Exhibit 10.3


    Exhibit
      10.3


     

    


     

     

     

     

     

     

     

    
      
        

      

    

     

    ClearOne
      Communications, Inc. 

    -and
      -

    ClearOne
      Communications of Canada, Inc.

     

    -
      and -

     

    3814149
      Canada, Inc. , 3814157 Canada Inc, Stechyson Family Trust, Jim Stechyson, Norm
      Stechyson, and Heather Stechyson Family Trust

     

    
      
        

      

    

     

     

    SHARE
      PURCHASE AGREEMENT

     

     

    
      
        

      

    

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

          



    
      
        
          	 	Page No.
	
                  ARTICLE
                    1 – INTERPRETATION 

                	
                  2

                
	
                   

                	
                  1.1

                	
                  Definitions

                	
                  2

                
	
                   

                	
                  1.2

                	
                  Time
                    of the Essence

                	
                  8

                
	
                   

                	
                  1.3

                	
                  Calculation
                    of Time

                	
                  8

                
	
                   

                	
                  1.4

                	
                  Business
                    Days

                	
                  8

                
	
                   

                	
                  1.5

                	
                  Currency

                	
                  8

                
	
                   

                	
                  1.6

                	
                  Headings

                	
                  8

                
	
                   

                	
                  1.7

                	
                  Plurals
                    and Gender

                	
                  8

                
	
                   

                	
                  1.8

                	
                  Statutory
                    References

                	
                  8

                
	
                   

                	
                  1.9

                	
                  Construction
                    

                	
                  9

                
	
                   

                	
                  1.10

                	
                  Exhibits

                	
                  9

                
	
                   

                	
                   

                	
                   

                	
                   

                
	
                  ARTICLE
                    2 – PURCHASE AND SALE OF PURCHASED SHARES

                	
                  9

                
	
                   

                	
                  2.1

                	
                  Purchase
                    and Sale of Purchased Shares

                	
                  9

                
	
                   

                	
                  2.2

                	
                  Purchase
                    Price

                	
                  9

                
	
                   

                	
                   

                	
                   

                	
                   

                
	
                  ARTICLE
                    3 – CLOSING ARRANGEMENTS

                	
                  10

                
	
                   

                	
                  3.1

                	
                  Place
                    of Closing

                	
                  10

                
	
                   

                	
                  3.2

                	
                  Delivery
                    of Certificates

                	
                  10

                
	
                   

                	
                  3.3

                	
                  Payment
                    of Purchase Price

                	
                  11

                
	
                   

                	
                  3.4

                	
                  Payoff
                    of Liabilities/Merchaniaries of Holdback

                	
                  12

                
	
                   

                	
                  3.5

                	
                  Lock
                    Up

                	
                  13

                
	
                   

                	
                   

                	
                   

                	
                   

                
	
                  ARTICLE
                    4 – REPRESENTATION AND WARRANTIES

                	
                  13

                
	
                   

                	
                  4.1

                	
                  Representations
                    and Warranties of the Vendors

                	
                  13

                
	
                   

                	
                  4.2

                	
                  Representations
                    and Warranties of the Purchase and the Parent

                	
                  35

                
	
                   

                	
                  4.3

                	
                  Non-Waiver

                	
                  37

                
	
                   

                	
                  4.4

                	
                  Nature
                    and Survival of Vendor’s Representations and Warranties

                	
                  37

                
	
                   

                	
                  4.5

                	
                  Survival
                    of Purchaser’s and Parent’s Representations and Warranties

                	
                  37

                
	
                   

                	
                  4.6

                	
                  Vendors
                    Covenants

                	
                  37

                
	
                   

                	
                   

                	
                   

                	
                   

                
	
                  ARTICLE
                    5 – CONDITIONS PRECENDENT TO THE PERFORMANCE BY 
                    THE
                      PARTIES OF THEIR OBLIGATIONS UNDER THIS
                      AGREEMENT

                  

                	
                   

                  38

                
	
                   

                	
                  5.1

                	
                  The
                    Purchaser’s Conditions

                	
                  38

                
	
                   

                	
                  5.2

                	
                  Conditions
                    of the Vendors

                	
                  41

                
	
                   

                	
                  5.3

                	
                  Waiver
                    by Purchaser

                	
                  43

                
	
                   

                	
                  5.4

                	
                  Waiver
                    by Vendors

                	
                  43

                
	
                   

                	
                   

                	
                   

                	
                   

                
	
                  ARTICLE
                    6 – INDEMNIFICATION

                	
                  43

                
	
                   

                	
                  6.1

                	
                  Indemnification
                    by Vendors

                	
                  43

                
	
                   

                	
                  6.2

                	
                  Indemnification
                    by the Purchase and the Parent

                	
                  44

                
	
                   

                	
                  6.3

                	
                  Limitation
                    of Liability

                	
                  44

                


        

        
          
            
              
              

            

            
              (ii)

              
              

            

            
              
              

            

          

        

         

        
          	
                   

                	
                  6.4

                	
                  The
                    Parent’s Guarantee

                	
                  44

                
	
                   

                	
                  6.5

                	
                  Procedure
                    for Indemnification

                	
                  44

                
	
                   

                	
                  6.6

                	
                  Additional
                    Rules and Procedures

                	
                  45

                
	
                   

                	
                  6.7

                	
                  Rights
                    Cumulative

                	
                  46

                
	
                   

                	
                  6.8

                	
                  GST

                	
                  47

                
	
                   

                	
                  6.9

                	
                  Set-Off
                    Rights

                	
                  47

                
	
                   

                	
                  6.10

                	
                  Exception

                	
                  47

                
	
                   

                	
                   

                	
                   

                	
                   

                
	
                  ARTICLE
                    7 – GENERAL

                	
                  47

                
	
                   

                	
                  7.1

                	
                  Public
                    Notices

                	
                  47

                
	
                   

                	
                  7.2

                	
                  Term
                    Sheet

                	
                  48

                
	
                   

                	
                  7.3

                	
                  Confidentiality

                	
                  48

                
	
                   

                	
                  7.4

                	
                  Stand-Off

                	
                  48

                
	
                   

                	
                  7.5

                	
                  Expenses

                	
                  48

                
	
                   

                	
                  7.6

                	
                  Further
                    Assurances

                	
                  48

                
	
                   

                	
                  7.7

                	
                  Assignment
                    and Enurement

                	
                  48

                
	
                   

                	
                  7.8

                	
                  Entire
                    Agreement

                	
                  49

                
	
                   

                	
                  7.9

                	
                  Waiver

                	
                  49

                
	
                   

                	
                  7.10

                	
                  Notices

                	
                  49

                
	
                   

                	
                  7.11

                	
                  Severability

                	
                  50

                
	
                   

                	
                  7.12

                	
                  Execution
                    by Facsimile

                	
                  50

                
	
                   

                	
                  7.13

                	
                  Counterparts

                	
                  51

                
	
                   

                	
                  7.14

                	
                  Governing
                    Law and Jurisdiction for Disputes

                	
                  51

                
	
                   

                	
                  7.15

                	
                  Resolution
                    of Disputes by Arbitrator

                	
                  51

                
	
                   

                	
                  7.16

                	
                  Remedies

                	
                  51

                
	
                   

                	
                  7.17

                	
                  Undisputed
                    Amounts

                	
                  52

                
	
                   

                	
                  7.18

                	
                  Survival

                	
                  52

                
	
                   

                	
                  7.19

                	
                  Good
                    Faith

                	
                  52

                


        

      

      
      

       

    

    
      
        
        

      

      
        (iii)

        
        

      

      
        
        

      

    

     

    
    

    


    SHARE
      PURCHASE AGREEMENT

     

    THIS
      AGREEMENT
      made as
      of the 16th day of August, 2002

     

    B
      E T W E E N:

    


    ClearOne
      Communications of Canada Inc..,
      a
      corporation incorporated under the laws of the Province of New Brunswick,
      Canada, and wholly owned by Gentner Ventures, Inc., a corporation organised
      under the laws of the State of Utah, United States; 

    


    (the
      “Purchaser”)

    


    -
      and
      -

    


    ClearOne
      Communications, Inc.,
      a
      corporation incorporated under the laws of the State of Utah, United States,
      and
      the sole shareholder of Gentner Ventures, Inc.

    


    (the
      “Parent”)

    


    -
      and
      -

    


    3814149
      Canada, Inc. , 3814157 Canada Inc
      Stechyson Family Trust, Jim Stechyson, Norm Stechyson and Heather Stechyson
      Family Trust

    


    (collectively,
      the “Vendors”)

    


    


    RECITALS:

    


    1. The
      Vendors are the owners of all of the issued and outstanding shares in the
      capital of Stechyson Electronics Ltd., a corporation organised under the Canada
      Business Corporations Act (the “Corporation”); and

    


    2. The
      Vendors wish to sell to the Purchaser and the Purchaser wishes to purchase
      from
      the Vendors all of the issued and outstanding shares in the capital of the
      Corporation.

    


    NOW
      THEREFORE
      in
      consideration of the mutual covenants set out in this Agreement and for other
      good and valuable consideration (the receipt and sufficiency of which is hereby
      irrevocably acknowledged), the parties agree as follows:

    


    


    
      
        
        

      

      
        1

        
        

      

      
        
        

      

    

     

    ARTICLE
      1   -
      INTERPRETATION

    


    1.1  Definitions

    


    Throughout
      this Agreement, except as otherwise expressly provided, the following words
      and
      expressions shall have the following meanings:

    


    (a) “Accredited
      Investor”
has
      the
      meaning set out in
      Regulation D, Rule 501(a) of the Securities Act of 1933, and

    


    (b) “Adverse
      Consequences”
means
      all actions, suits, proceedings, hearings, investigations, charges, complaints,
      claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
      dues, penalties, fines, costs, amounts paid in settlement, liabilities,
      obligations, taxes, liens, losses, damages of any kind, expenses and fees,
      including court costs and attorney fees and expenses

    


    (c) "Ordinary
      Course of Business"
      means
      the ordinary course of business consistent with past custom and practice
      (including with respect to quantity and frequency).

    


    (d) “Accepting
      Party”
has
      the
      meaning attributed thereto in Section 7.18;

    


    (e) “Accounts
      Receivable”
has
      the
      meaning attributed thereto in Section 4.1(v);

    


    (f) “Act”
has
      the
      meaning attributed thereto in Section 7.15;

    


    (g) “Affiliate”
shall
      have the meaning given to it in the Business Corporations Act
      (Ontario);

    


    (h) “Agreement”,
      “this
      Agreement”,
      “the
      Agreement”,
      “hereof”,
      “herein”,
      “hereto”,
      “hereby”,
      “hereunder”
and
      similar expressions mean this share purchase agreement, including all of its
      exhibits and all instruments supplementing, amending or confirming this
      Agreement. All references to “Articles”
or
      “Sections”
mean
      and refer to the specified Article or Section of this Agreement;

    


    (i) “Arm’s
      Length”
has
      the
      meaning attributed thereto in the Tax Act and the related
      jurisprudence;

    


    (j) “Authority”
means
      any governmental authority, body, agency or department, whether federal,
      provincial or municipal and any court, tribunal or similar body;

    


    (k) “Balance
      Sheet”
means
      the audited balance sheet of the Corporation as at October 31, 2001 forming
      part
      of the Financial Statements;

    


    (l) “Business”
means
      the business presently carried on by the Corporation consisting of the
      distribution and sale of services, audio /video products and accessories;


    


    
      
        
        

      

      
        2

        
        

      

      
        
        

      

    

    (m) “Business
      Day”
means
      any day which is not a Saturday, a Sunday or a day observed as a holiday under
      the laws of the Province of Ontario, the federal laws of Canada applicable
      to
      the Province of Ontario, or the State of Utah, United States;

    


    (n) “Cash”
shall
      mean Canadian dollars, which amounts shall be in the cash accounts of the
      Corporation as of the Time of Closing

     

    (o) “Claim”
has
      the
      meaning attributed thereto in Section 6.1;

    


    (p) “Closing”
means
      the completion of the transactions described in this Agreement and Closing
      shall
      be deemed to have occurred and shall be effective at such time that counsel
      for
      Vendors and counsel for Parent shall have each faxed to the other instructions
      to deliver all documents, certificates and instruments held in trust by such
      counsel to his respective client and funds required to wired at Closing shall
      have been received in the account designated by Vendors;

    


    (q) “Closing
      Date”
or
      “Date of Closing” means the date on which Close shall be deemed to have
      occurred; 

    


    (r)
       “Closing
      Financial Statements”
means
      the unaudited balance sheet, income statement, and statement of cash flow as
      of
      the closing date, and the nine-month period ended on July 31, 2002 and an
      internal trial balance which shows shows all accounts of the Corporation
      including but not limited to assets, liabilities, equity, sales, expenses,
      and
      income as of the August 16, 2002 along with a bring-down certificate as of
      the
      Closing Date signed by Norm Stechyson e 

     

    (s) 
      “Corporation”
means
      Stechyson Electronics Ltd., a corporation incorporated under the Canada Business
      Corporations Act, and its successors;

     

    (t)  “Cost
      of Goods Sold”
means
      the purchase price of products plus applicable exchange rate, duties, brokerage
      and freight, less any applicable discounts and rebates payable in relation
      to
      the products and less any wages paid in relation to the services provided.
      

    


    (u) “Debt”
means
      all current liabilities and long term debt of the Corporation;

    


    (v) “Deficiency”
shall
      have the meaning as defined in Section 2.2(ii)(b); 

    


    (w) “EBITDA”
means
      earnings before interest, taxes, depreciation and amortization calculated in
      accordance with U.S. GAAP;

    


    (x) “Encumbrance”
means
      any mortgage, lien (including any construction lien or certificate of action
      filed with respect thereto), pledge, charge, security interest, restriction,
      claim, set-off or encumbrance of any nature whatsoever;

    


    
      
        
        

      

      
        3

        
        

      

      
        
        

      

    

    (y) “Environmental
      Laws”
means
      all applicable Laws relating in whole or in part to the pollution or protection
      of the environment, occupational or public health and safety, Hazardous
      Substances.

     

           
      (z)  “Holdback
      Funds”
has
      the
      meaning set forth in Section 3.3(e);

     

        (aa) “Holdback
      Account”
has
      the
      meaning set forth in Section 3.3(e).

     

    (bb) “ETA”
means
      the Excise Tax Act (Canada);

    


    (cc) “Financial
      Statements”
means
      the Closing Financial Statements, and the audited financial statements of the
      Corporation for the fiscal year ended October 31, 2001, consisting of balance
      sheet as of those dates, statement of income (loss) and retained earnings
      (deficit) and, for the fiscal years ended October 31, 1999 and October 31,
      2000,
      unaudited financial statements consisting of balance sheets, statements of
      income (loss) and retained earnings (deficit), statements of cash flows and
      all
      notes thereto, copies of which are annexed as Exhibit 1.1(cc)
      hereto;

    


    (dd) “Future
      Products”
means
      products created, developed or distributed by the Corporation, as same may
      be
      further developed, modified or enhanced from time to time, after the date of
      this Agreement;

    


    (ee)
       “GAAP”
means
      Canadian generally accepted accounting principles applied on a consistent basis
      and which are in accordance with recommendations from time to time of the
      Canadian Institute of Chartered Accountants (as published in the CICA handbook)
      at the date on which such generally accepted accounting principles are
      applied;

    


    (ff)
       “Governmental
      Entity”
means
      Canadian federal and provincial regulatory and taxing authorities;

    


    (gg) “Gross
      Sales”
shall
      mean sales of all Products and services invoiced during the applicable period.
      

    


    (hh) “GST”
means
      all Taxes payable under the ETA or under any provincial legislation similar
      to
      the ETA and any reference to a specific provision of the ETA or any such
      provincial legislation shall refer to any successor provision thereto of like
      or
      similar effect;

    


    (ii) “Hazardous
      Substance”
means
      a
      Substance which is or is deemed to be alone, or in any combination, any
      pollutant, contaminant, waste, solid waste, liquid waste, industrial waste,
      hazardous waste, hazardous toxic, dangerous substance or dangerous good, a
      deleterious substance, a pollution or contamination or any other substance
      or
      material currently or hereafter prohibited, controlled or regulated under any
      Environmental Laws whether or not such substance is defined as hazardous under
      the Environmental Law.

    


    (jj)
       “Indemnified
      Party”
has
      the
      meaning attributed thereto in Section 6.5;

    


    
      
        
        

      

      
        4

        
        

      

      
        
        

      

    

    (kk) “Indemnifying
      Party”
has
      the
      meaning attributed thereto in Section 6.5;

    


    (ll) “Intellectual
      Property”
means
      all intellectual property of any nature owned or used by the Corporation which
      is reasonably necessary in the operation of the Business, including, but not
      limited to, all trade names (including, for certainty, the trade names “OM Video
“ and “Omvideo.ca”, domain names, business names, service marks, logos,
      trademarks, certification marks, distinguishing guises, industrial designs,
      copyrights, copyrightable works, formulae, processes, research data, technical
      expertise, know how, trade secrets, inventions and patents, whether domestic
      or
      foreign and whether registered or unregistered, whether in existence or now
      under development and all applications for registration in respect thereof,
      any
      rights to royalties, any claims for past infringements of such Intellectual
      Property (but only to the extent they exist and are legal) and including such
      intellectual property listed in Exhibit 1.1(ll) to this Agreement;

    


    (mm) “Inventories”
has
      the
      meaning attributed thereto in Section 4.1(u);

    


    (nn) "Laws”
means
      all applicable federal, provincial, municipal or local laws, statutes,
      regulations, ordinances, rules, guidelines, orders, directives or other
      requirements of any Authority.

