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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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Form 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
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RITCHIE BROS. AUCTIONEERS INCORPORATED
9200 Bridgeport Road
Richmond, BC, Canada
V6X 1S1
(604) 273 7564
(Address of principal executive offices)
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[indicate by check mark whether the registrant files or will file annual
reports
under cover Form 20-F or Form 40-F]
Form 20-F __ Form 40-F X
[indicate by check mark whether the registrant by furnishing information
contained
in this Form is also thereby furnishing the information to the Commission
pursuant to
rule 12g3-2(b) under the Securities Exchange Act of 1934]
Yes __ No X
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements do not include
all information and footnotes required by Canadian or United States generally
accepted accounting principles. However, in the opinion of management, all
adjustments (which consist only of normal recurring adjustments) necessary for a
fair presentation of the results of operations for the relevant periods have
been made. Results for the interim periods are not necessarily indicative of the
results to be expected for the year or any other period. These financial
statements should be read in conjunction with the summary of accounting policies
and the notes to the consolidated financial statements for the year ended
December 31, 1998 included in the Company's 1998 Annual Report, a copy of which
has been filed with the Securities and Exchange Commission.
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RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS EXCEPT PER SHARE AMOUNTS)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Auction revenues............................................ $ 18,013 $ 21,229
Direct expenses............................................. 2,752 3,567
---------- ----------
15,261 17,662
Expenses:
Depreciation.............................................. 734 600
General and administrative................................ 11,902 11,732
---------- ----------
12,636 12,332
---------- ----------
Income from operations...................................... 2,625 5,330
Other income (expenses):
Interest expense.......................................... (243) (741)
Other..................................................... 267 323
---------- ----------
(24) (418)
---------- ----------
Income before income taxes.................................. 2,649 4,912
Income taxes:
Current................................................... 851 1,535
Future (note 3)........................................... 166 --
---------- ----------
1,017 1,535
---------- ----------
Net income.................................................. $ 1,632 $ 3,377
========== ==========
Net income per share:
Basic..................................................... $ 0.10 $ 0.24
========== ==========
Diluted................................................... $ 0.10 $ 0.24
========== ==========
Weighted average number of shares outstanding............... 16,572,152 13,991,833
========== ==========
Diluted weighted average number of shares outstanding....... 16,783,199 14,188,166
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $108,506 $ 73,620
Accounts receivable....................................... 40,366 6,771
Inventory................................................. 9,901 2,355
Advances against auction contracts........................ 10,398 5,345
Prepaid expenses and deposits............................. 1,462 711
-------- --------
170,633 88,802
Capital assets (note 2)..................................... 65,881 61,324
Future income taxes (note 3)................................ 2,301 2,467
-------- --------
$238,815 $152,593
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Auction proceeds payable.................................. $106,099 $ 14,030
Accounts payable and accrued liabilities.................. 13,602 21,751
Current bank loans........................................ 840 793
Income taxes payable...................................... 899 3,079
-------- --------
121,440 39,653
Bank term loans............................................. 10,648 8,768
-------- --------
132,088 48,421
SHAREHOLDERS' EQUITY
Share capital (note 4).................................... 66,073 64,728
Retained earnings......................................... 43,404 41,772
Foreign currency translation adjustment................... (2,750) (2,328)
-------- --------
106,727 104,172
-------- --------
$238,815 $152,593
======== ========
</TABLE>
Subsequent event (note 6)
See accompanying notes to consolidated financial statements.
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RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(unaudited)
<TABLE>
<CAPTION>
FOREIGN
CURRENCY TOTAL
SHARE RETAINED TRANSLATION SHAREHOLDERS'
CAPITAL EARNINGS ADJUSTMENT EQUITY
------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1998.................... $64,728 $41,772 $(2,328) $104,172
Common shares issued........................ 1,345 -- -- 1,345
Net income.................................. -- 1,632 -- 1,632
Foreign currency translation adjustment..... -- -- (422) (422)
------- ------- ------- --------
Balance, March 31, 1999....................... $66,073 $43,404 $(2,750) $106,727
======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
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RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 1998
-------- -------
<S> <C> <C>
Cash provided by (used in)
Operations:
Net income................................................ $ 1,632 $ 3,377
Items not involving the use of cash
Depreciation........................................... 734 600
Future income taxes.................................... 166 --
Changes in non-cash working capital:
Accounts receivable.................................... (33,595) (51,347)
Inventory.............................................. (7,546) 299
Advances against auction contracts..................... (5,053) (2,989)
Prepaid expenses and deposits.......................... (751) (250)
Auctions proceeds payable.............................. 92,069 63,624
Accounts payable and accrued liabilities............... (8,149) 8,643
Income taxes payable................................... (2,180) (3,253)
Foreign currency translation adjustment................... (422) (53)
-------- -------
36,905 18,651
-------- -------
Financing:
Issuance of share capital, net of issue costs............. 1,345 51,911
Bank loans................................................ 1,927 (241)
-------- -------
3,272 51,670
-------- -------
Investments:
Capital asset additions, net.............................. (5,291) (8,592)
-------- -------
Increase in cash and cash equivalents....................... 34,886 61,729
Cash and cash equivalents, beginning of period.............. 73,620 27,149
-------- -------
Cash and cash equivalents, end of period.................... $108,506 $88,878
======== =======
Supplemental disclosure of cash flow information
Interest paid............................................. $ 248 $ 735
Income taxes paid......................................... $ 2,161 $ 4,415
</TABLE>
See accompanying notes to consolidated financial statements.
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RITCHIE BROS. AUCTIONEERS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
MARCH 31, 1999
(Information as at March 31, 1999 and for the three-month periods
ended March 31, 1999 and 1998 is unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES:
(a) BASIS OF PRESENTATION:
These unaudited consolidated financial statements present the financial
position, results of operations and changes in shareholders' equity and cash
flows of Ritchie Bros. Auctioneers Incorporated (the "Company").
These consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles for interim financial
information. Except as disclosed in note 5, these consolidated financial
statements comply, in all material respects, with generally accepted accounting
principles in the United States.
2. CAPITAL ASSETS
Capital assets at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------- ------------ --------
<S> <C> <C> <C>
Land and improvements..................................... $36,631 $ 900 $35,731
Buildings................................................. 21,056 2,825 18,231
Automotive equipment...................................... 5,164 1,606 3,558
Computer equipment........................................ 1,920 739 1,181
Yard equipment............................................ 2,619 1,124 1,495
Office equipment.......................................... 1,996 1,018 978
Leasehold improvements.................................... 200 50 150
------- ------ -------
$69,586 $8,262 $61,324
======= ====== =======
</TABLE>
Capital assets at March 31, 1999 are as follows:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------- ------------ --------
<S> <C> <C> <C>
Land and improvements..................................... $38,218 $1,013 $37,205
Buildings................................................. 23,581 2,919 20,662
Automotive equipment...................................... 5,631 1,768 3,863
Computer equipment........................................ 2,185 817 1,368
Yard equipment............................................ 2,543 1,147 1,396
Office equipment.......................................... 2,267 1,084 1,183
Leasehold improvements.................................... 266 62 204
------- ------ -------
$74,691 $8,810 $65,881
======= ====== =======
</TABLE>
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RITCHIE BROS. AUCTIONEERS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
MARCH 31, 1999
(Information as at March 31, 1999 and for the three-month periods
ended March 31, 1999 and 1998 is unaudited)
3. FUTURE INCOME TAXES
In the fourth quarter of 1998, the Company changed its policy for
accounting for income taxes by adopting the provisions of Section 3465, Income
Taxes, of The Handbook of the Canadian Institute of Chartered Accountants. Under
this standard, current income taxes are recognized for the estimated income
taxes payable for the current period. Future income tax assets and liabilities
are recognized for temporary differences between the tax and accounting bases of
assets and liabilities as well as for the benefit of losses available to be
carried forward to future years for tax purposes that are likely to be realized.
The adoption of Section 3465 did not impact amounts reported in the prior
period.
4. SHARE CAPITAL:
SHARES ISSUED:
In March 1998, the Company issued 3,335,000 common shares in connection
with its initial public offering. Net proceeds raised from the offering, after
deducting underwriting commissions and other direct costs, and after adding the
future income tax benefit related to the amortization of underwriting costs,
were $53.9 million.
In February 1999, the Company issued 50,000 common shares to an employee.
The transaction was recorded at a share price of $26.875 per share, the market
value of the common shares on the issuance date.
OPTIONS GRANTED:
In February 1999, the Company granted to directors and employees 17,000
options to acquire common shares. Each option has an exercise price of $26.875,
the market value of the common shares on the grant date, and expires on February
21, 2009.
OPTIONS EXERCISED AND CANCELLED:
During the three months ended March 31, 1999, 9,468 options were exercised
at $0.10 each and 1,500 options, having an exercise price of $0.10 each, were
cancelled. These $0.10 options had been granted to employees of the Company
prior to the Company's initial public offering. At March 31, 1999, 160,032 $0.10
options remain outstanding.
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RITCHIE BROS. AUCTIONEERS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
MARCH 31, 1999
(Information as at March 31, 1999 and for the three-month periods
ended March 31, 1999 and 1998 is unaudited)
5. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:
The consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles for interim financial
information which differ, in certain respects, from accounting practices
generally accepted in the United States and from requirements promulgated by the
United States Securities and Exchange Commission.
Material differences to the consolidated financial statements and related
notes of the Company are as follows:
CONSOLIDATED STATEMENTS OF NET INCOME PER SHARE AND COMPREHENSIVE NET
INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1999 1998
------- -------
<S> <C> <C>
Net income per share in accordance with United States GAAP
Basic..................................................... $ 0.10 $ 0.24
Diluted................................................... $ 0.10 $ 0.24
------ ------
Net income.................................................. $1,632 $3,377
Other comprehensive income (loss) adjustments
Foreign currency translation.............................. (422) (53)
------ ------
Comprehensive net income in accordance with United States
GAAP...................................................... $1,210 $3,324
------ ------
</TABLE>
6. SUBSEQUENT EVENT:
On April 1, 1999, the Company acquired the auction business of Forke, Inc.
("Forke"), a major auctioneer of industrial equipment headquartered in Lincoln,
Nebraska. In related transactions, the Company has entered into agreements to
acquire four permanent auction sites in Florida, North Carolina, Texas, and New
Mexico, and an office building in Nebraska, subject to satisfactory completion
of customary due diligence. The Company did not acquire Forke's equipment
finance business. To acquire Forke's auction business, the Company paid cash of
$25 million, issued 100,000 common shares of the Company, and granted warrants
to acquire 400,000 common shares of the Company for an exercise price of $26.69
per share. To acquire the four permanent auction sites and the office building
referred to above, and certain other tangible assets, the Company has agreed to
pay $12.4 million. The Company is financing these transactions substantially
with a term loan facility.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of Ritchie Bros.
Auctioneers Incorporated ("Ritchie Bros." or the "Company") for the three months
ended March 31, 1999 compared to the three months ended March 31, 1998. This
discussion should be read in conjunction with the consolidated financial
statements and notes thereto included herein and included in the Company's 1998
Annual Report. The Company prepares its consolidated financial statements in
accordance with generally accepted accounting principles in Canada which, except
as set out in note 5 to the consolidated financial statements, result in
materially consistent financial position and results of operations to that which
would be reported under generally accepted accounting principles in the United
States. Amounts discussed below are based on consolidated financial statements
prepared in accordance with Canadian accounting principles.
Ritchie Bros. is the world's leading auctioneer of industrial equipment. At
March 31, 1999, the Company operated from over 50 locations, including 13
permanent auction sites and 7 regional auction units, in North America, Europe,
Asia, Australia and the Middle East. The Company sells, through unreserved
public auctions, a broad range of used equipment, including equipment utilized
in the construction, transportation, mining, forestry, petroleum and
agricultural industries.
Gross auction sales represent the aggregate selling prices of all items
sold at Ritchie Bros. auctions during the periods indicated. Gross auction sales
are key to understanding the financial results of the Company, since the amount
of auction revenues and to a lesser extent, certain expenses, are dependent on
it. Auction revenues include commissions earned as agent for consignors through
both straight commission and gross guarantee contracts, plus the net profit on
the sale of equipment purchased and sold by the Company as principal. Under a
gross guarantee contract, the consignor is guaranteed a minimum amount of
proceeds on the sale of its equipment. When the Company guarantees gross
proceeds, it earns a commission on the guaranteed amount and typically
participates in a negotiated percentage of proceeds, if any, in excess of the
guaranteed amount. If auction proceeds are less than the guaranteed amount, the
Company's commission would be reduced, or, if sufficiently lower, the Company
would incur a loss. Auction revenues are reduced by the amount of any losses on
gross guarantee consignments and sales by the Company as principal. Auction
revenues also include interest income earned that is incidental to the auction
business.
The Company's gross auction sales and auction revenues are affected by the
seasonal nature of the auction business. Gross auction sales and auction
revenues tend to increase during the second and fourth calendar quarters during
which the Company generally conducts more auctions than in the first and third
calendar quarters. The Company's gross auction sales and auction revenues are
also affected on a period-to-period basis by the timing of major auctions. In
newer markets where the Company is developing operations, the number and size of
auctions and, as a result, the level of gross auction sales and auction
revenues, is likely to vary more dramatically from period-to-period than in the
Company's established markets where the number, size and frequency of the
Company's auctions are more consistent. Finally, economies of scale are achieved
as the Company's operations in a region mature from conducting intermittent
auctions, establishing a regional auction unit, and ultimately to developing a
permanent auction site. Economies of scale are also achieved when the size of
the Company's auctions increases.
The Company is aware of potential restrictions that may affect the ability
of equipment owners to transport certain equipment between some jurisdictions.
Management believes that these potential restrictions have not had a significant
impact on the Company's business, financial condition or results of operations
to date. However, the extent of any future impact on the Company's business,
financial condition or results of operations from these potential restrictions
cannot be predicted at this time.
Although the Company cannot accurately anticipate the future effect of
inflation, inflation historically has not had a material effect on the Company's
operations.
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In March 1999, the Company closed its office in Subic Bay, the Philippines
due to significantly diminished activity at that location. The Company is
negotiating to relocate its Asian regional auction unit to a more prominent
Asian location.
On April 1, 1999, Ritchie Bros. acquired the auction business of Forke,
Inc. ("Forke"), a major auctioneer of industrial equipment headquartered in
Lincoln, Nebraska. Whereas Ritchie Bros. operates through over 50 locations
throughout North America, Europe, Asia, Australia and the Middle East, Forke
operated primarily in the United States. Forke had been conducting industrial
auctions since 1921 and pioneered the industrial auction business in the United
States. In related transactions, the Company has entered into agreements to
acquire four permanent auction sites in Florida, North Carolina, Texas, and New
Mexico, and an office building in Nebraska, subject to satisfactory completion
of customary due diligence. The Company did not acquire Forke's equipment
finance business. To acquire Forke's auction business, the Company paid cash of
$25 million, issued 100,000 common shares of the Company, and granted warrants
to acquire 400,000 common shares of the Company at an exercise price of $26.69
per share. To acquire the four permanent auction sites and the office building
referred to above, and certain other tangible assets, the Company has agreed to
pay $12.4 million. The Company is financing these transactions substantially
with a term loan facility. The Company expects that the Forke transaction will
give rise to incremental operating costs commencing April 1, 1999. Incremental
gross auction sales and auction revenues are not expected to commence until July
1999. These incremental amounts are expected to be material, but the actual
amounts are unknown as they will be dependent, in part, on the productivity of
the new employees.
On April 20, 1999, the Company opened its newest permanent auction site on
the Gold Coast of Australia, near Brisbane, thereby upgrading its existing
regional auction unit to a permanent auction site.
In May 1999, the Company purchased 60 acres of land in Montreal, Quebec
with the intention of constructing a permanent auction site to serve the
Montreal market. The new site is expected to replace the Company's existing
Montreal-based regional auction unit in the first half of 2000, once the new
auction facilities have been constructed.
RESULTS OF OPERATIONS
AUCTION REVENUES
Auction revenues of $18.0 million for the three months ended March 31, 1999
decreased by $3.2 million, or 15.1%, from the three months ended March 31, 1998
due to decreased gross auction sales, and a lower auction revenue rate earned by
the Company on gross auction sales. Gross auction sales of $201.8 million for
the three months ended March 31, 1999 decreased by $25.9 million, or 11.4%, from
$227.6 million in the 1998 period, primarily as a result of decreased gross
auction sales in Europe and the effect on first quarter 1998 results of a large
auction in the Middle East (a $33 million auction was held in Dubai during the
first quarter of 1998; the Company's first Dubai auction in 1999 was comparable
in size -- $31 million -- but was not held until the second quarter). Results
for 1999 included significant gross auction sales for certain auctions held by
the Company in the Port of Moerdijk, the Netherlands; Fort Worth, Texas; and Las
Vegas, Nevada. Auction revenues as a percentage of gross auction sales have
averaged 8.80% on a long-term basis. In the first quarter of 1999, the auction
revenue rate of 8.93% was marginally higher than the long-term average and lower
than the unusually high 9.33% rate experienced in the comparable 1998 period.
The Company's expectations with respect to the long-term average auction revenue
rate remain unchanged.
DIRECT EXPENSES
Direct expenses are expenses that are incurred as a direct result of an
auction sale being held. Direct expenses include the costs of hiring personnel
to assist in conducting the auction, lease expenses for temporary auction sites,
travel costs for full time employees to attend and work at the auction site,
security hired to safeguard equipment while at the auction site, and advertising
costs specifically related to the auction. Direct expenses of $2.8 million for
the three months ended March 31, 1999 decreased by $0.8 million compared to the
comparable period in 1998. As a percentage of gross auction sales, direct
expenses were 1.36% for the three months ending March 31, 1999, lower than the
1.57% experienced during the 1998 period. This decrease
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was primarily a result of fewer but larger auctions being held in the 1999
period as compared to the 1998 period and the related expense efficiencies
arising from conducting large auctions.
DEPRECIATION EXPENSE
Depreciation is calculated on capital assets employed in the Company's
business, including building and site improvements, automobiles, yard equipment,
and computers. In the thee-month period ending March 31, 1999, depreciation
increased marginally from the 1998 period due to an increase in depreciable
fixed assets. Management anticipates that depreciation expense will increase as
existing auction sites are improved and additional permanent auction sites are
acquired and developed, including those permanent sites acquired in the Forke
transaction.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense ("G&A") includes employee expenses, such
as salaries, wages, performance bonuses and benefits, non-auction related
travel, institutional advertising, insurance, general office, and computer
expenses. For the three months ended March 31, 1999, the Company incurred G&A of
$11.9 million, as compared to $11.7 million for the comparable three month
period in 1998. G&A in the 1998 period was higher than the average quarterly G&A
of $9.8 million in 1998 because of unusually high performance bonus accruals
during the quarter. During the first quarter of 1999, the Company incurred a
special compensation expense of approximately $1.3 million related to a share
issuance to an employee. The Company does not intend to make similar share
issuances in the future. Management anticipates that G&A will increase in the
future due to the personnel hired as a result of the Forke transaction, and an
increasing level of administrative infrastructure to support expansion of the
Company's operations. See "-- Overview".
INCOME FROM OPERATIONS
Income from operations was $2.6 million in the three months ended March 31,
1999 as compared to $5.3 million in the comparable 1998 period. The primary
reason for the decrease was the reduced gross auction sales in the 1999 period
compared to the 1998 period. During the quarter ended June 30, 1999, the Company
expects to incur incremental expenses relating to the Forke acquisition;
however, the Company does not expect to incur any related incremental revenues
during the period. As a result, income from operations will be negatively
affected.
INTEREST EXPENSE
Interest expense includes interest and bank charges paid on term bank debt.
Interest expense for the three months ended March 31, 1999 decreased to $0.2
million, compared to $0.7 million incurred in the three months ended March 31,
1998. The decrease resulted from lower balances on the Company's operating
credit facilities during 1999 versus the comparable 1998 period, Management is
financing the Forke transaction with a term bank loan ($25 million was drawn
down on April 1, 1999), and plans to partially finance the acquisition of
additional permanent auction sites by incurring debt, which will result in an
increase in interest expense in the future. See "-- Overview" and "Liquidity and
Capital Resources."
OTHER INCOME
Other income arises from equipment appraisals performed by the Company, and
other miscellaneous sources. Other income for the three months ended March 31,
1999 of $0.3 million was unchanged from the comparable 1998 period.
