SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commissions file number: 333-18957
CLARK Material Handling Company
(Exact name of registrant as specified in its charter)
Delaware 61-1312827
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
172 Trade Street
Lexington, Kentucky 40511
(Address of registrant's principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (606) 288-1200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ x ]
As of January 1, 1998, there were 1,000 shares of the registrant's
common stock outstanding, all of which were owned by an affiliate of the
registrant.
Documents incorporated by reference: None
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CLARK Material Handling Company
Index to Annual Report on Form 10-K
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Page
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<S> <C>
PART I..........................................................................................................3
Item 1 -- BUSINESS...........................................................................................3
Item 2 -- PROPERTIES.........................................................................................8
Item 3 -- LEGAL PROCEEDINGS..................................................................................8
Item 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................9
PART II.........................................................................................................9
Item 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..............................9
Item 6 -- SELECTED FINANCIAL DATA............................................................................9
Item 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.........................................................................11
Item 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................................15
Item 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE..........................................................................15
PART III.......................................................................................................15
Item 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............................................15
Item 11 -- EXECUTIVE COMPENSATION...........................................................................16
Item 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................17
Item 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................20
PART IV........................................................................................................20
Item 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.................................21
</TABLE>
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The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
(including notes thereto) included elsewhere in this report. Unless otherwise
indicated or the context otherwise requires, references to the "Company" or
"CLARK" are to CLARK Material Handling Company (including its predecessors) and
the other material handling operations acquired from certain subsidiaries of
Terex Corporation ("the Predecessor's Parent") pursuant to the Acquisition (as
defined) for periods prior to the Acquisition and to CLARK Material Handling
Company and its subsidiaries for periods from and after the Acquisition, after
giving effect thereto.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. Certain matters discussed in
this filing could be characterized as forward looking statements, such as
statements relating to plans for future expansion, capital spending, financing
sources and effects of regulation and competition. Such forward looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward looking
statements.
PART I
Item 1 -- BUSINESS
General
CLARK is a leading international designer, manufacturer, and marketer of a
complete line of forklift trucks including internal combustion trucks, electric
riders, narrow aisle stackers and powered hand trucks. The Company invented the
platform truck in 1917, the tow tractor in 1924, and the forklift in 1928, and
produced the first electric forklift in 1942. As a result of this innovation and
the production of more than one million forklifts in its 80-year history,
management believes CLARK(R) is one of the most recognized brand names of
forklift trucks in North America.
Management believes that CLARK has a large installed fleet in North America
with over 250,000 units, and has a total of approximately 350,000 units in
operation worldwide. This large installed fleet has allowed CLARK to generate
significant ongoing replacement parts sales, which typically generate
substantially higher gross margins and provide a more stable revenue base than
new truck sales. CLARK's North American operations generally account for
approximately 70% of its net sales and its European operations account for the
remaining 30%. CLARK distributes its products to a diverse customer base through
a global network of more than 290 dealers, with more than 560 locations, in more
than 80 countries.
For information concerning the Company's backlog orders, see "Item
7--Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Backlog." Information about industry and geographic segments is
included in notes 1 and 13, respectively, to the Company's consolidated
financial statements included under "Item 8 -- Financial Statements and
Supplementary Data."
The Acquisition
The Company and CMH Holdings Corporation, a Delaware corporation
("Holdings"), were formed by Citicorp Venture Capital Ltd. ("CVC"), and certain
members of management of CLARK (the "Management Investors") to effect the
acquisition (the "Acquisition") of substantially all the assets and certain
liabilities of Clark Material Handling Company, a Kentucky corporation, and all
of the outstanding capital stock of certain of its affiliates, including its
German, Korean, Brazilian and Canadian affiliates. The Acquisition was
consummated on November 27, 1996 pursuant to a Stock and Asset Purchase and Sale
Agreement dated as of November 9, 1996 among the Predecessor's Parent and
certain of its subsidiaries, as sellers, and the Company, as buyer (the
"Acquisition Agreement"). The aggregate consideration for the Acquisition was
$139.5 million, which was subject to certain post-closing adjustments. To
finance the Acquisition (including the payment of related fees and expenses):
(i) CVC, Dr. Martin M. Dorio, President and Chief Executive Officer of the
Company, and Thomas J. Snyder, who was elected to the Board of Directors of the
Company in connection with the Acquisition, purchased $17.0 million of preferred
stock (the "Holdings Preferred Stock"), $1.0 million of voting common stock (the
"Holdings Class A Stock") and non-voting common stock (the "Holdings Class B
Stock", and together with the
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Holdings Class A Stock, the "Holdings Common Stock"), and $7.0 million of junior
subordinated debentures (the "Holdings Debentures") from Holdings for $25.0
million in cash; (ii) Holdings contributed such $25.0 million to the Company in
exchange for all of the capital stock of the Company; and (iii) the Company
issued and sold $130 million of 10 3/4% Senior Notes due 2006 (the "Notes").
During 1997 CLARK acquired, in purchase business combinations,
Hydroelectric Lift Trucks, Inc., ("HLT"), Blue Giant USA Corporation and Blue
Giant Canada Limited ("Blue Giant"). On February 28, 1997, the Company purchased
substantially all of the assets of HLT, a supplier of upright material handling
equipment. The Company's acquisition of Blue Giant was effective November 1,
1997, when it purchased, in two separate business combinations, substantially
all of the assets and certain liabilities of Blue Giant. See note 4 to the
Company's consolidated financial statements.
Products
CLARK currently offers over 100 truck designs within five major product
lines: light internal combustion ("IC") trucks (with a capacity of 1.0 to 5.0
tons), heavy IC trucks (with a capacity of 5.5 to 16.5 tons), narrow-aisle
trucks (with a capacity of 1.5 to 2.5 tons), electric counterbalanced riders
(with a capacity of 1.3 to 6.0 tons), and manual and powered hand trucks (with a
capacity of 2.0 to 4.0 tons).
Light IC trucks, used for general warehousing needs, are generally powered
by liquid propane. Such trucks are well suited for manufacturing and
distribution applications that require a high degree of maneuverability. Heavy
IC trucks are specialty products designed for use in more demanding situations
such as heavy manufacturing or container handling applications. Narrow-aisle
trucks provide solutions for high density storage needs and operate in six to
eight foot aisles and reach heights of more than 30 feet. Electric
counterbalanced riders, designed for indoor use in warehousing, manufacturing,
distribution and other applications, are powered by a rechargeable electric
battery. Management estimates that light IC trucks, heavy IC trucks,
narrow-aisle trucks and electric counterbalanced riders represent approximately
58%, 3%, 15% and 24% of the unit volume of the forklift rider truck industry,
respectively. Powered hand trucks are generally used in the transportation and
order-selecting businesses.
CLARK tailors its products to meet customers' particular material handling
needs. To further meet these needs, CLARK adds attachments such as container
handlers, side shifters, roll clamps, block handlers, carton clamps, push-pulls
(slip-sheet) and fork positioners.
Rapid development and introduction of new and redesigned products
incorporating the latest materials handling technology is a key component of
CLARK's strategy. Management believes that CLARK has introduced more new and
redesigned models in the last three years than any other major forklift truck
manufacturer and plans to continue a rapid pace of new product introduction.
CLARK maintains an engineering staff that is responsible for designing new
products and improving existing product lines.
Since 1993, CLARK has redesigned a substantial portion of its product line.
In December 1994, CLARK introduced the 2-3 ton Genesis(R) IC truck targeting the
light IC market. CLARK invested approximately $15.0 million to develop the
Genesis(R) truck. The Genesis(R) truck provides improved ergonomics,
performance, reliability, serviceability, and provides higher gross margins than
its predecessor, primarily due to its lower production cost.
CLARK's European subsidiaries ("CLARK Europe") introduced the Genesis(R)
2-3 ton gas and diesel MegaStat(TM) model in April 1995. The Genesis(R) 2-3 ton
MegaStat(TM) IC received the "General Lift Truck Innovation" award in 1996 from
the Fork Truck Association in the United Kingdom.
In 1996, CLARK continued to expand its Genesis(R) family with the addition
of a 4-5.5 ton pneumatic tired IC lift truck, and a 2 - 3.2 ton electric four
wheel sit down rider. CLARK also made significant additions to its narrow aisle
stacker product line, which was expanded to include double reach and straddle
models.
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During 1997, CLARK added three more trucks to its Genesis(R) family, a 4.0
- - 5.0 ton cushion tired IC lift truck , a 6.0 - 7.0 ton cushion tired IC lift
truck, and a 1.2 - 2.5 ton three wheel electric sit down rider. CLARK also
expanded its Genesis(R) heart-of -the-line 2-3 ton IC trucks by increasing the
capacity to 3.2 tons and adding a 3.0 liter GM engine option.
In 1997, CLARK purchased Blue Giant and HLT. Blue Giant will produce a full
line of CLARK branded manual and powered walkie pallet trucks and stackers as
well as continue to produce and sell under the Blue Giant name. HLT produces
forklift masts mainly for CLARK's own use.
Aftermarket Parts
Since the Company's inception, more than one million forklift trucks have
been manufactured by CLARK and its predecessors, and it currently has in service
approximately 350,000 trucks worldwide, with approximately 250,000 in North
America, 70,000 in Europe, and 30,000 in other international markets, generating
a substantial aftermarket parts business for CLARK. CLARK's worldwide installed
fleet of approximately 350,000 forklift trucks generates an estimated $240.0
million in annual global aftermarket parts sales, of which CLARK has
historically captured an estimated 40% share. Clark supplies both original
equipment parts to fit CLARK brand forklifts and Totalift (R) parts to fit other
brands.
CLARK's parts distribution operation undertakes purchasing and customer
services for aftermarket parts. CLARK distributes its aftermarket parts in North
America through a distribution center in Southaven, Mississippi, (the "Southaven
Facility"), in Europe through a warehouse located in Saarn, Germany and for the
International Operations of CLARK, through two sales and distribution facilities
located in Seoul, Korea and the State of Sao Paulo, Brazil, respectively. CLARK
shares the Southaven Facility with the Predecessor's Parent and, pursuant to the
Acquisition, CLARK and the Predecessor's Parent entered into a Service Agreement
providing for the continued use by CLARK of such facility. For information
regarding the Service Agreement, see "Item 13--Certain Relationships and Related
Transactions--Service Agreement."
Manufacturing Operations
CLARK's Lexington, KY facility produces both IC and electric forklifts with
lift capacities ranging from 1-17.5 tons and is equipped with five assembly
lines and two heavy IC assembly bays. The Lexington facility is primarily an
assembly operation with welding and painting capabilities, operates one shift
per day, and produces an average of 60 lift trucks per day. In 1996, the Company
made a commitment to achieve ISO-9001 certification for the Lexington facility.
A formal audit was conducted in June 1997. Certification was awarded in August
1997, indicating that the Company has achieved and sustained a high degree of
quality and consistency with respect to its products.
CLARK Europe's Mulheim manufacturing facility produces both IC forklifts
(Diesel, LP gas and natural gas) with hydrodynamic as well as electronically
controlled hydrostatic drive (MegaStat(TM)) and electric powered forklifts
equipped with D/C as well as frequency-controlled A/C motors (MegaAC(TM)) in the
capacity range of 1-5 tons. The Mulheim facility is equipped with four assembly
lines, one for electric trucks, two for IC trucks and one for uprights. The
manufacturing process includes pre-production and welding production of frames
and uprights and a powder dry paint system was recently installed to ensure
high-quality painting of frames and uprights. CLARK Europe's facility currently
operates one shift per day and produces an average of 25 lift trucks per day.
The Mulheim facility has also been awarded ISO-9001 certification.
Blue Giant has two locations, one in Pell City, Alabama, and one in
Brampton, Ontario, Canada. The Pell City, Alabama facility produces tow
tractors, pallet trucks and dock equipment and its capabilities include
machining, welding, paint and assembly. The Brampton, Ontario facility, produces
dock equipment, walkie and walkie stacker forklifts and scissor lifts and its
primary operations include machining, welding, assembly and painting. The
Brampton facility is ISO-9001 certified. HLT is located in Wilmington, Ohio, and
produces forklift mast in support of the CLARK Lexington plant's forklift
production. HLT's primary operations are welding, painting and assembly and the
facility operates two shifts per day.
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Dealer Network
CLARK markets both original equipment and parts through a worldwide dealer
network. CLARK currently has approximately 100 independent dealers in each of
North America and Europe and owns three dealers in Europe. In addition, outside
of North America and Europe, CLARK markets and distributes its export products
through 95 distributors operating in the Asian, African, Middle Eastern,
Caribbean and Latin American markets. CLARK's dealers and distributors generally
market the full CLARK product line and maintain comprehensive service
capabilities. CLARK's sales organization coordinates sales and promotional
activities, provides ongoing dealer training and facilitates dealer
communications. CLARK sells to a diversified customer base, with no single
customer accounting for more than 5% of total sales.
Suppliers
The Company strategically relies upon outside suppliers for a vast majority
of the individual components of a lift truck. Management believes that such
outsourcing allows CLARK greater flexibility in varying its cost structure in
response to changing market conditions.
Principal materials used by CLARK in its various manufacturing processes
include steel, castings, engines, tires, electric controls, uprights, transaxles
and motors, and a variety of other fabricated or manufactured items. While
substantially all such materials are typically available from multiple
suppliers, CLARK depends exclusively upon certain suppliers of key parts used in
its lift trucks. From time to time, certain of CLARK's suppliers have
experienced difficulties in meeting CLARK's production schedules. The failure of
a key supplier to meet the Company's requirements on a timely basis or the loss
of a key supplier could lead to delays in the Company's manufacturing operations
and have a material adverse effect on the Company.
Competition
CLARK produces one of the leading forklift truck brands in North America,
although NACCO Industries, Inc., ("NACCO"), through its Hyster and Yale
divisions, produces more forklift trucks annually. In addition to NACCO, other
major North American competitors include Toyota Industrial Equipment/TMS,
Mitsubishi Caterpillar Forklift America Inc., Nissan Forklift Corp. North
America, Komatsu Forklift USA Inc. and Daewoo in both IC trucks and electric
riders, and Crown Equipment Corp. and Raymond Corporation in electric riders
alone. In Europe, CLARK competes with Linde AG, the European market leader, as
well as Jungheinreich AG, Toyota Industrial Equipment/TMS, and NACCO. CLARK also
competes with a number of specialty manufacturers.
The truck market in which the Company competes is highly competitive. The
Company encounters significant competition particularly from lower cost foreign
competitors, including manufacturers located in Japan and Korea. The Company
competes on the basis of quality, price, on-time delivery, product line, ease of
use, safety, comfort and customer service. Many of the Company's competitors
have greater financial resources than the Company. Additionally, certain of the
Company's products are subject to changing technology that could place the
Company at a competitive disadvantage relative to product innovations by
competitors. There can be no assurance that the Company will be able to achieve
the technological advances that may be necessary to remain competitive.
Intellectual Property
The Company relies on a combination of trademarks, service marks, trade
names, patents, licensing arrangements, trade secrets, know-how and proprietary
technology to secure and protect its intellectual property rights. In
particular, the Company's CLARK(R), Clarklift(R), Powrworker(R), Genesis(R), and
Blue Giant(R) trademarks are of particular importance to the Company's business.
The Company is currently undertaking to obtain trademark registrations for its
MegaValve (TM), MegaStat (TM), MegaPro (TM), and MegaAC (TM) marks. The loss of
the Company's rights under one or more of the Company's trademarks could have a
material adverse effect on the Company's business.
There can be no assurance that the Company will be successful in obtaining
approval of any present or future patent or trademark applications; that any
patents, patent applications and patent licenses will adequately cover the
Company's technologies or protect the Company from potential infringements by
third parties; that any nondisclosure and confidentiality agreements will
provide meaningful protection for the Company's trade secrets, know-how or
proprietary technology in the event of any unauthorized use or disclosure of
such information; or that
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others will not obtain access to, or independently develop technologies or
know-how similar to, that of the Company. There also can be no assurance that
future litigation by the Company will not be necessary to enforce its trademark,
patent and other proprietary rights, or to defend the Company against claimed
infringement of the rights of others, adverse determinations in which could have
a material adverse effect on the Company.
Employees
As of December 31, 1997, CLARK's total work force consisted of
approximately 1,450 salaried, hourly and temporary employees. Of these employees
1,000 are in the Company's North American operations and 450 work in the foreign
operations.
In Europe, the Mulheim facility at Saarn is represented by the German Metal
Workers (Industrie Gewerkschaft Metal) and the aftermarket parts facility at
Saarn is represented by the German Union for Trading, Banking and Insurance
(Gewerkschaft Handel, Banken und Versicherungen). The Mulheim facility has a
total work force of approximately 350, of which approximately 200 are members of
the German Metal Workers, and the aftermarket parts facility at Saarn has a
total workforce of approximately 65, of which approximately 20 are members of
the German Union for Trading, Banking and Insurance. There are no contracts
between CLARK and the unions, but CLARK follows standard practices by complying
with contracts between the unions and the employers' association.
The union employees of the Predecessor's Parent at the Southaven Facility
engaged in a labor dispute beginning in 1995, which had a short-term effect on
the Company's distribution operations at the facility but had no appreciable
effect on the conduct of business or results of operations. See "Item 1 -
Business - Aftermarket Parts". Although such union employees filed a petition
with the National Labor Relations Board in May 1996 for decertification of the
union, there can be no assurance that similar labor disputes will not occur in
the future which, depending upon the timing and duration of such disputes, could
have a material adverse effect on the Company.
Management believes that its relationships with its employees and unions
are good.
Environmental Matters
As with most industrial companies, the Company's facilities and operations
are required to comply with and are subject to liability under federal, state,
local and foreign environmental and worker health and safety laws, regulations
and ordinances, including those relating to air emissions, wastewater discharges
and the management and disposal of certain materials, substances and wastes
("Environmental Laws"). Certain of these Environmental Laws hold owners or
operators of land or businesses liable for their own and for previous owners' or
operators' releases of hazardous or toxic substances, materials or wastes,
pollutants or contaminants, including, in some instances, petroleum and
petroleum products. Compliance with Environmental Laws also may require the
acquisition of permits or other authorizations for certain activities and
compliance with various standards or procedural requirements. Although the
Company believes that its operations are in substantial compliance with current
regulatory requirements under material applicable Environmental Laws, the nature
of the Company's operations and the history of industrial uses at some of its
facilities expose the Company to the risk of liabilities or claims with respect
to environmental and worker health and safety matters. The Company may also have
contingent responsibility for liabilities with respect to environmental matters
arising in connection with the prior operations of the material handling
business of CLARK Equipment Company, a predecessor of the Company ("CEC"). There
can be no assurance that material costs or liabilities will not be incurred in
connection with such liabilities or claims.
In connection with the Acquisition, the Company agreed to indemnify the
Predecessor's Parent and hold it harmless from and against all losses which are
incurred or suffered by the Predecessor's Parent with respect to or arising out
of the Company's business and assets except for such losses which arise from or
are in connection with any real property, business entities or assets which were
not acquired as part of the Acquisition (which the Predecessor's Parent agreed
to retain responsibility for and indemnified the Company against). No specific
environmental losses were identified by the parties in the Acquisition Agreement
nor are there any known material losses which have been asserted by the
Predecessor's Parent pursuant to the environmental indemnity provisions of the
Acquisition Agreement or incurred by the Company. The environmental indemnities
are subject to certain deductibles, caps and time limitations depending on the
nature of the environmental claim.
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Based upon the Company's experience to date and the indemnities obtained in
connection with the Acquisition, the Company believes that the future cost of
compliance with existing Environmental Laws (or liability for known
environmental liabilities or claims) should not have a material adverse effect
on the Company's business, financial condition or results of operations.
Compliance with such laws has, and will, require expenditures by the Company on
a continuing basis. Future events, such as changes in existing laws and
regulations or their interpretation, may give rise to additional compliance
costs or liabilities that could have a material adverse effect on the Company's
business, financial condition or results of operations. Compliance with more
stringent laws or regulations, as well as more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing laws,
may require additional expenditures by the Company that may be material.
Item 2 -- PROPERTIES
The Company's headquarters are located in Lexington, Kentucky. The Company
currently owns or leases 13 facilities in North America, Europe, Brazil and
Korea which are used for manufacturing, distribution, sales, warehousing and
service center activities.
The following table outlines the principal facilities owned or leased by
CLARK or its subsidiaries:
<TABLE>
<CAPTION>
Facility Location Type of Facility
----------------- ----------------
<S> <C> <C>
Lexington, Kentucky Manufacturing, warehouse and office
Lexington, Kentucky * Sales, training and engineering
Lexington, Kentucky Warehouse
Mulheim-Ruhr, Germany ** Manufacturing, engineering, power generation, maintenance and office
Saarn, Germany Warehouse
Barcelona, Spain Sales branch
Paris, France Sales branch
Lyon, France Sales branch
State of Sao Paulo, Brazil Parts distribution
Seoul, Korea Parts distribution and office
Wilmington, Ohio Manufacturing, warehouse and office
Pell City, Alabama Manufacturing, warehouse and office
Brampton Ontario, Canada * Manufacturing, warehouse and office
</TABLE>
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* Owned.
** A portion of the facility is owned.
CLARK also owns a manufacturing facility in Banwaal, Korea, which was
closed in the fourth quarter of 1994 and is presently held for sale. CLARK
Europe also presently leases unoccupied office space in Mulheim-Ruhr, Germany.
Management believes that the Company's facilities are suitable for its
operations and provide sufficient capacity to meet the Company's requirements
for the foreseeable future.
Item 3 -- LEGAL PROCEEDINGS
From time to time product liability claims are asserted against the Company
for various injuries alleged to have resulted from defects in the manufacture
and/or design of its products. As of December 31, 1997, the Company had 76
pending lawsuits relating to claims arising from accidents involving its
products. Most of these lawsuits are in various stages of pretrial completion,
and certain plaintiffs are seeking punitive as well as compensatory damages. The
Company is self-insured, up to certain limits, for these product liability
claims, as well as certain exposures related to general workers' compensation
and automobile liability. The Company has
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recorded and maintains on its balance sheet reserves relating to the estimated
liability, based in part upon actuarial determinations, of the Company's
aggregate exposure for such self-insured risks. The Company is involved in
various other legal proceedings, which have arisen in the normal course of its
operations. The Company has recorded provisions for estimated losses in
circumstances where a loss is probable and the amount or range of possible
amounts of the losses is estimable. There can be no assurance that any of the
foregoing reserves are adequate.
The Company is contingently liable as a guarantor for certain of its
dealers' and customers' financing arrangements with financial institutions. The
guarantees under these financing arrangements aggregated approximately $137,000
at December 31, 1997, which is consistent with prior years. Historically, the
Company and the Predecessor have incurred only minimal losses relating to these
arrangements. The unfavorable resolution of product liability claims or any
other contingencies or uncertainties in the future could have a material adverse
effect on the Company.
Item 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders for the
period ended December 31, 1997.
PART II
Item 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common equity is not publicly traded and, accordingly, an
established market does not exist for such common equity. The Company is a
wholly owned subsidiary of Holdings. For certain information concerning the
ownership of Holdings Preferred Stock and Holdings Common Stock, see "Item 12 --
Security Ownership of Certain Beneficial Owners and Management."
No dividends have been paid on the Company's common equity. There are
certain limitations on the payment of dividends in the Company's borrowing
arrangements.
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Item 6 -- SELECTED FINANCIAL DATA
Through November 26, 1996, the Company operated as wholly owned
subsidiaries of the Predecessor's Parent. On November 27, 1996, the Company was
acquired by Holdings. Accordingly, the selected financial data shown below is
not necessarily comparable as a result of these ownership changes and the
resulting adjustments required for purchase business combinations under
generally accepted accounting principles.
The information contained in this table should be read in conjunction with
"Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Company's consolidated financial statements
included under "Item 8--Financial Statements and Supplementary Data."
<TABLE>
<CAPTION>
Wholly Owned Subsidiaries of the
Predecessor's Parent The Company
---------------------------------------------- ----------------------------
Eleven Months One Month
Years Ended Ended Ended Year Ended
December 31, November 26, December 31, December 31,
------------------------
1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Net Sales $395.6 $472.7 $528.8 $404.6 | $46.8 $489.3
Gross Profit (1) 22.3 42.9 44.2 45.6 | 4.9 58.2
Engineering, selling and |
administration expenses (1) (2) 50.9 50.2 37.6 32.3 | 3.0 37.1
Income (loss) from operations (3) (28.6) (14.0) 3.1 13.3 | 1.9 21.0
Income (loss) before |
extraordinary items and |
cumulative effect of change |
in accounting (2) (3) (44.9) (25.3) (17.4) (2.1) | .5 7.9
Balance sheet data (at end |
of period): |
Working capital (4) 50.8 41.4 46.4 51.4 | 45.0 55.8
Net property, plant and |
equipment 75.3 60.7 58.2 51.2 | 51.0 47.8
Total assets 208.0 194.7 192.7 192.7 | 301.3 313.3
Long-term obligations (5) 120.0 125.9 143.0 151.3 | 133.6 133.9
|
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</TABLE>
(1) Certain reclassifications of prior years have been made to conform with
the current year presentation.
(2) Includes corporate charges allocated by the Predecessor's Parent of; (a)
$4.4 million, $8.5 million and $7.0 million in the years ended December
31, 1993, 1994 and 1995, respectively; and (b) $5.7 million in the eleven
month period ended November 26, 1996.
(3) Includes severance and exit charges of $6.7 million and $3.5 million in
the years ended December 31, 1994 and 1995, respectively.
(4) Calculated as net trade receivables plus net inventories less trade
payables.
(5) The amounts of long-term obligations as of December 31, 1993, 1994 and
1995, and November 26, 1996, include Due to Parent of $40.2 million,
$68.5 million, $87.6 million and $96.4 million, respectively; such
amounts also include the long-term portion of capital lease obligations.
At December 31, 1996 and 1997 the amount of long-term obligations
includes the Notes and the long-term portion of capital lease
obligations.
10
<PAGE>
Item 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
CLARK experienced operating losses of $28.6 million and $14.0 million for
the years ended December 31, 1993 and 1994, respectively. These losses were
largely due to high operating expenses and cash constraints. Since 1993, CLARK
has undertaken a series of initiatives aimed at reducing fixed costs, developing
a largely variable cost structure and maximizing the Company's ability to
respond to market changes. These initiatives involved (i) elimination of
redundant manufacturing and distribution facilities, (ii) head-count reductions
involving termination of over 600 employees, representing approximately 40% of
the Company's workforce, (iii) elimination of non-core, unprofitable product
lines and (iv) greater reliance on outsourcing. In addition to cost
rationalization, the Company has redesigned a significant portion of its product
portfolio. The Company's new and redesigned products have earned higher gross
margins due to their lower production costs. As a result of these initiatives,
CLARK'S operating earnings have steadily improved since 1993.
The Company manufactures products in the U.S. and Germany and sells
products in more than 80 countries worldwide. A portion of the Company's raw
materials are acquired from foreign suppliers and denominated in foreign
currencies. Consequently, the Company's operating results are subject to
fluctuations in foreign currency exchange rates, as well as, the translation of
its foreign operations into U.S. dollars. The risks associated with operating in
foreign countries could adversely affect the Company's future operating results.
In addition, currency fluctuations could improve the competitive position of the
Company's foreign competitors if the value of the U.S. dollar rises in relation
to the local currencies of such competitors. The Company has not historically
hedged its foreign currency risk.
Sales of products manufactured and sold by the Company have historically
been subject to cyclical variation based, among other things, on general
economic conditions. Management believes that the Company has improved its
ability to sustain profitability in changing market conditions. There can be no
assurance, however, as to the magnitude or timing of any decline or recovery, or
that any future decline will not have a material adverse effect on the Company's
business.
Results of Operations
<TABLE>
<CAPTION>
Wholly Owned Subsidiaries of the Predecessor's Parent The Company
----------------------------------------------------- ----------------------------------------
Year Ended Eleven Months Ended One Month Ended Year Ended
December 31, 1995 November 26, 1996 December 31, 1996 December 31, 1997
($) (%) ($) (%) ($) (%) ($) (%)
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $528.8 100.0% $404.6 100.0% | $46.8 100.0% $489.3 100.0%
Gross Profit (1) 44.2 8.4% 45.6 11.3% | 4.9 10.5% 58.2 11.9%
|
Engineering, Selling 37.6 7.1% 32.3 8.0% | 3.0 6.4% 37.1 7.6%
and Administrative |
Expenses (1) (2) |
Income from Operations(2)(3) 3.1 0.6% 13.3 3.3% | 1.9 4.0% 21.0 4.3%
</TABLE>
- ----------
(1) Certain reclassifications of prior year amounts have been made to conform
with the current year presentation.
(2) Includes corporate charges allocated by the Predecessor's Parent of, $7.0
million and $5.7 million in the years ending 1995 and the eleven months
ended November 26, 1996, respectively.
(3) Includes severance and exit charges of $6.7 million and $3.5 million in
the years ended December 31, 1994 and 1995, respectively.
Fiscal Year Ended December 31, 1997 compared to the month ended December 31,
- --------------------------------------------------------------------------------
1996, and the eleven months ended November 26, 1996
- ---------------------------------------------------
The acquisition of the Company on November 26, 1996, resulted in a
significant change in the Company's capital structure and a revaluation of the
Company's assets and liabilities in accordance with the provisions of purchase
accounting required by generally accepted accounting principles. Accordingly,
the results of operations for the year ended December 31, 1997, are not
comparable to the results of operations for the month ended December 31, 1996,
and the eleven-month period ended November 26, 1996, or the year ended December
31, 1995.
11
<PAGE>
Net Sales
- ---------
Net sales were $489.3 million in 1997, an increase of $37.9 million or
8.4% from $451.4 million in the twelve month period ended December 31, 1996.
Truck sales increased $38.1 million and parts sales were relatively consistent.
The increase in truck sales was primarily due to improved market conditions in
1997 and the acquisition of Blue Giant USA Corporation and Blue Giant Canada
Limited which increased sales by $4.8 million or 1.2%. CLARK derived 73.5% and
25.7% its net sales from its North American operations and CLARK Europe
respectively, compared to 68.6% and 31.4%, respectively in 1996. A change in the
German Deutsche mark ("DM") annual average currency translation rate from 1.505
DM to one U.S. dollar for 1996 to 1.734 DM to one U.S. dollar for 1997 had a
negative impact on reported sales (and income) in U.S. dollars from the
Company's European operations.
Gross Profit
- ------------
Gross profit increased $7.7 million, or 15.2%, to $58.2 million in 1997
from $50.5 million in 1996. As a percentage of net sales, gross profit was 11.9%
and 11.2% for 1997 and 1996 respectively. Increased sales accounted for
approximately $4.6 million of the increased gross profit and lower costs due to
the Company's cost reduction efforts in the area of materials, labor, and
overhead accounted for the balance of the improvement.
Engineering, Selling and Administrative Expenses
- ------------------------------------------------
Engineering, selling and administrative expenses increased by $1.8
million to $37.1 million for the twelve months period ended December, 1997 from
$35.3 million for the twelve month period ended December 31, 1996. Certain
administrative functions performed by the Predecessor's Parent were replaced,
but at a lower cost than was charged by the parent in 1996. The Company
increased its engineering and selling expenses $4.4 million. This increase was
to support new product and sales initiatives in 1997 and beyond. Engineering,
selling and administrative expenses expressed as a percentage of sales were 7.6%
and 7.8% respectively in 1997 and 1996.
Income from Operations
- ----------------------
Income from operations increased $5.8 million to $21.0 million for the
twelve-month period ended December 31, 1997 from $15.2 million in the
twelve-month period in 1996. This increase was due to the reasons noted above.
Income from operations expressed as a percentage of net sales was 4.3% and 3.4%
for the twelve months ended December 31, 1997 and December 31, 1996
respectively.
Eleven Months Ended November 26, 1996 Compared to Year Ended December 31, 1995
- ------------------------------------------------------------------------------
Net Sales
- ---------
Net sales were $404.6 million for the eleven months ended November 26,
1996 compared to $528.8 million for the twelve-month period in 1995, a decrease
of $124.2 million or 23.5%. This decrease was primarily due to reduced demand by
CLARK's customers, which management believes was related to lower industry
activity beginning in the last quarter of 1995. Net truck sales decreased $112.6
million, or 26.0%, primarily due to a softening in the demand for lift trucks in
North America and Europe, while parts sales declined 12.1%. CLARK derived 68.8%
and 31.2% of its net sales from its North American operations and CLARK Europe,
respectively, in the eleven months ended November 26, 1996, and 69.3% and 30.7%
respectively, in the twelve months ended December 31, 1995.
Gross Profit
- ------------
Gross profit increased $1.4 million, or 3.2%, to $45.6 million for the
eleven months ended November 26, 1996, compared to $44.2 million for the twelve
month period in 1995, despite the 23.5% decline in net sales. As a percentage of
net sales, gross profit was 11.3% and 8.4% for the eleven months ended November
26, 1996 and the twelve month period of 1995, respectively. Cost reduction
efforts and production improvements accounted for most of this increase. Factory
overhead expenses were reduced by $13.9 million. Of this amount, $10.1 million
was
12
<PAGE>
attributable to lower salaries, wages and benefits. Other significant areas of
cost decreases included lower product liability costs, lower freight costs and
lower material costs from improved outsourcing. These improvements were
partially offset by lower absorption of fixed costs due to lower production
levels and by lower margins for aftermarket parts due to a change in product
mix.
Engineering, Selling and Administrative Expenses
- ------------------------------------------------
For the eleven months ended November 26, 1996, engineering, selling and
administrative expenses decreased $5.3 million to $32.3 million from $37.6
million for the twelve month period in 1995 primarily due to the rationalization
of staff levels, facilities and support costs in response to lower industry
activity. Engineering, selling and administrative expenses as a percentage of
net sales were 8.0% and 7.1% in the eleven months ended November 26, 1996 and
twelve months ended December 31, 1995, respectively.
Income from Operations
- ----------------------
Income from operations increased $10.2 million to $13.3 million for the
eleven months ended November 26, 1996, compared to $3.1 million for the twelve
months ended December 31, 1995. In addition, CLARK had $3.5 million of severance
and exit charges related to workforce rationalization in Europe and the
termination of certain leases, in 1995, which did not recur in 1996. The
Predecessor's Parent allocated corporate charges to CLARK of $5.7 million and
$7.0 million in the 1996 and 1995 periods. Income from operations, expressed as
a percentage, of net sales were 3.3% and 0.6% for the eleven months ended
November 26, 1996 and the twelve months ended December 31, 1995, respectively.
Backlog
The Company's backlog of orders at December 31, 1997 and December 31,
1996 were $114.8 million and $80.4 million, respectively. Substantially all of
the Company's backlog orders are expected to be filled within one year, although
there can be no assurance that all such orders will be filled within that time
period. The cancellation or delay of certain orders could have a material
adverse effect on the Company.
Capital Resources, Liquidity and Financial Condition
The Company's business is capital intensive and requires funding for
purchases of production and replacement parts inventories, capital expenditures
for repair, replacement and upgrading of existing facilities as well as
financing of accounts receivables from customers and dealers. The Company will
continue to have significant debt service requirements. On December 31, 1997,
the Company had $6.6 million of cash, cash equivalents and cash securing letters
of credit, $130.0 million of long-term debt and $6.6 million of capital leases
obligations. The Company's overall financial condition did not change
significantly at December 31, 1997 from December 31, 1996. However, working
capital (defined as receivables and inventories less payables) increased $10.8
million primarily as a result of more rapid payment of accounts payable by
taking advantage of vendor discounts for prompt payment, and the acquisitions of
HLT and Blue Giant. This increase was partially offset by declines in the value
of the DM which reduced the working capital of the Company's European operations
when converted to U.S. dollars. The fluctuation in the German currency also
resulted in a substantial increase in the currency translation amount included
within stockholder's equity.
Cash provided by operating activities for 1997 was $11.1 million, and
the Company's cash levels were down $10.2 million from December 31, 1996 levels.
The Company had $6.3 million of capital expenditures including tooling, new
products and systems modernization expenditures, for the twelve months ending
December 31, 1997 compared to $3.5 million of capital expenditures for the
twelve months ending December 31, 1996. The Company purchased substantially all
the assets of HLT on February 28, 1997, in exchange for a $4.9 million
short-term note, which matured and was paid in the second quarter of 1997. In
addition to paying the note issued to acquire HLT, the Company closed its
acquisition of the Blue Giant in two separate purchase business combinations
using existing cash of $9.7 million (see note 4 to the consolidated financial
statements ). The Company also made the interest payments of $13.5 million on
its 10 3/4 % Senior Notes. The Company's ability to incur additional
indebtedness is somewhat restricted by the covenants set forth in the Company's
borrowing arrangements.
14
<PAGE>
In connection with the Acquisition, the Company entered into a $30.0
million revolving credit facility (the "Revolving Credit Facility"), which is
secured by the accounts receivable and inventory of the Company's domestic
operations, excluding HLT and Blue Giant. The Revolving Credit Facility has an
aggregate undrawn availability of $29.2 million at December 31, 1997, subject to
the borrowing conditions contained therein. Management believes that it has
adequate available borrowing capacity under the Revolving Credit Facility to
cover its foreseeable working capital requirements for fiscal 1998 and that cash
flow from operations and its borrowing arrangements will be adequate to meet
other liquidity and capital needs in 1998.
As of December 31, 1997, the Company was not in violation of any
covenants or restrictions in the Revolving Credit Facility or the indenture
governing the Notes.
Contingencies, Commitments and Uncertainties
From time to time product liability claims are asserted against the
Company for various injuries alleged to have resulted from defects in the
manufacture and/or design of its products. In addition, the Company is involved
in various other legal proceedings, which have arisen in the normal course of
its operations. See "Item 3-Legal Proceedings."
The Company is contingently liable as a guarantor for certain of its
dealers' and customers' financing arrangements with financial institutions. The
guarantees under these financing arrangements aggregated approximately $137,000
at December 31, 1997, which is consistent with prior years. Historically, the
Company and the Predecessor have incurred only minimal losses relating to these
arrangements.
CLARK is contingently liable for a portion of the related value of
machines sold to and leased by a third party to users for terms generally
ranging from three to five years. CLARK repurchases certain machines leased
under this program and then sells or leases such machines to other users. At
December 31, 1997, the maximum contingent liability under this program was
approximately $6.3 million. CLARK has historically recorded profits on the sale
of repurchased machines.
Year 2000
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium approaches. The "year 2000"
problem is pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not recognize such
information could generate erroneous data or cause a system to fail.
The Company is utilizing both internal and external resources with
respect to its year 2000 issues. The Company is also in the process of
installing new software to provide improved operational and financial
functionality. This new software is year 2000 compliant. The installation is
expected to be completed in 1998 and is expected to cost approximately $6.0
million.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". In February 1998, the FASB issued SFAS No.
132, "Employers' Disclosures about Pensions and other Postretirement Benefits".
These statements require certain modifications and additional information
relating to financial statement disclosure of the components of comprehensive
income, operating segment information and pensions and other post retirement
benefits. These statements only impact the disclosure in financial statements;
therefore, management does not expect that the adoption of these new standards
in 1998 will have a significant impact on the Company's financial condition or
results of operations.
For additional information on contingencies and uncertainties, see Note
11 to the Company's consolidated financial statements included under "Item
8--Financial Statements and Supplementary Data."
15
<PAGE>
Item 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company, along with the
Report of Independents Accountants, is included on pages F-1 through F-25 of
this Form 10-K.
Supplementary data called for by this item is not presented, as it is
not applicable to the registrant.
Item 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
persons who are members of the Board of Directors or executive officers of the
Company. Directors serve for a term of one year or until their successors are
elected and qualified; officers serve at the discretion of the Board of
Directors.
Name Age Position
---- --- --------
Dr. Martin M. Dorio 52 President, Chief Executive Officer and Director
Dr. J. Frithjof Timm 55 Managing Director and President, CLARK Europe
Joseph F. Lingg 52 Vice President, Finance and Human Resources
and Treasurer
Kevin M. Reardon 53 Vice President, Sales and Marketing, North
America
Michael J. Grossman 47 Vice President, General Counsel and Secretary
Robert J. O'Brien 48 Vice President, Manufacturing, North America
Thomas J. Snyder 52 Director
Dietcher 53 Director
Klingelnberg
Michael A. Delaney 43 Director
James A. Urry 43 Director
Dr. Martin M. Dorio, President, Chief Executive Officer and Director.
Dr. Dorio joined the Company in June 1995 as President and Chief Executive
Officer. From 1990 until he joined the Company, Dr. Dorio served in various
positions with Case Corporation, a manufacturer of tractors and construction
equipment, including Vice President, Corporate Planning and Development. Dr.
Dorio has over 20 years of experience in manufacturing and has served in key
management positions of FMC Corp. and General Electric Co.
Dr. J. Frithjof Timm, Managing Director and President, CLARK Europe.
Dr. Timm joined the Company in May 1995 as Managing Director and President of
CLARK Europe. From 1992 to 1995, he was President of Komatsu Europe and, prior
to that, he was Managing Director of Sales of the Hydraulic Mobile Crane
Division of Krupp A.G.
Joseph F. Lingg, Vice President, Finance, Human Resources and
Treasurer. Mr. Lingg joined the Company in January 1996 as Vice President,
Finance and Treasurer. In 1995, Mr. Lingg served as Vice President and Chief
Financial Officer of RBC Company of America, a manufacturer of bearings, and for
more than five years prior thereto he served as Vice President and Chief
Financial Officer of Mosler Inc., a manufacturer and servicer of security
products.