    


    (oo) “Lease”
means
      the lease between Commercial Property
      Developments as
      landlord and the Corporation, dated August 1, 2000 and amended on February
      1,
      2002;

    


    (pp) “Liability”
means
      any direct or indirect indebtedness, liability, guaranty, endorsement, claim,
      loss, damage, deficiency, cost, expense, obligation or responsibility, fixed
      or
      unfixed, known or unknown, asserted or unasserted, liquidated or unliquidated,
      secured or unsecured.

    


    (qq) “Location”
means
      the premises leased by the Corporation pursuant to the Lease;

    


    (rr) “Material
      Adverse Effect”
means,
      where used in relation to the Corporation, a material adverse effect on the
      business, operations, assets, financial condition or prospects of the
      Corporation, as the case may be;

    


    (ss) “Material
      Change”
means
      a
      material adverse change in the condition, business, operations, prospects,
      affairs, assets and personnel of the Business;

    


    (tt) “Operating
      Profit Margin”
shall
      mean income (determined according to US GAAP) before interest and taxes and
      the
      items listed in Exhibit 2.2(ii)(b). 

    


    (uu) “Net
      Working Capital”
shall
      mean an amount which shall be calculated as the net amount of current assets
      less current liabilities, specifically defined as [(Cash
      +
      short-term investments + accounts receivable + other receivables + inventory
      +
      prepaid expenses + GST credits + any other non-capital assets) less (accounts
      payable + accruals + unearned or deferred revenues + currency exchange premiums
      + payroll payable + commissions payable + payroll benefits payable + taxes
      payable + any other liabilities due to others within the period of the next
      12
      months)];

    


    
      
        
        

      

      
        5

        
        

      

      
        
        

      

    

    (vv)
       “Offer”
means
      an attempt or solicitation to buy securities of the Corporation or an interest
      in its securities, or to acquire a substantial portion of its assets, for
      value;

    


    (ww) “Options”
has
      the
      meaning attributed thereto in Section 4.1(e);

    


    (xx) “Parent”
means
      ClearOne
      Communications, Inc., a corporation organised under the laws of the State of
      Utah, United States,
      Inc.;

    


    (yy) “Parties”
means,
      collectively, the Purchaser, the Parent and each of the Vendors, and “Party”
means any of them;

    


    (zz)
       “Payment”
has
      the
      meaning attributed thereto in Section 6.8;

    


    (aaa) “Person”
means
      an individual, partnership, unincorporated association, organization, syndicate,
      corporation, trust and a trustee, executor, administrator or other legal or
      personal representative;

    


    (bbb)
       “Plans”
means
      all plans, arrangements, programs, policies, practices or undertakings, whether
      oral or written, formal or informal, funded or unfunded, registered or
      unregistered which the Corporation is a party to or bound by or under which
      the
      Corporation has any liability or which has any application to the employees
      of
      the Corporation relating to retirement savings, pensions or benefits, including
      any defined benefit pension plan, defined contribution pension plan, group
      registered retirement savings plan, or supplemental pension or retirement plan,
      or any bonus, profit sharing, stock option, share purchase, stock appreciation,
      deferred compensation, incentive compensation, supplemental unemployment
      benefits, hospitilization, health, dental, disability, life insurance, death
      or
      survivor’s benefit, employment insurance, vacation pay, severence or termination
      pay or other benefit plan with respect to any of its employees, retired
      employees or former employees and individuals working on contract with the
      Corporation or other individuals providing services to the Corporation of a
      kind
      normally provided by employees, or eligible dependents of any such
      person;

    


    (ccc)
       “Products”
means
      the audio products, video products, and audio/video accessories and services
      currently provided, distributed and sold by the Corporation;

    


    (ddd)
       “Pro
      Rata Portion”
and
      “Pro
      Rata Portions”
have
      the meanings attributed thereto in Section 2.1;

    


    (eee) “Purchased
      Shares”
means
      the shares listed in Exhibit 4.1(f) which are all of the_ issued and outstanding
      common shares in the capital of the Corporation;

    


    (fff)
       “Purchase
      Price”
has
      the
      meaning attributed thereto in Section 2.2;

    


    
      
        
        

      

      
        6

        
        

      

      
        
        

      

    

    (ggg)
       “Purchaser”
means
      ClearOne Communications of Canada
      Inc.,
      a
      corporation incorporated under the laws of the Province of New Brunswick, Canada
      and wholly owned by Gentner Ventures, Inc., a corporation organised under the
      laws of the State of Utah, United States; 

    


    (hhh)
       “Real
      Property”
means
      any real property, whether owned or leased, and used for the conduct of the
      Business or previously used for such purpose;

    


    (iii)
       “Regulatory
      Approvals”
means
      all necessary approvals, permits, sanctions, rulings, orders or consents from
      any Authority or self-regulatory organization within or outside of Canada with
      respect to the transactions contemplated by this Agreement;

    


    (jjj) "Security
      Interest"
      means
      any mortgage, pledge, lien, encumbrance, charge, or other security
      interest

    


    (kkk)“Substance”
      means
      any substance, waste, liquid, gaseous or solid matter, fuel, micro-organism,
      sound, vibration, heat, odour, radiation, energy vector, plasma, and organic
      or
      inorganic matter. 

    


    (lll)
       “Tax
      Act”
means
      the Income Tax Act (Canada);

    


    (mmm) “Tax”
      ;“Tax”
or
      “Taxes”
shall
      mean all federal, provincial, municipal, state, local, foreign and other duties,
      levies, taxes, assessments, reassessments or other Government charges of any
      nature whatsoever, including, without limitation,
      income,
      estimated income, capital, land transfer, value-added, business, occupation,
      franchise, property, sales, transfer, use, employment, wage, payroll, commercial
      rent or withholding taxes, workers compensation levies, customs excise duties,
      social security and unemployment insurance charges and retirement contributions,
      including interest, penalties, fines and additions in connection therewith
      for
      which the Corporation may be liable;

    


    (nnn)
       “Tax
      Return”
means
      any return, report, information return, election, designation or other document
      (including any related or supporting information) with respect to
      Taxes;

    


    (ooo)
       “Time
      of Closing”
means
      4:00 PM on the Closing Date or such other time as the Purchaser and the Vendors
      may agree upon;

    


    (ppp)
       “Threshold”
has
      the
      meaning attributed thereto in Section 6.6(f);

    


    (qqq)
       “Third
      Party Claim”
has
      the
      meaning attributed thereto in Section 6.5;

    


    (rrr)
       “Undisputed
      Amount”
has
      the
      meaning attributed thereto in Section7.17; and

    


    (sss)
       “Vendors”
has
      the
      meanings set forth in the recitals, above.

    


    


    
      
        
        

      

      
        7

        
        

      

      
        
        

      

    

     

    
      	1.2  	
              Time
                of the Essence

            


    

    


    Time
      shall be of the essence in and of this Agreement and every part hereof. Any
      extension, waiver or variation of any provision of this Agreement shall not
      be
      deemed to affect this provision and there shall be no implied waiver of this
      provision.

    


    
      	1.3  	
              Calculation
                of Time

            


    

    


    Unless
      otherwise specified, time periods within or following which any payment is
      to be
      made or act is to be done shall be calculated by excluding the day on which
      the
      period commences and including the day on which the period ends. Where the
      last
      day of any such time period is not a Business Day, such time period shall be
      extended to the next Business Day following the day on which it would otherwise
      end.

    


    
      	1.4  	
              Business
                Days

            


    

    


    Whenever
      any action to be taken or payment to be made pursuant to this Agreement would
      otherwise be required to be made on a day that is not a Business Day in the
      United States or in Canada, such action shall be taken or such payment shall
      be
      made on the first Business Day that is a Business Day both in the United States
      and in Canada on the following such day.

    


    
      	1.5  	
              Currency

            


    

    


    Unless
      otherwise specified, all references to amounts of money in this Agreement refer
      to Canadian currency. Conversions to/from U.S. dollars shall be made in
      accordance with the rates published in the Wall Street Journal for the date
      prior to the date when the conversion needs to be made.

    
      


      
        	1.6  	
                Headings

              


      

       

    

    The
      descriptive headings preceding Articles and Sections of this Agreement are
      inserted solely for convenience of reference and are not intended as complete
      or
      accurate descriptions of the content of such Articles or Sections. The division
      of this Agreement into Articles and Sections shall not affect the interpretation
      of this Agreement.

    
    

     

    
      
        
          	1.7  	
                  Plurals
                    and Gender

                


        

         

      

    

    The
      use
      of words in the singular or plural, or referring to a particular gender, shall
      not limit the scope or exclude the application of any provision of this
      Agreement to such persons or circumstances as the context otherwise
      permits.

     

    
      
        	1.8  	
                Statutory
                  References

              


      

       

    

    
      
        
        

      

      
        8

        
        

      

      
        
        

      

       

    

    Any
      reference to a statute shall mean the statute in force as at the date of this
      Agreement (together with all regulations promulgated thereunder) as the same
      may
      be amended, re-enacted, consolidated or replaced from time to time, and any
      successor statute thereto, unless otherwise expressly provided.

    


    
      	1.9  	
              Construction

            


    

    


    The
      words
“including”, “include”, and “includes” shall mean “including without
      limitation”, “include, without limitation” and “includes, without limitation”,
      respectively.

    


    
      	1.10  	
              Exhibits

            


    

    


    The
      Exhibits described herein and annexed hereto are incorporated by this reference
      and are deemed to form part of this Agreement.

     

    ARTICLE
      2  -
      PURCHASE AND SALE OF PURCHASED SHARES

    


    
      	2.1  	
              Purchase
                and Sale of Purchased
                Shares

            


    

    


    Subject
      to the terms and conditions of this Agreement, at the Time of Closing, each
      of
      the Vendors (as beneficial owner) shall sell, convey and assign those of the
      Purchased Shares set out opposite his or her name on Exhibit 3.3(a) free and
      clear from all liens, charges and encumbrances for that portion of the Purchase
      Price set out opposite each Vendor’s name in Exhibit 3.3(a) (each such portion
      being that Vendor’s “Pro Rata Portion” and, collectively, the Vendors’“Pro Rata
      Portions”), and the Purchaser shall purchase such shares.

    


    
      	2.2  	
              Purchase
                Price

            


    

    


    The
      consideration to be paid by the Purchaser for the Purchased Shares shall be
      US$8,000,000 subject to adjustments set out herein. Payment of the Purchase
      Price is more fully described in Section 3.3, below.

    


    (i) Pre
      Closing Adjustments:

    


    The
      Cash
      Proceeds (as hereinafter defined) and the Purchase Price shall be decreased
      by
      the amount that Purchaser or Parent has paid as of Closing to Corporation or
      any
      affiliate pursuant to that certain letter agreement dated April 18, 2002, a
      copy
      of which is attached hereto as Exhibit 2.2(i) which amounts the Parties agree
      shall constitute a non-refundable deposit toward the Purchase Price. The Vendors
      do hereby agree that notwithstanding the fact that such amount was not paid
      to
      any of them, such payments constitute part of the Purchase Price. 

    


    (ii) Post
      Closing Adjustments:

    


    (a)
       Within
      six months following Closing, Purchaser shall examine the financial records
      of
      Corporation and determine if the following conditions (the “Post Closing
      Conditions”) existed at the Time of Closing: (a) Corporation had in its accounts
      at least $300,000 Canadian Cash (which for purposes of this calculation will
      not
      include 

    
      
        
        

      

      
        9

        
        

      

      
        
        

      

    

    checks
      which were in the possession of the Corporation at the time of Closing but
      have
      not been honoured and collected as of the date of this calculation) , (b)
      Corporation had a minimum of $675,000 Canadian Net Working Capital, (c)
      Corporation had no long-term liabilities and (d) there were no amounts owing
      on
      any line of credit of the Corporation. If any of these conditions have failed
      to
      exist at the Time of Closing, then, if the failure is as to (a), (b) or (c)
      above then Purchaser shall draw from Holdback Funds an amount sufficient to
      remedy the deficiency, and if the failure is as to (d) above, Purchaser shall
      draw from Holdback Funds an amount necessary to pay off all amounts outstanding
      pursuant to any line of credit Purchaser may draw such amounts as provided
      above
      from the Holdback Funds without notice and without complying with the procedure
      set out in Article 6 hereof, (without limitation, without complying with the
      procedures set out in Section 6.9 hereof) and seek additional remedies for
      any
      deficiency. . Purchaser’s calculations to determine if the above conditions were
      met, shall be unilateral and not subject to discussion with Vendors. Within
      10
      days following any draw, Purchaser shall provide a courtesy notice to Vendors
      that such draws from Holdback Funds have been made and provide such information
      as is reasonably requested by Vendors. 

    


    (b) Subject
      to Section 2.2(ii)(c) below, if during the ninety (90) day period following
      Closing, Corporation requires Cash in excess of the amount in the Corporation’s
      accounts at the Time of Closing (the “Deficiency”), then Purchaser may draw from
      the Holdback Funds without notice and without complying with the procedure
      set
      out in Article 6 hereof, (without limitation, without complying with the
      procedures set out in Section 6.9 hereof) an amount sufficient to fund such
      Deficiency, but not to exceed Can
      $150,000, and the Purchase Price shall be reduced by such amount. The
      determination of the Deficiency by Purchaser shall be unilateral and not subject
      to discussion with Vendors. The expense items listed on Exhibit 2.2(ii)(b)
      shall
      not be included in the calculation of the Deficiency. Exhibit 2.2(ii)(b) must
      be
      signed by all parties in order to be operative. 

    


    (c) If
      the
      Corporations Net Working Capital at Closing exceeds Can$675,000, then the amount
      that may be drawn from the Holdback Funds pursuant to Section 2.2(ii)(a) or
      (b)
      above or to satisfy obligations owed pursuant to the
      pending audit by the Canada Customs and Revenue Agency
      shall be
      decreased by the amount that the Corporation’s Net Working Capital exceeds
      Can$675,000. 

    


    ARTICLE
      3  -
      CLOSING ARRANGEMENTS

    


    
      	3.1  	
              Place
                of Closing

            


    

    


    The
      Closing shall take place at the Time of Closing by express delivery of executed
      documents to each party’s counsel in trust with faxed instructions for disbursal
      or by another means agreed upon by the Purchaser and the Vendors.

    


    
      	3.2  	
              Delivery
                of Certificates

            


    

    


    The
      Vendors shall transfer and deliver to the Purchaser’s counsel prior to the Time
      of Closing share certificates representing the Purchased Shares duly endorsed
      in
      blank for transfer, or accompanied by irrevocable security transfer powers
      of
      attorney duly executed in blank. The

     

    
      
        
        

      

      
        10

        
        

      

      
        
        
Vendors
        shall take such steps as shall be necessary to cause the Corporation to enter
        the Purchaser upon the books of the Corporation as the holder of the Purchased
        Shares and to issue share certificates to the Purchaser representing the
        Purchased Shares purchased by it. Purchaser’s counsel shall deliver the share
        certificates to Purchaser upon Closing. 

    

    


    
      	3.3  	
              Payment
                of Purchase Price 

            


    

    


    Subject
      to the pre closing and post closing adjustments provided for above, the Purchase
      Price shall be paid by the Purchaser in the following manner:

     

    (a)  By
      delivery to the Vendors at the Closing by wire transfer of $5,000,000 less
      $324,000 totalling $4,676,000 to an account of James B. Curran, (pursuant to
      instructions to be delivered by Mr Curran) who is hereby appointed by Vendor’s
      and each of them as Vendors’ agent to receive such wire transfer and Vendors
      agree that wire of funds to Mr Curran constitutes delivery of funds to each
      of
      the Vendors. The respective Pro Rata Portions, of each Vendor in the Purchase
      Price is as set out on Exhibit 3.3(a) and as adjusted pursuant to Paragraph
      2.2
      above;

     

    (b)  US
      $1,600,000 by wire transfer to CIBC World Markets pursuant to the written
      agreement attached hereto as Exhibit 3.3(b) which provides irrevocable, not
      subject to amendment, instructions to CIBC World Markets to purchase over a
      period of ninety (90) days in the market, shares of ClearOne common stock based
      upon the formula set out therein;

     

    (c)  IF
      the
      separate operations of the Corporation, during the 12-month period beginning
      on
      Date of Closing and ending 12 months after the Date of Closing (the “Earn Out
      Calculation Period”) achieves the following earn out criteria, then an amount of
      earn out calculated as follows shall be paid in the manner set forth
      below:

    


    
      
        
        

      

      
        11

        
        

      

      
        
        

      

    

    
      	
              Earn
                Out Criteria

               

            	
              “Earn
                Out Amount”

            
	
               

              1.
                IF the Corporation’s Gross Sales during the Earn Out Calculation Period
                exceed Canadian $11,900,000 (“Earn Out Sales”).

              2.
                IF the Corporation’s Operating Profit Margin during the Earn Out
                Calculation Period exceeds 15.6% (“Earn Out OPM”).