INCOME TAXES
Income taxes of $1.0 million for the three months ended March 31, 1999 have
been computed based on rates of tax that apply in each of the tax jurisdictions
in which the Company operates. The effective rate of tax on net income for the
1999 period of 38.4% is higher than the rate the Company would normally expect
for subsequent periods and higher than the effective tax rate in the comparable
1998 period of 31.3%. During the
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three months ended March 31, 1999, the Company earned a larger portion of income
in higher tax rate jurisdictions than during the comparable period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash can fluctuate significantly from period to period,
largely due to differences in timing of receipt of gross sale proceeds from
buyers and the payment of net amounts due to consignors. If auctions are
conducted near a period end, the Company may hold cash in respect of those
auctions that will not be paid to consignors until after the period end.
Accordingly, Management believes a more meaningful measure of the Company's
liquidity is working capital, including cash.
At both March 31, 1999 and December 31, 1998, working capital, including
cash, was $49.2 million.
Net capital expenditures by the Company during the three months ended March
31, 1999 were $5.3 million as compared to $8.6 million for the three months
ended March 31, 1998. In the 1999 period, the Company continued to incur site
development costs in the United States, Canada, Australia and Europe.
The Company is continuing with its plan to add additional permanent auction
sites around the world and is presently in various stages of commitments to
acquire land for development in the United States and Canada, including certain
sites being acquired in connection with the Forke transaction.
The Company has established credit facilities with financial institutions
in the United States, Canada, Europe, and Australia. The Company presently has
access to credit lines for operations exceeding $95.0 million and to credit
lines for funding property acquisitions exceeding $35.0 million. At March 31,
1999, the Company had no bank debt relating to operations, and bank debt related
to property acquisitions totaled $14.8 million. . In addition, on March 26,
1999, the Company entered into a credit agreement to access up to $35.0 million
through a new term loan facility to fund the acquisition of the auction business
and certain assets of Forke. The Company intends to finance the total Forke
related borrowings of approximately $35 million over a five year term, with
repayments of approximately $5 million per year and a balloon payment of
approximately $15 million in 2004. The all-in interest rate on the facility is
currently Libor plus 0.8%. See "-- Overview".
YEAR 2000 COMPLIANCE
The Company relies on computer systems and software to operate its
business, including applications used to control information about bidders and
consignors and to operate certain of its marketing, finance and administrative
functions. The Company initiated its "Year 2000" compliance efforts in 1997.
Management believes that only minor modifications remain to be completed to make
its systems Year 2000 compliant and that related costs incurred to date have
not, and estimated future costs will not, have a material impact on the
Company's business, financial condition, or results of operations.
The most reasonable likely worst case Year 2000 scenario would involve the
failure of one or more of the Company's key suppliers to become Year 2000
compliant. In such a scenario, the Company's ability to adequately advertise its
auctions and account for receipts and payments as efficiently as it does at
present could be negatively affected.
The Company is presently developing contingency plans in the event of the
Company's or its key suppliers' failure to achieve full Year 2000 compliance and
management anticipates these will be completed in June 1999. The plan includes
identifying alternate organizations that may act as replacements for those with
which the Company presently conducts business and which may not achieve full
Year 2000 compliance, including one or more of its lenders, marketing service
suppliers, or external software providers. The plan also includes development of
internal back-up systems and identification of available replacement resources
to restore operations to present levels in the event of Year 2000
non-compliance. Failure by the Company or any of its key suppliers to achieve
full Year 2000 compliance in a timely manner or consistent with its current cost
estimates, or to rectify deficiencies through any contingency plans, could have
a material adverse effect on the Company's business, financial condition and
results of operations.
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FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. These statements are based on current expectations and estimates
about the Company's business. These statements include, in particular,
statements relating to auction revenue rates, direct expense rates, G&A
increases, income tax rates, the anticipated improvement, acquisition and
development of permanent auction sites, and the financing available to the
Company. Words such as "expects", "intends", "plans", "believes", "estimates"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions that are
difficult to predict. The following important factors, among others, could
affect the Company's actual results and could cause such results to differ
materially from those expressed in the Company's forward-looking statements: the
many factors that impact on the supply of and demand for used equipment;
fluctuations in the market values of used equipment; periodic and seasonal
variations in operating results or financial conditions; the timing and location
of auctions; potential delays in construction or development of auction sites;
actions of competitors; adverse changes in economic conditions; restrictions
affecting the ability of equipment owners to transport equipment between
jurisdictions; the ability of the Company to integrate the business acquired and
personnel hired as a result of the Forke transaction; and other risks and
uncertainties as detailed in the Company's Rule 424(b) Prospectus dated March 9,
1998. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Forward-looking statements should be considered in light of
these factors.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
<TABLE>
<CAPTION>
NUMBER
- ------ DESCRIPTION
<C> <S>
*3.1 Articles of Amalgamation, as amended
*3.2 By-laws
*4.1 Form of common share certificate
4.2 Description of capital shares contained in the Articles of
Amalgamation (see Exhibit 3.1)
4.3 Description of rights of securityholders contained in the
By-laws (see Exhibit 3.2)
*10.1 1997 Stock Option Plan, as amended
*10.2 Form of Indemnity Agreement for directors and officers
10.3 Asset Purchase Agreement dated as of February 19, 1999 among
Ritchie Bros. Auctioneers (America) Inc., Forke, Inc., and
certain other parties
10.4 Loan Agreement dated as of March 26, 1999 between Ritchie
Bros. U.S. Finance Limited Partnership (Delaware), Ritchie
Bros. Auctioneers Incorporated and U.S. Bank National
Association.
</TABLE>
- ---------------
* Incorporated by reference to the same exhibit number from the Registration
Statement on Form F-1 filed on September 26, 1997, as amended (File No.
333-36457).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
RITCHIE BROS. AUCTIONEERS INCORPORATED
(Registrant)
Date May 13, 1999 By /s/ ROBERT S. ARMSTRONG
----------------------------------------------
Robert S. Armstrong,
Corporate Secretary
</TABLE>
15
<PAGE> 1
EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of February 19, 1999 (this
"Agreement"), among RITCHIE BROS. AUCTIONEERS (AMERICA) INC., a Washington
corporation (the "Purchaser"), FORKE, INC., a Delaware corporation ("Forke,
Inc."), and the other Sellers, which are direct or indirect wholly owned (other
than Forke Los Subastadores S.A. de C.V. which is 99.7% owned) subsidiaries of
Forke, Inc., listed on the Signature pages hereof (together with Forke, Inc.,
collectively, the "Sellers") and the other parties listed on the Signature pages
hereof.
RECITALS
A. The Sellers own and operate an auction business and an equipment
marketing business (collectively, the "Business").
B. The Purchaser desires to purchase from the Sellers, and the Sellers
desire to sell to the Purchaser, certain of the property and assets constituting
the Business as of the date hereof, on the terms and subject to the conditions
set forth herein.
C. Concurrently herewith, (i) Ritchie Bros. Properties Inc., an
affiliate of the Purchaser ("RBP") and certain of the Sellers are entering into
the Sellers' Real Property Agreements (as defined herein) with respect to the
Sellers' Real Property (as defined herein) and (ii) RBP and Ring Power
Corporation, a Florida corporation ("Ring Power") and a shareholder of Forke,
Inc., are entering into the Ring Power Agreement (as defined herein) with
respect to the Ring Power Real Property (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the Purchaser and the Sellers
hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS
As used in this Agreement, the following terms shall have the following
meanings (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
<PAGE> 2
"Ancillary Agreements" means the Bill of Sale, the Assignment and
Assumption Agreement and the Sellers' Noncompetition Agreement.
"Assignment and Assumption Agreement" means an Assignment and Assumption
Agreement in substantially the form of Exhibit A.
"Auction Agreement" means the Auction Agreements in substantially the
forms of Exhibits E-1 and E-2.
"Benefit Plan" means each retirement, pension, profit sharing, deferred
compensation, savings, bonus, incentive, cafeteria, flexible benefits, medical,
dental, vision, hospitalization, life insurance, dependent care assistance,
tuition reimbursement, disability, sick pay, holiday, vacation, severance, stock
purchase, stock option, stock appreciation rights, fringe benefit and other
employee benefit plan, fund, policy, program, contract, arrangement or payroll
practice (including, but not limited to each "employee benefit plan," as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and each employment or consulting contract or agreement,
whether formal or informal, whether written or unwritten and whether legally
binding or not, (i) sponsored, maintained, provided or contributed to by any
Seller, (ii) covering or benefiting any current or former officer, employee,
agent, director or independent contractor of any Seller (or any dependent or
beneficiary of any such individual) or (iii) with respect to which any Seller
has (or could have) any actual or potential obligation or liability.
"Bill of Sale" means a Bill of Sale in substantially the form of Exhibit
B.
"Book Value" means (a) with respect to any item of depreciable Tangible
Personal Property, the cost thereof to the Sellers minus accumulated
depreciation determined (i) as of the end of the month immediately preceding the
month in which the relevant item is transferred hereunder (or if acquired in the
month transferred, as of the date acquired) and (ii) in accordance with GAAP
applied in a manner consistent with the preparation of the Financial Statements
and (b) with respect to any item normally expensed, a good faith estimate of the
value thereof determined by Sellers.
"Business" has the meaning specified in the recitals to this Agreement.
"Business Day" means any day that is not a Saturday, Sunday or any other
day on which banks generally are required or authorized to be closed in
Vancouver, British Columbia or Lincoln, Nebraska.
"Control" means the record or beneficial ownership, or the right to
control voting or disposition, of more than 50% of the voting equity securities
or interests, or the right to elect or appoint a majority of the board of
directors or comparable
<PAGE> 3
governing authority, of any entity.
"Environmental Laws" means any federal, state or local or foreign
statute, law, rule or regulation relating to: (a) releases, discharges, spills,
leaks or emissions (or threatened releases, discharges, spills, leaks or
emissions) of Hazardous Substances; (b) the manufacture, handling, transport,
use, treatment, storage or disposal of Hazardous Substances or materials
containing Hazardous Substances; or (c) otherwise relating to pollution of the
environment by Hazardous Substances or the protection of human health from
injury from Hazardous Substances.
"Environmental Permits" means all permits, licenses, approvals and other
authorizations required under applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation, trade, business or other entity
that, together with any Seller, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Internal Revenue Code.
"GAAP" means United States generally accepted accounting principles.
"Hazardous Substances" means (a) substances, chemicals or materials in
concentrations regulated under any applicable federal, state or local or foreign
statute, law, rule or regulation, including, without limitation, the following
federal statutes and their state counterparts, as well as such statutes'
implementing regulations as amended from time to time and as interpreted by
administering agencies: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Toxic Substances Control Act, the Federal
Insecticide, Fungicide, and Rodenticide Act, and the Clean Air Act; (b)
regulated concentrations of petroleum and petroleum products, radioactive
materials, asbestos in any form that is or could become friable, urea
formaldehyde, polychlorinated biphenyls and radon gas; and (c) any other
substances, chemicals or materials in concentrations with respect to which a
federal, state or local or foreign agency requires environmental investigation,
monitoring, reporting or remediation.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"Internal Revenue Code" means the U.S. Internal Revenue Code of 1986, as
amended.
<PAGE> 4
"Leases" means the leases related to each of the parcels of the Sellers'
Leased Real Property.
"Material Adverse Effect" means any material adverse effect on the
Assets or any change in, or effect on, the Business as currently being conducted
that is or is reasonably likely to be materially adverse to the business,
condition (financial or otherwise), results of operations or prospects of the
Business after the Closing.
"Noncompetition Agreements" means the Sellers' Noncompetition Agreement,
and the Shareholders' Noncompetition Agreements.
"RBA" means Ritchie Bros. Auctioneers Incorporated, a Canadian
corporation.
"Registration Rights Agreement" means the Registration Rights Agreement
between RBA and Forke, Inc., in substantially the form of Exhibit H.
"Ring Power Agreement" means a real property purchase agreement in
substantially the form of Exhibit C-1.
"Ring Power Real Property" means the portion of real property owned by
Ring Power Corporation in Ocala, Florida which portion is referred to in the
Ring Power Agreement, and the improvements thereon and related fixtures.
"Securities Act" means the U. S. Securities Act of 1933, as amended.
"Sellers' Leased Real Property" means the real property leased by the
Sellers and used in the operation of the Business.
"Sellers Noncompetition Agreement" means the Noncompetition and
Confidentiality Agreement, to be executed by each Seller, in substantially the
form of Exhibit D-1.
"Sellers' Owned Real Property" means the real property owned by the
Sellers in Statesville, North Carolina; Albuquerque, New Mexico; and Fort Worth,
Texas, referred to in the Sellers' Real Property Agreements, and the
improvements thereon and related fixtures.
"Sellers' Real Property" means the Sellers' Owned Real Property and the
Sellers' Leased Real Property.
"Sellers' Real Property Agreements" means real property purchase
agreements in substantially the forms of Exhibits C-2, C-3 and C-4.
"Shareholder Noncompetition Agreements" means the Noncompetition and
<PAGE> 5
Confidentiality Agreements, to be executed by Ring Power, Thompson, Randal
Ringhaver and Dewitt Thompson, in substantially the form of Exhibit D-2.
"Tax" or "Taxes" means all income, gross receipts, sales, use,
employment, franchise, profits, property or other taxes, fees, stamp taxes and
duties, assessments or charges of any kind whatsoever (whether payable directly
or by withholding), together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority with respect thereto.
"Thompson" means Thompson Machinery Commerce Corporation, a Tennessee
corporation.
SECTION 1.02 CERTAIN ADDITIONAL DEFINED TERMS
In addition to terms defined in Section 1.01, the following capitalized
terms are used as defined in the Sections set forth opposite such terms:
<TABLE>
<CAPTION>
Defined Terms Section Reference
------------- -----------------
<S> <C>
Additional Compensation Section 5.06
Assets Section 2.01(a)
Assumed Liabilities Section 2.02(a)
Audited Financial Statements Section 3.17(a)
Base Purchase Price Section 2.03(a)(i)
Closing Section 2.04(a)
Closing Date Section 2.04(a)
Computer Equipment Section 3.08
Confidentiality Agreement Section 5.04(a)
Contracts Section 2.01(a)(v)
Controlling Shareholders Section 5.11
Employees Section 3.13
Environmental Claims Section 3.06(g)
Excluded Assets Section 2.01(b)
Financial Statements Section 3.17(a)
IRS Section 5.02(b)
Intellectual Property Rights Section 3.07(a)
Lenders Section 2.03(a)(i)
Licenses Section 3.05
Losses Section 7.02(a)
Material Contracts Section 3.11
Obligations Section 7.04(a)
Payoff Amounts Section 2.03(a)(i)
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Prepaids Section 2.03(a)
Purchase Price Section 2.03(a)
RBA Shares Section 2.03(a)(ii)
RBA's SEC Filings Section 3.19(c)
Retained Liabilities Section 2.02(b)
RBP Recitals
Ring Power Recitals
Securities Section 3.19(a)
Tangible Personal Property Section 3.08
Unaudited Balance Sheet Section 3.17(a)
Unaudited Financial Statements Section 3.17(a)
Warrants Section 2.03(a)(iii)
</TABLE>
ARTICLE II. PURCHASE AND SALE
SECTION 2.01 PURCHASE AND SALE
(a) On the terms and subject to the conditions set forth in this
Agreement, the Sellers shall, on the Closing Date (or such other date as may be
applicable to Assets purchased pursuant to Section 5.10 hereof), sell, assign,
transfer, convey and deliver to the Purchaser, and the Purchaser shall, on the
Closing Date (or such other dates), purchase from the Sellers, all of the
Sellers' right, title and interest in the Business, and all of the assets, other
than Excluded Assets, used in the Business (all such assets, other than the
Excluded Assets and other than Sellers' Owned Real Property which are being
transferred pursuant to the terms of the Sellers' Real Property Agreements,
being referred to herein, collectively, as the "Assets"), including without
limitation, the following:
(i) all the Sellers' Intellectual Property Rights, regardless of in
which jurisdiction such rights exist and whether such rights have been
filed, registered or perfected, including, without limitation, patents,
trade names (including, without limitation, "Forke," "Forke Brothers,"
"Forke Credit Corporation," "Forke Acceptance," "Miller & Miller" and
"Forke Truck"), trademarks, service marks, copyrights, and trade secrets
used directly or indirectly in the Business;
(ii) all copies of the Sellers' sales and promotional literature,
customer lists and other sales-related materials used in the Business
whether in electronic, printed or any other form, including, without
limitation, The Blue Book and all associated records and rights;
(iii) all the Sellers' (A) assignable computer software, including,
<PAGE> 7
without limitation, source code, operating systems and specifications,
data, data bases, files, documentation and other materials related
thereto, pertaining to the Business, and (B) Internet Web sites
(including, without limitation, Web site domain names) used in the
Business and all data and records generated in connection with or
related to such Web sites;
(iv) the Computer Equipment and other Tangible Personal Property, to
the extent the Purchaser elects to purchase any such assets pursuant to
Section 5.10(a);
(v) all the Sellers' assignable rights, title and interest in, to
and under the contracts, agreements, instruments, leases and licenses
described in Schedule 2.01(a)(v), together with any Leases and equipment
leases to be assigned to the Purchaser pursuant to Sections 5.10(a) and
(b) (collectively, the "Contracts");
(vi) all municipal, state, federal and foreign franchises, permits,
licenses, agreements, waivers and authorizations held or used by any of
the Sellers in connection with, or required for, the conduct of the
Business, as currently conducted, to the extent (A) transferable and (B)
requested by the Purchaser;
(vii) all the Seller's prepaid rent, prepaid expenses and deposits
under any Leases or Contracts assigned to the Purchaser in respect of
which Seller shall be reimbursed at Closing (or with respect to any
Lease, such other date as such Lease may be assumed);
(viii) all the Sellers' telephone numbers and facsimile numbers
(other than those used exclusively for Forke Credit), a list of which is
attached as Schedule 2.01(a)(viii); and
(ix) all goodwill associated with the foregoing Assets and the
Business;
provided, however, that, notwithstanding the foregoing: (1) with respect to any
of the Leases to be assigned to the Purchaser or any of the Tangible Personal
Property to be purchased by the Purchaser after the Closing Date pursuant to
Section 5.10, the Sellers shall sell, assign, transfer, convey and deliver to
the Purchaser, and the Purchaser shall purchase from the Sellers, on the terms
and subject to the conditions set forth in this Agreement, all of the Sellers'
right, title and interest in and to such Leases and Tangible Personal Property
on the date or dates specified in Section 5.10; and (2) the Sellers shall convey
Sellers' Owned Real Property on such terms and conditions, and
<PAGE> 8
on such dates, as are specified in the Sellers' Real Property Agreements.
(b) The following assets of the Sellers (the "Excluded Assets") are
specifically excepted from the Assets to be transferred to the Purchaser
pursuant to Section 2.01(a) and shall be retained by the Sellers:
(i) all of the Sellers' cash-in-hand, bank accounts, marketable
securities and investment accounts;
(ii) all of the Sellers' accounts receivable;
(iii) any Computer Equipment and other Tangible Personal Property
that the Purchaser does not elect to purchase pursuant to Section
5.10(a);
(iv) any Leases or equipment leases not assigned to the Purchaser
pursuant to Sections 5.10(a) and (b);
(v) the capital stock of any corporation;
(vi) Benefit Plan assets;
(vii) claims against third parties that do not relate to claims
against the Purchaser, and other claims against third parties, to the
extent that the Purchaser has been fully indemnified for such claims or
agrees that it has no potential liability that may relate to such
claims;
(viii) claims against the Purchaser arising in connection with this
Agreement; and
(ix) any other asset not used directly or indirectly in the
Business.
provided, however, that any asset which is excluded pursuant to clauses (iii) or
(iv) above shall not become an "Excluded Asset" (and shall be considered an
"Asset" for purposes of this Agreement) until the earlier of either (1) the
Purchaser has notified Forke, Inc. that the Purchaser elects not to acquire such
asset, or (2) the time specified for the Purchaser to provide notice of its
election to acquire such asset has elapsed, and the Purchaser has not provided
such notice.
SECTION 2.02 ASSUMPTION OF LIABILITIES
(a) On the terms and subject to the conditions set forth in this
Agreement, the Purchaser shall execute and deliver, on the Closing Date, the
Assignment and Assumption Agreement, pursuant to which the Purchaser shall agree
to pay, perform and discharge, if and when due, the following liabilities and
obligations of the Sellers
<PAGE> 9
with respect to the Business (collectively, the "Assumed Liabilities"):
(i) all the Seller's express obligations under the written terms of
the Contracts, but only to the extent such obligations arise as a result
of activities carried on after the Closing Date (or, in the case of any
Leases or equipment leases assigned to the Purchaser after the Closing
Date pursuant to Section 5.10, after the date such Lease or equipment
lease is so assigned to the Purchaser) and are unrelated to any default
or other breach of any obligation by any of the Sellers or any agent
thereof prior to the Closing Date (or such later date of assignment, as
the case may be); and
(ii) all the Seller's express obligations arising under the
franchises, permits, licenses, agreements, waivers and authorizations
described in Section 2.01(a)(vi), but only to the extent such
obligations arise after the Closing Date and are unrelated to any
default or other breach of any obligation by any of the Sellers or any
agent thereof prior to the Closing Date.
