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Exhibit 2
Asset Purchase Agreement
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Execution Copy
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
1445833 ONTARIO INC., AS PURCHASER
AND
BLUE GIANT LIMITED, AS VENDOR
OCTOBER 19, 2000
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TABLE OF CONTENTS
Section Page
------- ----
1. Interpretation 1
2. Purchase and Sale of Purchased Assets 6
2.1 Purchased Assets 6
2.2 Excluded Assets 7
3. Purchase Price 8
3.1 Purchase Price 8
3.2 Closing Payment 8
3.3 Adjustment to Purchase Price 8
3.4 Transfer Taxes 10
3.5 Sales Tax on Accounts Receivable 10
3.6 Allocation of Purchase Price 10
3.7 GST 10
3.8 Income Tax Election 11
3.9 Adjustments 11
4. Assumption of Certain Liabilities by Purchaser 11
5. Representations and Warranties of Vendor 12
5.1 Organization 13
5.2 Authorization 13
5.3 No Other Agreements to Purchase 13
5.4 No Violation 13
5.5 Sufficiency of Purchased Assets 14
5.6 Real Property 14
5.7 Leased Property 15
5.8 Title to Personal Property 15
5.9 Accounts Receivable 15
5.10 Inventories 16
5.11 Intellectual Property 16
5.12 Insurance 16
5.13 No Expropriation 16
5.14 Agreements and Commitments 17
5.15 Compliance with Laws; Governmental Authorization 17
5.16 Environmental 17
5.17 Consents and Approvals 19
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5.18 Financial Statements 19
5.19 Books and Records 19
5.20 Absence of Changes 19
5.21 Litigation 20
5.22 Taxes 20
5.23 Employees; Collective Bargaining Agreements 20
5.24 Employee Plans 21
5.25 Customers and Suppliers 22
5.26 Disclosure 22
5.27 Dixie Receivables 22
6. Representations and Warranties of Purchaser 23
7. Survival of Representations and Warranties 24
8. Covenants and Agreements of the Parties 24
8.1 Access to Purchased Business and Purchased Assets 24
8.2 Delivery of Books and Records 24
8.3 Non-Use of Name 24
8.4 Conduct of Purchased Business Prior to Closing 25
8.5 Delivery of Conveyance Documents 27
8.6 Employees and Employee Plans 27
8.7 Collection of Accounts Receivable 28
8.8 No Negotiations 28
8.9 Financial Statements 29
8.10 Vendor's Status After the Closing 29
8.11 Dixie Receivables 30
9. Conditions of Closing 30
9.1 Conditions of Closing in Favor of Purchaser 30
9.2 Conditions of Closing in Favor of Vendor 32
10. Closing Date and Transfer of Possession 34
10.1 Transfer 34
10.2 Place of Closing 34
10.3 Further Assurances 34
10.4 Risk of Loss 34
11. Indemnification 34
11.1 Indemnification by Vendor 34
11.2 Indemnification by Purchaser 36
11.3 Indemnification Procedures 36
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11.4 Limitation on Indemnification 37
11.5 Exclusive Remedy 38
11.6 Taxes and Insurance 38
12. Restrictive Covenants 39
13. Miscellaneous 39
13.1 Notices 39
13.2 Commissions, etc 41
13.3 Non-Transferability 41
13.4 Bulk Sales 42
13.5 Best Efforts 42
13.6 Assignment by Purchaser 42
13.7 Expenses 42
13.8 Counterparts 42
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THIS AGREEMENT made the 19th day of October, 2000.
B E T W E E N:
BLUE GIANT LIMITED, a corporation existing
under the laws of Canada
(hereinafter called the "Vendor"),
- and -
1445833 ONTARIO INC., a corporation existing
under the laws of Ontario
(hereinafter called the "Purchaser").
The parties agree as follows:
1. INTERPRETATION.
1.1 For the purposes of this Agreement, the following terms shall
have the respective meanings set out below:
(a) "Act" means the Canada Business Corporations Act as in effect
on the date hereof;
(b) "Affiliate" has the meaning given to that term in the Act;
(c) "Ancillary Agreements" means the Transfer Agreement and the
Supply Agreements;
(d) "Assumed Contracts" has the meaning set out in Section 2.1(g);
(e) "Assumed Liabilities" has the meaning set out in Section 4.1;
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(f) "BGC" means Blue Giant Corporation, a Delaware corporation and
wholly-owned subsidiary of Clark;
(g) "Business Day" means any day, other than a Saturday or a
Sunday, on which the main branch of the Bank of Nova Scotia in
Toronto, Ontario is open for business;
(h) "Claim" has the meaning set out in Section 11.3;
(i) "Clark" means Clark Material Handling Company, a Delaware
corporation, the sole shareholder of Vendor;
(j) "Closing Date" means November 10, 2000 or such later date as
the parties shall agree;
(k) "Contract" means any agreement, indenture, contract, lease,
deed of trust, license, option, instrument or other
commitment, whether written or oral;
(l) "Dixie Receivables" means all receivables of Dixie Tool and
Die aggregating $40,492.
(m) "Dock Equipment" means the following loading dock equipment:
dock levelers, elevating docks, edge of dock levelers, truck
restraints, hydraulic lift tables and parts and accessories
for all of the foregoing;
(n) "Encumbrance" means any encumbrance, lien, charge,
hypothecation, pledge, mortgage, title retention agreement,
security interest of any nature, adverse claim, exception,
reservation, easement, right of occupation, any matter capable
of registration against title, option, right of preemption,
privilege or any Contract to create any of the foregoing;
(o) "Environmental Laws" means all federal, provincial, municipal
and local laws, statutes, ordinances, by-laws and regulations,
and orders, directives and decisions rendered by any ministry,
department or administrative or regulatory agency, relating to
the protection of the environment, occupational health and
safety or the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
Hazardous Substances;
(p) "Environmental Permits" means all licenses, permits,
approvals, consents, certificates, registrations, settlement
agreements and other authorizations under Environmental Laws;
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(q) "Equipment Leases" has the meaning set out in Section 2.1(c);
(r) "Excluded Assets" has the meaning set out in Section 2.2;
(s) "Financial Statements" means the unaudited financial
statements of Vendor as at and for the year ended December 31,
1999, including the Review Engagement Report thereon of
PricewaterhouseCoopers LLP, annexed hereto as Schedule 1.1(s);
(t) "Hazardous Substances" means any pollutants, contaminants,
toxic substances, chemicals or industrial, toxic or hazardous
wastes or substances which when released into the air, water
or soil produce contaminants in violation of any applicable
Environmental Law or which require remediation under any such
Environmental Law;
(u) "Intellectual Property" has the meaning set out in Section
2.1(h);
(v) "IP License Agreements" has the meaning set out in Section
5.11;
(w) "Losses" means, in respect of any matter, all claims, demands,
proceedings, losses, damages, liabilities, deficiencies, costs
and expenses (including, without limitation, all legal and
other professional fees and disbursements, interest, penalties
and amounts paid in settlement) arising directly or indirectly
as a consequence of such matter;
(x) "Permitted Encumbrances" means:
(i) liens for taxes either not due and payable or due but
for which notice of assessment has not been given;
(ii) statutory liens, charges, adverse claims or
encumbrances held by any governmental authority that
have not at the time been filed or registered against
the title to the asset or served upon Vendor pursuant
to law or that relate to obligations not due or
delinquent; or
(iii) with respect to Real Property, zoning restrictions,
servitudes, easements, encroachments, restrictions,
rights of way, reservations, and other similar rights
in real property or any interest therein, and minor
title defects, provided that the same are not of such
nature as to materially adversely affect the use or
marketability of the property subject thereto.
(y) "Purchase Price" has the meaning set out in Section 3.1;
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(z) "Purchase Price Adjustment" has the meaning set out in Section
3.3.
(aa) "Purchased Assets" has the meaning set out in Section 2.1;
(bb) "Purchased Business" means the business carried on by Vendor
at the date hereof and as of the Closing Date including,
without limitation, the production and sale of Dock Equipment;
(cc) "Real Property" means the real property owned by Vendor having
the legal description set forth on Schedule 1.1(cc) and
including all buildings, structures, fixtures and improvements
thereon;
(dd) "Representatives" has the meaning set out in Section 11.5;
(ee) "Supply Agreements" means the Supply Agreement referenced in
Section 9.1(i) in the form of Exhibit 1 attached hereto and
the Supply Agreement referenced in Section 9.2(f) in the form
of Exhibit 3 attached hereto;
(ff) "Tangible Net Worth" shall be determined in accordance with
Section 3.3.
(gg) "Time of Closing" means the close of business (Toronto time)
on the Closing Date, or such other time on the Closing Date as
Vendor and Purchaser may mutually determine;
(hh) "Transfer Agreement" means the Transfer Agreement referenced
in Section 9.1(j) in the form attached hereto as Exhibit 2;
(ii) "Wheeled Equipment" means the following: powered and manual
stackers, powered and manual pallet trucks, walkie lift trucks
and tractor products R0I-55, MTS-2000, BGP, PTW, BGS, BGL,
BGN, BGNR, GTT, TT Series, P Stakmate, BGW, BGR and parts for
all of the foregoing;
1.2 Unless otherwise indicated, all dollar amounts in this
Agreement are expressed in United States funds.
1.3 This Agreement, including the exhibits and schedules hereto,
the Ancillary Agreements, and the confidentiality agreement dated March 8, 2000
between Clark and TBM Holdings, Inc. constitute the entire agreements between
the parties with respect to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether written or
oral. There are no conditions, covenants, agreements, representations,
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warranties or other provisions, express or implied, collateral, statutory or
otherwise, relating to the subject matter hereof except as herein provided.
1.4 This Agreement shall be construed, interpreted and enforced in
accordance with, and the respective rights and obligations of the parties shall
be governed by, the laws of the Province of Ontario and the federal laws of
Canada applicable in Ontario.
1.5 This Agreement shall inure to the benefit of and shall be
binding on and enforceable by the parties and their respective successors and
permitted assigns. Subject to Section 13.6, neither party may assign any of its
rights or obligations hereunder without the prior written consent of the other
party.
1.6 No amendment or waiver of any provision of this Agreement
shall be binding on either party unless consented to in writing by such party.
No waiver of any provision of this Agreement shall constitute a waiver of any
other provision, nor shall any waiver constitute a continuing waiver unless
otherwise provided.
1.7 Each party hereto acknowledges that it and its legal counsel
have reviewed and participated in settling the terms of this Agreement, and the
parties hereby agree that any rule of construction to the effect that any
ambiguity is to be resolved against the drafting party shall not be applicable
in the interpretation of this Agreement.
1.8 The following Schedules and Exhibits are attached to and form
part of this Agreement:
Schedule 1.1(s) - Financial Statements
Schedule 1.1(cc) - Real Property
Schedule 2.1(c) - Equipment Leases
Schedule 2.1(g) - Assumed Contracts
Schedule 3.2 Bonus Calculation and Adjustment
Schedule 3.6 - Allocation of Purchase Price
Schedule 5.1 - Jurisdictions Authorized to do Business
Schedule 5.4 - Consents
Schedule 5.5 - Equipment Located Off-Site
Schedule 5.6 - Real Property Encumbrances
Schedule 5.8 - Personal Property Encumbrances;
Nonworking Assets
Schedule 5.9 - Reserves on Accounts Receivable
Schedule 5.11 - Intellectual Property
Schedule 5.14 - Unfilled Purchase Orders
Schedule 5.15 - Permits
Schedule 5.16 - Environmental
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Schedule 5.20 - Changes
Schedule 5.21 - Litigation
Schedule 5.25 - Customers and Suppliers
Exhibit 1 - Clark Supply Agreement
Exhibit 2 - Transfer Agreement
Exhibit 3 - Purchaser Supply Agreement
1.9 Definition of Knowledge. References in this Agreement to
"knowledge of Vendor", "Vendor's knowledge", "known to Vendor" or similar
statements regarding the knowledge of Vendor shall mean the awareness of facts
and circumstances, if any, that Vendor became aware of after inquiry of the
following individuals: Andrew Morrow and Michael Grossman.