               

              3.
                IF Jim Stechyson is fired by Corporation following Closing without
“Cause”
                as that term is defined in the Employment Agreement attached hereto
                as
                Exhibit 4.6(a)(1)
                

               

            	
                 
1. 
THEN
                an amount equal to (Earn Out Sales - C$11,900,000) multiplied by
                US
                $0.3077, up to a maximum of US $400,000 shall be paid pursuant to
                the
                following subsection.

               

              By
                way of examples only:

               

              if
                Earn Out Sales are Can$12,800,000 , minus Can$ 11,900,000, equals
                Can$900,000 multiplied by .3077 equals US$276,930

               

              If
                Earn Out Sales are Can$ 13,200,000, minus Can$ 11,900,000 multiplied
                by
                .3077 equals $US400,010 and the Earn Out Amount would be
                $US400,000.

               

                 
2. 
THEN
                an amount equal to (Earn Out OPM) - (15.6%) multiplied by US $800,000
                up
                to a maximum of US$400,000 shall be paid pursuant to the following
                subsection. By way of examples only:

               

                     
                if Earn Out OPM is 16.1%, the calculation would be as
                follows:

               

              16.1%
                minus 15.6% equals .5%

               

              Ignore
                the % sign

               

              .5
                multiplied by $800,000 US equals $400,000US

               

              if
                Earn Out OPM is 15.9%,minus 15.6% equals .3%

               

              Ignore
                the % sign

               

              .3
                multiplied by $800,000 equals $US240,000

               

              3.
                THEN $800,000 US_shall be paid pursuant to the following subsection.
                

               

            
	 	 


    

    
      
        
        

      

      
        12

        
        

      

      
        
        

      

    

    


    (d) The
      Earn
      Out Amount will be paid (promptly following determination) in cash wired to
      CIBC
      World Markets for the purchase over a period of ninety (90) days in the market,
      of shares of ClearOne Common Stock pursuant to the written agreement attached
      hereto as Exhibit 3.3(b) which provides irrevocable, not subject to amendment,
      instructions to CIBC World Markets to purchase shares of ClearOne common stock.
      Determination by Purchaser of the Earn-Out conditions shall be
      unilateral and not subject to discussion with Vendors. ;
      Purchaser shall act reasonably to promptly calculate any Earn Out Amount .
      

    


    (e) Transfer
      of US $600,000 (the “Holdback Funds”) to a separate account held by Parent (the
“Holdback Account”), to be disbursed in accordance with the terms hereof.; The
      Holdback Account shall be at a commercial bank in the United States. The
      Holdback Funds shall be invested in a money market account with such bank and
      shall be invested for liquidity rather than highest return. The interest earned
      on the Holdback Funds shall be considered part of the Holdback Funds, and will
      be disbursed in accordance with this agreement. 

    


    3.4 
Payoff
      of Liabilities/Mechanics of
      Holdback

     

        (a)  Excluding
      ordinary course of business trade payables which are not in default, payroll
      tax
      not in default, and sales taxes not in default prior to Closing the Vendors
      will
      cause the Corporation to pay-off those liabilities set forth on Exhibit 3.4(a),
      and those set forth in the Closing Financial Statements, and any liabilities
      of
      the Corporation accruing prior to the date of Closing and not reflected thereon
      (the “Liabilities”);

     

        (b)  To
      the
      extent that the Cash or Net Working Capital remaining in the Corporation
      following the Closing is insufficient to pay-off the Liabilities then Purchaser
      may draw an amount from Holdback Funds sufficient to pay-off such liabilities
      and Purchaser may draw such amount without notice and without complying with
      the
      procedures set out in Article 6 hereof, (without limitation, without complying
      with the procedures set out in Section 6.9 hereof) 

     

    Without
      limitation, the Parties agree that the Holdback Funds will be available to
      satisfy any obligation of the Corporation based on the pending audit by the
      Canada Customs and Revenue Agency without
      notice and without complying with the procedure set out in Article 6 hereof,
      (without limitation, without complying with the procedures set out in Section
      6.9 hereof) and seek additional remedies for any deficiency. 

     

        (c)  If
      at the
      end of the six month period following Closing all of the Post Closing Conditions
      have been determined by Purchaser to have been met, then Purchaser shall
      transfer to the Vendors 1/3 of the Holdback Funds which remain in the Holdback
      Account, pro rata as set out in Exhibit 3.3 (a) 

     

        (d)
       At
      such
      time that Purchaser shall have received from its Canadian counsel reasonable
      assurances that the pending audit by the Canada Customs and Revenue Agency
      has
      been completed and that there is a final determination that there is no
      liability 

     

    
      
        
        

      

      
        13

        
        

      

      
        
        

      

       

      owed
        by
        the Corporation based on such audit, then Purchaser shall transfer to the
        Vendors 25% of the Holdback Funds which remain in the Holdback
        Account, pro rata as set out in Exhibit 3.3 (a) 

    

     

    
    

    


    3.5
 Lockup

     

        All
      shares of
      ClearOne common stock purchased pursuant to Paragraphs 3.3 (b), (c) and (d)
      shall be subject to the Lockup Agreement the form of which is attached hereto
      as
      Exhibit 3.5 and which shall generally prohibit the resale of any such shares
      for
      a period of 12 months as to 3814157
      Canada Inc, Jim Stechyson, and Heather Stechyson Family Trust
      and 90
      days as to 3814149
      Canada, Inc., Stechyson Family Trust, Norm Stechyson, from
      the
      date of purchase. 

     

    


    ARTICLE
      4  
      - REPRESENTATIONS, WARRANTIES,
      AND COVENANTS

    


     

    4.1 
Representations
      and Warranties of the Vendors


    The
      Corporation and the Vendors and each of them, jointly and severally represent
      and warrant to the Purchaser and the Parent (and acknowledge that the Purchaser
      and the Parent are relying on such representations and warranties in completing
      the transactions contemplated by this Agreement) that as of the Closing
      Date:

    


    (a) 
Corporate

     

    The
      Corporation is a corporation duly incorporated and organized and is validly
      existing and in good standing under the federal laws of Canada and the Province
      of Ontario and has all necessary corporate power, authority and capacity to
      own
      its properties and assets and to carry on the Business as presently conducted.
      The Corporation is a private company as that term is defined in the Securities
      Act
      (Ontario). Neither the nature of the Business nor the location or character
      of
      the property owned or leased by the Corporation requires the Corporation to
      be
      registered, licensed or otherwise qualified in any jurisdiction other than
      in
      Ontario, where as at the Time of Closing it shall be duly registered, licensed
      or otherwise qualified for such purpose. Copies of the articles and by-laws
      of
      the Corporation, including any amendments thereto, are attached hereto as
      Exhibit 4.1(a).

    


    (b) 
Subsidiaries


    The
      Corporation does not own, directly or indirectly, nor has it agreed to acquire
      (i) any of the outstanding shares or securities convertible into shares of
      any other corporation, or (ii) any participating interest in any
      partnership, joint venture or other business enterprise.

    


    (c) 
Binding
      Agreement, Validity of
      Transactions


    Vendors,
      and Corporation and each of them has full power and authority (including full
      corporate and trust power and authority) to execute and deliver
      this

     

    
      
        
        

      

      
        14

        
        

      

      
        
        

      

       

       Agreement
        and to perform its obligations hereunder. Without limiting the generality
        of the
        foregoing, the board of directors of Corporation and the trustees of all
        vendors
        have duly authorized the execution, delivery, and performance of this Agreement.
        This
        Agreement constitutes a legal, valid, and binding obligation of the Vendors
        and
        the Corporation and each of them, enforceable against each in accordance
        with
        its terms (subject, as to the enforcement of remedies, to bankruptcy,
        reorganization, insolvency, moratorium, and other laws relating to or affecting
        creditors’ rights generally and subject to the availability of equitable
        remedies). The execution and delivery of this Agreement by the Vendors and
        the
        Corporation , the consummation of the transactions contemplated by this
        Agreement and the fulfilment by the Vendors and Corporation of the terms,
        conditions and provisions hereof do not and will not, except as set out in
        Exhibit 4.1(c):

       

          (i)  Contravene,
        or conflict with or violate or result in the breach or default (with or without
        the giving of notice or lapse of time, or both) or acceleration of any
        obligations of any of the Vendors or the Corporation under, or require the
        consent or approval of any Person under:

       

          (A)  Any
        constitution, statute, law, or rule, applicable to such Vendor or the
        Corporation;

       

          (B)  any
        judgment, order, writ, injunction, ruling or decree of any court or of any
        Authority which is presently applicable to such Vendor or the
        Corporation;

       

          (C)  the
        articles, by-laws or any resolutions of the Corporation or amendments thereto
        or
        restatements thereof; 

       

          (D)  the
        constituent documents of the Vendors’, as applicable; or 

       

          (E)  the
        provisions of any agreement, arrangement or understanding to which such Vendor
        or the Corporation is a party or by which any of them are bound.

       

          (ii)  create
        in
        any party the right to accelerate, terminate, modify or cancel any agreement
        to
        which the Corporation or any Vendor is a party, and Vendors further represent
        and warrant that there are no single source suppliers for any item it purchases
        from its suppliers.

       

          (iii)  require
        any notice under any agreement, contract, lease, license, instrument, or
        other
        arrangement to which any of Corporation or Vendor is a party or by which
        it is
        bound or to which any of its assets is subject (or result in the imposition
        of
        any Security Interest upon any of its assets).

       

          (iv)  require
        any notice to, make any filing with, or obtain any authorization, consent,
        or
        approval of any government or governmental agency in order for the Parties
        to
        consummate the transactions contemplated by this Agreement. Corporation and
        Vendors have obtained each and every third party 

    

     

    
      
        
        

      

      
        15

        
        

      

      
        
        

      

       

      consent
        necessary to accomplish the intent of this Agreement. Neither Corporation
        nor
        any Vendor has any liability or obligation to pay any fees to any broker,
        finder, with the exception of a nominal filing fee which must paid in connection
        with a post closing notice with Investment Canada

    

     

    (d)  Licences,
      Permits and Authorizations


    The
      Corporation has conducted the Business in compliance with, and the Corporation
      holds all licenses, permits and authorizations necessary for the lawful
      operation of the Business pursuant to, all applicable statutes, laws,
      ordinances, rules and regulations of all Authorities having jurisdiction over
      the Corporation or over any part of the Business, all of which licenses, permits
      and authorizations are listed on Exhibit 4.1(d) and all of which are valid
      and
      subsisting and in good standing with no violations in respect thereof as of
      the
      date of this Agreement.

    


     

    (e) 
Capitalization


    The
      authorized share capital of the Corporation is as follows:.
      an
      unlimited number of common shares, one vote per share, discretionary dividends,
      an unlimited number of Class A preferred shares, Class B preferred shares,
      Class
      C preferred shares, Class D preferred shares, Class E preferred shares, Class
      F
      preferred shares, all of which are non-voting, redeemable and
      retractable.
      The
      number of shares that are issued and outstanding are as set forth on Exhibit
      4.1(e). The issued and outstanding share capital has been duly and validly
      issued and is outstanding as fully paid and non-assessable shares in the capital
      of the Corporation. There are no outstanding securities (of any kind)
      convertible into or exchangeable or exercisable for any shares of the capital
      stock of the Corporation, nor does the Corporation have outstanding any rights
      to subscribe for or to purchase, or any options rights or warranties for the
      purchase of, or any agreements providing for the issuance of, any shares of
      its
      capital stock or any securities convertible into or exchangeable or exercisable
      for any shares of its capital stock. On the Closing Date, the Purchased Shares
      shall constitute all the issued and outstanding shares in the capital of the
      Corporation and all of the Options shall have been extinguished and shall be
      void and of no further effect. 

     

     

    (f) 
Ownership
      of Purchased Shares/Authority


    The
      Vendors are the only registered and beneficial owners of the Purchased Shares
      free and clear of any Encumbrances, owning the number of shares set out beside
      each Vendors’ name in Exhibit 4.1(f) attached hereto. There is no contract,
      option or other right of another binding upon or which at any time in the future
      may become binding upon any of the Vendors to sell, transfer, assign, pledge,
      charge, mortgage or in any other way dispose of or encumber any of the Purchased
      Shares, respectively, other than pursuant to this Agreement. 

    


     

    (g) 
Financial
      Statements

    


    The
      Financial Statements present fairly the financial position of the Corporation
      as
      of and for the periods stated therein, have been prepared in accordance with
      (Canadian) GAAP, applied on a consistent basis throughout the periods covered
      thereby and consistent with prior fiscal years of the Corporation. The Balance
      Sheet presents fairly a true and complete statement of the assets, liabilities
      (whether accrued, absolute, 

     

     

    
      
        
        

      

      
        16

        
        

      

      
        
        

      

       

      contingent
        or otherwise) and financial condition of the Corporation as of the dates
        stated
        therein, and the statements of income (loss) and retained earnings (deficit)
        and, for the periods covered thereby, statement of cash flows forming a part
        of
        the Financial Statements accurately set forth the results of the operations
        of
        the Corporation and the source and application of the funds thereof throughout
        the periods covered thereby. The Corporation has not produced or had prepared
        audited financial statements for any period ending, or as at a date, after
        October 31, 2001 nor are any of the Vendors in possession of such financial
        statements. 

       

    

    (h) 
Absence
      of Undisclosed Liabilities

     

    Except
      to
      the extent reflected or reserved against in the Balance Sheet or incurred
      subsequent to the date thereof and disclosed in Exhibit 4.1(h)(1) and except
      normal trade creditors payable in the ordinary and normal course of business,
      the Corporation does not have any outstanding indebtedness or any liabilities
      or
      obligations (whether accrued, absolute, contingent or otherwise) nor any
      outstanding commitments or obligations of any kind whether or not such
      obligations or commitments are presently considered liabilities of the
      Corporation under Canadian GAAP. At the Time of Closing, all long-term debt
      of
      the Corporation shall be paid in full. Corporation will not during the period
      between the date of this agreement and Closing make any payments other than
      in
      the Ordinary Course of Business and as are set out in Exhibit
      4.1(h)(2).

     

     

    (i) 
      Tax
      Matters

     

    Except
      as
      disclosed in Exhibit 4.1(i):

     

        (i)  The
      Corporation has duly filed on a timely basis with the appropriate Governmental
      Entities, all Tax Returns required to be filed for taxable periods ending on
      or
      before the Closing Date. All such Tax Returns are true, correct and complete
      in
      all material respects. To the best of the Corporation’s knowledge, no such Tax
      Return contains any misstatement or omits any statement that should have been
      included therein. No Tax Return has been amended. The Corporation is not the
      beneficiary of any extension of time within which to file any Income Tax
      Return.

     

        (ii)  The
      tax
      liability of the Corporation for previous taxation periods is as indicated
      in
      its Tax Returns. All Taxes shown as due on such Tax Returns or otherwise due
      or
      claimed to be due by any Governmental Entity have been paid. All instalments,
      assessments and reassessments of which the Corporation is aware of or has
      received notice of and all other Taxes which are due and payable by it, have
      been paid in full. Reserves and provisions for Taxes accrued but not yet due
      on
      or before the Closing Date as reflected in the Corporation’s Financial
      Statements are adequate as of the date of the Corporation’s Financial
      Statements, in accordance with Canadian generally accepted accounting
      principles. No deficiencies for Taxes have been proposed, asserted or assessed
      against the Corporation that are not adequately reserved against.

     

    
      
        
        

      

      
        17

        
        

      

      
        
        

      

       

          (iii)  Attached
        as Exhibit 4.1(i) are complete and correct copies of all Tax Returns that
        have
        been filed from 1999 to the date hereof and copies of all correspondence
        with
        taxing authorities.

       

          (iv)  No
        claim
        has ever been made by or is expected from any Governmental Entity in a
        jurisdiction in which any one of the members of the Corporation does not
        file
        Tax Returns that it is or may be subject to taxation in that
        jurisdiction.

       

          (v)  No
        unresolved assessments, reassessments, audits, claims, actions, suits,
        proceedings, or investigations exist or have been initiated with regard to
        any
        Taxes or Tax Returns of the Corporation. To the knowledge of the Corporation,
        no
        assessment, reassessment, audit or investigation by any Governmental Entity
        is
        underway, threatened or imminent with respect to Taxes for which the Corporation
        may be liable, in whole or part.

       

          (vi)  The
        Tax
        Returns of the Corporation have not been audited by Revenue Canada. The Ontario
        Ministry of Revenue has audited the Corporation’s 2000 Tax Return. 

       

          (vii)  No
        election, consent for extension, nor any waiver that extends any applicable
        statute of limitations relating to the determination of a Tax liability of
        the
        Corporation has been filed or entered into and is still effective.

       

          (viii)  There
        are
        no liens for Taxes on the assets of the Corporation.

       

          (ix)  The
        Corporation is not a party to, is not bound by, nor has any obligation under,
        any tax sharing agreement, tax indemnification agreement or similar contract
        or
        arrangement.

       

          (x)  The
        Corporation has properly withheld and remitted all amounts required to be
        withheld and remitted (including without limitation, income tax, Canadian
        Pension Plan contributions, Unemployment Insurance and Workman’s Compensation
        premiums) and has paid such amounts due to the appropriate authority on a
        timely
        basis and in the form required under the appropriate legislation.