Notwithstanding anything to the contrary, it is agreed that the
Purchaser does not, and by this Agreement or any Ancillary Agreement shall not,
assume or agree to pay, perform, defend or discharge any liabilities or
obligations (of any and every kind whatsoever) of any of the Sellers, other than
the Assumed Liabilities.
(b) Notwithstanding the Closing, the Sellers shall retain, pay, perform
and discharge, if and when due, to the extent not paid, performed or discharged
on or prior to the Closing Date (or, in the case of any Leases or equipment
leases assigned to the Purchaser after the Closing Date pursuant to Section
5.10, on or prior to the date such Lease or equipment lease is so assigned to
the Purchaser), all liabilities and obligations, of any and every kind
whatsoever, of the Sellers other than the Assumed Liabilities (collectively, the
"Retained Liabilities"), including, without limitation, all the Sellers'
liabilities and obligations, of any and every kind whatsoever, to their
respective employees (including, without limitation, liabilities and obligations
with respect to vacation pay, sick pay, and the Benefit Plans and obligations
relating to any claims of constructive or actual termination arising in
connection with Sellers' constructive or actual termination of such employees'
employment).
(c) Sellers and their ERISA Affiliates shall retain and be solely
responsible for satisfying any and all liabilities and obligations relating to
the provision of health care continuation coverage under COBRA (as set forth in
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA, as may
be amended from time to time) or under any state law with respect to any
medical, dental, vision or other group health plan sponsored, maintained or
provided by the Sellers or their ERISA Affiliates, regardless of whether the
relevant "qualifying event" occurs before, at or after the
<PAGE> 10
Closing.
SECTION 2.03 PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE
(a) Subject to any adjustments pursuant to Section 2.03(b), the purchase
price for the Assets (excluding the purchase price for Sellers' Owned Real
Property, which is specified in, and shall be paid pursuant to the terms and
subject to the conditions of, Sellers' Real Property Agreements) (the "Purchase
Price"), shall consist of the following:
(i) an amount (the "Base Purchase Price") equal to the sum of (A)
$25,000,000 plus (B) the aggregate amount, if any, by which the Base Purchase
Price is to be increased as of the Closing Date pursuant to Section 5.10 (the
Purchaser shall pay a portion of this cash amount directly to Nationsbank of
Tennessee, N.A. and any other lenders of the Sellers (other than lessors) who
have liens on the Assets (the "Lenders") in an amount sufficient to pay all of
the Sellers' loan obligations to the Bank and such other lenders (the "Payoff
Amounts"));
(ii) 100,000 Common Shares (the "RBA Shares") of RBA (appropriately
adjusted for any stock dividend, split or combination prior to the Closing
Date);
(iii) Warrants (the "Warrants") to purchase 400,000 Common Shares of
RBA (appropriately adjusted for any stock dividend, split or combination prior
to the Closing Date), in substantially the form of Exhibit F, exercisable until
the second anniversary of the Closing Date hereof at an exercise price per share
equal to the closing price of the Common Shares on the New York Stock Exchange
on the date of this Agreement (or, if not a Business Day, on the immediately
preceding Business Day); and
(iv) an amount equal to the prepaid rent, prepaid expenses and
deposits transferred to Purchaser, as set forth on Schedule to be provided in a
Schedule by the Sellers to the Purchaser three business days before the Closing
Date, subject to adjustment until the Closing (the "Prepaids").
(b) If any election under 5.10 is made by the Purchaser three Business
Days prior to the Closing, the Purchase Price shall be increased by the
aggregate Book Value (set forth in Schedule 3.08) of any Seller-owned Tangible
Personal Property purchased by the Purchaser as a result of such election and
the aggregate amount of any prepaid rent, security or similar deposits made by
the Sellers under any Leases assigned to the Purchaser as a result of such
election (which prepaid rent, security or similar deposits shall be assigned to
the Purchaser). With respect to any such
<PAGE> 11
Tangible Personal Property transferred to the Purchaser after the Closing or any
such Leases assumed by the Purchaser after Closing, such additional amounts
shall be paid after Closing in accordance with Section 5.10.
(c) The parties agree that, for U.S. Tax purposes, the Purchase Price
shall be allocated as of the Closing Date among the Assets in accordance with
Schedule 2.03(c) and Internal Revenue Code Section 1060 and Treasury Regulations
thereunder and they shall file such Tax returns and forms as required reflecting
such allocation of the Purchase Price. Any subsequent adjustments to the
Purchase Price pursuant to Section 2.03(b) shall be reflected in the allocation
hereunder in a manner consistent with Treasury Regulation Section 1.1060-1T(f).
No party hereto shall file any Tax return or form or take a position with a Tax
authority that is inconsistent with such allocation.
SECTION 2.04 CLOSING
(a) Subject to the terms and conditions of this Agreement, the sale and
purchase of the Assets and the assumption of the Assumed Liabilities
contemplated hereby shall take place at a closing (the "Closing") at 10:00 a.m.,
local time, on the later to occur of (i) the fifth Business Day following the
expiration or termination of the applicable waiting periods under the HSR Act,
or (ii) the fifth Business Day after notification by the Purchaser to the
Sellers (such notice to be given no later than the 25th day following the
receipt by the Purchaser of the Audited Financial Statements and the Unaudited
Financial Statements from the Sellers pursuant to Section 5.02). The Closing
shall occur at the offices of Perkins Coie LLP, 1211 S.W. Fifth Avenue, Suite
1500, Portland, Oregon, or at such other time or on such other date or at such
other place as Forke, Inc., on behalf of the Sellers, and the Purchaser may
mutually agree upon in writing (the day on which the Closing takes place being
the "Closing Date"). Notwithstanding anything to the contrary, the sale and
purchase of the Assets and the assumption of the Assumed Liabilities shall be
deemed for all purposes to have taken place as of 12:01 a.m. on the Closing Date
(or, in the case of any Leases or equipment leases assigned to the Purchaser
after the Closing Date pursuant to Section 5.10, as of 12:01 a.m. on the date
such Lease or equipment lease is so assigned to the Purchaser).
(b) At the Closing, Forke, Inc. shall deliver, on behalf of the Sellers,
or cause to be delivered to the Purchaser:
(i) the Bill of Sale, the Assignment and Assumption Agreement and
such other instruments as may be reasonably requested by the Purchaser
to transfer the Assets to the Purchaser;
<PAGE> 12
(ii) a receipt for the RBA Shares, the Warrants, the Base Purchase
Price and the Prepaids;
(iii) executed counterparts of each Ancillary Agreement to which any
Seller is a party;
(iv) the certificates and other documents required to be delivered
pursuant to Section 6.02; and
(v) evidence that, upon receipt of the Payoff Amounts, the Lenders
will promptly release their liens against the Assets.
(c) At the Closing, the Purchaser shall deliver to Forke, Inc., on
behalf of the Sellers:
(i) the Base Purchase Price and the Prepaids, by cashier's check or
wire transfer to an account designated by Forke, Inc., on behalf of the
Sellers;
(ii) a certificate evidencing the RBA Shares, issued in the name of
Forke, Inc.;
(iii) the Warrants, issued in the name of Forke, Inc.;
(iv) executed counterparts of each Ancillary Agreement to which the
Purchaser is a party; and
(v) the certificates and other documents required to be delivered
pursuant to Section 6.01.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as set forth in a Schedule bearing the number of the applicable
Section, whether or not such Schedule is referenced in the text of the Section,
each of the Sellers jointly and severally represents and warrants to the
Purchaser as follows:
SECTION 3.01 INCORPORATION AND AUTHORITY OF THE SELLERS
Each Seller is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction set forth on Schedule 3.01
attached hereto and has all necessary corporate power and authority to enter
into this Agreement and the Ancillary Agreements to which it is a party, to
carry out its obligations hereunder and thereunder, to consummate the
transactions contemplated hereby and thereby, to own, operate or lease the
properties and assets now owned, operated or leased thereby,
<PAGE> 13
and to carry on the business now being conducted thereby. Each Seller is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the operation of its business as now being conducted makes
such licensing or qualification necessary and in which the failure to qualify
could have a Material adverse effect. Except as set forth on Schedule 3.01, the
execution and delivery by each Seller of this Agreement and the Ancillary
Agreements to which it is a party, the performance by each Seller of its
obligations hereunder and thereunder and the consummation by each Seller of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate or similar action on the part of each Seller and its
shareholders. This Agreement has been duly executed and delivered by the Sellers
and (assuming due authorization, execution and delivery by the Purchaser) this
Agreement constitutes a legal, valid and binding obligation of each Seller,
enforceable against such Seller in accordance with its terms. At the Closing,
each of the Ancillary Agreements to which a Seller is a party shall be duly
executed and delivered by such Seller, and (assuming due authorization,
execution and delivery by the Purchaser) shall constitute a legal, valid and
binding obligation of such Seller, enforceable against such Seller in accordance
with its terms.
SECTION 3.02 NO CONFLICT
The execution, delivery and performance by the Sellers of this Agreement
and of each Ancillary Agreement to which any Seller is a party do not, and will
not (a) violate or conflict with the charter documents of any Seller, in each
case as amended, (b) conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to any
Seller, any of the Assets or the Business, or (c) subject to receipt of the
consents described in Schedule 3.03, result in any breach of, or constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
lien or other encumbrance on any of the Assets pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument to which any Seller is a party or by which any of its assets or
properties is bound or affected.
SECTION 3.03 CONSENTS AND APPROVALS
Except as described in Schedule 3.03, the execution, delivery and
performance by the Sellers of this Agreement and the Ancillary Agreements to
which any Seller is a party do not, and will not, require any consent, approval,
exemption, authorization or other action by, or filing with or notification to,
any (a) court, administrative agency or other governmental or regulatory
authority or (b) third party, except the notification requirements of the HSR
Act.
<PAGE> 14
SECTION 3.04 LITIGATION
Except as set forth on Schedule 3.04, no claim, action, proceeding
(other than a notification pursuant to the HSR Act contemplated by this
Agreement) or investigation is pending or, to the knowledge of the Sellers,
threatened (a) against any of the Sellers, or any of their respective assets or
properties, employees or the Business, before any federal, state or municipal
court, or administrative, governmental or regulatory authority or body that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, or (b) which seeks to delay or prevent the consummation
of, or which could reasonably be expected to adversely affect any of the
Seller's ability to consummate the transactions contemplated hereby and by the
Ancillary Agreements to which any Seller is a party. None of the Sellers or any
of their respective assets or properties or the Business is subject to any
order, writ, judgment, injunction, decree, determination or award that could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.05 COMPLIANCE WITH LAWS; LICENSES AND PERMITS
No Seller is in violation of any law, rule, regulation, order, judgment
or decree applicable to it or by which any of its properties is bound or
affected, except for violations the existence of which would not have a Material
Adverse Effect. Each Seller has all governmental licenses, franchises, permits,
approvals, authorizations, exemptions, certificates, registrations and similar
documents or instruments (collectively, "Licenses") necessary to carry on the
Business as it is now being conducted and to own and operate the Assets, except
for such Licenses which the Sellers' failure to have would not have a Material
Adverse Effect.
SECTION 3.06 ENVIRONMENTAL COMPLIANCE
Except as described in Schedule 3.06:
(a) To the knowledge of the Sellers, Hazardous Substances have not been
generated, used, treated or stored on, or transported to or from, any of the
Sellers' Leased Real Property or any property adjoining any of the Sellers'
Leased Real Property.
(b) To the knowledge of the Sellers, Hazardous Substances have not been
released or disposed of on any of the Sellers' Leased Real Property or any
property adjoining any of the Sellers' Leased Real Property.
(c) Environmental Permits have been obtained and are in effect for the
operations conducted at the Sellers' Leased Real Property.
<PAGE> 15
(d) There are no pending applications for issuance or renewal of any
Environmental Permits for the operations conducted at any of the Sellers' Leased
Real Property.
(e) The Sellers are in compliance in all material respects with all
applicable Environmental Laws and the requirements of all their Environmental
Permits pertaining to Sellers' Leased Real Property.
(f) The Sellers have disposed of all wastes, including those containing
any Hazardous Substances, in compliance with all applicable Environmental Laws.
(g) There are no past, pending or threatened administrative, regulatory
or judicial claims, actions, suits, investigations, demands, proceedings or
notices of violation relating in any way to any Environmental Law or
Environmental Permit ("Environmental Claims") against any Seller or any of the
Sellers' Leased Real Property that, individually or in the aggregate, could have
a Material Adverse Effect.
(h) To the knowledge of the Sellers, no parcel of the Sellers' Leased
Real Property is listed or proposed for listing on the National Priorities List
under CERCLA or on the CERCLIS or any similar state list of sites requiring
investigation or cleanup.
(i) To the knowledge of the Sellers, no Seller has transported or
arranged for the transportation of any Hazardous Substances to any location that
is listed or proposed for listing on the National Priorities List under CERCLA
or on the CERCLIS or any similar state list.
(j) To the knowledge of the Sellers, there are no circumstances with
respect to any parcel of the Sellers' Leased Real Property that could reasonably
be anticipated (i) to form the basis of an Environmental Claim against any
Seller or any parcel of the Sellers' Leased Real Property that, individually or
in the aggregate, could have a Material Adverse Effect or (ii) to cause any
parcel of the Sellers' Leased Real Property to be subject to any restrictions on
ownership, occupancy, use or transferability under any applicable Environmental
Law.
(k) To the knowledge of the Sellers, there are not now, and never have
been any underground storage tanks located on or under any of the Sellers'
Leased Property or any property adjoining the Sellers' Leased Real Property.
SECTION 3.07 INTELLECTUAL PROPERTY RIGHTS
(a) The Sellers own or otherwise have exclusive rights to use in the
Business as currently conducted in the jurisdiction of registration, without, to
the
<PAGE> 16
knowledge of the Sellers, restrictions or any conflict with the rights of
others, all registered trademarks identified on Schedule 3.07(a) and, to the
knowledge of the Sellers, the exclusive rights to use in the Business as
currently conducted, without, to the knowledge of the Sellers, restrictions or
any conflict with the rights of others, all patents, other trademarks, trade
names, service marks, copyrights, trade secrets and other intellectual property
rights, all applications and registrations therefor, and all other confidential
or proprietary information relating to or used by the Sellers in the conduct of
the Business as currently conducted (collectively, the "Intellectual Property
Rights"). No rights have been granted by any Seller to any third party with
respect to the Intellectual Property Rights. There is no claim, action or cause
of action challenging any Seller's use of the Intellectual Property Rights or
challenging or questioning the validity or effectiveness of any Intellectual
Property Rights. To the knowledge of the Sellers, (i) neither the operation of
the Business nor the Intellectual Property Rights infringe upon any issued or
pending patent, trademark, trade name, service mark, copyright or other right of
any person or entity, and (ii) there is no infringement by any other person or
entity of any Intellectual Property Right. Schedule 3.07(a) lists all known
patents, copyrights, trademarks and service marks, and any applications or
registrations therefor, included in the Intellectual Property Rights.
(b) The Sellers have not provided any lists of their customers to any
third party.
SECTION 3.08 TANGIBLE PERSONAL PROPERTY
Schedule 3.08 sets forth all computers and computer equipment
(collectively, the "Computer Equipment"), yard equipment, machinery, office
equipment and furniture owned by the Sellers, telephone equipment, motor
vehicles and other tangible personal property used in connection with the
Business, excluding inventory held for auction, (the "Tangible Personal
Property"). The information in Schedule 3.08 is grouped by the Seller owning
such equipment, and by the class of such property for purposes of Purchaser's
electing whether to purchase such class, and whether such Tangible Personal
Property is owned or leased by the Sellers and, if applicable, the Book Value
thereof. No later than seven days following the date hereof, the Sellers will
provide an updated Schedule 3.08, which will group the Tangible Personal
Property and Computer Equipment by which parcel of Sellers' Real Property such
personal property is located on or used. For each item of Tangible Personal
Property with a Book Value of $5,000 or more, Schedule 3.08 also sets forth the
date such item was purchased or otherwise acquired by the Sellers, the date (if
known) such item was manufactured and, if applicable, the serial number thereof.
The Tangible Personal Property is in normal operating condition, ordinary wear
and tear
<PAGE> 17
excepted.
SECTION 3.09 REAL PROPERTY
The only real property owned by the Sellers and their affiliates, and
used in the Business, is the Sellers' Owned Real Property and the Ring Power
Real Property; except that the Sellers pay a fee to Thompson to use its facility
in Nashville, Tennessee to conduct auctions. Schedule 3.09 lists all of the
Sellers' Leased Real Property.
SECTION 3.10 TITLE TO ASSETS; ABSENCE OF LIENS
Except as set forth in Schedule 3.10, each Asset is either (a) owned by
the Sellers, free and clear of all liens, security interests and other charges
and encumbrances, except: (i) liens for Taxes, assessments and other
governmental charges not yet due and payable; (ii) liens for Taxes, assessments
and charges and other claims, the validity of which is being contested in good
faith; and (iii) liens, security interests, imperfections of title and other
charges and encumbrances which, individually and in the aggregate, are
immaterial and, to the extent quantifiable, that relate to claims or liabilities
of less than $10,000, or (b) leased pursuant to one or more valid and
enforceable lease agreements that have not been breached by the Sellers or, to
the knowledge of the Sellers, any other party thereto. The Sellers have good and
marketable title to all the Assets they own, subject only to the liens, security
interest and other charges and encumbrances indicated above.
SECTION 3.11 MATERIAL CONTRACTS
Schedule 3.11 contains a list of all of the contracts, agreements,
instruments, leases (including, without limitation, the Leases), licenses,
arrangements or commitments by which any of the Tangible Personal Property, the
Assets or any of the Sellers' Real Property (excluding any easements,
restrictions or other arrangements recorded solely in the public records) is
subject or bound and that requires, in accordance with its terms, future
payments in excess of $10,000 or that is not cancelable without penalty upon not
more than 30 days' notice and each other contract, agreement or commitment that
is material to the Business other than auction dates and auction contracts
entered into in the ordinary course of the Sellers' Business (collectively, the
"Material Contracts"). The Sellers have delivered or made available to the
Purchaser true and complete copies of all the Material Contracts, in each case
as amended. With respect to the Material Contracts, (a) each Material Contract
is valid, binding and enforceable in accordance with its terms; (b) no Seller is
in default under or in violation of any provision of any of the Material
Contracts; (c) no Seller has received notice of alleged nonperformance or other
noncompliance with respect to its
<PAGE> 18
or any other Seller's obligations under any of the Material Contracts which
alleged nonperformance or other noncompliance is currently unresolved, nor any
notice that is currently unresolved that any of the Material Contracts may be
totally or partially terminated or suspended by any other party thereto; and (d)
no Seller has any knowledge of any nonperformance, breach or other noncompliance
by any other party to any of the Material Contracts.
SECTION 3.12 EMPLOYEE BENEFIT MATTERS
(a) Schedule 3.12 contains a list of all Benefit Plans. None of the
Sellers has any agreement, arrangement or commitment, whether formal or
informal, whether written or unwritten and whether legally binding or not, to
create any additional employee benefit plan, fund, policy, program, contract,
arrangement or payroll practice or to modify, amend or terminate any existing
Benefit Plan.
(b) Each Benefit Plan is, and at all times since its inception has been,
maintained, administered, operated and funded in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including, but not limited to, ERISA and the
Internal Revenue Code other than such noncompliance as will not have a Material
Adverse Effect. No transaction, event or omission has occurred or failed to
occur with respect to any Benefit Plan that has subjected, or could subject, any
Seller, directly or indirectly, to a tax, fine, penalty or related charge for
which payment has not been provided for by Seller under Chapter 43 of Subtitle D
of the Internal Revenue Code or under Section 502(c), 502(i), 502(l) or 4071 of
ERISA.
(c) Each Benefit Plan that is intended to be qualified under Section
401(a) of the Internal Revenue Code is, and at all times since inception has
been, so qualified and its related trust is, and at all times since inception
has been, exempt from taxation under Section 501(a) of the Internal Revenue
Code, and each such Benefit Plan is the subject of an unrevoked favorable
determination letter from the IRS to that effect. Nothing has occurred, and no
circumstances exist, or are reasonably expected by any Seller to occur, that
could cause such Benefit Plan to lose its tax-qualified status or that could
cause the IRS to revoke the most recent determination letter issued with respect
to such Benefit Plan or the Sellers (or such Benefit Plan) to otherwise lose
their ability to rely on such determination letter.