2. PURCHASE AND SALE OF PURCHASED ASSETS.
2.1 Purchased Assets. Upon and subject to the provisions of this
agreement, Vendor agrees to sell, assign and transfer to Purchaser, and
Purchaser agrees to purchase from Vendor, effective as of the close of business
on the Closing Date, all of the property and assets used in connection with the
Purchased Business (other than the Excluded Assets), whether real or personal,
tangible or intangible, of every kind and description and wheresoever situate,
as a going concern (collectively, the "Purchased Assets"), including without
limitation:
(a) Real Property. The Real Property;
(b) Tangible Personal Property. All machinery, equipment, tools,
dyes, molds, drawings, blueprints, vehicles, furniture,
furnishings, computer hardware and software (unless an
Excluded Asset) and miscellaneous items used in the Purchased
Business, including the tangible personal property located at
85 Heart Lake Road South, Brampton, Ontario;
(c) Equipment and Vehicle Leases. All right, title and interest of
Vendor in and under leases of equipment and vehicles used in
the Purchased Business, as specifically set forth in Schedule
2.1(c) (collectively, the "Equipment Leases");
(d) Inventories. All inventories, including, without limitation,
raw and packaging materials, work-in-process and finished
goods;
(e) Receivables. All receivables that are not Excluded Assets;
(f) Prepaid Expenses. All prepaid expenses;
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(g) Agreements. All rights of Vendor under orders or contracts for
the provision of goods or services (whether as buyer or
seller), and all other Contracts of Vendor, as specifically
set forth on Schedule 2.1(g) (collectively, along with the
Equipment Leases and IP License Agreements, the "Assumed
Contracts");
(h) Intellectual Property. All right, title and interest of Vendor
in all trade secrets, research data, designs, proprietary
know-how, technical information, specifications, and materials
in whatever form or media, recording or evidencing technology
or proprietary information used in the Purchased Business and
all right, title and interest of Vendor in and to all
inventions, patents, applications for patents, copyrights,
trademarks, trademark registrations, trade names and
industrial designs used in the Purchased Business
(collectively, the "Intellectual Property");
(i) Books and Records. All books and records (other than those
required by law to be retained by Vendor, copies of which will
be made available to Purchaser), including without limitation,
customer lists, sales records, price lists and catalogues,
sales literature, advertising material, personnel records,
inventory records and correspondence files (together with, in
the case of any such information that is stored
electronically, the media on which the same is stored);
(j) Permits and Licenses. All transferable or assignable
registrations, licenses, permits, approvals, certificates of
occupancy and operating rights held in connection with the
Purchased Assets; and
(k) Goodwill. All goodwill, including all of Vendor's rights to
use the name "Blue Giant", or any variation thereof, as part
of the name or style under which the Purchased Business or any
part thereof is carried on by Purchaser.
2.2 Excluded Assets. The Purchased Assets shall not include any of
the following property and assets (collectively, the "Excluded Assets"):
(a) Cash. All cash on hand or in banks or other depositories, term
deposits, guaranteed investment certificates, treasury bills
and other similar cash equivalent items and securities;
(b) Receivables. All receivables owing to Vendor from Clark or BGC
or any of their Affiliates;
(c) Income Taxes. All income tax installments paid by Vendor and
the right to receive any refund of income taxes paid by
Vendor; and
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(d) Insurance. All insurance held by Vendor, and all payments from
insurance companies pertaining to claims filed by Vendor prior
to the Closing Date.
(e) BGC Intellectual Property. The Intellectual Property owned by
BGC and used in the Purchased Business which shall be
separately transferred pursuant to the Transfer Agreement.
3. PURCHASE PRICE.
3.1 Purchase Price. The aggregate purchase price (the "Purchase
Price") payable by Purchaser to Vendor for the Purchased Assets shall be the sum
of U.S. $9.5 million. In addition, Purchaser shall pay BGC the sum of U.S. $1.5
million for the BGC Intellectual Property pursuant to the Transfer Agreement.
Purchaser shall also assume the Assumed Liabilities. The Purchase Price shall be
satisfied by the payments referred to in Sections 3.2.
3.2 Closing Payment.
(a) At the Time of Closing, Purchaser shall pay (i) to National
Bank of Canada, Vendor's bank, the aggregate of all amounts owing by Vendor to
that bank, and (ii) to Vendor the amount remaining after the payment to National
Bank of Canada is deducted from U.S. $9.5 million. Payments shall be in
immediately available United States funds by certified check or wire transfer to
an account or accounts designated by Vendor.
(b) At the Time of Closing, the Purchase Price payable from
Purchaser to Vendor shall be adjusted as follows: (i) the Purchase Price shall
be reduced by the monthly performance bonuses, sales bonuses and discretionary
bonuses payable by Purchaser to employees but attributable to periods of time
prior to the Closing Date, which amount the parties have calculated and agreed
to in advance, as set forth on Schedule 3.2 hereof, regardless of the actual
amount of bonuses actually paid to employees by Purchaser, and (ii) the Purchase
Price shall be increased or decreased, as the case may be, to reflect the
adjustments required by Section 3.9.
3.3 Adjustment to Purchase Price. On the Closing Date, the
Tangible Net Worth of the Purchased Business shall be determined as follows:
(a) Statement Preparation. As soon as practicable after
the Closing Date, Purchaser shall prepare (or cause to be prepared) a balance
sheet for the Purchased Business as of the Closing Date (the "Preliminary
Balance Sheet"). The Preliminary Balance Sheet shall be prepared as follows:
"Assets" shall be comprised of the total of (i) Net Accounts Receivable as of
the Closing Date, plus (ii) Accounts Receivable other as of the Closing Date,
plus (iii) Net Inventory as of the Closing Date, plus (iv) Other Current Assets
as of the Closing Date, plus (v) Rental Equipment Assets as of the Closing Date,
plus Net Fixed Assets as of the Closing Date. "Liabilities" shall be comprised
of the total of (i) Accounts Payable as of the Closing Date, plus
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(ii) Accrued Compensation and Benefits as of the Closing Date, plus (iii)
Warranty and Product Liability as of the Closing Date, plus (iv) other Current
Liabilities as of the Closing Date. "Tangible Net Worth" on the Closing Date
shall be the total of the Assets as determined above less the total of the
Liabilities as determined above . The Preliminary Balance Sheet shall be
prepared on a basis consistent with past periods. For purposes of converting
Canadian Dollars to U.S. Dollars the following exchange rate shall be used: CAN
$1.00 = US $1.5027. The Preliminary Balance Sheet indicating Tangible Net Worth
of the Purchased Business as of the Closing Date shall be delivered to Vendor no
later than 45 days after the Closing Date.
(b) Review Procedures. Vendor shall notify Purchaser
within thirty (30) days after receipt of the Preliminary Balance Sheet whether
it accepts or disputes the accuracy of the Preliminary Balance Sheet ("Vendor's
Letter"). If Vendor fails to respond in such time period, Vendor shall have
accepted the Preliminary Balance Sheet as the Final Balance Sheet. Vendor's
Letter shall list any proposed corrections or changes to the Preliminary Balance
Sheet. In connection with the review, Vendor or Vendor's accountants shall be
entitled to review all relevant books and records of the Purchaser and
workpapers and other documents of accountants of Purchaser. If Purchaser does
not object to Vendor's Letter within thirty (30) business days after receipt
thereof, any proposed corrections or changes in the Vendor's Letter shall be
made to the Preliminary Balance Sheet and the Preliminary Balance Sheet, as
corrected by the Vendor's Letter, shall be deemed to be the Final Balance Sheet
of the Purchased Business as of the Closing Date. If Purchaser disputes any item
in the Vendor's Letter, it shall in the notice of such objections (a "Dispute
Notice"), delivered within 30 days after receipt of the Vendor's Letter, set
forth in reasonable detail those items that Purchaser believes are not correctly
presented in the Vendor's Letter and the reasons for its opinion. The parties
shall then promptly meet and in good faith use their best efforts to resolve
their disagreements within thirty (30) days of the receipt by Vendor of the
Dispute Notice. If the parties resolve their differences, the Preliminary
Balance Sheet with those modifications to which the parties shall have agreed
shall be deemed to be the Final Balance Sheet. In the event the parties cannot
agree as to all corrections or changes listed in the Vendor's Letter within
thirty (30) days of receipt of a Dispute Notice, the parties shall forthwith
request an independent accounting firm of national reputation (selected with the
mutual consent of Purchaser and Vendor) to make a binding determination of the
disputed items in accordance with this Agreement. The Preliminary Balance Sheet,
with those modifications determined by such accounting firm to be appropriate,
shall be deemed to be the Final Balance Sheet and shall be binding upon the
parties hereto and shall not be subject to judicial review. The parties shall
bear their own expenses in connection with the post closing adjustments and
shall share equally the costs of such independent accounting firm.
(c) Adjustment Settlement. Upon determination of the
Final Balance Sheet reflecting the Tangible Net Worth of the Purchased Business,
the Purchase Price shall be adjusted ("Purchase Price Adjustment") as follows:
(A) If the Final Balance Sheet shall show Tangible Net Worth of less than
$7,250,000, the Purchase Price shall be reduced dollar for dollar by the amount
by which the Tangible Net Worth is less than $7,250,000, and (B) if the Final
Balance Sheet shall
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show Tangible Net Worth in excess of $7,750,000, the Purchase Price shall be
increased by an amount equal to such excess. Any party required to make a
payment hereunder shall make such payment to the other party by certified check
or wire transfer, within two (2) business days after determination of the Final
Balance Sheet.
3.4 Transfer Taxes. Purchaser shall be liable for and shall pay
all federal, provincial and state sales taxes (including any goods and services
tax, retail sales taxes and land transfer taxes) and other taxes, duties, fees
or other like charges of any jurisdiction properly payable in connection with
the transfer of the Purchased Assets by Vendor to Purchaser but excluding any
taxes, fees or withholdings payable on or with respect to the income or capital
of Vendor.
3.5 Sales Tax on Accounts Receivable. The accounts receivable that
form part of the Purchased Assets and are described in Section 2.1(e) include
amounts ("Tax Amounts") payable by Vendor's customers on account of "goods and
services tax" and "sales tax" which the Vendor is required to collect from those
customers and which the Vendor is obliged to remit to the relevant taxing
authority. Within 30 days following the Closing Date, the Purchaser shall
determine the aggregate of all Tax Amounts and pay that amount to the Vendor
under cover of a letter from a responsible officer of the Purchaser certifying
as to the accuracy of the determination of the aggregate of all Tax Amounts.
3.6 Allocation of Purchase Price. Vendor and Purchaser agree to
allocate the Purchase Price among the Purchased Assets in accordance with
Schedule 3.6 and to report the sale and purchase of the Purchased Assets for all
federal, provincial and local tax purposes in a manner consistent with such
allocation. Purchaser and Vendor agree that if any taxing authority does not
agree with any allocation of the Purchase Price agreed to between the parties in
accordance with the foregoing, Vendor and Purchaser shall use their best efforts
and good faith to agree upon a different allocation acceptable to the relevant
authority and, if the parties are so able to agree, they shall thereafter amend
the allocation and their income tax returns accordingly; provided, however, that
nothing contained herein shall be construed so as to require any party to
commence or participate in any litigation or administrative process challenging
the determination so made by any applicable authority.