       

          (xi)  The
        Corporation has not been and currently is not required to file any Tax Returns
        in any jurisdiction outside of Canada.

       

          (xii)  There
        has
        never been a change of control of the Corporation for the purposes of the
        Income
        Tax Act (Canada).

       

          (xiii)  No
        amount
        in respect of any outlay or expense that is deductible for the purposes of
        computing the Corporation’s income for the purposes of the Tax
        Act has
        been
        owing by the Corporation for longer than two (2) years to a person with whom
        the
        Corporation was not dealing at arm’s length (for the purposes of the
Tax
        Act)
        at the
        time the outlay or expense was incurred. The 

    

     

     

    
      
        
        

      

      
        18

        
        

      

      
        
        

      

       

      Corporation
        has not, either directly or indirectly, transferred property to or acquired
        property from a person with whom it was not dealing at arm’s length (for the
        purposes of the Tax
        Act)
        for
        consideration other than consideration equal to the fair market value of
        the
        property at the time of the disposition or acquisition
        thereof.

    

     

        (xiv)  The
      Corporation has not claimed a deduction with respect to an outlay or expense
      that may be considered unreasonable under the circumstances.

        

        (xv)  All
      amounts of consideration paid or agreed to be paid by the Corporation with
      respect to the acquisition from, the use or reproduction of property of, or
      services rendered by, a non-resident of Canada with whom the Corporation was
      not
      dealing at arm’s length for the purposes of and within the meaning of the
Income
      Tax Act (Canada)
      have been no greater than amounts which would be considered reasonable in the
      circumstances had such non-resident been dealing at arm'’ length with the
      Corporation. All amounts of consideration paid or agreed to be paid to the
      Corporation with respect to the acquisition by, the use or reproduction of
      property by, loan to, or services rendered to, a non-resident of Canada with
      whom the Corporation was not dealing at arm’s length for the purposes of and
      within the meaning of the Income
      Tax Act (Canada)
      have been no less than amounts which would be considered reasonable in
      circumstances had such non-resident been dealing at arm’s length with the
      Corporation.

     

        (xvi)  There
      are
      no circumstances which exist and would result in, or which have existed and
      resulted in, any of Sections 80 to and including Section 80.04 of the
Income
      Tax Act (Canada)
      applying to the Corporation.

     

        (xvii)  The
      Corporation is a registrant for the purposes of the ETA
      having
      registration number
      R105007314 T001,
      and is
      not a financial institution within the meaning of the Excise
      Tax Act (Canada).
      The Corporation has not made any elections under the ETA. 

     

        (xviii)  The
      Vendors are not non-residents of Canada within the meaning of the Tax
      Act.

     

     

    (j) 
      Absence
      of Changes

     

    Since
      June 30, 2002:

        (i)  no
      Material Change has occurred in any of the assets, business, financial
      condition, results of operation or prospects of the Corporation nor has any
      other event, condition or state of facts occurred or arisen that might
      materially and adversely affect, or threaten to materially and adversely affect,
      the Corporation or the business, the results of operations or prospects of
      the
      Corporation or the ability of the Corporation to carry on its business
      substantially the same as such business was being conducted as of June 30,
      2002;


    


    
      
        
        

      

      
        19

        
        

      

      
        
        

      

       

          (ii)  no
        damage, destruction or loss, labour trouble or any other event, development
        or
        condition of any character (whether or not covered by insurance) has occurred
        which might have a Material Adverse Effect; and

       

          (iii)  the
        Corporation has been operated in the ordinary course of
        business.

    

     

     

    (k) Absence
      of Unusual Transactions

     

    Since
      June 30, 2002, the Corporation has not:

     

        (i)  transferred,
      assigned, sold or otherwise disposed of any of its assets or cancelled any
      debts
      or claims except in each case in the ordinary and normal course of
      business;

     

        (ii)  incurred
      or assumed any obligation or liability including capitalized lease obligations,
      (direct or contingent), except those listed in Exhibit 4.1(k) hereto and except
      unsecured current obligations and liabilities incurred in the ordinary and
      normal course of business;

     

        (iii)  issued
      or
      sold any shares in its capital or any warrants, bonds, debentures or other
      corporate securities of the Corporation or issued, granted or delivered any
      right, option or other commitment for the issuance of any such other
      securities;

     

        (iv)  discharged
      or satisfied any lien or encumbrance, or paid any obligation or liability (fixed
      or contingent) other than liabilities included in the Balance Sheet and
      liabilities incurred since the date thereof in the ordinary and normal course
      of
      business;

     

        (v)  except
      as
      disclosed in Exhibit 4.1(k), declared, set aside, or made any payment of any
      dividend or other distribution in respect of any shares in its capital or
      purchased or redeemed any such shares or effected any subdivision, consolidation
      or reclassification of any such shares or repaid in full or in part any
      shareholder loans;

     

        (vi)  suffered
      an operating loss or any extraordinary loss, or waived any rights of substantial
      value, or entered into any commitment or transaction not in the ordinary and
      normal course of business where such loss, rights, commitment or transaction
      is
      or would be material in relation to the Corporation;

     

        (vii)  except
      as
      set out in Exhibit 4.1(k) qualified, amended or changed or taken any action
      to
      amend or change its constating documents or by-laws;

     

        (viii)  except
      as
      disclosed in Exhibit 4.1(k), made any wage or salary increases or in respect
      of
      personnel which it employs, including officers and directors;

    


    
      
        
        

      

      
        20

        
        

      

      
        
        

      

       

          (ix)  except
        as
        disclosed in Exhibit 4.1(k) hereto, mortgaged, pledged, subjected to lien,
        granted as security interest in or otherwise encumbered any of its assets
        or
        property, whether tangible or intangible;

       

          (x)  except
        as
        disclosed in Exhibit 4.1(k), paid or become liable for any management fee
        or any
        other fee or charge whatsoever to the Vendors or any Person who is an associate
        of the Vendors or paid or agreed to pay any bonus or like payment to any
        Person;

       

          (xi)  loaned
        or
        agreed to lend money to any Person including a shareholder; or

       

          (xii)  entered
        into any material agreement, contract, lease, or license outside the Ordinary
        Course of Business;

       

          (xiii)  received
        any information that any party (including Corporation) has accelerated,
        terminated, made material modifications to, or cancelled any material agreement,
        contract, lease, or license to which Corporation is bound;

       

          (xiv)  made
        any
        material capital expenditures outside the Ordinary Course of
        Business;

       

          (xv)  made
        any
        material capital investment in, or any material loan to, any other Person
        outside the Ordinary Course of Business;

       

          (xvi)  granted
        any license or sublicense of any material rights under or with respect to
        any
        Intellectual Property;

       

          (xvii)  entered
        into any employment contract or collective bargaining agreement, written
        or
        oral, or modified the terms of any existing such contract or
        agreement;

       

          (xviii)  adopted,
        amended, modified, or terminated any bonus, profit-sharing, incentive,
        severance, or other plan, contract, or commitment for the benefit of any
        of its
        directors, officers, and employees (or taken any such action with respect
        to any
        other Employee Benefit Plan) except as otherwise provided in this
        Agreement;

       

          (xix)  made
        any
        other material change in employment terms for any of its directors, officers,
        and employees

       

          (xx)  authorized
        or agreed or otherwise become committed to any of the
        foregoing.

    

     

     

    (l)
 Title
      to Properties

     

        Except
      as
      disclosed in the Balance Sheet or in Exhibit 4.1(l) hereto, the Corporation
      has
      good and marketable title to all of its assets, real and personal, including
      

     

     

    
      
        
        

      

      
        21

        
        

      

      
        
        

      

       

      but
        not
        limited to those reflected on the Balance Sheet or acquired since the date
        of
        the Balance Sheet (except as since transferred, sold or otherwise disposed
        of in
        the ordinary and normal course of business), free and clear of all
        Encumbrances.

       

      (m)  Leases
        of Personal Property

       

          Exhibit
        4.1(m) sets forth a true and complete list in all material respects of all
        equipment, other personal property and fixtures in the possession or custody
        of
        the Corporation which, as of the date hereof, is leased or held under licence
        or
        similar arrangement and of the leases, licenses, agreements, or other
        documentation relating thereto.

       

      (n) 
Leases
        of Real Property

       

          (i)  Other
        than the Lease, the Corporation is not a party to or bound by any lease,
        sublease, license or other instrument relating to real property and the
        Corporation has not entered into any other instrument relating to real property.
        The interest held by the Corporation under the Leases is free and clear of
        any
        and all Encumbrances.

       

          (ii)  The
        Lease
        is in good standing and in full force and effect without amendment, and the
        Corporation is entitled to the benefit of the Lease.

       

          (iii)  All
        amounts of rent and other amounts presently owing under the Lease have been
        paid.

       

          (iv)  The
        Corporation has complied with all of its obligations under the Lease and
        the
        Corporation is not in default or breach, nor has it received a notice of
        default
        or breach of its obligations under the Lease.

       

          (v)  Attached
        hereto as Exhibit 4.1(n) is a consent to assignment executed by the landlord
        as
        is necessary for this transaction

    

     

     

    (o)  Real
      Property

     

        The
      Corporation does not own any real property or, except for the Lease, any
      interest in real property.

     

    (p)  Fixed
      Assets

     

        Each
      item of
      tangible assets, machinery, equipment, vehicles, furniture, office equipment,
      computer hardware and software with a value greater than C$2,000 wherever
      situate and owned by the Corporation is set out in Exhibit 4.1(p)
      hereto.

    


    


    
      
        
        

      

      
        22

        
        

      

      
        
        

      

    

     

    (q) 
Condition
      of Assets

     

        All
      tangible
      assets of the Corporation are in good condition, repair and (where applicable)
      proper working order, having regard to the use and age thereof, except only
      for
      reasonable wear and tear.

     

    (r) 
Services
      Warranty 

     

        All
      of the
      services rendered by Corporation have conformed in all material respects with
      all applicable contractual commitments and all express and implied warranties,
      and ,
      after
      diligent inquiry, Corporation has no knowledge of any material liability (,
      whether asserted or unasserted, whether absolute or contingent, whether accrued
      or unaccrued, whether liquidated or unliquidated, and whether due or to become
      due) for damages in connection therewith.

    


    (s) Product
      Liability 

    


    After
      diligent inquiry, Corporation has no knowledge of any  material
      liability (whether asserted or unasserted, whether absolute or contingent,
      whether accrued or unaccrued, whether liquidated or unliquidated, and whether
      due or to become due) arising out of any injury to individuals or property
      as a
      result of the ownership, possession, or use of any product manufactured, sold,
      leased, or delivered by Corporation.

    


    (t) Litigation

    


    Except
      as
      disclosed in Exhibit 4.1(t) there is no suit, action, dispute, civil or criminal
      litigation, claim, arbitration or legal, administrative or other proceeding
      or
      governmental investigation, including appeals and applications for review
      (collectively, “Claims”), pending or, to the best of the Vendors’ knowledge,
      threatened against the Corporation or affecting any of its assets or properties
      or the Business. There are no facts or circumstances known to the Vendors which
      are likely to give rise to any such Claims. Except as disclosed in Exhibit
      4.1(t), there is not presently outstanding against the Corporation ( or
      affecting its Business or properties) any judgement, execution, decree,
      injunction, rule or order of any court, Authority, administrative agency or
      arbitrator.

    


    (u) Inventories 

    


    Exhibit
      4.1(u) sets forth a detailed list of the inventories (the “Inventories”) of the
      Corporation as at July 31, 2002 and as of August 16, 2002e, which list is true
      and correct. The Inventories are in good condition, are merchantable, are of
      a
      quality and quantity useable or saleable in the ordinary course of business,
      are
      fit for the purposes for which they are intended (except to the extent, if
      any,
      written down to net realizable value on the Financial Statements) and are
      carried on the books of the Corporation at the lower of cost or net realizable
      value. Inventories are labelled and stored in compliance with all applicable
      federal, provincial and local laws, ordinances, and governmental rules and
      regulations.

    


    
      
        
        

      

      
        23

        
        

      

      
        
        

      

    

    (v) Accounts
      Receivable 

    


    Exhibit
      4.1(v) sets forth a detailed list of the accounts receivable (the “Accounts
      Receivable”) of the Corporation as at July 31, 2002 and as of August 16, 2002
      which list is true and correct. The Accounts Receivable of the Corporation
      set
      out in Exhibit 4.1(v) are, and all other accounts receivable at the Time of
      Closing shall be, bona fide and good and collectible at their face amounts
      in
      the ordinary course of business (subject to no defence, counterclaim or set-off)
      except to the extent of any reserves provided for doubtful accounts in the
      ordinary course of business which reserves are set out in Exhibit
      4.1(v).

    


    (w)
       Material
      Contracts

    


    Except
      for the Encumbrances referred to in Exhibit 4.1(l), the leases and agreements
      referred to in Exhibit 4.1(m), the Leases, the written employment contracts
      referred to in Exhibit 4.1(x) and the contracts and agreements (including
      government grants or incentives) referred to in Exhibit 4.1(w), the Corporation
      is not a party to or bound by any material contract or commitment either now
      or
      in the future, whether oral or written. The contracts, leases and agreements
      referred to in the Leases and Exhibits 4.1(m), 4.1(x) and 4.1(w) are all legal,
      valid, binding, enforceable and in full force and effect unamended and no
      default exists in respect thereof on the part of the Corporation or on the
      part
      of any of the other parties thereto. The Corporation is not in default or in
      breach of any lease, contract or commitment to which it is a party and there
      exists no condition, event or act which, with the giving of notice or lapse
      of
      time or both would constitute such a default or breach and all such contracts
      and commitments are in good standing and in full force and effect without
      amendment thereto and the Corporation is entitled to all benefits thereunder.
      No
      party to any contract has repudiated such contract or express an intention
      to
      not perform such contract. 

    


    The
      term
“material contract” as used in this paragraph shall be deemed to include but not
      be limited to the following:

    


    (i)
       any
      agreement (or group of related agreements) in excess of $20,000Can for the
      sale
      or lease of personal property to or from any Person;

    


    (ii)
       any
      agreement (or group of related agreements)
      in
      excess of $20,000Can
      for the
      purchase or sale of raw materials, commodities, supplies, products, or other
      personal property, or for the furnishing or receipt of services;

    


    (iii)
       any
      agreement concerning a partnership or joint venture;

    


    (iv)
       any
      agreement (or group of related agreements) under which it has created, incurred,
      assumed, or guaranteed any indebtedness for borrowed money, or any capitalized
      lease obligation or under which it has imposed a Security Interest on any of
      its
      assets, tangible or intangible;

    


    (v)
       any
      agreement concerning confidentiality or noncompetition;

     

    
      
        
        

      

      
        24

        
        

      

      
        
        

      

    

    (vi)
       any
      agreement involving any Vendors;

    


    (vii)
       any
      profit sharing, stock option, stock purchase, stock appreciation, deferred
      compensation, severance, or other material plan or arrangement for the benefit
      of its current or former directors, officers, and employees;

    


    (viii)
       any
      license of Intellectual Property

    


    (ix)
       any
      written agreement for the employment of any individual on a full-time,
      part-time, consulting, or other basis;

    


    (x) any
      agreement under which it has advanced or loaned any amount to any of its
      directors, officers, and employees 

    


    (xi)
       any
      agreement under which the consequences of a default or termination could have
      a
      material adverse effect on the business, financial condition, operations,
      results of operations, or future prospects of the Corporation; or

    


    (xii)
       any
      other
      agreement (or group of related agreements) the performance of which involves
      consideration in excess of $20,000 Can.

    


    (x) Employment
      Matters

     

        (i)  Exhibit
      4.1(x) contains a complete and accurate list of all employees, agents and
      independent contractors of the Corporation and, to the extent applicable, their
      positions, current salaries, benefits and other remunerations, dates of last
      salary increases and dates of hire with the Corporation or any predecessors
      of
      the Corporation. Exhibit 4.1(x) also indicates which employees are parties
      to a
      written or oral agreement of employment (including confidentiality and
      non-competition agreements).

     

        (ii)  Except
      as
      disclosed in Exhibit 4.1(x), the Corporation is not a party to any agreements
      with past employees, agents or independent contractors in respect of whom the
      Corporation has continuing obligations. There are no oral contracts of
      employment entered into with any employees employed by the Corporation, which
      are not terminable in accordance with applicable law and the Corporation has
      not
      entered into any agreements with such employees with respect to the termination
      of employment. The Corporation does not have any obligation to re-instate any
      employees.

     

        (iii)  Except
      for Norm Stechyson, Heather Stechyson and Janice Stechyson, who have resigned
      and executed full releases which are attached hereto as Exhibit 4.1(x)(iii),
      at
      the Time of Closing, the Corporation will not have terminated, laid-off or
      dismissed (whether such dismissal is actual or constructive) in the four weeks
      preceding the Date of Closing any employees of the Corporation.

    


    
      
        
        

      

      
        25

        
        

      

      
        
        

      

       

          (iv)  All
        liabilities in respect of employees have or shall have been paid in full
        to the
        Closing Date, including premium contributions, remittance and assessments
        for
        unemployment insurance, employer health tax, Canada Pension Plan, income
        tax,
        Workers’ Compensation and any other employment related legislation, accrued
        wages, Taxes, salaries, commissions and employee benefit plan
        payments.