(d) Each "group health plan," as defined in Section 4980B(g)(2) of the
Internal Revenue Code or Section 607(1) or 733(a)(1) of ERISA, sponsored,
maintained, provided or contributed to by any Seller or any ERISA Affiliate, or
covering any of their employees, has been maintained, administered and operated
at all times since its inception in compliance with the requirements of Section
4980B(f)
<PAGE> 19
of the Internal Revenue Code, Parts 6 and 7 of Subtitle B of Title I of ERISA,
any regulations under such Internal Revenue Code and ERISA sections and any
other applicable laws regarding the provision or continuation of health
insurance coverage or other welfare benefits (within the meaning of Section 3(1)
of ERISA).
(e) No Seller or ERISA Affiliate maintains or contributes to, or has
ever maintained or contributed to (or been obligated to contribute to), any
multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA or
Section 414(f) of the Internal Revenue Code, any multiple employer plan within
the meaning of Section 4063 or 4064 of ERISA or Section 413(c) of the Internal
Revenue Code, or any employee benefit plan, fund, program, contract or
arrangement that is subject to Section 412 of the Internal Revenue Code or
Section 302 or Title IV of ERISA, and no Seller or ERISA Affiliate has incurred,
or could incur, any liability with respect to any such plan.
SECTION 3.13 EMPLOYEES, LABOR MATTERS
Schedule 3.13 sets forth a list of all employees, including employees on
leave of absence or disability leave, employed in the Business and all
individuals who were employed in the Business on a full-time basis at any time
within the past 12 months (collectively, the "Employees") (broken down by
appropriate categories) and independent contractors providing auctioneer or
sales services to the Sellers, and the Sellers have previously provided the
purchasers with a schedule containing the current compensation levels therefor
(broken down by base salary for 1999 and broken down by base salary, other
compensation (excluding 401(k) matching contributions) and total compensation
for each of the three calendar years in the period ending December 31, 1998),
and all accrued benefits therefor, including, without limitation, accrued
vacation and sick days, and, in the case of individuals no longer employed, the
last day of employment and reason for termination. Schedule 3.13 indicates any
Employees that are on leave of absence or disability leave. There are no labor
controversies pending or, to any of the Seller's knowledge, threatened, between
any Seller and any of the Employee. No Seller is a party to any collective
bargaining agreement or other labor union contract applicable to any of the
Employees, and no Seller has any knowledge of any strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to any of the
Employees.
SECTION 3.14 TAXES
Except as set forth on Schedule 3.14, (a) the Sellers have timely filed
or will file, all returns required to be filed by it with respect to Taxes
pertaining to the Assets or the Business prior to the Closing Date, (b) all
Taxes shown to be payable on such returns have been paid or will be paid by the
Sellers, (c) there are no agreements,
<PAGE> 20
waivers or consents providing for an extension of time with respect to the
assessment of any such Taxes or any other agreements, waivers or consents agreed
to by any Seller with, issued to, or for the benefit of, any taxing authority,
(d) no deficiency for any Tax has been asserted or assessed by a taxing
authority against any Seller pertaining to the Assets or Business, and (e) all
required deductions and withholdings at source with respect to the Assets and
the Business have been made and either remitted by the Sellers to the relevant
taxing authorities in all applicable jurisdictions or, if not delinquent, set
aside in accounts for such purpose or accrued, reserved against and entered upon
the books of the Sellers.
SECTION 3.15 CONDUCT IN THE ORDINARY COURSE; ABSENCE OF CHANGES
Since the date of the Unaudited Balance Sheet, the Business has been
conducted in the ordinary course and consistent with past practice. As
amplification and not limitation of the foregoing, since the date of the
Unaudited Balance Sheet no Seller has:
(i) sold, transferred, leased, subleased, licensed or otherwise
disposed of any material properties or assets used in connection with
the Business other than sales of inventory held for auction in the
ordinary course of Sellers' business;
(ii) (A) granted any increase, or announced any increase in the
wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable to any of the Employees, including, without limitation,
any increase or change pursuant to any Benefit Plan, or (B) established
or increased or promised to increase any benefits under any Benefit
Plan, in either case except as required by law or applicable collective
bargaining agreements;
(iii) suffered the loss of any significant customers or employees,
individually or in the aggregate; or
(iv) suffered any Material Adverse Effect.
SECTION 3.16 SUBSIDIARIES; SHAREHOLDERS
(a) The Sellers, other than Forke, Inc., include all subsidiaries of
Forke, Inc. other than Forke Credit Corporation and Forke Acceptance
Corporation. Each of such other Sellers is a direct or indirect wholly owned
subsidiary of Forke, Inc.
(b) Ring Power and Thompson each own 29.31% of the outstanding capital
stock of Forke, Inc. There are 13 additional shareholders of Forke, Inc. that
together own the remaining 41.38% of the outstanding capital stock of Forke,
Inc. and no such
<PAGE> 21
other shareholder owns in excess of 6.2% of the outstanding capital stock of
Forke, Inc. Except as set forth on Schedule 3.16, there are no other equity
securities or options, warrants or other rights to acquire equity securities in
Forke, Inc. or other instruments evidencing conversion rights for such
securities outstanding and no agreements or understandings exist with respect to
the future issuance of such securities rights or other instruments.
SECTION 3.17 FINANCIAL INFORMATION
(a) The Sellers have provided to the Purchaser true and complete copies
of (i) excerpts from the audited consolidated balance sheets of the Sellers
dated as of December 31, 1997, 1996, and 1995 showing all liabilities of the
Sellers and excerpts from the audited consolidated income statements for the
Sellers for the years ended December 31, 1997, 1996 and 1995 (such audited
consolidated balance sheets and audited consolidated income statements, together
with the audited consolidated statements of cash flow and shareholders' equity
and notes thereto, collectively, the "Audited Financial Statements") showing the
Sellers' auction revenues, together with notes to the Audited Financial
Statements and (ii) excerpts from the unaudited consolidated balance sheet for
the Sellers as of December 31, 1998 (the "Unaudited Balance Sheet") showing all
liabilities of the Sellers and excerpts from the unaudited consolidated income
statements for the Sellers for the 12-month period ended December 31, 1998 (such
unaudited consolidated balance sheet and unaudited consolidated income
statement, together with the unaudited consolidated statements of cash flow and
shareholders' equity for such period and notes thereto, collectively, the
"Unaudited Financial Statements" and, together with the Audited Financial
Statements, being referred to herein, collectively, as the "Financial
Statements"), showing the Sellers' auction revenues. The Financial Statements
present fairly, in all material respects, the financial condition and results of
operations of the Sellers, on a consolidated basis, as of the dates thereof or
for the periods covered thereby, and the Financial Statements have been prepared
in accordance with GAAP, consistently applied, throughout the periods covered
thereby, except as described in the notes thereto and except that the Unaudited
Financial Statements do not contain the notes required by GAAP. Except as set
forth in the Unaudited Balance Sheet, the Sellers have no liabilities,
contingent or otherwise, other than (x) liabilities incurred in the ordinary
course of business subsequent to the date of the Unaudited Balance Sheet and (y)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Sellers, on a
consolidated basis.
(b) Forke, Inc. has provided to the Purchaser, on a schedule dated even
date
<PAGE> 22
herewith, true and accurate information regarding the gross auction sales and
commissions and profits and losses on owned inventory of the Business since
January 1, 1994, by calendar quarter and broken down by inventory, truck sales
and traditional.
SECTION 3.18 BROKERS
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement or any of the Ancillary Agreements that could
provide the basis for, or result in, any claim against the Purchaser or the
Assets, based upon arrangements made by or on behalf of any Seller or any
Shareholder.
SECTION 3.19 SECURITIES MATTERS
(a) Forke, Inc. has full power and authority to own the RBA Shares and
the Warrants to be delivered to it hereunder and the Common Shares of RBA
issuable upon exercise of the Warrants (collectively, the "Securities").
(b) The Securities will be acquired for investment for Forke, Inc.'s own
account, and not with a view to the distribution of any part thereof (other than
to Shareholders), and Forke, Inc. has no present intention of selling, granting
any participation in, or otherwise distributing the same (including to any
Shareholders) in a manner contrary to the Securities Act, or applicable state or
other securities laws.
(c) The Sellers have received copies of RBA's prospectus filed under
Rule 424(b) of the Securities Act with respect to the Purchaser's initial public
offering, and of RBA's Reports on Form 6-K filed with the SEC for the quarters
ended March 31, June 30 and September 30, 1998 (collectively, "RBA's SEC
Filings").
(d) The Sellers are able to fend for themselves in the transactions
contemplated by this Agreement, can bear the economic risk of their investment
(including possible complete loss of such investment) for an indefinite period
of time and have such knowledge and experience in financial or business matters
that they are capable of evaluating the merits and risks of the investment in
the Securities. None of the Sellers has been organized for the purpose of
acquiring the Securities. The Sellers understand that the Securities have not
been registered under the Securities Act, or under the securities laws of any
jurisdiction, by reason of reliance upon certain exemptions, and that the
reliance of the Purchaser and RBA on such exemptions is predicated upon the
accuracy of the representations and warranties in this Section. Forke, Inc. is
familiar with Regulation D promulgated under the Securities Act and is an
"accredited investor" as defined in Rule 501(a) of such Regulation D.
<PAGE> 23
(e) The Sellers understand that the Securities are characterized as
"restricted securities" under the U.S. federal securities laws inasmuch as they
are being acquired from the Purchaser in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act only in certain limited
circumstances and in accordance with the terms and conditions set forth in the
legend described in subsection (f) below. In this connection, the Sellers
represent that they are familiar with Rule 144 promulgated under the Securities
Act, as presently in effect, and understand the resale limitations imposed
thereby and by the Securities Act.
(f) It is understood that the certificates evidencing the Securities may
bear the following or a similar legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE
STATE LAW, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED,
OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (i) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES,
(ii) THIS CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE
HOLDER OF THESE SECURITIES SATISFACTORY TO THIS CORPORATION STATING THAT
SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (iii) THIS CORPORATION
OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.
SECTION 3.20 DISCLOSURE
None of the foregoing representations or warranties contains any untrue
statement of a material fact, and no Seller has omitted to state any material
fact necessary to make such representation or warranty, or to Sellers'
knowledge, any other material disclosure provided to the Purchaser, not
misleading. Except as provided herein, to Seller's knowledge, there are no facts
or information regarding the Business or the Assets that the Sellers have not
disclosed in this Agreement that could reasonably be expected to have, singly or
in the aggregate, a Material Adverse Effect.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
<PAGE> 24
The Purchaser represents and warrants to the Sellers as follows:
SECTION 4.01 INCORPORATION AND AUTHORITY
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of Washington and has all necessary corporate power
and authority to enter into this Agreement and each of the Ancillary Agreements
to which it is a party, to carry out its obligations hereunder and thereunder,
to consummate the transactions contemplated hereby and thereby, to own, operate
or lease the properties now owned, operated or leased by the Company and to
carry on the business now being conducted by the Purchaser. Purchaser is a
wholly-owned subsidiary of RBA. The execution and delivery of this Agreement and
each of the Ancillary Agreements to which it is a party, the performance of its
obligations hereunder and thereunder and the consummation by the Purchaser of
the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of the Purchaser. This Agreement has
been duly executed and delivered by the Purchaser, and (assuming due
authorization, execution and delivery by the other parties thereto) constitutes
a legal, valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms. At the Closing, each of the Ancillary
Agreements to which the Purchaser is a party shall be duly executed and
delivered by the Purchaser, and (assuming due authorization, execution and
delivery by the other parties thereto) shall constitute a legal, valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms. RBA is a corporation duly amalgamated, validly
existing and in good standing under the laws of Canada, and has all necessary
corporate power and authority to enter into the Warrant and the Registration
Rights Agreement. At the Closing, the Warrant and the Registration Rights
Agreement shall be duly executed and delivered by RBA and shall constitute a
legal, valid and binding obligation of RBA, enforceable against RBA in
accordance with its terms.
SECTION 4.02 NO CONFLICT
The execution, delivery and performance by the Purchaser of this
Agreement and of each of the Ancillary Agreements to which it is a party and the
execution, delivery and performance by RBA of the Warrant and the Registration
Rights Agreement and the issuance of the RBA Shares by RBA pursuant to the terms
hereof, do not, and will not (a) violate or conflict with the Articles of
Incorporation or Articles of Amalgamation, as applicable, or Bylaws of the
Purchaser or RBA, (b) conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to the
Purchaser or RBA, or (c) except as will not have a material adverse effect on
the ability of the Purchaser or RBA to consummate the transactions contemplated
by this Agreement, the Ancillary
<PAGE> 25
Agreements to which it is a party, the Warrant and the Registration Rights
Agreement, result in any breach of, or constitute a default (or event which with
the giving of notice or lapse of time, or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any lien or other encumbrance on
any of the assets or properties of the Purchaser or RBA (other than liens and
encumbrances in favor of lenders providing financing for the transactions
contemplated by this Agreement) pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument relating to such assets or properties, to which the Purchaser or RBA
is a party or by which any of such assets or properties is bound or affected.
SECTION 4.03 CONSENTS AND APPROVALS
The execution, delivery and performance by the Purchaser of this
Agreement and of each Ancillary Agreement to which it is a party and the
execution, delivery and performance by RBA of the Warrant and the Registration
Rights Agreement and the issuance of the RBA Shares by RBA pursuant to the terms
hereof, do not, and will not, require any consent, approval, exemption,
authorization or other action by, or filing with or notification to, any (a)
court, administrative agency or other governmental or regulatory authority or
(b) third party, except the notification requirements of the HSR Act and
post-Closing filings under the federal securities laws.
SECTION 4.04 LITIGATION
No claim, action, proceeding or investigation is pending or, to the
Purchaser's knowledge, threatened (a) against Purchaser or RBA or any of their
respective assets or properties, employees or business, before any federal,
state or municipal court, or administrative, governmental or regulatory
authority or body that, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the Purchaser's or RBA's business,
condition (financial or otherwise), results of operations or prospects, or (b)
which seeks to delay or prevent the consummation of, or which could reasonably
be expected to adversely affect the Purchaser's or RBA's ability to consummate
the transactions contemplated hereby, by the Ancillary Agreements to which it is
a party and by the Warrant and the Registration Rights Agreement. Neither the
Purchaser nor any of its assets or properties or business is subject to any
order, writ, judgment, injunction, decree, determination or award that could
reasonably be expected to have a material adverse effect on the Purchaser's
business, condition (financial or otherwise), results of operations or
prospects.
SECTION 4.05 BROKERS
<PAGE> 26
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement or any of the Ancillary Agreements based upon
arrangements made by or on behalf of the Purchaser.
SECTION 4.06 DISCLOSURE
Neither RBA's SEC Filings nor any of the foregoing representations or
warranties of the Purchaser in this Article IV contains any untrue statement of
a material fact, and the Purchaser has not omitted to state any material fact
necessary to make such representation or warranty, or any other disclosure
provided to the Sellers, not misleading.
SECTION 4.07 RBA SHARES AND WARRANT SHARES
The RBA Shares will be duly authorized, validly issued, fully paid and
nonassessable when issued in accordance with the terms of this Agreement and the
Shares issued upon exercise of the Warrants will be duly authorized, validly
issued, fully paid and nonassessable when issued in accordance with the terms of
the Warrants.
ARTICLE V. ADDITIONAL AGREEMENTS
SECTION 5.01 CONDUCT OF BUSINESS PRIOR TO THE CLOSING
(a) The Sellers covenant and agree that, between the date hereof and the
Closing Date, they shall (i) conduct the Business in the ordinary course and
consistent with its prior practice, (ii) use their best efforts to keep
available to the Purchaser the services of the Employees and (iii) use their
best efforts to preserve the current relationships of the Sellers with their
customers and other persons with which they have relationships relevant to the
Business.
(b) The Sellers covenant and agree that, without the prior written
consent of the Purchaser (which consent shall not be unreasonably withheld),
they will not, prior to the latest date that any Asset may be transferred
pursuant to Section 5.10, (i) sell, transfer or otherwise dispose of (or agree
to sell, transfer or otherwise dispose of) any of the assets related to the
Business (other than as contemplated by this Agreement); (ii) create, or permit
to be created, any lien, security interest or other charge or encumbrances on
any of the Assets, other than any liens, security interests, charges and
encumbrances of the type described in clauses (i) through (iii) of Section 3.10;
(iii) except as specifically contemplated by Section 5.06 hereof, establish or
materially increase any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase or other
employee benefit plan, or
<PAGE> 27
otherwise increase the compensation payable or to become payable to any
Employee, except as may be required by law or applicable collective bargaining
agreements; (iv) enter into any employment or severance agreement with any
Employees or establish, adopt, enter into or amend any collective bargaining
agreement, except as may be required by law or any applicable collective
bargaining agreements; or (v) except as required by law, disclose any
competitive or confidential information or provide any customer lists to any
third party.
SECTION 5.02 ACCESS TO INFORMATION
(a) From the date hereof until the Closing Date, upon reasonable notice,
the Sellers shall, and shall cause each of their officers, directors, employees,
auditors and agents to, (i) afford the officers, employees and authorized agents
and representatives of the Purchaser reasonable access to the offices,
properties, books and records of the Sellers relating to the Business or the
Assets and (ii) furnish to the officers, employees and authorized agents and
representatives of the Purchaser such additional financial and operating data
and other information regarding the Business or the Assets as the Purchaser may
from time to time reasonably request; provided, however, (i) that such
investigation shall be conducted in a manner so as not to interfere unreasonably
with any of the businesses or operations of the Sellers and (i) the Sellers
shall not be required to provide the Audited Financial Statements and the
Unaudited Financial Statements (or the general ledger, trial balances, or other
similar financial records supporting such financial statements, except to the
extent disclosure thereof supports the disclosed excerpts and does not disclose
the otherwise undisclosed portions of such financial statements) until the
expiration or termination of the applicable waiting periods under the HSR Act.
(b) Without limiting the generality of Section 5.02(a) above, as soon as
practicable after the date hereof, each Seller shall deliver to the Purchaser or
its representatives a true, correct and complete copy (or, in the case of any
unwritten Benefit Plan, a description) of each Benefit Plan (and all amendments
thereto), along with, to the extent applicable to the particular Benefit Plan,
the following information: (i) copies of the annual reports (Form 5500 series),
and all attachments thereto, filed with respect to such Benefit Plan for the
last three years; (ii) copies of the summary plan descriptions, summary annual
reports, summaries of modifications and all employee manuals or communications
filed or distributed with respect to such Benefit Plan during the last three
years; (iii) copies of any insurance contracts or trust agreements (and any
amendments thereto) through which such Benefit Plan is funded; (iv) copies of
the most recently prepared actuarial report and financial statements prepared
for such Benefit Plan; and (v) a copy of the most recent determination letter
issued by the Internal Revenue Service ("IRS") with respect to such Benefit
Plan.
<PAGE> 28
(c) If necessary to facilitate the resolution of any claims made by or
against or incurred by the Sellers prior to the Closing, upon reasonable notice,
the Purchaser shall, after the Closing, at the Sellers' expense, (i) afford the
Sellers' officers, employees and authorized agents and representatives
reasonable access to the offices, properties, books and records of the Purchaser
relating to the Business or the Assets, (ii) furnish to the officers, employees
and authorized agents and representatives of the Sellers such additional
financial and other information regarding the Business or the Assets as the
Sellers may from time to time reasonably request and (iii) make available to the
Sellers, the employees of the Purchaser whose assistance, testimony or presence
is necessary to assist the Sellers in evaluating any such claims and in
defending such claims, including the presence of such persons as witnesses in
hearings or trials for such purposes; provided, however, that such investigation
shall be conducted in a manner so as not to interfere unreasonably with any of
the businesses or operations of the Purchaser or any of its affiliates or
subsidiaries.
SECTION 5.03 BOOKS AND RECORDS
(a) If, in order (i) to effect the orderly liquidation of the Excluded
Assets and the completion of the Sellers' business activities, or (ii) properly
to prepare documents required to be filed with governmental authorities or the
Sellers' financial statements, it is necessary that any Seller or its successors
be furnished with additional information relating to the Business or the Assets,
and such information is in the possession of the Purchaser, the Purchaser agrees
to use its reasonable best efforts to furnish or provide access to such
information to such Seller, at such Seller's cost and expense.