3.7 GST. Vendor and Purchaser shall elect together under
subsection 167(1.1) of the Excise Tax Act (Canada) and any provincial
legislation imposing a similar value added or multi-staged tax, that no tax be
payable with respect to the sale and purchase of the Purchased Assets pursuant
to this Agreement. The election shall be in prescribed form and containing the
prescribed information and shall be filed by Purchaser in compliance with the
requirements of the Excise Tax Act (Canada) and any provincial legislation
imposing a similar value added or multi-staged tax.
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Purchaser covenants and agrees to indemnify and save harmless Vendor
from all Losses suffered by Vendor as a result of any failure by Vendor to
collect applicable taxes pursuant to Part IX of the Excise Tax Act (Canada) on
the sale of the Purchased Assets on the Closing Date.
3.8 Income Tax Election. Purchaser and Vendor agree to elect
jointly in the prescribed form under Section 22 of the Income Tax Act (Canada)
as to the sale of accounts receivable, and to designate in such election an
amount equal to the portion of the Purchase Price allocated to such assets
pursuant to Section 3.6 and Schedule 3.6 as the consideration paid by Purchaser
therefor.
3.9 Adjustments. Water, rental, gas, hydro rates, realty taxes,
municipal taxes, fuel and other usual and similar prepaid expenses and accrued
liabilities relating to the Real Property shall be adjusted as the Closing Time
in accordance with standard practice for the closing of real estate transfers.
4. ASSUMPTION OF CERTAIN LIABILITIES BY PURCHASER.
4.1 Subject to the provisions of this Agreement, Purchaser shall
not assume any liabilities, obligations or commitments of Vendor, relating to or
arising out of the Purchased Business or Purchased Assets prior to the Closing,
other than those liabilities specifically identified as Assumed Liabilities
pursuant to this Section 4.1. Subject to the foregoing, Purchaser agrees to
assume, pay, satisfy, perform and discharge, to the extent not theretofore paid,
satisfied, performed and discharged (collectively, the "Assumed Liabilities")
the following:
(a) Vendor's obligations and liabilities under the Assumed
Contracts arising after the Closing Date;
(b) Vendor's trade payables entered into in the ordinary course of
business consistent with past practice;
(c) Liabilities and obligations arising with respect to the
Purchased Business and the Purchased Assets, to the extent
such liabilities and obligations arise after the Closing Date;
and
(d) Liabilities and obligations which Purchaser expressly assumes
in Section 8.6.
Except with respect to the Assumed Liabilities, Purchaser does not hereby and
shall not assume or in any way undertake to pay, perform, satisfy or discharge
any liabilities or obligations of Vendor, and Vendor agrees to pay and satisfy
when due any such liabilities and obligations not assumed by Purchaser
hereunder, including the Excluded Liabilities (as hereinafter defined).
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4.2 Neither Purchaser nor any of its Affiliates shall, as a result
of this Agreement or the transactions contemplated hereby, assume or have any
responsibility or liability for the following debts, liabilities and obligations
of Vendor ("Excluded Liabilities"):
(a) any liability arising out of or relating to the Excluded
Assets;
(b) any inter-company payable to Clark or BGC or any of their
Affiliates;
(c) any liability or obligation of Vendor, contingent or
otherwise, for any indebtedness for borrowed money of Vendor,
including, without limitation, under the term loan and the
operating loan to National Bank of Canada, other than
Purchaser's obligation to make the payment set forth in
Section 3.2(a)(i);
(d) any liability for federal, provincial, local, foreign and
other governmental taxes imposed on Vendor, the Excluded
Assets or, to the extent relating to any period before the
Time of Closing, the Purchased Assets, including (i) any tax
of any other corporation which tax is assessed against Vendor
by virtue of its status as a member of any consolidated group,
and (ii) any taxes imposed on Vendor as a result of the
consummation of the transactions contemplated under this
Agreement;
(e) any liabilities or obligations to employees of Vendor except
to the extent expressly assumed by Purchaser under Section
8.6;
(f) any liabilities arising from inter-company transfers,
including advances, receivables and payables, between Vendor,
Clark, BGC and any of their Affiliates, including, without
limitation, liabilities from any allegedly preferential or
fraudulent transfers occurring prior to the filing of
bankruptcy petitions by Clark and BGC; and
(g) any other liabilities of Vendor, other than the Assumed
Liabilities.
4.3 The Purchaser shall not assume, and Vendor shall be solely
responsible for and shall indemnify and hold harmless Purchaser from and
against, all product liability, product warranty and other claims and
obligations respecting products sold by Vendor in connection with the Purchased
Business up to the Time of Closing.
5. REPRESENTATIONS AND WARRANTIES OF VENDOR.
Vendor represents and warrants to Purchaser as follows and acknowledges
that Purchaser is relying on such representations and warranties in connection
with its purchase of the Purchased Assets:
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5.1 Organization. Vendor is validly subsisting under the laws of
Canada and has the corporate power to own or lease its property and to carry on
the Purchased Business as now being conducted by it. Vendor is duly authorized
to do business in the jurisdictions set forth on Schedule 5.1 hereto and each
other jurisdiction where the character of the properties owned or leased by it
or the nature of the activities conducted by it make such qualification
necessary. Vendor has the corporate power to enter into this Agreement and to
perform its obligations hereunder. Vendor does not, directly or indirectly, own
any shares of, or have any other interest in, any other corporation or business
entity.
5.2 Authorization. This Agreement has been duly authorized,
executed and delivered by Vendor and is a legal, valid and binding obligation of
Vendor, enforceable against Vendor in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency and other laws affecting
the rights of creditors generally and except that equitable remedies may be
granted only in the discretion of a court of competent jurisdiction.
5.3 No Other Agreements to Purchase. No person other than
Purchaser has any written or oral agreement or option or any right or privilege
(whether by law, pre-emptive or contractual) capable of becoming an agreement or
option for the purchase or acquisition from Vendor of any of the Purchased
Assets, other than pursuant to purchase orders accepted by Vendor in the
ordinary course of the Purchased Business.
5.4 No Violation. Except as set forth on Schedule 5.4, the
execution and delivery of this Agreement by Vendor and the consummation of the
transactions herein provided for will not result in:
(a) the breach or violation of any of the provisions of, or
constitute a default under, or conflict with or cause the
acceleration of any obligation of Vendor under:
(i) any Contract to which Vendor is a party or by which
it is or its properties are bound;
(ii) any provision of Vendor's articles of incorporation,
other constituting documents, by-laws, resolutions of
its board of directors (or any committee thereof) or
its sole shareholder;
(iii) any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction
over Vendor or Clark;
(iv) any license, permit, approval, consent or
authorization held by Vendor or necessary to the
operation of the Purchased Business; or
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(v) any applicable law, statute, ordinance, regulation or
rule; or
(b) the creation or imposition of any Encumbrance on any of the
Purchased Assets.
5.5 Sufficiency of Purchased Assets. The Purchased Assets are
sufficient to carry on the Purchased Business, except for the BGC Intellectual
Property being transferred to Purchaser pursuant to the Transfer Agreement and
certain financing and support services normally provided by Clark such as
financial, accounting, regulatory and legal support services. Other than as set
forth in Schedule 5.5, with the exception of inventory in transit, the Purchased
Assets are situated at 85 Heart Lake Road South, Brampton, Ontario.
5.6 Real Property.
(a) The municipal address of the Real Property is 85 Heart Lake
Road South, Brampton, Ontario. There is no other real property that is used in
the Purchased Business or owned by Vendor. No person other than Vendor occupies
or uses any portion of the Real Property.
(b) Vendor is the beneficial owner of, and has good and marketable
title in fee simple to, the Real Property, free and clear of any and all
Encumbrances except: (i) Permitted Encumbrances; and (ii) the Encumbrances set
forth on Schedule 5.6. The current use of the Real Property is not materially
adversely affected by any zoning or building laws, ordinances, regulations or
official plans, and to Vendor's knowledge, there is no proposed or pending
change to any zoning affecting the Real Property. Vendor has not received any
written or oral notice for assessment for public improvements against the Real
Property which remain unpaid, and, to Vendor's knowledge, no such assessment has
been proposed. There are no expropriation, condemnation, eminent domain or
similar proceedings pending or, to the knowledge of Vendor, threatened, with
respect to the Real Property or any part thereof. The Vendor is not aware of any
fact that is materially adverse in respect of the Real Property, other than as
previously disclosed to Purchaser in writing.
(c) All utilities, including without limitation, potable water,
sewer, gas, electric, telephone, and other public utilities and all storm water
drainage required by law or necessary for the operation of the Real Property are
installed, connected, operating and adequate for the operation of the Purchased
Business as it has been previously conducted by Vendor, with all installation
and connection charges paid in full and are adequate (in both quality and
quantity) to service the Real Property for its use in the Purchased Business as
presently conducted thereon.
(d) All buildings, structures, improvements and appurtenances
situated on the Real Property are in operating condition and are adequate and
suitable for the purposes for which they are currently being used. None of such
buildings, structures, improvements or appurtenances (or any equipment therein),
nor the operation or maintenance thereof, violates any restrictive
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covenant or any provision of any federal, provincial or municipal law,
ordinance, rule or regulation, or encroaches on any property owned by others.
(e) All amounts for work and services performed and materials
placed or furnished upon or in respect of the Real Property have been fully paid
and satisfied, and no person is entitled to claim a lien under the Construction
Lien Act (Ontario) or similar legislation in other provinces of Canada against
the Real Property, or any part thereof, other than current accounts in respect
of which the payment due date has not yet passed.
(f) To the knowledge of Vendor, the Real Property (including all
buildings, improvements and fixtures) is free of material structural, mechanical
or other defects, and there are no material or structural repairs or
replacements that are necessary for the continued use of the Real Property in
the ordinary course. The Real Property is not currently undergoing any
alteration or renovation nor is any such alteration or renovation contemplated.
(g) The Real Property has full, free and unobstructed access to
and from adjoining public highways, streets and roads and the Vendor has no
knowledge of any existing fact or condition which could result in the amendment
or termination of such access. There are no outstanding work orders, notices or
deficiencies or other notices of violation outstanding or facts existing which
are within the Vendor's knowledge that could give risk to such.
5.7 Leased Property. Vendor is not a party to any lease or
agreement to lease in respect of any real property used in the Purchased
Business, whether as lessor or lessee.
5.8 Title to Personal Property. The Purchased Assets (other than
the Real Property) are owned beneficially by Vendor with a good and marketable
title thereto, free and clear of all Encumbrances other than as follows: (i) the
Purchased Assets may be subject to Permitted Encumbrances, (ii) the vehicles
listed on Schedule 2.1(c) are leased from third parties, and (iii) the Purchased
Assets are subject to the Encumbrances set forth on Schedule 5.8, which will be
discharged prior to the transfer of the Purchased Assets to Purchaser on the
Closing Date. Except as set forth on Schedule 5.8, the Purchased Assets are in
operating condition, reasonable wear and tear excepted.
5.9 Accounts Receivable. All customer and trade notes, fees and
accounts receivable owned by Vendor and forming part of the Purchased Assets
were created in the ordinary course of business, are not subject to any
discount, rebate, offset, defense or the like except cash discounts for prompt
payments, and are fully collectible in the aggregate to the extent of the
aggregate face value thereof, subject to Reserves (as hereafter defined), and to
the extent not collected prior thereto, will be on the Closing Date, fully
collectible in the aggregate, subject to the Reserves. Schedule 5.9 sets forth
the total amount of the reserves for accounts of doubtful collection as of
September 30, 2000 ("Reserves"), and the specific customer accounts, with a
provision for reserves through the Closing Date.
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5.10 Inventories. All of the inventories of Vendor are valued at
the lower of cost or market, the cost thereof being determined on a first-in,
first-out basis. The inventories of Vendor relating to the Purchased Business do
not include any material quantities that are below standard quality or of a
quality or quantity not usable or saleable in the normal course of business, the
value of which has not been written down on its books of account to net
realizable market value.