       

          (v)  There
        are
        no outstanding, pending, threatened or anticipated assessments, actions,
        causes
        of action, claims, complaints, demands, orders, prosecutions or suits against
        the Corporation, or its directors, officers or agents pursuant to or under
        any
        applicable rules, regulations, orders or laws, including Canada Pension Plan,
        unemployment insurance, Tax, employer health tax, employment standards, labour
        relations, occupational health and safety, human rights, workers’ compensation
        and pay equity laws. 

       

          (vi)  The
        Corporation has not made any agreements, whether directly or indirectly,
        with
        any labour union, employee association or other similar entity or made
        commitments to or conducted negotiations with any labour union or employee
        association or similar entity with respect to any future agreements. No trade
        union, employee association or other similar entity has any bargaining rights
        acquired by either certification or voluntary recognition with respect to
        the
        employees of the Corporation. The Vendors, after diligent inquiry, are not
        aware
        of any current attempts to organize or establish any other labour union,
        employee association or other similar entity.

       

          (vii)  All
        vacation pay, bonuses, commissions and other emoluments relating to the
        employees of the Corporation are accurately reflected in all respects and
        have
        been accrued in the financial records of the Corporation.

       

          (viii)  Except
        as
        described in Exhibit 4.1(x), the Corporation is in compliance with all federal,
        provincial, state, local foreign and other applicable law respecting employment
        and employment practices, terms and conditions of employment and wages and
        hours.

       

          (ix)  
        Corporation has no liability, and anticipates no liability, to the Canada
        Customs and Revenue Agency, or to employees, in connection with any audit
        by
        that agency.

       

          (x)  There
        is
        no unfair labour practice, complaint, charge or other matter against or
        involving the Corporation pending or threatened before any governmental
        authority.

       

          (xi)  All
        officers and employees have been thoroughly interviewed (the notes from such
        interviews are attached as Exhibit 4.1(x)(xi)) and based upon such interviews
        no
        officer or employee employed by the Corporation has indicated his or her
        intention to resign following Closing except that Norm, Heather and Janice
        Stechyson will not continue their employment. 

    

    


    
      
        
        

      

      
        26

        
        

      

      
        
        

      

       

          (xii)  The
        consummation of the transaction contemplated by this agreement will not entitle
        any current or former officer or employee of the Corporation to severance
        pay,
        pay in lieu of notice, unemployment compensation, or any other similar payment,
        nor accelerate the time of payment or date of vesting, nor increase the amount
        of any compensation due to any officer or employee of the
        Corporation.

    

    


    (y) Pension
      and Benefit Matters

    


    (i) Exhibit
      4.1(y) hereto is a complete list of each written or unwritten employee benefit,
      pension or retirement plan, program, agreement or arrangement whether formal
      or
      informal and whether legally binding or not, including any plan or arrangement
      relating to bonuses, incentive compensation, stock purchase rights, stock
      options, severance or termination pay, hospitalization or other medical or
      dental benefits, disability, life or other insurance, supplemental unemployment
      benefits or profit sharing (“Employee Plan”), and all deferred compensation
      arrangements in which any of the employees of Vendor re
      participants.

    


    (ii) Each
      of
      the Employee Plans is duly registered where required by law, is in good standing
      and is maintained in material compliance with applicable laws.

    


    (iii) Neither
      the execution, delivery and performance of this Agreement nor the consummation
      of the transactions herein or therein contemplated will cause Buyer or any
      affiliate thereof to be liable to any person pursuant to the terms of any
      Employee Plan or applicable law.

    


    (iv) Vendor
      is
      not a party to any pending or threatened action, claim, suit or proceeding
      by
      any person or governmental instrumentality concerning any Employee Plan which
      relates to Vendor or any of its employees.

    


    (v) All
      payments due from Vendor (on account of employment contracts or otherwise)
      for
      Employee Plans have been paid for all periods ended on or prior to the date
      hereof, and for the period from the date hereof through the Closing Date, shall
      be paid by Vendor. Vendor has no Employee Plan that constitutes a “registered
      pension plan” as that term is defined in s. 248(1) of the Income Tax Act
      (Canada).

    


    (z) Legal
      Compliance

    


    After
      diligent inquiry, Corporation represents and warrants that to the best of
      Vendors knowledge it has complied with all applicable laws (including rules,
      regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
      and
      charges thereunder) of federal, state, local, and foreign governments (and
      all
      agencies thereof), and no action, suit, proceeding, hearing, investigation,
      charge, complaint, claim, demand, or notice has been filed or commenced against
      any of 

     

    
      
        
        

      

      
        27

        
        

      

      
        
        

      

      them
        alleging any failure so to comply, except where the failure to comply would
        not
        have a material adverse effect on the business, financial condition, operations,
        results of operations, or future prospects of the Corporation and its
        business.

    

    


    (aa) Insurance

    


    The
      Corporation has all of its assets, property and undertaking and the Business
      insured against loss or damage by all insurable hazards or risks on a
      replacement cost basis and such insurance coverage will be continued in full
      force and effect (with all premiums paid) up to and including the Closing Date.
      

     

    Exhibit
      4.1(aa) sets forth the following information with respect to each material
      insurance policy (including policies providing property, casualty, liability,
      and workers' compensation coverage and bond and surety arrangements) with
      respect to which Corporation is a party, a named insured, or otherwise the
      beneficiary of coverage:

     

    (i)
       the
      name,
      address, and telephone number of the agent;

    


    (ii)
       the
      name
      of the insurer, the name of the policyholder, and the name of each covered
      insured;

    


    (iii)
       the
      policy number and the period of coverage;

    


    (iv)
       the
      scope
      (including an indication of whether the coverage is on a claims made,
      occurrence, or other basis) and amount (including a description of how
      deductibles and ceilings are calculated and operate) of coverage;
      and

    


    (v)
       a
      description of any retroactive premium adjustments or other material
      loss-sharing arrangements.

    


    With
      respect to each such insurance policy: (A) the policy is legal, valid, binding,
      enforceable, and in full force and effect in all material respects; (B)
      Corporation is not in material breach or default (including with respect to
      the
      payment of premiums or the giving of notices), and no event has occurred which,
      with notice or the lapse of time, would constitute such a material breach or
      default, or permit termination, modification, or acceleration, under the policy;
      and (C) no party to the policy has repudiated any material provision thereof.
      

    


    (bb) Intellectual
      Property

     

    General

    


    (i) Exhibit
      1.1(ll) contains a complete and accurate list of all of the Intellectual
      Property, and details, if any, of all registrations thereof and all applications
      for registration in respect thereof, and indicate in each case whether such
      Intellectual Property is owned by or licensed to the Corporation. 

    


    (ii) All
      registrations with, and applications to, Authorities on behalf of, or for the
      benefit of, the Corporation in respect of the Intellectual Property are


    
      
        
        

      

      
        28

        
        

      

      
        
        

      

       

      valid
        and
        in full force and effect (subject to adjudication, of which there is presently
        none) and are not in arrears in respect of payment of any taxes or maintenance
        fees or the taking of any other actions by the Corporation to maintain their
        validity or effectiveness, other than routine filings and payments applicable
        to
        registrations of that kind. 

    

    


    (iii) All
      intellectual property reasonably necessary for the conduct of the Business
      by
      the Corporation, as currently conducted, is owned by, or licensed to, the
      Corporation. 

    


    (A) Except
      as
      disclosed in Exhibit 1.1(ll) hereto, no licences or sublicenses have been
      granted by the Corporation to third parties permitting the use of any
      Intellectual Property, nor is there any obligation on the part of the
      Corporation to enter into a licence or sublicense with a third party to permit
      such third party to use any of the Intellectual Property. With regard to the
      items listed in Exhibit 1.1(ll), the
      license, sublicense, agreement, or permission covering the item is legal, valid,
      binding, enforceable, and in full force and effect in all material
      respects;

    


    (B)
       no
      party
      to the license, sublicense, agreement, or permission is in material breach
      or
      default, and no event has occurred which with notice or lapse of time would
      constitute a material breach or default or permit termination, modification,
      or
      acceleration thereunder;

    


    (C)
       no
      party
      to the license, sublicense, agreement, or permission has repudiated any material
      provision thereof; and

    


    (iv) Except
      as
      disclosed in the Exhibit 4.1(bb)(iv) hereto, to the best of the Vendors’
knowledge, there has been no infringement or violation of the rights of the
      Corporation in and to any of the Intellectual Property. The Corporation has
      not
      interfered with, infringed upon, misappropriated, or violated any material
      intellectual property rights of third parties in any material respect, and
      neither Vendors nor their affiliates nor the Corporation has ever received
      any
      charge, complaint, claim, demand, or notice alleging any such interference,
      infringement, misappropriation, or violation (including any claim that
      Corporation must license or refrain from using any intellectual property rights
      of any third party).

    


    (v) The
      Corporation has all rights necessary to enable it to lawfully and without
      infringement of the rights of any third party place on its websites and in
      its
      Products the content currently on the Corporation’s websites (and to permit
      others to view and/or download and use such content in the manner allowed by
      those sites), and contained in the Products. The Corporation has not placed
      any
      content on any website or in any Product or distributed such content in a manner
      which infringes the rights of any third party to a materially adverse extent
      or
      which could reasonably be expected to give rise to any claim having any Material
      Adverse Effect. No legal proceedings alleging infringement in respect of the
      content on the Corporation’s websites or Products of any type (including CD-ROMs
      and software) have ever been brought.

    


    
      
        
        

      

      
        29

        
        

      

      
        
        

      

       

    

    (vi) The
      software listed on Exhibit 1.1(ll) shall not contain any clock, timer, counter,
      or other limiting or disabling code, design or routine that would cause the
      software to be erased, made inoperable or otherwise rendered incapable of
      performing in accordance with its performance specifications and descriptions
      or
      otherwise limit or restrict the Purchaser’s ability to use a copy of the
      software after a specific or random number of years or copies, or any viruses,
      Trojan horses, or other disabling or disruptive codes or commands.

    


    (vii)
       Corporation
      has not ever agreed to indemnify any Person for or against any interference,
      infringement, misappropriation, or other conflict with respect to the use of
      any
      intellectual property.

    


    Copyrights

    


    (i) The
      Corporation owns
      all
      equitable and legal rights in and to all copyrightable works forming part of
      the
      Intellectual Property (including all source code versions of the Products),
      other than works used in the Business under a contract listed in Exhibit
      4.1(w) (“Works”).
      All Works are protectable under the copyright laws of the United States and
      Canada and have been, or are capable of being, registered in the United States
      and Canadian copyright offices. A complete list of all Works reasonably
      necessary for the conduct of Business is included on Exhibit
      1.1(ll).

    


    (ii) The
      Works
      listed on Exhibit 1.1(ll) have not been incorporated, in whole or in part,
      into
      any completed works which are not listed on Exhibit 1.1(ll), whether published
      or unpublished.

    


    (iii) Except
      as
      noted in Exhibit 1.1(ll), the Works listed thereon are each original works
      of
      authorship and are comprised of material created solely by the Corporation’s
      employees in the course of their employment or by contractors who have executed
      forms of assignment vesting all rights in such Works in the Corporation. No
      material created by any other persons or any other legal entities have been
      incorporated in any of the Works except where the Corporation has acquired
      the
      rights to do so.

    


    (iv) The
      Corporation has taken no action, and the Vendors are aware of no facts, which
      would cause any of the Works listed on Exhibit 1.1(ll) to be adjudicated in
      any
      legal forum to have entered the public domain.

    


    (v) The
      authors of all Works have waived, to the extent permitted by law, in whole
      any
      moral rights he or she may have in the Works, in favour of all future acquirors
      of the Works.

    


    Trademarks
      

    


    (i) The
      Corporation owns all equitable and legal title to all words, symbols, devices,
      designs, logos, artistic renderings, and similar items which have 

     

    
      
        
        

      

      
        30

        
        

      

      
        
        

      

       

      come
        to
        indicate a particular source of origin with respect to the Corporation’s goods
        and/or services and which are reasonably necessary for the conduct of Business.
        Collectively, these properties are referred to in this Agreement as “the
        Marks”.

    

    


    (ii) To
      the
      knowledge of the Vendors, the Corporation is entitled to use in Canada all
      generic, descriptive and non-distinctive words, symbols, devices, photographs,
      designs, artistic renderings and packages designs which it has incorporated
      in
      the sale, promotion, advertising or licensing of its goods and/or
      services.


    (iii) There
      are
      no claims pending or which, to the Vendors’ knowledge, may be successfully
      brought against the continued use, or attempted or continued registration of
      any
      of the marks presently being used by the Corporation in the United States,
      Canada or throughout the world.

    


    (iv) There
      are
      no claims pending or which, to the Vendors’ knowledge, may be validly brought
      against the continued use of any generic, descriptive and/or non-distinctive
      words, symbols, devices, photographs, designs, artistic renderings and package
      designs which have been incorporated in the sale, promotion, advertising or
      licensing of the Corporation’s goods and/or services in the United States or
      throughout the world. The Vendors are aware of no facts which would support
      any
      such claims, actual or potential.

     

    (v) All
      properties which the Corporation recognizes as Marks are listed on Exhibit
      1.1(ll) by mark, goods or services, registration number, and date the Mark
      was
      first used.

    


    (vi) All
      Marks
      listed on Exhibit 1.1(ll) are currently in use in Canada. 

    


    Domain
      Names

    


    (i) All
      domain names listed on Exhibit 1.1(ll) have been duly registered with an ICANN
      approved Registrar of the corresponding country top level domain name
      registration authority approved registrar(“ICANN”) through ICANN’s registration
      procedures, and are operating, active domain names. The Corporation has taken
      all reasonable steps to maintain in force the domain name registrations listed
      on Exhibit 1.1(ll).

     

    (ii) ICANN’s
      records show the Corporation to be the sole Person in exclusive control of
      the
      domain names listed in Exhibit 1.1(ll).

     

    (iii) Neither
      ICANN nor any third party has advised the Corporation that any of the domain
      names listed in Exhibit 1.1(ll) infringe,
      dilute, or interfere with the rights of any other party, or may infringe, dilute
      or interfere with the rights of any other party.

     

    
      
        
        

      

      
        31

        
        

      

      
        
        

      

    

    (iv) ICANN
      has
      not notified the Corporation that any of the domain names listed in Exhibit
      1.1(ll) have been placed on “hold” or are otherwise subject to a dispute or
      potential dispute pursuant to NSI's dispute resolution policy.

     

    (v) There
      are
      no claims pending or, to the knowledge of the Vendors, which may be validly
      brought against the continued use or registration of any of the domain names
      presently being used by the Corporation in the United States or throughout
      the
      world, as listed on Exhibit 1.1(ll). The Vendors are aware of no facts which
      would support any such claims, actual or potential.

    


    (cc) Computer
      Systems

    


    The
      Corporation owns or licences all of the computer systems reasonably necessary
      for the operation of the Business as it is currently conducted. All such
      computer systems of the Corporation, including, but not limited to, mainframes,
      mini-computers and special purpose systems are fully operational.

    


    (dd) Source
      Code Versions

    


    All
      source code versions of the Products are accurate and complete in all material
      respects and are sufficient for the ongoing operation and conduct of the
      Business, and for the enhancement and/or modification of the Products to which
      such source code versions relate.

     

    (ee) Contracts
      with Non-Arm’s Length Persons


    Except
      as
      set forth in Exhibit 4.1(ee), there are no existing contracts or arrangements
      to
      which the Corporation is a party in which any of the Vendors, any director
      or
      officer of the Corporation or any other Person not dealing at arm’s length with
      the Vendors or the Corporation, or any director or officer of the Corporation
      has an interest, whether directly or indirectly, including, without limitation,
      arrangements for the payment of management or consulting fees of any kind
      whatsoever. 

    


    (ff) Agreements
      Restricting Business

    


    The
      Corporation is not a party to any agreement or arrangement which restricts
      the
      freedom of the Corporation to carry on the Business, including any contract
      or
      agreement which contains covenants by the Corporation not to compete in any
      line
      of business with any other Person.

    


    (gg) Bank
      Accounts, etc.

    


    There
      is
      set forth in Exhibit 4.1(gg) hereto the name of each bank or other depository
      in
      which the Corporation maintains any bank account, trust account or safety
      deposit box and the names of all persons authorized to draw thereon or who
      have
      access thereto.

    


    
      
        
        

      

      
        32

        
        

      

      
        
        

      

    

    (hh) Absence
      of Guarantees

    


    The
      Corporation has not given or agreed to give and is not a party to or bound
      by
      any guarantee of indebtedness, indemnity, bond or suretyship or other
      obligations of another Person or Persons or any other commitment by which the
      Corporation is, or is contingently, responsible for such indebtedness or other
      obligations except as specifically provided for or referred to in this Agreement
      or in any exhibit hereto.

    


    (ii) Corporate
      Records

    


    The
      minute books of the Corporation contain, and will contain at the Closing Date,
      accurate and complete minutes of all meetings and resolutions of its directors
      and shareholders held since its incorporation. All resolutions of the
      Corporation were duly passed and all meetings of the Corporation were duly
      held,
      and its share certificate books and share certificate registers are, and will
      at
      the Closing Date be, complete and accurate and shall reflect all transactions
      contemplated by this Agreement.