Kevin M. Reardon, Vice President, Sales and Marketing, North America.
Mr. Reardon joined the Company in 1984 and has been Vice President of Sales and
Marketing, North America since 1995. Previously, Mr. Reardon served as Director
of Marketing and National Sales Manager for the Company.
Michael J. Grossman, Vice President, General Counsel and Secretary. Mr.
Grossman joined the Company in 1985 as Assistant General Counsel. Since 1991, he
has served as Vice President, General Counsel and Assistant Secretary of the
Company.
15
<PAGE>
Robert J. O'Brien, Vice President, Manufacturing, North America. Mr.
O'Brien joined the Company in March of 1995, as Director of Manufacturing. From
1980 until he joined the Company, he served in various key operations positions
with Allied Signal Aerospace. Mr. O'Brien has over 20 years of experience in
manufacturing operations in the Aerospace industry.
Thomas J. Snyder, Director. Mr. Snyder has been President, Chief
Operating Officer and a director of Delco Remy International, Inc. since 1994.
From 1962 to 1994, Mr. Snyder held several executive positions with the Delco
Remy Division of General Motors, most recently as Product Manager, Heavy Duty
Systems. He is also a director of St. John's Health Systems.
Dietcher Klingelnberg, Director. Mr. Klingelnberg served as Chief
Executive Officer of International Knife & Saw, Inc. until March 1996. In
addition, he served as Chairman of the Board and Chief Executive Officer of IKS
Corporation from 1979 until November 1996. Mr. Klingelnberg is currently
Managing Director of Klingelnberg Beteillgungs-GmbH and is a director of Honsel
AG, IKS Corporation, the Alfred H. Schuette Company, and Eickhoff, Bochum, and
Oerlikon Geartec AG, Zuerich.
Michael A. Delaney, Director. Mr. Delaney has been a Managing Director
of CVC since 1989. From 1986 through 1989, he was Vice President of Citicorp
Mergers and Acquisitions. Mr. Delaney is a director of Aetna Industries, Inc.,
AmeriSource Health Corporation, MSX International, CORT Business Services
Corporation, Delco Remy International, Inc., Enterprise Media Inc., GVC
Holdings, IKS Corporation, JAC Holdings, Palomar Technologies, Inc., SC
Processing, Inc., and Triumph Holdings, Inc.
James A. Urry, Director. Mr. Urry has been with Citibank, N.A. since
1981, serving as a Vice President since 1986. He has been a Vice President of
CVC since 1989. He is a director of AmeriSource Health Corporation, CORT
Business Services Corporation, Hancor Holding Corporation, IKS Corporation,
Airxcel, Inc., Polamar Technologies, Inc. and York International Corporation.
Director Compensation and Arrangements
The directors of the Company do not receive compensation for their
services as directors. Members of the Board of Directors are elected pursuant to
certain voting agreements among Holdings and its stockholders. See "Item 12 --
Security Ownership of Certain Beneficial Owners and Management--The
Stockholders' Agreement."
Item 11 -- EXECUTIVE COMPENSATION
The compensation of executive officers of the Company will be
determined by the Board of Directors of the Company. The Company adopted a
401(k) retirement plan in 1997. See "--401(k) Plan".
The following table sets forth certain information concerning the
compensation received by the Chief Executive Officer and the four most highly
compensated officers of the Company for services rendered in 1997.
16
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
----------------------
Annual Compensation Awards
------------------- ------
Other Restricted Stock
Annual Stock Options All Other
Salary Bonus Compensation Awards (# Shares) Compensation(1)
------ ----- ------------ ------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Martin M. Dorio................. $293,750 188,745 -- -- -- $ 11,490
President and Chief Executive
Officer
Dr. J. Frithjof Timm................ 193,195 17,388 -- -- -- 31,719
President, CLARK Europe (2)
Joseph F Lingg...................... 124,375 48,367 -- -- -- 6,905
Vice President of Finance and
Human Resources
Kevin M. Reardon.................... 118,067 33,132 -- -- -- 4,148
Vice President of Sales and
Marketing
Michael J. Grossman 125,000 49,335 -- -- -- 5,639
Vice President and General Counsel
</TABLE>
- -----------------
(1) Includes Company 401(k) contributions and group term life insurance
premiums, respectively, as follow: Dr. Dorio, $8,501 and $2,989; Mr.
Reardon, $1,171 and $2,977; Mr. Grossman, $3,868 and $1,772; and Mr. Lingg,
$3,866 and $3,039. Includes $31,719 for pension and disability for Dr. Timm.
(2) Dr. Timm's salary, bonus, and other compensation are calculated from
Deutsche Marks using a conversion rate of 1.734 DM/$.
Employment Agreements
In 1996, Holdings entered a three-year employment contract with Dr.
Martin M. Dorio pursuant to which Dr. Dorio is employed as the President and
Chief Executive Officer of Holdings and the Company. The agreement provides for
an annual base salary of $225,000, which is subject to annual merit increases,
and an annual performance bonus. The Company has agreed that, in the event that
holdings is unable to pay Dr. Dorio any amounts due to him with respect to
annual bonuses, the Company will pay such amounts. Since November 1996, the
Company has paid Dr. Dorio's compensation. In addition, the agreement provides
for the receipt by Dr. Dorio of standard company benefits. The agreement is
terminable by Holdings with or without cause. In the event, the agreement is
terminated without cause or as a result of the total disability of Dr. Dorio,
Dr. Dorio will be entitled to continue to receive his base salary and certain
other benefits for specified periods. Following any termination of Dr. Dorio's
employment, he will be subject to a non-competition covenant for up to two
years.
401(k) Plan
In 1997, the Company adopted a qualified 401(k)-retirement plan.
Subject to certain statutory limitations, eligible employees are able to
contribute a percentage of their compensation to the plan on a pre-tax basis
("elective deferrals"). For 1997, the maximum amount of elective deferrals that
could be made by any employee was $9,500. Employees are fully vested in their
elective deferrals at all times. Generally, employees may not receive a
distribution of their account balances prior to their death, disability,
termination of employment or retirement, and their account balances cannot be
assigned or alienated.
Compensation Committee Interlocks and Insider Participation
Although the Company has no compensation committee, each of Messrs.
Snyder, Klingelnberg, Delaney and Urry participated in deliberations of the
Board of Directors concerning executive compensation.
17
<PAGE>
Item 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding capital stock of the Company is currently owned
by Holdings. The following table sets forth certain information with respect to
the beneficial ownership of the Holdings Preferred Stock and Holdings Common
Stock by (i) each person or entity who owns five percent or more thereof, (ii)
each director of the Company who is a stockholder, (iii) the Chief Executive
Officer of the Company and the other executive officers named in the "Summary
Compensation Table" above who are stockholders, and (iv) the directors and
officers of the Company as a group. Unless otherwise specified, all shares are
directly held.
<TABLE>
<CAPTION>
Number and Percent of Shares
Holdings
Preferred Holdings Class A Holdings Class B
Stock Stock(1) Stock(2)
----- -------- --------
Name of Beneficial Owner Number Percent Number Percent Number Percent
------------------------ ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Citicorp Venture Capital Ltd. 12,205.4 71.89% 102,671.40 37.5% 549,394.14 75.6%%
399 Park Avenue
New York, New York 10043
Dr. Martin M. Dorio 404.8 2.4% 55,180.7 20.2% -- --
172 Trade Street
Lexington, Kentucky 40511
Dr. J. Frithjof Timm 130.1 0.8% 19,879.5 7.3% -- --
172 Trade Street
Lexington, Kentucky 40511
Kevin M. Reardon 37.1 0.2% 5,391.6 2.0% -- --
Michael J. Grossman 68.4 0.4% 6,566.3 2.4% -- --
Joseph F. Lingg 40.5 0.2% 5,518.1 2.0% -- --
Thomas J. Snyder -- -- 5,000.0 1.8% -- --
Dietcher Klingelnberg -- -- 42.0 0.02% 8,943.5 1.2%
Michael A. Delaney 101.5 0.6% 855.0 0.3% 4,536.3 0.6%
James A. Urry 101.5 0.6% 855.0 0.3% 4,536.3 0.6%
All directors and executive
officers as a group
(10 persons) 734.9 4.3% 106,396.6 38.9% 18,016.1 1.2%
- ----------
</TABLE>
(1) Does not include shares of Holdings Class A Stock issueable upon conversion
of Holdings Class B Stock. See "--Holdings Common Stock." Assuming the
conversion of all of a holder's shares of Holdings Class B Stock into
Holdings Class A Stock, but no such conversion by any other holder of
Holdings Class B Stock, the number of shares and the percentage of total
Holdings Class A Stock held by the converting holder would be as follows:
for CVC, 652,065.5 and 79.2%; for Dietcher Klingelnberg, 8,985.5 and 3.2%;
for Michael A. Delaney, 5,391.3 and 1.9%; for James A. Urry, 5,391.3 and
1.9%; and for all directors and executive officers as a group, 124,412.7 and
42.7%.
(2) Does not include shares of Holdings Class B Stock issuable upon conversion
of Holdings Class A Stock. See "--Holdings Common Stock." Assuming the
conversion of all of a holder's shares of Holdings Class A Stock into
Holdings Class B Stock, but no such conversion by any other holder of
Holdings Class A Stock, the number of shares and the percentage of total
Holdings Class B Stock held by the converting holder would be as follows:
for CVC, 652,065.54 and 78.6%; for Dr. Martin M. Dorio, 55,180.7 and 7.1%;
for Dr. J. Frithjof Timm, 19,879.5 and 2.7%; for Kevin M. Reardon, 5,391.6
and 0.7%; for Michael J. Grossman, 6,566.3 and 0.9%; for Joseph F. Lingg,
5,518.1 and 0.7%; for Thomas J. Snyder, 5,000 and 0.7%; for Dietcher
Klingelnberg, 8,985.5 and 1.2%; for Michael A. Delaney, 5,391.3 and 0.7%;
and for James A. Urry, 5,391.3 and 0.7%; and for all directors and executive
officers as a group, 124,412.7 and 14.9%.
Holdings Common Stock
The Certificate of Incorporation of Holdings provides that Holdings may
issue 2,500,000 shares of Holdings Common Stock, divided into two classes
consisting of 1,250,000 shares of Holdings Class A Stock and 1,250,000 of
Holdings Class B Stock. The holders of Holdings Class A Stock are entitled to
one vote for each share held of record on all matters submitted to a vote of the
stockholders. Except as required by law, the holders of Holdings Class B Stock
have no voting rights. Under the Certificate of Incorporation of Holdings, a
holder of either class of Holdings Common Stock may convert any or all of his
shares into an equal number of shares of the other class of Holdings Common
Stock; provided that in the case of a conversion from Holdings Class B Stock,
which is nonvoting, into Holdings Class A Stock, which is voting, the holder of
shares to be converted would be permitted under applicable law to hold the total
number of shares of Holdings Class A stock which would be held after giving
effect to the conversion.
18
<PAGE>
The Stockholders' Agreement
Pursuant to the Securities Purchase and Holders Agreement entered into
among the stockholders of Holdings (the "Stockholders' Agreement"), the Board of
Directors of Holdings and the Company shall be composed at all times of five
directors as follows: the President of the Company, Dr. Martin M. Dorio (so long
as he continues to serve as President); two individuals designated by CVC; and
two additional directors who shall not be employees of CVC but who shall be
designated by CVC, subject to the right of holders of the majority of the
outstanding shares of Holdings Class A Stock to veto the election of either of
such additional directors.
The Stockholders' Agreement contains certain provisions which, with
certain exceptions, restrict the ability of the stockholders from transferring
any Holdings Common Stock, Holdings Preferred Stock or Holdings Debentures
except pursuant to the terms of the Stockholders' Agreement. So long as Holdings
has not consummated a public offering of Holdings Common Stock resulting in
aggregate net proceeds of $30.0 million or more, if holders of at least 50% of
the Holdings Common Stock then outstanding approve the sale of the Company, each
stockholder has agreed to consent to such sale and, if such sale includes the
sale of stock, each stockholder has agreed to sell all of such stockholder's
Holdings Common Stock on the terms and conditions approved by holders of a
majority of the Holdings Common Stock then outstanding. In the event Holdings
proposes to issue and sell (other than in a public offering pursuant to a
registration statement) any shares of Holdings Common Stock and/or Holdings
Preferred Stock or any securities containing options or rights to acquire any
shares of Holdings Common Stock and/or Holdings Preferred Stock or any
securities convertible into Holdings Common Stock and/or Holdings Preferred
Stock to CVC or its corporate affiliates, Holdings must first offer to each of
the other shareholders a pro rata portion of such shares. Such preemptive rights
are not applicable in certain circumstances including the issuance of shares of
Holdings Common Stock and/or Holdings Preferred Stock upon the conversion of
shares of one class of Holdings Common Stock and/or Holdings Preferred Stock
into shares of the other class or upon an initial public offering.
The Stockholders' Agreement also provides for certain additional
restrictions on transfer of shares by Management Investors, including the right
of Holdings to repurchase shares upon termination of such stockholder's
employment prior to 2002, at a formula price, and in certain circumstances the
grant of a right of first refusal in favor of Holdings in the event a Management
Investor elects to transfer shares of Holdings Common Stock.
Registration Rights Agreement
In connection with their entry into the Stockholders' Agreement,
Holdings, CVC, Dr. Martin M. Dorio, Thomas J. Snyder and the other stockholders
of Holdings entered into a Registration Rights Agreement (the "Holdings
Registration Rights Agreement"). Pursuant to the Holdings Registration Rights
Agreement, upon the written request of CVC, Holdings has agreed to (subject to
certain exceptions) prepare and file a registration statement with the
Securities and Exchange Commission concerning the distribution of all or part of
the shares held by CVC and use its best efforts to cause such registration
statement to become effective. If at any time Holdings files a registration
statement for the Holdings Common Stock pursuant to a request by CVC or
otherwise (other than a registration statement on Form S-8, Form S-4 or any
similar form, a registration statement filed in connection with a share exchange
or an offering solely to Holdings' employees or existing stockholders, or a
registration statement registering a unit offering), Holdings will use its best
efforts to allow the other parties to the Holdings Registration Rights Agreement
to have their shares of Holdings Common Stock (or a portion of their shares
under certain circumstances) included in such offering of Holdings Common Stock
if the registration form proposed to be used may be used to register such
shares. Registration expenses of the selling stockholders (other than
underwriting fees, brokerage fees and transfer taxes applicable to the shares
sold by such stockholders or the fees and expenses of any accountants or other
representatives retained by a selling stockholder) are to be paid by Holdings.
19
<PAGE>
Item 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Service Agreement
In connection with the Acquisition, the Company entered into a service
agreement (the "Service Agreement") with the Predecessor's Parent pursuant to
which the Company shares space in the Southaven Facility with another division
of the Predecessor's Parent. In addition, pursuant to such agreement the Company
hired approximately 27 employees who are responsible for aftermarket customer
support and administration. The Company pays an aggregate annual fee under such
Service Agreement of approximately $5.9 million (the "Base Fee"), payable in
monthly installments. In addition to the Base Fee, certain provisions of the
Service Agreement may require each of the Predecessor's Parent and CLARK to
share the responsibility for additional costs and savings resulting from, among
other things, changes or increases in the provision of services or the
implementation of certain cost savings. The term of the agreement is for three
years. Management believes that the terms of the Service Agreement are no less
favorable to the Company than those that could have been obtained from
non-affiliated parties at the time the agreement was entered into.
Tax Sharing Agreement
Holdings and the Company will be included in the consolidated United
States federal income tax return of Holdings. Holdings and the Company entered
into a tax sharing agreement (the "Tax Sharing Agreement") whereby the Company
will pay Holdings (or Holdings will pay the Company) its pro rata share of the
total tax liability, as set out in the Tax Sharing Agreement. In the event the
Company is included in a joint, combined, consolidated or unitary state or local
income or franchise tax return with Holdings, the Company shall make payments to
Holdings, and Holdings shall make payments to the Company, in a manner
consistent with that described above for federal tax purposes.
License Agreement
In connection with the Acquisition, Holdings acquired certain patents
and patent applications related to the Company's business from the Predecessor's
Parent. Pursuant to a License Agreement dated as of November 27, 1996, Holdings
granted to the Company a perpetual, world-wide, exclusive royalty-free,
fully-paid-up license to practice methods, and to make, use, import, offer for
sale or sell any products, covered by such patents and patent applications.
Other
At the time of the Acquisition, it was contemplated that certain shares
of capital stock of Holdings would be issued to the members of management. In
furtherance of that intent, effective as of as of January 31, 1997, Holdings
repurchased certain outstanding shares of Holdings Preferred Stock and Holdings
Class B Stock having an aggregate value of approximately $1.1 million from CVC
and, simultaneously therewith, issued and sold shares of Holdings Preferred
Stock and Holdings Common Stock having an equivalent value to Dr. Martin M.
Dorio, and other members of management. In connection therewith, the Company
loaned Dr. Dorio $200,000 toward the purchase price of the securities acquired
by him. Such loan is evidenced by a demand promissory note that does not bear
interest. In addition, effective as of February 20, 1997, Holdings repurchased
certain outstanding shares of Holdings Class A Stock, Holdings Class B Stock and
12% Junior Subordinated Notes (the "Junior Subordinated Notes") of Holdings
having an aggregate value of $250,000 from CVC and simultaneously therewith,
issued and sold shares of Holdings Class A Stock, Holdings Class B Stock and the
Junior Subordinated Notes having an equivalent value to Dietcher Klingelnberg.
20
<PAGE>
PART IV
Item 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) List of Financial Statements.
Financial Data Schedule
The following Consolidated Financial Statements of the Company and the
Report of Independent Accountants set forth on pages F-1 through F-25,
respectively, are incorporated by reference into this item 14 of Form 10-K by
item 8 hereof:
See Index to Consolidated Financial Statements on page F-1.
(a)(2) Financial Statement Schedules.
No financial statement schedules have been filed herewith since they
are either not required, are not applicable, or the required information is
shown in the consolidated financial statements or related notes.
(a)(3) Exhibits.
Exhibit Description
No.
- ---
3.1 Certificate of Incorporation, as amended, of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form
S-4, Registration No. 333-18957)
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-4, Registration No. 333-18957)
4.1 Indenture dated as of November 27, 1996 between the Company and United
States Trust Company of New York, as Trustee (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
4.2 Registration Rights Agreement dated as of November 27, 1996 among the
Company, Jefferies & Company, Inc. and Bear, Stearns & Co. Inc.
(incorporated by reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
4.3 Form of 10 3/4% Senior Notes due 2006 (included in Exhibit 4.1)
(incorporated by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.1 Purchase Agreement dated November 22, 1996 among the Company, Jefferies &
Company, Inc. and Bear, Stearns & Co. Inc. (incorporated by reference to
Exhibit 10.1 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.2 Loan and Security Agreement dated November 27, 1996 by and between
Congress Financial Corporation and the Company (incorporated by reference
to Exhibit 10.2 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.3 Stock and Asset Purchase and Sale Agreement, dated as of November 9, 1996
among the Terex Corporation, and certain of its subsidiaries and the
Company (incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-4, Registration No. 333-18957)
10.4 Service Agreement dated as of November 27, 1996 between the Terex
Corporation and the Company (incorporated by reference to Exhibit 10.4 to
the Company's Registration Statement on Form S-4, Registration No.
333-18957)
10.5 Indemnity as to Letters of Credit, Performance Bonds, Appeal Bonds,
Guaranties, etc. dated November 27, 1996 by the Company in favor of the
Terex Corporation, for itself and as successor to CMH Acquisition Corp.,
CMH Acquisition International Corp., CLARK Material Handling Company and
CLARK Material Handling International, Inc. (incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.6 Employment Agreement dated as of November 27, 1996 between Holdings and
Dr. Martin M. Dorio (incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-4, Registration No. 333-18957)
21
<PAGE>
10.7 Tax Sharing Agreement made as of November 27, 1996 between Holdings and
the Company (incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement on Form S-4, Registration No. 333-18957)
10.8 Stock Purchase Agreement, dated as of May 27, 1992, by and between CLARK
Equipment Company and the Terex Corporation (incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.9 First Amendment to the Stock Purchase Agreement, dated as of July 31,
1992, by and between CLARK Equipment Company and Terex Corporation
(incorporated by reference to Exhibit 10.9 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.10 Trademark Assignment Agreement, dated as of July 31, 1992, by and between
CLARK Equipment Company and CLARK Material Handling Company (incorporated
by reference to Exhibit 10.10 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.11 Second Amended and Restated General Operating Agreement, dated November
29, 1990, by and between CLARK Material Handling Company and Chase
Manhattan Leasing Company, Inc. (incorporated by reference to Exhibit
10.11 to the Company's Registration Statement on Form S-4, Registration
No. 333-18957)
10.12 Second Amendment to the Second Amended and Restated General Operating
Agreement, dated April 15, 1994, by and among CLARK Material Handling
Company, Drexel dated August 1, 1994, by and between CLARK Material
Handling Company and CLARK Credit Corporation (incorporated by reference
to Exhibit 10.13 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.14 Assignment of Second Amended and Restated General Operating Agreement,
dated March 22, 1995, by and between CLARK Material Handling Company,
CLARK Credit Corporation, f/k/a Chase Manhattan Leasing Company, and
Associates Commercial Corporation (incorporated by reference to Exhibit
10.14 to the Company's Registration Statement on Form S-4, Registration
No. 333-18957)
10.15 Master Software License and Service Agreement, dated May 17, 1996,
between CLARK Material Handling Company and SDRC Operations (incorporated
by reference to Exhibit 10.15 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.16 Letter Agreement, dated October 26, 1995, between CLARK Material Handling
Company, Manufacturers Distribution Services, Inc. and Maine Rubber
International (incorporated by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-4, Registration No. 333-18957)
10.17 MCI Services Agreement, effective as of July 1, 1995, between MCI
Telecommunications Corporation and CLARK Material Handling Company
(incorporated by reference to Exhibit 10.17 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.18 Agreement for Systems Operations Services, dated as of March 2, 1992,
between CLARK Material Handling Company and Integrated Systems Solutions
Corporation, as amended by Amendments #1 through #5 (incorporated by
reference to Exhibit 10.18 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.19 Supply Agreement, dated December 14, 1994, between CLARK Material
Handling Company and Funk Manufacturing Company (incorporated by
reference to Exhibit 10.19 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.20 Supply Agreement, dated July 1, 1995, between CLARK Material Handling
Company and Funk Manufacturing Company (incorporated by reference to
Exhibit 10.20 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.21 Agreement, dated June 1, 1983, between CLARK Equipment Company and
Mitsubishi Corporation, Mitsubishi Heavy Industries, Ltd. and Mitsubishi
Motors Corporation, as amended (incorporated by reference to Exhibit
10.24 to the Company's Registration Statement on Form S-4, Registration
No. 333-18957)
10.22 Master Contract for Purchase and Sale, dated July 17, 1995, between CLARK
Material Handling Company and Custom Tool and Manufacturing Company
(incorporated by reference to Exhibit 10.25 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.23 Supply Agreement, dated December 20, 1991, between CLARK Material
Handling Company and Dixson, Inc. (incorporated by reference to Exhibit
10.26 to the Company's Registration Statement on Form S-4, Registration
No. 333-18957)
22
<PAGE>
10.24 Lease Agreement, dated as of April 15, 1987, between Vergil D. Kelly and
Kenny Angelucci and CLARK Equipment Company with respect to 172 Trade
Street, Lexington, Kentucky, as amended by Amendment #1 to Lease dated
April 15, 1987 (incorporated by reference to Exhibit 10.27 to the
Company's Registration Statement on Form S-4, Registration No. 333-18957)
10.25 Standard Form Dealer Sales Agreements, between CLARK Material Handling
Company and domestic dealer entities (incorporated by reference to
Exhibit 10.28 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.26 Agreement, dated as of September 12, 1995, by and between CLARK Material
Handling Company and Nissan Forklift Corporation, North America
(incorporated by reference to Exhibit 10.29 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.27 License Agreement, dated as of November 27, 1996, between Holdings and
the Company (incorporated by reference to Exhibit 10.30 to the Company's
Registration Statement on Form S-4, Registration No. 333-18957)
10.28 Asset Purchase Agreement, dated as of November 6, 1997, between Clark
Material Handling of Canada Ltd. and Blue Giant Limited.
10.29 Asset Purchase Agreement, dated as of October 31, 1997, between Blue
Giant Corporation and Blue Giant USA Corporation.
21.1 Subsidiaries of the Company
27 Financial Data Schedule
(b) Reports on Form 8-K.
On October 31, 1997, the Company filed a Form 8-K to report its
acquisition of Blue Giant USA Corporation and Blue Giant Canada Limited in two
separate purchase business combinations effective November 1, 1997.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CLARK Material Handling Company
BY: /s/ Dr. Martin M. Dorio
Dr. Martin M. Dorio
President and CEO
March 31, 1998
Pursuant to the requirements of the securities exchange act of 1934, as
amended this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on March 31, 1998.
<TABLE>
<S> <C>
/s/ Martin M. Dorio President, Chief Executive Officer and Director
- ---------------------------- (Principal Executive Officer)
Martin M. Dorio
/s/ Joseph F. Lingg Vice President, Finance, Human Resources and Treasurer
- ---------------------------- (Principal Financial and Accounting Officer)
Joseph F. Lingg
/s/ James A. Urry Director
- ----------------------------
James A. Urry
/s/ Thomas J. Snyder Director
- ----------------------------
Thomas J. Snyder
/s/ Michael A. Delaney Director
- ----------------------------
Michael A. Delaney
/s/ Dietcher Klingelnberg Director
- ----------------------------
Dietcher Klingelnberg
</TABLE>
24
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH
HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE
ACT.
The registrant has not sent the following to security holders: (i) any
annual report to security holders covering the registrant's last fiscal year; or
(ii) any proxy statement, form of proxy or other proxy soliciting material with
respect to any annual or other meeting of security holders.
25
<PAGE>
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Consolidated financial statements as of December 31, 1997 and December 31, 1996
and for the year ended December 31,1997, the one month period ended December 31,
1996, the eleven month period ended November 26, 1996 and the year ended
December 31, 1995.
Page
Report of independent accountants F-2
Consolidated balance sheet F-3
Consolidated statement of operations F-4
Consolidated statement of stockholder's equity F-5
Consolidated statement of cash flows F-6
Notes to consolidated financial statements F-7
Schedules for which provision is made in the applicable regulations of the
Securities and Exchange Commission are not required under the related
instructions or the information is included in the notes to the consolidated
financial statements, or are not applicable, and therefore have been omitted.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholder of CLARK Material
Handling Company
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations, of stockholder's equity and of cash flows present
fairly, in all material respects, the consolidated financial position of CLARK
Material Handling Company and its predecessor businesses at December 31, 1997
and December 31, 1996 and the results of their operations and cash flows for the
year ended December 31, 1997, the one month period ended December 31, 1996, the
eleven month period ended November 26, 1996 and the year ended December 31,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Cincinnati, Ohio
February 24, 1998
F-2
<PAGE>
CLARK Material Handling Company
Consolidated Balance Sheet (in thousands, except share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
---- ----
<S> <C> <C>
Current assets
Cash and cash equivalents $ 16,554 $ 6,334
Cash securing letters of credit 1,092 320
Trade receivables (less allowance of $2,215 at
December 31, 1996 and $1,906 at December 31, 1997) 38,154 47,018
Net inventories 60,441 70,784
Other current assets 6,255 7,281
---------- -----------
Total current assets 122,496 131,737
Long term assets
Property, plant and equipment-net 51,014 47,836
Goodwill, net of accumulated amortization of
$231 at December 31, 1996 and $3,081 at
December 31, 1997 109,311 114,887
Other assets 18,486 18,794
---------- -----------
Total assets $ 301,307 $ 313,254
========== ===========
Current liabilities
Notes payable $ 3,246 $ 3,184
Current portion of capital lease obligations 2,407 2,732
Trade accounts payable 53,562 62,002
Accrued compensation and benefits 5,319 5,730
Accrued warranties and product liability 23,383 20,774
Other current liabilities 9,489 10,728
---------- -----------
Total current liabilities 97,406 105,150
Non-current liabilities
Senior notes payable 130,000 130,000
Capital lease obligations, less current portion 3,600 3,864
Accrued warranties and product liability 30,826 38,497
Other non-current liabilities 14,402 12,002
---------- -----------
Total liabilities 276,234 289,513
---------- -----------
Commitments and contingencies (Note 11) - -
Stockholder's equity
Common stock, par value $1 per share, 1,000
shares authorized, issued and outstanding 1 1
Paid-in-capital 24,999 24,999
Retained earnings 535 8,406
Cumulative translation adjustment (462) (9,665)
---------- -----------
Total stockholder's equity 25,073 23,741
---------- -----------
Total liabilities and stockholder's equity $ 301,307 $ 313,254
========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
</TABLE>
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Consolidated Statement of Operations (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Predecessor The Company
----------- -----------
Eleven One
Year Months Month Year
Ended Ended Ended Ended
December3l, November26, December3l, December3l,
1995 1996 1996 1997
<S> <C> <C> <C> <C>
Net sales $ 528,759 $ 404,629 | $ 46,763 $ 489,294
Cost of goods sold 484,569 359,061 | 41,905 431,127
--------- --------- | --------- ---------
Gross profit 44,190 45,568 | 4,858 58,167
|
Engineering, selling and administrative expenses 30,649 26,613 | 2,923 37,133
|
Parent company management fees 6,996 5,672 | - -
|
Severance and exit charges 3,478 - | - -
--------- --------- | --------- ---------
Income from operations 3,067 13,283 | 1,935 21,034
|
Other income (expense): |
Interest expense (790) (370) | (1,393) (15,086)
Allocated interest expense from parent |
company (16,145) (14,656) | - -
Interest income 602 220 | 25 809
Amortization interest expense from parent |
company (530) (349) | - -
Property impairment charge (2,500) - | - -
Other income (expense) - net (975) (223) | (32) 1,598
--------- --------- | --------- ---------
Income (loss) before income taxes and |
extraordinary items (17,271) (2,095) | 535 8,355
|
Provision (benefit) for income taxes (148) - | - 484
--------- --------- | --------- ---------
Income (loss) before extraordinary items (17,419) (2,095) | 535 7,871
|
Extraordinary loss on retirement of allocated |
debt (1,347) - | - -
--------- --------- | --------- ---------
Net income (loss) $ (18,766) $ (2,095) | 535 $ 7,871
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
CLARK Material Handling Company
and Predecessor Businesses
Consolidated Statement of Stockholder's Equity (in thousands)
- --------------------------------------------------------------------------------
Foreign
Retained currency
Common Paid-in earnings translation
stock capital (deficit) adoustments
----- ------- --------- -----------
<S> <C> <C> <C> <C>
PREDECESSOR
Balance at December 31, 1994 $ (76,107) $ (3,915)
Net loss for the year ended December 31, 1995 (18,766)
Translation adjustment - 2,066
--------- ----------
Balance at December 31, 1995 (94,873) (1,849)
Net loss for the eleven months ended
November 26, 1996 (2,095)
Translation adjustment - (2,546)
--------- ----------
Balance at November 26, 1996 $ (96,968) $ (4,395)
========= ==========
THE COMPANY
Issuance of common stocks $ 1 $ 24,999
Net income for the month ended
December 31, 1996 - - 535 -
Translation adjustment - - - (462)
-------- --------- --------- ----------
Balance at December 31, 1996 1 24,999 535 (462)
Net income for the year ended
December 31, 1997 - - 7,871
Translation adjustment - - - $ (9,203)
-------- --------- --------- ----------
Balance at December 31, 1997 $ 1 $ 24,999 $ 8,406 $ (9,665)
======== ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Consolidated Statement of Cash Flows (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Predecessor The Company
------------------------------ ------------------------------
Eleven One
Year Months Month Year
Ended Ended Ended Ended
December 3l, November 26, December 3l, December 3l,
1995 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating activities: |
Net income (loss) $ (18,766) $ (2,095) | $ 535 $ 7,871
Adjustments to reconcile net income (loss) |
to cash provided by operating activities: |
Depreciation 11,534 9,312 | 778 1,900
Amortization 1,310 1,099 | 322 3,350
Extraordinary loss on retirement of allocated debt 1,347 - | - -
Loss on sale of property, plant and equipment 183 31 | 70 24
Property impairment charge 2,500 - |
Changes in operating assets and liabilities excluding |
business combinations: |
Restricted cash (516) (220) | (136) 638
Trade receivables (240) (2,406) | 2,800 (8,732)
Net inventories (2,685) (2,696) | 9,801 (7,015)
Trade accounts payable (2,084) 61 | (11,265) 7,866
Accrued compensation and benefits (73) 409 | (609) (156)
Accrued warranties and product liability 1,126 (2,248) | 237 3,581
Due to parent company 19,187 8,720 | - -
Other assets and liabilities, net (5,645) (5,876) | 223 (5,211)
--------- --------- | ---------- ---------
Net cash provided by operating activities 7,178 4,091 | 2,756 11,109
--------- --------- | ---------- ---------
Investing activities: |
Business combinations - - | - (14,646)
Capital expenditures (5,290) (3,208) | (317) (6,340)
Proceeds from sale of assets 534 139 | - -
--------- --------- | ---------- ---------
Net cash used in investing activities (4,756) (3,069) | (317) (20,986)
--------- --------- | ---------- ---------
Financing activities: |
Issuance of current notes payable - - | - 1,182
Repayment of current notes payable - - | - (1,020)
Repayment of allocated debt (51,754) - | - -
Proceeds from allocated debt 51,220 105 | - -
Other,net (1,607) 1,376 | 293 147
--------- --------- | ---------- ---------
Net cash provided by (used in) financing activities (2,141) 1,481 | 293 309
--------- --------- | ---------- ---------
Effect of exchange rate changes on cash and |
cash equivalents (976) (1,262) | (306) (652)
--------- --------- | ---------- ---------
|
Net increase (decrease) in cash and cash equivalents (695) 1,241 | 2,426 (10,220)
Cash and cash equivalents at beginning of period 1,514 819 | 14,128 16,554
---------- --------- | ---------- ---------
Cash and cash equivalents at end of period $ 819 $ 2,060 | $ 16,554 $ 6,334
========== ========= | ========== =========
|
Supplemental disclosures |
Cash paid for interest 793 $ 337 | $ 86 $ 14,465
Income taxes paid 17 | $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
NOTE 1 - REPORTING ENTITY AND BASIS OF PRESENTATION
CLARK Material Handling Company (the "Company") is a wholly-owned subsidiary of
CMH Holdings Corporation ("Holdings"). Prior to November 27, 1996, Holdings had
no previous business operations and was formed for the purpose of acquiring the
Company and its subsidiaries from Terex Corporation ("Terex" or the "Parent
Company") in a purchase business combination. That acquisition was consummated
on November 27, 1996. See Note 3 for information regarding the acquisition.
Prior to the acquisition, the Company's predecessor businesses ("Predecessor")
operated as wholly-owned subsidiaries of the Parent Company. Reference to the
Company relates to the period subsequent to November 26, 1996, while reference
to the Predecessor relates to operations on or prior to November 26, 1996. The
Parent Company acquired the Predecessor in 1992 in a purchase business
combination and Parent Company's basis, including its acquisition debt and
goodwill associated with the 1992 acquisition, was "pushed down" to the
Predecessor's financial statements.
The Predecessor's financial statements include allocations of Parent Company
acquisition debt and related interest expense. Management fees, which include
corporate overhead costs (including legal, treasury and other shared services),
have been allocated to the Predecessor based generally on the percentage of
Predecessor revenues to the Parent Company's consolidated revenues. Interest has
been charged on the management fee allocated and the due to Parent Company
balance at a rate of 13% compounded monthly.
The Company and the Predecessor operate in one industry segment, that being the
design, manufacture, marketing and worldwide distribution and support of
internal combustion and electric lift trucks, electric walkies and related
components and replacement parts. Geographic segment information is shown in
Note 13.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation. The Company's financial statements include the
accounts of the Company and its subsidiaries, including CLARK Material Handling
GmbH, CLARK Forklift Korea, CLARK Material Handling of Brazil, HLT, Inc. ("HLT")
and Blue Giant Canada Limited and Blue Giant USA Corporation ("Blue Giant"). HLT
and Blue Giant were acquired in 1997-see Note 4. The Predecessor's financial
statements include the U.S, German, Brazilian and Korean material handling
operations of the Parent Company prior to their acquisition on November 27,
1996, on a combined basis. All material intercompany balances, transactions and
profits have been eliminated.
Cash and cash equivalents. Cash equivalents consist of highly liquid investments
with original maturities of three months or less. The carrying amount of cash
and cash equivalents approximates their fair value.
F-7
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Cash securing letters of credit. The Company has certain cash and cash
equivalents that are not fully available for use in operations. Certain
international operations collateralize letters of credit and performance bonds
with cash deposits.
Inventories. Inventories are stated at the lower of cost or market value. The
Company determines cost on the first-in, first-out ("FIFO") method for all
inventories. The Predecessor determined cost using the last-in, first-out
("LIFO") method for U.S. inventories and by the FIFO method for inventories of
international operations.
Goodwill. Goodwill represents the difference between the total purchase price
and the fair value of assets and liabilities (tangible and intangible) acquired
at the date of acquisition. Goodwill related to the Company is being amortized
on the straight-line method over forty years. The Company reviews the carrying
value of goodwill for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Measurement of any
impairment would include a comparison of discounted estimated future operating
cash flows anticipated to be generated during the remaining amortization period
of the goodwill to the net carrying value of goodwill.
Debt issuance costs. Debt issuance costs of the Company have been capitalized
and are being amortized on the straight-line method over the term of the related
debt. Debt issuance costs are included in other assets and totaled $6,625 and
$5,599 at December 31, 1997 and 1996, respectively. Amortization of these costs
totaled $625 and $47 for the year ended December 31, 1997 and for the one month
ended December 31, 1996, respectively.
Property, plant and equipment. Property, plant and equipment are stated at cost.
Expenditures for major renewals and improvements are capitalized while
expenditures for maintenance and repairs not expected to extend the life of an
asset beyond its normal useful life are charged to expense when incurred.
Depreciation is determined for financial reporting purposes using the
straight-line method over the estimated useful asset lives, generally 20 to 35
years for buildings, eight to twelve years for machinery and equipment and two
to eight years for other assets.
Revenue recognition. Revenue and costs are generally recorded when products are
shipped and invoiced to customers. Certain new units may be invoiced prior to
the time customers take physical possession. Revenue is recognized in such cases
only when the customer has a fixed commitment to purchase the units, the units
have been completed, tested and made available to the customer for pickup or
delivery, and the customer has requested that the units be held for pickup or
delivery at a time specified by the customer in the sales documents. In such
cases, the units are invoiced under the customary billing terms, title to the
units and risks of ownership pass to the customer upon invoicing, the units are
segregated from inventories and identified as belonging to the customer and
there are no further obligations under the order.
F-8
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Accrued warranties and product liability. Accruals for potential warranty and
product liability claims are recorded based on past claims experience. Warranty
costs are accrued at the time revenue is recognized. Self-insurance accruals are
provided for estimated product liability experience on known claims and for
claims anticipated to have been incurred which have not yet been reported.
Product liability accruals are presented on a gross settlement basis.
Foreign currency translation. Assets and liabilities of international operations
are translated at year-end exchange rates. Income and expenses are translated at
average exchange rates prevailing during the year. Foreign operations utilize
the local currency as the functional currency; translation adjustments are
accumulated in the cumulative translation adjustment account in equity. Gains or
losses resulting from foreign currency transactions are included in other income
(expense) and totaled $1,536, ($149), ($1,055) and ($1,232) for the year ended
December 31, 1997, the one month ended December 31, 1996, the eleven months
ended November 26, 1996 and for the year ended December 31, 1995, respectively.
Income taxes. Income taxes are provided using the asset and liability method
required by Statement of Financial Accounting Standards ("SFAS") No. 109.
Pursuant to a tax sharing agreement with Holdings, the Company is included in
the consolidated federal return of Holdings. The tax sharing arrangement does
not differ materially from that which would occur on a separate entity basis.
The Predecessor provided for income taxes on a separate entity basis.
Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Reclassifications. Certain reclassifications of prior year amounts have been
made to conform with the current year presentation.
F-9
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
NOTE 3 - ACQUISITION
On November 27, 1996, Holdings acquired the Company and the Company's
subsidiaries in a business combination accounted for as a purchase. The
aggregate purchase price for the acquisition was $139,500, which was subject to
certain immaterial post-closing adjustments, and was financed through a $25,000
equity investment by Holdings in the common stock of the Company and the
issuance of $130,000 in Senior Notes due 2006 by the Company. The purchase price
was allocated to the estimated fair values of the Company's tangible and
intangible net assets with the remainder allocated to goodwill. The excess of
purchase price over the net assets acquired of $116,942 is being amortized on a
straight-line basis over forty years.
The operating results of the Company are included in the consolidated results of
operations since November 27, 1996. The following unaudited pro forma summary
presents the consolidated results of operations as though Holdings completed the
acquisition on January 1 of each period presented.