(b) If, in order properly to prepare documents required to be filed with
governmental authorities or its financial statements, it is necessary that the
Purchaser or its successors be furnished with additional information relating to
the Business, the Assets or the Sellers, and such information is in the
possession of the Sellers, the Sellers agree to use their reasonable best
efforts to furnish such information to the Purchaser, at the Purchaser's cost
and expense.
(c) The Sellers covenant and agree to retain and preserve in a secure,
accessible facility in Lincoln, Nebraska, Jacksonville, Florida or another
mutually agreeable location, for a period of 12 months following the Closing,
all the Sellers' general, financial, personnel and other records (including,
without limitation, all appraisal files, records pertaining to consignments and
commission rates, offers, commitments, purchases and sales, invoices and other
relevant documents) pertaining to the Business and to afford the officers,
employees and authorized agents and representatives of the Purchaser full access
to such records for any purpose deemed appropriate by the Purchaser, including,
but not limited to, making copies thereof.
<PAGE> 29
SECTION 5.04 CONFIDENTIALITY
(a) The terms of the letter agreement dated December 3, 1998 (the
"Confidentiality Agreement") between Forke Auctioneers, Inc. and RBA are hereby
incorporated by reference and shall continue in full force and effect until the
Closing except as required by the securities laws and as contemplated by Section
9.03, at which time the obligations of RBA under such Confidentiality Agreement
and under this Section 5.04 shall terminate; provided, however, that the
Confidentiality Agreement shall terminate only in respect of that portion of the
Information (as defined in the Confidentiality Agreement) exclusively relating
to the transactions contemplated by this Agreement. If the Closing does not
occur, or if this Agreement is terminated pursuant to Section 8.01 hereof, the
Confidentiality Agreement shall continue in full force and effect in respect of
such Information and RBA and the Purchaser shall promptly return to Forke, Inc.,
on behalf of the Sellers, all copies of any such Information and any analyses,
reports, compilations or summaries based, in whole or in part, on such
Information.
(b) The Sellers, their affiliates and their respective representatives
will keep confidential any and all proprietary information obtained from the
Purchaser or its affiliates concerning the Purchaser, its affiliates or its
business. Immediately following the Closing, or if this Agreement is terminated
pursuant to Section 8.01 hereof or otherwise prior to Closing, the Sellers shall
promptly return to the Purchaser all copies of any such information and any
analyses, reports, compilations or summaries based, in whole or in part, on such
proprietary information. In addition, after the Closing, the Sellers and such
affiliates and representatives will keep confidential any and all proprietary
information regarding the Assets or the Business and shall treat all such
information as the Purchaser's confidential and proprietary information.
Immediately following the Closing, the Sellers shall destroy any printed copies
and eliminate all electronic and other versions of Sellers' promotional
literature, customer lists and other sales related materials and software
pertaining to the Business and not used exclusively in the business of Forke
Credit other than those copies and versions provided to the Purchaser pursuant
to Section 2.01(a)(i) hereof. If, following the Closing, the Sellers become
aware of any employee or former employee of the Sellers, or any other third
party, that has in such party's possession any form of any such materials, the
Sellers shall immediately inform the Purchaser of the identity of such party and
of the nature of the materials in such party's possession, and the Sellers shall
use reasonable efforts to cause such party (i) to immediately cease using any
such material, and (ii) to convey such material to the Purchaser.
SECTION 5.05 REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS
Each party hereto will use its best efforts to obtain all
authorizations, consents,
<PAGE> 30
orders and approvals of all federal, state, local and foreign regulatory bodies
and officials, and of any lessors or other third parties, that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and the Ancillary Agreements to which it
is a party, and will cooperate fully with the other parties in promptly seeking
to obtain all such authorizations, consents, orders and approvals. The Purchaser
and the Sellers agree to make an appropriate filing of a Notification and Report
Form pursuant to the HSR Act with respect to the transactions contemplated
hereby on the date hereof and to supply promptly any additional information and
documentary material that may be requested pursuant to the HSR Act, with any
supplemental filings, correspondence or other communications with the
appropriate reporting authorities to be coordinated by the Purchaser's counsel.
The parties hereto will not take any action that will have the effect of
delaying, impairing or impeding the receipt of any required approvals. The
Purchaser, on the one hand, and the Sellers, on the other hand, shall pay their
own respective expenses in connection with the preparation of the Notification
and Report Forms and the Purchaser shall be responsible for the filing fees
required by the HSR Act.
SECTION 5.06 EMPLOYEES
(a) The Purchaser or an affiliate of the Purchaser will, after the
execution of this Agreement, offer employment to all the Employees identified on
Schedules 6.02(j)(A) and 6.02(j)(B) and otherwise identified in Section 6.02(j),
and such other Employees as the Purchaser may elect, upon terms (subject to the
next sentence) that are substantially equivalent to those provided to
similarly-situated employees of the Purchaser, conditioned and effective upon
the Closing and, unless otherwise agreed by the Sellers and the Purchaser, the
Sellers will terminate all such Employees who accept employment with Purchaser
at the Closing. The Sellers agree that they shall use their best efforts to
encourage each Employee offered employment by the Purchaser to accept such
offer. With respect to Scott Forke, Michael Rich, Michael Groves and Gary
Seybold, the Purchaser shall compensate such Employees (through an aggregate of
base salary and signing bonus) at the annual rate of $100,000. The Sellers shall
be entitled, but shall not be required, to pay the Employee's listed on
Schedules 6.02(j)(A) and 6.02(j)(B) and otherwise identified in Section 6.02(j),
additional compensation in excess of the amount to be paid to such employees by
the Purchaser (the "Additional Compensation") in order to induce such Employees
to accept employment with the Purchaser. To the extent that Sellers elect to pay
such Additional Compensation, Sellers agree to pay such Additional Compensation
in equal monthly installments in the form of severance payments over the period
from the Closing Date until December 31, 1999 (or a proportionately reduced
amount paid over a shorter period in case of termination of employment by
<PAGE> 31
the Purchaser), and such Employees' total monthly compensation during the period
from the Closing date until December 31, 1999 will not exceed their average
monthly compensation in effect prior to the Closing without the prior written
approval of the Purchaser.
(b) To the extent that duration of service is relevant for purposes of
eligibility, vesting or benefit accrual under the Purchaser's vacation plan and
employee stock purchase program (but not for any other purpose), such plan and
program shall credit each Employee hired by the Purchaser for service prior to
the Closing with the Sellers.
SECTION 5.07 TRANSFER FEES AND TAXES
Each of the Purchaser and the Sellers shall be liable for and pay the
sales, transfer and similar Taxes, charges or fees to be paid by such party by
applicable statutes or regulations as a result of the sale and transfer of the
Assets contemplated hereby; provided, however, that with respect to any such
Taxes, charges or fees or related filings that may arise from the transfer of
Seller's Real Property to the Purchaser, the provisions of Seller's Real
Property Agreements shall govern. The parties shall cooperate in the filing of
all necessary documentation and Tax returns, reports and forms with respect to
such Taxes, charges and fees.
SECTION 5.08 CHANGE OF NAMES AND TELEPHONE NUMBERS; FORKE
CREDIT CORPORATION
As promptly as practicable after the Closing, the Sellers will execute
such applications to governmental authorities, consents and other documents and
take such other action, and will cause their affiliates to execute such
applications, consents and other documents and take such other action, as the
Purchaser may reasonably request in order (a) to change each of the Sellers' and
such affiliates' names to one not involving the use of the word "Forke" or
"Miller" and (b) to enable the Purchaser to use and register, as the Purchaser
may desire, such name and any variation thereof and each of the Sellers'
telephone numbers; provided, however, that (i) the Sellers may use the Forke
name during the period immediately following the Closing to the extent required
to comply with the Sellers' obligations under Section 5.09(a) hereof, and (ii)
Forke Credit Corporation (but no assignee or successor thereto, by operation of
law or otherwise) may continue to use such name to conduct its financing
business as currently conducted, but only for so long and to the extent that it
does not, directly or indirectly, use such name in connection with any
auction-related business. The right granted in the preceding proviso to use the
name "Forke Credit Corporation" shall automatically terminate upon the earlier
of (x) Forke Credit Corporation's using such name (A) to conduct business other
than its financing business as currently conducted
<PAGE> 32
or (B) in connection with any auction-related business, and (y) the date twelve
(12) months after Closing.
SECTION 5.09 POST-CLOSING FORKE AUCTIONS
(a) The Sellers shall be responsible for conducting any auctions that,
as of the Closing, auction brochures have previously been distributed or for
which an auction brochure is scheduled for its press run during the five
Business Days immediately following the Closing. The Purchaser agrees to assist
the Sellers in conducting such auctions by providing the Purchaser's personnel
and other resources to the extent consistent with the Purchaser's business
requirements at the Purchaser's fully-loaded cost. The Sellers and the Purchaser
may agree that any such auctions shall instead be conducted by the Purchaser
pursuant to Section 5.09(b) below.
(b) If, as of the Closing, the Sellers have contracted or committed in
writing for the sale of equipment by auctions other than those described in
Section 5.09(a) above, the Purchaser agrees to conduct such auctions, on behalf
of the Sellers for a fee equal to 6% of the aggregate gross auction sales
(reduced on a deal-by-deal basis for direct auction expenses (including, but not
limited to, costs related to the auction site) previously paid by the Sellers)
of such equipment and upon such terms and conditions as are provided in the
Purchaser's standard straight commission auction contract. Such fee may be
retained by the Purchaser from gross auction sales it collects, on behalf of the
Sellers, in connection with the auctions. To the extent any Seller is the owner
or lessee of any site used for any such auction, such Seller hereby authorizes
the Purchaser, its employees and agents to enter upon such site for the purpose
of conducting such auction at a fair rental rate. Notwithstanding the
Purchaser's role in conducting any such auctions under this Section, the Sellers
shall remain solely responsible for all obligations to consignors and others
with respect to the contracts or commitments any of the Sellers or their agents
made to sell equipment at such auctions. Promptly following the Closing, the
Sellers shall provide notice to each consignor or other party for whom the
Purchaser will be conducting auctions on the Sellers' behalf to the effect that
the Purchaser shall conduct such auction on behalf of the Sellers and such
notice will provide such consignor or other party the opportunity to cancel
their contract with the Sellers. With respect to any post-closing auction that
the Purchaser is conducting on Seller's behalf pursuant to this Section 5.09(b),
the Purchaser shall not be required to advertise in its brochures any equipment
for any consignors for which the Sellers have not delivered such notice.
SECTION 5.10 RIGHT TO PURCHASE ADDITIONAL ASSETS
(a) The Purchaser may elect, by providing written notice thereof to the
Sellers at any time prior to the third Business Day before the Closing Date,
that (i) any
<PAGE> 33
or all of the scheduled classes of Computer Equipment and Tangible Personal
Property owned by the Sellers be included in the Assets transferred to the
Purchaser at the Closing and/or (ii) all of the Sellers' right, title and
interest in, to and under any or all of the leases by which the Sellers lease
Computer Equipment or Tangible Personal Property be assigned to the Purchaser at
the Closing and included in the Assets. The Purchaser shall, to the extent set
forth in Section 2.02(a), assume the obligations of the Sellers under any such
assigned leases. The Base Purchase Price payable at the Closing shall be
increased by the aggregate Book Value (set forth in Schedule 3.08) of any
Seller-owned Computer Equipment and Tangible Personal Property purchased by the
Purchaser. Notwithstanding the foregoing, with respect to (x) any Lease assumed
by the Purchaser after the Closing pursuant to this Section 5.10 or (y) any of
Seller's Real Property transferred to RBP after the Closing, the Purchaser may
elect to condition the purchase of any Tangible Personal Property situated on
the premises subject to such Lease or on such parcel of Sellers' Real Property
upon the assumption of such Lease or the closing of the transfer of such parcel
of Sellers' Real Property, in which case the payment by the Purchaser of any
additional purchase price required with respect to such Tangible Personal
Property shall take place on the date such Lease is assumed or the closing date
of the transfer of such parcel of Seller's Real Property, as the case may be.
(b) The Purchaser may elect, by providing written notice thereof to the
Sellers at any time prior to the third Business Day before the Closing Date,
that the Sellers assign to the Purchaser all of their right, title and interest
in, to and under any or all of the Leases and the Purchaser shall, to the extent
set forth in Section 2.02(a), assume the obligations of the Sellers under any
such assigned Lease. Notwithstanding the foregoing, the Purchaser may elect to
condition the Purchaser's assumption of any Lease upon satisfactory completion,
in the Purchaser's sole discretion, of an environmental review of the real
property subject to such Lease. Unless the Purchaser notifies Forke, Inc. within
30 days after the Closing, that it is not so satisfied (stating the reasons
why), the Purchaser shall be conclusively presumed to be satisfied with such
review and shall assume such Lease effective on the Closing Date in accordance
with the terms of this Section 5.10. If the Purchaser has elected to
conditionally assume any Lease under this Section 5.10(b), the Purchaser shall
reimburse the Sellers for the rent obligations and other obligations under the
Lease for the period from the Closing until the day that the Purchaser notifies
the Sellers that it will not assume such Lease due to the environmental review.
Notwithstanding the foregoing, and solely with respect to the Lease for Sellers'
existing facility in Lincoln, Nebraska, the Purchaser may elect to assume such
Lease up to 30 days following the Closing Date by providing written notice to
the Sellers at any time prior to such 30th day, and the Purchaser will not be
responsible for the rent obligations and other obligations under such Lease
unless and until the Purchaser assumes such Lease. The Sellers and the
<PAGE> 34
Purchaser shall prorate amounts prepaid, deposits and amounts due under any
assigned Lease with respect to property taxes and utilities, based on the number
of days in the billing period preceding and including, and following the date of
the assignment.
(c) The applicable Sellers shall execute and deliver additional Bills of
Sale and Assignment Agreements and such other instruments as may be reasonably
requested by the Purchaser to reflect any transfers and assignments which occur
after the Closing Date pursuant to this Section 5.10. The Purchaser shall
execute and deliver additional Assignment and Assumption Agreements as may be
reasonably requested by the Sellers to reflect any such assumptions which occur
after the Closing Date.
(d) The Sellers agree to promptly provide to the Purchaser such evidence
as the Purchaser shall reasonably request regarding the calculation of the Book
Value of any item or items of Tangible Personal Property.
SECTION 5.11 ADDITIONAL MATTERS
Ring Power and Thompson (the "Controlling Shareholders") each covenant
and agree (i) to execute and deliver, on or prior to the Closing Date, an
Auction Agreement and a Shareholder Noncompetition Agreement with the Purchaser,
(ii) to provide, or cause to be provided, to the Purchaser, within 60 days
following the end of each calendar year beginning with calendar year 1999 and
for so long as the Sellers shall have any indemnity obligation to the Purchaser
under this Agreement, a letter from a nationally recognized certified public
accounting firm certifying as to the compliance with clause (iii) below, and
(iii) to cause Forke, Inc. to maintain a minimum net worth (defined as total
assets less total liabilities other than liabilities expressly subordinated to
Sellers' obligations to Purchaser under this Agreement (with subordination
provisions reasonably satisfactory to Purchaser)), for a period of two years
after the Closing Date, equal to at least $10,000,000. On or prior to the
Closing Date, Randal Ringhaver and Dewitt Thompson shall each provide a letter
to the Purchaser certifying that Ring Power and Thompson Machinery, L.P., a
limited partnership for which Thompson is the general partner, each hold a
Caterpillar dealer franchise within Florida and Tennessee, respectively.
SECTION 5.12 LINCOLN FACILITY
The Sellers covenant and agree to keep the Sellers' existing facility in
Lincoln, Nebraska open for a period of at least 30 days after the Closing Date.
During such period, the Sellers shall continue to employ all of the Sellers'
existing staff at such facility, together with the Sellers' field administrative
staff wherever located. The
<PAGE> 35
Sellers shall cause such Employees, in addition to any activities on the
Sellers' behalf, to assist the Purchaser in the transfer of the Assets and in
obtaining access to the information and records referenced in Section 5.03
hereof. Prior to the expiration of such 30-day period, the Purchaser may
designate, by notice to Forke, Inc., certain of such Employees to whom the
Purchaser intends to offer employment. The Sellers shall use their best efforts
to encourage each such Employee offered employment by the Purchaser to accept
such offer.
SECTION 5.13 OTHER NEGOTIATIONS
None of the Sellers will (and the Sellers will instruct their respective
officers, directors, employees, agents and affiliates on its behalf not to) take
any action to solicit, initiate, seek, encourage or support any inquiry,
proposal or offer from, furnish any information to, or participate in any
negotiations with, any corporation, partnership, person or other entity or group
(other than the Purchaser) regarding any acquisition of any of the Sellers, any
merger or consolidation with or involving any of the Sellers, or any acquisition
of any material portion of the stock or assets of any of the Sellers or enter
into an agreement concerning any of the foregoing with any party other than the
Purchaser.
SECTION 5.14 FURTHER ACTION
Each of the parties hereto shall execute and deliver such documents and
other papers and take such further actions as may be reasonably required to
carry out the provisions hereof and give effect to the transactions contemplated
hereby.
SECTION 5.15 RENTAL PAYMENTS FOR SELLERS' OWNED REAL PROPERTY
For the period of time between the Closing Date and either the closing
date under a Sellers' Real Property Agreement or the date that the Purchaser
notifies the Seller under such Seller's Real Property Agreement that the
Purchaser has elected not to purchase the applicable Seller's Owned Real
Property pursuant to the terms of such agreement, the Purchaser shall pay such
Seller a monthly rent for such property equal to three quarters of one percent
(3/4%) of the purchase price of such property under the applicable Seller's Real
Property Agreement, which amount shall be prorated for any partial month.
SECTION 5.16 TRADEMARK FILINGS
The Sellers will, prior to Closing, file an application to register the
names "Forke Europe," "Forke Auctioneers," "Forke," "Forke Brothers" and "Forke
Truck" in the community trademark registry. The Purchaser will pay the fees and
expenses in connection with such filing.
<PAGE> 36
ARTICLE VI. CONDITIONS TO CLOSING
SECTION 6.01 CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, at or prior
to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects as of the Closing, with the same force and
effect as if made as of the Closing (other than such representatives and
warranties as are made as of another date), and all the covenants contained in
this Agreement to be complied with by the Purchaser on or before the Closing,
including payment of the Base Purchase Price and the Prepaids, shall have been
complied with in all material respects, and the Seller shall have received a
certificate of the Purchaser to such effect signed by a duly authorized officer
thereof.
(b) No Order. No governmental authority or other agency or commission or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and has the
effect of making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions.
(c) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Assets contemplated hereby shall have
expired or been terminated.
(d) Consents. All consents, authorizations and approvals, if any,
necessary for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements shall have been obtained, including,
without limitation, written consents from the applicable landlords to the
assignments of any Leases to be assigned to the Purchaser pursuant to Section
5.10(b), except to the extent the failure to obtain such consent will not have a
material adverse effect on the Sellers.
(e) Ancillary Agreements. The Purchaser shall have duly executed and
delivered to the Sellers counterparts of the Assignment and Assumption Agreement
and the Ancillary Agreements to which it is a party that have not been
previously delivered.
(f) Warrant and RBA Shares. RBA shall have delivered the Warrant and the
RBA Shares.
<PAGE> 37
(g) Registration Rights Agreement. The Purchaser shall have duly
executed and delivered to Forke, Inc. the Registration Rights Agreement.
(h) Legal Opinion. The Sellers shall have received from counsel to the
Purchaser legal opinions from Canadian and U.S. counsel, each addressed to the
Sellers and dated the Closing Date, in form and substance reasonably agreed
among the Sellers and the Purchaser within ten days following the date hereof.
(i) Sellers' Real Property Agreements. The Purchaser shall not be in
material default under any of the Sellers' Real Property Agreements.
(j) Approval by Counsel. All actions, proceedings, instruments, and
documents required to fulfill the conditions set forth in this Section 6.01 or
incident hereto and all other related legal matters shall have been reasonably
satisfactory to the Sellers' counsel, and such counsel shall have been furnished
with such certified copies of such corporate actions and proceedings and such
other instruments and documents as shall have been reasonably requested by such
counsel.
To the extent the closing of any transaction contemplated by Section
5.10 is to take place after the Closing, the obligations of the Sellers to
consummate such transaction shall be subject to the prior fulfillment of each of
the foregoing conditions (treating the closing of such transaction as the
Closing for purposes of each condition).
SECTION 6.02 CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, at or prior
to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Sellers contained in this Agreement shall be true and correct
in all material respects as of the Closing, with the same force and effect as if
made as of the Closing (other than such representations and warranties as are
made as of another date), and all the covenants contained in this Agreement to
be complied with by the Sellers on or before the Closing shall have been
complied with in all material respects, and the Purchaser shall have received a
certificate of each of the Sellers to such effect signed by a duly authorized
officer thereof.
