for
dollar reduction for any bona fide claims made by any 3
rd party against the Assets, on the earlier of
90 days after Closing or the date, if any, on which the Vendor
files for bankruptcy under the federal laws of the United States
and/or Canada., on which date the balance of the Asset Purchase
Holdback shall be paid as directed by the competent authority in
any such bankruptcy proceeding or released to the Vendor
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(b)
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Subject to
section 3.3 (c), if a Clearance Certificate fixing an amount equal
to the portion of the Purchase Price is provided by the Vendor to
the Purchaser after 90 days from Closing, the Purchaser shall
immediately release the Asset Purchase Holdback to the Vendor
subject to a dollar for dollar reduction for any amounts paid to
the Receiver General of Canada in satisfaction of the
Purchaser’s withholding tax liability hereunder pursuant to
Section 116 of the Tax Act and, subject to the provisions in
Section 3.3(a)(ii) above, a dollar for dollar reduction for
any bona fide claims made by any 3 rd party against the
Assets.
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(c)
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Notwithstanding
any other provision of this section , if a Clearance
Certificate fixing an amount equal to the portion of Purchase Price
has not been provided by the Vendor to the Purchaser as set out
above on or before the 30th day after the end of the month in which
the Closing Date occurs, the Purchaser shall remit that amount
which is equal to 25% of the Purchase Price to the Receiver General
for Canada as is required to satisfy the Purchaser’s
withholding tax liability in respect of the purchase of the Assets
from the Vendor pursuant to section 116 of the Tax Act, unless the
Vendor provides evidence satisfactory to the Purchaser (acting
reasonably) that the Canadian Minister of National Revenue has
instructed that the no such portion of the Asset Purchase Holdback
be remitted at such time.
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(d)
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In the event
that Section 3.3(c) applies to defer the time at which amounts
would otherwise be required to be remitted to the Receiver General
for Canada, the provisions of Section 3.3(c) shall continue to
apply to the Asset Purchase Holdback as if the reference to the
date that such amounts are required to be remitted to the Receiver
General for Canada were instead a reference to the new date set by
the Canada Revenue Agency as the date for the remittance or the
date remittance is otherwise required by law.
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(e)
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If the
certificate limit in the Clearance Certificate provided to the
Purchaser is less than (or is otherwise issued based upon the
payment of an amount less than) the Purchase Price, the Purchaser
shall remit 25% of the difference between the Purchase Price and
the certificate limit shown in the Clearance Certificate to the
Receiver General for Canada, in satisfaction of the
Purchaser’s withholding tax liability in respect of the
purchase of the Shares pursuant to section 116 of the Tax Act, and
any funds remaining in the Asset Purchase Holdback after such
payment shall be dealt with as provided in Sections 3.3(a) and
(b).
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(f)
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In the event
the Asset Purchase Holdback is insufficient to satisfy the dollar
for dollar reduction for any amounts paid by the Purchaser to the
Receiver General of Canada in satisfaction of the Purchaser’s
withholding tax liability hereunder pursuant to Section 116 of
the Tax Act and, subject to Section 3.3(a)(ii) abov
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