Year ended December 31,
-----------------------
1995 1996
---- ----
Net sales $ 528,759 $ 451,392
========== =========
Income from operations $ 5,894 $ 16,976
========== =========
Net income (loss) $ (12,452) $ 1,881
========== =========
NOTE 4 - BUSINESS COMBINATIONS
Blue Giant
On November 7, 1997, the Company closed its acquisitions of substantially all of
the assets and certain liabilities of Blue Giant USA Corporation ("BGU") and
Blue Giant Canada Limited ("BGC") (collectively, "Blue Giant") in two separate
purchase business combinations effective November 1, 1997. Although separate
legal entities, BGU and BGC were under the common control of substantially the
same stockholder group. The purchase price for the acquisitions comprised $9,365
in cash (of which $200 was paid to a shareholder of Blue Giant under a
noncompete agreement), an obligation payable over three years totaling $1,105
under a noncompete agreement with a shareholder of the Blue Giant and related
expenses of $333. The purchase price was allocated to the estimated fair value
of the tangible and intangible net assets acquired, with the residual being
allocated to goodwill. The goodwill of $1,026 is being amortized on a
straight-line basis over forty years.
F-10
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
The operating results of Blue Giant are included in the consolidated results of
operations since November 1, 1997. The following unaudited pro forma summary
presents the consolidated results of operations as though the acquisition of the
Company described in Note 3 had been completed and the Company had completed the
acquisition of Blue Giant on January 1 of each period presented.
Year Ended December 31,
-----------------------
1996 1997
---- ----
Net sales $ 477,254 $ 509,187
========== =========
Income from operations $ 17,293 $ 21,583
========== =========
Net income $ 1,415 $ 8,320
========== =========
HLT, Inc.
On February 28, 1997, the Company purchased substantially all of the assets of
HLT, Inc., a supplier of upright material handling equipment, for $4,948. Assets
acquired included inventory, equipment and tooling. The purchase was financed
through a short-term note which matured in the second quarter of 1997. The
Company is leasing the former company's facility and is continuing production of
the equipment, primarily for its own use. The acquisition was not significant
and pro forma data is not presented.
NOTE 5 - INVENTORIES
Inventories consist of the following:
December 31, December 31,
1996 1997
---- ----
Finished equipment $ 12,797 $ 12,000
Replacement parts 24,107 28,302
Work-in-progress 1,402 5,356
Raw material and supplies 22,135 25,126
--------- ----------
Net inventories $ 60,441 $ 70,784
========= ==========
F-11
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31, December 31,
1996 1997
---- ----
Property $ 7,364 $ 7,005
Plant 15,556 14,574
Equipment 28,779 33,854
---------- -----------
51,699 55,433
Less: Accumulated depreciation (685) (7,597)
---------- -----------
Net property, plant and equipment $ 51,014 $ 47,836
========== ===========
NOTE 7 - BORROWINGS, LINES OF CREDIT AND INDEBTEDNESS
Long-term debt is summarized as follows:
December 31, December 31,
1996 1997
---- ----
10.75% Senior Notes due 2006 $ 130,000 $ 130.000
Capital lease obligations (Note 8) 6,007 6,596
--------- ----------
Total long-term debt 136,007 136,596
Less: current portion 2,407 2,732
--------- ----------
Long-term debt, less current
portion $ 133,600 $ 133,864
========= ==========
Senior Notes due 2006
The Senior Notes due 2006 ("Senior Notes") were issued in connection with the
acquisition of the Company and are due on November 15, 2006. The Senior Notes
are not redeemable at the Company's option prior to November 15, 2001.
Thereafter, the Senior Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon, if any, to the
applicable date of redemption, if redeemed during the 12 month period beginning
on November 15 of the years indicated below:
Year Percentage
---- ----------
2001 105.375%
2002 102.688%
2003 and thereafter 100.000%
F-12
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
The Senior Notes also contain provision for early redemption upon the occurrence
of certain significant corporate events, including an offering of equity
securities or a change in control of the Company.
Revolving Line of Credit
The Company has entered into a $30,000 revolving credit facility (the
"Facility") with Congress Financial Corporation (the "Bank"). Borrowings under
the Facility are available for working capital and general corporate purposes,
including letters of credit. The Facility is secured by first priority liens on
all accounts receivable and inventory of the Company's domestic operations,
excluding HLT and Blue Giant.
The Facility expires in November 1999, unless extended. The interest rate per
annum applicable to the Facility is the prime rate, as announced periodically,
plus 0.50% or, at the Company's option, the adjusted Eurodollar rate plus 2.50%.
The Facility permits the Company to prepay loans and to permanently reduce
revolving credit commitments or letters of credit, in whole or in part, at any
time in certain minimum amounts. The Company is required to pay certain fees in
connection with the Facility, including a commitment fee of 0.25% on the undrawn
portion of the revolving credit commitment.
The Facility contains customary representations and warranties, and events of
default and certain other covenants. Borrowings on the Facility are classified
in the consolidated balance sheet as notes payable and were $799 and $0 at
December 31, 1997 and 1996, respectively. The average interest rate on
borrowings during 1997 was 9%.
Fair Value Disclosures
The fair value of the Company's Senior Notes at December 31, 1997 is
approximately $137,800 based on quoted market prices. The fair value of the
Senior Notes approximated carrying value at December 31, 1996. The Company
believes that the carrying value of its other borrowings approximates fair
market value based on discounted future cash flows using rates currently
available for debt with similar terms and remaining maturities.
NOTE 8 - LEASE COMMITMENTS
The Company leases certain facilities, machinery and equipment, and vehicles
with varying terms under operating leases. In most leasing arrangements, the
Company pays the property taxes, insurance, maintenance and expenses related to
the leased property.
Most of the Company's operating leases provide the Company with the option to
renew the leases for varying periods after the initial lease terms. These
renewal options enable the Company to renew the leases based upon the fair
rental values at the date of expiration of the initial lease. Total rental
expense under operating leases was as follows:
F-13
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Year ended December 31, 1997 $ 2,807
=========
One month ended December 31, 1996 $ 191
=========
Eleven months ended November 26, 1996 $ 1,886
=========
Year ended December 31, 1995 $ 2,557
=========
The Company also routinely enters into sale-leaseback arrangements for certain
equipment, which is similarly sold to third-party customers under sales-type
lease agreements. The Company maintains a net investment in these leases,
represented by the present value of payments receivable under the leases. The
Company's net investment in sales-type leases was $7,901 and $7,517 at December
31, 1997 and 1996, respectively, and is included in other current and
non-current assets on the consolidated balance sheet.
In connection with the original sale-leaseback arrangements underlying the
customer lease program, the Company has an outstanding rental installment
obligation which is recorded based on the present value of minimum payments due
under the leases of $6,596 of which $2,732 is current at December 31, 1997.
Future minimum capital and noncancelable operating lease payments and the
related present value of capital lease payments at December 31, 1997 are as
follows:
Capital Operating
Leases Leases
------ ------
1998 $ 2,446 $ 3,139
1999 2,001 2,439
2000 1,556 2,023
2001 1,038 1,454
2002 371 1,314
Thereafter - 29
-------- --------
Total minimum obligations 7,412 $ 10,398
========
Less amount representing interest 816
--------
Present value of net minimum obligations 6,596
Less current portion 2,732
--------
Long-term obligations $ 3,864
========
F-14
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES
The components of income (loss) before income taxes and extraordinary items are
as follows:
<TABLE>
<CAPTION>
Eleven One
Year Months Month Year
Ended Ended Ended Ended
December 31, November 26, December 31, December 31,
1995 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
United States $ (16,405) $ 2,541 | $ 165 $ 4,080
Foreign (866) (4,636) | 370 4,275
---------------- ---------------- | ---------------- ----------------
Income (loss) before income taxes |
and extraordinary items $ (17,271) $ (2,095) | $ 535 $ 8,355
================ ================ | ================ ================
</TABLE>
As a result of the Predecessor's operating losses for book and tax purposes,
provision (benefit) for income taxes for the year ended December 31, 1995 and
the eleven months ended November 26, 1996 were minimal, relating primarily to
state or foreign jurisdictions where taxable income occurred but net operating
loss ("NOL") carryforwards were limited.
Provisions for income taxes during the year ended December 31, 1997 and the one
month ended December 31, 1996 relate to state and local income taxes. The
Company did not provide for federal income taxes during the year ended December
31, 1997 and the one month period ended December 31, 1996 as the result of
incurring a taxable loss in the United States and utilizing NOL carryforwards to
offset taxable income in foreign jurisdictions.
The provision for income taxes is different from the amount which would be
provided by applying the statutory federal income tax rate to income (loss)
before income taxes and extraordinary items. The reasons for the difference are
summarized below:
<TABLE>
<CAPTION>
Eleven One
Year Months Month Year
Ended Ended Ended Ended
December 31, November 26, December 31, December 31,
1995 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Expected income tax at U.S. Federal
rates $ (6,045) $ (712) | $ 182 $ 2,841
NOL with no current benefit 5,651 1,575 | - -
Foreign NOL carryforward benefit - - | (166) (1,987)
Benefit of domestic NOL - (863) | (56) (1,387)
Foreign tax differential on income/ |
losses of foreign subsidiaries 303 - | 40 533
State and local taxes - - | - 484
Other 239 - | - -
---------------- ---------------- | ---------------- ----------------
|
Total provision for income taxes $ 148 $ - | $ - $ 484
================ ================ | ================ ===============
</TABLE>
F-15
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
The tax effects of the basis differences and NOL carryforwards as of December
31, 1997 and December 31, 1996 are summarized below:
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
---- ----
<S> <C> <C>
Property, plant and equipment $ (81) $ (1,846)
Goodwill - (942)
---------- ----------
Total deferred tax liabilities (81) (2,788)
---------- ----------
Warranties and product liability 19,602 21,478
Net inventories 2,586 975
Receivables 536 414
Other 2,330 1,620
Benefit of net operating loss carryforwards 19,506 19,293
---------- ----------
Total deferred tax assets 44,560 43,780
---------- ----------
Deferred tax valuation allowance (44,479) (40,992)
---------- ----------
Net deferred taxes $ - $ -
========== ==========
</TABLE>
Basis differences between the amounts assigned to net assets for financial
reporting purposes and the amounts assigned for tax purposes resulted in a net
deferred tax asset of $40,992. In light of the Company's and Predecessor's
operating history, management provided a valuation allowance in the same amount.
At December 31, 1997, the Company had U.S. federal NOL carryforwards of $3,049
which begin to expire in 2011.
In addition, the Company's foreign subsidiaries have approximately $43,036 of
loss carryforwards, $18,407 in corporate losses for Germany, $20,763 in
municipal losses for Germany and $3,866 in other countries, which are available
to offset future foreign taxable income. The loss carryforwards in Germany are
available without expiration. The loss carryforwards in other countries expire
in the years 1998 through 2001.
F-16
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
NOTE 10 - RETIREMENT PLANS
Pension Plans
Certain of the Company's German employees are covered by noncontributory defined
benefit pension plans. The Company also maintains separate pension benefit plans
for German executive employees and for other staff. The executive pension plans
are based on final pay and service, and, in some cases, are dependent on social
security pensions while the other staff plans are based on fixed amounts applied
to the number of years of service rendered. The plans are unfunded.
The components of pension expense relating to defined benefit plans for each of
the reporting periods covered by these financial statements are as follows:
<TABLE>
<CAPTION>
Eleven One
Year Months Month Year
Ended Ended Ended Ended
December 31, November 26, December 31, December 31,
1995 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current service cost $ 57 $ 38 | $ 2 $ 37
Interest cost 886 840 | 52 837
Net amortization and deferrals (927) 107 | 7 -
---------------- ---------------- | ---------------- ----------------
$ 16 $ 985 | $ 61 $ 874
================ ================ | ================ ================
</TABLE>
The following table summarizes the funded status of the Company's defined
benefit pension plans to the amounts recognized in the financial statements:
December 31, December 31,
1996 1997
---- ----
Projected benefit obligations $ 12,379 $ 11,073
--------- ---------
Accrued pension cost $ 12,379 $ 11,073
========= =========
The accumulated benefit obligations do not differ materially from the projected
benefit obligations.
F-17
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
A discount rate of 7.5% was used in 1997 and 1996 to determine the projected
benefit obligations.
Savings Plans
The Company sponsors various tax deferred savings plans into which eligible
employees may elect to contribute a portion of their compensation. Generally,
the Company matches contributions up to a maximum of 3% of compensation. In
connection with the required match, the Company's contribution to the plan was
$512, $30, $237 and $283 for the year ended December 31, 1997, for the one month
ended December 31, 1996, for the eleven months ended November 26, 1996 and for
the year ended December 31, 1995, respectively.
Other Postemployment Benefits
The Company does not have any benefit programs which provide retiree health or
life insurance benefits.
NOTE 11 - LITIGATION, COMMITMENTS AND CONTINGENCIES
In the normal course of business, lawsuits have been filed alleging damages for
accidents relating to use of the Company's products. As part of the acquisition
of the Predecessor, the Company assumed both the outstanding and future product
liability exposures related to such operations. As of December 31, 1997, there
were 76 lawsuits outstanding alleging damages for injuries or deaths arising
from accidents involving forklift products. Most of the foregoing suits are in
various stages of pretrial completion, and certain plaintiffs are seeking
punitive as well as compensatory damages. The Company is self-insured, up to
certain limits, for these product liability exposures, as well as for certain
exposures related to general, workers' compensation and automobile liability.
Insurance coverage is obtained for catastrophic losses as well as those risks
required to be insured by law or contract. The Company has recorded and
maintains an estimated liability, based in part upon actuarial determinations,
in the amount of management's estimate of the Company's aggregate exposure for
such self-insured risks.
The Company is involved in various other legal proceedings which have arisen in
the normal course of business. The Company has recorded provisions for estimated
losses in circumstances where a loss is probable and the amount or range of
possible amounts of the loss is estimable.
The Company is contingently liable as a guarantor for certain of its dealers'
financing arrangements with a financial institution. In certain circumstances of
dealer default, the Company is obligated to: a) repurchase new equipment
financed under dealer floor plan obligations and b) purchase dealers' long-term
rental equipment contracts with customers for which financing has been provided
by the financial institution to the dealer. The guarantees
F-18
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
under these financing arrangements aggregated approximately $25,000 and
$110,000, respectively, at December 31, 1997. When a dealer default does occur,
a newly selected dealer generally assumes the assets of the prior dealer and any
related financial obligations. Historically, the Company and the Predecessor
have incurred only minimal losses relating to these arrangements.
The Company is contingently liable for a portion of the residual value of
machines sold by the Company to an independent company which subsequently leases
those machines to third parties for terms generally ranging from three to five
years. Historically, the Company and the Predecessor have made a profit on the
subsequent resale of repurchased machines. At December 31, 1997, the maximum
contingent liability was approximately $6,273. At December 31, 1997 and December
31, 1996, there were $1,887 and $1,188, respectively, of repurchased machines
included in inventory.
The Company is contingently liable on guarantees given by the Predecessor to
financial institutions relating to loans and other dealer and customer
obligations arising in the ordinary conduct of its business. Such guarantees
approximated $2,272 at December 31, 1997. Estimated losses, if any, on such
guarantees are accrued as a component of the allowance for doubtful accounts.
Historically, the Company and the Predecessor have not incurred material losses
on these guarantees.
The Company's outstanding letters of credit totaled $1,084 at December 31, 1997.
The letters of credit generally serve as collateral for certain liabilities
included in the balance sheet. Certain of the letters of credit serve as
collateral guaranteeing the Company's performance under contracts.
The Company is a wholly-owned subsidiary of Holdings. Other than its investment
in the Company, Holdings has no other substantive business activities or
operations. Holdings has financed its investment in the Company through the
issuance of $7,000 of Junior Subordinated Debentures, bearing interest at 12%
per annum and maturing 2007, $17,000 of preferred stock with an annual
cumulative dividend of 12% and $1,000 of common stock. Although the Company has
not guaranteed Holdings' debt or preferred stock dividend obligations, or
otherwise assumed such obligations, Holdings will look to the Company's assets
and cash flows to meet its interest, debt and dividend obligations when and if
they are paid.
F-19
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
NOTE 12 - RELATED PARTY TRANSACTIONS
The following table summarizes related party transactions conducted with the
Parent Company:
<TABLE>
<CAPTION>
Eleven One
Year Months Month Year
Ended Ended Ended Ended
December 31, November 26, December 31, December 31,
1995 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Distribution and parts warehousing |
expenses $ 7,088 $ 6,100 | $ 490 $ 5,580
Management fee allocation 6,996 5,672 | - -
Interest expense 16,145 14,656 | - -
Interest income 480 150 | - -
</TABLE>
NOTE 13 - GEOGRAPHIC SEGMENT INFORMATION
<TABLE>
<CAPTION>
Eleven One
Year Months Month Year
Ended Ended Ended Ended
December 31, November 26, December 31, December 31,
1995 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales
North America $ 385,611 $ 286,992 $ 31,480 $ 388,185
Europe 162,396 126,045 15,787 134,437
All other 116 85 231 3,829
Eliminations (19,364) (8,493) (735) (37,157)
---------------- ---------------- ---------------- ----------------
Total $ 528,759 $ 404,629 $ 46,763 $ 489,294
================ ================ ================ ================
Income (loss) from operations
North America $ (523) $ 10,307 $ 1,389 $ 17,164
Europe 3,973 3,664 571 4,741
All other (379) (688) (25) (768)
Eliminations (4) - - (103)
---------------- ---------------- ---------------- ----------------
Total $ 3,067 $ 13,283 $ 1,935 $ 21,034
================ ================ ================ ================
Indentifiable assets
North America $ 95,107 $ 98,553 $ 265,472 $ 305,184
Europe 101,054 96,595 89,861 79,249
All other 9,650 10,353 10,161 6,839
Eliminations (13,102) (12,794) (64,187) (78,018)
---------------- ---------------- ---------------- ----------------
Total $ 192,709 $ 192,707 $ 301,307 $ 313,254
================ ================ ================ ================
</TABLE>
Sales between geographic areas are generally priced to recover costs plus a
reasonable markup for profit. Operating income equals net sales less direct and
allocated operating expenses, excluding interest and other nonoperating items.
F-20
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
The Company is not dependent upon any single customer.
NOTE 14 - SEVERANCE ACTIONS
The Predecessor announced personnel reductions totaling approximately 134
employees in the North American operations during 1995 as a continuation of the
Predecessor's programs to increase manufacturing efficiency, reduce costs and
improve liquidity. The Predecessor recorded a combined charge of $3,478 in 1995
for severance costs associated with these actions and additional costs
associated with the closing of certain administrative and warehouse facilities.
Also during 1995, the Predecessor recorded a charge of $2,500 to recognize the
impairment in value of certain properties held for sale in Korea.
NOTE 15 - FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES
The Company conducts a portion of its business through subsidiaries. The Senior
Notes referred to in Note 7 are unconditionally guaranteed, jointly and
severally, by certain subsidiaries (the "Subsidiary Guarantors") which presently
constitute HLT and BGU operations. Certain of the Company's subsidiaries do not
guarantee the Senior Notes (the "Non-Guarantor Subsidiaries"), presently the
Company's foreign subsidiaries.
Presented below is condensed financial information for the Company, the
Subsidiary Guarantors and the Non-Guarantor Subsidiaries at December 31, 1997.
The equity method has been used by the Company with respect to investments in
subsidiaries. Separate financial statements for Subsidiary Guarantors are not
presented based on management's determination that they do not provide
additional information that is material to investors.
F-21
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidating Balance Sheet
December 31, 1997
CLARK Material
Handling Company Non-
(Parent Company Subsidiary Guarantor
Only) Guarantors Subsidiaries Eliminations Consolidated
----------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 70 $ 1 $ 6,263 $ - $ 6,334
Cash securing letters of credit - - 320 - 320
Trade receivables 24,224 3,081 19,713 - 47,018
Affiliate accounts receivable 4,900 11,982 189 (17,071) -
Net inventories 47,331 5,106 18,347 - 70,784
Other current assets 1,614 552 5,115 - 7,281
-------------- ---------- ----------- ----------- -----------
Total current assets 78,139 20,722 49,947 (17,071) 131,737
Long term assets
Property, plant and equipment-net 18,275 1,639 27,922 - 47,836
Goodwill 113,861 1,026 - - 114,887
Investment in affiliates 60,844 - - (60,844) -
Other assets 9,638 1,178 7,978 - 18,794
-------------- ---------- ------------ ----------- -----------
Total assets $ 280,757 $ 24,565 $ 85,847 $ (77,915) $ 313,254
============== ========== ============ =========== ===========
Current liabilities
Notes payable $ 1,261 $ - $ 1,923 $ - $ 3,184
Current portion of capital lease obligations - - 2,732 - 2,732
Trade accounts payable 44,437 3,664 13,901 - 62,002
Affiliate accounts payable 12,043 1,680 2,707 (16,430) -
Accrued compensation and benefits 3,051 503 2,176 - 5,730
Accrued warranties and product liability 19,345 196 1,233 - 20,774
Other current liabilities 4,424 303 6,001 - 10,728
-------------- ---------- ------------ ----------- -----------
Total current liabilities 84,561 6,346 30,673 (16,430) 105,150
Non-current liabilities
Senior notes payable 130,000 - - - 130,000
Capital lease obligations, less current portion - - 3,864 - 3,864
Accrued warranties and product liability 38,497 - - - 38,497
Other non-current liabilities 730 7,168 4,745 (641) 12,002
-------------- ----------- ------------ ----------- -----------
Total liabilities 253,788 13,514 39,282 (17,071) 289,513
-------------- ----------- ------------ ----------- -----------
Commitments and contingencies - - - - -
Stockholder's equity
Common stock 1 - - - 1
Paid-in-capital 24,999 - - - 24,999
Retained earnings 1,969 1,741 4,696 - 8,406
Subsidiary investment - 9,310 51,534 (60,844) -
Cumulative translation adjustment - - (9,665) - (9,665)
-------------- ---------- ------------- ----------- -----------
Total stockholder's equity 26,969 11,051 46,565 (60,844) 23,741
-------------- ---------- ------------- ----------- -----------
Total liabilities and stockholder's equity $ 280,757 $ 24,565 $ 85,847 $ (77,915) $ 313,254
============== ========== ============= =========== ===========
</TABLE>
F-22
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Consolidating Statement of Operations
Year Ended December 31, 1997
<TABLE>
<CAPTION>
CLARK Material
Handling Company Non-
Parent Company Subsidiary Guarantor
Only) Guarantors Subsidiaries Eliminations Consolidated
-------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 358,103 $ 27,849 $ 140,499 $ (37,157) $ 489,294
Cost of goods sold 316,068 24,579 127,535 (37,055) 431,127
------------ ------------ ------------- ------------- ------------
Gross profit 42,035 3,270 12,964 (102) 58,167
Engineering, selling and administrative expenses 26,918 1,399 8,816 - 37,133
------------ ------------ ------------- ------------- ------------
Income from operations 15,117 1,871 4,148 (102) 21,034
Other income (expense):
Interest income 699 8 102 - 809
Interest expense (14,480) (48) (558) - (15,086)
Other income - net 907 6 685 - 1,598
------------ ------------ ------------- ------------- ------------
Income before income taxes 2,243 1,837 4,377 (102) 8,355
Equity in earnings of subsidiaries 5,952 - - (5,952) -
Provision for income taxes 324 105 55 - 484
------------ ------------ ------------- ------------- ------------
Net income $ 7,871 $ 1,732 $ 4,322 $ (6,054) $ 7,871
============ ============ ============= ============= ============
</TABLE>
F-23
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Consolidating Statement of Cash Flows
Year Ended December 31, 1997
<TABLE>
<CAPTION>
CLARK Material
Handling Company Non-
(Parent Company Subsidiary Guarantor
Only) Guarantors Subsidiaries Consolidated
--------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 3,347 $ 326 $ 7,436 $ 11,109
------------- --------- ---------- ---------
Investing activities:
Business combinations (14,646) - - (14,646)
Capital expenditures (4,532) (325) (1,483) (6,340)
------------- --------- ---------- ---------
Net cash used in investing activities (19,178) (325) (1,483) (20,986)
------------- --------- ---------- ---------
Financing activities:
Issuance of current notes payable 822 - 360 1,182
Repayment of current notes payable - - (1,020) (1,020)
Other, net - - 147 147
------------- --------- ---------- ---------
Net cash provided by (used in) financing activities 822 - (513) 309
------------- --------- ---------- ---------
Effect of exchange rate changes on cash and
cash equivalents - - (652) (652)
------------- --------- ---------- ---------
Net increase (decrease) in cash and cash equivalents (15,009) 1 4,788 (10,220)
Cash and cash equivalents at beginning of period 15,079 - 1,475 16,554
------------- --------- ---------- ---------
Cash and cash equivalents at end of period $ 70 $ 1 $ 6,263 $ 6,334
============= ========= ========== =========
</TABLE>
F-24
<PAGE>
NOTE 16 - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Balance
at Balance
beginning (1) (2) at end
of period Provision Other Deductions of period
--------- --------- ----- ---------- ---------
Allowance for Doubtful Accounts
The Company
- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997 $ 2,215 $ 27 $ (123) $ (213) $ 1,906
One month ended December 31, 1996 2,063 164 (12) - 2,215
The Predecessor
- ---------------
Eleven months ended November 26, 1996 2,867 59 (48) (740) 2,138
Year ended December 31, 1995 3,600 - 71 (804) 2,867
(1) Effect of exchange rate
(2) Utilization of established reserves,
net of recoveries
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit Description
No.
3.1 Certificate of Incorporation, as amended, of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form
S-4, Registration No. 333-18957)
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-4, Registration No. 333-18957)
4.1 Indenture dated as of November 27, 1996 between the Company and United
States Trust Company of New York, as Trustee (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
4.2 Registration Rights Agreement dated as of November 27, 1996 among the
Company, Jefferies & Company, Inc. and Bear, Stearns & Co. Inc.
(incorporated by reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
4.3 Form of 103/4% Senior Notes due 2006 (included in Exhibit 4.1)
(incorporated by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.1 Purchase Agreement dated November 22, 1996 among the Company, Jefferies &
Company, Inc. and Bear, Stearns & Co. Inc. (incorporated by reference to
Exhibit 10.1 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.2 Loan and Security Agreement dated November 27, 1996 by and between
Congress Financial Corporation and the Company (incorporated by reference
to Exhibit 10.2 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.3 Stock and Asset Purchase and Sale Agreement, dated as of November 9, 1996
among Terex Corporation, and certain of its subsidiaries and the Company
(incorporated by reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.4 Service Agreement dated as of November 27, 1996 between Terex Corporation
and the Company (incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-4, Registration No. 333-18957)
10.5 Indemnity as to Letters of Credit, Performance Bonds, Appeal Bonds,
Guaranties, etc. dated November 27, 1996 by the Company in favor of Terex
Corporation, for itself and as successor to CMH Acquisition Corp., CMH
Acquisition International Corp., CLARK Material Handling Company and
CLARK Material Handling International, Inc. (incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.6 Employment Agreement dated as of November 27, 1996 between Holdings and
Dr. Martin M. Dorio (incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-4, Registration No. 333-18957)
10.7 Tax Sharing Agreement made as of November 27, 1996 between Holdings and
the Company (incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement on Form S-4, Registration No. 333-18957)
10.8 Stock Purchase Agreement, dated as of May 27, 1992, by and between CLARK
Equipment Company and Terex Corporation (incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.9 First Amendment to the Stock Purchase Agreement, dated as of July 31,
1992, by and between CLARK Equipment Company and Terex Corporation
(incorporated by reference to Exhibit 10.9 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.10 Trademark Assignment Agreement, dated as of July 31, 1992, by and between
CLARK Equipment Company and CLARK Material Handling Company (incorporated
by reference to Exhibit 10.10 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.11 Second Amended and Restated General Operating Agreement, dated November
29, 1990, by and between CLARK Material Handling Company and Chase
Manhattan Leasing Company, Inc. (incorporated by reference to Exhibit
10.11 to the Company's Registration Statement on Form S-4, Registration
No. 333-18957)
10.12 Second Amendment to the Second Amended and Restated General Operating
Agreement, dated April 15, 1994, by and among CLARK Material Handling
Company, Drexel
<PAGE>
Industries, Inc. and CLARK Credit Corporation (incorporated by reference
to Exhibit 10.12 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.13 Third Amendment to the Second Amended and Restated General Operating
Agreement, dated August 1, 1994, by and between CLARK Material Handling
Company and CLARK Credit Corporation (incorporated by reference to
Exhibit 10.13 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.14 Assignment of Second Amended and Restated General Operating Agreement,
dated March 22, 1995, by and between CLARK Material Handling Company,
CLARK Credit Corporation, f/k/a Chase Manhattan Leasing Company, and
Associates Commercial Corporation (incorporated by reference to Exhibit
10.14 to the Company's Registration Statement on Form S-4, Registration
No. 333-18957)
10.15 Master Software License and Service Agreement, dated May 17, 1996,
between CLARK Material Handling Company and SDRC Operations (incorporated
by reference to Exhibit 10.15 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.16 Letter Agreement, dated October 26, 1995, between CLARK Material Handling
Company, Manufacturers Distribution Services, Inc. and Maine Rubber
International (incorporated by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-4, Registration No. 333-18957)
10.17 MCI Services Agreement, effective as of July 1, 1995, between MCI
Telecommunications Corporation and CLARK Material Handling Company
(incorporated by reference to Exhibit 10.17 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.18 Agreement for Systems Operations Services, dated as of March 2, 1992,
between CLARK Material Handling Company and Integrated Systems Solutions
Corporation, as amended by Amendments #1 through #5 (incorporated by
reference to Exhibit 10.18 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.19 Supply Agreement, dated December 14, 1994, between CLARK Material
Handling Company and Funk Manufacturing Company (incorporated by
reference to Exhibit 10.19 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.20 Supply Agreement, dated July 1, 1995, between CLARK Material Handling
Company and Funk Manufacturing Company (incorporated by reference to
Exhibit 10.20 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.21 Agreement, dated June 1, 1983, between CLARK Equipment Company and
Mitsubishi Corporation, Mitsubishi Heavy Industries, Ltd. and Mitsubishi
Motors Corporation, as amended (incorporated by reference to Exhibit
10.24 to the Company's Registration Statement on Form S-4, Registration
No. 333-18957)
10.22 Master Contract for Purchase and Sale, dated July 17, 1995, between CLARK
Material Handling Company and Custom Tool and Manufacturing Company
(incorporated by reference to Exhibit 10.25 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.23 Supply Agreement, dated December 20, 1991, between CLARK Material
Handling Company and Dixson, Inc. (incorporated by reference to Exhibit
10.26 to the Company's Registration Statement on Form S-4, Registration
No. 333-18957)
10.24 Lease Agreement, dated as of April 15, 1987, between Vergil D. Kelly and
Kenny Angelucci and CLARK Equipment Company with respect to 172 Trade
Street, Lexington, Kentucky, as amended by Amendment #1 to Lease dated
April 15, 1987 (incorporated by reference to Exhibit 10.27 to the
Company's Registration Statement on Form S-4, Registration No. 333-18957)
10.25 Standard Form Dealer Sales Agreements, between CLARK Material Handling
Company and domestic dealer entities (incorporated by reference to
Exhibit 10.28 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.26 Agreement, dated as of September 12, 1995, by and between CLARK Material
Handling Company and Nissan Forklift Corporation, North America
(incorporated by reference to Exhibit 10.29 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.27 License Agreement, dated as of November 27, 1996, between Holdings and
the Company (incorporated by reference to Exhibit 10.30 to the Company's
Registration Statement on Form S-4, Registration No. 333-18957)
10.28 Asset Purchase Agreement, dated as of November 6, 1997, between Clark
Material Handling of Canada Ltd. and Blue Giant Limited.
<PAGE>
10.29 Asset Purchase Agreement, dated as of October 31, 1997, between Blue
Giant Corporation and Blue Giant USA Corporation.
21.1 Subsidiaries of the Company
27 Financial Data Schedule
ASSET PURCHASE AGREEMENT
BETWEEN
CLARK MATERIAL HANDLING OF CANADA LTD.
as Buyer
AND
BLUE GIANT CANADA LIMITED
as Seller
Dated as of November 6, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ASSET PURCHASE AGREEMENT..........................................................................................1
Background........................................................................................................1
Terms.............................................................................................................1
ARTICLE I THE TRANSACTION........................................................................2
---------------
1.1. Sale and Purchase of Assets..............................................................................2
1.2. Excluded Assets..........................................................................................4
1.3. Purchase Price...........................................................................................5
1.4. Payment of Purchase Price................................................................................5
1.5. Allocation of Purchase Price.............................................................................6
1.6. Post-Closing Adjustment to Purchase Price................................................................7
1.7. Assumption of Liabilities................................................................................9
1.8. Closing.................................................................................................14
1.9. Deliveries and Proceedings at Closing...................................................................14
1.10. Regarding Certain Consents..............................................................................16
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER..............................................17
----------------------------------------
2.1. Organization............................................................................................17
2.2. Subsidiaries............................................................................................17
2.3. Qualification; Location of Business and Assets..........................................................18
2.4. Authorization and Enforceability........................................................................18
2.5. No Violation of Laws or Agreements......................................................................19
2.6. Financial Statements....................................................................................20
2.7. Undisclosed Liabilities.................................................................................21
2.8. No Changes..............................................................................................21
2.9. Taxes...................................................................................................25
2.10. Inventory...............................................................................................27
2.11. Accounts Receivable.....................................................................................27
2.12. No Pending Litigation or Proceedings....................................................................28
2.13. Contracts; Compliance...................................................................................29
2.14. Compliance with Laws....................................................................................31
2.15. Environmental Matters...................................................................................32
2.16. Consents................................................................................................37
2.17. Personal Property.......................................................................................37
2.18. Real Estate.............................................................................................38
- i -
<PAGE>
2.19. Transactions with Related Parties.......................................................................43
2.20. Condition of Assets.....................................................................................44
2.21. Compensation Arrangements; Officers and Directors.......................................................44
2.22. Labour Relations........................................................................................44
2.23. Products Liability......................................................................................45
2.24. Insurance...............................................................................................46
2.25. Patents and Intellectual Property Rights................................................................47
2.26. Employee Plans..........................................................................................49
2.27. Employees...............................................................................................51
2.28. Customers and Suppliers.................................................................................52
2.29. Brokerage...............................................................................................52
2.30. Disclosure..............................................................................................53
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER........................................................53
---------------------------------------
3.1. Organization and Good Standing..........................................................................53
3.2. Corporate Power and Authority...........................................................................54
3.3. Due Authorization.......................................................................................54
3.4. Brokerage...............................................................................................55
3.5. No Breaches; Etc. .....................................................................................55
3.6. Disclosure. ...........................................................................................55
3.7. Litigation. ...........................................................................................56
3.8. Business Activities. ..................................................................................56
3.9. GST.....................................................................................................56
3.10. Investment Canada.......................................................................................57
ARTICLE IV CERTAIN OBLIGATIONS OF SELLER..................................................................57
-----------------------------
4.1. Conduct of Business Pending Closing.....................................................................57
4.2. Insurance. .............................................................................................60
4.3. Fulfillment of Agreements. .............................................................................61
4.4. Access, Information and Documents. .....................................................................61
4.5. Resignations. ..........................................................................................62
4.6. Negotiations. ..........................................................................................62
4.7. Public Announcements....................................................................................63
ARTICLE V CONDITIONS TO CLOSING; TERMINATION.............................................................63
----------------------------------
5.1. Conditions Precedent to Obligations of Buyer............................................................63
5.2. Conditions Precedent to the Obligations of Seller.......................................................67
5.3. Termination.............................................................................................69
- ii -
<PAGE>
ARTICLE VI CERTAIN ADDITIONAL COVENANTS...................................................................70
6.1. Costs and Expenses......................................................................................70
6.2 Goods and Services Tax Election.........................................................................70
6.3 Transfer Taxes..........................................................................................71
6.4 Income Tax Election.....................................................................................71
6.5. Brokers. ..............................................................................................71
6.6. Employee Benefit Matters................................................................................72
6.7. Employees of the Business...............................................................................72
6.8. Indemnification.........................................................................................74
6.9. Confidentiality and Non-Competition.....................................................................80
6.10. Access to Information...................................................................................82
6.11. Prohibition on use of Blue Giant Name...................................................................83
6.12. Cooperation.............................................................................................84
6.13. Blue Europe Receivable..................................................................................84
6.14. Environmental Remediation...............................................................................85
6.15. Ontario Ministry of Labour..............................................................................85
ARTICLE VII MISCELLANEOUS..................................................................................86
-------------
7.1. Further Assurances; Cooperation.........................................................................86
7.2. Nature and Survival of Representations..................................................................86
7.3. Notices.................................................................................................87
7.4. Successors and Assigns..................................................................................88
7.5. Governing Law...........................................................................................88
7.6. Headings................................................................................................88
7.7. Amendment and Waiver....................................................................................89
7.8. Entire Agreement........................................................................................89
7.9. Counterparts............................................................................................89
7.10. Enforcement.............................................................................................90
7.11. Construction............................................................................................90
LIST OF SCHEDULES AND EXHIBITS....................................................................................2
ANNEX ADEFINITIONS................................................................................................2
- iii -
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
This is an ASSET PURCHASE AGREEMENT (the "Agreement"), dated November
6, 1997 by and between Clark Material Handling of Canada Ltd., a Canadian
corporation ("Buyer") and Blue Giant Canada Limited, a Canadian corporation
("Seller").
Background
----------
Seller is engaged in the business of manufacturing and selling manual
and electric stackers and pallet trucks, electric tow tractors, vehicle
restraint devices, hydraulic scissor lifts and dock levelers (the "Business").
Seller desires to sell and transfer to Buyer and Buyer desires to purchase from
Seller substantially all the assets of Seller used or associated with the
Business, all upon the terms and subject to the conditions set forth in this
Agreement, and to be effective as of 11:59 p.m. on October 31, 1997 (the
"Effective Time"). Seller shall operate the Business solely for the benefit of
Buyer from and after the Effective Time.
Terms
-----
In consideration of the mutual covenants contained herein and intending
to be legally bound hereby, the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE TRANSACTION
---------------
1.1. Sale and Purchase of Assets.
---------------------------
Subject to the terms and conditions hereof, at the Closing referred to in
Section 1.8 below, Seller will sell, transfer, convey and assign to Buyer, free
and clear of all Liens of every kind, nature and description, except for the
Excluded Assets (as defined in Section 1.2) or as otherwise disclosed and agreed
in this Agreement, and Buyer will purchase from Seller, all of Seller's
properties and business as a going concern and good will and assets of every
kind, nature and description existing on the date of Closing, wherever such
assets are located and whether real, personal or mixed, tangible or intangible,
and whether or not any of such assets have any value for accounting purposes or
are carried or reflected on or specifically referred to in its books or
financial statements (collectively, the "Purchased Assets"), including, without
limitation, all of Seller's right, title and interest in and to the following,
as the same may exist on the Closing Date:
(a) all the real property, together with the buildings, fixtures,
structures and other improvements erected thereon, and together with all
easements, rights and privileges appurtenant thereto, as more particularly
described in Schedule 1.1(a) hereto;
(b) all of Seller's machinery, equipment, tooling, dies, jigs,
vehicles, spare parts and supplies, including without limitation the items
listed on Schedule 1.1(b) hereto;
- 2 -
<PAGE>
(c) all of Seller's raw materials, work in progress, parts,
subassemblies, finished goods and other inventories, wherever located and
whether or not obsolete or carried on Seller's books of account;
(d) all of Seller's other tangible assets, including office
furniture, office equipment and supplies, computer hardware and software,
leasehold improvements and vehicles;
(e) all of Seller's trade and other notes and accounts receivable
except Excluded Assets;
(f) all of Seller's books, records, manuals, documents, books of
account, correspondence, sales and credit reports, customer lists, literature,
brochures, advertising material and the like;
(g) all of Seller's rights under leases for real or personal
property, and all of the Seller's rights under all other leases, contracts,
agreements and purchase and sale orders (the "Assigned Contracts"), as
specifically set forth on Schedule 2.13 hereto;
(h) all of Seller's claims, choses in action, causes of action and
judgments;
(i) all of Seller's good will and rights in and to the name "Blue
Giant," and in any other tradename, trademark, fictitious name or service mark,
or any variant of any of them, and any registrations or applications for
registration therefor, and any other forms of intellectual property or
industrial property rights, including any patents, copyrights, trade
- 3 -
<PAGE>
secrets, know-how or proprietary manufacturing processes and all licenses,
sublicenses or other rights relating thereto including, without limitation,
those listed on Schedule 2.25; and
(j) all transferable or assignable registrations, licenses,
permits, approvals, certificates of occupancy and operating rights held in
connection with the Purchased Assets.