(b) No Order. No governmental authority or other agency or commission or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and has the
effect of making the
<PAGE> 38
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions.
(c) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Assets contemplated hereby shall have
expired or been terminated.
(d) Consents. All consents, authorizations and approvals, if any,
necessary for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements shall have been obtained, including,
without limitation, written consents, in form and substance satisfactory to the
Purchaser, from the applicable landlords to assignments of any Leases to be
assigned to the Purchaser pursuant to Section 5.10(b), except to the extent the
failure to obtain such consent will not have a Material Adverse Effect.
(e) Ancillary Agreements. The Sellers shall have duly executed and
delivered to the Purchaser the Bill of Sale, the Assignment and Assumption
Agreement and the Ancillary Agreements to which they are parties that have not
been previously delivered.
(f) Shareholder Documents. The Purchaser shall have received the
Shareholder Noncompetition Agreements.
(g) Sellers' Real Property Agreements. None of the Sellers shall be in
material default under any of the Sellers' Real Property Agreements.
(h) Letters Regarding Ring Power and Thompson. The Purchaser shall have
received the letters from Randal Ringhaver and Dewitt Thompson referenced in
Section 5.11 hereof.
(i) Legal Opinion. The Purchaser shall have received from counsel to the
Sellers a legal opinion addressed to the Purchaser and dated the Closing Date in
form and substance reasonably agreed among the Sellers and the Purchaser within
ten days following the date hereof.
(j) Minimum Number of Employees. (i) Not less than 75% of all
auctioneers listed on Schedule 6.02(j)(A) and 80% of all sales representatives
listed on Schedule 6.02(j)(B), shall have accepted the Purchaser's offer of
employment pursuant to Section 5.06(a), (ii) Robert Whitsit, Greg Forke, Scott
Forke, Michael Rich and Gary Seybold, shall have accepted such offer of
employment, as evidenced, in each case, by such Employees having executed the
Purchaser's employment agreement in substantially the form attached as Exhibit G
hereto (the effectiveness of which shall be conditioned upon the consummation of
the Closing). Neither the failure of any of the
<PAGE> 39
persons referenced in clause (ii) in this Section 6.02(j) to pass any of the
drug or medical exams under the terms of such person's employment agreement with
the Purchaser, nor the death or disability of any such person prior to the
Closing Date shall cause the Sellers to fail to meet the conditions set forth in
this Section 6.02(j), which persons shall be treated as though they accepted
employment hereunder.
(k) Approval by Counsel. All actions, proceedings, instruments, and
documents required to fulfill the conditions set forth in this Section 6.02 or
incident hereto and all other related legal matters shall have been reasonably
satisfactory to the Purchaser's counsel, and such counsel shall have been
furnished with such certified copies of such corporate actions and proceedings
and such other instruments and documents as shall have been reasonably requested
by such counsel.
(l) No Material Adverse Change. Since the date of the Unaudited
Financial Statement, there shall have been no damage to or destruction of any
material Asset, or any labor disruption, employee departures or other event,
development or condition of any character, including, without limitation, any
change in the Business, which has had or could reasonably be expected to have a
Material Adverse Effect, provided, however, that employee attrition shall not
constitute a Material Adverse Effect for purposes of this paragraph if the
conditions set forth in Section 6.02(j) above have been satisfied; and provided
further, that a decrease in the number of scheduled auctions or in the amount of
equipment to be auctioned by the Sellers shall not constitute a Material Adverse
Effect under this Agreement.
(m) Release of Liens. All liens, security interests and other
encumbrances on, in or against the Assets shall have been released.
(n) Post-Closing Auction Information. The Purchaser shall have received
all relevant information (including, without limitation, the anticipated date of
sale) regarding all equipment that the Sellers have contracted or committed to
sell by auction on a date after the Closing Date, as referenced in Section 5.09.
(o) Auction Agreements. The Controlling Shareholders shall each have
entered into an Auction Agreement with Purchaser.
ARTICLE VII. INDEMNIFICATION
SECTION 7.01 SURVIVAL
Subject to the limitations and other provisions of this Agreement, the
representations and warranties of the parties hereto contained herein shall
survive and remain in full force and effect, regardless of any investigation
made by or on behalf of the Sellers or the Purchaser, for a period of two years
after the Closing Date; provided,
<PAGE> 40
however, that the representations and warranties set forth in Section 3.14 shall
remain in full force and effect until the applicable period under the statute of
limitations applicable to the subject matter thereof has expired.
SECTION 7.02 INDEMNIFICATION BY THE PURCHASER
(a) The Purchaser agrees, subject to the other terms and conditions of
this Section 7.02, to indemnify the Sellers and their affiliates against and
hold the Sellers and such affiliates harmless from any and all liabilities,
losses, costs, expenses (including, without limitation, reasonable attorneys'
fees) of and damages (collectively, "Losses") to the Sellers and such affiliates
arising out of or with respect to (i) the breach of any representation,
warranty, covenant or agreement of the Purchaser in this Agreement or any of the
Ancillary Agreements, (ii) the use or ownership of the Assets or conduct of the
Business by the Purchaser following the transfer thereto pursuant to the terms
of this Agreement and (iii) the Assumed Liabilities.
(b) No claim may be made against the Purchaser for indemnification
pursuant to this Section 7.02 with respect to any individual Loss unless the
aggregate of all Losses of the Sellers and their affiliates with respect to this
Section 7.02 shall exceed $100,000, in which case the Purchaser shall be
required to pay for the aggregate amount of all such Losses and any additional
Losses; provided, however, that any Losses arising in connection with Section
4.05, 5.07, 5.10(b) or 9.01 or in connection with the Assumed Liabilities shall
not be subject to any such limitation.
(c) No claim may be asserted nor any action commenced against the
Purchaser pursuant to this Section 7.02 or otherwise for breach of any
representation or warranty contained in this Agreement, unless written notice of
such claim or action is received by the Purchaser, describing the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation or warranty on which such claim or
action is based ceases to survive as set forth in Section 7.01, irrespective of
whether the subject matter of such claim or action shall have occurred before or
after such date.
(d) The Sellers agree to give the Purchaser prompt written notice of any
claim, assertion, event or proceeding by or in respect of a third party of which
any Seller has knowledge concerning any Loss as to which any Seller or any
affiliate thereof may request indemnification hereunder or any Loss as to which
the $100,000 amount referred to in Section 7.02(b) may be applied. The Purchaser
shall have the right to direct, through counsel of its own choosing, the defense
or settlement of any such claim or proceeding at its own expense. If the
Purchaser elects to direct the defense of any such claim or proceeding, the
Sellers may participate in such defense,
<PAGE> 41
but in such case the expenses of the Sellers shall be paid by the Sellers. The
Sellers shall provide the Purchaser with access to their records and personnel
relating to any such claim, assertion, event or proceeding during normal
business hours and the Sellers shall otherwise cooperate with the Purchaser in
the defense or settlement thereof, and the Purchaser shall reimburse the Sellers
for all their reasonable out-of-pocket expenses in connection therewith. If the
Purchaser elects to direct the defense of any such claim or proceeding, the
Seller shall not pay, or permit to be paid, any part of any claim or demand
arising from such asserted liability, unless the claim may be settled for less
than the $100,000 amount referred to in Section 7.02(b) or Purchaser consents in
writing to such payment (which consent shall not be unreasonably withheld) or
unless the Purchaser, subject to the last sentence of this Section 7.02(d),
withdraws from the defense of such asserted liability, or unless a final
judgment from which no appeal may be taken by or on behalf of the Sellers is
entered against the Sellers for such liability. If the Purchaser shall fail to
defend, or if, after commencing or undertaking any such defense, the Purchaser
fails to prosecute or withdraws from such defense, the Sellers shall have the
right to undertake the defense or settlement thereof, at the Purchaser's
expense. If the Sellers assume the defense of any such claim or proceeding
pursuant to this Section 7.02(d) and propose to settle such claim or proceeding
prior to a final judgment thereon or to forego any appeal with respect thereto,
then the Sellers shall give the Purchaser prompt written notice thereof and the
Purchaser shall have the right, at the Purchaser's expense, to participate in
the settlement or assume or reassume the defense of such claim or proceeding.
SECTION 7.03 INDEMNIFICATION BY THE SELLERS
(a) Each Seller agrees, subject to the other terms and conditions of
this Section 7.03, jointly and severally, to indemnify the Purchaser and its
affiliates against and hold the Purchaser and its affiliates harmless from any
and all Losses of or to the Purchaser and its affiliates arising out of or with
respect to (i) the breach of any representation, warranty, covenant or agreement
of any of the Sellers in this Agreement or any of the Ancillary Agreements, (ii)
the conduct of the Business prior to the Closing or the use or ownership of the
Assets prior to the transfer to the Purchaser pursuant to the terms of this
Agreement, (iii) the Retained Liabilities, (iv) other than to the extent such
Loss is attributable to the negligence or willful misconduct of the Purchaser,
its employees or agents, the performance by the Purchaser, its employees and
agents of the Purchaser's obligations under Section 5.09, and (v) any of the
Sellers' Employees that are not hired by the Purchaser arising within the scope
of their employment by the Sellers.
(b) No claim may be made against the Sellers for indemnification
pursuant
<PAGE> 42
to this Section 7.03 with respect to any individual Loss unless the aggregate of
all Losses of the Purchaser with respect to this Section 7.03 shall exceed
$100,000, in which case the Sellers shall be required to pay or be liable for
the aggregate amount of such Losses and any additional Losses; provided,
however, that any Losses arising in connection with Sections 3.18, 5.07, 5.09,
5.10(b) or 9.01 shall not be subject to any such limitation.
(c) No claim may be asserted nor any action commenced against the
Sellers pursuant to this Section 7.03 or otherwise for breach of any
representation or warranty contained in this Agreement, unless written notice of
such claim or action is received by Forke, Inc., on behalf of the Sellers,
describing the facts and circumstances with respect to the subject matter of
such claim or action on or prior to the date on which the representation or
warranty on which such claim or action is based ceases to survive as set forth
in Section 7.01, irrespective of whether the subject matter of such claim or
action shall have occurred before or after such date.
(d) The Purchaser agrees to give Forke, Inc., on behalf of the Sellers,
prompt written notice of any claim, assertion, event or proceeding by or in
respect of a third party of which it has knowledge concerning any Loss as to
which it may request indemnification hereunder or any liability or damage as to
which the $100,000 amount referred to in Section 7.03(b) may be applied. The
Sellers shall have the right to direct, through counsel of their own choosing,
the defense or settlement of any such claim or proceeding at their own expense.
If the Sellers elect to direct the defense of any such claim or proceeding, the
Purchaser may participate in such defense, but in such case the expenses of the
Purchaser shall be paid by the Purchaser. The Purchaser shall provide the
Sellers with access to its records and personnel relating to any such claim,
assertion, event or proceeding during normal business hours and shall otherwise
cooperate with the Sellers in the defense or settlement thereof, and the Sellers
shall reimburse the Purchaser for all its reasonable out-of-pocket expenses in
connection therewith. If the Sellers elect to direct the defense of any such
claim or proceeding, the Purchaser shall not pay, or permit to be paid, any part
of any claim or demand arising from such asserted liability unless the claim may
be settled for less than the $100,000 amount referred to in Section 7.03(b) or
Sellers consent in writing to such payment (which consent shall not be
unreasonably withheld) or unless the Sellers, subject to the last sentence of
this Section 7.03(d), withdraw from the defense of such asserted liability or
unless a final judgment from which no appeal may be taken by or on behalf of the
Purchaser is entered against the Purchaser for such liability. If the Sellers
shall fail to defend or, if after commencing or undertaking any such defense,
shall fail to prosecute or shall withdraw from such defense, the Purchaser shall
have the right to undertake the defense or settlement thereof, at the Sellers'
expense. If the Purchaser assumes the defense of any such claim or
<PAGE> 43
proceeding pursuant to this Section 7.03(d) and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then the Purchaser shall give the Sellers prompt written notice
thereof and the Sellers shall have the right, at their own expense, to
participate in the settlement or assume or reassume the defense of such claim or
proceeding.
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 TERMINATION
This Agreement may be terminated upon written notice given at any time
prior to the Closing:
(a) by the mutual written consent of Forke, Inc., on behalf of the
Sellers, and the Purchaser; or
(b) by Forke, Inc., on behalf of the Sellers, or by the Purchaser, if
the Closing shall not have occurred prior to April 30, 1999; provided, however,
that the right to terminate this Agreement under this Section 8.01(b) shall not
be available to (i) the Sellers if the failure by any Seller to fulfill any
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur prior to such date, or (ii) the
Purchaser, if the Purchaser's failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing to occur prior to such date.
SECTION 8.02 EFFECT OF TERMINATION
In the event of termination of this Agreement as provided in Section
8.01, this Agreement shall forthwith become void and there shall be no liability
on the part of any party hereto except (a) as set forth in Sections 5.04 and
9.01 and (b) nothing herein shall relieve either party from liability for any
willful breach hereof.
SECTION 8.03 WAIVER
(a) At any time prior to the Closing, Forke, Inc., on behalf of the
Sellers, may (i) extend the time for the performance of any of the obligations
or other acts of the Purchaser, (ii) waive any inaccuracies in the
representations and warranties of the Purchaser contained herein or in any
document delivered pursuant hereto or (iii) waive compliance with any of the
agreements or conditions of the Purchaser contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed by
Forke, Inc., on behalf of the Sellers.
(b) At any time prior to the Closing, the Purchaser may (i) extend the
time
<PAGE> 44
for the performance of any of the obligations or other acts of the Sellers, (ii)
waive any inaccuracies in the representations and warranties of the Sellers
contained herein or in any document delivered pursuant hereto or (iii) waive
compliance with any of the agreements or conditions of the Sellers contained
herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the Purchaser.
ARTICLE IX. GENERAL PROVISIONS
SECTION 9.01 EXPENSES
Unless otherwise indicated in this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, shall be paid by the party incurring such
costs and expenses, whether or not the Closing shall have occurred.
SECTION 9.02 NOTICES
All notices, requests, claims, demands and other communications given or
made pursuant hereto shall be in writing (and shall be deemed to have been duly
given or made upon receipt) by delivery in person, by courier, by facsimile
(with confirmation copy of such facsimile material delivered in person or by
registered or certified mail, postage prepaid, return receipt requested) or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
9.02):
(a) if to any of the Sellers:
Forke, Inc.
8050 Philips Highway
Jacksonville, FL 32256
Attention: Ronald T. Roy
Facsimile: (904) 281-0155
with a copy to:
Holland & Knight, LLP
Suite 2000
One Independent Drive
Jacksonville, FL 32202
Attention: James L. Main
<PAGE> 45
Facsimile: (904)-358-2199
(b) if to the Purchaser:
Ritchie Bros. Auctioneers Incorporated
9200 Bridgeport Road
Richmond, B.C. V6X 1S1
CANADA
Attention: C. Russell Cmolik
Facsimile: (604) 273-2405
with a copy to:
Perkins Coie LLP
1211 SW Fifth Avenue, Suite 1500
Portland, OR 97204
Attention: Roy W. Tucker
Facsimile: (503) 727-2222
(c) if to Ring Power Corporation:
8050 Philips Highway
Jacksonville, FL 32256
Attention: Ronald T. Roy
Facsimile: (904) 281-0155
(d) if to Thompson Machinery Commerce Corporation:
1245 Bridgestone Blvd.
LaVergne, TN 37086-1981
Attention: Dewitt C. Thompson, IV
Facsimile: (615) 251-8611
SECTION 9.03 ANNOUNCEMENTS
Upon the signing of this Agreement, a press release, in the form of
Exhibit 9.03, shall be released by the Purchaser and Forke, Inc., on behalf of
the Sellers. Such press release shall not disclose the Purchase Price. No Seller
or any affiliate or agent thereof shall make, or cause to be made, any other
press releases or public announcements in respect of this Agreement or the
transactions contemplated herein or otherwise communicate with any news media
without prior consent of the Purchaser, which consent shall not be unreasonably
withheld. The parties shall cooperate as to the timing and contents of any such
announcement by any party,
<PAGE> 46
except as such release, announcement or communication may be required by
governmental authorities, a court of competent jurisdiction or applicable law
(including, without limitation, securities laws affecting the Purchaser's public
disclosure obligations), in which case the party releasing the information shall
use its best efforts to provide the information contained therein to the other
party in advance of its disclosure. The Sellers authorize Forke, Inc. to act on
their behalf with respect to any actions contemplated by this Section 9.03.
SECTION 9.04 HEADINGS
The descriptive headings contained in this Agreement are for convenience
of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
SECTION 9.05 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
SECTION 9.06 ENTIRE AGREEMENT
his Agreement, the Ancillary Agreements and the Ring Power Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and, except as set forth in Section 5.04, supersede all
prior agreements and undertakings, both written and oral, between any of the
parties with respect to the subject matter hereof.
SECTION 9.07 ASSIGNMENT
Prior to the Closing, this Agreement shall not be assigned by operation
of law or otherwise without the express written consent (which shall not be
unreasonably withheld) of Forke, Inc., on behalf of the Sellers, with respect to
assignments by the Purchaser, or of the Purchaser, with respect to assignments
by any of the Sellers; provided, however, that the Purchaser may assign its
rights and obligations hereunder to purchase any or all of the Assets and to
assume any or all of the Assumed
<PAGE> 47
Liabilities or any other liabilities or obligations of the Purchasers or its
affiliates, to one or more of the direct or indirect wholly owned affiliates of
RBA so long as the Purchaser remains liable hereunder and under all agreements
and documents to be delivered by it pursuant hereto, and the affiliate assumes
all such obligations in writing in form and content acceptable to Sellers. This
Agreement shall be binding upon and inure to the benefit of the successors,
heirs, personal representatives and permitted assigns of the parties hereto.
SECTION 9.08 NO THIRD-PARTY BENEFICIARIES
This Agreement is for the sole benefit of the parties hereto and their
successors and permitted assigns, and nothing herein expressed or implied is
intended to or shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 9.09 AMENDMENT; WAIVER
This Agreement may not be amended or modified except by an instrument in
writing duly executed by Forke, Inc. (on behalf of the Sellers), the Purchaser;
and, with respect to any amendment or modification of Section 5.11, the
Controlling Shareholders. Waiver of any term or condition of this Agreement
shall only be effective if in writing and shall not be construed as a waiver of
any subsequent breach or waiver of the same term or condition, or a waiver of
any other term or condition of this Agreement.
SECTION 9.10 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware applicable to contracts executed and to be
performed in that State.
SECTION 9.11 COUNTERPARTS
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 9.12 ATTORNEYS' FEES
If any suit or action arising out of or related to this Agreement is
brought by any party, the prevailing party shall be entitled to recover the
costs and fees (including, without limitation, reasonable attorneys' fees, the
fees and costs of experts
<PAGE> 48
and consultants, copying, courier and telecommunication costs, and deposition
costs and all other costs of discovery) incurred by such prevailing party in
such suit or action, including, without limitation, any post-trial or appellate
proceeding, or in the collection or enforcement of any judgment or award entered
or made in such suit or action.
[This space intentionally left blank]
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
duly executed on their behalf this Asset Purchase Agreement as of the date first
written above.
PURCHASER:
RITCHIE BROS. AUCTIONEERS (AMERICA)
INC.
By:
Name:
Title:
SELLERS:
FORKE, INC.
By:
Name:
Title:
FORKE AUCTIONEERS, INC.
By:
Name:
Title:
FORKE AUCTIONEERS, LTD.
By:
Name:
Title:
<PAGE> 50
FORKE EUROPE, B.V.
By:
Name:
Title:
FORKE LOS SUBASTADORES S.A. de C.V.
By:
Name:
Title:
OTHERS:
RING POWER CORPORATION
By:
Name:
Title:
THOMPSON MACHINERY COMMERCE CORPORATION
By:
Name:
Title:
<PAGE> 51
SCHEDULES
<PAGE> 52
EXHIBITS
<PAGE> 1
EXHIBIT 10.4
LOAN AGREEMENT
<TABLE>
<S> <C> <C>
Dated as of: March 26, 1999
Parties: Ritchie Bros. U.S. Finance Limited Partnership (Delaware) ("Borrower")
Ritchie Bros. Auctioneers Incorporated ("Guarantor")
And: U.S. BANK NATIONAL ASSOCIATION ("Lender")
</TABLE>
ARTICLE I
DEFINITIONS AND INTERPRETIVE PROVISIONS
1.1 DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"Access Laws" means the Americans With Disabilities Act of 1990; the
Fair Housing Amendments Act of 1988; all other federal, state and local laws or
ordinances related to disabled access; and all statutes, rules, regulations,
ordinances, orders of governmental bodies and regulatory agencies and orders and
decrees of any court adopted, enacted or issued with respect thereto; all as now
existing or hereafter amended or adopted.