5.11 Intellectual Property. Schedule 5.11 lists the following
Intellectual Property of Vendor: all patent applications and registrations,
trademark applications and registrations, service marks, trade names, copyright
applications and registrations ("IP Rights"). Schedule 5.11 also (i) specifies
the jurisdictions in or by which any of such IP Rights have been registered,
filed or issued, (ii) contains a description of all contracts or licenses
pursuant to which Vendor has authorized any other person(s) to use any
Intellectual Property, and (iii) lists any contract or license pursuant to which
Vendor may use any Intellectual Property it does not own other than the BGC
Intellectual Property transferred to Purchaser pursuant to the Transfer
Agreement (collectively the items listed in (ii) and (iii) referred to as "IP
License Agreements"). Except as set forth in Schedule 5.11, Vendor is the sole
and exclusive owner of the Intellectual Property set forth therein and has the
sole and exclusive right to use such Intellectual Property, and there is no, and
at the Closing there will be no, Intellectual Property which Vendor is
prohibited from using without royalty because of the ownership of any such
Intellectual Property being vested in third parties. No claims, notices, or
demands have been received by Vendor, no proceeding has been instituted or is
pending, or to the knowledge of Vendor, threatened which challenges Vendor's
rights with respect to the Intellectual Property, including, without limitation,
claims with respect to (i) infringement of any Intellectual Property, (ii) any
unauthorized use of any Intellectual Property, or (iii) any asserted unfair
competition. None of the Intellectual Property is subject to any outstanding
order, decree, judgment or stipulation and, to the knowledge of Vendor, none
infringes upon or otherwise violates the rights of others or is being infringed
by others. Vendor has taken adequate steps to keep its proprietary information
confidential and limited to its employees and agents.
5.12 Insurance. Vendor has the Purchased Assets insured against
loss or damage by all insurable hazards or risks on a replacement cost basis and
such insurance coverage will be continued in full force and effect to and
including the Time of Closing. All product liability, professional liability and
general liability policies maintained by or for the benefit of Vendor since
November 6, 1997 have been "occurrence" policies and not "claims made" policies.
Such insurance coverage will not be transferred to Purchaser.
5.13 No Expropriation. No part of the Purchased Assets has been
taken or expropriated by any federal, provincial, state, municipal or other
authority, nor has any notice or proceeding in respect thereof been given or
commenced, nor is Vendor aware of any intent or proposal to give any such notice
or commence any such proceedings.
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5.14 Agreements and Commitments. Except as described in Schedules
2.1(c), 2.1(g) and 5.11 and except for Vendor's financing arrangements with
National Bank of Canada which will be paid off at Closing, Vendor is not a party
to or bound by any material Contract relating to the Purchased Business or
Purchased Assets. Vendor has performed in all material respects all of the
obligations required to be performed by it and is entitled to all benefits
under, and is not in default or alleged to be in default in respect of, any
material Contract relating to the Purchased Business or Purchased Assets to
which it is a party or by which it is bound and all such Contracts are in good
standing and in full force and effect, and, to the knowledge of Vendor, no
event, condition or occurrence exists that, after notice or lapse of time or
both, would constitute a default under any of the foregoing. Vendor has provided
to Purchaser a true and complete copy of each Contract listed or described in
Schedules 2.1(c), 2.1(g) and 5.11 and all amendments thereto. Set forth on
Schedule 5.14 is a summary of unfilled firm purchase orders of Vendor as of
October 16, 2000, other than any unfilled firm purchase orders which have an
individual value of less than $2,000.
5.15 Compliance with Laws; Governmental Authorization. Vendor has
complied in all material respects with all laws, statutes, ordinances,
regulations, rules, judgments, decrees or orders applicable to the Purchased
Business or the Purchased Assets. Vendor holds all licenses, permits, approvals,
consents, certificates, registrations and authorizations (whether governmental,
regulatory or otherwise) necessary to carry on the Purchased Business or to own
or lease any of the Purchased Assets ("Permits"). All such Permits are listed on
Schedule 5.15. Except as set forth on Schedule 5.15, each Permit is in full
force and effect and Vendor has no knowledge that any Permit will be terminated,
adversely affected or otherwise subject to governmental approval by the
transactions contemplated hereby.
5.16 Environmental. Except as disclosed in the Reports listed on
Schedule 5.16:
(a) Vendor has complied with and is not in violation of any
Environmental Laws. Vendor holds and is in compliance with all Environmental
Permits, which are listed on Schedule 5.16 hereto. To the knowledge of Vendor,
such Environmental Permits are all the permits required to carry on the
Purchased Business. All Environmental Permits are valid and in full force and
effect, and may be transferred to Purchaser.
(b) No notice, request for information, notice of claim, demand,
citation, summons or order has been mailed to, delivered, issued or served upon
Vendor, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any governmental authority
with respect to:
(i) any claim that Vendor or any of its predecessors are
or may be potentially responsible for: the clean-up of any threatened
or actual release of any Hazardous Substance;
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(ii) any alleged violation by Vendor of any Environmental
Law or Environmental Permit;
(iii) any alleged failure by Vendor to have any
Environmental Permit; or
(iv) any use, possession, generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substances by or
on behalf of Vendor or its predecessors.
(c) Except for Hazardous Substances stored or used in the ordinary
course of their manufacturing processes, in quantities and in a manner: (1) not
in violation of any applicable law, or (2) which has not or is not reasonably
likely to create a condition which requires investigation, remediation or other
responsive action or responsibility or liability under Environmental Laws,
neither Vendor nor any other party has used, generated, treated, stored for more
than 90 days, recycled or disposed of any Hazardous Substances on the Real
Property and there is not now, nor has there ever been in the past a release or
a threat of release of Hazardous Substances from the Real Property into the
environment.
(d) To the knowledge of Vendor, no polychlorinated biphenyls, lead
based paints or asbestos-containing materials, or urea formaldehyde are at the
Real Property, nor are there any underground storage tanks, active or abandoned,
at the Real Property.
(e) No Hazardous Substance generated by Vendor has been recycled,
treated, stored, disposed of or transported by the Vendor or, to the knowledge
of Vendor, by any other entity in violation of any Environmental Law or in a
manner which has created or is reasonably likely to create any liability or
responsibility under any Environmental Law. No Hazardous Substance has been
released at, on, about or under the Real Property by Vendor, or to the knowledge
of Vendor, is present on the Real Property which requires investigation,
remediation or other response action.
(f) To the knowledge of Vendor, no Hazardous Substance generated
or managed by Vendor has come to be located at any site which is the subject of
federal, provincial or local actions or other investigations which may lead to
claims against Vendor or Purchaser for clean-up costs, remedial work, damages to
natural resources or for a personal injury claim, including, but not limited to,
claims under the Environmental Protection Act (Ontario) or other applicable
Environmental Laws.
(g) To the knowledge of Vendor, after due inquiry and
investigation, there are no facts or circumstances related to environmental
matters concerning the Real Property that could reasonably be expected to lead
to any future environmental claims against Vendor or Purchaser under current
law. Copies of all environmental inspections, investigations, studies, audits,
tests,
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reviews or other analyses conducted by or at the direction of Vendor or, in the
possession of Vendor have been provided to Purchaser.
5.17 Consents and Approvals. There is no requirement to make any
filing with, give any notice to or to obtain any license, permit, certificate,
registration, authorization, consent or approval of any governmental or
regulatory authority as a condition to the lawful consummation of the
transactions contemplated by this Agreement, except for the filings,
notifications, licenses, permits, certificates, registrations, consents and
approvals described in Schedule 5.4 or that relate solely to the identity of
Purchaser or the nature of any business carried on by Purchaser. There is no
requirement under any Contract relating to the Purchased Business or Purchased
Assets to which Vendor is a party or by which it is bound to obtain the consent
or approval of, any party to such agreement, instrument or commitment relating
to the consummation of the transactions contemplated by this Agreement, except
for the consents and approvals described in Schedule 5.4.
5.18 Financial Statements. True and correct copies of the Financial
Statements have been provided to Purchaser. The Financial Statements have been
prepared in accordance with Canadian generally accepted accounting principles
applied on a basis consistent with prior periods ("GAAP") and are correct and
complete in all material respects and present fairly the assets, sales,
liabilities, earnings and results of operations of the Purchased Business for
the respective periods covered by the Financial Statements.
5.19 Books and Records. The books and records of the Purchased
Business fairly and correctly set out and disclose, in accordance with Canadian
generally accepted accounting principles, the financial position of the
Purchased Business as at the date hereof, and all financial transactions of
Vendor relating to the Purchased Business have been accurately recorded in such
books and records.
5.20 Absence of Changes. Except as set forth on Schedule 5.20,
since December 31, 1999, the Purchased Business has been carried on in the
ordinary and normal course consistent with past practice and will be carried on
in the ordinary and normal course after the date hereof and up to the Time of
Closing. There has not been any change since December 31, 1999, which has had a
material adverse effect on the results of operations of Vendor, and to the
knowledge of Vendor, no fact or condition exists which, in the reasonable
judgment of Vendor, would cause any material change in the operations or
financial condition of Vendor. Since December 31, 1999, Vendor has not entered
into any material transaction or incurred any material liability except in the
ordinary course of business consistent with past practice. Without limiting the
generality of the foregoing, since December 31, 1999, except as disclosed on
Schedule 5.20, there has not been (i) any damage, destruction or loss (whether
or not covered by insurance) materially adversely affecting the properties,
liabilities, financial condition or results of operations of Vendor, or (ii) any
change in the accounting methods or practices, other than as required by law,
used to determine the financial condition of Vendor and the results of its
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operations, including without limitation, any change in depreciation or
amortization policies or rates theretofore adopted.
5.21 Litigation. Except as described in Schedule 5.21, there are no
actions, grievances, complaints, charges, investigations, suits or proceedings
pending or, to the knowledge of Vendor, threatened against or affecting Vendor
at law or in equity or before or by any federal, provincial, state, municipal or
other governmental department, court, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before or by an arbitrator or
arbitration board. There are no outstanding judgments, decrees or orders of any
court or any governmental or administrative agency against or affecting Vendor,
the Purchased Assets or the Purchased Business.
5.22 Taxes.
(a) Vendor has (i) accurately and timely filed all federal,
provincial, state and local income, payroll, withholding, excise, sales, use,
goods and services, personal property, use and occupancy, business and
occupation, mercantile, real estate, capital stock and franchise or other tax
returns of any kind whatsoever (all the foregoing taxes, including interest and
penalties thereon and including estimated taxes referred to as "Taxes"), (ii)
paid all Taxes which are shown to have become due pursuant to such returns, and
(iii) paid all other Taxes for which a notice of assessment or demand for
payment has been received. All Tax returns have been prepared in accordance with
all applicable laws and requirements and accurately reflect the taxable income
of Vendor. No Tax returns are currently under audit or review by any
administrative agency having jurisdiction over such returns.
(b) Vendor is not a non-resident of Canada for the purposes of the
Income Tax Act (Canada).
(c) Vendor is a registrant for purposes of the Excise Tax Act
(Canada) whose registration number is 876860164 RT.
5.23 Employees; Collective Bargaining Agreements.
(a) Vendor has delivered to Purchaser a complete and accurate list
("Employee List") of the names of all individuals who are employees of Vendor as
of September 30, 2000 specifying: the length of service, age, title, rate of
salary and commission or bonus structure, and accrued vacation for each such
employee. The Employee List also provides a list of former employees and/or
their families who are still entitled to any benefits by Vendor. The Employee
List shall be updated and delivered to Purchaser at least two days prior to the
Closing. All accruals for unpaid vacation pay, premiums for employment
insurance, health premiums, Canada Pension Plan premiums, accrued wages,
salaries and commissions and employee benefit plan payments have been reflected
in the books and records of Vendor. No employee of Vendor has a written
employment contract.