1.2. Excluded Assets.
---------------
Notwithstanding any other provision of this Agreement, Seller shall retain and
the Purchased Assets shall not include the following assets (collectively, the
"Excluded Assets"):
(a) all of the Seller's cash, cash in banks, certificates of
deposit, cash equivalents, bank and mutual fund accounts, deposits, investments,
securities and other cash equivalents on hand or on deposit in any financial
institution on the Closing Date;
(b) all consideration received by and the rights of the Seller
under or pursuant to this Agreement or any agreement, instrument or document
ancillary hereto;
(c) all note receivables owing to Seller on the Closing Date from
Blue Giant Europe and Giant Materials Handling Corporation, and any Related
Party;
(d) the corporate records of the Seller including, without
limitation, its minute books, articles of incorporation, bylaws, minutes of
proceedings, stock transfer ledger, letters patent and corporate seal;
(e) all privileged communications;
- 4 -
<PAGE>
(f) Intercompany (among the Seller and any Affiliate other than
Blue Giant USA Corporation) accounts receivable;
(g) payments from insurance companies pertaining to claims filed
by Seller prior to the Closing Date and only to the extent relating to any
liability or obligation included within the Excluded Liabilities (as defined in
Section 1.7(b)); and
(h) all assets, properties and rights described in Schedule 1.2
hereto;
(i) all the issued and outstanding capital stock of Blue Giant
Europe Limited ("Blue Europe") that is owned by Seller.
1.3. Purchase Price.
--------------
The aggregate purchase price for the Purchased Assets (the "Purchase Price")
shall be four million, seven hundred thousand United States Dollars
(U.S.$4,700,000) subject to adjustment as provided in Section 1.6, plus the
assumption of certain liabilities of Seller, as provided in Section 1.7.
1.4. Payment of Purchase Price.
-------------------------
The Purchase Price shall be paid by Buyer to Seller as follows:
(a) Buyer's delivery of three million, four hundred and fifty
thousand United States Dollars (U.S. $3,450,000) by certified cheque, bank draft
or wire transfer at Closing.
- 5 -
<PAGE>
(b) Buyer's delivery of one million, two hundred and fifty
thousand United States Dollars (U.S. $1,250,000) by certified cheque, bank draft
or wire transfer at Closing to the Escrow Agent pursuant to the Escrow
Agreement, substantially in the form of Exhibit 1.4(b) hereto (the "Escrow
Agreement").
(c) By Buyer's assumption at Closing of Seller's liabilities as
required by Section 1.7. Any amounts owing Buyer or Seller pursuant to Section
1.6 as a result of an adjustment to the Purchase Price shall be paid by Seller
or Buyer to the other by certified cheque or bank draft or by mutual direction
to the Escrow Agent to disburse a portion of the funds held under the Escrow
Agreement within 10 days after the amount is finally determined pursuant to
Section 1.6.
1.5. Allocation of Purchase Price.
----------------------------
Buyer shall prepare a final allocation of the Purchase Price within 45 days
following the Closing Date. Buyer and Seller agree that each will report the
federal, provincial and local income and other tax consequences of the purchase
and sale contemplated hereby in a manner consistent with such allocation. The
Buyer and the Seller agree that if any taxing authority does not agree with any
allocation of the Purchase Price agreed to between the parties in accordance
with the foregoing, the Seller and the Buyer shall use their best efforts and
good faith to agree upon a different allocation acceptable to the relevant
authority and, if the parties are so able to agree, they shall thereafter amend
the allocation and their
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income tax returns accordingly; provided, however that nothing contained herein
shall be construed so as to require any party to commence or participate in any
litigation or administrative process challenging the determination so made by
any applicable authority.
1.6. Post-Closing Adjustment to Purchase Price.
-----------------------------------------
(a) Preparation of Closing Statement of Net Asset Value. Within 45
days after the Closing, Buyer shall, at its expense, prepare and deliver to
Seller a statement of the Net Asset Value of the Seller as of the date of the
Effective Time (the "Closing Statement"), as determined by chartered accountants
chosen by Buyer. The Closing Statement shall be prepared in accordance with
Canadian generally accepted accounting principles applied on a basis consistent
with those applied by Seller in the preparation of its June 30, 1997 financial
statements. In the event that Seller disagrees with the Closing Statement,
Seller shall hire an independent chartered accountant at its expense, which
shall prepare Seller's proposed adjustments to the Closing Statement within 45
days of Seller's receipt of the Closing Statement. Any dispute (and only those
items in dispute) concerning the Closing Statement which cannot be resolved by
the parties and their respective independent chartered accountants within 30
days of Buyer's receipt of Seller's proposed adjustments to the Closing
Statement will be submitted no later than 45 days after such receipt to the
Toronto, Ontario office of Arthur Andersen, or such other independent chartered
accounting firm mutually selected by Buyer and Seller, and the determination of
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<PAGE>
such firm shall be final and binding on the parties. All parties represent
hereto that they have not had a business relationship with Arthur Andersen
during the five year period preceding the date of this Agreement and that they
shall not establish such a business relationship between the date of this
Agreement and the final determination of the Closing Statement pursuant to this
Section 1.6(a). The fees and expenses of such third independent accounting firm
shall be borne equally by the Buyer and Seller.
(b) Adjustment Formula. If the Net Asset Value (as hereinafter
defined) at the Effective Time as reflected on the Closing Statement is more
than U.S. $5,625,558, then the Purchase Price shall be increased by the amount
of such excess and Buyer shall pay Seller such amount by certified cheque or
bank draft. If such Net Asset Value is less than U.S. $5,625,558 at the
Effective Time, the Purchase Price shall be reduced by the amount of such
deficiency and Seller shall pay Buyer such amount by certified cheque or bank
draft. Buyer or Seller, as the case may be, shall make any payment required as a
result of an adjustment to the Purchase Price pursuant to this Section within 10
days after the amount of such payment has been finally determined in accordance
with Section 1.6(a). As used herein, "Net Asset Value" shall mean the remainder
of (i) the book value of the assets of Seller that are included in the Purchased
Assets but exclude the Excluded Assets (the "Book Assets") minus (ii) the book
value of the liabilities of Seller that constitute the Assumed Liabilities but
exclude the Excluded Liabilities, as such amounts are reflected on the Closing
Statement calculated in accordance with Canadian generally accepted accounting
principles
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<PAGE>
on a basis consistent with the calculation of the "Net Asset Value" of Seller as
of June 30, 1997 attached hereto as Exhibit 1.6.
In any event, Seller shall pay Buyer, or Buyer shall deduct from amounts
otherwise owing to Seller an amount in cash equal to the cash received by Seller
after the Effective Time and before the Closing Date.
1.7. Assumption of Liabilities.
-------------------------
(a) Assumed Obligations. At the Closing, Buyer shall by an
appropriate instrument of assumption to be executed and delivered at Closing and
to be substantially in the form attached as Exhibit 1.7 hereto (the "Assumption
Agreement"), assume and agree to perform, pay or discharge, when due, to the
extent not theretofore performed, paid or discharged: all of (a) Seller's
obligations and liabilities (including the obligations to make payments) under
the Assigned Contracts arising on or after the Closing Date; (b) all of Seller's
trade accounts payable, but only to the extent reflected on the Closing
Statement; (c) Seller's payroll tax payable, sales tax payable, payroll
deduction payroll and accrued payroll, but in each case only to the extent
reflected on the Closing Statement; (d) all liabilities and obligations of
Seller (including the obligations to make payments) first arising after the
Closing Date under all licenses, permits, approvals, certificates of occupancy
and operating rights held in connection with the Purchased Assets to the extent
such licenses,
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<PAGE>
permits, approvals, certificates of occupancy and operating rights are included
in the Purchased Assets; (e) warranty claims for all products manufactured,
assembled, sold, serviced or distributed by Seller prior to the Closing Date;
(f) any claims relating to the condition or operation of any work in process or
other inventories that are a part of the Purchased Assets; (g) unfilled sales
orders for products or services sold or committed, but not delivered by Seller
as of the Closing Date, to the extent that such unfilled sales orders are
included within the Purchased Assets; and (h) liabilities for materials which
have been ordered but have not been delivered to and paid for by Seller as of
the Closing Date, to the extent that such materials have been ordered in the
ordinary course of business and are of a type that would be included in the
Purchased Assets had they been delivered to Seller prior to the Closing Date;
(i) management bonus payable, but only to the extent reflected on the Closing
Statement; and (j) all liabilities and obligations incurred by Seller in its
operation of the Business pursuant to this Agreement from the Effective Time
through and including the Closing Date. The obligations and liabilities to be
assumed by Buyer pursuant to this Section are hereinafter sometimes referred to
as the "Assumed Liabilities." Except with respect to the Assumed Liabilities,
Buyer does not hereby and shall not assume or in any way undertake to pay,
perform, satisfy or discharge any liabilities or obligations of Seller, and
Seller agrees to pay and satisfy when due any such liabilities and obligations
not assumed by Buyer including the Excluded Liabilities (as hereinafter
defined).
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<PAGE>
(b) Excluded Liabilities. Except as expressly provided in Section
1.7(a), Seller shall retain and Buyer shall not assume or be liable for any
liabilities and obligations of Seller, including without limitation the
following: (the "Excluded Liabilities"):
(i) any liabilities or obligations of Seller, contingent or
otherwise, for any indebtedness of Seller;
(ii) the liabilities or obligations of Seller to its
shareholders respecting dividends, distributions to its shareholders in
liquidation, redemptions of stock, or otherwise;
(iii) liabilities or obligations of Seller arising out of any
transactions occurring, or obligations incurred, after the Closing;
(iv) any obligations of Seller for expenses, taxes or fees
incident to or arising out of the negotiation, preparation, approval or
authorization of this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation, all legal and accounting
fees and expenses and all brokers or finders fees or commissions payable by
Seller (including but not limited to those referred to in Section 6.2 hereof);
(v) any obligation of Seller under or arising out of this
Agreement;
(vi) liabilities to the extent that the Seller is insured or
otherwise indemnified or which would have been covered by insurance (or
indemnification)
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<PAGE>
but for a claim by the insurer (or the indemnitor) that the insured (or the
indemnitees) had breached its obligations under the policy of insurance (or the
contract of indemnity) or had committed fraud in the insurance application;
(vii) any liability or obligation of Seller to any Related
Party (as hereinafter defined);
(viii) any liabilities or obligations, the existence of which
constitute a breach of the representations, warranties or covenants of Seller
contained in this Agreement;
(ix) any obligations or liabilities of Seller to indemnify
its officers, directors, employees or agents;
(x) any liability or obligation in respect of the Excluded
Assets;
(xi) all federal, provincial, local, foreign and other
governmental taxes imposed on Seller, including (i) any Tax of any other
corporation which tax is assessed against Seller by virtue of its status, prior
to the Closing Date, as a member of any consolidated group of which such other
corporation was also a member and (ii) any Taxes imposed as a result of the
consummation of the transaction under this Agreement;
(xii) any Environmental Liabilities;
(xiii) except for the Assumed Liabilities, any obligation or
liability arising under any contract, instrument or agreement (1) that is not
transferred to
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<PAGE>
Buyer as part of the Purchased Assets, or (2) that is not transferred to Buyer
because of Seller's failure or inability to obtain any third party consent
required for the transfer or assignment of such contract or agreement to Buyer,
or (3) that relates to any breach or default (or an event which might, with the
passing of time or the giving of notice, or both, constitute a default) under
any contract, instrument or agreement or to any services to be provided by
Seller under any such contract, instrument or agreement arising out of or
relating to periods on or prior to the Effective Time, or (4) for which Seller
received payment prior to the Effective Time;
(xiv) save as expressly provided elsewhere in this Agreement,
any liabilities pertaining to employees, former employees or retirees of Seller
on the Closing Date, including, without limitation, any liabilities of Seller in
respect of termination or severance arrangements, agreements or obligations with
or to employees of Seller who are offered employment with Buyer but who decline
such offer. Such liabilities include, without limitation, all legal and other
professional fees and disbursements, interest, penalties and amounts paid in
investigation and settlement; and
(xv) any other liability or obligation of Seller or its
Affiliates including any liability or obligation directly or indirectly arising
out of or relating to the operation of the Business or ownership of the
Purchased Assets on or prior to the Closing Date, whether contingent or
otherwise, fixed or absolute, known or unknown, matured or unmatured, present,
future or otherwise, except for the Assumed Liabilities.
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<PAGE>
1.8. Closing.
-------
The closing under this Agreement (the "Closing") will take place at 10:00 A.M.,
local time, on November 7, 1997 at the offices of Borden & Elliot, or at such
other time, date or place as the parties shall mutually agree. The date on which
Closing occurs is sometimes referred to herein as the "Closing Date."
1.9. Deliveries and Proceedings at Closing.
-------------------------------------
At the Closing:
(a) Deliveries by Seller. Seller will deliver or cause to be
delivered to Buyer:
(i) a bill of sale and instrument of assignment to the
Purchased Assets, including a list of the Assigned Contracts as of the Closing
Date, duly executed by the Seller substantially in the form of Exhibit 1.9(a)
hereto (the "Bill of Sale");
(ii) an assignment of all transferable or assignable
licenses, permits and warranties relating to the Purchased Assets and of any
trademarks, trade names, patents and the like, duly executed and in recordable
form, subject to Section 1.10 hereof;
(iii) transfers, duly executed and in registrable form of all
of the real property referred to in section 1.1(a) ("Transfers");
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<PAGE>
(iv) title certificates to any motor vehicles included in the
Purchased Assets duly executed by the Seller (together with any other transfer
and safety forms and certificates necessary to transfer title to such vehicles);
(v) resignations of non-employee trustees of employee benefit
plans;
(vi) powers of attorney to Buyer to endorse all cheques made
payable to Seller relating to trade and other notes and accounts receivable of
Seller;
(vii) the Escrow Agreement; and
(viii) an amendment to the Seller's deferred profit sharing
plan, amending the employer and plan sponsor to Buyer, effective at the
Effective Time, together with the agreement of Canada Life thereto;
(ix) such other instruments of conveyance as shall, in the
reasonable opinion of Buyer and its counsel, be necessary to vest in Buyer good,
valid and marketable title to the Purchased Assets in accordance with Section
1.1.
(b) Deliveries by Buyer. At the Closing, Buyer will deliver to
Seller:
(i) the cash portion of Purchase Price;
(ii) the Assumption Agreement; and
(iii) the Escrow Agreement.
(c) Other Deliveries. The closing certificates, opinions of
counsel and other documents required to be delivered pursuant to this Agreement
will be exchanged.
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<PAGE>
1.10. Regarding Certain Consents. Nothing in this Agreement shall be
construed as an attempt to assign any contract, agreement, permit, franchise, or
claim included in the Purchased Assets which is by its terms or in law
nonassignable without the consent of the other party or parties thereto, unless
such consent shall have been given, or as to which all the remedies for the
enforcement thereof enjoyed by Seller would not, as a matter of law, pass to
Buyer as an incident of the assignments provided for by this Agreement. In
order, however, to provide Buyer the full realization and value of every
contract, agreement, permit, franchise and claim of the character described in
the immediately preceding sentence, Seller agrees that on and after the Closing,
it will, at the request and under the direction of Buyer, in the name of Seller
or otherwise as Buyer shall specify take all reasonable action (including
without limitation the appointment of Buyer as attorney-in-fact for Seller) and
do or cause to be done all such things as shall in the reasonable opinion of
Buyer or its counsel be necessary or proper (a) to assure that the rights of
Seller under such contracts, agreements, permits, franchises, and claims shall
be preserved for the benefit of Buyer and (b) to facilitate receipt of the
consideration to be received by Seller in and under every such contract,
agreement, permit, franchise, and claim, which consideration shall be held for
the benefit of, and shall be delivered to, Buyer. Nothing in this Section shall
in any way diminish Seller's obligations hereunder to obtain all
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<PAGE>
consents and approvals and to take all such other actions prior to or at Closing
as are necessary to enable Seller to convey or assign valid title to all the
Purchased Assets to Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents, warrants and covenants to and with Buyer as
follows:
2.1. Organization.
------------
Seller is a corporation duly incorporated and validly existing under the laws of
Canada. Seller has all requisite corporate power and authority to own or lease
its properties and assets as now owned or leased, to carry on its businesses as
and where now being conducted and to enter into this Agreement, and perform its
obligations hereunder. The copies of Seller's articles of incorporation and
bylaws, as amended to date, which have been delivered to Buyer, are correct and
complete and are in full force and effect.
2.2. Subsidiaries.
------------
Except for the subsidiaries listed on Schedule 2.2 hereto (collectively, the
"Subsidiaries" and individually, a "Subsidiary"), Seller does not, directly or
indirectly, own any shares of, or any other interest in, any other corporation
or business entity.
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<PAGE>
2.3. Qualification; Location of Business and Assets.
----------------------------------------------
The Seller is duly qualified and in good standing as a Canadian corporation,
duly authorized to do business in the jurisdictions set forth on Schedule 2.3
hereto, and such jurisdictions are the only jurisdictions wherein the character
of the properties owned or leased or the nature of activities conducted by
Seller make such qualification necessary and where the failure to so qualify
would have a material adverse effect on Seller, the Business or the Purchased
Assets. Set forth on Schedule 2.3 hereto is each municipal address where Seller:
(a) has a place of business, (b) owns or leases real property, and (c) owns or
leases any other property, including inventory, equipment, furniture, tools and
dies.
2.4. Authorization and Enforceability.
--------------------------------
The execution, delivery and performance of this Agreement has been, and at
Closing the Assumption Agreement, the Bill of Sale, the Transfer and such other
agreements necessary to vest in Buyer good, valid and marketable title to the
Purchased Assets (the "Ancillary Agreements") shall have been duly authorized by
all necessary corporate action on the part of Seller, including, if necessary,
shareholder approval. This Agreement has been, and at Closing the Ancillary
Agreements shall have been duly executed and delivered by Seller, and this
Agreement constitutes, and at Closing the Ancillary Agreements will constitute,
the legal, valid and binding obligations of Seller, enforceable in accordance
with their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, or other similar laws
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<PAGE>
affecting the enforcement of creditors' rights in general, moratorium laws or by
general principles of equity.
2.5. No Violation of Laws or Agreements.
----------------------------------
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and the compliance with the terms,
conditions and provisions of this Agreement by Seller, will not (a) contravene
any provision of Seller's articles of incorporation or bylaws; (b) conflict with
or result in a breach of or constitute a default (or an event which might, with
the passage of time or the giving of notice or both, constitute a default) under
any of the terms, conditions or provisions of any indenture, mortgage, loan or
credit agreement or any other agreement or instrument to which Seller is a party
or by which it or any of its assets may be bound or affected except as set forth
on Schedule 2.16, or any judgment or order of any court or governmental
department, commission, board, agency or instrumentality, domestic or foreign,
or any applicable law, rule or regulation, (c) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon
Seller's assets or give to others any interests or rights therein, (d) result in
the maturation or acceleration of any liability or obligation of Seller that
will not be paid in full by Seller at Closing (or give others the right to cause
such a maturation or acceleration), or (e) result in the termination of or loss
of any right (or give others the
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right to cause such a termination or loss) under any of the Assigned Contracts
except as set forth on Schedule 2.16.
2.6. Financial Statements.
--------------------
The books of account and related records of Seller fairly reflect in reasonable
detail its assets, liabilities and transactions and are in adequate condition
for the preparation of the Financial Statements (as defined below) of Seller in
accordance with Canadian generally accepted accounting principles applied on a
consistent basis. Seller has delivered to Buyer the following financial
statements (the "Financial Statements"):
(a) Audited statements of income and retained earnings and
statements of changes in financial position of Seller for the years ended
December 31, 1993 through December 31, 1996 inclusive, and balance sheets of
Seller as at each of such dates.
(b) Unaudited statements of income and retained earnings of Seller
for the six (6) months ended June 28, 1997, and balance sheets of Seller as at
each of such dates.
The Financial Statements of Seller referred to in paragraph (a) above: (i)
fairly present the financial condition, assets and liabilities of Seller as at
their respective dates and the results of its operations and changes in
financial position for the periods covered thereby, (ii) have been prepared in
accordance with Canadian generally accepted accounting principles
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<PAGE>
consistently applied. The Financial Statements referred to in paragraph (a)
above have been audited by KPMG the independent chartered accountants for
Seller. All references in this Agreement to the "Balance Sheet" shall mean the
balance sheet of Seller as at June 28, 1997 included in the Financial Statements
and all references to the "Balance Sheet Date" shall mean June 28, 1997.
2.7. Undisclosed Liabilities.
-----------------------
To Seller's Knowledge after due inquiry, Seller has no liability or obligation
of any nature, whether due or to become due, absolute, contingent or otherwise,
including liabilities for or in respect of federal, provincial, local or foreign
taxes and any interest or penalties related hereto, except for liabilities that
are (a) fully reflected on the Balance Sheet or (b) incurred in the ordinary
course of business since the Balance Sheet Date and fully reflected as
liabilities on the Seller's books of account, none of which individually or in
the aggregate, has been materially adverse or (c) disclosed on Schedule 2.7
hereto.
2.8. No Changes.
----------
Except as disclosed on Schedule 2.8 hereto, since December 31, 1996, the Seller
has conducted its business only in the ordinary course. Without limiting the
generality of the foregoing sentence, except as disclosed on Schedule 2.8
hereto, since the Balance Sheet Date, there has not been:
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<PAGE>
(a) any change in the financial condition, assets, liabilities,
net worth or business of the Seller, except changes in the ordinary course of
business, none of which, individually or in the aggregate has been or will be
materially adverse to Seller;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the properties, business or prospects
of Seller, or any material deterioration in the operating condition of Seller's
assets;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of Seller's assets, tangible or intangible;
(d) any strike, walkout, labour trouble or any other new or
continued event, development or condition of any character which has or could
materially adversely affect the business, properties or prospects of Seller;
(e) any declaration, setting aside or payment of a dividend or
other distribution in respect of any capital shares of Seller, or any direct or
indirect redemption, purchase or other acquisition of any such shares or any
rights to purchase such shares or securities convertible into or exchangeable
for such shares;
(f) any increase in the salaries or other compensation (excluding
increases in the ordinary course of business and consistent with past practice)
payable or to become payable to, or any advance (excluding advances for ordinary
business expenses) or loan to, any officer, director, employee or shareholder of
Seller, or any increase in, or any addition to, other benefits (including
without limitation any bonus, profit-sharing, pension
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<PAGE>
or other plan) to which any of its officers, directors, employees or
shareholders may be entitled, or any payments to any pension, retirement,
profit-sharing, bonus or similar plan except payments in the ordinary course of
business and consistent with past practice made pursuant to the employee benefit
plans described on Schedule 2.25 hereto, or any other payment of any kind to (or
on behalf of) any such officer, director, employee or shareholder other than
payment of base compensation and reimbursement for reasonable business expenses
in the ordinary course of business;
(g) any making or authorization of any capital expenditures in
excess of $50,000.00;
(h) any cancellation or waiver of any right material to the
operation of Seller's business or any cancellation or waiver of any debts or
claims of substantial value or any cancellation or waiver of any debts or claims
against any Related Party (as such term is hereinafter defined);
(i) any sale, transfer or other disposition of any assets of
Seller, except sales of assets in the ordinary course of business;
(j) any payment, discharge or satisfaction of any liability or
obligation (whether accrued, absolute, contingent or otherwise) by Seller, other
than the payment, discharge or satisfaction, in the ordinary course of business,
of liabilities or obligations shown or reflected on the Balance Sheet or
incurred in the ordinary course of business since the Balance Sheet Date;
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<PAGE>
(k) any adverse change or any threat of any adverse change in
Seller's relations with, or any loss or threat of loss of, Seller's suppliers,
clients or customers, which change or loss would have a material adverse affect
on Seller or its Business;
(l) any write-offs as uncollectible of any notes or accounts
receivable of Seller or right-downs of the value of any assets or inventory by
Seller other than in immaterial amounts or in the ordinary course of business
consistent with past practice and at a rate no greater than during the twelve
months ended on the Balance Sheet Date;
(m) any change by Seller in any method of accounting or keeping
its books of account or accounting practices;
(n) any creation, incurrence, assumption or guarantee by Seller of
any obligations or liabilities (whether absolute, accrued, contingent or
otherwise and whether due or to become due), except in the ordinary course of
business, or any creation, incurrence, assumption or guarantee by Seller of any
indebtedness for money borrowed;
(o) any payment, loan or advance of any amount to or in respect
of, or the sale, transfer or lease of any properties or assets (whether real,
personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with, any "Related Party" (as hereinafter
defined), except for (i) directors' fees, (ii) compensation to the officers and
employees of Seller at rates not exceeding the rates of compensation disclosed
on Schedule 2.19 hereto and (iii) reimbursements of or advances for expenses
incurred for business-related purposes not exceeding $5,000 in the aggregate (as
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<PAGE>
used herein, a "Related Party" means any of the officers, directors or
shareholders of Seller, any affiliate or relative of Seller or of any
shareholder of Seller, or any of their respective officers or directors, or any
business or entity in which any shareholder of Seller or any affiliate or
relative of any such persons or of Seller has any direct or material indirect
interest);
(p) any disposition of or failure to keep in effect any rights in,
to or for the use of any patent, trademark, service mark, trade name or
copyright, or, to Seller's Knowledge, any disclosure to any person not an
employee or other disposal of any trade secret, process or know-how; or
(q) any transaction, agreement or event to which Seller is a party
or a participant outside the ordinary course of Seller's business or
inconsistent with past practice.
2.9. Taxes.
-----
(a) Seller has
(i) timely filed all federal, provincial, state and local
income, payroll, withholding, excise, sales, use, goods and services, personal
property, use and occupancy, business and occupation, mercantile, real estate,
capital stock and franchise or other tax returns of any kind whatsoever (all the
foregoing taxes, including interest and penalties thereon and including
estimated taxes, being hereinafter collectively called "Taxes" and individually
a "Tax");
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<PAGE>
(ii) paid all Taxes which are shown to have become due
pursuant to such returns and (c) paid all other Taxes for which a notice of
assessment or demand for payment has been received. All such returns have been
prepared in accordance with all applicable laws and requirements and accurately
reflect the taxable income (or other measure of Tax) of the party filing the
same. The accruals for Taxes contained in the Balance Sheet are adequate to
cover all liabilities for Taxes of the Seller for all periods ending on or
before the Balance Sheet Date and nothing has occurred subsequent to that date
to make any of such accruals inadequate as of the Balance Sheet Date. All Taxes
for periods beginning after the Balance Sheet Date have been paid or are
adequately reserved against on the books of Seller. Seller has timely filed all
information returns or reports which are required to be filed and has accurately
reported all information required to be included on such returns or reports.
True copies of federal and provincial income tax returns of Seller for each of
the fiscal years ended December 31, 1992 through December 31, 1996 have been
delivered to Buyer. To Seller's Knowledge, there are no proposed assessments of
Tax against Seller or proposed adjustments to any tax returns filed, pending
against Seller;
(b) Seller is not a non-resident of Canada for the purposes of the
Income Tax Act (Canada);
(c) Seller is a registrant for purposes of the Excise Tax Act
(Canada) whose registration number is 100550870.
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<PAGE>
2.10. Inventory.
---------
All of the inventories of Seller, including that reflected in the Balance Sheet,
are valued at the lower of cost or market, the cost thereof being determined on
a first-in, first-out basis, except as disclosed in the Financial Statements.
All of the inventories of Seller reflected in the Balance Sheet and all such
inventories acquired since the Balance Sheet Date consist of items of a quality
and quantity usable and saleable in the ordinary course of Seller's business
within a reasonable period of time and at normal profit margins (other than
normal trade discounts regularly offered by the Business for prompt payment or
quantity purchase), and all of the raw materials and work in process inventory
of Seller reflected in the Balance Sheet and all such inventories acquired since
the Balance Sheet Date can reasonably be expected to be consumed in the ordinary
course of business within a reasonable period of time. Attached hereto is
Schedule 2.10 which sets forth a summary of the value of Seller's inventory of
finished goods, work in process and raw materials as of September 28, 1997
according to the internal accounting records of the Seller as of said date.
2.11. Accounts Receivable.
-------------------
All of the Seller's trade accounts and notes receivable represent amounts
receivable for merchandise actually delivered or services actually provided (or,
in the case of non-trade accounts or notes, represent amounts receivable in
respect of other bona-fide business
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<PAGE>
transactions), have arisen in the ordinary course of business, are not subject
to any counterclaims or offsets and have been billed and are generally due
within 30 days after such billing (with regard to Canadian trade accounts
receivable) and within 90 days (with regard to non-Canadian trade accounts
receivable). All such receivables are fully collectible in the normal and
ordinary course of business, except to the extent of a reserve in an amount not
in excess of the reserve for doubtful accounts reflected on the Balance Sheet.
Schedule 2.11 hereto sets forth (a) the total amount of accounts receivable of
the Seller outstanding as of the close of business on September 27, 1997 and (b)
the aging of such receivables based on the following schedule: 0-30 days, 31-60
days, 61-90 days, and over 90 days, from the due date thereof.
2.12. No Pending Litigation or Proceedings.
------------------------------------
Except as set forth on Schedule 2.12 hereto, there are no actions, suits,
investigations, proceedings or claims pending or, to Seller's Knowledge,
threatened against or affecting Seller or Seller's agents or their assets, at
law or in equity, by or before any court or governmental department, agency or
instrumentality, and to Seller's Knowledge, there is no basis for any such
action, suit, investigation, proceeding or claim. There are presently no
outstanding judgments, decrees or orders of any court or any governmental or
administrative agency against or, to Seller's Knowledge, affecting Seller or any
of their businesses or assets.
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<PAGE>
2.13. Contracts; Compliance.
---------------------
Except as listed on Schedule 2.13 hereto, Seller is not a party to or bound by
any lease, contract or commitment, oral or written, formal or informal, of the
following types:
(a) mortgages, indentures, security agreements or other agreements
and instruments relating to the borrowing of money, the extension of credit or
the granting of liens or encumbrances;
(b) employment and consulting agreements;
(c) union or other collective bargaining agreements;
(d) powers of attorney;
(e) sales agency, manufacturers representative and distributorship
agreements or other distribution or commission arrangements;
(f) licenses of patent, trade secrets, know-how, trademark,
copyrights, software and other intellectual property rights;
(g) agreements, orders or commitments for the purchase of
services, raw materials, supplies or finished products from any one supplier for
an amount in excess of $5,000.
(h) agreements, orders or commitments for the sale of products or
services for more than $5,000 to any single purchaser;
(i) contracts or options relating to the sale by Seller of any
asset, other than sales of inventory in the ordinary course of business;
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(j) bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation, accrued vacation pay, group insurance,
welfare agreements or other plans, agreements, trusts or arrangements for the
benefit of employees;
(k) agreements or commitments for capital expenditures in excess
of $50,000.00 for any single project;
(l) joint venture agreements;
(m) agreements requiring the consent of any party thereto to the
consummation of the transactions contemplated hereby;
(n) agreements with any Related Party;
(o) lease agreements under which it is either lessor or lessee;
(p) agreements, contracts or commitments for any charitable or
political contribution; or
(q) other agreements, contracts and commitments which are material
to the business of Seller, or which involve payments or receipts of more than
$5,000.00 in any single year, or which were entered into other than in the
ordinary and usual course of business.
All such leases, contracts and other commitments are in full force and effect;
all parties to such leases, contracts and other commitments have complied with
the provisions thereof; no such party is in default under any of the terms
thereof; and no event has occurred that with
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the passage of time or the giving of notice or both would constitute a default
by any party under any provision thereof. Set forth on Schedule 2.13 hereto is a
summary of unfilled firm purchase orders of Seller as of the last day of the
month immediately preceding the present month, other than any unfilled firm
purchase order which has a value of less than $1,000.
2.14. Compliance with Laws.
--------------------
Schedule 2.14 hereto sets forth a list of all material permits, certificates,
licenses, orders, registrations, franchises, authorizations and other approvals
from all federal, provincial, local and foreign governmental and regulatory
bodies held by Seller. All such permits, certificates, licenses, orders,
registrations, franchises, authorizations and other approvals are in full force
and effect and the Seller is in compliance with the terms and conditions
thereof. The Seller holds and is in compliance with all material permits,
certificates, licenses, approvals, registrations and authorizations required
under all laws, rules and regulations in connection with their businesses, and,
to Seller's Knowledge, all of such permits, certificates, licenses, approvals,
registrations and authorizations are in full force and effect. The Seller has
complied with all applicable statutes, rules, regulations and orders, federal,
provincial and municipal, which, if not complied with, would have a material
adverse effect on its business. No notice, citation, summons or order has been
issued, no complaint has been filed, no penalty has been assessed and, to
Seller's Knowledge, no investigation or review is pending or threatened by any
governmental or other entity (a) with respect to any alleged violation
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by Seller of any law, ordinance, rule, regulation or order of any governmental
entity or (b) with respect to any alleged failure by Seller to have any permit,
certificate, license, approval, registration or authorization required in
connection with its business.
2.15. Environmental Matters.
---------------------
(a) Except as disclosed on Schedule 2.15 hereto or in the site
assessments of the Owned Real Property performed by or on behalf of Buyer (true
and complete copies of which Buyer has delivered to Seller):,
(i) Seller has complied with and is not in violation of any
federal, provincial, regional or local statutory or common law, regulation,
rule, order, ordinance, guideline, direction, policy or notice, relating to the
environment, public health and safety, and occupational health and safety,
including those relating to Hazardous Substances ("Environmental Laws").
(ii) Seller holds and is in compliance with all environmental
permits, certificates, consent or other settlement agreements, licenses,
approvals, registrations and authorizations required under all Environmental
Laws ("Environmental Permits"), and all of such Environmental Permits are valid
and in full force and effect. All such Environmental Permits held by Seller are
listed on Schedule 2.15 hereto and any that are not transferable are so
designated. Seller has made or will make before the Closing timely application
for renewals of all such Environmental Permits for which Environmental
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Laws require that applications must be filed on or before the Closing to
maintain the Environmental Permits in full force and effect after the Closing
Date.
(iii) No consent, approval or authorization of, or registra-
tion or filing with any Person, including any environmental governmental
Authority or regulatory agency, is required in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby. Seller (with Buyer's reasonable assistance) has or will prepare and file
all applications for the transfer of all Environmental Permits, at Buyer's
expense, that must be transferred as a result of the consummation of the
transactions contemplated by this Agreement.
(iv) No notice, citation, summons or order has been issued or
served upon, no complaint has been filed, no penalty has been assessed and, to
Seller's Knowledge, no investigation or review is pending or threatened by any
Authority or Person: (a) with respect to any alleged violation by Seller of any
Environmental Law; or (b) with respect to any alleged failure by Seller to have
any Environmental Permit; or (c) with respect to any use, possession,
generation, treatment, storage, recycling, transportation or disposal
(collectively "Management") of any Hazardous Substances by or on behalf of
Seller or its predecessors.
(v) Seller has not received any request for information,
notice of claim, demand, order or notification that it or any of its
predecessors are or may be
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potentially responsible with respect to any investigation or clean-up of any
threatened or actual Release of any Hazardous Substance.
(vi) Except for Hazardous Substances stored or used in the
ordinary course of their manufacturing processes, in quantities and in a manner
(1) not in violation of any applicable law, or (2) which has not or is not
reasonably likely to create a condition which requires investigation,
remediation or other responsive action or responsibility or liability under
Environmental laws, neither Seller nor any Affiliate of Seller has used,
generated, treated, stored for more than 90 days, recycled or disposed of any
Hazardous Substances on any property now owned, operated or leased by Seller or
any Affiliate of Seller or on any formerly owned, operated or leased property,
nor has anyone else during the period that such property has been owned,
operated or leased by Seller or, to Seller's Knowledge, during any other period,
treated, stored for more than 90 days, recycled or disposed of any Hazardous
Substances on any property now owned, operated or leased by Seller or any
Affiliate of Seller or on any formerly owned, operated or leased property.
(vii) Except as disclosed on Schedule 2.15, to Seller's
Knowledge, no polychlorinated biphenyls, lead based paints or
asbestos-containing materials are or have been present at any property now
owned, operated or leased by Seller or any Affiliate of Seller, or at any
formerly owned, operated or leased property during the period that such property
was owned, operated or leased by Seller, nor are there any underground
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storage tanks, active or abandoned, at any property now owned, operated or
leased by Seller or any Affiliate of Seller or during the period that such
property was owned, operated or leased by Seller, at any formerly owned,
operated or leased property.
(viii) To Seller's Knowledge, no Hazardous Substance
generated by Seller or any Affiliate of Seller has been recycled, treated,
stored, disposed of or transported by any entity in violation of any
Environmental Law or in a manner which has created or is reasonably likely to
create any liability or responsibility under any Environmental Law.
(ix) To Seller's Knowledge without any independent inquiry,
no Hazardous Substance managed by Seller or any Affiliate of Seller has come to
be located at any site which is the subject of federal, provincial or local
enforcement actions or other investigations which may lead to claims against
Seller or any Affiliate, or Buyer for clean-up costs, remedial work, damages to
natural resources or for personal injury claims, including, but not limited to,
claims under the Environmental Protection Act (Ontario) or other applicable
Environmental Laws.
(x) No Hazardous Substance has been Released at, on, about or
under by Seller or, to Seller's Knowledge is present in any property now owned,
operated or leased by Seller or any Affiliate of Seller or any formerly owned,
operated or leased property which requires investigation, remediation or other
response action.
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<PAGE>
(xi) No oral or written notification of a Release or threat
of Release of a Hazardous Substance has been filed by or on behalf of Seller or
any Affiliate of Seller or in relation to any property now or previously owned,
operated or leased by Seller or any Affiliate of Seller.
(xii) There are no environmental Liens on any properties
owned or leased by Seller or any Affiliate of Seller which would impair Buyer's
ability to lawfully operate the Business as such Business was operated prior to
the Closing Date and, to Seller's Knowledge, no government actions have been
taken or are in process or pending which could subject any of such properties to
such Liens or orders to pay.
(xiii) No deed or other instrument of conveyance of real
property to Seller or any Affiliate of Seller with respect to real property
presently owned, operated or leased by Seller contains a restriction relating to
the actual or suspected presence of Hazardous Substances, which restriction
would impair Buyer's ability to lawfully operate the Business as such Business
was operated prior to the Closing Date.
(xiv) To Seller's Knowledge, there are no facts or
circumstances related to environmental matters concerning real property owned,
operated or leased by Seller or businesses conducted by Seller that could
reasonably be expected to lead to any future environmental claims against
Seller, or Buyer under current law.
(xv) There have been no environmental inspections,
investigations, studies, audits, tests, reviews or other analyses conducted by
or at the
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direction of Seller or, in the possession of Seller indicating the presence of
any Hazardous Substance in or on any property or business now or previously
owned, operated, or leased by Seller or any Affiliate of Seller in violation of
any Environmental Law or which has created a condition which requires
investigation, remediation or other response action under Environmental Law
which have not been provided to Buyer prior to the date hereof.
2.16. Consents.
--------
Except as set forth on Schedule 2.16, no consent, approval or authorization of,
or registration or filing with, any Person, is required in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
2.17. Personal Property.
-----------------
The Seller owns all of its tangible personal property and assets, including the
properties and assets reflected in the Balance Sheet (except those disposed of
in the ordinary course of business since the Balance Sheet Date); and at the
Closing none of such properties or assets will be subject to any mortgage,
pledge, lien, restriction, encumbrance, tenancy, license, encroachment,
covenant, right of way, easement, claim, security interest, charge or any other
matter affecting title, except, (a) minor imperfections of title, none of which,
individually or in the aggregate, materially detracts from the value of or
impairs the use of the affected properties or impairs any operations of the
Seller, (b) liens for current taxes not yet due and
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payable, or (c) as disclosed on Schedule 2.17 hereto (collectively "Personal
Property Permitted Encumbrances"). All tangible personal property and assets
which are consigned or leased to the Seller and are used in the operation of the
businesses of Seller are listed on Schedule 2.17.
2.18. Real Estate.
-----------
(a) Schedule 2.18 hereto contains a true, correct and complete
list of all real properties owned, leased, subleased, licensed or otherwise
occupied by Seller (collectively, the "Real Properties") separately indicating
the nature of Seller's interest therein. Except as set forth on Schedule 2.18
hereto, no other Person has any oral or written right, agreement or option to
acquire, lease, sublease or otherwise occupy all or any portion of such Real
Properties. Seller has not received any written or oral notice for assessment
for public improvements against any of the Real Properties which remains unpaid
and, to Seller's Knowledge, no such assessment has been proposed. There is no
pending condemnation, expropriation, eminent domain or similar proceeding
affecting all or any portion of any of the Real Properties and, to Seller's
Knowledge, no such proceeding is contemplated.
(b) Accurate and current copies of all real property leases,
subleases, licenses or other occupancy agreements (and all amendments thereto)
listed on Schedule 2.18 hereto have previously been delivered to Buyer
(collectively, the "Leases"). Seller has
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not assigned its rights under any Leases other than collateral assignments
executed in connection with financings identified on the schedules attached
hereto. The Leases are in full force and effect and constitute binding
obligations of the Seller and the other parties thereto and (i) there are no
defaults thereunder by Seller or by any other party thereto, and (ii) to
Seller's Knowledge, no event has occurred which with notice, lapse of time, or
both would constitute a default by the Seller or, to Seller's Knowledge, by any
other party thereto.