"Default" means any Event of Default or any event which with the giving
of notice or the passage of time, or both, would constitute an Event of Default.
"Environmental Laws" means all laws, rules, regulations, or ordinances
of any Governmental Body pertaining to Hazardous Substances and environmental
regulation, contamination or clean-up including, without limitation, the federal
statutes commonly known as CERCLA and RCRA and all other national, state or
provincial lien or environmental clean-up statutes, all as now existing or
hereafter amended or adopted.
"GAAP" means Canadian generally accepted accounting principles
consistently applied.
"Governmental Body" means (a) any foreign or domestic national, federal,
state or local government or municipality or political subdivision of any
government or municipality, (b) any assessment, improvement, community
facilities or other special taxing district, (c) any governmental or
quasi-governmental body, agency, authority, board, bureau, commission,
corporation, department, instrumentality or public body, (d) any court,
administrative tribunal, arbitrator, public utility or regulatory body, or (e)
any central bank or comparable authority.
"Guaranty" means each guaranty of any obligations of Borrower to Lender
heretofore, contemporaneously herewith or hereafter executed by any Guarantor or
any other Person.
"Hazardous Substances" means (a) any substance or material defined or
designated as hazardous or toxic waste, hazardous or toxic material, or a
hazardous, toxic or radioactive substance (or designated by any similar term) by
or for purposes of any applicable Environmental Law; (b) asbestos and any
substance or compound containing asbestos; and (c) any other hazardous, toxic or
Page 1
<PAGE> 2
dangerous waste, substance or material, including but not limited to gasoline,
crude oil, fuel oil, diesel oil, and any other related petroleum products.
"Loan Documents" means this Agreement, the Reducing Revolver Note, the
Guaranties and all other documents and instruments attached hereto, referred to
herein or heretofore, contemporaneously herewith or hereafter executed or
delivered to Lender by any Person in connection with any indebtedness of
Borrower to Lender.
"Loan Party" means each party hereto other than Lender.
"Parent" means Ritchie Bros. Auctioneers Incorporated, which is
incorporated under the laws of Canada.
"Person" means an individual or entity, including without limitation a
corporation, general or limited partnership, limited liability company, trust,
unincorporated association, government or government agency.
"RB Companies" means the Parent and each of its present or future direct
and indirect subsidiaries.
1.2 OTHER INTERPRETIVE PROVISIONS.
1.2.1 Unless otherwise specified, the words "herein," "hereof,"
"hereto," "hereunder" and similar terms refer to this Agreement as a whole and
not to any particular provisions of this Agreement and subsection, section, and
exhibit references are to this Agreement.
1.2.2 The word "or" shall not be exclusive; the singular includes the
plural and the plural includes the singular; the masculine includes the feminine
and the feminine includes the masculine, and the word "including" is not
limiting and means "including without limitation".
1.2.3 References to any Loan Document shall mean such Loan Document as
amended, modified, supplemented or extended from time to time and any number of
substitutions, renewals and replacements thereof or therefor.
1.2.4 References to governmental laws, statutes, ordinances, rules and
regulations shall be construed as including all amendments, consolidations and
replacements thereof or therefor.
1.2.5 Headings in this Agreement and each of the other Loan Documents
are for convenience of reference only and are not part of the substance hereof
or thereof.
1.2.6 Except as otherwise provided in this Agreement or any other Loan
Document, all accounting terms used in this Agreement or any other Loan Document
shall be construed, and all accounting and financial information or computations
shall be prepared or computed, in accordance with GAAP. If GAAP changes during
the term of this Agreement such that any covenants contained herein would then
be calculated in a different manner or with different components, the Loan
Parties and Lender agree to negotiate in good faith to amend this Agreement in
such respects as is necessary to conform those covenants as criteria for
evaluating the Loan Parties' financial condition to substantially the same
criteria as were effective before such change in GAAP, provided, however, that
until the Loan Parties and Lender so amend this Agreement, all such covenants
shall be calculated in accordance with GAAP as in effect on the date of this
Agreement.
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ARTICLE II
REDUCING REVOLVER LOANS
2.1 LOANS. Subject to the terms and conditions of this Agreement, Lender
agrees to make loans to Borrower from time to time on a reducing revolving
credit basis (each a "Reducing Revolver Advance", and collectively, the
"Reducing Revolver Loans"), provided that the aggregate principal amount of
outstanding Reducing Revolver Loans shall at no time exceed the Maximum Reducing
Revolver Amount in effect at such time.
2.2 MAXIMUM AMOUNT.
2.2.1 The initial Maximum Reducing Revolver Amount shall be
$35,000,000. On April 1, 2000 and on the same day of 2001, 2002 and 2003 and on
April 2, 2004 (each a "Reduction Date") the Maximum Reducing Revolver Amount
shall be reduced by $1,750,000.
2.2.2 The Maximum Reducing Revolver Amount may also be reduced
pursuant to Section 6.1.3.
2.2.3 Borrower may permanently reduce the maximum Reducing
Revolver Amount, provided that Borrower notifies Lender in writing not less than
two weeks prior to such permanent reduction.
2.2.4 On September 30, 2004 the Maximum Reducing Revolver Amount
shall be permanently reduced to $0.00.
2.3 USE OF PROCEEDS. Borrower shall use the proceeds of the initial
Reducing Revolver Advance to fund the acquisition of the assets of Forke
Auctioneers, Inc. Subsequent Reducing Revolver Advances shall be used for
Borrower's general corporate purposes.
2.4 NOTE. The Reducing Revolver Loans shall be evidenced by a promissory
note executed by Borrower in the principal amount of $35,000,000 substantially
in the form attached as EXHIBIT A ("Reducing Revolver Note"). The Reducing
Revolver Loans shall be subject to all terms and conditions of the Reducing
Revolver Note and of this Agreement.
2.5 INTEREST. Interest on the unpaid principal balance of the Reducing
Revolver Note shall be due and payable at the times and at the rates set forth
in the Reducing Revolver Note.
2.6 PRINCIPAL PAYMENTS. On each Reduction Date, Borrower shall pay to
Lender such amount as is necessary to reduce the principal balance of the
Reducing Revolver Note to the Maximum Reducing Revolver Amount in effect as of
such date. The principal balance of the Reducing Revolver Note shall be due and
payable in full on September 30, 2004.
2.7 ADDITIONAL PAYMENTS. In addition to the payments otherwise required
on the Reducing Revolver Note, if at any time the outstanding principal balance
of the Reducing Revolver Note exceeds the Maximum Reducing Revolver Amount,
Borrower shall pay to Lender on demand an amount equal to the amount by which
such principal balance exceeds the Maximum Reducing Revolver Amount.
2.8 REQUESTS FOR ADVANCES. Whenever Borrower wishes to request a
Reducing Revolver Advance, Borrower shall give Lender notice thereof in
accordance with the provisions of the Reducing Revolver Note.
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2.9 LOAN FEE. On the date of the initial Reducing Revolver Advance,
Borrower shall pay to Lender a loan fee in the amount of $8,750.00 for the
period from such date through June 30, 1999. On September 1, 1999, and on the
first day of the last month of each fiscal quarter thereafter, Borrower shall
pay to Lender a fee for such fiscal quarter computed at a rate per annum equal
to the Applicable Percentage (based upon the Debt to EBITDA Ratio as of the last
day of the preceding fiscal quarter) of the Maximum Reducing Revolver Amount as
in effect on the first day of such fiscal quarter. Notwithstanding the
foregoing, if Borrower does not timely furnish a Compliance Certificate setting
forth the Debt to EBITDA Ratio, the Applicable Percentage shall be automatically
adjusted, as of the first day of the last month of the applicable fiscal
quarter, to the highest rate set forth below.
The Applicable Percentage shall be the percent per annum set
forth below opposite the applicable Debt to EBITDA Ratio (as defined in Section
6.1.1).
<TABLE>
<CAPTION>
DEBT TO EBITDA RATIO APPLICABLE PERCENTAGE
-------------------- ---------------------
<S> <C>
Less than 1.0 to 1.0 .075%
Equal to or greater than 1.0 to 1.0 but less than 1.75 to 1.0 .10%
Equal to or greater than 1.75 to 1.0 but less than 2.50 to 1.0 .125%
Equal to or greater than 2.50 to 1.0 but less than 3.25 to 1.0 .15%
Equal to or greater than 3.25 to 1.0 .20%
</TABLE>
ARTICLE III
GUARANTIES AND NEGATIVE PLEDGE
3.1 GUARANTY. All present and future obligations of Borrower to Lender
shall be guaranteed by Guarantor. Concurrently with execution of this Agreement,
Guarantor shall execute and deliver a guaranty to Lender.
3.2 MAXIMUM GUARANTY AMOUNT. Notwithstanding any contrary provision of
any Guaranty, if any action or proceeding is commenced asserting that the
Guaranty of any Guarantor is subject to avoidance as a fraudulent transfer or
fraudulent conveyance or any similar term under any applicable state or federal
law, the obligations of such Guarantor under such Guaranty shall be limited to
the maximum amount that would not render such Guarantor's obligations subject to
avoidance under such law in such action or proceeding.
3.3 NEGATIVE PLEDGE.
3.3.1 Without the prior written consent of Lender, the Parent
shall not, and shall not permit any of the other RB Companies to, grant, create,
assume or permit to exist any pledge, assignment for security purposes,
encumbrance, mortgage, hypothecation, or any other security interest (including
without limitation, any conditional sale or other title retention agreement and
any financing or capital lease having substantially the same economic effect as
any of the foregoing) in all or any portion of any real or personal property now
owned or hereafter acquired by the RB Companies (collectively, "Property"),
except those liens and security interests in effect as of March 31, 1999 which
are described on attached SCHEDULE 3.3.1.
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3.3.2 Notwithstanding any other provision of this Agreement, the
RB Companies may create or permit to exist purchase money security interests or
equivalent security interests (including without limitation capital or financing
leases) granted to secure the purchase price of or to finance the acquisition of
equipment for use in the ordinary course of the RB Companies business so long as
(a) such security interest does not extend to any Property other than the
equipment acquired, and (b) such security interest secures only the obligation
to pay the purchase price (or the obligation under any capital or financing
lease).
ARTICLE IV
CONDITIONS PRECEDENT
4.1 INITIAL CONDITIONS PRECEDENT. The effectiveness of this Agreement is
subject to satisfaction of each of the following conditions precedent
concurrently with or prior to execution of this Agreement:
4.1.1 Lender shall have received executed originals of this
Agreement, the Reducing Revolver Note, and each other Loan Document required by
Lender.
4.1.2 Lender shall have received all documents and information
Lender may request relating to the authority for and validity of this Agreement
and the other Loan Documents, and to any other related matters, each in form and
substance satisfactory to Lender.
4.1.3 Lender shall have received such additional documents and
information and each Loan Party shall have satisfied such additional
requirements as Lender reasonably requires.
4.1.4 Lender shall have received the fee required by Section 2.9.
4.1.5 Lender shall have received an opinion from counsel for
Guarantor acceptable to Lender, covering such matters as Lender reasonably
requires.
4.2 CONDITIONS PRECEDENT TO EACH REDUCING REVOLVER ADVANCE. Lender's
agreement to Reducing Revolver Advance is subject to satisfaction of the
following conditions on the date Reducing Revolver Advance is made.
4.2.1 No Default shall have occurred or will exist following the
making of the Reducing Revolver Advance.
4.2.2 The representations and warranties in this Agreement shall
be true and correct as of such date.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES. Each Loan Party hereby represents
and warrants as of the date of execution of this Agreement and as of the date of
each Reducing Revolver Advance:
5.1.1 EXISTENCE AND POWER. Borrower is a duly organized and
validly existing limited partnership and Guarantor is a duly organized and
validly existing corporation, and each Loan Party is duly qualified and in good
standing in each jurisdiction where the conduct of its business or the ownership
of its properties requires such qualification, and has full power, authority and
legal right to carry on its business as presently conducted, to own and operate
its properties and assets, and to execute, deliver and perform the Loan
Documents and all other documents to be executed and delivered by it.
5.1.2 AUTHORIZATION. Its execution, delivery and performance of
the Loan Documents and all documents to be executed, delivered or performed by
it and any borrowing in connection therewith have been duly authorized by all
necessary corporate or other entity action, do not contravene any law,
regulation, rule or order binding on it, or its articles of incorporation or
operating agreement, and do not contravene the provisions of or constitute a
default under any agreement or instrument to which it is a party or by which it
may be bound or affected.
5.1.3 LITIGATION. There are no actions, proceedings,
investigations, or claims pending against it, or to its knowledge, threatened
against or affecting it, before any court or arbitrator or any governmental body
or agency which would be likely to result in a judgment or order against it (in
excess of insurance coverage) for more than $1,000,000 individually or in the
aggregate, excluding any matters previously reflected in Guarantor's financial
statements as of December 31, 1998 (the "Existing Claims").
5.1.4 FINANCIAL CONDITION. Its most recent balance sheet and
related statements of income, retained earnings and cash flows heretofore
delivered to Lender fairly present as of the date thereof its financial
condition for the period then ended, all in accordance with GAAP. Since that
date there have been no material adverse changes in its financial condition or
operations, except as disclosed to Lender in writing.
5.l.5 TAXES. It has filed all tax returns and reports required of
it, and has paid all taxes payable by it which have become due pursuant to such
tax returns and all other taxes and assessments payable by it.
5.1.6 OTHER AGREEMENTS. It is not in breach of or in default
under any agreement to which it is a party or which is binding on it or any of
its assets, which such breach or default would have a material adverse effect on
its financial condition or operations.
5.1.7 GOVERNMENTAL APPROVALS. No approval, authorization,
consent, certificate of compliance, license, permit or exemption from, contract
with, registration or filing with or report or notice to any Governmental Body
is required for its due execution, delivery and performance of the Loan
Documents or the loyalty, validity, binding effect and enforceability of any of
the Loan Documents, except such as have been obtained and are in full force and
effect.
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5.1.8 COMPLIANCE WITH LAWS. It is in compliance in all material
respects with all applicable laws, regulations and ordinances of any
Governmental Body, including without limitation all environmental permits,
Environmental Laws, Access Laws and laws regulating employee pensions or
retirement plans.
5.1.9 NO MATERIAL MISSTATEMENTS. No report, financial statement,
representation or other information furnished by it to Lender contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
5.1.10 ENFORCEABILITY. This Agreement constitutes, and each other
Loan Document to which it is a party when executed and delivered to Lender will
constitute a legal, valid and binding obligation of such Loan Party, enforceable
in accordance with its terms.
5.2 CONTINUING REPRESENTATIONS. Each request by Borrower for a Reducing
Revolver Advance shall be deemed to be its representation and warranty that (a)
no Default has occurred, or will exist after the making of such Reducing
Revolver Advance, and (b) all representations and warranties set forth in this
Agreement are true, accurate and complete as of the date of such request.
ARTICLE VI
FINANCIAL COVENANTS AND INFORMATION
6.1 FINANCIAL COVENANTS. Until payment and performance in full of all
obligations of each Loan Party under the Loan Documents, each Loan Party agrees
that:
6.1.1 DEBT TO EBITDA RATIO. The Parent shall maintain, on a
consolidated basis, as of the last day of each fiscal quarter, a Debt to EBITDA
Ratio of not more than 4.0 to 1.0.
As used herein:
"Debt to EBITDA Ratio" means, as of any date of
determination, the ratio, for the Parent and its subsidiaries on a consolidated
basis of (a) long term debt (including liabilities as lessee on capital leases
and the current portion of long term debt and capital leases) as of such date to
(b) EBITDA for the period of four consecutive fiscal quarters ending on such
date (each such period, an "Annual Period").
"EBITDA" means, for any time period net income (or loss)
for such time period plus the amount which in determining net income (or loss)
has been deducted for interest expense, income taxes, depreciation and
amortization.
6.1.2 FUNDED DEBT RATIO. The Parent shall maintain, on a
consolidated basis, as of the last day of each fiscal quarter, a ratio of Funded
Debt to Funds Employed of not more than .75 to 1.0.
As used herein:
"Funded Debt" means, as of any date of determination, the
principal portion of all interest bearing indebtedness (including liabilities as
lessee on capital leases) of the Parent at such time.
"Funds Employed" means as of any date of determination the
sum of (a) the
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Parent's Funded Debt plus (b) an amount equal to the Parent's assets minus the
Parent's liabilities.
6.1.3 FIXED CHARGE RATIO. The Parent shall maintain, on a
consolidated basis, as of the last day of each fiscal quarter, a Fixed Charge
Ratio of not less than 1.50 to 1.0.
"Fixed Charge Ratio" means, as of any date of
determination, the ratio, for the Parent and its subsidiaries on a consolidated
basis, of (a) EBITDA for the Annual Period ending on such date, minus dividends
declared or paid during such Annual Period to (b) the sum of (i) the current
portion of long term debt (including liabilities as lessee on capital leases),
plus (ii) the Required Sinking Fund Amount for the Annual Period commencing on
such date, plus (iii) interest expense for the Annual Period ending on such
date.
6.1.4 RIGHT TO CURE. If the financial statements delivered by
Borrower pursuant to Section 6.2.2 demonstrate that the Loan Parties are not in
compliance with the requirements of Sections 6.1.1, 6.1.2 or 6.1.3 as of the end
of any fiscal quarter, the Loan Parties shall have 30 days following timely
delivery of such financial statements within which to cure the violation by
delivering to Lender such additional financial statements as Lender requires
which demonstrate compliance with such requirements as of the last day of the
month prior to the date of delivery of such additional financial statements
(including, for purposes of this calculation only, EBITDA dividends and interest
expense for the one-year period ending on such last day and the current portion
of long term debt and Required Sinking Fund Amount for the one-year period
commencing on such day). If the violation is not cured within such time period,
then Lender may, at its sole discretion, call the loan by declaring the entire
outstanding balance of principal and interest on the Reducing Revolver Note
immediately due and payable.
6.1.5 DEBT. Without the prior written consent of Lender, which
shall not be unreasonably withheld, the Parent shall not, and shall not permit
any of the RB Companies to, incur or permit to exist, any indebtedness to or
commitments for indebtedness from any Person, except a) indebtedness to and
commitments from Lender, b) indebtedness and commitments existing on the date
hereof and set forth on attached SCHEDULE 6.1.2 and any renewals or extensions
thereof (but excluding any increase thereof) c) short term trade obligations
incurred in the ordinary course of business, and d) additional indebtedness
and/or commitments in an aggregate principal amount of up to $10,000,000.
6.1.6 SINKING FUND. On a consolidated basis, Parent shall at all
times on and after April 1, 2000, maintain cash on hand in an amount at least
equal to the Required Sinking Fund Amount at such time. The Required Sinking
Fund Amount shall be $3,250,000 as of April 1, 2000. On April 1 of each year
thereafter (each a "Sinking Fund Increase Date") the Required Sinking Fund
Amount shall be increased by $3,250,000. Notwithstanding the foregoing, the
Sinking Fund Amount shall not increase on any Sinking Fund Increase Date if, at
least 10 days prior to such date, Borrower (a) notifies Lender of its election
to permanently reduce the Maximum Reducing Revolver Amount by an amount equal to
the required increase in the Sinking Fund Amount and (b) makes such payments as
are necessary to reduce the principal balance of the Reducing Revolver Note by
such amount.
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6.2 FINANCIAL INFORMATION.
6.2.1 As soon as available and in any event within 120 days after
the end of each of its fiscal years, the Parent shall deliver to Lender its CPA
or Chartered Accountant audited balance sheet as at the end of such fiscal year;
related statements of income, retained earnings and cash flows for such year;
and report, if any, to management by the accountant who prepared the financial
statements, in each case certified by a certified public accountant acceptable
to Lender. No document or report shall contain a disclaimer of opinion or
adverse opinion except such as Lender in its sole discretion may determine to be
immaterial.
6.2.2 As soon as available and in any event within 45 days after
the end of each of its fiscal quarters, the Parent shall deliver to Lender its
internally prepared consolidated balance sheet and related statements of income,
retained earnings and cash flow as at the end of such quarter, and for the
fiscal year to date.
6.2.3 As soon as available and in any event within 45 days after
the end of each fiscal quarter Borrower or the Parent shall deliver to Lender,
at Borrower's sole expense, a Compliance Certificate, substantially in the form
attached as EXHIBIT B signed by its chief financial officer or other authorized
officer acceptable to Lender.