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(b) Except those which have been resolved, no notice has been
received by Vendor of any complaint filed by any of the employees of Vendor
claiming that Vendor has violated the Employment Standards Act (Ontario), the
Human Rights Code (Ontario) (or any applicable employee or human rights or
similar legislation in the other jurisdictions in which the Purchased Business
is conducted) or of any complaints or proceedings of any kind involving Vendor
with respect thereto or, to Vendor's knowledge, after due inquiry, any of the
employees of Vendor before any labor relations board. There are no outstanding
orders or charges against Vendor under the Occupational Health and Safety Act
(Ontario) or any applicable health and safety legislation. All levies,
assessments and penalties made against Vendor pursuant to the Worker's
Compensation Act (Ontario) or any applicable workers' compensation laws have
been paid by Vendor.
(c) Vendor has not made any Contracts with any labor union or
employee association nor made commitments to or conducted negotiations with any
labor union or employee association with respect to any future agreements and
Vendor is not aware of any current attempts to organize or establish any labor
union or employee association with respect to any employees of the Purchased
Business nor is there any certification of any such union with regard to a
bargaining unit.
5.24 Employee Plans. Vendor's Employee Handbook and Group Insurance
Brochure (collectively, "Employee Materials"), copies of which have been or will
be provided to Purchaser prior to October 30, 2000, identifies each retirement,
pension, bonus, stock purchase, profit sharing, stock option, deferred
compensation, severance or termination pay, insurance, medical, hospital,
dental, vision care, drug, sick leave, disability, salary continuation,
unemployment benefits, vacation, incentive or other compensation plan or
arrangement or other employee benefit that is maintained, or otherwise
contributed to or required to be contributed to, by Vendor relating to the
Purchased Business for the benefit of employees or former employees of Vendor
("Employee Plans"). Each Employee Plan has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such Employee Plan and has been
administered in accordance with the terms of any trusts or insurance contracts
maintained in connection therewith. All of the following is true:
(i) all contributions to, and payments from, each
Employee Plan that may have been required to be made in accordance with
the terms of any such Employee Plan and the laws of the jurisdictions
that govern such Employee Plan, have been made in a timely manner;
(ii) all material reports, returns and similar documents
(including applications for approval of contributions) with respect to
any Employee Plan required to be filed with any government agency or
distributed to any Employee Plan participant have been duly filed in a
timely manner or so distributed;
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(iii) there are no pending investigations by any
governmental or regulatory agency or authority involving or relating to
any Employee Plan, no threatened or pending claims (except for claims
for benefits payable in the normal operation of the Employee Plans),
suits or proceedings against any Employee Plan or asserting any rights
or claims to benefits under any Employee Plan that could give rise to a
liability nor, to the Vendor's knowledge, are there any facts that
could give rise to any liability in the event of such investigation,
claim, suit or proceeding; and
(iv) no notice has been received by Vendor of any
complaints or other proceedings of any kind involving Vendor or, to
Vendor's knowledge, any of the employees of Vendor before any committee
relating to any Employee Plan or to the Purchased Business or the
Purchased Assets.
5.25 Customers and Suppliers. Schedule 5.25 lists the twenty
largest customers and 20 largest suppliers (by dollar volume) of Vendor for the
last fiscal year and expected for the current fiscal year. Except as set forth
on Schedule 5.25, since December 31, 1999, there has been no termination or
cancellation of, and no material modification in, Vendor's business relationship
with any major customer or group of customers or any major supplier or group of
suppliers. Vendor has no reason to believe that the benefits of any relationship
with any of its major customers or suppliers will not continue after the Closing
Date in substantially the same manner as prior to the date hereof.
5.26 Disclosure. No representation or warranty by Vendor in this
Agreement, and no exhibit, certificate, information or schedule furnished or to
be furnished to Purchaser hereunder, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements of fact contained herein or therein not misleading or necessary to
provide Purchaser with proper information as to the Purchased Assets and the
Purchased Business. Vendor shall disclose to Purchaser at or prior to Closing
any information then in its possession that indicates that Vendor is in breach
of this Agreement or which may provide the basis for a claim by Purchaser that
Vendor has breached this Agreement.
5.27 Dixie Receivables. The Dixie Receivables shall be collected by
the Purchaser in full within 210 days after the Closing without reference to the
Reserves, as defined in Section 5.9.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
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The Purchaser represents and warrants to Vendor as follows and
acknowledges and confirms that Vendor is relying on such representations and
warranties in connection with its sale of the Purchased Assets:
6.1 The Purchaser is a corporation validly existing under the laws
of Ontario and has the corporate power to enter into this Agreement and to
perform its obligations hereunder.
6.2 This Agreement has been duly authorized, executed and
delivered by Purchaser and is a legal, valid and binding obligation of
Purchaser, enforceable against Purchaser by Vendor in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency and other laws
affecting the rights of creditors generally and except that equitable remedies
may only be granted in the discretion of a court of competent jurisdiction.
6.3 The execution and delivery of this Agreement by Purchaser and
the consummation of the transactions herein provided for will not result in the
violation of, or constitute a default under, or conflict with or cause the
acceleration of any obligation of Purchaser under:
(a) any Contract to which Purchaser is a party or by which it is
bound;
(b) any provision of its articles of incorporation or by-laws or
resolutions of its board of directors (or any committee
thereof) or its shareholders;
(c) any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction over
Purchaser; or
(d) any applicable law, statute, ordinance, regulation or rule.
6.4 There is no requirement for Purchaser to make any filing with,
give any notice to or obtain any license, permit, certificate, registration,
authorization, consent or approval of, any government or regulatory authority as
a condition to the lawful consummation of the transactions contemplated by this
Agreement.
6.5 The Purchaser is a "non-Canadian" that is controlled by a "WTO
Investor" as those terms are used in the Investment Canada Act (Canada).
6.6 The Purchaser is a registrant for purposes of the Excise Tax
Act (Canada) whose registration number is 89318 8615.
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
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7.1 The representations and warranties made by Vendor and
Purchaser to one another in this Agreement, or contained in any document or
certificate given to one another in order to carry out the transactions
contemplated hereby, will survive the closing of the sale and purchase of the
Purchased Assets provided for herein for a period of one year after the Closing
Date, provided, that (a) Claims, if any, asserted in writing prior to the
expiration of a representation or warranty to which they related, shall survive
until finally resolved and satisfied in full, (b) Claims, if any, which involve
the representations set forth in Section 5.16 or otherwise involve environmental
matters shall survive without limitation, (c) Claims, if any, which assess tax
liability shall survive for the full period of the applicable statute of
limitations, and until finally resolved and satisfied in full, (d) Claims from
the litigation matters listed on Schedule 5.21 shall survive without limitation,
and (e) Claims, if any, relating to title or ownership of the Purchased Assets
shall survive without limitation. All Claims shall be subject to the limitations
hereinafter set forth in Article 11.
7.2 After the expiration of the relevant time periods referred to
in Section 7.1, Vendor and Purchaser will each be released from all obligations
and liabilities in respect of such representations and warranties respectively
made by them in this Agreement or in any document or certificate given in order
to carry out the transactions contemplated hereby, except with respect to any
Claims made by either Vendor or Purchaser in writing prior to the expiration of
such period.
8. COVENANTS AND AGREEMENTS OF THE PARTIES.
8.1 Access to Purchased Business and Purchased Assets. Vendor
shall forthwith make available to Purchaser and its authorized representatives
and, if requested by Purchaser, provide a copy to Purchaser of all Contracts,
Employee Plans, Permits, financial statements, policies, plans, reports, orders,
and all other documents and data relating to the Purchased Business or the
Purchased Assets. Vendor shall afford Purchaser and its authorized
representatives on reasonable notice every reasonable opportunity to have access
to the Purchased Assets and all other property and assets utilized in the
Purchased Business.
8.2 Delivery of Books and Records. At or prior to the Time of
Closing, there shall be delivered to Purchaser by Vendor all the books and
records described in Section 2.1(i). The Purchaser agrees that it will preserve
the books and records so delivered to it for a period of six years from the
Closing Date, or for such longer period as is required by any applicable law,
and will permit Vendor or its authorized representatives reasonable access
thereto in connection with the affairs of Vendor and Clark.
8.3 Non-Use of Name. Vendor agrees that within two (2) Business
Days from the Closing Date, it shall change its name and shall cause any of its
Affiliates, including BGC, whose name includes the words "Blue Giant" to change
their name to a name that does not include the words "Blue Giant" or any similar
words. Vendor agrees that, from and after the
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Closing Date, it will not use the words "Blue Giant" or any similar words as
part of any trade name or trademark with which it carries on business.
8.4 Conduct of Purchased Business Prior to Closing. Without in any
way limiting any other obligations of Vendor hereunder, during the period from
the date hereof to the Time of Closing Vendor shall conduct the Purchased
Business only in the ordinary and normal course consistent with past practice
and Vendor shall use its best efforts to preserve intact the Purchased Business
and Purchased Assets and to carry on the Purchased Business as currently
conducted, and Vendor shall use its best efforts to promote and preserve for
Purchaser the goodwill of suppliers, customers and others having business
relations with Vendor. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement or with the prior
written consent of Purchaser, Vendor agrees that it shall not:
(a) keep and maintain its books of account and records other than
in accordance with GAAP consistent with past practices;
(b) amend or change Vendor's Certificate of Incorporation or
By-laws;
(c) (i) other than Vendor's existing line of credit with National
Bank of Canada, create, incur or assume any long-term debt (including
obligations with respect to capital leases), or create, incur, assume, maintain
or permit to exist any short-term debt representing indebtedness for borrowed
money, (ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, other than as the result of the endorsement of negotiable instruments in
the ordinary course of business consistent with past practices, or (iii) make
any loans, advances or capital contributions to, or investments in, any other
person;
(d) (i) other than in the normal course of business consistent
with past practice, increase the compensation for any of its directors, officers
or other employees, (ii) pay or agree to pay any pension, retirement allowance
or other employee benefits not required or permitted by an existing plan,
agreement or arrangement to any such director, officer or employee, whether past
or present, or (iii) commit itself to any new or renewed pension,
profit-sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay, retirement or
other employee benefit plan, agreement or arrangement, or to any employment or
consulting agreement (or amendment, renewal other extension thereof) with or for
the benefit of any person, or to amend any of such plans or any of such
agreements in existence on the date hereof;
(e) permit any of its current insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or
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lapse, replacement policies are in full force and effect providing coverage
equal to or greater than the coverage under those canceled, terminated or lapsed
for substantially similar premiums;
(f) amend or terminate any Contract or, except in the ordinary
course of business, sell, transfer, mortgage or otherwise dispose of or
encumber, or agree to sell, transfer, mortgage or otherwise dispose of or
encumber, any properties, real personal or mixed;
(g) except in the ordinary course of business, sell, transfer,
license or otherwise dispose of, or agree to sell, transfer, license or
otherwise dispose of, any Purchased Assets;
(h) enter into any other agreements, commitments or contracts
which, individually or in the aggregate, are material to the business,
prospects, operations, properties, assets, liabilities, earnings, cash flows or
condition (financial or otherwise) of Vendor, except agreements, commitments or
contract for the purchase, sale or lease of goods and services in the ordinary
course of business, consistent with past practice and not in excess of current
requirements, or otherwise make any material change in conduct of the business
or operations of Vendor;
(i) grant any powers of attorney;
(j) approve or undertake, either as the surviving, disappearing,
acquiring or selling corporation, any merger, consolidation, liquidation, asset
acquisition or disposition or any takeover transaction or furnish or cause to be
furnish any information concerning its business, properties or assets to any
person (other than to Purchaser) which is interested in any such transaction;
(k) solicit, encourage, respond to or otherwise entertain any
inquiries or proposals for the acquisition of all or any part of the capital
stock, assets or business of Vendor;
(l) take any action which would result in any of the
representation or warranties contained in this Agreement not being true at and
as of the time immediately after such action, or in any of the covenants
contained in this Agreement becoming unperformable;
(m) make any capital improvements;
(n) make any payments for Intercompany Payables or receive
payments for Intercompany Receivables, except in the ordinary course consistent
with past practice;
(o) make any payments of principal or interest under any
intercompany note; or
(p) agree to do any of the foregoing.
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8.5 Delivery of Conveyance Documents.
(a) The Vendor shall make available to the Purchaser or its
solicitor, (i) copies of all plans, specifications, drawings (architectural,
structural, mechanical and electrical), permits, documents, reports, draft plan
approvals, studies, agreements, contracts or other materials in the possession
of the Vendor and relating to the Real Property; (ii) copies of all tests and
inspections relating to the Real Property and in the Vendor's possession; (iii)
authorizations of the Vendor to all relevant municipal, regional and
governmental authorities having jurisdiction over the Real Property allowing the
release of any information on file with such governmental authorities to the
Purchaser or its solicitor and authorizing such further investigations as the
Purchaser may request; and (iv) surveys in its possession of the Real Property
prepared by and under seal of an Ontario Land Surveyor showing the location and
area of any buildings or structures and all existing improvements, if any, and
fences, easements and encroachments thereon or therefrom.
(b) Vendor shall deliver to Purchaser, on or before the Closing
Date, all necessary conveyances, bills of sale, assurances, transfers,
assignments and any other documentation necessary or reasonably required to
transfer the Purchased Assets to Purchaser including, without limitation,
consents to the assignment of all contracts requiring same.
(c) The Vendor shall, at its own expense, prior to closing, cause
the release and discharge of all liens, security interests, encumbrances,
encroachments, easements, rights of way, restrictions, leases and other
interests affecting the Real Property other than Permitted Encumbrances, and
shall comply with any and all work orders, notices of deficiencies and notices
of violation.
8.6 Employees and Employee Plans.
(a) Purchaser agrees that it shall offer employment to all active
employees of the Purchased Business, effective as at the Time of Closing, at the
same salary and wage rates and otherwise on substantially the same terms and
conditions of employment as are then applicable to those employees. Any employee
who accepts such offer of employment and does not voluntarily resign his or her
employment within ten (10) days after the Closing Date is herein referred to as
a "Transferred Employee".
(b) Except as expressly assumed by Purchaser in Section 8.6(c)
below, Vendor shall remain liable for, and Purchaser shall not assume, any
liability for accrued wages, salary, vacation pay, benefits under any employee
benefit plan or obligations to pay severance benefits to any employee of Vendor
prior to the Time of Closing.
(c) Purchaser shall be liable for and shall discharge all
obligations to the Transferred Employees arising or accruing from and after the
Time of Closing for wages, salary, vacation pay and benefits and for severance
pay, notice of termination of employment or pay in lieu thereof,
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damages for wrongful dismissal or other employee benefits and claims resulting
from the termination of employment of such employees with Purchaser after the
Closing Date (and, in each case, whether or not any such obligations for
termination are referable in whole or in part to periods prior to the Closing
Date and policies of the Vendor).
(d) The Purchaser agrees that the offers of employment will
provide that employees have comparable benefit plans from and after the Time of
Closing or Purchaser will assume Vendor's existing benefit plans as of the Time
of Closing (and Purchaser shall notify Vendor at least three (3) days prior to
Closing whether or not it shall assume such existing benefit plans). For the
purpose of determining the eligibility for membership or benefits under
Purchaser's plans in respect of Transferred Employees:
(a) their period of employment shall include employment
with both Vendor, predecessor employers which Vendor
has recognized and Purchaser, and shall be deemed not
to have been interrupted at the Time of Closing; and
(b) their period of membership shall include membership
in both the plans of Vendor, the plans of predecessor
employers which Vendor has recognized and Purchaser's
comparable plans and shall be deemed not to have been
interrupted at the Time of Closing;
provided that no such Transferred Employee shall be entitled to benefits under
any disability plan sponsored by Purchaser in respect of any condition existing
at or event occurring prior to the Time of Closing. All such Transferred
Employees shall begin to accrue benefits under Purchaser's plans as of the Time
of Closing in respect of their employment by Purchaser.
(e) Vendor shall be solely responsible for payment of any
penalties assessed under Worker's Compensation laws for insurance claims made
prior to the Time of Closing, but shall not be liable for any insurance premium
increase after the Time of Closing.
8.7 Collection of Accounts Receivable. After the Closing Date,
Vendor hereby authorizes Purchaser to open any and all mail addressed to Vendor
and delivered to it at 85 Heart Lake Road South, Brampton, Ontario and hereby
appoints Purchaser, its attorney in fact to endorse, cash and deposit any
monies, checks or negotiable instruments received by Purchaser after the Closing
Date with respect to any accounts receivable made payable or endorsed to Vendor
or its order, for Purchaser's own account.
8.8 No Negotiations. Until the Closing Date, or the earlier
termination of this Agreement in accordance with its terms, without the express
prior consent of Purchaser, neither Vendor, Clark, BGC nor any of their
Affiliates, officers, directors, employees, consultants, advisors, agents,
investment bankers, or any family members of any of the foregoing shall,
directly or indirectly, initiate discussions with, engage in negotiations with,
entertain any offer
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from, or provide any information to any corporation, partnership, person or
other entity or group involving the possible sale, directly or indirectly,
transfer or joint venture of Vendor, the Purchased Business or the Purchased
Assets to any person or entity other than Purchaser.
8.9 Financial Statements. Vendor acknowledges that Purchaser's
accountants will need to incorporate audited financial statements of Vendor for
Vendor's last fiscal year ("Audited Financial Statements"), for inclusion in the
Current Report on Form 8-K of Purchaser's parent ("Parent") to be filed with the
Securities and Exchange Commission and thereafter to be incorporated into
Parent's audited financial statements. Vendor agrees that it shall cause
Vendor's independent certified public accountants ("Vendor's Accountants") (i)
to prepare such Audited Financial Statements in accordance with the requirements
of GAAP, Regulation S-X of the Securities and Exchange Commission, work letters
of Parent's accountants, and such other accounting requirements as are
applicable to public reporting companies, (ii) to authorize Parent, Purchaser
and Parent's accountants to rely on such Audited Financial Statements and the
certification thereof by Vendor's Accountants, and to incorporate such Audited
Statements into Parent's audited financial statements for inclusion in Parent's
Form 8-K filing and all subsequent required filings and reporting, and (iii) to
otherwise cooperate with Parent's accountants in the preparation of pro-formas,
interim statements, and other reports as are reasonably required in connection
with Purchaser's filing and reporting obligations. At all times between the date
hereof and the Closing Date, Vendor shall cause Vendor's Accountants to afford
Parent's accountants access to (including copies of) Vendor's and Vendor's
Accountants' books and records and such other information as Parent's
accountants reasonably request in order to review such Audited Statements and to
incorporate them into Parent's audited financial statements. At all times during
such review, whether before or after the Closing Date, Vendor shall, and shall
cause Vendor's Accountants to, cooperate fully with Parent's accountants,
including taking such actions as Parent's accountants reasonably require, in
connection with such Audited Financial Statements. Purchaser shall pay
reasonable costs of Vendor's Accountants in complying with this section.
8.10 Vendor's Status after the Closing. From and after the Closing
Date, Vendor agrees as follows:
(i) Vendor shall maintain a net worth of liquid assets of at
least $250,000 until the later of (A) final resolution of the Purchase Price
Adjustment described in Section 3.3, (B) sixty (60) days after the Closing Date,
or (C) completion of the matters identified in Section 11.1(d) which both
parties will diligently work to complete; and
(ii) For at least three years after the Closing Date, Vendor
shall maintain product liability insurance in substantially the same amounts as
currently maintained to cover potential product liability claims for periods of
time prior to the Closing Date.
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8.11 Dixie Receivables. Purchaser agrees that from and after the
Time of Closing, Purchaser shall use commercially reasonable efforts to collect
the Dixie Receivables. If the Dixie Receivables have not been collected in full
within 210 days after the Time of Closing, upon payment to Purchaser by Vendor
of the face amount thereof, Purchaser shall assign such uncollected Dixie
Receivables to Vendor. Purchaser shall pay any collection fees associated with
its efforts to collect the Dixie Receivables.
9. CONDITIONS OF CLOSING.
9.1 Conditions of Closing in Favor of Purchaser. The sale and
purchase of the Purchased Assets is subject to the following terms and
conditions for the exclusive benefit of Purchaser, to be performed or fulfilled
at or prior to the Time of Closing:
(a) Representations and Warranties. The representations and
warranties of Vendor contained in this Agreement shall be true
and correct in all material respects at the Time of Closing
with the same force and effect as if such representations and
warranties were made at and as of such time, and a certificate
of an officer of Vendor, dated the Closing Date, to that
effect shall have been delivered to Purchaser, such
certificate to be in form and substance satisfactory to
Purchaser;
(b) Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by Vendor at or
before the Time of Closing shall have been complied with or
performed in all material respects, and a certificate of an
officer of Vendor, dated the Closing Date, to that effect
shall have been delivered to Purchaser, such certificate to be
in form and substance satisfactory to Purchaser;
(c) Regulatory Consents. There shall have been obtained from all
appropriate federal, provincial, state, municipal or other
governmental or administrative bodies such licenses, permits,
consents, approvals, certificates, registrations and
authorizations as are required to be obtained by Vendor or
Clark to permit the change of ownership of the Purchased
Assets contemplated hereby, including, without limitation,
those described in Schedule 5.4, in each case in form and
substance satisfactory to Purchaser;
(d) Contractual Consents. Vendor shall have given or obtained the
notices, consents and approvals described in Schedule 5.4, in
each case in form and substance satisfactory to Purchaser,
other than consents that may be required in connection with
customer orders incurred in the ordinary course of business;
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(e) No Action or Proceeding. No legal or regulatory action or
proceeding shall be pending or threatened by any person to
enjoin, restrict or prohibit the purchase and sale of the
Purchased Assets contemplated hereby;
(f) No Material Damage. No material damage by fire or other hazard
to the whole or any material part of the Purchased Assets
shall have occurred from the date hereof to the Time of
Closing;
(g) No Material Adverse Change. There shall have been no material
adverse change in the condition (financial or otherwise), of
the assets, liabilities, operations, earnings, business or
prospects of the Purchased Business since September 30, 2000;
(h) Legal Matters. All actions, proceedings, instruments and
documents required to implement this Agreement, or
instrumental thereto, and all legal matters relating to the
purchase of the Purchased Assets, shall have been approved as
to form and legality by Levett Rockwood, P.C., counsel for
Purchaser, acting reasonably;
(i) Clark Supply Agreement. Clark shall have executed and
delivered to Purchaser a Supply Agreement substantially in the
form of Exhibit 1 ("Clark Supply Agreement");
(j) U.S. Conveyance. BGC shall have executed and delivered to
Purchaser the Transfer Agreement substantially in the form of
Exhibit 2;
(k) Director Approval. The board of directors of Purchaser shall
have approved the execution, delivery and performance of this
Agreement by November 2, 2000;
(l) Financing. Purchaser shall have received financing from a
financial institution sufficient to pay the Purchase Price,
provided that if Purchaser fails to obtain a commitment from a
financial institution by November 2, 2000, either party may
terminate this Agreement upon written notice to the other with
no further obligation or liability to each other under this
Agreement, other than the obligations contained in Section
13.2;
(m) Section 6 Certificate. Upon execution of this Agreement the
Vendor shall apply forthwith, and thereafter deliver to the
Purchaser at the Time of Closing, a certificate issued by the
Minister of Revenue pursuant to Section 6 of the Retail Sales
Tax Act (Ontario) which certificate shall indicate that the
Vendor has paid all taxes collectable or payable under the
said Act up to the Effective Time or has entered into an
arrangement satisfactory to the said Minister for the payment
of such taxes;
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(n) Outstanding Debt. As of the Closing, Vendor's outstanding
indebtedness for borrowed money shall not exceed $3,000,000;
(o) Certification of Employee Materials. Vendor shall provide a
certificate, certified by an officer of Vendor attaching the
Employee Materials (as defined in Section 5.24) and certifying
as to their accuracy and completeness; and
(p) Schedules; Due Diligence Review. By October 31, 2000,
Purchaser shall be satisfied in its discretion with (A) the
schedules to this Agreement and any exhibits to this
Agreement, and (B) its due diligence review of the Purchased
Business and the Purchased Assets.
(q) Environmental. No environmental liabilities shall exist on the
Real Property which could cost in excess of $50,000.
If any of the conditions contained in this Section 9.1 shall not be
performed or fulfilled as of the time specified, or if no time is specified, at
or prior to the Time of Closing to the satisfaction of Purchaser, Purchaser may,
by notice to Vendor, terminate this Agreement and the obligations of Vendor and
Purchaser under this Agreement, other than the obligations contained in Section
13.2. If the condition set forth in Section 9.1(p) is not met, Purchaser must
provide a written notice of termination no later than October 31, 2000. If
either of the conditions set forth in Sections 9.1(k) or (l) are not met,
Purchaser must provide written notice of termination no later than November 3,
2000.
9.2 Conditions of Closing in Favor of Vendor. The sale and
purchase of the Purchased Assets is subject to the following terms and
conditions for the exclusive benefit of Vendor, to be performed or fulfilled at
or prior to the Time of Closing:
(a) Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects at the Time of
Closing with the same force and effect as if such
representations and warranties were made at and as of such
time, and a certificate of an officer of Purchaser, dated the
Closing Date, to that effect shall have been delivered to
Vendor, such certificate to be in form and substance
satisfactory to Vendor;
(b) Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by Purchaser at or
before the Time of Closing shall have been complied with or
performed in all material respects, and a certificate of an
officer of Purchaser, dated the Closing Date, to that effect
shall have been delivered to Vendor, such certificate to be in
form and substance satisfactory to Vendor;
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(c) Regulatory Consents. There shall have been obtained from all
appropriate federal, provincial, state, municipal or other
governmental or administrative bodies such licenses, permits,
consents, approvals, certificates, registrations and
authorizations as are required to be obtained by Purchaser,
Clark or BGC to permit the change of ownership of the
Purchased Assets contemplated hereby, including those
described in Schedule 5.4, in each case in form and substance
satisfactory to Vendor;
(d) No Action or Proceeding. No legal or regulatory action or
proceeding shall be pending or threatened by any person to
enjoin, restrict or prohibit the purchase and sale of the
Purchased Assets contemplated hereby;
(e) Legal Matters. All actions, proceedings, instruments and
documents required to implement this Agreement, or
instrumental thereto, shall have been approved as to form and
legality by Borden Ladner Gervais LLP, counsel for Vendor;
(f) Purchaser Supply Agreement. The Purchaser shall have executed
and delivered to Clark a Supply Agreement substantially in the
form of Exhibit 3;
(g) Approvals. The board of directors of Clark shall have approved
the execution, delivery and performance of this Agreement by
November 2, 2000. The United States Bankruptcy Court for the
District of Delaware in Case No. 00-1740 (SLR) ("Bankruptcy
Court") shall have approved the agreement of Clark to be bound
by Article 11 hereto.
(h) Bankruptcy Court Approval. The Bankruptcy Court shall have
approved the Supply Agreements and the Transfer Agreement.
(i) Environmental. No environmental liabilities shall exist on the
Real Property which could cost in excess of $50,000.
If any of the conditions contained in this Section 9.2 shall not be
performed or fulfilled as of the time specified, or if no time is specified, on
or prior to the Time of Closing to the satisfaction of Vendor, Vendor may, by
notice to Purchaser, terminate this Agreement and the obligations of Vendor and
Purchaser under this Agreement, other than the obligations, if any, contained in
Section 13.2. If the condition set forth in the first sentence of Section 9.2(g)
is not met, Vendor must provide written notice of termination no later than
November 3, 2000.
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10. CLOSING DATE AND TRANSFER OF POSSESSION.
10.1 Transfer. Subject to compliance with the terms and conditions
hereof, the transfer of possession of the Purchased Assets shall be deemed to
take effect as at the close of business on the Closing Date.
10.2 Place of Closing. The closing shall take place at the Time of
Closing at the offices of Borden Ladner Gervais LLP, counsel for Vendor, at 40
King Street West, Toronto, Ontario, Canada.
10.3 Further Assurances. From time to time subsequent to the
Closing Date, each party to this Agreement covenants and agrees that it will at
all times after the Closing Date, at the expense of the requesting party,
promptly execute and deliver all such documents, including, without limitation,
all such additional conveyances, transfers, consents and other assurances and do
all such other acts and things as the other party, acting reasonably, may from
time to time request be executed or done in order to better evidence or perfect
or effectuate any provision of this Agreement or of any agreement or other
document executed pursuant to this Agreement or any of the respective
obligations intended to be created hereby or thereby.
10.4 Risk of Loss. From the date hereof up to the Time of Closing,
the Purchased Assets shall be and remain at the risk of Vendor. If, prior to the
Time of Closing, all or any part of the Purchased Assets that are necessary to
carry on the Purchased Business as currently conducted are destroyed or damaged
by fire or any other casualty or shall be appropriated, expropriated or seized
by governmental or other lawful authority, unless Purchaser terminates its
obligations under this Agreement as contemplated by Section 9.1, Purchaser shall
complete the purchase without reduction of the Purchase Price, in which event
all proceeds of insurance or compensation for expropriation or seizure shall be
paid to Purchaser at the Time of Closing and all right and claim of Vendor to
any such amounts not paid by the Closing Date shall be assigned at the Time of
Closing to Purchaser.
11. INDEMNIFICATION
11.1 Indemnification by Vendor. Subject to the provisions of
Sections 7.1, 7.2, 11.3, 11.4, 11.5 and 11.6 hereof, Vendor and Clark hereby
jointly and severally indemnify and hold Purchaser and each of its
Representatives harmless from and against any and all Losses suffered, asserted
against or required to be paid by Purchaser to the extent that they are the
result of:
(a) the breach or non-performance of any representation, warranty,
covenant or agreement of Vendor in this Agreement, any
Ancillary Agreement or in any document, schedule or
certificate provided pursuant to this Agreement;
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(b) any product liability claim by a third party attributable to
products sold by Vendor prior to the Time of Closing;
(c) any Claims associated with any investigation or remediation
required by an appropriate governmental authority under any
environmental law or regulation from any activities of Vendor
or in connection with any Hazardous Substances located on the
Real Property prior to the Closing Date;
(d) any Claims associated with (i) remediation that may be
required after completion of a Phase II subsurface
investigation, which investigation will be completed by
October 30, 2000, as to any soil and groundwater contamination
that may have resulted from solvent spills near the drainage
hole located in the flammable liquids storage room, (ii) the
costs of sealing the drainage hole in the flammable liquids
storage room and installation of secondary spill containment
systems for the flammable liquids storage room, the waste
paint collection area and 1,000 L plastic totes containing
hydraulic oil, and (iii) any costs associated with obtaining
Certificate of Approvals (Air) ("Permits") from the Ontario
Ministry of the Environment for the paint spray booth exhausts
and welding fume exhaust system, except to the extent of
routine administrative costs Purchaser would have normally
incurred in transferring or obtaining such Permits if such
Permits were properly in place immediately prior to Closing,
but, in each case, only to the extent required by
environmental laws or to any lesser extent deemed in
satisfaction of environmental law by any governmental agency
charged with enforcing such law.
(e) any and all liability for Federal, provincial, local or
foreign taxes, charges, fees, levies, or other assessments in
the nature of taxes, including interest or penalties
associated therewith, imposed on Vendor, any of the Excluded
Assets whether prior to or after the Closing Date, or the
Purchased Assets on or prior to the Closing Date;
(f) the pending or threatened litigation matters and potential
claims listed on Schedule 5.21;
(g) non-compliance with any bulk sales or similar laws in
connection with the transactions contemplated hereby except to
the extent arising from Purchaser's failure to pay, satisfy,
discharge and perform any of the Assumed Liabilities; or
(h) claims arising from or associated with any Excluded
Liabilities.
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11.2 Indemnification by Purchaser. Subject to the provisions of
Sections 7.1, 7.2, 11.3, 11.4, 11.5 and 11.6 hereof, Purchaser agrees to
indemnify and hold Vendor and each of its Representatives harmless from and
against any and all Losses suffered, asserted against or required to be paid by
Vendor or any of its Representatives to the extent that they are the result of:
(a) the breach or nonperformance of any representation, warranty,
covenant or agreement of Purchaser in this Agreement, any
Ancillary Agreement or in any document or certificate given
pursuant to this Agreement;
(b) any product liability claim by a third party attributable to
products sold by Purchaser after the Time of Closing;
(c) any Claims associated with any investigation or remediation
required by an appropriate governmental authority under any
environmental law or regulation from any activities of
Purchaser after the Closing Date;
(d) claims arising in connection with the Assumed Liabilities; or
(e) the claims of brokers or finders hired by or claiming to have
been hired by Purchaser.
11.3 Indemnification Procedures. A party seeking indemnification
hereunder ("Indemnitee") shall give written notice to the party from which
indemnification is sought (the "Indemnitor") of any matter with respect to which
Indemnitee seeks to be indemnified (a "Claim") within thirty (30) days after
Indemnitee has knowledge of such Claim, unless such Claim results from any
action, suit or proceeding against the Indemnitee (a "Litigation"), in which
case such notice shall be given promptly following Indemnitee's receipt of
service of process in such Litigation, stating in such notice the nature of the
Claim, all facts known to Indemnitee giving rise to such Claim, the amount or an
estimate of the amount of the liability arising therefrom and the status of
settlement or other negotiations, if any; provided, however, that the delay or
failure of the Indemnitee to provide such notice shall not relieve the
Indemnitor from its indemnification obligations hereunder except, and only to
the extent, that it is materially prejudiced by such delay or failure. The
Indemnitee shall provide such assistance as Indemnitor may reasonably request,
at the sole cost of Indemnitor.
(a) a claim for indemnification may, at the option of the
Indemnitee, be asserted as soon as any Claim has been asserted
by a third party in writing, regardless of whether actual harm
has been suffered or out-of-pocket expenses incurred, provided
that the Indemnitee shall have reasonably determined that it
may be entitled to indemnification hereunder in respect to
such Claim;
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(b) after the Indemnitee has given Indemnitor notice of a Claim,
the Indemnitee shall permit the Indemnitor, at Indemnitor's
option and expense, to assume the defense of such action,
suit, proceeding, claim, demand or assessment with full
authority to conduct such defense and the Indemnitee will
cooperate fully in such defense; provided, however, that the
Indemnitor shall prior to assuming such defense acknowledge in
writing its obligation to provide indemnity for such Claim
hereunder, which acknowledgement shall be irrevocable and
unconditional. Indemnitor and Indemnitee shall cooperate with
each other in the defense of any Claim and each shall have
notice of, and access to, all discovery, trial or other
proceedings and all documents relating to any such Claim; and
(c) the Indemnitee shall have the right to employ separate counsel
in any of the foregoing actions, claims or proceedings and to
participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the Indemnitee;
provided, however, that if the Indemnitor fails to assume the
defense of any Claim within thirty (30) days after the
Indemnitee's notice of the Claim, the Indemnitee shall have
the right to undertake the defense, compromise or settlement
of such action, claim or proceeding for the account of the
Indemnitor. Anything in this Section 11.3 to the contrary
notwithstanding, the Indemnitor shall not, without the
Indemnitee's prior written consent, settle or compromise any
action, claim or proceeding or consent to entry of any
judgment with respect to any such action, claim or proceeding
unless such settlement or compromise requires solely the
payment of money damages by the Indemnitor and includes as an
unconditional term thereof the release by the claimant or the
plaintiff of the Indemnitee from all liability in respect of
such action, claim or proceeding.