(c) Except as disclosed on Schedule 2.18 hereto,
(i) Seller has indefeasible, good, marketable and insurable
(1) legal and equitable fee simple title to the real property owned by Seller
(the "Owned Real Property"), and (2) valid and enforceable leasehold interest to
the property leased pursuant to the Leases (the "Leased Real Property"), in all
cases, free and clear of any and all Liens, exceptions, items, encumbrances,
easements, restrictions and other matters either of record or not of record
which either individually or in the aggregate, could prohibit or adversely
interfere with Buyer's use of such property except (a) matters set forth on
Schedule 2.18 and referred to as "Exceptions that will not exist at Closing"
(the "Exceptions That Will Not Exist at Closing"), (b) matters set forth on
Schedule 2.18, none of which is material in amount and none of which,
individually or in the aggregate, impairs, or grants or evidences rights which
if exercised would impair, the use of the affected property in the manner such
property is currently being used, or impairs the current operations of the
Seller,
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<PAGE>
(c) defects of title, conditions, easements, encroachments, covenants or
restrictions, if any, none of which is material in amount and none of which,
individually or in the aggregate, materially impairs, or grants or evidences
rights which if exercised would materially impair, the use of the affected
property in the manner such property is currently being used, or impairs the
current operations of the Seller, and (d) zoning or land use ordinances, none of
which individually or in the aggregate, impairs the use of the affected property
in the manner such property is currently being used or impairs the current
operations of the Seller (collectively, the "Permitted Real Property
Encumbrances"). No material default or breach exists under any of the covenants,
conditions, restrictions, rights-of-way or easements, if any, affecting all or
any portion of the Real Properties.
(ii) The current zoning of each of the Real Properties
permits the operator of such property to use such property for the current
respective use thereof. Seller has not made any application for a rezoning of
any of the Real Properties. To Seller's Knowledge, there is no proposed or
pending change to any zoning affecting any of the Real Properties.
(iii) All utilities, including without limitation, potable
water, sewer, gas, electric, telephone, and other public utilities and all storm
water drainage required by law or necessary for the operation of the Real
Properties, 1) either enter the Real Properties through open public streets
adjoining the Real Properties, or, if they pass through adjoining private land,
do so in accordance with valid public or private easements
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or rights of way which will inure to the benefit of Buyer, 2) are installed,
connected, operating and adequate for the operation of the Business as it has
been previously conducted by Seller, with all installation and connection
charges paid in full, including, without limitation, connection and the right to
discharge sanitary waste into the collector system of the appropriate sewer
utility, and 3) are adequate (in both quality and quantity) to service the Real
Properties for their respective use in the business as presently conducted
thereon.
(iv) Each of the Owned Real Property is located along one or
more dedicated public streets or has access thereto. All curb-cut and
street-opening permits or licenses required for vehicular access to and from the
Real Properties to any adjoining public street or to any parking spaces utilized
in connection with the Owned Real Property have been obtained and paid for, are
in full force and effect and shall inure to the benefit of Buyer.
(d) All buildings, structures, improvements and appurtenances
situated on the Real Properties are in good operating condition and in a state
of good maintenance and repair and are adequate and suitable for the purposes
for which they are currently being used. None of such buildings, structures,
improvements or appurtenances (or any equipment therein), nor the operation or
maintenance thereof, violates any restrictive covenant or any provision of any
federal, provincial or municipal law, ordinance,
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rule or regulation, or encroaches on any property owned by others. Without
limiting the generality of the foregoing:
(i) no alteration, repair, improvement or other work has been
ordered, directed or requested in writing to be done or performed to or in
respect of the Real Properties other than routine maintenance, or to any of the
plumbing, heating, elevating, water, drainage or electrical systems, fixtures or
works by any municipal, provincial or other competent authority, which
alteration, repair, improvement or other work has not been completed, and Seller
knows of no written notification having been given to it of any such outstanding
work being ordered, directed or requested, other than those that have been
complied with;
(ii) all accounts for work and services performed and
materials placed or furnished upon or in respect of the Real Properties at the
request of the Seller have been fully paid and satisfied, and no person is
entitled to claim a lien under the Construction Lien Act (Ontario) or similar
legislation in other provinces of Canada against the Real Properties, or any
part thereof, other than current accounts in respect of which the payment due
date has not yet passed; and
(iii) each of the Real Properties (including all buildings,
improvements and fixtures) is fit for its present use, and there are no material
or structural repairs or replacements that are necessary or advisable and,
without limiting the foregoing, there are no repairs to, or replacements of, the
roof or the mechanical, electrical, heating,
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ventilating, air-conditioning, plumbing, drainage or security equipment or
systems that are necessary or advisable; and none of the Real Properties is
currently undergoing any alteration or renovation nor is any such alteration or
renovation contemplated;
(e) Except as set forth on Schedule 2.18 hereto, there are no
deeds of trust, mortgages or charges which are a Lien upon the Real Properties.
2.19. Transactions with Related Parties.
---------------------------------
Except as disclosed on Schedule 2.19, no Related Party has:
(a) borrowed money or loaned money to Seller which remains
outstanding;
(b) any contractual or other claims, express or implied, of any
kind whatsoever against Seller;
(c) any interest in any property or assets used by Seller in its
business; or
(d) is engaged in any other transaction with Seller (other than
employment relationships at the salaries disclosed in Schedule 2.19 hereto).
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2.20. (a) Condition of Assets.
-------------------
The buildings, machinery, equipment, tools, furniture, improvements and other
fixed assets of the Seller, including those reflected in the Balance Sheet, are
adequate for the operation of the Business as it has been previously conducted
by the Seller.
2.21. Compensation Arrangements; Officers and Directors.
-------------------------------------------------
Schedule 2.21 hereto sets forth the following information:
(a) The names and current annual salary, including any bonus, if
applicable, of all present officers and employees of Seller whose current annual
salary, including any promised, expected or customary bonus, equals or exceeds
$50,000 together with a statement of the full amount of all remuneration paid by
Seller to each such person and to any director of Seller, during the 12 month
period preceding the date hereof.
(b) the names and titles of each trustee, fiduciary or plan
administrator of each employee benefit plan of the Seller.
2.22. Labour Relations.
----------------
The overall relations of Seller with its employees is good. No employee of
Seller is represented by any union or other labour organization or employee
association. To Seller's Knowledge, there is not currently and there has not
been in the past three years, any attempt to organize or establish any labour
union or employee association with respect to
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any employees of Seller. There is no complaint against Seller pending or, to
Seller's Knowledge, threatened before the Ontario Labour Relations Board. There
is no labour strike, dispute, slow down or stoppage actually pending or, to
Seller's Knowledge, threatened against or involving Seller. No employee
grievance which might have an adverse effect on Seller or the conduct of its
businesses is pending. No private agreement restricts Seller from relocating,
closing or terminating any of its operations or facilities. Seller has not in
the past three years experienced any work stoppage or slow down or committed any
unfair labour practice.
2.23. Products Liability.
------------------
Except for lawsuits, claims, damages and expenses adequately covered by the
Seller's insurance, there are no (a) liabilities of Seller, fixed or contingent,
asserted or, to Seller's Knowledge, unasserted, with respect to any product
liability or any similar claim that relates to any product manufactured and sold
by Seller to others, or (b) liabilities of Seller, fixed or contingent, asserted
or, to Seller's Knowledge, unasserted, with respect to any claim for the breach
of any express or implied product warranty or any other similar claim with
respect to any product manufactured and sold by Seller to others other than
standard warranty obligations (to replace, repair or refund) made by the Seller
in the ordinary course of business to purchasers of their products and special
warranties made by the Seller with
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regard to certain pit dock levelers and truck restraints, for which the Seller
matches competitors' warranties.
2.24. Insurance.
---------
Attached hereto as Schedule 2.24 is a complete and correct list of all policies
of insurance of which Seller is the owner, insured or beneficiary, or covering
any of its property, true, correct and complete copies of which have been
delivered to Buyer, indicating for each policy the carrier, the insured, type of
coverage, the amounts of coverage, deductible, premium rate, cash value if any,
expiration date and any pending claims thereunder. All such policies are in full
force and effect. The coverages provided by such policies are reasonable, in
both scope and amount, in light of the risks attendant to the businesses in
which the Seller is, or has been, engaged. Seller has paid-in-full all premiums
due on such policies as of the Closing Date. To Seller's Knowledge, there is no
default with respect to any provision contained in any such policy, nor has
there been any failure to give any notice or present any claim under any such
policy in a timely fashion or in the manner or detail required by the policy.
Except as set forth on Schedule 2.24, there are no outstanding unpaid premiums
or claims under such policies. No notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any such policy has been
received by Seller. Except as set forth on Schedule 2.24, Seller has not been
refused any insurance, nor has its coverage been limited by any insurance
carrier to which it has applied for insurance
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or with which it has carried insurance during the last five years. Except as set
forth on Schedule 2.24, all products liability, professional liability and
general liability policies maintained by or for the benefit of the Seller during
the last five years have been "occurrence" policies and not "claims made"
policies. Schedule 2.24 contains a complete and correct list of all such
products liability, professional liability and general liability policies,
indicating for each policy, the carrier, risks insured, the amount and dates of
coverage, deductible and any pending claims thereunder; and all such policies
are in full force and effect.
2.25. Patents and Intellectual Property Rights.
----------------------------------------
Attached hereto as Schedule 2.25 is a correct list of all patents,
patent applications, trademarks, service marks and trade names, copyrights,
intellectual property licenses, logos and the like, held, owned or used by the
Seller (the "IP Rights"), and as to all such IP Rights that are registered, all
of such registrations, and as to all such IP Rights for which registration has
been applied, such applications are valid and in good standing. To Seller's
Knowledge, none of the IP Rights infringes (nor has any claim been made that any
of them infringes) the patents, trademarks or other rights of others. Except as
set forth on Schedule 2.25, to Seller's Knowledge, the manufacture, sale or use
of any products now or heretofore manufactured or sold by Seller did not and
does not infringe (nor has any claim been made that any such action infringes)
the patents or intellectual property rights of others. The Seller owns or
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possesses adequate licenses or other rights (at reasonable market costs) to use
all patent, patent applications, copyrights, trademarks, servicemarks and
tradenames necessary to conduct its business as now conducted. Except as set
forth on Schedule 2.25, there is no agreement to which Seller is a party or to
which Seller is legally bound and no restriction or Liens, materially and
adversely affecting the use by Seller and, after the Closing, the use by Buyer,
of any of the IP Rights. There is no pending litigation or other legal action
with respect to any of the IP Rights, and no order, holding, decision or
judgment has been rendered by any Authority, and no agreement, consent or
stipulation exists to which Seller is a party or of which Seller has Knowledge,
which would prevent Seller, or after the Closing, Buyer, from using any of the
IP Rights.
Except for the MCBA accounting program, all computer software and all hardware
and other products incorporating embedded software or microcode, used in the
Business (the "Programs"), are "year 2000 compliant" and, more specifically, (i)
are designated to be used prior to, during and after the calendar year 2000 A.D.
without error relating to date data, and shall operate transparently to the user
during such time periods, (ii) are capable of operating without error relating
to the product of date data which represents or references different centuries
or more than one century, and (iii) are designed such that all data fields,
date-related user interfaces and other interfaces include the indication of
century.
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2.26. Employee Plans.
--------------
Schedule 2.26 identifies each retirement, pension, bonus, stock purchase, profit
sharing, stock option, deferred compensation, severance or termination pay,
insurance, medical, hospital, dental, vision care, drug, sick leave, disability,
salary continuation, legal benefits, unemployment benefits, vacation, incentive
or other compensation plan or arrangement or other employee benefit that is
maintained, or otherwise contributed to or required to be contributed to, by the
Seller relating to the Business or the Purchased Assets for the benefit of
employees or former employees of the Seller (the "Employee Plans") and a true
and complete copy of each Employee Plan has been furnished to the Buyer. Each
Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Employee Plan and has been administered in
accordance with the terms of any trusts or insurance contracts maintained in
connection therewith. The Seller has delivered to the Buyer the actuarial
valuations, if any, prepared for each Employee Plan during the past o years.
Except as described in Schedule 2.26:
(a) all contributions to, and payments from, each Employee Plan
that may have been required to be made in accordance with the terms of any such
Employee Plan, or with the recommendation of the actuary for such Employee Plan,
and, where applicable, the laws of the jurisdictions that govern such Employee
Plan, have been made in a timely manner;
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(b) all material reports, returns and similar documents (including
applications for approval of contributions) with respect to any Employee Plan
required to be filed with any government agency or distributed to any Employee
Plan participant have been duly filed in a timely manner or distributed;
(c) there are no pending investigations by any governmental or
reg- ulatory agency or authority involving or relating to any Employee Plan, no
threatened or pending claims (except for claims for benefits payable in the
normal operation of the Employee Plans), suits or proceedings against any
Employee Plan or asserting any rights or claims to benefits under any Employee
Plan that could give rise to a liability nor, to the Seller's Knowledge, are
there any facts that could give rise to any liability in the event of such
investigation, claim, suit or proceeding;
(d) no notice has been received by the Seller of any complaints or
other proceedings of any kind involving the Seller or, to the Seller's
Knowledge, any of the employees of the Seller before any pension board or
committee relating to any Employee Plan or to the Business or the Purchased
Assets; and
(e) the assets of each Employee Plan are at least equal to the
liabilities of such Employee Plans based on the actuarial assumptions utilized
in the most recent valuation performed by the actuary for such Employee Plan,
and neither the Buyer nor any of its Associates or Affiliates will incur any
liability with respect to any Employee Plan as a result of the transactions
contemplated by this Agreement.
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<PAGE>
2.27. Employees.
---------
Seller has delivered to Buyer a complete and accurate list of the names of all
individuals who are employees of the Seller actively employed or engaged in the
Business as of October 31, 1997 specifying: the length of service, age, title,
rate of salary and commission or bonus structure for each such employee.
No notice has been received by the Seller of any complaint filed by any of the
employees against the Seller claiming that the Seller has violated the
Employment Standards Act (Ontario), the Human Rights Code (Ontario) (or any
applicable employee or human rights or similar legislation in the other
jurisdictions in which the Business is conducted) or of any complaints or
proceedings of any kind involving the Seller or, to the Seller's Knowledge,
after due inquiry any of the employees of the Seller before any, labour
relations board, except as disclosed in Schedule 2.27. There are no outstanding
orders or charges against the Seller under the Occupational Health and Safety
Act (Ontario) (or any applicable health and safety legislation in the other
jurisdictions in which the Business is conducted). All levies, assessments and
penalties made against the Seller pursuant to the Workers' Compensation Act
(Ontario) (and any applicable workers' compensation legislation in the other
jurisdictions in which the Business is conducted) have been paid by the Seller
and the Seller has not been reassessed under any such legislation during the
past 5 years.
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All accruals for unpaid vacation pay, premiums for employment
insurance, health premiums, Canada Pension Plan premiums, accrued wages,
salaries and commissions and employee benefit plan payments have been reflected
in the books and records of the Seller.
2.28. Customers and Suppliers.
-----------------------
Schedule 2.28 sets out the major customers of the Business and there has been no
termination or cancellation of, and no modification or change in, the Seller's
business relationship with any major customer or group of major customers. The
Seller has no reason to believe that the benefits of any relationship with any
of the major customers or suppliers of the Business will not continue after the
Closing in substantially the same manner as prior to the date of this Agreement.
2.29. Brokerage.
---------
Except as described in Section 6.5, neither Seller nor any shareholder thereof
has made any agreement or taken any other action which might cause anyone to
become entitled to a broker's fee or commission as a result of the transaction
contemplated hereunder.
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2.30. Disclosure.
----------
No representation or warranty by Seller in this Agreement, and no exhibit,
certificate or schedule furnished or to be furnished to Buyer pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading or necessary to provide Buyer with proper information as
to the Seller and the Purchased Assets. Seller shall disclose to Buyer at
Closing any information then in the possession of Seller that indicates that
Buyer is in breach of this Agreement or which may provide the basis for a claim
by Seller that Buyer has breached this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as follows:
3.1. Organization and Good Standing.
------------------------------
Buyer is a corporation duly incorporated and validly existing under the laws of
Canada.
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3.2. Corporate Power and Authority.
-----------------------------
Buyer has all requisite corporate power and authority to make, execute, deliver
and perform this Agreement, the Assumption Agreement and all other agreements,
documents and instruments to which it is a party or is otherwise obligated which
are executed, delivered or performed pursuant to this Agreement.
3.3. Due Authorization.
-----------------
The execution, delivery and performance of this Agreement, the Assumption
Agreement and all other agreements, documents and instruments to which the
Borrower is a party or is otherwise obligated which are to be executed,
delivered or performed pursuant to this Agreement have been duly authorized by
all necessary corporate action on the part of Buyer, and this Agreement
constitutes, and the Assumption Agreement and the Note and the other instruments
to be delivered by Buyer at Closing, when executed and delivered at Closing,
will constitute, the legal, valid and binding obligations of Buyer, enforceable
against it in accordance with their respective terms.
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3.4. Brokerage.
---------
Except as disclosed in Section 6.5, Buyer has not made any agreement or taken
any other action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
3.5. No Breaches; Etc.
-----------------
The execution, delivery and performance of this Agreement and the other
agreements contemplated by this Agreement and the consummation of the
transactions contemplated by this Agreement do not and will not result in any
breach or acceleration of any of the terms or conditions of its articles of
incorporation or bylaws, or of any mortgage, bond, indenture, contract,
agreement, license or other instrument or obligation to which Buyer is a party.
The execution, delivery and performance of this Agreement or the other
agreements contemplated by this Agreement will not result in the material
violation of any statute, regulation, judgment, writ, injunction or decree of
any court, threatened or entered in a proceeding or action in which Buyer is,
was or may be bound.
3.6. Disclosure.
----------
No representation or warranty of Buyer in this Agreement or in connection with
the transactions contemplated by this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state any material
fact required to be stated
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herein or therein that are necessary to make the statements herein or therein
not misleading. Buyer shall disclose to Seller at Closing any information then
in the possession of Buyer that indicates that Seller is in breach of this
Agreement or which may provide the basis for a claim by Buyer that Seller has
breached this Agreement.
3.7. Litigation.
----------
There is no action, suit, proceeding or investigation pending, or, to Buyer's
knowledge, threatened, against or related to Buyer or its respective properties
or business which would be reasonably likely to adversely affect or restrict
Buyer's ability to consummate the transactions contemplated by this Agreement,
and there is no reasonable basis known to Buyer for any such action that may
result in such effect and is probable of assertion.
3.8. Business Activities.
-------------------
Buyer has not engaged in any active business since 1995.
3.9. GST.
---
Buyer is a registrant for purposes of the Excise Tax Act (Canada) whose
registration number is 876860164RT.
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3.10. Investment Canada.
-----------------
Buyer is an American within the meaning of the Investment Canada Act (Canada).
ARTICLE IV
CERTAIN OBLIGATIONS OF SELLER
-----------------------------
4.1. Conduct of Business Pending Closing.
-----------------------------------
From and after the Effective Time and pending Closing, and unless Buyer shall
otherwise consent or agree in writing, Seller covenants and agrees that:
(a) Ordinary Course; Compliance. The business of the Seller will
be conducted only in the ordinary course and consistent with past practice,
including billing, shipping and collection practices, inventory transactions and
payment of accounts payable; the Seller will maintain their property, equipment
and other assets in at least as good order and condition as existed on the date
of this Agreement; and the Seller will timely comply with the provisions of all
their leases, agreements, contracts and commitments, will obtain, maintain in
full force and effect and comply with all permits, certificates, licenses,
approvals, patents, registrations and authorizations required under all laws in
connection with their businesses or assets, and will comply with all laws, rules
and regulations applicable to their businesses or assets.
(b) Preservation of Business. Seller will use all reasonable
efforts to preserve the business organization of the Seller intact, to keep
available to Buyer the
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services of the present officers and employees of the Seller, and to preserve
for Buyer the good will of the suppliers, customers and others having business
relations with the Seller.
(c) Material Transaction. Seller will not:
(i) amend its Articles of Incorporation or Bylaws;
(ii)change its authorized or issued capital stock or issue
any rights or options to acquire shares of its capital stock;
(iii) enter into any contract or commitment the performance
of which may extend beyond the Closing, except those made in the ordinary course
of business, and the terms of which are consistent with past practice;
(iv) enter into any employment or consulting contract or
arrangement with any person which is not terminable at will, without penalty or
continuing obligation;
(v) sell, transfer, lease or otherwise dispose of any of its
assets other than sales of inventory in the ordinary course of business and
consistent with past practice;
(vi) incur, create, assume or suffer to exist any mortgage,
pledge, lien, restriction, encumbrance, tenancy, license, encroachment,
covenant, condition, right-of-way, easement, claim, security interest, charge or
other matter affecting title on any of its assets or other property, except
Personal Property Permitted Encumbrances and Real Property Permitted
Encumbrances;
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(vii) fail to pay when due all taxes, assessments,
governmental charges or levies imposed upon it or its income, profits or assets
or otherwise required to be paid by it, or fail to pay when due any liability or
charge which, if unpaid, might become a lien or charge upon any of its assets;
(viii) make, change or revoke any tax election or make any
agreement or settlement with any taxing authority;
(ix) declare or pay any dividend or other distribution in
respect of any class of its capital stock, or make any payment to redeem,
purchase or otherwise acquire, or call for redemption, any of such stock or any
securities convertible into or exchangeable for such stock;
(x) increase or otherwise change the compensation payable or
to become payable to any officer, employee or agent other than in the ordinary
course of business consistent with past practice;
(xi) make or authorize the making of any capital expenditure
in excess of $50,000.00;
(xii) incur any debt or other obligation for money borrowed;
(xiii)contractually incur any other obligation or liability, absolute or
contingent except in the ordinary course of business and consistent with past
practice;
(xiv) waive or permit the loss of any substantial right;
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(xv) guarantee or become a co-maker or accommodation maker or
otherwise become or remain contingently liable in connection with any liability
or obligation of any person other than another Seller;
(xvi) loan, advance funds or make an investment in or capital
contribution to any person other than another Seller, other than advances to
employees for business-related expenses made in the ordinary course of business
and consistent with past practice and in an amount not to exceed $5,000 in the
aggregate; or
(xvii) take any action or permit to occur any event set forth
in subparagraphs (c), (e) through (j) and (l) through (p) of Section 2.8 hereof;
or
(xviii)take any action or omit to take any action which will
result in a violation of any applicable law or cause a breach of any agreements,
contracts or commitments, the violation or breach of which would have a material
adverse effect on Seller, the Business or the Purchased Assets.
4.2. Insurance.
----------
Seller shall maintain in full force and effect the policies of insurance listed
on Schedule 2.24, subject only to variations required by the ordinary operations
of its business, or else will obtain, prior to the lapse of any such policy,
substantially similar coverage with insurers of recognized standing and approved
in writing by the Buyer, which approval shall not be unreasonably withheld or
delayed. Seller shall promptly advise the Buyer in writing of any
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change of insurer or type of coverage in respect of the policies listed on
Schedule 2.24 hereto.
4.3. Fulfillment of Agreements.
-------------------------
Seller shall use its best efforts to cause all of the conditions to the
obligations of the Buyer under Section 5.1 of this Agreement to be satisfied on
or prior to the Closing. Seller shall use best efforts to conduct its business
in such a manner that at the Closing the representations and warranties of the
Seller contained in this Agreement shall be true and correct as though such
representations and warranties were made on, as of, and with reference to such
date. Seller will promptly notify Buyer in writing of any event or fact which
represents or is likely to cause a breach of any of its representations,
warranties, covenants or agreements. Seller shall promptly advise Buyer in
writing of the occurrence of any condition or development (exclusive of general
economic factors affecting business in general) of a nature that, to Seller's
Knowledge, is or may be materially adverse to the business, operations,
properties, assets, prospects or conditions (financial or otherwise) of Seller.
4.4. Access, Information and Documents.
---------------------------------
Seller will give to Buyer and to Buyer's counsel, accountants and other
representatives sufficient access during normal business hours to all of the
Seller's properties, books, tax
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returns, contracts, commitments, records, officers and accountants and will
furnish to Buyer all such documents and copies of documents (certified to be
true copies if requested) and all information with respect to the affairs of the
Seller as Buyer may reasonably request. Pending the Closing, Buyer will preserve
the confidentiality of any information provided by Seller to Buyer relating to
the Seller which is confidential in nature and, if Closing is not held, will
return all such information to Seller and will not use or allow such information
to be used by Buyer, CMH or any of their respective Affiliates for any purpose
whatsoever.
4.5. Resignations.
------------
At Closing, Seller will, if requested by Buyer, deliver written resignations of
the non-employee trustees of employee plans.
4.6. Negotiations.
------------
Between the date of this Agreement and the Closing Date, neither the Seller nor
any of its Affiliates, officers, directors, employees, shareholders, agents or
advisors, shall solicit, initiate, furnish information relating to or
participate in any discussions or negotiations with any Person concerning the
sale or other disposition of any or all of the Purchased Assets (except as
contemplated herein). The Seller shall promptly notify Buyer if any such
discussion or negotiations are sought to be initiated with, any such information
is requested from, or any
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proposal is received by Seller or any of their Affiliates, officers, directors,
employees, shareholders, agents or advisors.
4.7. Public Announcements.
--------------------
To the fullest extent reasonably practicable, no party hereto shall make or
issue, or cause to be made or issued, any public announcement or written
statement concerning this Agreement or the transactions contemplated hereby for
dissemination to the general public (except to the respective directors,
officers or employees on a need to know basis or as may be specifically required
by applicable law or administrative or legal process) without the prior written
consent of the other parties (which will not be unreasonably withheld or
delayed).
ARTICLE V
CONDITIONS TO CLOSING; TERMINATION
----------------------------------
5.1. Conditions Precedent to Obligations of Buyer. The obligations of
Buyer to proceed with the Closing under this Agreement are subject to the
fulfillment prior to or at Closing of the following conditions (any one or more
of which may be waived in whole or in part by Buyer at Buyer's option):
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(a) Bringdown of Representations and Warranties. The
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the date of Closing, with the same force and
effect as though such representations and warranties had been made on, as of and
with reference to such date and Buyer shall have received a certificate to such
effect signed by a responsible officer of Seller.
(b) Performance and Compliance. Seller shall have performed all of
the covenants and complied with all of the provisions required by this Agreement
to be performed or complied with by them on or before the Closing and Buyer
shall have received a certificate to such effect signed by a responsible officer
of Seller.
(c) Opinion of Counsel. Buyer shall have received from Stevens &
Stevens, counsel for Seller, an opinion dated the date of the Closing in form
and substance satisfactory to Buyer, to the effects set forth in Exhibit 5.1(c)
hereto.
(d) Satisfactory Instruments of Transfer. All instruments and
documents required on the Seller's part to effectuate and consummate the
transactions contemplated hereby shall be delivered to Buyer and shall be in
form and substance reasonably satisfactory to Buyer and its counsel.
(e) Required Consents. All statutory and regulatory consents and
approvals which are required under the laws or regulations of the United States,
Canada or any other Authority shall have been obtained; and all necessary
consents and approvals of
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third parties to the transactions contemplated hereby shall have been obtained,
including the consents listed on Schedule 2.16.
(f) Accounts Receivable and Inventory Certificates. Buyer shall
have received a certificate of the chief financial officer of Seller certifying
as to a summary of (i) the amount and an aging of the Seller's accounts and
notes receivable as of the close of business on the day prior to the day of
Closing and (ii) the Seller's inventory of finished goods, work in process and
raw materials as of September 27, 1997.
(g) Litigation. No order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions contemplated
hereby or which would materially limit or adversely affect Buyer's ownership or
control of any of the Purchased Assets or the business of Seller, and there
shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any court or governmental agency or other regulatory or
administrative agency or commission, (i) challenging any of the transactions
contemplated by this Agreement or seeking monetary relief by reason of the
consummation of such transactions or (ii) by any present or former owner of any
capital stock or equity interest in Seller (whether through a derivative action
or otherwise) against Seller or any officer, director or shareholder of Seller
in his capacity as such or (iii) which might have a material adverse effect on
the Purchased Assets or on the business, prospects or condition (financial or
otherwise) of Seller.
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(h) Brampton. Seller shall have executed and delivered a transfer
(the "Transfer") with Buyer for the Seller's Brampton, Ontario facility,
substantially in the form of Exhibit 5.1(h) hereto.
(i) Additional Agreements. Steve Leachman shall have entered into
and delivered the employment contract, including non-competition provisions,
with Buyer, substantially in the form of Exhibit 5.1(i) hereto (the "Employment
Agreement").
(j) Due Diligence. Buyer shall be satisfied with the results of
its financial, business and legal due diligence review of Seller, including a
pre-acquisition review to be conducted by Buyer's accountants.
(k) Tax Clearance Certificates. Seller shall have delivered to
Buyer a retail sales tax clearance certificate issued by the Minister of Revenue
of Ontario under section 6(1) of the Retail Sales Tax Act (Ontario).
(l) United States Purchase Agreement. Blue Giant USA Corporation
(Alabama) shall have executed and delivered an Asset Purchase Agreement with
Blue Giant Corporation (Delaware) (the "United Sates Purchase Agreement") and
shall have closed the transaction contemplated therein contemporaneous with the
Closing hereunder.
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5.2. Conditions Precedent to the Obligations of Seller.
--------------------------------------------------
The obligations of Seller to proceed with the Closing hereunder are subject to
the fulfillment prior to or at Closing of the following conditions (any one or
more of which may be waived in whole or in part by Seller at Seller's option):
(a) Bringdown of Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the date of Closing, with the same force and
effect as though such representations and warranties had been made on, as of and
with reference to such date and Buyer shall have delivered to Seller a
certificate, signed by a responsible officer of Buyer, to such effect.
(b) Performance and Compliance. Buyer shall have performed all of
the covenants and complied with all the provisions required by this Agreement to
be performed or complied with by it on or before the Closing and Buyer shall
have delivered to Seller a certificate, signed by a responsible officer of
Buyer, to such effect.
(c) Opinion of Counsel for Buyer. Seller shall have received from
Borden & Elliot, counsel for Buyer, an opinion dated the date of the Closing in
form and substance satisfactory to Seller, to the effect set forth in Exhibit
5.2(c) hereto.
(d) Satisfactory Instruments. All instruments and documents
required on the Buyer's part to effectuate and consummate the transactions
contemplated
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hereby shall be delivered by Buyer and shall be in form and substance reasonably
satisfactory to Seller and its counsel.
(e) Litigation. No order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions contemplated
hereby and there shall not have been threatened, nor shall there be pending, any
action or proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, challenging any of the
transactions contemplated by this Agreement or seeking monetary relief by reason
of the consummation of such transactions.
(f) Required Consents. All statutory and regulatory consents and
approvals which are required under the laws or regulations of the United States,
Canada or any other Authority for the transactions contemplated hereby shall
have been obtained and all necessary consents and approvals of third parties to
the transactions contemplated hereby shall have been obtained, including the
consents listed on Schedule 2.16.
(g) Other Contracts. Buyer shall have executed and delivered the
Employment Agreement.
(h) United States Purchase Agreement. Blue Giant Corporation
(Delaware) shall have executed and delivered the United States Purchase
Agreement.
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5.3. Termination.
------------
(a) When Agreement May Be Terminated. This Agreement may be
terminated at any time prior to Closing:
(i) By mutual consent of Buyer and Seller;
(ii) By Buyer if there has been a misrepresentation by
Seller, a breach by Seller of any of its warranties or covenants, or if any of
the conditions specified in Section 5.1 hereof shall not have been fulfilled by
the time required and shall not have been waived by Buyer;
(iii) By Seller if there has been a misrepresentation by
Buyer, a breach by Buyer of any of its warranties or covenants, or if any of the
conditions specified in Section 5.2 hereof shall not have been fulfilled by the
time required and shall not have been waived by Seller;
(iv) By Buyer or Seller if Closing shall not have occurred
prior to November 14, 1997; provided that Buyer or Seller may terminate this
Agreement pursuant to this subparagraph (iv) only if Closing shall not have
occurred by such date for a reason other than a failure by such party to satisfy
the conditions to Closing of the other party set forth in Section 5.1 or 5.2
hereof.
(b) Effect of Termination. In the event of termination of this
Agreement by Seller or Buyer, as provided above, this Agreement shall forthwith
terminate and there shall be no liability on the part of Seller or Buyer or
their respective officers or
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directors, except for liabilities arising from a breach of this Agreement prior
to such termination; provided, however, that the obligations of the parties set
forth in Sections 6.8 and 6.9 hereof shall survive such termination.
ARTICLE VI
CERTAIN ADDITIONAL COVENANTS
----------------------------
6.1. Costs and Expenses.
------------------
Buyer and Seller will each pay all their own expenses incurred in connection
with this Agreement and the transactions contemplated hereby, including (a) all
costs and expenses stated herein to be borne by a party, and (b) all accounting,
legal and appraisal fees and settlement charges.
6.2. Goods and Services Tax Election.
-------------------------------
The Buyer and the Seller shall elect jointly under subsection 167(1) of the
Excise Tax Act (Canada), in the form prescribed for the purposes of that
subsection, in respect of the sale and transfer of the Purchased Assets
hereunder, and the Buyer shall file such election in its GST return for its
reporting period that includes the Closing Date.
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6.3. Transfer Taxes.
---------------
The Buyer shall be liable for and shall pay all federal and provincial sales
taxes (including any GST, retail sales taxes and land transfer taxes) and all
other taxes, duties, fees or other like charges of any jurisdiction properly
payable in connection with the transfer of the Purchased Assets by Seller to the
Buyer.
6.4. Income Tax Election.
--------------------
The Buyer and the Seller agree to elect jointly in the prescribed form under
section 22 of the Income Tax Act (Canada) as to the sale of the accounts
receivable and other assets that are referred to in section 1.1(e) and described
in section 22 of the Income Tax Act (Canada) and to designate in such election
an amount equal to the portion of the Purchase Price allocated to such assets
pursuant to section 1.5 as the consideration paid by the Purchaser therefor.
6.5. Brokers.
-------
Seller has engaged Geneva Corporate Finance, Inc. as a broker in connection with
this transaction, and any fee payable to such broker will be paid by Seller.
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6.6. Employee Benefit Matters.
-------------------------
Buyer agrees to assume from Seller, at Closing, the sponsorship of the Canada
Life Group Registered Retirement Savings Plan ("GRRSP"), the Deferred Profit
Sharing Plan ("DPSP") and the Standard Life Assurance Company benefit plan
package identified on Schedule 2.26, subject to:
(i) the agreement of Canada Life and Standard Life;
(ii) the acceptance by Revenue Canada of all amendments to
the GRRSP and DPSP which are required in order to effect such change;
(iii) the acceptability to Buyer of all of the terms and
conditions of the GRRSP, the DPSP and any related agreements or other documents.
Notwithstanding the foregoing, Buyer reserves the right to amend the GRRSP, DPSP
and Standard Life benefit plan package from time to time as it sees fit,
including terminating one or both of such plans.
6.7. Employees of the Business.
-------------------------
(a) Effective as of the Closing Date, Buyer shall offer to hire
each of the active employees of Seller set forth on Schedule 2.27 at the same
salary and wage rates and, otherwise, on no less favourable terms and conditions
of employment as are then
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applicable to such employees; provided that the nature and mix of their employee
benefits do not need to be identical to those to which they were entitled while
employed by Seller. Buyer agrees to use payroll history information of the
Seller for the purposes of issuing Records of Employment. The Seller will
cooperate with and assist Buyer in obtaining the continued employment of all
such employees. Seller shall be responsible for all salaries, wages, employment
taxes, contractual severance arrangements and all terms of employment for each
of its respective employees accruing prior to the Closing Date. Notwithstanding
the foregoing, Buyer assumes and agrees to timely discharge all of Seller's
liabilities and obligations for (i) the salaries, wages, employment taxes and
related payroll obligations for the payroll period for which such employees are
employed by Buyer and (ii) all accrued vacation for Seller's employees who
become employed by Buyer existing as of the Closing Date; provided the
obligations described in (i) and (ii) are properly accrued for on the Closing
Statement.
(b) Seller shall remain responsible and liable for any and all
obligations to all employees of Seller through and until 11:59 p.m. local time
on the Closing Date, at which time all such employees shall be terminated by
Seller.
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6.8. Indemnification.
---------------
(a) General Indemnification Obligations.
(i) Indemnification by Seller. Seller hereby agrees to
indemnify and hold harmless Buyer from and against:
(1) any and all Damages arising out of or resulting from
any misrepresentation, breach of warranty or nonfulfillment of any agreement on
the part of Seller contained in this Agreement or in any certificate furnished
or to be furnished to Buyer pursuant hereto or in connection with the
transactions contemplated hereby;
(2) any and all Damages arising out of or resulting from
any liabilities of Seller of any nature, whether due or to become due, whether
accrued, absolute, contingent or otherwise existing on the Closing Date or
arising out of any transactions entered into, or any state of facts existing,
prior to such date, except Assumed Liabilities;
(3) any and all Damages arising out of or resulting from
any claim asserted against Buyer with respect to Excluded Liabilities;
(4) any and all Damages as a result of or arising
directly or indirectly out of, in connection with or pursuant to any claims by
any employees or former employees of the Business, other than claims by
Employees who accept Buyer's offers of employment with respect to their
employment with Buyer; and
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(5) any and all Damages arising out of or resulting from
any claim, suit, prosecution, or order under any Environmental Laws, or the
undertaking by the Buyer of any reasonable remediation, clean-up or preventative
action as a result of the Release of any Hazardous Substance, to the extent that
such Damages are incurred, in whole or in part, as a result of (i) the operation
of the Business by the Seller or any predecessor in title of the Seller; or (ii)
the ownership, use or occupation of the Purchased Assets by the Seller or any
predecessor in title of the Seller.
(ii) Indemnification by Buyer. Buyer hereby agrees to
indemnify and hold harmless Seller from and against:
(1) any Damages arising out of or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any agreement on the
part of Buyer contained in this Agreement or in any certificate furnished or to
be furnished to Seller in connection with the transactions contemplated hereby;
(2) any Damages resulting from or arising out of the
failure by Buyer to pay or discharge, or cause to be paid or discharged, any of
the Assumed Liabilities; or
(3) any Damages arising out of or resulting from any
claim asserted against Seller with respect to Assumed Liabilities.
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(iii) For purposes of this Agreement, "Damages" means the
aggregate amount of all damages, claims, losses, obligations, liabilities
(including any governmental penalty, fines or punitive damages), deficiencies,
interest, costs and expenses arising out of or relating to a matter and any
actions, judgments, costs and expenses (including reasonable legal fees and
expenses and all other expenses incurred in investigating, preparing or
defending any litigation or proceeding, commenced or threatened) incident to
such matter or to the enforcement of this Agreement, including, but not limited
to, reasonable legal fees incurred by the party entitled to indemnification
under this Agreement.
(b) General Indemnification Procedures.
(i) Buyer and Seller shall cooperate in the defense or
prosecution of any claim, action, suit or proceeding by a party other than a
party or an Affiliate of any party hereto in respect of which indemnity may be
sought hereunder (a "Third Party Claim") and shall furnish such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials and appeals, as may be reasonably requested in connection
therewith.
(ii) No action or claim for Damages resulting from breaches
of the representations and warranties of Seller or Buyer shall be brought or
made after March 31, 1999, except that such time limitation shall not apply to
(a) claims for misrepresentations or breaches of warranty relating to Section
2.9 (relating to Taxes) or Section 2.26 (relating
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<PAGE>
to Employee Plans), which may be asserted until 60 days after the running of the
applicable statute of limitations with respect to the taxable period to which
the particular claims relates, (b) claims for misrepresentations or breaches of
warranty relating to Section 2.1 (relating to Organization), Section 2.3
(relating to Qualification, Location of Business and Assets), Section 2.4
(relating to Authorization and Enforceability), which may be asserted for a
three (3) year period from the Closing Date, (c) Section 2.17 (relating to
Personal Property), or claims in respect of Excluded Liabilities, which may be
asserted for a six (6) year period from the Closing Date, (d) Section 2.18
(relating to Real Property) or Section 2.15 (relating to Environmental) (subject
to clause (e) hereof), which may be asserted for a three (3) year period from
the Closing Date, (e) claims for misrepresentations or breaches of warranty
relating to any off-site treatment, storage, disposal or transportation of
Hazardous Substances, which may be asserted for a 10 year period from the
Closing Date and (f) any claims which have been the subject of a written notice
from Buyer to Seller prior to the expiration of the applicable period under this
Section 6.8(b), which notice specifies in reasonable detail the nature of the
claim.
(iii) Notwithstanding anything to the contrary in this
Section 6.8, no limitation or condition of liability provided in this Section
shall apply to the breach of any of the representations and warranties contained
herein if such representation or warranty was made with actual knowledge that it
contained an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements or facts
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<PAGE>
contained therein not misleading and such a claim for such breach was made not
later than the period specified above for such breach, plus in each case three
(3) years.
(iv) If there shall be a judicial determination that any
party (the "Indemnified Party") seeking indemnification from another party (the
"Indemnifying Party") under this Agreement is not entitled to such
indemnification in the amount originally claimed, then the Indemnifying Party
shall be entitled to reimbursement from the Indemnified party for its costs and
expenses, including reasonable legal fees and expenses, incurred in the defense
of the claim for such indemnity pro rata, to the extent that the amount awarded
is less than the amount originally claimed.
(v) Following the receipt by Buyer of a complaint initiating
a lawsuit in respect of a Third Party Claim in respect of which indemnity may be
sought from Seller hereunder, within a reasonable time after such receipt, Buyer
shall give Seller notice of such Third Party Claim.
(vi) This Agreement does not relieve any party hereto of its
obligations under appropriate law to mitigate damages.
(vii) Buyer shall notify Seller of any claim for Damages.
Such notice shall describe, to the extent reasonably available, the nature of
the claim, the proposed remedy and the cost to remedy or to satisfy the claim.