     

    (jj) 
      Consents


    No
      consent, approval or authorization of, or declaration, filing (other than
      administrative filings with Tax authorities, companies registries and the like)
      or registration with, any Authority or other person is required to be made
      or
      obtained by the Corporation or the Vendors prior to, or as a condition of,
      the
      consummation of the transactions contemplated in this Agreement.

    


    (kk) Powers
      of Attorney

    


    The
      Corporation has not given any power of attorney to any Person for any purpose
      whatsoever.

    


    (ll) Brokers

    


    The
      Vendors and the Corporation have not engaged any broker or other agent in
      connection with the transactions contemplated in this Agreement and,
      accordingly, there is no commission, fee or other remuneration payable to any
      broker or agent who purports or may purport to act or have acted for the Vendors
      or the Corporation.

    


    (mm) Full
      Disclosure

    


    None
      of
      the foregoing representations and statements of fact contains any untrue
      statement of a material fact or omits to state any material fact necessary
      to
      make any such statement or representation not misleading to a prospective
      purchaser of the Purchased Shares seeking full information as to the Corporation
      and its properties, businesses and affairs. There is no fact that the Vendors
      have not disclosed to the Purchaser in writing having, or, so far as the Vendors
      can foresee, that might have, a Material Adverse Effect or that might materially
      adversely effect the ability of the Vendors to perform their obligations under
      this Agreement. No condition exists that would materially adversely affect
      Purchaser’s ability to continue to conduct the Business following Closing. The


     

     

    
      
        
        

      

      
        33

        
        

      

      
        
        

      

       

      parties
        hereto agree that a fact disclosed in one Exhibit hereto does not constitute
        disclosure in any other Exhibit hereto. 

    

    


    (nn) Only
      Business-Customer and Supply Relationships

    


    The
      Corporation has not in the last 5 years carried on and does not currently carry
      on any business other than the Business. After diligent inquiry, to the best
      of
      Vendors knowledge, no condition presently exists which would cause an adverse
      change in Business following Closing which change is based upon relationships
      with customers or suppliers of the Corporation or the Business. After diligent
      inquiry, to the best of Vendors knowledge, no person has committed any act
      or
      omitted to commit any act which act or omission has had, or with the passage
      of
      time would have the effect of damaging relationships with Corporation’s
      customers or suppliers. There is set forth in Exhibit 4.1(nn) copies of all
      correspondence from customers or suppliers, within the past 24 months which
      contains material complaints or criticism, regarding the Corporation, its
      conduct or the conduct of employees or business practices. Exhibit 4.1(nn)
      also
      contains all information (whether or not it has been reduced to writing or
      not)
      regarding any other material problems of any kind which Corporation has had
      with
      customers or suppliers which has occurred in the last 24 months.

    


    (oo) US
      Securities Laws

    


    Each
      Vendor agrees that: (1) Purchaser has made no recommendation to any Vendor
      to
      purchase shares of ClearOne common stock in the market as provided in this
      Agreement and has made no representation regarding the current or future price
      of ClearOne common stock (2) Purchaser has provided no information to any Vendor
      which is not contained in any publicly available document () Each Vendor has
      been advised by its professional advisors regarding the merits and risks of
      an
      investment in ClearOne common stock (4) each Vendor agrees and acknowledges
      that
      the investment in ClearOne common stock involves substantial risk based upon
      the
      future performance of ClearOne as well as risks associated with the market
      generally(5) each Vendor can sustain the a loss of its investment in the
      ClearOne common stock. 

    


    (pp)  Ontario
      Securities Laws

    


    Each
      of
      the Vendors is by virtue of such Vendor’s net worth, investment experience and
      sophistication able to evaluation and assess the merits and risks associated
      with holding the ClearOne Shares as an investment.

     

        (i) 
      Each
      of
      the Vendors is acquiring the ClearOne Shares as principal for such Vendor’s own
      account and not for the benefit of any other person.

     

        (ii) 
      Each
      of
      the Vendors is a resident of the Province of Ontario.

     

    
      
        
        

      

      
        34

        
        

      

      
        
        

      

    

     

        (iii) 
      Each
      of
      the Vendors acknowledges that the ClearOne Shares may not be resold otherwise
      than in compliance with the resale restrictions applicable to the Vendors and
      any purchaser of the ClearOne Shares, including, without limitation, such
      restrictions under the Ontario Securities Laws.

     

    (qq) Environmental
      Matters

    


    (i) The
      Corporation has carried and is carrying on its business and its assets always
      have been and are now in compliance with all Environmental Laws. Neither the
      Corporation nor any of its directors or officers has ever been convicted of
      any
      offence for non-compliance with any Environmental Law, been fined or otherwise
      penalized for non-compliance with an Environmental Law, or settle any
      prosecution for non-compliance with any Environmental Law short of
      conviction.

     

    (ii) The
      Corporation has filed all reports and other information and obtained all
      permits, certifications, programs, registrations, licences and other approvals
      (collectively “Permits”)
      copies
      or a list of which are attached as Exhibit 4.1(qq)(ii)  to
      enable
      it to carry on its business as now conducted in compliance with Environmental
      Laws. All of the Permits are valid and in good standing and transferable, there
      has been no violation of any Permit by the Corporation and no proceeding is
      pending, or to the knowledge of the Sellers, threatened to revoke or limit
      any
      Permit.

     

    (iii) No
      control orders, stop orders or other orders or directives have been issued
      from
      an Authority with respect to any environmental matter to the Corporation in
      respect to its business or assets (including any owned or leased real property)
      or, to the knowledge of the Vendors (after due inquiry), to any other Person
      in
      respect of any such matter. To the knowledge of the Vendors (after due inquiry),
      no fact or circumstance exists which could give rise to such an order or
      directive being issued.

     

    (iv) No
      Hazardous Substance originating from any real property owned or leased by the
      Corporation, or any other assets of the Corporation, has been released onto
      nor
      has migrated or is migrating to any neighbouring, adjoining or proximate
      property. No Hazardous Substance originating from any neighbouring or adjoining
      properties, has been released onto, has migrated onto, or is migrating towards
      any real property owned or leased by the Corporation or any other asset of
      the
      Corporation. No Hazardous Substance is present on, in or under any real property
      owned or leased by the Corporation or any other asset of the Corporation in
      levels or concentrations in excess of those prescribed by Environmental Laws,
      whether or not such presence is in violation of Environmental Laws.

     

    (v) The
      Corporation has stored, treated and disposed of all Hazardous Substances used
      or
      generated in or otherwise relating to its business and assets in compliance
      with
      Environmental Laws. The Corporation has not incurred and is not incurring any
      liability pursuant to Environmental Law in connection with its business and
      assets including arising as a result of dealing in Hazardous
      Substances.

     

    
      
        
        

      

      
        35

        
        

      

      
        
        

      

    

     

    (vi) None
      of
      the Sellers nor the Corporation has received any written or oral notice of
      any
      alleged violation of Environmental Laws or other damage to the environment
      emanating from or occurring on any of the real property owned or leased by
      the
      Corporation or on any property in the vicinity of any of the real property,
      owned or leased by the Corporation or has incurred any environmental Liability
      in connection with any of the Corporation's assets and, to the knowledge of
      the
      Sellers (after due inquiry), no present or past fact, condition or circumstance
      exists which would give rise to such a claim or liability, or potential
      liability.

     

    (vii) There
      are
      no above ground or underground storage tanks at, on, in or under the real
      property owned or leased by the Corporation. None of the real property owned
      or
      leased by the Corporation has ever been used by any Person as a landfill site,
      a
      waste disposal site, or as a location for the disposal of Hazardous Substances
      or waste, has ever had any urea formaldehyde foam insulation, asbestos, pcbs,
      or
      radioactive substances located thereon. 

     

    (viii) All
      information provided to the Purchaser or its environmental consultants or
      similar representatives in connection with any environmental audit or other
      investigation will be true and complete in all material respects. The Sellers
      and the Corporation have not conducted an environmental audit (including any
      evaluation, assessment, review or study) of any of the real property owned
      or
      leased by the Corporation, the business or assets of the Corporation except
      those in respect of which copies have been provided to the Purchaser, as listed
      on Exhibit 4.1(qq)(viii). The Purchaser has been provided with correct and
      complete copies of all reports required to be made to Authorities under
      Environmental Laws, and all correspondence relating thereto.

    


    The
      representations contained in Environmental Matters subparagraphs (iv) and (vii)
      are limited to the best knowledge of the Vendors upon the condition that the
      Vendors have used best efforts to determine if those representations are true.
      If Vendors have not used such best efforts, then those representations are
      not
      subject to a best knowledge limitation. 

     

    


    4.2 
      Representations
      and Warranties of the Purchaser and the
      Parent


    The
      Purchaser and the Parent hereby jointly and severally represent and warrant
      to
      the Vendors (and acknowledge that the Vendors are relying on the representations
      and warranties in completing the transactions contemplated hereby)
      that:

    


    (a) Corporate
      - Purchaser

    


    The
      Purchaser is a corporation duly incorporated and validly existing under the
      laws
      of the Province of New Brunswick. The Purchaser has the corporate power and
      authority to own and hold its properties and to carry on its business as now
      conducted. 

    


    
      
        
        

      

      
        36

        
        

      

      
        
        

      

    

    


    


    (b) Corporate
      - Parent

    


    The
      Parent is a corporation duly incorporated, validly existing and in good standing
      under the laws of the State of Utah, United States. The Parent has the corporate
      power and authority to own and hold its properties and to carry on its business
      as now conducted and as proposed to be conducted.

    


    (c) Authority

    


    Each
      of
      the Purchaser and the Parent has all necessary corporate power, authority and
      capacity to enter into this Agreement and to perform its obligations hereunder
      and the execution and delivery of this Agreement and the performance by each
      of
      the Purchaser and the Parent of its obligations hereunder has been duly
      authorized by all necessary corporate action on the part of the Purchaser and
      the Parent, respectively.

    


    (d) Capitalization
      - Parent

    


    The
      authorized capital stock of the Parent consists of fifty million
      (50,000,000)
      common
      shares,
      of
      which 10,269,117 are outstanding as of May 1, 2002. All of the outstanding
      shares are validly issued and outstanding, fully paid and non-assessable, with
      no personal liability attaching to the ownership thereof. 

    


    (e) Enforceability

    


    This
      Agreement constitutes a legal, valid and binding obligation of each of the
      Purchaser and the Parent, enforceable against each of them in accordance with
      its terms (subject, as to the enforcement of remedies, to bankruptcy,
      reorganization, insolvency, moratorium, and other laws relating to or affecting
      creditors’ rights generally and subject to the availability of equitable
      remedies). The execution and delivery of this Agreement by the Purchaser and
      the
      Parent, the consummation of the transactions contemplated hereby and the
      fulfilment by the Purchaser and the Parent of the terms, conditions and
      provisions hereof will not: contravene or violate or result in the breach (with
      or without the giving of notice or lapse of time, or both) or acceleration
      of
      any obligations of the Purchaser or the Parent under:

     

    (A)  any
      laws
      applicable to the Purchaser or the Parent;

     

    (B)  any
      judgement, order, writ, injunction or decree of any court or of any Authority
      which is presently applicable to the Purchaser or the Parent;

     

    (C)  the
      articles of incorporation, by-laws or any resolutions of the Purchaser or the
      Parent or any amendments thereto or restatements thereof; or

     

    (D)  the
      provisions of any agreement, arrangement or understanding to which the Purchaser
      or the Parent is a party or by which it is bound.

    


    


    
      
        
        

      

      
        37

        
        

      

      
        
        

      

    

    


    (f) Brokers

    


    The
      Purchaser has not engaged any broker or other agent in connection with the
      transactions contemplated in this Agreement and, accordingly, there is no
      commission, fee or other remuneration payable to any broker or agent who
      purports or may purport to have acted for the Purchaser.

    


    4.3 Non-Waiver

    


    No
      investigations made by or on behalf of any party at any time shall have the
      effect of waiving, diminishing the scope of or otherwise affecting any
      representation or warranty made by the other parties herein or pursuant
      hereto.

    


    4.4 Nature
      and Survival of Vendor’s Representations and
      Warranties

    


    The
      representations and warranties of the Vendors contained in this Agreement or
      in
      any document or certificate given pursuant to this Agreement shall survive
      the
      Closing for the benefit of the Purchaser and Parent as follows:3 years for
      Claims based on breaches of warranties regarding tax matters and two years
      for
      all other Claims unless a bona fide notice of Claim shall have been made in
      writing before the expiry of that period, in which case the representation
      and
      warranty to which such notice applies shall survive in respect of that Claim
      until the final determination or settlement of that claim.

    


    4.5 Survival
      of Purchaser’s and Parent’s Representations and
      Warranties

    


    The
      representations and warranties of the Purchaser and the Parent contained in
      this
      Agreement or any document or certificate given pursuant to this Agreement shall
      survive the Closing for the benefit of the Vendors for a period of two (2)
      years
      unless a bona fide notice of Claim shall have been made in writing before the
      expiry of that period, in which case the representation and warranty to which
      such notice applies shall survive in respect of that Claim until the final
      determination or settlement of that claim.

    


    4.6 Vendors
      Covenants

    


    (a) Non-Compete.
      

    


    With
      the
      exception of Jim Stechyson each Vendor agrees that, for a period of three (3)
      years following the Closing, it will not compete directly or indirectly with
      the
      Purchaser, as more fully described in the Non-Compete Agreement substantially
      in
      the form set forth in Exhibit 4.6(a). Jim Stechyson will execute and deliver
      the
      Employment Agreement attached hereto as Exhibit 4.6(a)(1).

    


    (b) Employee
      Matters.

    


    No
      employees of Corporation shall be terminated as a result of this transaction
      except for Norm, Heather and Janice Stechyson each of whom has executed and
      delivered a release as attached hereto as Exhibit 4.1(x)(iii). 

    


    
      
        
        

      

      
        38

        
        

      

      
        
        

      

       

       

      (c) Matters
        Regarding the Share Resale

       

          (i)  The
        Vendors will comply with all applicable securities laws in connection with
        the
        resale of the shares of ClearOne common stock purchased in the market pursuant
        to Section 3 above, including, without limitation, the provisions of the
        Securities Act of 1933, Securities
        Act (Ontario)
        and the regulations, rules, policies, blanket orders and rulings thereunder
        (the
“Ontario Securities Laws”), and shall consult with its own legal advisors to
        ensure such compliance.

       

          (ii)  The
        Vendors will execute and deliver within the applicable time periods all
        documentation as may be required by any applicable securities laws, including,
        without limitation, the Ontario Securities Laws, to permit the resale by
        the
        Vendors of ClearOne shares.

    

    


    


    ARTICLE
      5   -
      CONDITIONS PRECEDENT TO THE PERFORMANCE

    BY
      THE PARTIES OF THEIR OBLIGATIONS UNDER THIS AGREEMENT

    


    5.1 
The
      Purchaser’s Conditions

     

    The
      obligation of the Purchaser to complete the purchase of the Purchased Shares
      hereunder shall be subject to the satisfaction of, or compliance with, at or
      before the Time of Closing, each of the following conditions (each of which
      is
      hereby acknowledged to be inserted for the exclusive benefit of the
      Purchaser):

     

    (a)  Representations
      and Warranties

    


    All
      representations and warranties of the Vendors made pursuant to this Agreement
      shall be true and correct with the same force and effect as if made at and
      as of
      the Time of Closing and the Vendors shall have delivered to the Purchaser at
      the
      Time of Closing a certificate dated the Closing Date, duly executed by a senior
      officer of each of the Vendors reasonably acceptable to the Purchaser, to such
      effect. The receipt of such certificate and the closing of the transaction
      of
      purchase and sale provided for in this Agreement shall not be nor deemed to
      be a
      waiver of the representations and warranties of the Vendors contained in this
      Agreement, which representations and warranties shall continue in full force
      and
      effect for the benefit of the Purchaser as provided in Article
      4.

     

    (b)  Performance
      of Obligations

    


    The
      Vendors shall have performed or complied with, in all respects, all of their
      obligations, covenants and agreements in this Agreement which are to be
      performed or complied with by the Vendors at or prior to the Time of Closing,
      and the Vendors shall have delivered to the Purchaser at the Time of Closing
      a
      certificate dated the Closing Date under corporate seal, duly executed by a
      senior officer of each of the Vendors reasonably acceptable to the Purchaser,
      to
      such effect.

    


    
      
        
        

      

      
        39

        
        

      

      
        
        

      

       

      (c)  Receipt
        of Closing Documentation

       

          All
        documentation relating to the due authorization and completion of the purchase
        and sale of the Purchased Shares and all actions and proceedings taken on
        or
        prior to the Closing Date in connection with the performance by the Vendors
        of
        their obligations, covenants and agreements under this Agreement , including
        but
        not limited to delivery of the Closing Financial Statements and all Exhibits
        hereto shall be satisfactory to the Purchaser and its counsel, acting
        reasonably, and the Purchaser shall have received copies of all such
        documentation or other evidence as it may reasonably request in order to
        establish the consummation of the transactions contemplated hereby and the
        taking of all corporate proceedings in connection therewith in compliance
        with
        these conditions, in form and substance satisfactory to the Purchaser and
        its
        counsel, acting reasonably.