11.4 Limitation on Indemnification. Notwithstanding the foregoing
provisions of this Article 11:
(a) neither Vendor nor Clark shall be obligated to indemnify
Purchaser or any of its Representatives from or against any
Losses arising out of or in connection with any matter
described in Section 11.1 until such time that such Losses
exceed an aggregate amount of One Hundred Thousand U.S.
Dollars (U.S. $100,000), upon which Vendor and Clark shall be
jointly and severally liable only for Losses that exceed such
initial $100,000, unless the Loss is with respect to the Dixie
Receivables or the matters set forth in Section 11.1(d), in
which case Vendor and Clark shall be liable for the full
amount;
(b) the aggregate amount payable by Clark hereunder, including but
not limited to this Article 11, shall not exceed $500,000, and
such indemnity obligations of Clark shall terminate on the
first anniversary of the Closing Date, except that
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claims made but not resolved within such one year period shall
continue until finally resolved;
(c) subject to Section 11.4 (b), in no event shall Purchaser or
Vendor or their Representatives be entitled to indemnification
hereunder in an aggregate amount in excess of U.S. $2 Million
Dollars, provided, however, that this limitation shall not be
applicable for claims by Purchaser against Vendor with respect
to tax matters, environmental matters, Excluded Liabilities,
litigation listed on Schedule 5.21, failure to collect in full
the Dixie Receivables, failure to comply with bulk sales laws
or matters relating to the ownership of the Purchased Assets;
(d) unless otherwise agreed to between Purchaser and Vendor at or
prior to the Time of Closing, Purchaser shall not be entitled
to make a Claim based on any representation or warranty
contained herein which becomes false or misleading between the
date of execution hereof and the Time of Closing if Vendor
notifies Purchaser in writing of such false or misleading
representation or warranty at or prior to the Time of Closing;
Notwithstanding the limitations set forth in Section 11.4(b) above, if a final
order confirming a plan of reorganization in Clark's bankruptcy case is on a
date that is prior to the one year anniversary date of the Closing Date, Clark
agrees that its plan of reorganization shall provide security for Clark's
obligations under Section 11.1 (subject to the limitation in Section 11.4(b))
through a letter of credit or other credit instrument reasonably satisfactory to
Purchaser
11.5 Exclusive Remedy. The indemnification provisions of this
Article 11 shall be the exclusive remedy following the Closing for any breaches
or alleged breaches of any representation, warranty, covenant, agreement or
other provision of this Agreement or other claims in connection with the
transactions contemplated hereby. Each of the parties hereto, on behalf of
itself and its officers, directors, employees, shareholders, partners,
Affiliates, agents, lawyers or other representatives (collectively, such party's
"Representatives"), agrees not to bring any actions or proceedings, at law,
equity or otherwise, against any other party or its Representatives, in respect
of any breaches or alleged breaches of any representation, warranty, covenant,
agreement or other provision of this Agreement, except pursuant to the express
provisions of this Article 11. No party has made any representations and
warranties, express or implied, with respect to this Agreement or the matters
contemplated hereby, except as explicitly set forth in this Agreement and the
Ancillary Agreements.
11.6 Taxes and Insurance. The amount of the Losses suffered by an
Indemnitee shall be net of any Tax Benefit (as defined below), insurance payment
or other recovery which such party or its Representatives realizes in respect of
or as a result of such Losses or the facts or circumstances relating thereto. If
any Losses for which indemnification is provided hereunder are subsequently
reduced by any such Tax Benefit, insurance payment or other recovery from a
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third party, the amount of such reduction shall be remitted to the Indemnitor.
If, after the Closing, either party realizes a Loss for which it is indemnified
by the other party hereunder, such Indemnified Party shall, if reasonable,
promptly seek the maximum recovery or other benefit available to it under any
applicable insurance policy, and shall also claim to the fullest extent possible
all Tax deductions and credits available to it as a result of such Loss. The
Indemnitee shall furnish to the Indemnitor, on demand, a certificate of its
chief financial officer verifying the amount of any such insurance recovery or
other benefit, and of any Tax Benefit as a result of any such tax deduction or
credit claim. As used in this Section 11.6, the "Tax Benefit" in respect of a
Loss shall mean the actual decrease in income taxes payable as a result of
realizing or reflecting such Loss for tax purposes. All indemnification payments
under this Article 11 shall be deemed adjustments to the Purchase Price for the
Purchased Assets hereunder for tax purposes.
12. RESTRICTIVE COVENANTS. Vendor agrees that during the five-year
period commencing on the Closing Date, Vendor shall not (and shall ensure that
neither Clark, nor any Affiliate of Clark nor any of Clark's successors shall)
individually or as a partner, joint venturer, agent, consultant or shareholder
of a corporation, or otherwise, directly or indirectly, enter into any business
or engage in any business that competes in Canada or the United States or
anywhere in the world where Vendor currently conducts business, with the Dock
Equipment part of the Purchased Business as conducted in those countries on the
Closing Date; provided that (i) this provision shall not prohibit either Vendor
or Clark from owning less than 3% in the aggregate of the voting securities of
any entity if none of the employees of Vendor or Clark is involved in the
management of that entity and (ii) this provision shall not prohibit or restrict
Vendor or Clark in any way from engaging in a business involving Wheeled
Equipment in compliance with any agreements between the parties.
13. MISCELLANEOUS.
13.1 Notices.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be delivered in
person, by reliable overnight courier, transmitted by telecopy
or similar means of recorded electronic communication or sent
by registered or certified mail, charges prepaid, addressed as
follows:
(i) if to Vendor:
Clark Material Handling Company
172 Trade Street
Lexington, Kentucky 40511
Attention: Michael Grossman
Telecopier No.: (859) 388-7985
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with a copy to:
Borden Ladner Gervais LLP
Barristers & Solicitors
Scotia Plaza
40 King Street West
Toronto, Ontario
M5H 3Y4
Attention: Gordon A. Park
Telecopier No.: (416) 361-2781
(ii) if to Purchaser:
TBM Holdings, Inc.
136 Main St.
Westport, CT 06880
Attention: William Schwartz, President
Telecopier No.: (203)227-1050
with a copy to:
Levett Rockwood P.C.
33 Riverside Avenue
Westport, CT 06880
U.S.A.
Attention: Debra R. Cardinali
Telecopier No.: (203)206-8025
(b) Any such notice or other communication shall be deemed to have
been given and received on the day on which it was delivered
or transmitted (or, if such day is not a Business Day, on the
next following Business Day) or, if mailed, on the 5th
Business Day following the date of mailing; provided, however,
that if at the time of mailing or within five Business Days
thereafter there is or occurs a labor dispute or other event
that might reasonably be expected to disrupt the delivery of
documents by mail, any notice or other communication hereunder
shall be delivered or transmitted by means of recorded
electronic communication as aforesaid.
(c) Either party may at any time change its address for service
from time to time by giving notice to the other party in
accordance with this Section 13.1.
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13.2 Commissions, etc. Vendor and Purchaser agree to indemnify and
save harmless each other from and against all claims, demands, liabilities,
damages, costs and expenses suffered or incurred by Purchaser or Vendor in
respect of any commission or other remuneration payable or alleged to be payable
to any broker, agent or other intermediary who purports to act or have acted for
or on behalf of Vendor or Purchaser, as the case may be. Without limiting the
generality of the foregoing, all fees, commissions, costs and expenses of or
relating to George Gianis shall be paid and satisfied by Purchaser.
13.3 Non-Transferability
(a) Subject to Sections 13.3(b) and 13.3(c), to the extent that
any Contract relating to the Purchased Business or Purchased
Assets is not capable of being sold, assigned, transferred,
delivered or subleased without the consent or waiver of any
person, or if such sale, assignment, transfer, delivery or
sublease, or attempted sale, assignment, delivery or sublease
would constitute a breach thereof or a violation of any law,
statute, ordinance, regulation, rule, judgment or order, this
Agreement shall not constitute a sale, assignment, transfer,
delivery or sublease thereof, or an attempted sale,
assignment, transfer, delivery or sublease thereof until such
consent or waiver of the applicable person is received.
(b) Vendor shall use its best efforts (and Purchaser shall
reasonably cooperate with Vendor) on or before the Closing
Date and thereafter as required, to obtain the consents and
waivers referred to in Section 13.3(a) and to resolve the
impediments to the sale, assignment, transfer, delivery or
sublease referred to in Section 13.3(a).
(c) To the extent that the consents and waivers referred to in
Section 13.3(a) are not obtained by Vendor, or until the
impediments to the sale, assignment, transfer, delivery or
sublease referred to therein are resolved, Vendor shall, after
the Closing Date:
(i) hold the benefits of any Contract referred to in
Section 13.3(a) in trust for Purchaser in accordance
with the provisions of this Section 13.3(c);
(ii) cooperate in any reasonable and lawful arrangement,
approved by Purchaser, designed to provide such
benefits to Purchaser, without Vendor thereby
incurring any financial obligation to Purchaser; and
(iii) enforce and perform for the account of Purchaser, any
rights or obligations of Vendor arising from any
Contract referred to in Section 13.3(a) against or in
respect of any person, including the right to elect
to terminate in accordance with the terms thereof
upon the advice of Purchaser;
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provided, however, that this Section 13.3(c) shall not
constitute a waiver of any right of Purchaser to require
delivery of all consents and waivers on the Closing Date
pursuant to Section 9.1.
(d) If Vendor provides Purchaser with the use of any Contract
referred to in Section 13.3(a) without having obtained the
necessary consents and waivers referred to in that subsection,
and if the use by Purchaser constitutes a breach or violation
of any Contract to which Vendor is a party or by which Vendor
is bound, Vendor shall not be responsible for any Losses
arising as a consequence of such breach or violation under any
such Contract.
13.4 Bulk Sales. The Purchaser hereby waives compliance by Vendor
with the Bulk Sales Act (Ontario) and similar legislation in any other
applicable jurisdiction. Vendor will indemnify Purchaser with respect to all
Losses which Purchaser may incur or suffer as a result of the Vendor's
non-compliance with the Bulk Sales Act (Ontario) and similar legislation in
other applicable jurisdictions, except to the extent that such Losses arise from
Purchaser's failure to pay, satisfy, discharge and perform any of the Assumed
Liabilities.
13.5 Best Efforts. The parties acknowledge and agree that, for all
purposes of this Agreement, an obligation on the part of either party to use its
best efforts to obtain any waiver, consent, approval, permit, license or other
document shall not require such party to make any payment to any person for the
purpose of procuring the same, other than payments for amounts due and payable
to such person, payments for incidental expenses incurred by such person and
payments required by any applicable law or regulation.
13.6 Assignment by Purchaser. The Purchaser may assign its rights
under this Agreement in whole or in part to any other person; provided, however,
that any such assignment shall not relieve Purchaser from any of its obligations
hereunder.
13.7 Expenses. Whether or not the transactions contemplated hereby
are consummated, except as otherwise specifically provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
13.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
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IN WITNESS WHEREOF this Agreement has been executed by the parties.
BLUE GIANT LIMITED
By: /s/ Michael Grossman
--------------------------------
Michael Grossman
1445833 ONTARIO INC.
By: /s/ William A. Schwartz
--------------------------------
William A. Schwartz
CONSENT TO BE BOUND BY ARTICLE 11:
CLARK MATERIAL HANDLING COMPANY
By: /s/ Michael Grossman
-----------------------------
Michael Grossman
43