Buyer shall, in good faith, consult with Seller and give Seller a reasonable
opportunity to propose an alternative method to remedy or satisfy the claim.
Provided, however, that if the nature of the claim
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<PAGE>
is such that, in Buyer's sole judgment, the above notice and opportunity
provisions could reasonably be expected to cause further Damages or would
otherwise not be appropriate under the circumstances, then the prior notice and
opportunity shall not be required. The Buyer shall not be required in any event
to adopt the method proposed by Seller. The Buyer's failure to give the prior
notice and opportunity or to adopt the method proposed, shall not bar in any
event the Buyer from asserting an indemnification claim against Seller under and
subject to the terms and conditions described in this Section 6.8, but, in any
such claim, the failure of the Buyer to give prior notice and opportunity, or to
adopt the method proposed shall be admissible evidence if Seller shall contest
the reasonableness of the amount of the Damages that the Buyer may recover from
Seller.
(c) Indemnification Threshold. Buyer shall not be entitled to
indemnification or other recovery from Seller under any provision of this
Agreement or otherwise until such time and only to the extent as the claims
subject to indemnification by the Seller of Buyer pursuant to this Agreement
exceed, in the aggregate, One Hundred Fifty Thousand United States Dollars (US.
$150,000) (the "Threshold"); provided, however, that any claims for
indemnification by Buyer relating to Section 6.8(b)(ii)(b) or 6.8(a)(i)(3) shall
not be subject to any limitation or condition pursuant to this section 6.8(c);
provided further, however, that any claims under this Section 6.8 shall be
aggregated with any claims under the Section of the U.S. Purchase Agreement (as
hereinafter defined) corresponding to this section 6.8 in meeting the Threshold.
The "U.S. Purchase Agreement means the agreement
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<PAGE>
by and between Blue Giant USA Corp. and Blue Giant Corporation, dated the
Closing Date, whereby Blue Giant USA Corporation has agreed to sell certain
assets and Blue Giant Corporation has agreed to buy certain assets (the "U.S.
Purchase Agreement").
(d) Indemnification Limitation. The aggregate obligation of the
Seller to Buyer, or of the Buyer to Seller, for indemnification or otherwise
under any provision of this Agreement or otherwise shall be limited to an amount
not to exceed Five Million United States Dollars (U.S.$5,000,000) minus any
amounts paid by Blue Giant USA Corporation to indemnify Blue Giant Corporation
under the terms of the United States Purchase Agreement; provided, however, that
any claims for indemnification by Buyer relating to Section 6.8(b)(ii)(b) or
6.8(a)(i)(3) shall not be subject to any limitation or condition pursuant to
this section 6.8(d).
6.9. Confidentiality and Non-Competition.
-----------------------------------
(a) Confidentiality. From and after the Closing, Seller shall, and
shall cause its Affiliates and representatives to, keep confidential and not
disclose to any other Person or use for his or its own benefit or the benefit of
any other Person any trade secrets or other confidential proprietary information
in its possession or control regarding Seller or their respective businesses and
operations. The obligations of the Seller under this Section 6.9(a) shall not
apply to information which (i) is or becomes generally available to the public
without breach of the commitment provided for in this Section; or (ii) is
required
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<PAGE>
to be disclosed by law, order or regulation of a court or tribunal or
governmental authority; provided, however, that, in any such case, Seller shall
notify Buyer as early as reasonably practicable prior to disclosure to allow
Buyer to take appropriate measures to preserve the confidentiality of such
information.
(b) Non-competition. For a period of 10 years from and after the
Closing (the "10 Year Term"), Seller shall not, directly or indirectly, (i) own,
manage, operate, join, control or participate in the ownership, management,
operation or control of, or be connected as an officer, director, employee,
stockholder, partner or otherwise with, (1) an entity engaged in the Business or
the forklift industry (other than Blue Europe), or (2) any entity using the name
"Blue Giant" (other than Blue Europe) or "Clark" (collectively, the "Competing
Businesses"), or (ii) solicit, employ, retain as a consultant, interfere with or
attempt to entice away from Buyer, its Affiliates, or any successor to any of
the foregoing, any individual who is, has agreed to be or within one year of
such solicitation, employment, retention, interference or enticement has been,
employed or retained by Buyer, its Affiliates or any successor to any of the
foregoing in a senior executive capacity or as a general manager or sales,
manufacturing, or technical employee. Ownership of not more than 2% of the
outstanding stock of any publicly traded company shall not, in and of itself, be
a violation of this Section 6.9(b). The restrictive covenant contained in this
Section 6.9(b) is a covenant independent of any other provision of this
Agreement, and the existence of any claim which Seller may allege against Buyer,
whether based on this Agreement or otherwise,
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<PAGE>
shall not prevent the enforcement of this covenant. Seller agrees that a breach
by Seller of this Section 6.9(b) shall cause irreparable harm to Buyer, and its
Affiliates, that Buyer's remedies at law for any breach or threat of breach by
Seller of the provisions of this Section 6.9(b) shall be inadequate, and that
Buyer shall be entitled to an injunction or injunctions to prevent breaches of
this Section 6.9(b) and to enforce specifically the terms and provisions hereof,
in addition to any other remedy to which Buyer may be entitled at law or in
equity. The 10 Year Period shall be tolled with respect to Seller during any
period of violation of this covenant not to compete by Seller. In the event that
this covenant not to compete shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for too long a
period of time or over too large a geographical area or by reason of its being
too extensive in any other respect, it shall be interpreted to extend only over
the longest period of time for which it may be enforceable, and/or over the
largest geographical area as to which it may be enforceable and/or to the
maximum extent in all other aspects as to which it may be enforceable, all as
determined by such court in such action.
6.10. Access to Information.
---------------------
Seller and Buyer shall reasonably cooperate with each other after the Closing so
that (subject to any limitations that are reasonably required to preserve any
applicable attorney-client privilege) each party has access to the business
records, contracts and other
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<PAGE>
information existing at the Closing Date and relating to Seller (whether in the
possession of Seller or Buyer) (including copies thereof) as is reasonably
necessary for the (a) preparation for or the prosecution or defense of any suit,
action, litigation or administrative, arbitration or other proceeding or
investigation (other than one by or on behalf of a party to this Agreement) by
or against Buyer or Seller (b) preparation and filing of any Tax Return or
election relating to Seller and any audit by any taxing authority of any returns
of Buyer or Seller relating thereto, (c) preparation and filing of any other
documents required by governmental or regulatory bodies and (d) transfer of data
to Buyer relating to the Seller. The party requesting such information and
assistance shall reimburse the other party for all out-of-pocket costs and
expenses incurred by such party in providing such information and in rendering
such assistance. The access to files, books and records contemplated by this
Section 6.10 shall be during normal business hours and upon not less than two
(2) business days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
6.11. Prohibition on use of Blue Giant Name.
-------------------------------------
Seller and its respective Affiliates are prohibited from using the "Blue Giant"
name as a trade name, trade mark or service mark in connection with any of their
businesses or
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<PAGE>
operations. Seller shall co-operate with Buyer to permit Buyer to change its
name after closing to include the words "Blue Giant".
6.12. Cooperation.
-----------
With respect to the Excluded Liabilities, the Buyer agrees to reasonably
cooperate with Seller, at no cost to Buyer, in connection with Sellers' defense
of any claims or lawsuit relating thereto, including, without limitation, making
available to Seller for inspection and copying business records of the Buyer
pertaining to such claims or lawsuits and making employees of the Buyer
available as needed from time to time for interviews, depositions, trial
testimony and similar appearances; provided, however, that Buyer is reimbursed
by Seller for any out of pocket costs or expenses and that such cooperation does
not unreasonably interfere with Buyer's operation of its business.
6.13. Blue Europe Receivable.
----------------------
As of the date hereof, Blue Europe has past due receivables (the "Receivables")
estimated to be $712,458.59 (Cdn), due and owing to the Seller. Buyer shall use
commercially reasonable efforts to collect the Receivables for a 90 day period
from the date hereof and to remit the Receivables to Seller in the event that
Blue Europe identifies such payments to Buyer as payments of the Receivables;
provided, however, that such collection efforts by
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<PAGE>
Buyer shall not require Buyer to refuse to ship any product to Blue Europe or to
modify any of its terms of sale to Blue Europe.
6.14. Environmental Remediation.
-------------------------
Buyer shall engage consultants or other contractors to perform in the name of
and on behalf of Seller, the environmental remediation work outlined under the
heading "Scope of Work" in the RFP dated October 24, 1997 attached as Schedule
6.14. Seller shall promptly pay or reimburse Buyer for all costs of such
remediation work.
6.15. Ontario Ministry of Labour.
--------------------------
In the event that the Ontario Ministry of Labour levies a fine in excess of
US$55,000 in respect of the matter referenced in item 1 of Schedule 2.12, Seller
and Buyer shall send the Notice contemplated by the Escrow Agreement to the
escrow agent acting thereunder for the purpose of causing the escrow agent to
pay the amount of such excess to Buyer.
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<PAGE>
ARTICLE VII
MISCELLANEOUS
-------------
7.1. Further Assurances; Cooperation.
-------------------------------
At and after the Closing, Seller will execute and deliver such further
instruments of conveyance and transfer as Buyer may reasonably request to convey
and transfer effectively to Buyer the Purchased Assets or to put Buyer in actual
possession and control of the business of the Seller.
7.2. Nature and Survival of Representations.
--------------------------------------
The representations, warranties, covenants and agreements of Buyer and Seller
contained in this Agreement, and all statements contained in this Agreement or
any Exhibit or Schedule hereto or any certificate delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby, shall be
deemed to constitute representations, warranties, covenants and agreements of
the respective party delivering the same. All such representations, warranties,
covenants and agreements shall survive the Closing hereunder subject to Section
6.8 hereof. Seller acknowledges that their representations and warranties in
this Agreement shall not be affected or mitigated by any investigation conducted
by Buyer or its representative prior to the Closing or any knowledge of Buyer.
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<PAGE>
7.3. Notices.
-------
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered or,
if mailed, when mailed by Canadian or United States first-class, certified or
registered mail, postage prepaid, to the other party at the following addresses
(or at such other address as shall be given in writing by any party to the
other):
If to Buyer, to:
[Blue Giant Corporation]
749 West Short St.
Lexington, Kentucky 40508
Attention: Michael J. Grossman, Esq.,
Vice President and General Counsel
With a required copy to:
Borden & Elliot
Suite 4200
40 King Street West
Toronto, Ontario
M5H 3Y4
Attention: Gordon A. Park
If to Seller to:
Colin S. Larsen
2803 Abbott Drive
Pell City, AL 35128
- 87 -
<PAGE>
With a required copy to:
Noreen Stevens
Stevens & Stevens
Newmarket Corporate Centre
Suite 302
1091 Gorham Street
Newmarket, Ontario
7.4. Successors and Assigns.
----------------------
This Agreement, and all rights and powers granted hereby, will bind and insure
to the benefit of the parties hereto and their respective successors and
assigns.
7.5. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the laws of
Ontario and the laws of Canada applicable therein.
7.6. Headings.
--------
The headings preceding the text of the sections and subsections hereof are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement, nor shall they affect its meaning, construction or effect.
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<PAGE>
7.7. Amendment and Waiver.
--------------------
The parties may by mutual agreement amend this Agreement in any respect, and any
party, as to such party, may (a) extend the time for the performance of any of
the obligations of any other party, (b) waive any inaccuracies in
representations by any other party, (c) waive compliance by any other party with
any of the agreements contained herein and performance of any obligations by
such other party, and (d) waive the fulfillment of any condition that is
precedent to the performance by such party of any of its obligations under this
Agreement. To be effective, any such amendment or waiver must be in writing and
be signed by the party against whom enforcement of the same is sought.
7.8. Entire Agreement.
----------------
This Agreement and the Schedules hereto, each of which is hereby incorporated
herein, set forth all of the promises, covenants, agreements, conditions and
undertakings between the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written.
7.9. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but which together shall constitute one and the same
instrument.
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<PAGE>
7.10. Enforcement.
-----------
Buyer and Seller agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that each of
Buyer and Seller shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement, this being in addition to any other remedy to which it is
entitled at law or in equity.
7.11. Construction.
------------
The parties acknowledge that each party and its counsel have reviewed and
revised this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments, schedules or
exhibits hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BLUE GIANT CANADA LIMITED
By: /s/ Colin S. Larsen
---------------------------------------
Colin S. Larsen, Vice-President
CLARK MATERIAL HANDLING OF CANADA LTD.
By: /s/ Michael J. Grossman
---------------------------------------
Michael J. Grossman, Vice-President
- 91 -
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1(a) Description of Real Estate
Schedule 1.1(b) Description of Equipment
Schedule 1.5 Allocation of Purchase Price
Schedule 2.2 Subsidiaries
Schedule 2.3 Locations of Assets; Qualification
Schedule 2.7 No Undisclosed Liabilities
Schedule 2.8 Changes Since Balance Sheet Date
Schedule 2.9 Taxes
Schedule 2.10 Inventory
Schedule 2.11 Accounts Receivable
Schedule 2.12 Pending Litigation
Schedule 2.13 Contracts; Unfilled Firm Purchase Orders
Schedule 2.14 Permits
Schedule 2.15 Environmental Matters
Schedule 2.16 Consents
Schedule 2.17 Personal Property Permitted Encumbrances
Schedule 2.18 Real Estate
Schedule 2.19 Transactions With Related Parties
Schedule 2.21 Compensation Arrangements, Bank Accounts and
Officers and Directors
Schedule 2.24 Insurance
<PAGE>
Schedule 2.25 Patents, Trademarks, Etc.
Schedule 2.26 Employee Benefits Plans
Schedule 2.27 Employees
Schedule 2.28 Customers
Schedule 6.14 Environmental Remediation
Exhibit 1.4(b) Escrow Agreement
Exhibit 1.6 Net Asset Value of Seller as at June 30, 1997
Exhibit 1.7 Assumption of Liabilities
Exhibit 1.9(a)(i) Bill of Sale including list of Assigned
Contracts
Exhibit 5.1(c) Opinion of Seller's Counsel
Exhibit 5.1(h) Transfer
Exhibit 5.1(i) Employment Agreement (Leachman)
Exhibit 5.2(c) Opinion of Buyer's Counsel
- 2 -
<PAGE>
ANNEX A
DEFINITIONS
"Affiliate" means any Person directly or indirectly controlling,
controlled by or under common control with such Person, and includes any Person
who is an officer, director or employee of such Person and any Person that would
be deemed to be an "affiliate" or an "associate" of such Person, as those terms
are defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended. As used in this definition,
"controlling" (including, with its correlative meanings, "controlled by" and
"under common control with") means possession, directly or indirectly, of power
to direct or cause the direction of management or policies, whether through
ownership of securities, partnership or other ownership interests, by contract
or otherwise.
"Authority" means any federal, provincial, state, local or foreign
governmental or regulatory entity, or any department, agency, authority or
political subdivision thereof.
"CMH" means Clark Material Handling Company, a Delaware corporation.
"Environmental Liabilities" means any liabilities (including costs of
Remediation) known or unknown, foreseen or unforeseen, whether contingent or
otherwise, fixed or absolute, present or future, asserted against or incurred by
Buyer or the Business arising out of or relating to (1) environmental conditions
first occurring or existing prior to the Closing (whether disclosed or
undisclosed) including, without limitation, the presence, Release, threat of
Release, Management or exposure of or to Hazardous Materials (each as defined
herein) at, on, in or under any property now or previously owned, operated or
<PAGE>
leased by Seller, the Business or any of its Affiliates or predecessors (whether
into the air, soil, ground or surface waters on-site or off-site); (2) the
off-site transportation, storage, treatment, recycling or disposal of Hazardous
Materials Managed, Released or generated prior to the Closing by Seller or the
Business or any of its Affiliates or predecessors or generated in connection
with any of their operations; or (3) any violation of any Environmental Law
first occurring or existing prior to the Closing (including, without limitation,
costs and expenses for pollution control equipment required to bring the
Business into compliance with Environmental Laws and fines, penalties and
defense costs incurred for such reasonable time after the Closing as it takes
Buyer to come into compliance).
"Hazardous Substances" means any substance that because of its
quantity, concentration or physical, chemical or infectious characteristics,
either individually or in combination with other substances, is an existing or a
potential threat to the environment, human health or other living organisms and
without limiting the generality of the foregoing shall include any substance
whether liquid, solid or gas which is from time to time listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or as a
pollutant, contaminant or waste, under any applicable Environmental Laws,
whether by quality, type or quantity.
"Lien" or "Liens" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
tenancy, ground rent,
- 2 -
<PAGE>
license, mortgage, security agreement, covenant, condition, restriction,
right-of-way, easement, encroachment, option, judgment or of other encumbrance
or matter of title.
"PCBs" means polychlorinated biphenyls.
"Person" means any individual, a corporation, a partnership, an
association, a trust or other entity or organization, including an Authority.
"Release" when used as a verb includes but is not limited to releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping, and when used as a noun shall have a
corresponding meaning.
"Seller's Knowledge" means the knowledge, after due inquiry, of Kurt
Larsen, Colin Larsen, Helen Senn, Pete Santiago, Andrew Morrow and Steve
Leachman.
- 3 -
ASSET PURCHASE AGREEMENT
AMONG
BLUE GIANT CORPORATION
as Buyer
AND
BLUE GIANT USA CORPORATION
as Seller
Dated October 31, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ASSET PURCHASE AGREEMENT........................................................................................ 1
Background...................................................................................................... 1
Terms ....................................................................................................... 1
ARTICLE I THE TRANSACTION.................................................................... 2
1.1. Sale and Purchase of Assets........................................................ 2
1.2. Excluded Assets.................................................................... 4
1.3. Purchase Price..................................................................... 5
1.4. Payment of Purchase Price.......................................................... 6
1.5. Allocation of Purchase Price....................................................... 6
1.6. Post-Closing Adjustment to Purchase Price.......................................... 7
1.7. Assumption of Liabilities.......................................................... 9
1.8. Closing............................................................................ 14
1.9. Deliveries and Proceedings at Closing.............................................. 14
1.10. Regarding Certain Consents......................................................... 16
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER........................................... 17
2.1. Organization....................................................................... 17
2.2. Subsidiaries....................................................................... 18
2.3. Qualification; Location of Business and
Assets............................................................................. 18
2.4. Authorization and Enforceability................................................... 18
2.5. No Violation of Laws or Agreements................................................. 19
2.6. Financial Statements............................................................... 20
2.7. Undisclosed Liabilities............................................................ 21
2.8. No Changes......................................................................... 21
2.9. Taxes.............................................................................. 26
2.10. Inventory.......................................................................... 27
2.11. Accounts Receivable................................................................ 28
2.12. No Pending Litigation or Proceedings............................................... 29
2.13. Contracts; Compliance.............................................................. 29
2.14. Compliance with Laws............................................................... 31
2.15. Environmental Matters.............................................................. 32
2.16. Consents........................................................................... 38
2.17. Personal Property.................................................................. 38
2.18. Real Estate........................................................................ 39
2.19. Transactions with Related Parties.................................................. 43
2.20. Condition of Assets................................................................ 43
2.21. Compensation Arrangements; Officers and
Directors.......................................................................... 44
2.22. Labor Relations.................................................................... 44
2.23. Products Liability................................................................. 45
2.24. Insurance.......................................................................... 45
2.25. Patents and Intellectual Property Rights........................................... 46
- i -
<PAGE>
2.26. Employee Retirement Income Security Act of
1974, as amended ("ERISA")......................................................... 48
2.27. Brokerage.......................................................................... 50
2.28. Disclosure......................................................................... 50
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER............................................ 51
3.1. Organization and Good Standing..................................................... 51
3.2. Corporate Power and Authority...................................................... 51
3.3. Due Authorization.................................................................. 51
3.4. Brokerage.......................................................................... 52
3.5. No Breaches; Etc................................................................... 52
3.6. Disclosure......................................................................... 52
3.7. Litigation......................................................................... 53
3.8. Business Activities................................................................ 53
ARTICLE IV CERTAIN OBLIGATIONS OF SELLER...................................................... 53
4.1. Conduct of Business Pending Closing................................................ 53
4.2. Insurance.......................................................................... 57
4.3. Fulfillment of Agreements.......................................................... 57
4.4. Access, Information and Documents.................................................. 58
4.5. Negotiations....................................................................... 59
4.6. Public Announcements............................................................... 59
ARTICLE V CONDITIONS TO CLOSING; TERMINATION................................................. 60
5.1. Conditions Precedent to Obligations of
Buyer.............................................................................. 60
5.2. Conditions Precedent to the Obligations of
Seller............................................................................. 62
5.3. Termination........................................................................ 65
ARTICLE VI CERTAIN ADDITIONAL COVENANTS....................................................... 66
6.1. Costs, Expenses and Taxes.......................................................... 66
6.2. Brokers............................................................................ 66
6.3. Blue Giant USA Corporation Retirement
Savings Plan....................................................................... 66
6.4. Employees of the Business.......................................................... 68
6.5. Indemnification.................................................................... 69
6.6. Confidentiality and Non-Competition................................................ 76
6.7. Access to Information.............................................................. 78
6.8. Prohibition on use of Blue Giant Name.............................................. 80
6.9. Cooperation........................................................................ 80
6.10. Riverside and Blue Europe Receivables.............................................. 80
ARTICLE VII MISCELLANEOUS...................................................................... 81
7.1. Further Assurances; Cooperation.................................................... 81
7.2. Nature and Survival of Representations............................................. 81
7.3. Notices............................................................................ 82
7.4. Successors and Assigns............................................................. 82
7.5. Governing Law...................................................................... 83
7.6. Headings........................................................................... 83
7.7. Amendment and Waiver............................................................... 83
7.8. Entire Agreement................................................................... 83
7.9. Counterparts....................................................................... 84
7.10. Enforcement........................................................................ 84
7.11. Construction....................................................................... 84
7.12. Defined Terms...................................................................... 84
- ii -
<PAGE>
LIST OF SCHEDULES AND EXHIBITS.................................................................................. 86
ANNEX A DEFINITIONS................................................................................... 88
- iii -
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
This is an ASSET PURCHASE AGREEMENT (the "Agreement"), dated October
31, 1997 by and between Blue Giant Corporation, a Delaware corporation ("Buyer")
and Blue Giant USA Corporation, an Alabama corporation ("Seller").
Background
----------
Seller is engaged in the business of manufacturing and selling manual
and electric stackers and pallet trucks, electric tow tractors, vehicle
restraint devices, hydraulic scissor lifts and dock levelers (the "Business").
Seller desires to sell and transfer to Buyer and Buyer desires to purchase from
Seller certain of the assets of Seller used or associated with the Business, all
upon the terms and subject to the conditions set forth in this Agreement, and to
be effective as of 11:59 p.m. on October 31, 1997 (the "Effective Time"). Seller
shall operate the Business solely for the benefit of Buyer from and after the
Effective Time.
Terms
-----
In consideration of the mutual covenants contained herein and intending
to be legally bound hereby, the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE TRANSACTION
---------------
1.1. Sale and Purchase of Assets. Subject to the terms and conditions
hereof, at the Closing referred to in Section 1.8 below, Seller will sell,
transfer, convey and assign to Buyer, free and clear of all Liens of every kind,
nature and description, except for the Excluded Assets (as defined in Section
1.2) or as otherwise disclosed and agreed in this Agreement, and Buyer will
purchase from Seller, all of Seller's properties and business as a going concern
and good will and assets of every kind, nature and description existing on the
date of Closing, wherever such assets are located and whether real, personal or
mixed, tangible or intangible, and whether or not any of such assets have any
value for accounting purposes or are carried or reflected on or specifically
referred to in its books or financial statements (collectively, the "Purchased
Assets"), including, without limitation, all of Seller's right, title and
interest in and to the following, as the same may exist on the Closing Date:
(a) subject to Section 1.2(a), all the real property, together
with the buildings, fixtures, structures and other improvements erected thereon,
and together with all easements, rights and privileges appurtenant thereto, as
more particularly described in Schedule 1.1(a) hereto;
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(b) all of Seller's machinery, equipment, tooling, dies, jigs,
vehicles, spare parts and supplies, including without limitation the items
listed on Schedule 1.1(b) hereto;
(c) all of Seller's raw materials, work in progress, parts,
subassemblies, finished goods and other inventories, wherever located and
whether or not obsolete or carried on Seller's books of account;
(d) all of Seller's other tangible assets, including office
furniture, office equipment and supplies, computer hardware and software,
leasehold improvements and vehicles;
(e) all of Seller's trade and other notes and accounts receivable;
(f) all of Seller's books, records, manuals, documents, books of
account, correspondence, sales and credit reports, customer lists, literature,
brochures, advertising material and the like;
(g) all of Seller's rights under leases for real or personal
property, and all of the Seller's rights under all other leases, contracts,
agreements and purchase and sale orders (the "Assigned Contracts"), as
specifically set forth on Schedule 2.13 hereto or the Bill of Sale;
(h) all of Seller's claims, choses in action, causes of action and
judgments;
(i) all of Seller's good will and rights in and to the name "Blue
Giant," and in any other tradename, trademark, fictitious name or service mark,
or any variant of any of them,
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and any registrations or applications for registration therefor, and any other
forms of intellectual property or industrial property rights, including any
patents, copyrights, trade secrets, know-how or proprietary manufacturing
processes and all licenses, sublicenses or other rights relating thereto
including, without limitation, those listed on Schedule 2.25; and
(j) all transferable or assignable registrations, licenses,
permits, approvals, certificates of occupancy and operating rights held in
connection with the Purchased Assets.
1.2. Excluded Assets. Notwithstanding any other provision of this
Agreement, Seller shall retain and the Purchased Assets shall not include the
following assets (collectively, the "Excluded Assets"):
(a) the real property, together with the buildings, fixtures,
structures and other improvements erected thereon, and together with all
easements, rights and privileges appurtenant thereto, located at 204 Industrial
Park Drive, Pell City, Alabama (the "Alabama Real Property");
(b) all of the Seller's cash, cash in banks, certificates of
deposit, cash equivalents, bank and mutual fund accounts, deposits, investments,
securities, advance payments, prepaid items and expenses, deferred charges,
rights of offset and credits, claims for refund and other cash equivalents on
hand or on deposit in any financial institution on the Closing Date;
(c) all of Seller's interest in SAGA Insurance Company, Limited;
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(d) all consideration received by and the rights of the Seller
under or pursuant to this Agreement or any agreement, instrument or document
ancillary hereto;
(e) all notes and receivables owing to Seller on the Closing Date
(i) from any Subsidiaries or Related Party and (ii) with respect to workers'
compensation insurance policies for all policy years prior to the current policy
year;
(f) the corporate records of the Seller including, without
limitation, its minute books, articles of incorporation, bylaws, minutes of
proceedings, stock transfer ledger, letters patent and corporate seal;
(g) all privileged communications;
(h) intercompany (among the Seller and any Affiliate other than
Blue Giant Canada Limited) accounts receivable;
(i) payments from insurance companies pertaining to claims filed
by Seller prior to the Closing Date and only to the extent relating to any
liability or obligation included within the Excluded Liabilities (as defined in
Section 1.7(b));
(j) all assets, properties and rights described in Schedule 1.2
hereto; and
(k) all the issued and outstanding capital stock of Blue Giant
Europe Limited ("Blue Europe") that is owned by Seller.
1.3. Purchase Price. The aggregate purchase price for the Purchased
Assets (the "Purchase Price") shall be Four Million Four Hundred Sixty-Five
Thousand U.S. Dollars ($4,465,000)
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subject to adjustment as provided in Section 1.6, plus the assumption of certain
liabilities of Seller, as provided in Section 1.7.
1.4. Payment of Purchase Price. The Purchase Price shall be paid by
Buyer to Seller as follows:
(a) Buyer's delivery of Three Million Two Hundred Fifteen Thousand
U.S. Dollars ($3,215,000) in cash by wire transfer at Closing.
(b) Buyer's delivery of One Million Two Hundred Fifty Thousand
U.S. Dollars ($1,250,000) in cash or by bank check or wire transfer at Closing
to SouthTrust Bank, National Association (the "Escrow Agent") pursuant to the
Escrow Agreement, substantially in the form of Exhibit A hereto (the "Escrow
Agreement").
(c) By Buyer's assumption at Closing of Seller's liabilities as
required by Section 1.7. Any amounts owing Buyer or Seller pursuant to Section
1.6 as a result of an adjustment to the Purchase Price shall be paid by Seller
or Buyer to the other in cash, by bank check or by mutual direction to the
Escrow Agent to disburse a portion of the funds held under the Escrow Agreement
within 10 days after the amount is finally determined pursuant to Section 1.6.
1.5. Allocation of Purchase Price. Buyer shall prepare a definitive
allocation of the Purchase Price within 45 days following the Closing Date.
Buyer and Seller agree that each will report the federal, state and local income
and other tax
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consequences of the purchase and sale contemplated hereby in a manner consistent
with such allocation including the preparation and filing of Form 8594 pursuant
to Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code")
and that neither will take any position inconsistent therewith upon examination
of any tax return, in any refund claim, in any litigation, or otherwise.
1.6. Post-Closing Adjustment to Purchase Price.
(a) Preparation of Closing Statement of Net Asset Value. Within 45
days after the Closing, Buyer shall, at its expense, prepare and deliver to
Seller a statement of the Net Asset Value of the Seller as of the Effective Time
(the "Closing Statement"), as determined by independent certified accountants
chosen by Buyer. The Closing Statement shall be prepared in accordance with
generally accepted accounting principles applied on a basis consistent, to the
extent not inconsistent with generally accepted accounting principles, with
those principles applied by Seller in the preparation of its June 28, 1997
financial statements. The Closing Statement as originally proposed by Buyer and
as adjusted as hereinafter described shall not contain a "warranty reserve" or
any other similar reserve or allowance, it being agreed by the parties that
Buyer shall be solely responsible for all warranty claims for products
manufactured and services provided by Seller, irrespective of whether such
claims first arose before or after the Closing. In the event that Seller
disagrees with the Closing Statement,
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Seller shall hire an independent certified accountant at its expense, which
shall prepare Seller's proposed adjustments to the Closing Statement within 45
days of Seller's receipt of the Closing Statement. Any dispute (and only those
items in dispute) concerning the Closing Statement which cannot be resolved by
the parties and their respective independent certified accountants within 30
days of Buyer's receipt of Seller's proposed adjustments to the Closing
Statement will be submitted no later than 45 days after such receipt to the
Atlanta, Georgia office of Arthur Andersen, or such other independent certified
accounting firm mutually selected by Buyer and Seller, and the determination of
such firm shall be final and binding on the parties. All parties represent
hereto that they have not had a business relationship with Arthur Andersen
during the five year period preceding the date of this Agreement and that they
shall not establish such a business relationship between the date of this
Agreement and the final determination of the Closing Statement pursuant to this
Section 1.6(a). The fees and expenses of Arthur Andersen shall be borne equally
by the Buyer and Seller.
(b) Adjustment Formula. If the Net Asset Value (as hereinafter
defined) at the Effective Time as reflected on the Closing Statement is more
than $3,051,166, then the Purchase Price shall be increased by the amount of
such excess and Buyer shall pay Seller such amount by certified or bank check.
If such Net Asset Value is less than $3,051,166 at the Effective Time, the
Purchase Price shall be reduced by the amount of such
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deficiency and Seller shall pay Buyer such amount by certified or bank check.
Buyer or Seller, as the case may be, shall make any payment required as a result
of an adjustment to the Purchase Price pursuant to this Section within 10 days
after the amount of such payment has been finally determined in accordance with
Section 1.5(a). In any event, Seller shall pay Buyer, or Buyer shall deduct from
amounts otherwise owing to Seller, an amount in cash equal to the cash received
by Seller after the Effective Time and before the Closing Date. As used herein,
"Net Asset Value" shall mean the remainder of (i) the book value of the assets
of Seller that are included in the Purchased Assets but exclude the Excluded
Assets (the "Book Assets") minus (ii) the book value of the liabilities of
Seller that constitute the Assumed Liabilities but exclude the Excluded
Liabilities, as all such amounts are reflected on the Closing Statement
calculated in accordance with generally accepted accounting principles on a
basis consistent with the calculation of the "Net Asset Value" of Seller as of
June 30, 1997 attached hereto as Exhibit 1.6.
1.7. Assumption of Liabilities.
(a) Assumed Obligations. At the Closing, Buyer shall by an
appropriate instrument of assumption to be executed and delivered at Closing and
to be substantially in the form attached as Exhibit B hereto (the "Assumption
Agreement"), assume and agree to perform, pay or discharge, when due, to the
extent not theretofore performed, paid or discharged: all of (a) Seller's
obligations and liabilities (including the obligations to make
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payments) under the Assigned Contracts arising on or after the Closing Date; (b)
all of Seller's trade accounts payable, but only to the extent reflected on the
Closing Statement; (c) Seller's sales tax payable, payroll tax payable, payroll
deduction payable and accured payroll, but in each case only to the extent
reflected on the Closing Statement; (d) all liabilities and obligations of
Seller (including the obligations to make payments) first arising after the
Closing Date under all licenses, permits, approvals, certificates of occupancy
and operating rights held in connection with the Purchased Assets to the extent
such licenses, permits, approvals, certificates of occupancy and operating
rights are included in the Purchased Assets; (e) warranty claims for all
products manufactured, assembled, sold, serviced or distributed by Seller prior
to the Closing Date; (f) any claims relating to the condition or operation of
any work in process or other inventories that are a part of the Purchased
Assets; (g) unfilled sales orders for products or services sold or committed,
but not delivered by Seller as of the Closing Date, to the extent that such
unfilled sales orders are included within the Purchased Assets; (h) liabilities
for materials which have been ordered but have not been delivered to and paid
for by Seller as of the Closing Date, to the extent that such materials have
been ordered in the ordinary course of business and are of a type that would be
included in the Purchased Assets had they been delivered to Seller prior to the
Closing Date; (i) management bonus payable,
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but only to the extent reflected on the Closing Statement; and (j) all
liabilities and obligations incurred by Seller in its operation of the Business
pursuant to this Agreement from the Effective Time through and including the
Closing Date. The obligations and liabilities to be assumed by Buyer pursuant to
this Section are hereinafter sometimes referred to as the "Assumed Liabilities."
Except with respect to the Assumed Liabilities, Buyer does not hereby and shall
not assume or in any way undertake to pay, perform, satisfy or discharge any
liabilities or obligations of Seller, and Seller agrees to pay and satisfy when
due any such liabilities and obligations not assumed by Buyer including the
Excluded Liabilities (as hereinafter defined).
(b) Excluded Liabilities. Except as expressly provided in Section
1.7(a), Seller shall retain and Buyer shall not assume or be liable for any
liabilities and obligations of Seller, including without limitation the
following: (the "Excluded Liabilities"):
(i) any liabilities or obligations of Seller, contingent or
otherwise, for any indebtedness of Seller;
(ii) the Liabilities or obligations of Seller to its
stockholders respecting dividends, distributions to its stockholders in
liquidation, redemptions of stock, or otherwise;
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(iii) liabilities or obligations of Seller arising out of any
transactions occurring, or obligations incurred, after the Closing;
(iv) any obligations of Seller for expenses, taxes or fees
incident to or arising out of the negotiation, preparation, approval or
authorization of this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation, all attorneys and
accountants fees and all brokers or finders fees or commissions payable by
Seller (including but not limited to those referred to in Section 6.2 hereof);
(v) any obligation of Seller under or arising out of this
Agreement;
(vi) liabilities to the extent that the Seller is insured or
otherwise indemnified or which would have been covered by insurance (or
indemnification) but for a claim by the insurer (or the indemnitor) that the
insured (or the indemnitees) had breached it obligations under the policy of
insurance (or the contract of indemnity) or had committed fraud in the insurance
application;
(vii) any liability or obligation of Seller to any Related
Party (as hereinafter defined);
(viii) any liabilities or obligations, the existence of which
constitute a breach of the representations, warranties or covenants of Seller
contained in this Agreement;
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(ix) any obligations or liabilities of Seller to indemnify
its officers, directors, employees or agents;
(x) any liability or obligation in respect of the Excluded
Assets;
(xi) all federal, state, local, foreign and other
governmental taxes imposed on Seller, including (i) any Tax of any other
corporation which tax is assessed against Seller by virtue of its status, prior
to the Closing Date, as a member of any consolidated group of which such other
corporation was also a member and (ii) any Taxes imposed as a result of the
consummation of the transaction under this Agreement;
(xii) any Environmental Liabilities;
(xiii) except for the Assumed Liabilities, any obligation or
liability arising under any contract, instrument or agreement (1) that is not
transferred to Buyer as part of the Purchased Assets, or (2) that is not
transferred to Buyer because of Seller's failure or inability to obtain any
third party consent required for the transfer or assignment of such contract or
agreement to Buyer, or (3) that relates to any breach or default (or an event
which might, with the passing of time or the giving of notice, or both,
constitute a default) under any contract, instrument or agreement or to any
services to be provided by Seller under any such contract, instrument or
agreement arising out of or relating to periods on or prior to the Effective
Time, or (4) for which Seller received payment prior to the Effective Time; and
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(xiv) any other liability or obligation of Seller or its
Affiliates including any liability or obligation directly or indirectly arising
out of or relating to the operation of the Business or ownership of the
Purchased Assets on or prior to the Effective Time, whether contingent or
otherwise, fixed or absolute, known or unknown, matured or unmatured, present,
future or otherwise, except for the Assumed Liabilities.
1.8. Closing. The closing under this Agreement (the "Closing") will
take place at 10:00 A.M., local time, on November 12, 1997 at the offices of
Dechert Price & Rhoads, or at such other time, date or place as the parties
shall mutually agree. The date on which Closing occurs is sometimes referred to
herein as the "Closing Date."
1.9. Deliveries and Proceedings at Closing. At the Closing:
(a) Deliveries by Seller. Seller will deliver or cause to be
delivered to Buyer:
(i) a general warranty bill of sale and instrument of
assignment to the tangible Purchased Assets (other than certificated motor
vehicles) including a list of the Assigned Contracts as of the Closing Date,
duly executed by the Seller substantially in the form of Exhibit C hereto (the
"Bill of Sale");
(ii) an assignment of all transferable or assignable
licenses, permits and warranties relating to the Purchased Assets and of any
trademarks, trade names, patents and
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the like, duly executed and in recordable form, subject to Section 1.10 hereof;
(iii) title certificates to any motor vehicles included in
the Purchased Assets duly executed by the Seller (together with any other
transfer forms necessary to transfer title to such vehicles) promptly following
the Closing but in no event later than two (2) weeks following the Closing Date;
(iv) powers of attorney to Buyer to endorse all checks made
payable to Seller relating to trade and other notes and accounts receivable of
Seller;
(v) the Escrow Agreement;
(vi) a general warranty bill of sale and instrument of
assignment to all certificated motor vehicles included in the Purchased Assets
as of the Closing Date, duly executed by Seller substantially in the form of
Exhibit D hereto;
(vii) an amendment to the Blue Giant 401(k) Plan (as defined
in Section 6.3(a), amending the employer and plan sponsor to be Blue Giant
Corporation, a Delaware corporation, effective 11:59 p.m. of the Closing Date;
and
(viii) such other instruments of conveyance as shall, in the
reasonable opinion of Buyer and its counsel, be necessary to vest in Buyer good,
valid and marketable title to the Purchased Assets in accordance with Section
1.1.
(b) Deliveries by Buyer. At the Closing, Buyer will deliver to
Seller:
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(i) the cash portion of Purchase Price;
(ii) the Assumption Agreement;
(iii) the Escrow Agreement; and
(iv) the CLARK Guaranty.
(c) Other Deliveries. The closing certificates, opinions of
counsel and other documents required to be delivered pursuant to this Agreement
will be exchanged.
1.10. Regarding Certain Consents. Nothing in this Agreement shall be
construed as an attempt to assign any contract, agreement, permit, franchise, or
claim included in the Purchased Assets which is by its terms or in law
nonassignable without the consent of the other party or parties thereto, unless
such consent shall have been given, or as to which all the remedies for the
enforcement thereof enjoyed by Seller would not, as a matter of law, pass to
Buyer as an incident of the assignments provided for by this Agreement. In
order, however, to provide Buyer the full realization and value of every
contract, agreement, permit, franchise and claim of the character described in
the immediately preceding sentence, Seller agrees that on and after the Closing,
it will, at the request and under the direction of Buyer, in the name of Seller
or otherwise as Buyer shall specify take all reasonable action (including
without limitation the appointment of Buyer as attorney-in-fact for Seller) and
do or cause to be done all such things as shall in the reasonable opinion of
Buyer or its counsel be necessary or proper (a) to assure that the rights of
Seller under such
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contracts, agreements, permits, franchises, and claims shall be preserved for
the benefit of Buyer and (b) to facilitate receipt of the consideration to be
received by Seller in and under every such contract, agreement, permit,
franchise, and claim, which consideration shall be held for the benefit of, and
shall be delivered to, Buyer. All expenses and obligations incurred by Seller
under any contract or agreement that is not included in the Purchased Assets but
from which Buyer realizes value pursuant to this Section 1.10 shall be paid to
Seller by Buyer within ten (10) days of request by Seller, including reasonable
supporting documentation. Nothing in this Section shall in any way diminish
Seller's obligations hereunder to obtain all consents and approvals and to take
all such other actions prior to or at Closing as are necessary to enable Seller
to convey or assign valid title to all the Purchased Assets to Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents, warrants and covenants to and with Buyer as
follows:
2.1. Organization. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of Alabama. Seller has all
requisite corporate power and authority to own or lease its properties and
assets as now owned or leased, to carry on its businesses as and where now being
conducted and to enter into this Agreement, and perform its
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obligations hereunder. The copies of Seller's articles of incorporation and
bylaws, as amended to date, which have been delivered to Buyer, are correct and
complete and are in full force and effect.
2.2. Subsidiaries. Except for the subsidiaries listed on Schedule 2.2
hereto (collectively, the "Subsidiaries" and individually, a "Subsidiary"),
Seller does not, directly or indirectly, own any stock of, or any other interest
in, any other corporation or business entity.
2.3. Qualification; Location of Business and Assets The Seller is duly
qualified and in good standing as a foreign corporation, duly authorized to do
business in the jurisdictions set forth on Schedule 2.3 hereto, and such
jurisdictions are the only jurisdictions wherein the character of the properties
owned or leased or the nature of activities conducted by Seller make such
qualification necessary and where the failure to so qualify would have a
material adverse effect on Seller, the Business or the Purchased Assets. Set
forth on Schedule 2.3 hereto is each location (specifying state, county and
city) where Seller: (a) has a place of business, (b) owns or leases real
property, and (c) owns or leases any other property, including inventory,
equipment, furniture, tools and dies.
2.4. Authorization and Enforceability. The execution, delivery and
performance of this Agreement has been, and at Closing the Assumption Agreement,
the Bill of Sale and such other agreements necessary to vest in Buyer good,
valid and
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marketable title to the Purchased Assets (the "Ancillary Agreements") shall have
been duly authorized by all necessary corporate action on the part of Seller,
including, if necessary, shareholder approval. This Agreement has been, and at
Closing the Ancillary Agreements shall have been duly executed and delivered by
Seller, and this Agreement constitutes, and at Closing the Ancillary Agreements
will constitute, the legal, valid and binding obligations of Seller, enforceable
in accordance with their respective terms, except as enforcement may be limited
by bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights in general, moratorium laws or by general principles of
equity.
2.5. No Violation of Laws or Agreements. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated by
this Agreement and the compliance with the terms, conditions and provisions of
this Agreement by Seller, will not (a) contravene any provision of Seller's
articles of incorporation or bylaws; (b) conflict with or result in a breach of
or constitute a default (or an event which might, with the passage of time or
the giving of notice or both, constitute a default) under any of the terms,
conditions or provisions of any indenture, mortgage, loan or credit agreement or
any other agreement or instrument to which Seller is a party or by which it or
any of its assets may be bound or affected except as set forth on Schedule 2.16,
or any judgment or order of any court or governmental department,
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commission, board, agency or instrumentality, domestic or foreign, or any
applicable law, rule or regulation, (c) result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon Seller's assets or
give to others any interests or rights therein, (d) result in the maturation or
acceleration of any liability or obligation of Seller that will not be paid in
full by Seller at Closing (or give others the right to cause such a maturation
or acceleration), or (e) result in the termination of or loss of any right (or
give others the right to cause such a termination or loss) under any of the
Assigned Contracts except as set forth on Schedule 2.16.
2.6. Financial Statements. The books of account and related records of
Seller fairly reflect in reasonable detail its assets, liabilities and
transactions and are in adequate condition for the preparation of the Financial
Statements (as defined below) of Seller in accordance with generally accepted
accounting principles applied on a consistent basis. Seller has delivered to
Buyer the following financial statements (the "Financial Statements"):
(a) Audited statements of income and retained earnings and
statements of changes in financial position of Seller for the years
ended December 31, 1993 through December 31, 1996 inclusive, and
balance sheets of Seller at such dates.
(b) Unaudited statements of income and retained earnings of Seller
for the six (6) months ended June 28, 1997 and a balance sheet of
Seller at such date.
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The Financial Statements referred to in paragraph (a) above: (i) fairly present
the financial condition, assets and liabilities of Seller as at their respective
dates and the results of its operations and changes in financial position for
the periods covered thereby, (ii) have been prepared in accordance with
generally accepted accounting principles consistently applied and (iii) have
been audited by Raughton & Company, C.P.A., the independent certified public
accountants for Seller. All references in this Agreement to the "Balance Sheet"
shall mean the balance sheet of Seller as at June 28, 1997 included in the
Financial Statements and all references to the "Balance Sheet Date" shall mean
June 28, 1997.
2.7. Undisclosed Liabilities. To Seller's Knowledge after due inquiry,
Seller has no liability or obligation of any nature, whether due or to become
due, absolute, contingent or otherwise, including liabilities for or in respect
of federal, state, local or foreign taxes and any interest or penalties related
hereto, except for liabilities that are (a) fully reflected on the Balance Sheet
or (b) incurred in the ordinary course of business since the Balance Sheet Date
and fully reflected as liabilities on the Seller's books of account, none of
which individually or in the aggregate, has been materially adverse or (c)
disclosed on Schedule 2.7 hereto.
2.8. No Changes. Except as disclosed on Schedule 2.8 hereto, since
December 31, 1996, the Seller has conducted its business only in the ordinary
course. Without limiting the
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generality of the foregoing sentence, except as disclosed on Schedule 2.8
hereto, since the Balance Sheet Date, there has not been:
(a) any change in the financial condition, assets, liabilities,
net worth or business of the Seller, except changes in the ordinary course of
business, none of which, individually or in the aggregate has been or will be
materially adverse to Seller;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the properties, business or prospects
of Seller, or any material deterioration in the operating condition of Seller's
assets;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of Seller's assets, tangible or intangible;
(d) any strike, walkout, labor trouble or any other new or
continued event, development or condition of any character which has or could
materially adversely affect the business, properties or prospects of Seller;
(e) any declaration, setting aside or payment of a dividend or
other distribution in respect of any capital stock of Seller, or any direct or
indirect redemption, purchase or other acquisition of any such stock or any
rights to purchase such stock or securities convertible into or exchangeable for
such stock;
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(f) any increase in the salaries or other compensation (excluding
increases in the ordinary course of business and consistent with past practice)
payable or to become payable to, or any advance (excluding advances for ordinary
business expenses) or loan to, any officer, director, employee or shareholder of
Seller, or any increase in, or any addition to, other benefits (including
without limitation any bonus, profit-sharing, pension or other plan) to which
any of its officers, directors, employees or shareholders may be entitled, or
any payments to any pension, retirement, profit-sharing, bonus or similar plan
except payments in the ordinary course of business and consistent with past
practice made pursuant to the employee benefit plans described on Schedule 2.26
hereto, or any other payment of any kind to (or on behalf of) any such officer,
director, employee or shareholder other than payment of base compensation and
reimbursement for reasonable business expenses in the ordinary course of
business;
(g) any making or authorization of any capital expenditures in
excess of $50,000.00;
(h) any cancellation or waiver of any right material to the
operation of Seller's business or any cancellation or waiver of any debts or
claims of substantial value or any cancellation or waiver of any debts or claims
against any Related Party (as such term is hereinafter defined);
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(i) any sale, transfer or other disposition of any assets of
Seller, except sales of assets in the ordinary course of business;
(j) any payment, discharge or satisfaction of any liability or
obligation (whether accrued, absolute, contingent or otherwise) by Seller, other
than the payment, discharge or satisfaction, in the ordinary course of business,
of liabilities or obligations shown or reflected on the Balance Sheet or
incurred in the ordinary course of business since the Balance Sheet Date;
(k) any adverse change or any threat of any adverse change in
Seller's relations with, or any loss or threat of loss of, Seller's suppliers,
clients or customers, which change or loss would have a material adverse affect
on Seller or its Business;
(l) any write-offs as uncollectible of any notes or accounts
receivable of Seller or right-downs of the value of any assets or inventory by
Seller other than in immaterial amounts or in the ordinary course of business
consistent with past practice and at a rate no greater than during the twelve
months ended on the Balance Sheet Date;
(m) any change by Seller in any method of accounting or keeping
its books of account or accounting practices;
(n) any creation, incurrence, assumption or guarantee by Seller of
any obligations or liabilities (whether
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absolute, accrued, contingent or otherwise and whether due or to become due),
except in the ordinary course of business, or any creation, incurrence,
assumption or guarantee by Seller of any indebtedness for money borrowed;
(o) any payment, loan or advance of any amount to or in respect
of, or the sale, transfer or lease of any properties or assets (whether real,
personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with, any "Related Party" (as hereinafter
defined), except for (i) directors' fees, (ii) compensation to the officers and
employees of Seller at rates not exceeding the rates of compensation disclosed
on Schedule 2.19 hereto and (iii) reimbursements of or advances for expenses
incurred for business-related purposes not exceeding $5,000 outstanding in the
aggregate at any given time (as used herein, a "Related Party" means any of the
officers, directors or shareholders of Seller, any affiliate or relative of
Seller or of any shareholder of Seller, or any of their respective officers or
directors, or any business or entity in which any shareholder of Seller or any
affiliate or relative of any such persons or of Seller has any direct or
material indirect interest);
(p) any disposition of or failure to keep in effect any rights in,
to or for the use of any patent, trademark, service mark, trade name or
copyright, or, to Seller's Knowledge, any disclosure to any person not an
employee or other disposal of any trade secret, process or know-how; or
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(q) any transaction, agreement or event to which Seller is a party
or a participant outside the ordinary course of Seller's business or
inconsistent with past practice.
2.9. Taxes. Seller has (a) timely filed all federal, state and local
income, payroll, withholding, excise, sales, use, personal property, use and
occupancy, business and occupation, mercantile, real estate, capital stock and
franchise or other tax returns of any kind whatsoever (all the foregoing taxes,
including interest and penalties thereon and including estimated taxes, being
hereinafter collectively called "Taxes" and individually a "Tax"), (b) has paid
all Taxes which are shown to have become due pursuant to such returns and (c)
paid all other Taxes for which a notice of assessment or demand for payment has
been received. All such returns have been prepared in accordance with all
applicable laws and requirements and accurately reflect the taxable income (or
other measure of Tax) of the party filing the same. The accruals for Taxes
contained in the Balance Sheet are adequate to cover all liabilities for Taxes
of the Seller for all periods ending on or before the Balance Sheet Date and
nothing has occurred subsequent to that date to make any of such accruals
inadequate as of the Balance Sheet Date. All Taxes for periods beginning after
the Balance Sheet Date have been paid or are adequately reserved against on the
books of Seller. Seller has timely filed all information returns or reports,
including forms 1099, which are required to be filed and has accurately reported
all information required to be included on such returns
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or reports. True copies of federal and state income tax returns of Seller for
each of the fiscal years ended December 31, 1992 through December 31, 1996 have
been delivered to Buyer. To Seller's Knowledge, there are no proposed
assessments of Tax against Seller or proposed adjustments to any tax returns
filed, pending against Seller. Except as disclosed on Schedule 2.9, Seller has
not received notice that any Tax return is under examination by any taxing
authority. Except as disclosed on Schedule 2.9 hereto, Seller has not executed a
waiver or consent extending any statute of limitation for federal income or
other tax liability which remains outstanding. Except as disclosed on Schedule
2.9 hereto, since January 1, 1990, Seller has not (a) joined in or been required
to join in filing a consolidated federal income tax return, or (b) entered into
a closing agreement with any taxing authority.
2.10. Inventory. All of the inventories of Seller, including that
reflected in the Balance Sheet, are valued at the lower of cost or market, the
cost thereof being determined on a first-in, first-out basis, except as
disclosed in the Financial Statements. All of the inventories of Seller
reflected in the Balance Sheet and all such inventories acquired since the
Balance Sheet Date consist of items of a quality and quantity usable and
saleable in the ordinary course of Seller's business within a reasonable period
of time and at normal profit margins (other than normal trade discounts
regularly offered by the Business for prompt payment or quantity purchase), and
all of the raw
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materials and work in process inventory of Seller reflected in the Balance Sheet
and all such inventories acquired since the Balance Sheet Date can reasonably be
expected to be consumed in the ordinary course of business within a reasonable
period of time. Attached hereto is Schedule 2.10 which sets forth a summary of
the book value of Seller's inventory of finished goods, work in process and raw
materials as of September 28, 1997 according to the internal accounting records
of the Seller as of said date.
2.11. Accounts Receivable. All of the Seller's trade accounts and notes
receivable represent amounts receivable for merchandise actually delivered or
services actually provided (or, in the case of non-trade accounts or notes,
represent amounts receivable in respect of other bona-fide business
transactions), have arisen in the ordinary course of business, are not subject
to any counterclaims or offsets and have been billed and are generally due
within 30 days after such billing (with regard to U.S. trade accounts) and
within 90 days (with regard to non-U.S. trade accounts). All such receivables
are fully collectible in the normal and ordinary course of business, except to
the extent of a reserve in an amount not in excess of the reserve for doubtful
accounts reflected on the Balance Sheet. Schedule 2.11 hereto sets forth (a) the
total amount of accounts receivable of the Seller outstanding as of September
28, 1997 and (b) the aging of such receivables based on the following schedule:
0-30 days,
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31-60 days, 61-90 days, and over 90 days, from the due date thereof.
2.12. No Pending Litigation or Proceedings. Except as set forth on
Schedule 2.12 hereto, there are no actions, suits, investigations, proceedings
or claims pending or, to Seller's Knowledge, threatened against or affecting
Seller or Seller's agents or their assets, at law or in equity, by or before any
court or governmental department, agency or instrumentality, and to Seller's
Knowledge, there is no basis for any such action, suit, investigation,
proceeding or claim. There are presently no outstanding judgments, decrees or
orders of any court or any governmental or administrative agency against or, to
Seller's Knowledge, affecting Seller or any of their businesses or assets.
2.13. Contracts; Compliance. Except as listed on Schedule 2.13 hereto,
Seller is not a party to or bound by any lease, contract or commitment, oral or
written, formal or informal, of the following types:
(a) mortgages, indentures, security agreements or other agreements
and instruments relating to the borrowing of money, the extension of credit or
the granting of liens or encumbrances;
(b) employment and consulting agreements;
(c) union or other collective bargaining agreements;
(d) powers of attorney;
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(e) sales agency, manufacturers representative and distributorship
agreements or other distribution or commission arrangements;
(f) licenses of patent, trade secrets, know- how, trademark,
copyrights and other intellectual property rights;
(g) agreements, orders or commitments for the purchase of
services, raw materials, supplies or finished products from any one supplier for
an amount in excess of $5,000.
(h) agreements, orders or commitments for the sale of products or
services for more than $5,000 to any single purchaser;
(i) contracts or options relating to the sale by Seller of any
asset, other than sales of inventory in the ordinary course of business;
(j) bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation, accrued vacation pay, group insurance,
welfare agreements or other plans, agreements, trusts or arrangements for the
benefit of employees;
(k) agreements or commitments for capital expenditures in excess
of $50,000.00 for any single project;
(l) joint venture agreements;
(m) agreements requiring the consent of any party thereto to the
consummation of the transactions contemplated hereby;
(n) agreements with any Related Party;
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(o) lease agreements under which it is either lessor or lessee;
(p) agreements, contracts or commitments for any charitable or
political contribution; or
(q) other agreements, contracts and commitments which are material
to the business of Seller, or which involve payments or receipts of more than
$5,000.00 in any single year, or which were entered into other than in the
ordinary and usual course of business.
All such leases, contracts and other commitments are in full force and
effect; all parties to such leases, contracts and other commitments have
complied with the provisions thereof; no such party is in default under any of
the terms thereof; and no event has occurred that with the passage of time or
the giving of notice or both would constitute a default by any party under any
provision thereof. Set forth on Schedule 2.13 hereto is a summary of unfilled
firm purchase orders of Seller as of September 26, 1997 other than any unfilled
firm purchase order which has a value of less than $1,000.
2.14. Compliance with Laws. Schedule 2.14 hereto sets forth a list of
all material permits, certificates, licenses, orders, registrations, franchises,
authorizations and other approvals from all federal, state, local and foreign
governmental and regulatory bodies held by Seller. The Seller holds and is in
compliance with all material permits, certificates, licenses, orders, approvals,
registrations, franchises and authorizations
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required under all laws, rules and regulations in connection with its business,
and, to Seller's Knowledge, all of such permits, certificates, licenses, orders,
approvals, registrations, franchises and authorizations are in full force and
effect. The Seller has complied with all applicable statutes, rules, regulations
and orders, federal, state and municipal, which, if not complied with, would
have a material adverse effect on its business. No notice, citation, summons or
order has been issued, no complaint has been filed, no penalty has been assessed
and, to Seller's Knowledge, no investigation or review is pending or threatened
by any governmental or other entity (a) with respect to any alleged violation by
Seller of any law, ordinance, rule, regulation or order of any governmental
entity or (b) with respect to any alleged failure by Seller to have any permit,
certificate, license, approval, registration or authorization required in
connection with its business.
2.15. Environmental Matters.
(a) Except as disclosed on Schedule 2.15 hereto or in the site
assessments of the Owned Real Property performed by or on behalf of Buyer (true
and complete copies of which Buyer has delivered to Seller):
(i) To Seller's knowledge, Seller has complied with and is
not in violation of any federal, state, regional or local statutory or common
law, regulation, rule, order, ordinance, guideline, direction, policy or notice,
relating to the environment, public health and safety, and employee
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health and safety, including those relating to Hazardous Substances
("Environmental Laws").
(ii) To Seller's knowledge, Seller holds and is in compliance
with all environmental permits, certificates, consent or other settlement
agreements, licenses, approvals, registrations and authorizations required under
all Environmental Laws ("Environmental Permits"), and all of such Environmental
Permits are valid and in full force and effect. All such Environmental Permits
held by Seller are listed on Schedule 2.15 hereto and any that are not
transferable are so designated. Seller has made or will make before the Closing
timely application for renewals of all such Environmental Permits for which
Environmental Laws require that applications must be filed on or before the
Closing to maintain the Environmental Permits in full force and effect after the
Closing Date.
(iii) No consent, approval or authorization of, or
registration or filing with any Person, including any environmental governmental
Authority or regulatory agency, is required in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
(iv) No notice, citation, summons or order has been issued or
served upon, no complaint has been filed, no penalty has been assessed and, to
Seller's Knowledge, no investigation or review is pending or threatened by any
Authority or Person: (a) with respect to any alleged violation by Seller
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of any Environmental Law; or (b) with respect to any alleged failure by Seller
to have any Environmental Permit; or (c) with respect to any use, possession,
generation, treatment, storage, recycling, transportation or disposal
(collectively "Management" or "Managed," as the context requires) of any
Hazardous Substances by or on behalf of Seller or its predecessors.
(v) Seller has not received any request for information,
notice of claim, demand, order or notification that it or any of its
predecessors are or may be potentially responsible with respect to any
investigation or clean-up of any threatened or actual Release of any Hazardous
Substance.
(vi) Except for Hazardous Substances stored or used in the
ordinary course of their manufacturing processes, in quantities and in a manner
(1) not in violation of any applicable law, or (2) which has not or is not
reasonably likely to create a condition which requires investigation,
remediation or other responsive action or responsibility or liability under
Environmental Laws, neither Seller nor any Affiliate of Seller has used,
generated, treated, stored for more than 90 days, recycled or disposed of any
Hazardous Substances on any property now owned, operated or leased by Seller or
any Affiliate of Seller or on any formerly owned, operated or leased property,
nor to Seller's Knowledge has anyone else during the period that such property
has been owned, operated or leased by Seller or, to Seller's Knowledge, during
any other period, treated, stored for more than 90 days, recycled or disposed of
any Hazardous
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Substances on any property now owned, operated or leased by Seller or any
Affiliate of Seller or on any formerly owned, operated or leased property.
(vii) To Seller's Knowledge, no polychlorinated biphenyls or
asbestos-containing materials are or have been present at any property now
owned, operated or leased by Seller or any Affiliate of Seller, or at any
formerly owned, operated or leased property during the period that such property
was owned, operated or leased by Seller, nor are there any underground storage
tanks, active or abandoned, at any property now owned, operated or leased by
Seller or any Affiliate of Seller or during the period that such property was
owned, operated or leased by Seller, at any formerly owned, operated or leased
property.
(viii) To Seller's Knowledge, no Hazardous Substance
generated by Seller or any Affiliate of Seller has been recycled, treated,
stored, disposed of or transported by any entity in violation of any
Environmental Law or in a manner which has created or is reasonably likely to
create any liability or responsibility under any Environmental Law.
(ix) To Seller's Knowledge, without any independent inquiry,
no Hazardous Substance managed by Seller or any Affiliate of Seller has come to
be located at any site which is listed or proposed for listing under the
National Priorities List ("NPL") under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), the Comprehensive
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Environmental Response, Compensation and Liability Information List ("CERCLIS")
or on any similar state list, or at any site which is the subject of federal,
state or local enforcement actions or other investigations which may lead to
claims against Seller or any Affiliate, or Buyer for clean-up costs, remedial
work, damages to natural resources or for personal injury claims, including, but
not limited to, claims under CERCLA.
(x) No Hazardous Substance has been Released at, on, about or
under by Seller or, to Seller's Knowledge is present in any property now owned,
operated or leased by Seller or any Affiliate of Seller or any formerly owned,
operated or leased property which requires investigation, remediation or other
response action.
(xi) No oral or written notification of a Release or threat
of Release of a Hazardous Substance has been filed by or on behalf of Seller or
any Affiliate of Seller or in relation to any property now or previously owned,
operated or leased by Seller or any Affiliate of Seller. To Seller's Knowledge,
without any independent inquiry, no such property is listed or proposed for
listing on the NPL promulgated pursuant to CERCLA, on CERCLIS or on any similar
state list of sites requiring investigation or clean-up.
(xii) There are no environmental Liens on any properties
owned or leased by Seller or any Affiliate of Seller which would impair Buyer's
ability to lawfully operate the Business as such Business was operated prior to
the Closing Date
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and, to Seller's Knowledge, no government actions have been taken or are in
process or pending which could subject any of such properties to such Liens.
(xiii) No deed or other instrument of conveyance of real
property to Seller or any Affiliate of Seller with respect to real property
presently owned, operated or leased by Seller contains a restriction relating to
the actual or suspected presence of Hazardous Substances, which restriction
would impair Buyer's ability to lawfully operate the Business as such Business
was operated prior to the Closing Date.
(xiv) To Seller's Knowledge, there are no facts or
circumstances related to environmental matters concerning real property owned,
operated or leased by Seller or businesses conducted by Seller that could
reasonably be expected to lead to any future environmental claims against
Seller, or Buyer under current law.
(xv) There have been no environmental inspections,
investigations, studies, audits, tests, reviews or other analyses conducted by
or at the direction of Seller or, in the possession of Seller indicating the
presence of any Hazardous Substance in or on any property or business now or
previously owned, operated, or leased by Seller or any Affiliate of Seller in
violation of any Environmental Law or which has created a condition which
requires investigation, remediation or other response action under Environmental
Law which have not been provided to Buyer prior to the date hereof.
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2.16. Consents. Except as set forth on Schedule 2.16, no consent,
approval or authorization of, or registration or filing with, any Person, is
required in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
2.17. Personal Property. The Seller owns all of its tangible personal
property and assets, including the properties and assets reflected in the
Balance Sheet (except those disposed of in the ordinary course of business since
the Balance Sheet Date); and at the Closing none of such properties or assets
will be subject to any mortgage, pledge, lien, restriction, encumbrance,
tenancy, license, encroachment, covenant, right of way, easement, claim,
security interest, charge or any other matter affecting title, except, (a) minor
imperfections of title, none of which, individually or in the aggregate,
materially detracts from the value of or impairs the use of the affected
properties or impairs any operations of the Seller, (b) liens for current taxes
not yet due and payable, or (c) as disclosed on Schedule 2.17 hereto
(collectively "Personal Property Permitted Encumbrances"). All tangible personal
property and assets which are consigned or leased to the Seller and are used in
the operation of the businesses of Seller are listed on Schedule 2.17.
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2.18. Real Estate.
(a) Schedule 2.18 hereto contains a true, correct and complete
list of all real properties owned, leased, subleased, licensed or otherwise
occupied by Seller (collectively, the "Real Properties") separately indicating
the nature of Seller's interest therein. Except as set forth on Schedule 2.18
hereto, no other Person has any oral or written right, agreement or option to
acquire, lease, sublease or otherwise occupy all or any portion of such Real
Properties. Seller has not received any written or oral notice for assessment
for public improvements against any of the Real Properties which remains unpaid
and, to Seller's Knowledge, no such assessment has been proposed. There is no
pending condemnation, expropriation, eminent domain or similar proceeding
affecting all or any portion of any of the Real Properties and, to Seller's
Knowledge, no such proceeding is contemplated.
(b) Accurate and current copies of all real property leases,
subleases, licenses or other occupancy agreements (and all amendments thereto)
listed on Schedule 2.18 hereto have previously been delivered to Buyer
(collectively, the "Leases"). Seller has not assigned its rights under any
Leases other than collateral assignments executed in connection with financings
identified on the schedules attached hereto. The Leases are in full force and
effect and constitute binding obligations of the Seller and the other parties
thereto and (i) there are no defaults thereunder by Seller or by any other party
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thereto, and (ii) to Seller's Knowledge, no event has occurred which with
notice, lapse of time, or both would constitute a default by the Seller or, to
Seller's Knowledge, by any other party thereto.
(c) Except as disclosed on Schedule 2.18 hereto,
(i) Seller has (1) indefeasible, good, marketable and
insurable equitable fee simple title to the real property owned by Seller (the
"Owned Real Property"), and (2) a valid and enforceable leasehold interest to
the property leased pursuant to the Leases (the "Leased Real Property"). The
Owned Real Property is free and clear of any and all Liens, exceptions, items,
encumbrances, easements, restrictions and other matters either of record or not
of record which either individually or in the aggregate, could prohibit or
adversely interfere with Buyer's use of such property except (a) matters set
forth on Schedule 2.18 and referred to as "Exceptions that will not exist at
Closing" (the "Exceptions That Will Not Exist at Closing"), (b) matters set
forth on Schedule 2.18, none of which is material in amount and none of which,
individually or in the aggregate, impairs, or grants or evidences rights which
if exercised would impair, the use of the affected property in the manner such
property is currently being used, or impairs the current operations of the
Seller, (c) defects of title, conditions, easements, encroachments, covenants or
restrictions, if any, none of which is material in amount and none of which,
individually or
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in the aggregate, materially impairs, or grants or evidences rights which if
exercised would materially impair, the use of the affected property in the
manner such property is currently being used, or impairs the current operations
of the Seller, and (d) zoning or land use ordinances, none of which, to Seller's
Knowledge, individually or in the aggregate, impairs the use of the affected
property in the manner such property is currently being used or impairs the
current operations of the Seller (collectively, the "Permitted Real Property
Encumbrances"). No material default or breach exists under any of the covenants,
conditions, restrictions, rights-of-way or easements, if any, affecting all or
any portion of the Owned Real Properties.
(ii) The current zoning of each of the Owned Real Properties
permits the operator of such property to use such property for the current
respective use thereof. Seller has not made any application for a rezoning of
any of the Real Properties. To Seller's Knowledge, without any independent
inquiry, there are no proposed or pending change to any zoning affecting any of
the Owned Real Properties.
(iii) All utilities, including without limitation, potable
water, sewer, gas, electric, telephone, and other public utilities and all storm
water drainage required by law or necessary for the operation of the Owned Real
Properties, 1) either enter the Owned Real Properties through open public
streets adjoining the Owned Real Properties, or, if they pass through adjoining
private land, do so in accordance with valid
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public or private easements or rights of way which will inure to the benefit of
Buyer, 2) are installed, connected, operating and adequate for the operation of
the Business as it has been previously conducted by Seller, with all
installation and connection charges paid in full, including, without limitation,
connection and the right to discharge sanitary waste into the collector system
of the appropriate sewer utility, and 3) are adequate (in both quality and
quantity) to service the Owned Real Properties for their respective use in the
business as presently conducted thereon.
(iv) Each of the Owned Real Property is located along one or
more dedicated public streets or has access thereto. All curb-cut and
street-opening permits or licenses required for vehicular access to and from the
Real Properties to any adjoining public street or to any parking spaces utilized
in connection with the Owned Real Property have been obtained and paid for, are
in full force and effect and shall inure to the benefit of Buyer.
(v) The improvements located on the Owned Real Properties,
including the roof, structure, soil, elevators, walls, heating, ventilation, air
conditioning, plumbing, electrical, drainage, fire alarm, communications,
security and exhaust systems and their component parts, or other improvements on
or forming a part of the Owned Real Properties, are adequate for the operation
of the Business as it has been previously conducted by Seller. Seller has not
received any notification of
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and there are no outstanding or incomplete work orders in respect of any of the
buildings, improvements or other structures constructed on the Owned Real
Properties or of any current non-compliance with applicable statutes and
regulations or building and zoning by-laws and regulations.
(d) Except as set forth on Schedule 2.18 hereto, there are no
deeds of trust or mortgages which are a Lien upon the Owned Real Properties.
2.19. Transactions with Related Parties. Except as disclosed on
Schedule 2.19, no Related Party has:
(a) borrowed money or loaned money to Seller which remains
outstanding;
(b) any contractual or other claims, express or implied, of any
kind whatsoever against Seller;
(c) any interest in any property or assets used by Seller in its
business; or
(d) is engaged in any other transaction with Seller (other than
employment relationships at the salaries disclosed in Schedule 2.19 hereto).
2.20. Condition of Assets. The buildings, machinery, equipment, tools,
furniture, improvements and other fixed assets of the Seller, including those
reflected in the Balance Sheet, are adequate for the operation of the Business
as it has been previously conducted by the Seller.
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2.21. Compensation Arrangements; Officers and Directors. Schedule 2.21
hereto sets forth the following information:
(a) The names and current annual salary, including any bonus, if
applicable, of all present officers and employees of Seller whose current annual
salary, including any promised, expected or customary bonus, equals or exceeds
$50,000 together with a statement of the full amount of all remuneration paid by
Seller to each such person and to any director of Seller, during the 12 month
period preceding the date hereof.
(b) the names and titles of each trustee, fiduciary or plan
administrator of each employee benefit plan of the Seller.
2.22. Labor Relations. The overall relations of each Seller with its
employees are good. No employee of Seller is represented by any union or other
labor organization. There is no unfair labor practice complaint against Seller
pending or, to Seller's Knowledge, threatened before the National Labor
Relations Board. There is no labor strike, dispute, slow down or stoppage
actually pending or, to Seller's Knowledge, threatened against or involving
Seller. No employee grievance which might have an adverse effect on Seller or
the conduct of its businesses is pending. No private agreement restricts Seller
from relocating, closing or terminating any of its operations or facilities.
Seller has not in the past three years experienced
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any work stoppage or slow down or committed any unfair labor practice.
2.23. Products Liability. Except for lawsuits, claims, damages and
expenses adequately covered by the Seller's insurance, there are no (a)
liabilities of Seller, fixed or contingent, asserted or, to Seller's Knowledge,
unasserted, with respect to any product liability or any similar claim that
relates to any product manufactured and sold by Seller to others, or (b)
liabilities of Seller, fixed or contingent, asserted or, to Seller's Knowledge,
unasserted, with respect to any claim for the breach of any express or implied
product warranty or any other similar claim with respect to any product
manufactured and sold by Seller to others other than standard warranty
obligations (to replace, repair or refund) made by the Seller in the ordinary
course of business to purchasers of its products and special warranties made by
the Seller with regard to certain pit dock levelers and truck restraints, for
which the Seller matches competitors' warranties.
2.24. Insurance. Attached hereto as Schedule 2.24 is a complete and
correct list of all policies of insurance of which Seller is the owner, insured
or beneficiary, or covering any of its property, true, correct and complete
copies of which have been delivered to Buyer, indicating for each policy the
carrier, the insured, type of coverage, the amounts of coverage, deductible,
premium rate, cash value if any, expiration date and any pending claims
thereunder. All such policies are in full
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force and effect. The coverages provided by such policies are reasonable, in
both scope and amount, in light of the risks attendant to the businesses in
which the Seller is, or has been, engaged. Seller has paid-in-full all premiums
due on such policies as of the Closing Date. To Seller's Knowledge, there is no
default with respect to any provision contained in any such policy, nor has
there been any failure to give any notice or present any claim under any such
policy in a timely fashion or in the manner or detail required by the policy.
Except as set forth on Schedule 2.24, there are no outstanding unpaid premiums
or claims under such policies. No notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any such policy has been
received by Seller. Except as set forth on Schedule 2.24, Seller has not been
refused any insurance, nor has its coverage been limited by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the last five years. Except as set forth on Schedule 2.24, all
products liability and general liability policies maintained by or for the
benefit of the Seller during the last five years have been "occurrence" policies
and not "claims made" policies.
2.25. Patents and Intellectual Property Rights. Attached hereto as
Schedule 2.25 is a correct list of all patents, patent applications, trademarks,
service marks and trade names, copyrights, intellectual property licenses, logos
and the like, held, owned or used by the Seller (all the above
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collectively referred to as the "IP Rights"), and as to all such IP Rights that
are registered, all of such registrations, and as to all such IP Rights for
which registration has been applied, such applications are valid and in good
standing. To Seller's Knowledge, none of the IP Rights infringes (nor has any
claim been made that any of them infringes) the patents, trademarks or other
rights of others. Except as set forth on Schedule 2.25, to Seller's Knowledge,
the manufacture, sale or use of any products now or heretofore manufactured or
sold by Seller did not and does not infringe (nor has any claim been made that
any such action infringes) the patents or intellectual property rights of
others. The Seller owns or possesses adequate licenses or other rights (at
reasonable market costs) to use all patent, patent applications, copyrights,
trademarks, service marks and tradenames necessary to conduct its business as
now conducted. Except as set forth on Schedule 2.25, there is no agreement to
which Seller is a party or to which Seller is legally bound and no restriction
or Liens, materially and adversely affecting the use by Seller and, after the
Closing, the use by Buyer, of any of the IP Rights. There is no pending
litigation or other legal action with respect to any of the IP Rights, and no
order, holding, decision or judgment has been rendered by any Authority, and no
agreement, consent or stipulation exists to which, in any such event, Seller is
a party or of which Seller has Knowledge, which would prevent Seller, or after
the Closing, Buyer, from using any of the IP Rights.
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2.26. Employee Retirement Income Security Act of 1974, as amended
("ERISA").
(a) Except for the welfare benefit plans listed on Schedule
2.26(A) hereto (the "Welfare Plans"), the pension benefit plans listed on
Schedule 2.26(B) hereto (the "Pension Plans") and the multiemployer plans listed
on schedule 2.26(C) hereto, (the "Multiemployer Plans") (together the "Plans"),
Seller does not sponsor, maintain and is not required, either by law or by
contract, to contribute to any employee welfare benefit plan, within the meaning
of section 3(1) of ERISA, nor to any employee pension benefit plan, within the
meaning of section 3(2) of ERISA nor to any multiemployer plan, within the
meaning of section 3(37) of ERISA. Seller does not contribute to and is not
required to contribute to any multiemployer plan, within the meaning of section
3(37) of ERISA.
(b) Neither Seller nor any other employer (an "ERISA Affiliate")
that is, or at any relevant time was, together with Seller considered a "single
employer" under Code ss.414(b), ss.414(c) or ss.414(m), has, at any time since
January 1, 1991 (i) maintained or contributed to any employee pension benefit
plan subject to Title IV of ERISA or Code ss.412 or (ii) been required to
contribute to, or incurred any withdrawal liability within the meaning of ERISA
ss.4201 to, any multiemployer plan as defined in ERISA ss.3(37).
(c) All contributions required, by law or by contract, to be made
by Seller to any Plan for any plan year, or
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other period on the basis of which contributions are required, ending before the
date hereof, have been made as of the date hereof or have been adequately
provided for in the Financial Statements.
(d) The Plans, and any trusts or insurance contracts maintained in
connection therewith, have been administered in compliance with ERISA and the
Code, in all material respects, and the Seller has complied in all material
respects with all reporting and disclosure requirements with respect to the
Plans.
(e) No Plan, nor any trust created thereunder, nor any trustee or
administrator thereof, has engaged in any transaction prohibited by section 406
or section 407 of ERISA, or by section 4975 of the Code which could subject
Seller or any Plan to any penalty imposed under ERISA or to any tax imposed by
section 4975 of the Code or, if any such transaction has occurred, it has been
corrected, within the meaning of section 4975 of the Code and all applicable
taxes and penalties with respect thereto have been paid.
(f) The Pension Plans have been determined by the Internal Revenue
Service to be "qualified" within the meaning of section 401(a) of the Code. To
Seller's Knowledge, there is no fact that may adversely affect the qualified
status of any of such Pension Plans.
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(g) Seller has provided Buyer with true and correct copies of IRS
Form 5500 most recently filed for each Plan.
(h) There are no actions, suits, investigations or proceedings
pending or, to Seller's Knowledge, threatened against or affecting any Plan, any
fiduciaries thereof or the assets of any trust thereunder, at law or in equity,
by or before any court or governmental department, agency or instrumentality,
and to Seller's Knowledge, there is no basis for any such action, suit,
investigation or proceeding. There are presently no outstanding judgments,
decrees or orders of any court or any governmental or administrative agency
against or affecting any Plan, any fiduciaries thereof or the assets of any
trust thereunder.
2.27. Brokerage. Except as described in Section 6.2, neither Seller nor
any shareholder thereof has made any agreement or taken any other action which
might cause anyone to become entitled to a broker's fee or commission as a
result of the transaction contemplated hereunder.
2.28. Disclosure. No representation or warranty by Seller in this
Agreement, and no exhibit, certificate or schedule furnished or to be furnished
to Buyer pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements or
facts contained herein or therein not misleading or
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necessary to provide Buyer with proper information as to the Seller and the
Purchased Assets. Seller shall disclose to Buyer at Closing any information then
in the possession of Seller that indicates that Buyer is in breach of this
Agreement or which may provide the basis for a claim by Seller that Buyer has
breached this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as follows:
3.1. Organization and Good Standing. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware.
3.2. Corporate Power and Authority. Buyer has all requisite corporate
power and authority to make, execute, deliver and perform this Agreement, the
Assumption Agreement and all other agreements, documents and instruments to
which it is a party or is otherwise obligated which are executed, delivered or
performed pursuant to this Agreement.
3.3. Due Authorization. The execution, delivery and performance of this
Agreement, the Assumption Agreement and all other agreements, documents and
instruments to which the Buyer is a party or is otherwise obligated which are to
be executed, delivered or performed pursuant to this Agreement have been duly
authorized by all necessary corporate action on the part of Buyer, and this
Agreement constitutes, and the Assumption
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Agreement and the Note and the other instruments to be delivered by Buyer at
Closing, when executed and delivered at Closing, will constitute, the legal,
valid and binding obligations of Buyer, enforceable against it in accordance
with their respective terms.
3.4. Brokerage. Buyer has not made any agreement or taken any other
action which might cause anyone to become entitled to a broker's fee or
commission as a result of the transactions contemplated hereunder.
3.5. No Breaches; Etc. The execution, delivery and performance of this
Agreement and the other agreements contemplated by this Agreement and the
consummation of the transactions contemplated by this Agreement do not and will
not result in any breach or acceleration of any of the terms or conditions of
its articles of incorporation or bylaws, or of any mortgage, bond, indenture,
contract, agreement, license or other instrument or obligation to which Buyer is
a party. The execution, delivery and performance of this Agreement or the other
agreements contemplated by this Agreement will not result in the material
violation of any statute, regulation, judgment, writ, injunction or decree of
any court, threatened or entered in a proceeding or action in which Buyer is,
was or may be bound.
3.6. Disclosure. No representation or warranty by Buyer in this
Agreement, and no exhibit, certificate or schedule furnished or to be furnished
to Seller pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or
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will omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading or necessary to provide Seller with
proper information as to the Buyer and the Purchased Assets. Buyer shall
disclose to Seller at Closing any information then in the possession of Buyer
that indicates that Seller is in breach of this Agreement or which may provide
the basis for a claim by Buyer that Seller has breached this Agreement.
3.7. Litigation. There is no action, suit, proceeding or investigation
pending, or, to Buyer's knowledge, threatened, against or related to Buyer or
its respective properties or business which would be reasonably likely to
adversely affect or restrict Buyer's ability to consummate the transactions
contemplated by this Agreement, and there is no reasonable basis known to Buyer
for any such action that may result in such effect and is probable of assertion.
3.8. Business Activities. The Buyer has not engaged in any activities
other than those incident to its organization or is contemplated by the terms of
this Agreement. [The Buyer is duly qualified to transact business in the State
of Alabama.]
ARTICLE IV
CERTAIN OBLIGATIONS OF SELLER
-----------------------------
4.1. Conduct of Business Pending Closing. From and after the date
hereof and pending Closing, and unless Buyer shall
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otherwise consent or agree in writing, Seller covenants and agrees that:
(a) Ordinary Course; Compliance. The business of the Seller will
be conducted only in the ordinary course and consistent with past practice,
including billing, shipping and collection practices, inventory transactions and
payment of accounts payable; the Seller will maintain its property, equipment
and other assets in at least as good order and condition as existed on the date
of this Agreement; and the Seller will timely comply with the provisions of all
its leases, agreements, contracts and commitments, will obtain, maintain in full
force and effect and comply with all permits, certificates, licenses, approvals,
patents, registrations and authorizations required under all laws in connection
with its businesses or assets, and will comply with all laws, rules and
regulations applicable to its businesses or assets.
(b) Preservation of Business. Seller will use all reasonable
efforts to preserve the business organization of the Seller intact, to keep
available to Buyer the services of the present officers and employees of the
Seller, and to preserve for Buyer the good will of the suppliers, customers and
others having business relations with the Seller.
(c) Material Transaction. Seller will not:
(i) amend its Articles of Incorporation or Bylaws;
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(ii) change its authorized or issued capital stock or issue
any rights or options to acquire shares of its capital stock;
(iii) enter into any contract or commitment the performance
of which may extend beyond the Closing, except those made in the ordinary course
of business, and the terms of which are consistent with past practice;
(iv) enter into any employment or consulting contract or
arrangement with any person which is not terminable at will, without penalty or
continuing obligation;
(v) sell, transfer, lease or otherwise dispose of any of its
assets other than sales of inventory in the ordinary course of business and
consistent with past practice;
(vi) incur, create, assume or suffer to exist any mortgage,
pledge, lien, restriction, encumbrance, tenancy, license, encroachment,
covenant, condition, right-of-way, easement, claim, security interest, charge or
other matter affecting title on any of its assets or other property, except
Personal Property Permitted Encumbrances and Real Property Permitted
Encumbrances;
(vii) fail to pay before delinquent all taxes, assessments,
governmental charges or levies imposed upon it or its income, profits or assets
or otherwise required to be paid by it, or fail to pay when due any liability or
charge which, if unpaid, might become a lien or charge upon any of its assets;
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(viii) make, change or revoke any tax election or make any
agreement or settlement with any taxing authority;
(ix) declare or pay any dividend or other distribution in
respect of any class of its capital stock, or make any payment to redeem,
purchase or otherwise acquire, or call for redemption, any of such stock or any
securities convertible into or exchangeable for such stock;
(x) increase or otherwise change the compensation payable or
to become payable to any officer, employee or agent other than in the ordinary
course of business consistent with past practice;
(xi) make or authorize the making of any capital expenditure
in excess of $50,000.00;
(xii) incur any debt or other obligation for money borrowed;
(xiii) contractually incur any other obligation or liability,
absolute or contingent except in the ordinary course of business and consistent
with past practice;
(xiv) waive or permit the loss of any substantial right;
(xv) guarantee or become a co-maker or accommodation maker or
otherwise become or remain contingently liable in connection with any liability
or obligation of any person other than another Seller;
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(xvi) loan, advance funds or make an investment in or capital
contribution to any person other than another Seller, other than advances to
employees for business-related expenses made in the ordinary course of business
and consistent with past practice and in an amount not to exceed $5,000 in the
aggregate; or
(xvii) take any action or permit to occur any event set forth
in subparagraphs (c), (e) through (j) and (l) through (p) of Section 2.8 hereof;
or
(xviii) take any action or omit to take any action which will
result in a violation of any applicable law or cause a breach of any agreements,
contracts or commitments, the violation or breach of which would have a material
adverse effect on Seller, the Business or the Purchased Assets.
4.2. Insurance. Seller shall maintain in full force and effect the
policies of insurance listed on Schedule 2.24 in effect as of the date hereof,
subject only to variations required by the ordinary operations of its business,
or else will obtain, prior to the lapse of any such policy, substantially
similar coverage with insurers of recognized standing and approved in writing by
the Buyer, which approval shall not be unreasonably withheld or delayed. Seller
shall promptly advise the Buyer in writing of any change of insurer or type of
coverage in respect of the policies listed on Schedule 2.24 hereto.
4.3. Fulfillment of Agreements. Seller shall use its best efforts to
cause all of the conditions to the obligations of
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the Buyer under Section 5.1 of this Agreement to be satisfied on or prior to the
Closing. Seller shall use best efforts to conduct its business in such a manner
that at the Closing the representations and warranties of the Seller contained
in this Agreement shall be true and correct as though such representations and
warranties were made on, as of, and with reference to such date. Seller will
promptly notify Buyer in writing of any event or fact which represents or is
likely to cause a breach of any of its representations, warranties, covenants or
agreements. Seller shall promptly advise Buyer in writing of the occurrence of
any condition or development (exclusive of general economic factors affecting
business in general) of a nature that, to Seller's Knowledge, is or may be
materially adverse to the business, operations, properties, assets, prospects or
conditions (financial or otherwise) of Seller.
4.4. Access, Information and Document. Seller will give to Buyer and to
Buyer's counsel, accountants and other representatives sufficient access during
normal business hours to all of the Seller's properties, books, tax returns,
contracts, commitments, records, officers and accountants and will furnish to
Buyer all such documents and copies of documents (certified to be true copies if
requested) and all information with respect to the affairs of the Seller as
Buyer may reasonably request. Pending the Closing, Buyer will preserve the
confidentiality of any information provided by Seller to Buyer relating to the
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Seller which is confidential in nature and, if Closing is not held, will return
all such information to Seller and will not use or allow such information to be
used by Buyer, CLARK or any of their respective Affiliates for any purpose
whatsoever.
4.5. Negotiations. Between the date of this Agreement and the Closing
Date, neither the Seller nor any of its Affiliates, officers, directors,
employees, shareholders, agents or advisors, shall solicit, initiate, furnish
information relating to or participate in any discussions or negotiations with
any Person concerning the sale or other disposition of any or all of the
Purchased Assets (except as contemplated herein). The Seller shall promptly
notify Buyer if any such discussion or negotiations are sought to be initiated
with, any such information is requested from, or any proposal is received by
Seller or any of their Affiliates, officers, directors, employees, shareholders,
agents or advisors.
4.6. Public Announcements. To the fullest extent reasonably
practicable, no party hereto shall make or issue, or cause to be made or issued,
any public announcement or written statement concerning this Agreement or the
transactions contemplated hereby for dissemination to the general public,
customers or suppliers (except to their respective directors, officers or
employees on a need to know basis or as may be specifically required by
applicable law or administrative or legal process) without the prior written
consent of the other parties which will not be unreasonably withheld or delayed.
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ARTICLE V
CONDITIONS TO CLOSING; TERMINATION
----------------------------------
5.1. Conditions Precedent to Obligations of Buyer.
The obligations of Buyer to proceed with the Closing under this Agreement are
subject to the fulfillment prior to or at Closing of the following conditions
(any one or more of which may be waived in whole or in part by Buyer at Buyer's
option):
(a) Bringdown of Representations and Warranties. The
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the date of Closing, with the same force and
effect as though such representations and warranties had been made on, such date
and Buyer shall have received a certificate to such effect signed by the
President or a Vice President of Seller.
(b) Performance and Compliance. Seller shall have performed all of
the covenants and complied with all of the provisions required by this Agreement
to be performed or complied with by on or before the Closing and Buyer shall
have received a certificate to such effect signed by the President or a Vice
President of Seller.
(c) Opinion of Counsel. Buyer shall have received from Hand
Arendall, L.L.C., counsel for Seller, an opinion dated the date of the Closing
in form and substance satisfactory to Buyer, to the effects set forth in Exhibit
E hereto.
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(d) Satisfactory Instruments of Transfer. All instruments and
documents required on the Seller's part to effectuate and consummate the
transactions contemplated hereby shall be delivered to Buyer and shall be in
form and substance reasonably satisfactory to Buyer and its counsel.
(e) Required Consents. All statutory and regulatory consents and
approvals which are required under the laws or regulations of the United States
or any other Authority shall have been obtained; and consents and approvals of
third parties listed on Schedule 5.1(e).
(f) Accounts Receivable and Inventory Certificates. Buyer shall
have received a certificate of an officer of Seller certifying as to a summary
of (i) the amount and an aging of the Seller's accounts and notes receivable as
of the close of business on the day prior to the day of Closing and (ii) the
Seller's inventory of finished goods, work in process and raw materials as of
September 27, 1997.
(g) Litigation. No order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions contemplated
hereby or which would materially limit or adversely affect Buyer's ownership or
control of any of the Purchased Assets or the business of Seller, and there
shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any court or governmental agency or other regulatory or
administrative agency or commission, (i) challenging any of the transactions
contemplated
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by this Agreement or seeking monetary relief by reason of the consummation of
such transactions or (ii) by any present or former owner of any capital stock or
equity interest in Seller (whether through a derivative action or otherwise)
against Seller or any officer, director or shareholder of Seller in his capacity
as such or (iii) which might have a material adverse effect on the Purchased
Assets or on the business, prospects or condition (financial or otherwise) of
Seller.
(h) Alabama Lease. Seller shall have executed and delivered a
lease (the "Alabama Lease") with Buyer for the Seller's Pell City, Alabama
facility, substantially in the form of Exhibit F hereto.
(i) Additional Agreements. Kurt Larsen shall have executed and
delivered a Consulting Agreement and a Noncompetition Agreement with Buyer,
substantially in the form of Exhibits G and H, respectively. (the "Consulting
Agreement) and (Noncompete Agreement"). Colin Larsen shall have entered into and
delivered an Employment and a Noncompetition Agreement with Buyer, substantially
in the form of Exhibits I and J hereto (the "Employment Agreement" and the
"Noncompetition Agreement").
(j) Canada Purchase Agreement. Blue Giant Canada Limited shall
have executed and delivered the Canada Purchase Agreement and shall have closed
the transaction contemplated contemporaneous with the Closing hereunder.
5.2. Conditions Precedent to the Obligations of Seller. The obligations
of Seller to proceed with the Closing
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hereunder are subject to the fulfillment prior to or at Closing of the following
conditions (any one or more of which may be waived in whole or in part by Seller
at Seller's option):
(a) Bringdown of Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the date of Closing, with the same force and
effect as though such representations and warranties had been made on, as of and
with reference to such date and Buyer shall have delivered to Seller a
certificate, signed by its President or a Vice President, to such effect.
(b) Performance and Compliance. Buyer shall have performed all of
the covenants and complied with all the provisions required by this Agreement to
be performed or complied with by it on or before the Closing and Buyer shall
have delivered to Seller a certificate, signed by its President or a Vice
President, to such effect.
(c) Opinion of Counsel for Buyer. Seller shall have received from
Dechert Price & Rhoads, counsel for Buyer, an opinion dated the date of the
Closing in form and substance satisfactory to Seller, to the effects set forth
in Exhibit K hereto.
(d) Satisfactory Instruments. All instruments and documents
required on the Buyer's part to effectuate and consummate the transactions
contemplated hereby shall be
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delivered by Buyer and shall be in form and substance reasonably satisfactory to
Seller and its counsel.
(e) Litigation. No order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions contemplated
hereby and there shall not have been threatened, nor shall there be pending, any
action or proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, challenging any of the
transactions contemplated by this Agreement or seeking monetary relief by reason
of the consummation of such transactions.
(f) Required Consents. All statutory and regulatory consents and
approvals which are required under the laws or regulations of the United States
or any other Authority for the transactions contemplated hereby shall have been
obtained and all necessary consents and approvals of third parties to the
transactions contemplated hereby shall have been obtained, including the
consents listed on Schedule 5.1(e).
(g) Other Contracts. Buyer shall have executed and delivered the
Consulting Agreement, the Noncompete Agreement, the Noncompetition Agreement and
the Employment Agreement.
(h) Alabama Lease. Buyer shall have executed and delivered the
Alabama Lease.
(i) Canada Purchase Agreement. Clark Material Handling of Canada,
Ltd. shall have executed and delivered the
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Canada Purchase Agreement and shall have closed the transaction contemplated
contemporaneous with the Closing hereunder.
(j) CLARK Guaranty. CLARK shall have executed and delivered the
CLARK Guaranty, substantially in the form of Exhibit L hereto (the "CLARK
Guaranty").
5.3. Termination.
(a) When Agreement May Be Terminated. This Agreement may be
terminated at any time prior to Closing:
(i) By mutual consent of Buyer and Seller;
(ii) By Buyer if there has been a misrepresentation by
Seller, a breach by Seller of any of its warranties or covenants, or if any of
the conditions specified in Section 5.1 hereof shall not have been fulfilled by
the time required and shall not have been waived by Buyer;
(iii) By Seller if there has been a misrepresentation by
Buyer, a breach by Buyer of any of its warranties or covenants, or if any of the
conditions specified in Section 5.2 hereof shall not have been fulfilled by the
time required and shall not have been waived by Seller;
(iv) By Buyer or Seller if Closing shall not have occurred
prior to November 14, 1997; provided that Buyer or Seller may terminate this
Agreement pursuant to this subparagraph (iv) only if Closing shall not have
occurred by such date for a reason other than a failure by such party to satisfy
the conditions to Closing of the other party set forth in Section 5.1 or 5.2
hereof.
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(b) Effect of Termination. In the event of termination of this
Agreement by Seller or Buyer, as provided above, this Agreement shall forthwith
terminate and there shall be no liability on the part of Seller or Buyer or
their respective officers or directors, except for liabilities arising from a
breach of this Agreement prior to such termination; provided, however, that the
obligations of the parties set forth in Section 6.5 hereof shall survive such
termination.
ARTICLE VI
CERTAIN ADDITIONAL COVENANTS
----------------------------
6.1. Costs, Expenses and Taxes. Buyer and Seller will each pay all
their own expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including (a) all costs and expenses stated
herein to be borne by a party, and (b) all accounting, legal and appraisal fees
and settlement charges. All transfer taxes associated with any motor vehicles
shall be paid by Buyer.
6.2. Brokers. Seller has engaged Geneva Corporate Finance, Inc. as a
broker in connection with this transaction, and any fee payable to such broker
will be paid by Seller.
6.3. Blue Giant USA Corporation Retirement Savings Plan.
(a) Assumption of Sponsorship. At Closing, Buyer shall become plan
sponsor, within the meaning of ERISA ss.
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3(16)(B), of the Blue Giant USA Corporation Retirement Savings Plan ("Blue Giant
401(k) Plan").
(b) Seller Cooperation. Seller will take any and all action
reasonably requested by Buyer, or the trustee(s) appointed by Buyer to insure
transfer of sponsorship of the Blue Giant 401(k) Plan to Buyer and transfer of
all right, title and interest in and to any assets thereof, and specifically
including, without limitation, any and all group annuity contracts issued to the
Trustee of the Blue Giant 401(k) Plan by Nationwide Insurance Company, to
Buyer's trustee(s).
(c) Seller Indemnification. Except to the extent that any such
claims are properly payable from assets of the Blue Giant 401(k) Plan
transferred into the control of Buyer's trustee(s), Seller shall be responsible
for, and hold Buyer harmless from and against, any claim or liability relating
to the Blue Giant 401(k) Plan with respect to any act or omission occurring on
or before the Closing Date.
(d) Buyer's Indemnification. Buyer shall be responsible for, and
hold Seller harmless from and against (i) any claim or liability properly
payable from assets of the Blue Giant 401(k) Plan transferred to Buyer and
Buyer's trustee(s) as part of Buyer's assumption of sponsorship of the Blue
Giant 401(k) Plan and (ii) any claims or liabilities arising from acts or
omissions by Buyer or Buyer's trustee(s) following Buyer's assumption of
sponsorship of the Blue Giant 401(k) Plan on the
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Closing Date and Buyer's trustee's control of the assets of that Plan.
6.4. Employees of the Business.
(a) Effective as of the Closing Date, Buyer shall offer to hire on
an at-will basis substantially all active employees of Seller as of that date.
The Seller will cooperate with and assist Buyer in obtaining the continued
employment of all such employees. Seller shall be responsible for all salaries,
wages, employment taxes, contractual severance arrangements and all terms of
employment for each of its respective employees accruing prior to the Closing
Date. Notwithstanding the foregoing, Buyer assumes and agrees to timely
discharge all of Seller's liabilities and obligations for (i) the salaries,
wages, employment taxes and related payroll obligations for the payroll period
for which such employees are employed by Buyer and (ii) all accrued vacation for
Seller's employees who become employed by Buyer existing as of the Closing Date;
provided the obligations described in (i) and (ii) are properly accrued for on
the Closing Statement.
(b) Seller shall remain responsible and liable for any and all
obligations to any employees of Seller through and until 11:59 p.m. local time
on the Closing Date, at which time all such employees shall be terminated by
Seller.
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6.5. Indemnification.
(a) General Indemnification Obligations.
(i) Indemnification by Seller. Seller hereby agrees to
indemnify and hold harmless Buyer from and against:
(1) any and all Damages arising out of or resulting from
any misrepresentation, breach of warranty or nonfulfillment of any agreement on
the part of Seller contained in this Agreement or in any certificate furnished
or to be furnished to Buyer pursuant hereto or in connection with the
transactions contemplated hereby;
(2) any and all Damages arising out of or resulting from
any liabilities of Seller of any nature, whether due or to become due, whether
accrued, absolute, contingent or otherwise existing on the Closing Date or
arising out of any transactions entered into, or any state of facts existing,
prior to such date, except Assumed Liabilities.
(3) any Damages arising out of or resulting from any
claim asserted against Buyer with respect to Excluded Liabilities.
(ii) Indemnification by Buyer. Buyer hereby agrees to
indemnify and hold harmless Seller from and against:
(1) any Damages arising out of or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any agreement on the
part of Buyer contained in this Agreement or in any certificate furnished or to
be furnished
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to Seller in connection with the transactions contemplated hereby;
(2) any Damages resulting from or arising out of the
failure by Buyer to pay or discharge, or cause to be paid or discharged, any of
the Assumed Liabilities;
(3) any Damages arising out of or resulting from any
claim asserted against Seller with respect to Assumed Liabilities;
(4) any Damages resulting from any claims, proceedings,
actions or investigations brought by third parties relating to (i) Sellers'
transfer of any Plans to any successor plans established by Buyer or
post-closing continuation of the existing Plans by Buyer. The indemnification
obligations of Buyer under this Section 6.5(a)(ii)(4) shall not be limited in
amount or subject to any time restrictions; provided, however, the foregoing
shall in no way limit any defense Buyer may have; or
(5) effective only upon consummation of the transactions
at Closing, any and all Damages arising out of or resulting from any liabilities
of Buyer of any nature, whether due or to become due, whether accrued, absolute,
contingent or otherwise, arising out of Buyer's transactions or its operation of
the Business after the Effective Time.
(iii) For purposes of this Agreement, "Damages" means the
aggregate amount of all damages, claims, losses, obligations, liabilities
(including any governmental
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<PAGE>
penalty, fines or punitive damages), deficiencies, interest, costs and expenses
arising out of or relating to a matter and any actions, judgments, costs and
expenses (including reasonable attorneys' fees and all other expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened) incident to such matter or to the enforcement of this Agreement,
including, but not limited to, reasonable legal fees incurred by the party
entitled to indemnification under this Agreement.
(b) General Indemnification Procedures.
(i) Buyer and Seller shall cooperate in the defense or
prosecution of any claim, action, suit or proceeding asserted against either of
them by a party other than a party hereto or an Affiliate of any party hereto in
respect of which indemnity may be sought hereunder (a "Third Party Claim") and
shall furnish such records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith.
(ii) No action or claim for Damages resulting from breaches
of the representations and warranties of Seller or Buyer shall be brought or
made after March 31, 1999, except that such time limitation shall not apply to
(a) claims for misrepresentations or breaches of warranty relating to Section
2.9 (relating to Taxes) or Section 2.26 (relating to ERISA), which may be
asserted until 60 days after the running of
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<PAGE>
the applicable statute of limitations with respect to the taxable period to
which the particular claims relates, (b) claims for misrepresentations or
breaches of warranty relating to Section 2.1 (relating to Organization), Section
2.3 (relating to Qualification, Location of Business and Assets) or Section 2.4
(relating to Authorization and Enforceability), which may be asserted for a
three (3) year period from the Closing Date, (c) or Section 2.17 (relating to
Personal Property), which may be asserted for a six (6) year period from the
Closing Date (d) Section 2.18 (relating to Real Property) or Section 2.15
(relating to Environmental) which may be asserted for a three (3) year period
from the Closing Date, (e) claims for Damages under Section 6.5(a)(i)(3) for
Environmental Liabilities, which may be asserted for a seven (7) year period
from the Closing Date, unless such Damages relate to properties formerly owned,
operated or leased by the Seller, the Business or any of its Affiliates (and not
the Purchased Assets) or relate to off-site locations, in which case the claims
for Damages may be asserted for a ten (10) year period from the Closing Date and
(f) any claims which have been the subject of a written notice from Buyer to
Seller prior to the expiration of the applicable period under this Section
6.5(b) period, which notice specifies in reasonable detail the nature of the
claim.
(iii) Notwithstanding anything to the contrary in this
Section 6.5, no limitation or condition of liability provided in this Section
shall apply to the breach of
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<PAGE>
any of the representations and warranties contained herein if such
representation or warranty was made with actual knowledge that it contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements or facts contained therein not misleading and
such a claim for such breach was made not later than the period specified in
Section 6.5(b)(ii)(a), 6.5(b)(ii)(b), 6.5(b)(ii)(c), and 6.5(b)(ii)(d), plus in
each case three (3) years.
(iv) If there shall be a judicial determination that any
party (the "Indemnified Party") seeking indemnification from another party (the
"Indemnifying Party") under this Agreement is not entitled to such
indemnification in the amount originally claimed, then the Indemnifying Party
shall be entitled to reimbursement from the Indemnified Party for its costs and
expenses, including reasonable attorneys' fees, incurred in the defense of the
claim for such indemnity pro rata, to the extent that the amount awarded is less
than the amount originally claimed.
(v) Following the receipt by either party of a complaint
initiating a lawsuit in respect of a Third Party Claim in respect of which
indemnity may be sought from the other party hereunder, within a reasonable time
after such receipt, the party receiving the complaint shall notify the other
party of such Third Party Claim.
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<PAGE>
(vi) This Agreement does not relieve any party hereto of its
obligations under appropriate law to mitigate damages.
(vii) Buyer shall notify Seller and Seller shall notify Buyer
of any claim for Damages. Such notice shall describe, to the extent reasonably
available, the nature of the claim, the proposed remedy and the cost to remedy
or to satisfy the claim. Buyer and Seller shall, in good faith, consult with the
other party and give the other party a reasonable opportunity to propose an
alternative method to remedy or satisfy the claim. Provided, however, that if
the nature of the claim is such that, in Buyer and Seller's judgment, the above
notice and opportunity provisions could reasonably be expected to cause further
Damages or would otherwise not be appropriate under the circumstances, then the
prior notice and opportunity shall not be required. Neither Buyer nor Seller
shall be required in any event to adopt the method proposed by the other party.
Buyer and Seller's failure to give the other party the prior notice and
opportunity or to adopt the method proposed, shall not bar in any event either
party from asserting an indemnification claim against the other under and
subject to the terms and conditions described in this Section 6.5, but, in any
such claim, the failure of either party to give prior notice and opportunity, or
to adopt the method proposed shall be admissible evidence if either party shall
contest the reasonableness of the amount of the Damages that it may recover from
the other party.
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<PAGE>
(c) Indemnification Threshold. Buyer shall not be entitled to
indemnification or other recovery from Seller under any provision of this
Agreement or otherwise until such time and only to the extent as the claims
subject to indemnification by the Seller pursuant to this Agreement exceed, in
the aggregate, One Hundred Fifty Thousand Dollars $150,000 (the "Threshold");
provided, however, that any claims for indemnification by Buyer relating to
Sections 6.5(b)(ii)(b) and (c) shall not be subject to any limitation or
condition pursuant to this Section 6.5(c); provided further, however, that any
claims under this Section 6.5 shall be aggregated with any claims under the
section of the Canada Purchase Agreement (as hereinafter defined) corresponding
to this Section 6.5(e) in meeting the Threshold. The "Canada Purchase Agreement"
means the agreement by and between Clark Material Handling of Canada, Ltd. and
Blue Giant Canada Limited, dated the Closing Date, whereby Blue Giant Canada
Limited has agreed to sell certain assets and Clark Material Handling of Canada,
Ltd. has agreed to buy certain assets (the "Canada Purchase Agreement").
(d) Indemnification Limitation. The aggregate obligation of the
Seller to Buyer for indemnification or otherwise under any provision of this
Agreement and of Blue Giant Canada Limited to Clark Material Handling of Canada
Ltd. or under any provision of the Canada Purchase Agreement or otherwise shall
be limited to an amount not to exceed Five Million Dollars ($5,000,000);
provided, however, that any claims for
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<PAGE>
indemnification by Buyer relating to Sections 6.5(b)(ii)(b) and (c) shall not be
subject to any limitation or condition pursuant to this Section 6.5(d).
(e) Buyer's Right of Setoff. Buyer shall have the right to set off
against any payments due and owing from Buyer to Seller pursuant to the Alabama
Lease to the extent Buyer has a claim for indemnity for Damages against Seller
under this Section 6.5, in accordance with the set off procedure set forth in
the Alabama Lease.
(f) Alabama Mortgage. Seller shall execute and deliver to Buyer a
mortgage on the Alabama Real Property (the "Alabama Mortgage") equal to
$5,000,000 to secure any claim for indemnity Buyer may have for Damages against
Seller under this Section 6.5 substantially in the form of Exhibit M attached
hereto.
6.6. Confidentiality and Non-Competition.
(a) Confidentiality. From and after the Closing, Seller shall keep
confidential and not disclose to any other Person or use for his or its own
benefit or the benefit of any other Person any trade secrets or other
confidential proprietary information in its possession or control regarding
Seller or its respective businesses and operations. The obligations of the
Seller under this Section 6.6(a) shall not apply to information which (i) is or
becomes generally available to the public without breach of the commitment
provided for in this Section; or (ii) is required to be disclosed by law, order
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or regulation of a court or tribunal or governmental authority; provided,
however, that, in any such case, Seller shall notify Buyer as early as
reasonably practicable prior to disclosure to allow Buyer to take appropriate
measures to preserve the confidentiality of such information.
(b) Noncompetition. For a period of ten (10) years from and after
the Closing (the "Ten Year Term"), Seller shall not, directly or indirectly, (i)
own, manage, operate, join, control or participate in the ownership, management,
operation or control of, or be connected as a stockholder, partner or otherwise
with, (1) an entity engaged in the Business or the forklift industry (other than
Blue Europe), or (2) any entity using the name "Blue Giant" (other the Blue
Europe) or "Clark" (collectively, the "Competing Businesses"), or (ii) solicit,
employ, retain as a consultant, interfere with or attempt to entice away from
Buyer, its Affiliates, or any successor to any of the foregoing, any individual
who is, has agreed to be or within one year of such solicitation, employment,
retention, interference or enticement has been, employed or retained by Buyer,
its Affiliates or any successor to any of the foregoing in a senior executive
capacity or as a general manager or sales, manufacturing, or technical employee.
Ownership of not more than 2% of the outstanding stock of any publicly traded
company shall not, in and of itself, be a violation of this Section 6.6(b). The
restrictive covenant contained in this Section 6.6(b) is a covenant independent
of any other provision
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<PAGE>
of this Agreement, and the existence of any claim which Seller may allege
against Buyer, whether based on this Agreement or otherwise, shall not prevent
the enforcement of this covenant. Seller agrees that a breach by Seller of this
Section 6.6(b) shall cause irreparable harm to Buyer, and its Affiliates, that
Buyer's remedies at law for any breach or threat of breach by Seller of the
provisions of this Section 6.5(b) shall be inadequate, and that Buyer shall be
entitled to an injunction or injunctions to prevent breaches of this Section
6.6(b) and to enforce specifically the terms and provisions hereof, in addition
to any other remedy to which Buyer may be entitled at law or in equity. The Ten
Year Term shall be tolled with respect to Seller during any period of violation
of this covenant not to compete by Seller. In the event that this covenant not
to compete shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too long a period of time or over
too large a geographical area or by reason of its being too extensive in any
other respect, it shall be interpreted to extend only over the longest period of
time for which it may be enforceable, and/or over the largest geographical area
as to which it may be enforceable and/or to the maximum extent in all other
aspects as to which it may be enforceable, all as determined by such court in
such action.
6.7. Access to Information. Seller and Buyer shall reasonably cooperate
with each other after the Closing so that (subject to any limitations that are
reasonably required to
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<PAGE>
preserve any applicable attorney-client privilege) each party has access to the
business records, contracts and other information existing at the Closing Date
and relating to Seller (whether in the possession of Seller or Buyer) (including
copies thereof) as is reasonably necessary for the (a) preparation for or the
prosecution or defense of any suit, action, litigation or administrative,
arbitration or other proceeding or investigation (other than one by or on behalf
of a party to this Agreement) by or against Buyer or Seller (b) preparation and
filing of any Tax Return or election relating to Seller and any audit by any
taxing authority of any returns of Buyer or Seller relating thereto, (c)
preparation and filing of any other documents required by governmental or
regulatory bodies and (d) transfer of data to Buyer relating to the Seller. The
party requesting such information and assistance shall reimburse the other party
for all out-of-pocket costs and expenses incurred by such party in providing
such information and in rendering such assistance. The access to files, books
and records contemplated by this Section 6.8 shall be during normal business
hours and upon not less than two (2) business days prior written request, shall
be subject to such reasonable limitations as the party having custody or control
thereof may impose to preserve the confidentiality of information contained
therein, and shall not extend to material subject to a claim of privilege unless
expressly waived by the party entitled to claim the same.
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<PAGE>
6.8. Prohibition on use of Blue Giant Name. Seller and its respective
Affiliates are prohibited from using the "Blue Giant" name as a trade name,
trade mark or service mark in connection with any of their businesses or
operations.
6.9. Cooperation. With respect to the Excluded Liabilities, the Buyer
agrees to reasonably cooperate with Seller in connection with Sellers' defense
of any claims or lawsuit relating thereto, including, without limitation, making
available to Seller for inspection and copying business records of the Buyer
pertaining to such claims or lawsuits and making employees of the Buyer
available as needed from time to time for interviews, depositions, trial
testimony and similar appearances; provided, however, that Buyer is reimbursed
by Seller for any out-of-pocket costs or expenses, and that such cooperation
does not unreasonably interfere with Buyer's operation of its business.
6.10. Riverside and Blue Europe Receivables. As of the date hereof,
Riverside and Blue Europe each has a past due receivable (collectively, the
"Receivables") estimated to be $82,000 and(pound)20,000, respectively, due and
owing to the Seller. Buyer shall use commercially reasonable efforts to collect
the Receivables for a ninety day period from the date hereof and to remit the
Receivables to Seller in the event that Riverside and Blue Europe identify such
payments to Buyer as payments of the Receivables; provided, however, that such
collection efforts by Buyer shall not require Buyer to refuse to ship any
product to
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Riverside or Blue Europe or to modify any of its terms of sale to Riverside or
Blue Europe.
ARTICLE VII
MISCELLANEOUS
-------------
7.1. Further Assurances; Cooperation. At and after the Closing, Seller
will execute and deliver such further instruments of conveyance and transfer as
Buyer may reasonably request to convey and transfer effectively to Buyer the
Purchased Assets or to put Buyer in actual possession and control of the
business of the Seller.
7.2. Nature and Survival of Representations. The representations,
warranties, covenants and agreements of Buyer and Seller contained in this
Agreement, and all statements contained in this Agreement or any Exhibit or
Schedule hereto or any certificate delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby, shall be deemed to
constitute representations, warranties, covenants and agreements of the
respective party delivering the same. All such representations, warranties,
covenants and agreements shall survive the Closing hereunder subject to Section
4.5 hereof. Seller acknowledges that its representations and warranties in this
Agreement shall not be affected or mitigated by any investigation conducted by
Buyer or its representative prior to the Closing or any knowledge of Buyer.
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<PAGE>
7.3. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or, if mailed, when mailed by United States first-class,
certified or registered mail, postage prepaid, to the other party at the
following addresses (or at such other address as shall be given in writing by
any party to the other):
If to Buyer, to:
Blue Giant Corporation
172 Trade Street
Lexington, Kentucky 40511
Attention: Michael J. Grossman, Esq.,
Vice President and General
Counsel
With a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
Attention: Christopher G. Karras, Esq.
If to Seller to:
Colin S. Larsen
2803 Abbott Drive
Pell City, AL 35128
With required copies to:
W. Clark Watson, Esq.
Hand Arendall, L.L.C.
900 Park Place Tower
2001 Park Place North
Birmingham, AL 35203
7.4. Successors and Assigns. This Agreement, and all rights and powers
granted hereby, will bind and inure to the
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<PAGE>
benefit of the parties hereto and their respective successors and assigns.
7.5. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of Alabama.
7.6. Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
7.7. Amendment and Waiver. The parties may by mutual agreement amend
this Agreement in any respect, and any party, as to such party, may (a) extend
the time for the performance of any of the obligations of any other party, (b)
waive any inaccuracies in representations by any other party, (c) waive
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party against whom
enforcement of the same is sought.
7.8. Entire Agreement. This Agreement and the Schedules hereto, each of
which is hereby incorporated herein, set forth all of the promises, covenants,
agreements, conditions and undertakings between the parties hereto with respect
to the subject matter hereof, and supersede all prior and
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<PAGE>
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written.
7.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
7.10. Enforcement. Buyer and Seller agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that each of Buyer and Seller shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in addition
to any other remedy to which it is entitled at law or in equity.
7.11. Construction. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments, schedules or exhibits hereto.
7.12. Defined Terms. As used herein, the terms defined in Annex A shall
have the respective meanings set forth therein.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BLUE GIANT CORPORATION
By: /s/ Michael J. Grossman
---------------------------------------
Michael J. Grossman, Vice President
BLUE GIANT USA CORPORATION
By: /s/ Kurt K. Larsen
---------------------------------------
Kurt K. Larsen, President
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<PAGE>
LIST OF SCHEDULES AND EXHIBITS
------------------------------
Schedule 1.1(a) Description of Real Estate
Schedule 1.1(b) Description of Equipment
Schedule 1.2 Additional Excluded Assets
Schedule 2.2 Subsidiaries
Schedule 2.3 Locations of Assets; Qualification
Schedule 2.7 No Undisclosed Liabilities
Schedule 2.8 Changes Since Balance Sheet Date
Schedule 2.9 Taxes
Schedule 2.10 Inventory
Schedule 2.11 Accounts Receivable
Schedule 2.12 Pending Litigation
Schedule 2.13 Contracts; Unfilled Firm Purchase Orders
Schedule 2.14 Permits
Schedule 2.15 Environmental Matters
Schedule 2.16 Consents
Schedule 2.17 Personal Property Permitted Encumbrances
Schedule 2.18 Real Estate
Schedule 2.19 Transactions With Related Parties
Schedule 2.21 Compensation Arrangements
Schedule 2.24 Insurance
Schedule 2.25 Patents, Trademarks, Etc.
Schedule 2.26(A) Welfare Benefits Plans
Schedule 2.26(B) Pension Plans
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<PAGE>
Schedule 2.26(C) Multiemployer Plans
Schedule 5.1(e) Required Consents
Exhibit A Escrow Agreement
Exhibit B Assumption Agreement
Exhibit C Bill of Sale
Exhibit D Vehicle Bill of Sale
Exhibit E Opinion of Seller's Counsel
Exhibit F Alabama Lease
Exhibit G Consulting Agreement
Exhibit H Noncompete Agreement
Exhibit I Employment Agreement
Exhibit J Noncompetition Agreement
Exhibit K Opinion of Buyer's Counsel
Exhibit L CLARK Guaranty
Exhibit M Alabama Mortgage
Exhibit N Power of Attorney
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<PAGE>
ANNEX A
DEFINITIONS
-----------
"Affiliate" means any Person directly or indirectly controlling,
controlled by or under common control with such Person, and includes any Person
who is an officer, director or employee of such Person and any Person that would
be deemed to be an "affiliate" or an "associate" of such Person, as those terms
are defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended. As used in this definition,
"controlling" (including, with its correlative meanings, "controlled by" and
"under common control with") means possession, directly or indirectly, of power
to direct or cause the direction of management or policies, whether through
ownership of securities, partnership or other ownership interests, by contract
or otherwise.
"Authority" means any federal, state, local or foreign governmental or
regulatory entity, or any department, agency, authority or political subdivision
thereof.
"CLARK" means CLARK Material Handling Company, a Delaware corporation.
"Environmental Liabilities" means any liabilities (including costs of
Remediation) known or unknown, foreseen or unforeseen, whether contingent or
otherwise, fixed or absolute, present or future, asserted against or incurred by
Buyer or the Business arising out of or relating to (1) environmental conditions
first occurring or existing prior to the Closing
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<PAGE>
(whether disclosed or undisclosed) including, without limitation, the presence,
Release, threat of Release, Management or exposure of or to Hazardous Materials
(each as defined herein) at, on, in or under any property now or previously
owned, operated or leased by Seller, the Business or any of its Affiliates or
predecessors (whether into the air, soil, ground or surface waters on-site or
off-site), except to the extent such condition are exacerbated by the acts of
Buyer after the Closing Date; (2) the off-site transportation, storage,
treatment, recycling or disposal of Hazardous Substances Managed, Released or
generated prior to the Closing by Seller or the Business or any of its
Affiliates or predecessors or generated in connection with any of their
operations; or (3) any violation of any Environmental Law first occurring or
existing prior to the Closing (including, without limitation, costs and expenses
for applying for and obtaining Environmental Permits or pollution control
equipment, (either of which would have been required under Environmental Laws
prior to the Closing Date and not as a result of the Buyer's acquisition of the
Purchased Assets pursuant to this Agreement or the transfer or reissuance of
existing Environmental Permits to the Buyer necessitated by this transaction),
either of which are required to bring the Business into compliance with
Environmental Laws and fines, penalties and defense costs incurred for such
reasonable time after the Closing as it takes Buyer to come into compliance).
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<PAGE>
"Hazardous Substances" means any hazardous, toxic or polluting
materials, substances, wastes, pollutants or contaminants (including, without
limitation, petroleum and petroleum products, PCBs, radioactive materials,
asbestos or asbestos-containing materials).
"Lien" or "Liens" means any lien, charge, claim, pledge, security
interest, conditional sale agreement or other title retention agreement, lease,
tenancy, ground rent, license, mortgage, security agreement, covenant,
condition, restriction, right-of-way, easement, encroachment, option, judgment
or of other encumbrance of matter of title.
"PCBs" means polychlorinated biphenyls.
"Person" means any individual, a corporation, a partnership, an
association, a trust or other entity or organization, including an Authority.
"Release" means spill, leak, disposal, pump, pour, emit, empty, inject,
leach, dump, migrate or escape, as such terms relate to Hazardous Substances.
"Remediation" means any actions to clean up, investigate, remove,
treat, monitor or in any other way respond to any presence, Release or threat of
Release, or minimize the further Release of any Hazardous Substance.
"Seller's Knowledge" means the knowledge, after due inquiry (unless
otherwise provided), of Kurt Larsen, Colin Larsen, Helen Senn and Pete Santiago.
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<PAGE>
BLUE GIANT USA CORPORATION
Net Asset Value as of June 28, 1997
Book Assets
Accounts Rec. - Trade (1) $ 2,408,075
Note Receivable (2) 0
Inventories 1,709,547
Prepaid Expenses 231,721
Net P, P&E (3) 428,440
Investments (4) 55,517
_______
Total Book Assets $4,833,300
----------
Book Liabilities
A/P - Trade $(420,305)
A/P - B.G. Canada (971,145)
Sales Tax Payable 0
Payroll Tax Payable (26,687)
Payroll Deduction Payable 0
Accrued Payroll 0
Management Bonus Payable (112,000)
Accrued Expenses (251,997)
--------
Total Book Liabilities $(1,782,134)
Net Asset Value $ 3,051,166
===========
(1) Excludes amounts due from Blue Giant Europe Ltd. ($62,000) and from
Riverside Installations ($82,000), both of which are Excluded Assets.
(2) Note Receivable due from Blue Giant Europe Ltd ($33,310) which is an
Excluded Asset.
(3) Excludes Pell City property ($540,000) and U.K. condominium ($59,000),
both of which are Excluded Assets.
(4) Excludes $15,000 for captive insurance company which is an Excluded Asset.
Exhibit 21.1
Subsidiaries
Name Jurisdiction
------- --------------
Clark Material Handling Gmbh Germany
Clark Maquinaria S.A. Spain
Clark Material Handling France France
Clark Forklift Korea, Inc. Korea
Clark Empilhaderas do Brasil Ltda. Brazil
Hydroelectric Lift Trucks, Inc. United States
Blue Giant Limited Canada
Blue Giant Corporation United States
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,654,000
<SECURITIES> 0
<RECEIVABLES> 47,018,000
<ALLOWANCES> (1,906,000)
<INVENTORY> 70,784,000
<CURRENT-ASSETS> 131,737,000
<PP&E> 47,836,000
<DEPRECIATION> (7,597,000)
<TOTAL-ASSETS> 313,254,000
<CURRENT-LIABILITIES> 105,150,000
<BONDS> 136,596,000
0
0
<COMMON> 1,000
<OTHER-SE> 24,999,000
<TOTAL-LIABILITY-AND-EQUITY> 313,254,000
<SALES> 489,294,000
<TOTAL-REVENUES> 489,294,000
<CGS> 431,127,000
<TOTAL-COSTS> 431,127,000
<OTHER-EXPENSES> 37,133,000
<LOSS-PROVISION> 27,000
<INTEREST-EXPENSE> 15,086,000
<INCOME-PRETAX> 8,355,000
<INCOME-TAX> 484,000
<INCOME-CONTINUING> 7,781,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,781,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