       

      (d)  Vendors’
        Closing Opinion

       

          The
        Purchaser
        shall have received an opinion dated as of the Closing Date in form and
        substance reasonably satisfactory to Purchaser’s counsel, from counsel for the
        Vendors and from counsel to the Corporation in such form and as to such matters
        as the Purchaser or its counsel may request provided that, insofar as the
        opinions expressed in such opinion are based on matters of fact, such opinions
        may be based upon certificates of the Vendors, public officials and officers
        of
        the Corporation as counsel may deem reasonably appropriate and, as to matters
        involving the laws of jurisdictions in which such counsel is not qualified
        to
        practice, on opinions of recognized local counsel in such
        jurisdictions.

       

      (e)  Employment
        Agreements

       

          Jim
        Stechyson shall
        have entered into Employment Agreements with the Corporation in the form
        attached as Exhibit 4.6(a)(1) respectively.

       

      (f)  Approvals

       

          The
        acquisition of all of the Purchased Shares pursuant to this Agreement shall
        have
        been approved by the Board of Directors and, if necessary, by the shareholders
        of the Corporation and approvals or waivers, if any, required by the Investment
        Canada Act.

       

      (g)  Lease
        Matters

       

          The
        Vendors
        shall have obtained from the landlord under the Lease an acknowledgement
        that:

    

    


    (i) the
      Lease
      is in good standing and in full force and effect without amendment; 

    


    (ii) the
      closing of the transactions contemplated herein (including the amalgamation
      of
      the Corporation into the Purchaser) will not result in the

     

    
      
        
        

      

      
        40

        
        

      

      
        
        

      

    

     termination
      of or an increase in the rent presently being paid under the Lease or any change
      in terms of the Lease as they exist on the date hereof; and

    


    (iii) the
      Corporation has paid or caused to be paid all rents and other amounts presently
      owing under the Lease.

     

    (h)  No
      Action to Restrain

     

        No
      action or
      proceeding shall be pending or threatened by any Authority or any other Person
      (including a party hereto) to restrain or prohibit the completion of the
      transactions contemplated by this Agreement or to prevent or restrain the
      Corporation from carrying on the Business as presently carried on.

     

    (i)  Directors
      and Officers

     

        All
      directors
      and officers of the Corporation specified by the Purchaser shall have resigned
      and shall have executed a form of release satisfactory to the Purchaser and
      its
      counsel. In addition, all employees (other than Norm Stechyson) deemed necessary
      to the successful operation of the Corporation by the Purchaser shall continue
      to be in the employ of the Corporation as of the Closing.

     

    (j)  Due
      Diligence

     

        The
      Purchaser
      has commenced the conduct of investigations of the business and financial
      position of the Corporation and shall continue such investigations after the
      execution of this Agreement and prior to the Closing and the Purchaser shall
      have been satisfied, in its absolute discretion, with the results of its due
      diligence review of the Corporation and the Business, including its review
      of
      the Financial Statements, the Closing Financial Statements and all Exhibits
      hereto.

     

    k)  Board
      Approval

     

        The
      board of
      directors of the Purchaser and the Parent shall have approved of the transaction
      contemplated in this Agreement.

     

    (l)  Options
      Cancelled (if applicable)

     

        Any
      Optionee
      of the Corporation
      shall,
      upon payment of consideration (if any) by the Vendors (and not by the
      Corporation, the Purchaser or the Parent), have surrendered to the Corporation
      all of the his
      or
      her
      Options
      for cancellation and delivered a general release to and in favour of the
      Corporation and all of its directors, officers and shareholders past and
      present, in form and substance satisfactory to the Purchaser, acting
      reasonably.

     

    (m)  Vendor
      Agreements

     

        Each
      beneficial owner of the Vendors shall have entered into his or her respective
      Vendor Agreement. 


    
      
        
        

      

      
        41

        
        

      

      
        
        

      

       

      (n)  Cash

       

          The
        cash
        account of the Company shall contain at least C$300,000 including checks
        that
        are dated prior to Closing and were received prior to Closing.

       

      (o)  Net
        Working Capital

       

          The
        Net
        Working Capital of the Company
        shall be at least C$675,000.

       

      (p)  Liabilities

       

          The
        Liabilities shall have been paid or terminated, as applicable, as of the
        Closing
        with the exception of accounts payable and other amounts owing to various
        government agencies in the ordinary course of business. 

       

      (q)  Encumbrances
        

       

          All
        encumbrances on property of the Corporation shall have been released and
        Purchaser shall have received copies of such releases and such encumbrances
        shall be shown on the public record to have been released. 

       

      (r)  Line
        of Credit

       

          All
        of the
        Corporation’s lines of credit shall have been terminated and copies of such
        termination shall have been delivered to Purchaser. 

       

      (s) 
        Ernst
        and Young shall provide an opinion regarding the Corporation’ equity and no
        detrimental effect from corporate reorganization, in form and substance
        satisfactory to Purchaser. 

       

      (t) The
        Closing Financial Statements shall be satisfactory to the Purchaser both
        in form
        and content. 


    

     

    5.2 
Conditions
      of the Vendors

    The
      obligation of the Vendors to complete the sale of the Purchased Shares hereunder
      shall be subject to the satisfaction of or compliance with in all material
      respects, at or before the Time of Closing, of each of the following conditions
      (each of which is hereby acknowledged to be inserted for the exclusive benefit
      of the Vendors):

     

    (a) 
Representations
      and Warranties

     

        All
      representations and warranties that the Purchaser and the Parent made pursuant
      to this Agreement shall be true and correct with the same force and effect
      as if
      made at and as of the Time of Closing and the Purchaser and the Parent shall
      have delivered to the Vendors at the Time of Closing a certificate dated the
      Closing Date, duly executed by a senior officer of the Purchaser and the Parent
      acceptable to the Vendors, to such effect. The receipt of such certificate
      and
      the Closing of the transaction of purchase 

    
      
        
        

      

      
        42

        
        

      

      
        
        

      

       

      and
        sale
        provided for in this Agreement shall not be nor be deemed to be a waiver
        of the
        representations and warranties of the Purchaser and the Parent contained
        in this
        Agreement, which representations and warranties shall continue in full force
        and
        effect for the benefit of the Vendors as provided in Article
        4.

    

    


    (b) 
Performance
      of Agreement

     

        The
      Purchaser
      and the Parent shall have performed or complied with, in all respects all of
      its
      obligations, covenants and agreements in this Agreement which are to be
      performed or complied with by the Purchaser and the Parent at or prior to the
      Time of Closing and shall have delivered to the Vendors at the time of Closing
      a
      certificate dated the Closing Date under corporate seal, duly executed by a
      senior officer of the Purchaser and the Parent acceptable to the Vendors, to
      such effect.

     

    (c)  
Receipt
      of Closing Documentation

     

        All
      documentation relating to the due authorization and completion of the purchase
      and sale of the Purchased Shares and all actions and proceedings taken on or
      prior to the Closing Date in connection with the performance by the Purchaser
      and the Parent of their respective obligations under this Agreement shall be
      satisfactory to the Vendors and their counsel, acting reasonably, and the
      Vendors shall have received copies of all such documentation or other evidence
      as they may reasonably request in order to establish the consummation of the
      transactions contemplated hereby and the taking of all corporate proceedings
      in
      connection therewith in compliance with these conditions, in form and substance
      satisfactory to the Vendors and their counsel, acting reasonably.

     

    (d)  No
      Action to Restrain

     

        No
      action or
      proceeding shall be pending or threatened by any Authority or any other Person
      (including a party hereto) to restrain or prohibit the completion of the
      transactions contemplated by this Agreement.

     

    (e) 
Opinion
      of Parent’s General Counsel

     

        The
      Vendors
      shall have received an opinion dated the Closing Date, in form and substance
      reasonably satisfactory to Vendors Counsel, from Parent’s General Counsel,
      confirming the matters warranted in paragraphs b, c, d, e, f of Section 4.2
      hereof, provided that, insofar as the opinion, expressed with respect to such
      matters as are based on matters of fact, such opinions may be based solely
      upon
      an officer of the Parent and such evidence as such general counsel may
      reasonably deem appropriate.

     

    (f)  Opinion
      of Purchaser’s Counsel

     

        The
      Vendors
      shall have received an opinion dated the Closing Date, in form and substance
      reasonably satisfactory to Vendors Counsel, from Purchaser’s Counsel, confirming
      the matters warranted in paragraphs a, c and f of Section 4.2 hereof, provided
      that, insofar as the opinion, expressed with respect to such matters as are
      based on 

     

    
      
        
        

      

      
        43

        
        

      

      
        
        

      

       

      matters
        of fact, such opinions may be based solely upon an officer of the Parent
        or
        Purchaser and such evidence as such counsel may reasonably deem
        appropriate.

    

    


    5.3
Waiver
      by Purchaser

     

    If
      any of
      the conditions set forth in Section 5.1
      have not
      been fulfilled, performed or satisfied at or prior to August 19, 2002 the
      Purchaser may, by written notice to the Vendors terminate all of its obligations
      hereunder and the Purchaser shall be released from all its obligations under
      this Agreement. Any of such conditions may be waived in whole or in part by
      the
      Purchaser by instrument in writing given to the Vendors without prejudice to
      any
      of the Purchaser’s rights of termination in the event of non-performance of any
      other condition, obligation or covenant in whole or in part, and without
      prejudice to its right to complete the transaction of purchase and sale
      contemplated by this Agreement and claim damages for breach of representation,
      warranty or covenant.

    


     

    5.4 
Waiver
      by Vendors

     

    If
      any of
      the conditions set forth in Section 5.2
      have not
      been fulfilled, performed or satisfied at or prior to _August 19, 2002 the
      Vendors may, by written notice executed by all of the Vendors and given to
      the
      Purchaser, terminate all of their obligations hereunder and the Vendors shall
      be
      released from all their obligations under this Agreement. Any of such conditions
      may be waived in whole or in part by the Vendors by instrument in writing
      executed by all of the Vendors and given to the Purchaser, without prejudice
      to
      any of the Vendors’ rights of termination in the event of non-performance of any
      other condition, obligation or covenant in whole or in part, and without
      prejudice to their right to complete the transaction of purchase and sale
      contemplated by this Agreement and claim damages for breach of representation,
      warranty or covenant.

    


    


    ARTICLE
      6   -
      INDEMNIFICATION

    


    6.1 Indemnification
      by Vendors

     

    The
      Vendors jointly and severally covenant and agree with the Purchaser and the
      Corporation to indemnify and save harmless the Purchaser and the Corporation,
      from and against any claim, demand, action, cause of action, damage, loss
      (including lost profits), cost, liability or expense (including reasonable
      professional fees and disbursements) (a “Claim”) (including without limitation
      any liability based on an employee’s dismissal prior to Closing or other
      liability to any employee prior to Closing)which may be made or brought against
      the Purchaser or the Corporation or any one or more of them, or which they
      or
      any one or more of them may suffer or incur in respect of, as a result of,
      or
      arising out of:

     

    (a) any
      nonfulfillment of any covenant or agreement on the part of the Vendors, or
      any
      one or more of them, contained in this Agreement or any document or certificate
      given pursuant to this Agreement;

    
      
        
        

      

      
        44

        
        

      

      
        
        

      

    

    (b) any
      inaccuracy in or breach of any representation or warranty of the Vendors, or
      any
      one or more of them, contained in this Agreement or any document or certificate
      given pursuant to this Agreement; or

     

    (c) any
      debts
      and liabilities of the Corporation for Taxes existing at the Time of Closing,
      or
      any reassessment for Taxes for any period ending on or before the
      Closing
      Date,
      for which no adequate reserve has been provided for and disclosed in the Balance
      Sheet.

    


     

    6.2 
Indemnification
      by the Purchaser
      and the Parent

     

    The
      Purchaser and the Parent covenant and agree with the Vendors to jointly and
      severally indemnify and save harmless the Vendors, from and against any Claim
      which may be made or brought against the Vendors, or one or more of them, or
      which they or one or more of them may suffer or incur, directly or indirectly,
      in respect of, as a result of, or arising out of:

    (a) any
      non-fulfillment of any covenant or agreement on the part of the Purchaser under
      this Agreement or any document or certificate given pursuant to this
      Agreement;

     

    (b) any
      inaccuracy in or breach of any of the Purchaser’s representations or warranties
      contained in this Agreement or any document or certificate given pursuant to
      this Agreement; 

      

     

    6.3 
Limitation
      of Liability

     

    In
      no
      event shall an Indemnifying Party be liable for Claims, whether or not
      previously made by an Indemnified Party, to the extent the aggregate value
      of
      all Claims exceeds the Purchase Price. The parties acknowledge that Purchase
      Price represents the maximum liability of the Purchaser and the Parent, on
      the
      one hand, and the Vendors, on the other hand. Further, all demand for payment
      of
      indemnification shall be subject to Sections 4.4 and 4.5 hereof and all other
      provisions of this Agreement. 

    


     

    6.4 
The
      Parent’s Guarantee

     

    The
      Parent hereby guarantees the performance of and compliance with all of the
      Purchaser’s obligations, covenants and agreements under this Agreement and Jim
      Stechyson’s employment agreement in the form attached hereto as Exhibit
      4.6(a)(1) 

    


    6.5 
Procedure
      for Indemnification

     

    (a)  Claims
      Other Than Third Party Claims

     

        Following
      receipt from the Vendors or the Purchaser, as the case may be (the “Indemnified
      Party”), of a written notice of a claim for indemnification which has not arisen
      in respect of a Third Party Claim, the party who is in receipt of such notice
      (the “Indemnifying Party”) shall have 30 days to make such investigation of the
      Claim as the Indemnifying Party considers desirable. For the purpose of such
      investigation, the 

    
      
        
        

      

      
        45

        
        

      

      
        
        

      

       

      Indemnified
        Party shall make available to the Indemnifying Party the information relied
        upon
        by the Indemnified Party to substantiate the claim. If the Indemnified Party
        and
        the Indemnifying Party agree at or prior to the expiration of such 30 day
        period
        (or any mutually agreed upon extension thereof) to the validity and amount
        of
        the Claim, the Indemnifying Party shall immediately pay to the Indemnified
        Party
        the Undisputed Amount. If the Indemnified Party and the Indemnifying Party
        do
        not agree within such period (or any mutually agreed upon extension thereof),
        such dispute shall be resolved by arbitration as set out in Section 7.15.

       

      (b)  Third
        Party Claims

       

          The
        Indemnified Party shall notify the Indemnifying Party in writing as soon
        as is
        reasonably practicable after being informed in writing that facts exist which
        may result in a Claim originating from a Person other than the Indemnified
        Party
        (a “Third Party Claim”) and in respect of which a right of indemnification given
        pursuant to Section 6.1
        or
6.2
        may
        apply. The Indemnifying Party shall have the right to elect, by written notice
        delivered to the Indemnified Party within 10 days of receipt by the Indemnifying
        Party of the notice from the Indemnified Party in respect of the Third Party
        Claim, at the sole expense of the Indemnifying Party, to participate in or
        assume control of the negotiation, settlement or defence of the Third Party
        Claim, provided that:

    

    


    (i) such
      will
      be done at all times in a diligent and bona fide matter;

    


    (ii) the
      Indemnifying Party acknowledges in writing its obligation to indemnify the
      Indemnified Party in accordance with the terms contained in this Agreement
      in
      respect of that Third Party Claim; and 

    


    (iii) the
      Indemnifying Party shall pay all reasonable out-of-pocket expenses incurred
      by
      the Indemnified Party as a result of such participation or
      assumption.

     

    
      If
        the
        Indemnifying Party elects to assume such control, the Indemnified Party shall
        co-operate with the Indemnifying Party and its counsel and shall have the
        right
        to participate in the negotiation, settlement or defence of such Third Party
        Claim at its own expense. If the Indemnifying Party does not so elect or,
        having
        elected to assume such control, thereafter fails to proceed with the settlement
        or defence of any such Third Party Claim, the Indemnified Party shall be
        entitled to assume such control. In such case, the Indemnifying Party shall
        co-operate where necessary with the Indemnified Party and its counsel in
        connection with such Third Party Claim and the Indemnifying Party shall be
        bound
        by the results obtained by the Indemnified Party with respect to such Third
        Party Claim.

    

     

    6.6 
Additional
      Rules and Procedures

     

    The
      obligation of the parties to indemnify each other pursuant to this Article
      6
      shall
      also be subject to the following:

    
      
        
        

      

      
        46

        
        

      

      
        
        

      

       

          (a) an
        Indemnified Party shall only be entitled to make a claim for indemnification
        pursuant to Section 6.1
        or
6.2,
        as the
        case be, if written notice containing reasonable particulars of such Claim
        is
        delivered to the Indemnifying Party within the time periods provided for
        in
        Section 6.5(a) or 6.5(b) as the case may be;

       

          (b) if
        any
        Third Party Claim is of a nature such that the Indemnified Party is required
        by
        applicable law to make a payment to any Person (a “Third Party”) with respect to
        such Third Party Claim before the completion of settlement negotiations or
        related legal proceedings, the Indemnified Party may make such payment and
        the
        Indemnifying Party shall, forthwith after demand by the Indemnified Party,
        reimburse the Indemnified Party for any such payment. If the amount of any
        liability under the Third Party Claim in respect of which such a payment
        was
        made, as finally determined, is less than the amount which was paid by the
        Indemnifying Party to the Indemnified Party, the Indemnified Party shall,
        forthwith after receipt of the difference from the Third Party, pay such
        difference to the Indemnifying Party;

       

          (c) except
        in
        the circumstances contemplated by Section 6.5 above, and whether or not the
        Indemnifying Party assumes control of the negotiation, settlement or defence
        of
        any Third Party Claim, the Indemnified Party shall not settle or compromise
        any
        Third Party Claim except with the prior written consent of the Indemnifying
        Party (which consent shall not be unreasonably withheld). A failure by the
        Indemnifying Party to respond in writing to a written request by the Indemnified
        Party for consent for a period of five days or more, shall be deemed a consent
        by the Indemnifying Party to such request;

       

          (d) the
        Indemnifying Party and the Indemnified Party shall provide each other on
        an
        ongoing basis with all information which may be relevant to the other’s
        liability hereunder and shall supply copies of all relevant documentation
        promptly as they become available;

       

          (e) notwithstanding
        Section 6.5, the Indemnifying Party shall not settle any Third Party Claim
        or
        conduct any related legal or administrative proceeding in a manner which
        would,
        in the opinion of the Indemnified Party, acting reasonably, have a material
        adverse impact on the Indemnified Party, provided the Indemnified Party agrees
        to release the Indemnifying Party from any liability in relation to third
        party
        claims; and

       

          (f) no
        party
        will have any liability in respect of indemnification under this Article
        6 until
        the total dollar amount arising thereunder exceeds C$50,000 (the “Threshold
        Amount”). In the event a party’s liabilities under this Section 6 exceeds the
        Threshold Amount, then in such event the party obligated for indemnification
        shall fully indemnify and reimburse the other party for all amounts up to
        the
        Threshold Amount, as well as amounts in excess of such amount.


    

    


    6.7 
Rights
      Cumulative

     

    The
      rights of indemnification contained in this Article
      6 are
      cumulative and are in addition to every other right or remedy of the parties
      contained in this Agreement or otherwise.

    
      
        
        

      

      
        47

        
        

      

      
        
        

      

    

     

    6.8 
GST

     

    If
      the
      Vendors and the Purchaser acting reasonably determine that any payment (the
      “Payment”) made pursuant to this Article
      6
      is
      subject to GST or are deemed by the ETA to be inclusive of GST, the Indemnifying
      Party agrees to pay to the Indemnified Party in addition to the Payment an
      amount equal to the Payment multiplied by the applicable rate of
      GST.


     

    6.9 
Set-Off
      Rights

     

    The
      Holdback Funds shall be placed in a separate account of the Purchaser or Parent
      at Closing pursuant to Article 3 above, for a period of one year from the
      Closing (the “Holdback Period).. If Purchaser determines that it has a Claim it
      shall notify Jim Stechyson on behalf of the Vendors (hereinafter for purposes
      of
      this Section, the “Vendor”) in writing of such Claim (the “Set-Off Claim”)
      stating (i) the amount of the Claim, and (ii) the basis for such Claim for
      the
      Vendor to evaluate the Set-Off Claim; Vendor shall have ten (10) days to
      evaluate and respond to the Set-Off Claim in writing. If Vendor does not dispute
      the Set-Off Claim, Purchaser shall be entitled to set off such claim against
      the
      Holdback Funds. In the event that the Vendor disputes a Set-Off Claim, the
      parties will resolve such dispute using the procedure described in Section
      7.15
      below, provided that, if the HoldbackPeriod described in this section expires
      during the existence of a dispute involving a Set-Off Claim, the Purchaser
      shall
      retain an amount equal to the Set-Off Claim pending resolution of the dispute,
      and will release the balance of the Holdback Funds to Vendor.

    


    6.10 Exception

     

    Notwithstanding
      any other provision in this Agreement, if Purchaser has an expressed right
      pursuant to this Agreement to draw HoldbackFunds without compliance with Article
      6 then Purchaser may draw Holdback Funds without regard to any limitation in
      this Article 6 and without compliance with any provision of this Article 6
      and,
      without limiting the generality of the above, such draw Holdback Funds shall
      not
      be subject to the limitations set out in Section 6.6(f) hereof. However, any
      draw from Holdback Funds by Purchaser shall be based on Purchaser’s reasonable
      interpretation of this Agreement and applicable facts and Vendors reserve the
      right to arbitrate any claim that Purchaser was not entitled to draw funds
      from
      the Holdback under the terms of this Agreement. 

     

    The
      foregoing indemnification provisions in this Article 6 are in addition to,
      and
      not in derogation of, any statutory, equitable, or common law remedy any Party
      may have with respect to the transactions contemplated by this
      Agreement.

     

    ARTICLE
      7   -
      GENERAL


     

    7.1 
Public
      Notices

     

    All
      public notices to third parties and all other publicity concerning the matters
      contemplated by this Agreement shall be jointly planned and co-ordinated by
      the
      Parties and no Party shall act unilaterally in this regard without the prior
      approval of the other Parties, except where the Party making such notice is
      required to do so by law or by the applicable regulations 

    
      
        
        

      

      
        48

        
        

      

      
        
        

      

       

      or
        policies of any regulatory agency of competent jurisdiction or any stock
        exchange in circumstances where prior consultation with the other Parties
        is not
        practicable.

    

     

    7.2 
Term
      Sheet

     

    The
      Parties acknowledge that this Agreement supersedes any and all versions of
      that
      that certain unexecuted term sheet between the Vendors and the Purchaser.


    


    7.3 
Confidentiality

     

    The
      existence and terms and conditions of this Agreement are confidential until
      publicly disclosed. The parties acknowledge and agree that they are parties
      to a
      mutual non-disclosure agreement, and continue to be bound by the terms thereof.
      

    


    7.4 
Stand-Off

     

    The
      Vendors, on behalf of themselves, the Corporation, its officers, directors,
      attorneys, and advisors, agree not to (i) solicit, initiate, or encourage
      the submission of any proposal or offer from any person relating to the
      acquisition of any capital stock or other voting securities, or any substantial
      portion of the assets, of the Corporation (including any acquisition structured
      as a merger, consolidation, or share exchange), or (ii) participate other
      than with Purchaser in any discussions or negotiations regarding, furnish any
      information with respect to, assist or participate in, or facilitate in any
      other manner any effort or attempt by any person to do or seek any of the
      foregoing (collectively, the “Stand-Off”). The Vendors and/or the Corporation
      will notify Parent immediately if any person makes any proposal, offer, inquiry,
      or contact with respect to any of the foregoing. The Corporation will deal
      exclusively with Purchaser notwithstanding any third party proposals. The Stand
      Off will expire at the earlier of (i) sixty (60) days from the effective date
      of
      this Agreement (ii) or the Closing.

    


    7.5 
Expenses

     

    Each
      Party to this Agreement shall pay its respective legal, accounting and other
      professional advisory fees, costs and expenses incurred in connection with
      the
      negotiation, preparation or execution of this Agreement and all documents and
      instruments executed or delivered pursuant to this Agreement, as well as any
      other costs and expenses incurred.

    


    7.6 
Further
      Assurances

     

    The
      Parties shall do all such things and provide all such reasonable assurances
      as
      may be required to consummate the transactions contemplated by this Agreement,
      and each Party shall provide such further documents or instruments required
      by
      any other party as may be reasonably necessary or desirable to effect the
      purpose of this Agreement and carry out its provisions, whether before or after
      Closing.

    


    7.7 
Assignment
      and Enurement

     

    Neither
      this Agreement nor any benefits or duties accruing under this Agreement shall
      be
      assignable by any Party without the prior written consent of each of the other
      Parties, which 

     

    
      
        
        

      

      
        49

        
        

      

      
        
        

      

       

      consent
        shall not be unreasonably
        withheld or delayed. Subject to the foregoing, this Agreement shall ensure
        to
        the benefit of and be binding upon the Parties and their respective successors
        (including any successor by reason of amalgamation of any Party) and
        permitted assigns.

    

    


    7.8  
Entire
      Agreement

     

    With
      respect to the subject matter of this Agreement, this Agreement and its
      Exhibits supersedes all prior understandings and communications between the
      parties or any of them, oral or written. This Agreement, together with any
      exhibits and checklists attached hereto and any document delivered pursuant
      to
      this Agreement, constitutes the entire agreement between the Parties with
      respect to the matters herein and supersedes all prior agreements,
      understandings, negotiations and discussions relating to the subject matter
      hereof. The execution of this Agreement has not been induced by, nor do any
      of
      the Parties rely upon or regard as material, any representations, promises,
      agreements or statements whatsoever not incorporated herein and made a part
      hereof. This Agreement shall not be amended, altered or qualified except by
      written agreement signed by all of the Parties.

    


    7.9
 Waiver

     

        Except
      as
      otherwise expressly set out herein, no waiver of any provision of this Agreement
      shall be binding unless it is in writing. No indulgence or forbearance by a
      Party shall constitute a waiver of such Party’s right to insist on performance
      in full and in a timely manner of all covenants in this Agreement. Waiver of
      any
      provision shall not be deemed to waive the same provision thereafter, or any
      other provision of this Agreement at any time.

    


    7.10  Notices

     

    All
      payments and communications which may be or are required to be given by any
      party to any other party, shall be in writing and (i) delivered personally,
      (ii) sent by prepaid courier service or mail, or (iii) sent by prepaid
      telecopier or other similar means of electronic communication to the parties
      at
      their following respective addresses:

     

    
      For
        the
        Purchaser and the Parent:

      
        Susie
          Strohm

        ClearOne
          Communications, Inc.

        1825
          West
          Research Way

        Salt
          Lake
          City, Utah 84119

        Attention: 
          Susie
          Strohm

        
          Telecopier: 
            (801)
            974-3742

        

      

    

    
       

       

      
        
          
          

        

        
          50

          
          

        

        
          
          

        

      

      with
        a
        copy to:

      
        
          J.
            Scott
            Hunter

          Clyde,
            Snow, Sessions, & Swenson

          201
            South
            Main

          Salt
            Lake
            City, Utah 84119

        

        
          Attention: 
            J.
            Scott
            Hunter

          
            Telecopier: 
              (801)
              521-6280

          

        

      

       

      For
        the Vendors:

      Jim
        Stechyson

      5597
        Goddard St

      Ottawa,
        Ontario

      K4M1C5

       

      with
        a copy to:

      
        
          Norm
            Stechyon

          1080
            Tomkins Farm Crescent

          Greely,
            ON, K4P 1M5

           

          Telecopier: 
613
            822 1109

           

           

        

      

      Any
        such
        notice so given shall be deemed conclusively to have been given and received
        when so personally delivered or delivered, by courier or on the day on which
        termination is confirmed if sent by telecopier or other electronic communication
        or on the fifth day following the sending thereof by mail. Any party may
        from
        time to time change its address hereinbefore set forth by notice to the other
        parties in accordance with this section.

       

      7.11  Severability

       

      If
        any
        provision of this Agreement or portion thereof or the application thereof
        to any
        Person or circumstance shall to any extent be invalid or unenforceable:
        (a) the remainder of this Agreement or the application of such provision or
        portion thereof to any other Person or circumstance shall not be affected
        thereby; and (b) the Parties will negotiate in good faith to amend this
        Agreement to implement the intentions set forth herein. If the Parties cannot
        agree on an appropriate amendment, any Party may refer the matter for
        determination pursuant to and in accordance with Section 7.15.
        Each
        provision of this Agreement shall be valid and enforceable to the fullest
        extent
        permitted by law.

       

      7.12  Execution
        by Facsimile

       

      The
        signature of any of the Parties hereto may be evidenced by a facsimile copy
        of
        this Agreement bearing such signature.

       

       

      
        
          
          

        

        
          51

          
          

        

        
          
          

        

      

       

      7.13  Counterparts

       

      This
        Agreement may be signed in one or more counterparts, each of which so signed
        shall be deemed to be an original, and such counterparts together shall
        constitute one and the same instrument. Notwithstanding the date of execution
        of
        any counterpart, each counterpart shall be deemed to bear the effective date
        set
        forth below.

       

      7.14  Governing
        Law and Jurisdiction for Disputes

       

          This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        Province of Ontario and the federal laws of Canada applicable therein and
        shall
        be treated, in all respects, as an Ontario contract and the parties hereto
        do
        attorn to the exclusive jurisdiction of the Courts of Ontario. 

       

      7.15  Resolution
        of Disputes by Arbitrator

       

          (a) Any
        dispute, controversy or claim arising out of this contract, including any
        question regarding its existence, validity or termination, shall be submitted
        by
        any party to be finally resolved by arbitration under the Ontario
        Arbitration Act,
        1991 as
        amended (the “Act”). The Act is incorporated by reference into this
        clause.

       

          (b) The
        language of the arbitration shall be English. The arbitration shall be governed
        by the substantive and procedural law of Ontario. The venue for the arbitration
        shall be Ottawa.

          

          (c) The
        arbitration shall be conducted by a single arbitrator appointed by agreement
        between the parties, or in the absence of agreement, in accordance with the
        Act.

       

          (d) The
        arbitration must be complete, and a decision rendered, within ninety (90)
        days
        of the submission of the dispute to arbitration.

       

          (e) The
        decision arrived at pursuant to the arbitration shall be final and binding.
        No
        appeal shall lie from the arbitration. Any award granted as a result of
        arbitration proceedings under this section shall be recognized internationally,
        and may be entered in any court having jurisdiction to enforce such
        awards.

       

          (f) The
        prevailing Party in any arbitration brought to enforce or interpret this
        Agreement shall be entitled to reasonable costs, fees, losses, and expenses
        including attorney’s fees.

       

      7.16 Remedies

       

      The
        parties hereto agree that irreparable damage would occur in the event that
        any
        of the provisions of this Agreement are not performed in accordance with
        their
        specific terms or are otherwise breached. It is accordingly agreed that the
        parties shall be entitled to seek an injunction or injunctions to prevent
        breaches of this Agreement and to enforce specifically the terms and provisions
        hereof in an arbitration proceeding brought pursuant to Section 7.15 of this
        Agreement. 

      


      
        
          
          

        

        
          52

          
          

        

        
          
          

        

      

      7.17 Undisputed
        Amounts

       

      Subject
        to the express provisions of this Agreement, where there is any dispute as
        to
        the amount of money owing by any Party to any other Party hereunder, the
        portion
        of the amount owing that is not in dispute or otherwise contested or challenged
        (the “Undisputed Amount”) if any, shall be paid within the time required herein
        or if the required time has elapsed, shall be paid immediately, without
        deduction or abatement, but without prejudice to the rights of the Parties
        to
        contest, challenge or otherwise dispute the appropriate disposition of the
        remaining portion of the money claimed hereunder.

       

      7.18 
        Survival

       

      Unless
        replaced, amended or withdrawn prior to any detrimental reliance thereon
        by the
        Accepting Party (as defined in this paragraph), all covenants, agreements,
        indemnities, warranties and representations set forth herein or in any
        certificate or other document delivered pursuant to or in connection with
        this
        Agreement by or on behalf of one Party to another Party (the “Accepting Party”)
        shall be deemed to have been relied upon by the Accepting Party notwithstanding
        any investigations heretofore or hereafter made by or on behalf of the Accepting
        Party or its agents, and shall, unless expressly provided otherwise, survive
        in
        full force and effect and not merge upon the execution, termination or expiry
        of
        this Agreement.

       

      7.19  Good
        Faith

       

      All
        parties hereto covenant to act in good faith and fairly in connection with
        all
        obligations set out herein including, without limitation, allowing Vendors
        a
        good faith attempt to earn the Earn Out Amount. In connection therewith,
        James
        Stechyson shall have reasonable rights and responsibilities regarding operations
        of the Corporation subject to reasonable controls by Parent.

       

      [Signatures
        appear on the following page]

      


       

      
        
          
          

        

        
          53

          
          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF
        the
        parties have hereunto duly executed this Agreement on the date first above
        written.

       

       

       

      
        
          	 

                    /s/ Brian R.
                    Woodland                              

                  Witness

                	 

                  PURCHASER:

                  ClearOne
                    Communications of Canada, Inc., a 

                  New
                    Brunswick corporation

                   

                  Per:    /s/ Frances
                    M. Flood  
                                                   

                  Its:     President
                    &
                    CEO                                  
                    

                
	 

                   /s/ Brian R.
                    Woodland                              
                    Witness

                  

                	 

                  PARENT:

                  ClearOne
                    Communications, Inc., a Utah 

                  corporation

                   

                  
                    Per:    /s/ Frances
                      M. Flood  
                                                     

                    Its:     President
                      &
                      CEO                                  
                      

                  

                
	 

                                                                                       

                  Witness

                	 

                  VENDORS:

                  3814149
                    Canada Inc., a Canadian corporation

                       

                  Per:                                                                             

                  Its:                                                                             

                
	 

                                                                                       

                  Witness

                	 

                  3814157
                    Canada Inc., a Canadian corporation

                       

                  Per:                                                                             

                  Its: 
                                                                                        
                    

                
	 

                                                                                       

                  Witness

                	 

                  Stechyson
                    Family Trust

                       

                  Per:                                                                             

                  Its:                                                                     
                    

                
	
                                                                                       

                  Witness

                	 

                  Heather
                    Stechyson Family Trust

                       

                  Per: 
                                                                                              

                  Its:                                                                       

                   

                                                                                     
                    

                  Jim
                    Stechyson

                   

                                                                                     
                    

                  Norm
                    Stechyson