6.2.4 Within 10 days after filing, the Parent shall deliver to
Lender copies of all financial statements, proxy statements, reports and other
documents which the Parent files with the Securities and Exchange Commission or
sends to its stockholders.
6.2.5 From time to time, each Loan Party shall provide to Lender
such information as Lender may reasonably request concerning the financial
condition and business affairs of such Loan Party.
ARTICLE VII
AFFIRMATIVE COVENANTS
Until payment and performance in full of all obligations of each Loan
Party under the Loan Documents, each Loan Party agrees that:
7.1 INSPECTION RIGHTS. At any reasonable time, and from time to time
upon the reasonable request of Lender, it will permit Lender to examine and make
copies of and abstracts from its records and books of account, to visit its
properties and to discuss its affairs, finances and accounts with any of its
officers or representatives.
7.2 KEEPING OF BOOKS AND RECORDS. It will keep adequate records and
books of account in which complete entries will be made reflecting all material
financial transactions, and except as otherwise specifically provided herein,
will prepare all financial statements, computations and information required
hereunder in accordance with GAAP.
7.3 OTHER OBLIGATIONS. It will pay and discharge before the same shall
become delinquent all indebtedness, taxes and other obligations for which it is
liable or to which its income or property is subject and all claims for labor
and materials or supplies which, if unpaid, might become by law a lien upon its
assets, unless it is contesting the indebtedness, taxes, or other obligations in
good faith and provision has been made to the reasonable satisfaction of Lender
for the payment thereof in the event any such contest is determined adversely to
it.
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7.4 INSURANCE. It will provide, maintain and deliver to Lender policies
of insurance on its properties and operations, in such form and amounts and
covering such risks as Lender may require.
7.5 COMPLIANCE WITH LAWS. It shall comply in all material respects with
all laws, regulations and ordinances of any Governmental Body (including but not
limited to all Environmental Laws, Access Laws, the Fair Labor Standards Act and
laws regulating employee pension and retirement plans) and promptly provide
written notice to Lender of the receipt of any notice of violation thereof from
any governmental authority which violation, alone or together with any other
such violations, could reasonably be expected to have a material adverse effect
on its business, assets, operations or condition, financial or otherwise.
7.6 NOTIFICATION. Promptly after learning thereof, it will notify Lender
in writing of:
7.6.1 The occurrence of any Default, and if such Default is then
continuing, a certificate of its chief financial officer or other authorized
officer setting forth the details thereof and the action which it is taking or
proposes to take with respect thereto.
7.6.2 The occurrence of any release of any Hazardous Substances
onto or affecting any of its property or any adjacent property, any Collateral,
or any other environmental problem or liability with respect to any such
property.
7.6.3 The details of any claim, lien, litigation, administrative
proceeding or judgment involving $1,000,000 or more individually or in the
aggregate (other than the Existing Claims) threatened, instituted or completed
against any Loan Party, or any assets of any Loan Party, including but not
limited to any and all enforcement, cleanup, removal or other governmental or
regulatory proceedings pursuant to any Environmental Laws.
ARTICLE VIII
NEGATIVE COVENANTS
Until payment and performance in full of all obligations of each Loan
Party under the Loan Documents, each Loan Party agrees that except with the
written consent of Lender:
8.1 LIQUIDATION, MERGER, ETC. It shall not wind up, liquidate or
dissolve itself, reorganize, merge or consolidate with or into, or convey, sell,
assign, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person, except one of the RB Companies.
8.2 TYPE OF BUSINESS. It shall not make any material change in the
character of its business.
8.3 STRUCTURE. It shall not make any material change in its
organizational structure.
8.4 TRANSACTIONS WITH AFFILIATES. It shall not enter into any
transaction with any affiliate, including, without limitation, the purchase,
sale, or exchange of property or the rendering of any service, except in the
ordinary course of business and upon fair and reasonable terms no less favorable
to it than those that would prevail in a comparable arm's-length transaction
with a Person not an affiliate.
ARTICLE IX
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FOREIGN JURISDICTION, CURRENCY AND TAX MATTERS
9.1 JURISDICTION.
9.1.1 Each Loan Party hereby irrevocably consents to the
non-exclusive jurisdiction of any state or federal court of competent
jurisdiction in the State of Oregon, in any action, suit or proceeding
("Proceeding") enforcing or otherwise arising out of this Agreement or any of
the other Loan Documents, and irrevocably agrees that all claims which are the
subject of such Proceeding may be heard or determined in any such court.
9.1.2 Each Loan Party hereby designates and appoints Perkins Coie
LLP, whose address in the United States is 1211 SW Fifth Avenue, #1500,
Portland, OR 97204-3715, as its authorized agent ("Agent") and true and lawful
attorney in fact in its name, place and stead to accept service of a summons and
complaint or any other process in any such Proceeding and agrees that the
failure of Agent to give any notice of any such service of process to any Loan
Party shall not impair or affect the validity of such service or of any judgment
based thereon.
9.1.3 Each Loan Party waives personal service of process and
consents to the service of any and all process in any Proceeding by mail or hand
delivery or as otherwise provided by the laws of the State of Oregon or the
United States of America, (a) to each Loan Party at Perkins Coie LLP, 1211 SW
Fifth Avenue, #1500, Portland, OR 97204-3715 or at such other address in the
United States as each Loan Party provides in writing to Bank for such service;
(b) to Agent at Agent's address set forth above.
9.1.4 Each Loan Party waives any defense or objection to
jurisdiction or venue in the aforesaid courts, including any objection or
defense based upon lack of personal jurisdiction, insufficiency of summons or
process, sovereign immunity or other immunity from suit or the doctrine of forum
non conveniens. Each Loan Party agrees that a final judgment rendered against
such Loan Party by any state or federal court in the state of Oregon in any
action, suit or proceeding shall be conclusive and may be enforced in other
jurisdictions, domestic or foreign, by suit on the judgment or in any other
manner provided by law.
9.1.5 Nothing herein shall affect the right of Lender to serve
legal process or obtain jurisdiction in any other manner permitted by law, or
affect the right of Lender to bring any action, suit or proceeding against any
Loan Party or its property in the courts of any other jurisdiction, domestic or
foreign.
9.2 JUDGMENT CURRENCY.
9.2.1 All references to money amounts herein or in any other Loan
Document are to lawful money of the United States of America. The payment
obligations of any Loan Party under any Loan Document shall not be discharged by
any amount paid in any currency other than United States Dollars ("USD"), except
to the extent of the USD amount realized by Lender when the amount paid is
converted to USD under Lender's normal banking practices.
9.2.2 If, for purposes of obtaining judgment in any foreign court
it is necessary to convert a sum due hereunder from USD into another currency
(the "Other Currency"), the rate of exchange shall be that at which, in
accordance with its normal banking practice, Lender could
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purchase USD with the Other Currency on the date judgment is obtained; provided,
however, that the obligation of any Loan Party in respect of any amount due to
Lender in USD shall be discharged only if and to the extent that, on the day of
receipt of any sum adjudged due in the Other Currency, Lender is able, in
accordance with its normal banking practice, to purchase the amount of USD with
such Other Currency which Lender could have purchased on the judgment date.
9.2.3 If the amount paid to Lender in any currency other than
USD, whether pursuant to a judgment or otherwise, does not, upon conversion to
USD in accordance with Lender's normal banking practices, yield the amount of
USD due hereunder, each Loan Party, as a separate obligation, and
notwithstanding any judgment or other recovery, agrees to indemnify Lender
against and to pay to Lender on demand, in USD, any difference between the sum
originally due in USD and the amount of USD obtained by Lender.
9.3 DEDUCTION AND WITHHOLDING. Any and all payments made by any Loan
Party shall be made free and clear of and without deduction for any present or
future taxes, levies, imposts, dedications, charges or withholding pursuant to
any applicable laws ("Taxes"), unless such Loan Party shall be required by
applicable law to make any such deduction. If, pursuant to any requirement of
applicable law, any Loan Party shall make any deduction or withholding from any
amount to be paid hereunder, then the parties shall, on a best efforts basis,
agree to modify the terms of the Reducing Revolver Loan so as to eliminate the
required withholding. The Loan Parties shall furnish to Lender, as soon as
reasonable, such receipts and other documents as may be required to establish
payment of such Taxes and any tax credit to which Lender may be entitled. The
obligations of each Party under this Section 9.3 shall survive the termination
of the Loan Agreement and the repayment of the indebtedness evidenced by or
guaranteed by the Loan Documents. Upon receipt of any tax credit or refund to
which the Lender is entitled, the Loan Parties shall pay to Lender the amount,
if any, which is necessary so that Lender is made whole and receives the amount
it would have received if no withholding had occurred.
ARTICLE X
DEFAULT
10.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default under this Agreement and each of the Loan
Documents:
10.1.1 Any failure of any Loan Party to pay any portion of any
principal, interest, fees or any other amount when due under this Agreement, the
Reducing Revolver Note or any other Loan Document.
10.1.2 Any failure of any Loan Party to pay, perform or comply
with any term of this Agreement, any other Loan Document, or any other agreement
between Lender or any affiliate of Lender and any Loan Party or any of the RB
Companies.
10.1.3 Any indebtedness of any Loan Party under any note,
indenture, agreement, undertaking or obligation of any kind to any Person,
including Lender, becomes due by acceleration or otherwise and is not paid.
10.1.4 Any default under any security instrument securing any
indebtedness or obligation of Borrower to Lender or any security interest or
lien created or purported to be created by any security document shall cease to
be, or shall be asserted by any Person not to be, a valid, first
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priority security interest or lien.
10.1.5 Any Guaranty shall cease to be, or shall be asserted by
any Loan Party not to be, in full force and effect.
10.1.6 Any warranty, representation, statement, or information
made or furnished to Lender by or on behalf of any Loan Party proves to have
been false or misleading in any material respect when made or furnished or when
deemed made or furnished, or becomes false or misleading in any material respect
at any time thereafter.
10.1.7 The commencement of any proceeding under any bankruptcy or
insolvency laws by or against, appointment of a receiver for any part of the
property of, insolvency or business failure of, or any attachment, seizure or
levy on any property of, any Loan Party.
10.1.8 The dissolution or liquidation of any Loan Party or the
taking by any Loan Party of any action to authorize a dissolution or
liquidation.
10.1.9 The interruption or cessation of a material portion of any
Loan Party's ordinary business operations.
10.1.10 Except with respect to the Existing Claims, any judgment,
writ of attachment or similar process in an amount in excess of $1,000,000
individually or in the aggregate shall be entered or filed against any Loan
Party or any property of any Loan Party and remains unpaid, unvacated, unbonded
or unstayed for a period of 30 days or more.
10.1.11 The failure of any Loan Party to provide Lender with
financial information promptly when requested.
10.1.12 Any change in ownership of any of the partnership
interests in Borrower.
10.1.13 Any material adverse change, as reasonably determined by
Lender, in the financial condition or management of any Loan Party or Lender
reasonably deems itself insecure with respect to the payment or performance of
the obligations of any Loan Party to Lender.
10.2 CONSEQUENCES OF DEFAULT; LENDER'S RIGHTS AND REMEDIES. Time is of
the essence of this Agreement.
10.2.1 Upon the occurrence of any Event of Default and at any
time thereafter Lender may, at its sole option, do any one or more of the
following:
(a) Without notice to any Loan Party, terminate the availability
of Reducing Revolver Advances and declare the entire outstanding balance of
principal and interest on the Reducing Revolver Note and other Loan Documents
immediately due and payable, whereupon the same shall become immediately due and
payable without presentment, demand, protest or other requirements of any kind,
all of which are expressly waived by each Loan Party; and
(b) Exercise any and all other rights and remedies provided in
the Loan Documents and in any related agreements and documents, and as otherwise
provided by law.
10.2.2 Notwithstanding any right to cure events of default
provided in the Reducing Revolver Note or any of the other Loan Documents, each
Loan Party agrees that such Loan Party
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shall have only such cure rights as may be set forth herein.
ARTICLE XI
ARBITRATION
11.1 ARBITRATION OF CLAIMS. Either Lender or any Loan Party may require
that all disputes, claims, counterclaims, and defenses, including those based on
or arising from any alleged tort ("Claims") relating in any way to this
Agreement, any loan, any of the Loan Documents, or any transaction of which this
Agreement is a part (each a "Credit"), be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and Title 9 of the U.S. Code. All Claims will be subject to the
statutes of limitation applicable if they were litigated. This provision is void
if the Credit, at the time of the proposed submission to arbitration, is secured
by real property located outside of Oregon or Washington, or if the effect of
the arbitration procedure (as opposed to any Claims of any Loan Party) would be
to materially impair Lender's ability to realize on any Collateral securing the
Credit.
11.2 ARBITRATORS. If arbitration occurs and each party's Claim is less
than $100,000, one neutral arbitrator will decide all issues; if any party's
Claim is $100,000 or more three neutral arbitrators will decide all issues. All
arbitrators will be active Oregon State Bar members in good standing. All
arbitration hearings will be held in Portland, Oregon. In addition to all other
powers, the arbitrator(s) shall have the exclusive right to determine all issues
of arbitrability. Judgment on any arbitration award may be entered in any court
with jurisdiction.
11.3 OTHER REMEDIES. If any party institutes any judicial proceeding
relating to any Credit, such action shall not be a waiver of the right to submit
any Claim to arbitration. In addition, each has the right before, during, and
after any arbitration to exercise any number of the following remedies, in any
order or concurrently: (a) setoff; (b) self-help repossession; (c) judicial or
non-judicial foreclosure against real or personal property collateral; (d)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery and replevin.
11.4 GOVERNING PROVISION. Each Loan Party agrees that, notwithstanding
any contrary provision of the Reducing Revolver Note or any of the other Loan
Documents, the provisions of this Article shall govern the arbitration of all
matters described herein.
ARTICLE XII
MISCELLANEOUS
12.1 NO WAIVER BY LENDER. No failure or delay of Lender in exercising
any right, power or remedy under this Agreement or any Loan Document shall
operate as a waiver of such right, power or remedy of Lender or of any other
right. A waiver of any provision of any Loan Document shall not constitute a
waiver of or prejudice Lender's right otherwise to demand strict compliance with
that provision or any other provision. Any waiver, permit, consent or approval
of any kind or character on the part of Lender must be in writing and shall be
effective only to the extent specifically set forth in such writing.
12.2 COSTS AND FEES. Without limiting any other provisions of this
Agreement, Borrower hereby agrees to pay Lender on demand an amount equal to all
costs and expenses incurred by Lender in connection with the negotiation,
preparation, execution, administration and enforcement of the Loan Documents,
including without limitation all recording costs, filing fees, costs of
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appraisals, collateral audits, costs of perfecting, maintaining and defending
Lender's security interest in the Collateral and fees of in-house and outside
counsel.
12.3 NOTICES. Except as otherwise specifically set forth in any Loan
Document, all notices, requests and demands hereunder shall be in writing, and
shall be deemed to have been given when hand-delivered, when sent by registered
or certified mail, postage prepaid, or when sent by telecopier, addressed as set
forth below; provided, however, that any request for a Reducing Revolver Advance
shall not be effective until received by Lender. Any party may at any time
change its address for notices by giving notice of such change to the other
parties.
If to Borrower or Guarantor: If to Lender:
c/o Ritchie Bros. Auctioneers Incorporated U.S. Bank National Association
9200 Bridgeport Road Oregon Corporate Banking
Richmond, BC Canada V6X 1S1 111 S.W. Fifth Avenue, T-4
Fax: (604) 273-6873 Portland, OR 97204
Fax: (503) 275-5795
12.4 COLLECTION COSTS AND ATTORNEY FEES. Whether or not litigation or
arbitration is commenced, the Loan Party promises to pay all costs of collecting
any amounts which may become due to Lender under any of the Loan Documents.
Without limiting the foregoing, if litigation or arbitration is commenced to
enforce or construe any term of any of the Loan Documents, the prevailing party
shall be entitled to recover from the other party all costs thereof, including
but not limited to such sums as the court or arbitrator(s) may adjudge
reasonable as attorney fees at trial, in any appellate proceeding, proceeding
under the bankruptcy code or receivership and post-judgment attorney fees
incurred in enforcing any judgment .
12.5 INTEGRATION; CONFLICTING TERMS. This Agreement together with the
other Loan Documents comprises the entire agreement of the parties on the
subject matter hereof and supersedes and replaces all prior agreements, oral and
written, on such subject matter. If any term of any of the other Loan Documents
expressly conflicts with the provisions of this Agreement, the provisions of
this Agreement shall control; provided, however, that the inclusion of
supplemental rights and remedies of Lender in any of the other Loan Documents
shall not be deemed a conflict with this Agreement.
12.6 ASSIGNMENT AND PARTICIPATION. Lender may from time to time assign
or sell participating interests in all or any part of its interest in this
Agreement, the Reducing Revolver Note and the other Loan Documents.
12.7 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, except that no Loan Party may assign or
transfer any of its rights or obligations under any Loan Document without the
prior written consent of Lender.
12.8 SEVERABILITY. If any provisions of this Agreement or any of the
Loan Documents is held invalid under any applicable laws, such invalidity shall
not affect any other provision of this Agreement that can be given effect
without the invalid provision.
12.9 GOVERNING LAW. Except to the extent that Lender has greater rights
and remedies
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under federal law, this Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Oregon without regard to
conflicts of law principles (except that matters concerning the validity and
perfection of security interests covered thereby shall be governed by the
conflicts of law provisions of the Uniform Commercial Code).
12.10 ADDITIONAL ACTS. Upon request by Lender, each Loan Party will from
time to time provide such information, execute such documents and do such acts
as may reasonably be required by Lender in connection with any indebtedness or
obligations of any of them to Lender.
12.11 DOCUMENTS SATISFACTORY TO LENDER. All information, documents and
instruments required to be executed or delivered to Lender shall be in form and
substance satisfactory to Lender.
12.12 COMPUTATIONS. All interest rates and fees referred to herein shall
be computed on the basis of a 360-day year and applied to the actual number of
days elapsed.
12.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of said
counterparts taken together shall be deemed to constitute but one document.
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12.14 DISCLOSURE.
UNDER OREGON LAW, MOST AGREEMENTS PROMISES AND COMMITMENTS MADE
BY LENDERS AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS
WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY
THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED
BY THE LENDER TO BE ENFORCEABLE.
EACH LOAN PARTY ACKNOWLEDGES RECEIPT OF A COPY OF THIS AGREEMENT.
RITCHIE BROS. U.S. FINANCE U.S. BANK NATIONAL ASSOCIATION
LIMITED PARTNERSHIP (DELAWARE)
BY: RITCHIE BROS. HOLDINGS LTD.,
ITS GENERAL PARTNER BY:
TITLE:
BY:
TITLE:
RITCHIE BROS. AUCTIONEERS
INCORPORATED
BY:
TITLE:
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EXHIBIT B_____
COMPLIANCE CERTIFICATE
This Compliance Certificate is executed and delivered by
_______________________ ______________________ to U.S. Bank National Association
("Lender") pursuant to the requirements of the Loan Agreement dated as of
_______________________ between Borrower, certain other parties and Lender
("Loan Agreement"). Any capitalized terms used herein and not defined herein
shall have the meanings given to such terms in the Loan Agreement. This
Compliance Certificate covers the fiscal quarter ended __________________.
1. A review of the activities of Loan Parties during the fiscal period
covered by this Compliance Certificate has been made under the supervision of
the undersigned with a view to determining whether during such fiscal period the
Loan Parties performed and observed all of their obligations under the Loan
Agreement. To the best knowledge of the undersigned, during such fiscal period
all covenants and conditions of Loan Parties have been performed and observed
and no Default has occurred and is continuing under the Loan Agreement [with the
exceptions set forth below in response to which Loan Parties has taken or
proposes to take the following actions:
________________________________________________________________________
________________________________________________________.]
2. To the best knowledge of the undersigned, no material adverse change
has occurred with regard to Loan Parties' business, assets, operations or
condition, financial or otherwise, since the last Compliance Certificate was
delivered [with the exceptions set forth below:
________________________________________________________________________
________________________________________________________.]
3. Attached are the calculations and other supporting documentation
showing whether Loan Parties were in compliance with Sections 6.1.1, 6.1.2,
6.1.3 and 6.1.5 of the Loan Agreement as of the end of the fiscal period covered
by this Compliance Certificate. Each such calculation is derived from the books
and records of the Loan Parties and correctly reflects whether the Loan Parties
are in compliance with the applicable sections of the Loan Agreement.
4. This Compliance Certificate is executed on ________________________.
By:
Title:
