<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 30, 1996
---------------
CORPORATE EXPRESS, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Commission File No. 0-24642
---------
Colorado 84-0978360
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
325 Interlocken Parkway
Broomfield, Colorado 80021
---------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 373-2800
--------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 30, 1996, the Registrant completed the acquisition (the
"Acquisition") of all of the issued and outstanding stock of Boulevard Produits
de Bureau, Inc. ("Boulevard"), a corporation organized under the laws of Quebec.
The acquisition was made pursuant to a certain Share Purchase Agreement (the
"Share Purchase Agreement") dated August 30, 1996 by and among the Registrant,
Boulevard, 122897 Canada, Inc. ("97 Inc.") and 122898 Canada, Inc. ("98 Inc."),
each a Canadian corporation (together, 97 Inc. and 98 Inc. shall be referred to
as the "Sellers"). Consideration for the Acquisition was CDN$22,000,000,
subject to certain adjustments. In addition, the Registrant purchased
CDN$13,000,000 in Boulevard promissory notes from the Sellers for CDN$1,000,000
in cash and 237,888 shares of the Registrant's common stock valued at
CDN$12,000,000. The source of the cash used in the transaction was a portion of
the proceeds received from the issuance of the Registrant's 4 1/2% Convertible
Notes due on July 1, 2000 (the "Notes"). The nature and amount of consideration
paid in connection with the Acquisition was determined based on negotiations
between the Registrant and the Sellers. Prior to the Acquisition, there was no
material relationship between the Registrant or any of its affiliates, directors
or officers or any associates thereof and Boulevard or the Sellers. The
foregoing summary of the Acquisition is qualified in its entirety by reference
to the Share Purchase Agreement filed as Exhibit 2.1 to this report and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
. The audited financial statements of Boulevard as of October 31, 1995
and 1994 and for the years then ended (in Canadian dollars).
. The unaudited financial statements of Boulevard as of July 31, 1996
and for the nine months then ended (in Canadian dollars).
(b) Pro Forma Financial Information
. The unaudited pro forma combined balance sheet of Corporate Express,
Inc. and Boulevard as of June 1, 1996.
. The unaudited pro forma combined statements of operations of
Corporate Express, Inc. and Boulevard for the three months ended
June 1, 1996 and for the year ended March 2, 1996.
(c) Exhibits
2.1 Share Purchase Agreement dated August 30, 1996 by and among the
Registrant, Corporate Express Canada, Inc., Boulevard, 97 Inc. and
98 Inc.
23.1 Consent of Samson Belair Deloitte & Touche
<PAGE>
CORPORATE EXPRESS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The unaudited pro forma combined balance sheet as of June 1, 1996 includes
the Company's unaudited balance sheet as of June 1, 1996 and Boulevard's
unaudited balance sheet as of July 31, 1996. The unaudited pro forma combined
balance sheet gives effect to the Acquisition as if the Acquisition had occurred
June 1, 1996. The unaudited pro forma combined balance sheet also gives effect
to the sales by the Company in June 1996 of the Notes as if such sales had been
made on June 1, 1996.
The unaudited pro forma combined statement of operations for the quarter
ended June 1, 1996 includes the unaudited results of operations of the Company
and Boulevard for the three months ended June 1, 1996 and July 31, 1996,
respectively. The unaudited pro forma combined statement of operations for the
three months ended June 1, 1996 gives effect to the Acquisition as if the
Acquisition had occurred on March 3, 1996. The unaudited pro forma combined
statement of operations also gives effect to the sales by the Company in June
1996 of the Notes as if such sales had been made on March 3, 1996.
The unaudited pro forma combined statement of operations for the year ended
March 2, 1996 includes the audited results of operations of the Company for the
year ended March 2, 1996 and the unaudited results of operations of Boulevard
for the twelve months ended January 31, 1996. The unaudited pro forma combined
statement of operations for the year ended March 2, 1996 gives effect to the
Boulevard acquisition as if the acquisition had occurred on February 26, 1995.
The unaudited pro forma combined statement of operations also gives effect to
the sales by the Company in June 1996 of the Notes as if such sales had been
made on February 25, 1995.
The pro forma combined financial data are based on available information
and on certain assumptions and adjustments described in the accompanying notes
which management believes are reasonable. The pro forma combined financial data
are provided for informational purposes only and do not purport to present the
results of operations of the Company had the transactions assumed therein
occurred on or as of the dates indicated, nor are they necessarily indicative of
the results of operations which may be achieved in the future.
<PAGE>
BOULEVARD OFFICE PRODUCTS INC.
Table of contents
================================================================================
Auditors' report ..............................................................1
Statement of earnings .........................................................2
Statement of retained earnings ................................................3
Balance sheet .................................................................4
Statement of changes in financial position ....................................5
Notes to the financial statements ...........................................6-8
<PAGE>
[LOGO OF --------------------------------------------------------
SAMSON BELAIR SAMSON BELAIR/DELOITTE & TOUCHE, S.E.N.C.
DELOITTE & COMPTABLES AGREES
TOUCHE
APPEARS HERE] 1, Place Ville-Marie Telephone: (514) 393-7115
Bureau 3000 Telecopieur: (514) 393-7140
Montreal (Quebec) H3B 4T9
AUDITORS' REPORT
To the Shareholders of Boulevard Office Products Inc.
We have audited the balance sheet of Boulevard Office Products Inc. as at
October 31, 1995 and the statements of earnings, retained earnings and changes
in financial position for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at October 31, 1995 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles.
/s/ SAMSON BELAIR
DELOITTE & TOUCHE
Chartered Accountants
December 5, 1995
<PAGE>
BOULEVARD OFFICE PRODUCTS INC.
Statement of earnings
year ended October 31, 1995
================================================================================
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
$ $
<S> <C> <C>
Sales 76,290,603 67,709,313
- --------------------------------------------------------------------------------
Cost of sales and other expenses 71,609,595 66,560,451
Amortization of capital assets 557,208 533,036
Amortization of goodwill 70,008 45,004
Loss on disposal of capital assets 31,006 5,497
Interest on long-term debt 211,038 174,827
Interest on short-term debt 286,646 186,096
- --------------------------------------------------------------------------------
72,765,501 67,504,911
- --------------------------------------------------------------------------------
Earnings before income taxes 3,525,102 204,402
Income taxes 1,365,682 41,419
- --------------------------------------------------------------------------------
Net earnings 2,159,420 162,983
================================================================================
</TABLE>
Page 2 of 8
<PAGE>
BOULEVARD OFFICE PRODUCTS INC.
Statement of retained earnings
year ended October 31, 1995
===============================================================================
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------
$ $
<S> <C> <C>
Balance, beginning of year 9,064,481 8,901,498
Net earnings 2,159,420 162,983
- -------------------------------------------------------------------------------
Balance, end of year 11,223,901 9,064,481
===============================================================================
</TABLE>
Page 3 of 8
<PAGE>
BOULEVARD OFFICE PRODUCTS INC.
Balance sheet
as at October 31, 1995
===============================================================================
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------
$ $
<S> <C> <C>
Current assets
Accounts receivable 8,762,147 6,683,475
Inventories 6,906,279 5,299,392
Income taxes -- 310,279
Prepaid expenses 99,095 148,727
- -------------------------------------------------------------------------------
15,767,521 12,441,873
Capital assets (Note 3) 8,866,857 9,005,131
Other assets 488,544 468,428
- -------------------------------------------------------------------------------
25,122,922 21,915,432
===============================================================================
Current liabilities
Bank loan (Note 4) 4,307,934 3,598,530
Accounts payable and accrued liabilities 6,666,823 6,450,492
Income taxes 1,197,188 --
Current portion of long-term debt (Note 5) 1,131,344 616,457
- -------------------------------------------------------------------------------
13,303,289 10,665,479
- -------------------------------------------------------------------------------
Long-term debt (Note 5) 585,732 2,175,472
- -------------------------------------------------------------------------------
Shareholders' equity
Share capital (Note 6) 10,000 10,000
Retained earnings 11,223,901 9,064,481
- -------------------------------------------------------------------------------
11,233,901 9,074,481
- -------------------------------------------------------------------------------
25,122,922 21,915,432
===============================================================================
</TABLE>
Approved by the Board
_________________________________ Director
_________________________________ Director
Page 4 of 8
<PAGE>
BOULEVARD OFFICE PRODUCTS INC.
Statement of changes in financial position
year ended October 31, 1995
===============================================================================
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------
$ $
<S> <C> <C>
Operating activities
Net earnings 2,159,420 162,983
Items not affecting cash
Amortization of capital assets 557,208 533,036
Amortization of goodwill 70,008 45,004
Loss on disposal of capital assets 31,006 5,497
Deferred income taxes -- (79,716)
- -------------------------------------------------------------------------------
2,817,642 666,804
Change in non-cash operating working
capital items (1,912,129) 1,835,562
- -------------------------------------------------------------------------------
905,513 2,502,366
- -------------------------------------------------------------------------------
Financing activities
Increase in long-term debt -- 650,000
Repayment of long-term debt (1,074,853) (560,292)
- -------------------------------------------------------------------------------
(1,074,853) 89,708
- -------------------------------------------------------------------------------
Investing activities
Business acquisitions -- (2,124,593)
Acquisition of capital assets (454,140) (1,576,557)
Disposal of capital assets 4,200 36,954
Acquisition of other assets (90,124) (163,432)
- -------------------------------------------------------------------------------
(540,064) (3,827,628)
- -------------------------------------------------------------------------------
Net decrease in cash position (709,404) (1,235,554)
Cash position, beginning of year (3,598,530) (2,362,976)
- -------------------------------------------------------------------------------
Cash position, end of year (4,307,934) (3,598,530)
===============================================================================
</TABLE>
Page 5 of 8
<PAGE>
BOULEVARD OFFICE PRODUCTS INC.
Notes to the financial statements
year ended October 31, 1995
- -------------------------------------------------------------------------------
1. Status and nature of activities
The Company, incorporated under Part 1A of the Quebec Companies Act, sells
office supplies, furniture and equipment.
2. Accounting policies
The financial statements have been prepared in accordance with generally
accepted accounting principles and include the following significant
accounting policies:
Inventories
Inventories are valued at the lower of cost and net realizable value. Cost
is determined primarily on the first in, first out basis.
Capital assets
Capital assets, accounted for at acquisition cost, are amortized under the
declining balance method at the following annual rates:
Buildings 4% and 5%
Paving and landscaping 8%
Furniture and equipment 20%
Automotive equipment 30%
Computer equipment 50%
Leasehold improvements are amortized under the straight-line method over the
remaining term of the lease.
Other assets
Goodwill is amortized over five years under the straight-line method.
Deferred income taxes
The Company accounts for its income taxes using the deferral method.
Deferred income taxes result from timing differences between the recording
of certain revenues for accounting and for income tax purposes.
Page 6 of 8
<PAGE>
BOULEVARD OFFICE PRODUCTS INC.
Notes to the financial statements
year ended October 31, 1995
<TABLE>
<CAPTION>
========================================================================================
3. Capital assets
1995 1994
-------------------------------------- ----------
Accumulated
Depreciation
and Net Book Net Book
Cost Amortization Value Value
---------- ------------ ---------- --------
$ $ $ $
<S> <C> <C> <C> <C>
Land 1,469,800 -- 1,469,800 1,469,800
Buildings 7,965,355 1,734,980 6,230,375 6,418,109
Paving and landscaping 476,163 151,676 324,487 287,433
Furniture and equipment 923,089 482,752 440,337 521,172
Automotive equipment 63,965 49,769 14,196 20,281
Computer equipment 847,818 478,780 369,038 264,791
Leasehold improvements 24,774 6,150 18,624 23,545
------------------------------------------------------------------------------------
11,770,964 2,904,107 8,866,857 9,005,131
====================================================================================
</TABLE>
4. Bank loan
A bank loan in the amount of $4,289,000 ($3,385,000 in 1994) is secured by
the accounts receivable and inventories.
5. Long-term debt
<TABLE>
<CAPTION>
1995 1994
----------- ----------
$ $
<S> <C> <C>
Variable rate, secured by immovable hypothec,
prime rate plus 0.5%, maturing May 13, 1996 1,089,442 2,052,636
Variable rate, secured by immovable hypothec,
prime rate, maturing June 20, 2004 601,230 636,597
Advances from directors, non-interest bearing and no
terms of payment 26,404 102,696
---------------------------------------------------------------------------------------
1,717,076 2,791,929
Current portion 1,131,344 616,457
---------------------------------------------------------------------------------------
585,732 2,175,472
=======================================================================================
</TABLE>
Page 7 of 8
<PAGE>
BOULEVARD OFFICE PRODUCTS INC.
Notes to the financial statements
year ended October 31, 1995
================================================================================
5. Long-term debt (cont'd)
Capital payments required in each of the next five years are as follows:
$
1996 1,131,344
1997 45,370
1998 49,136
1999 53,214
2000 57,630
6. Share capital
Authorized
Unlimited number of special preferred shares II, 8% preferential
non-cumulative, redeemable at the option of the Company at the amount
of the consideration received upon issuance, no par value
Unlimited number of special preferred shares, 9% preferential
non-cumulative, redeemable at the option of the Company at the amount
of the consideration received upon issuance, no par value
Unlimited number of preferred shares, 10% non-cumulative, redeemable at
110% of paid-up capital, no par value
1,000 Common shares
1995 1994
------------------------
$ $
Issued and paid
1,000 Common shares 10,000 10,000
===============================================================================
7. Commitments
The Company is committed under renewable, non-cancellable operating
equipment leases in the amount of $854,079 as follows:
$
1996 416,328
1997 416,328
1998 21,423
8. Contingency
At the time a tract of land and a building valued at $4,000,000 were
acquired, the parties took advantage of the tax option under which the
Company is liable for the income taxes related to the recapture of
depreciation and the taxable capital gain. Income taxes of $310,000 could
result when these assets are sold.
Page 8 of 8
<PAGE>
BOULEVARD PRODUITS DE BUREAU, INC.
BALANCE SHEET
( Unaudited )
(in thousands)
<TABLE>
<CAPTION>
July 31, 1996
(in Canadian $)
---------------
<S> <C>
ASSETS
Current assets:
Receivables, net $ 6,833
Inventories 7,400
Other current assets 268
------------
Total current assets 14,501
Property and Equipment, net 8,915
Goodwill, net 182
Other assets, net --
------------
Total assets 23,598
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft 1,889
Accounts payable 7,407
Accrued liabilities 1,054
Current portion of long-term debt and capital leases 36
------------
Total current liabilities 10,386
Long-term debt 532
------------
Total liabilities 10,918
Shareholders' equity:
Common stock 10
Retained earnings (deficit) 12,670
------------
Total shareholders' equity 12,680
------------
Total liabilities and shareholders' equity $ 23,598
============
</TABLE>
<PAGE>
BOULEVARD PRODUITS DE BUREAU, INC.
STATEMENT OF OPERATIONS
( Unaudited )
(in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
July 31, 1996
(in Canadian $)
---------------
<S> <C>
Net sales $ 62,582
Cost of sales 49,236
---------------
Gross profit 13,346
Selling, general and administrative expenses 11,064
---------------
Operating profit 2,282
Interest expense, net --
Other (income) expense --
---------------
Income before income taxes 2,282
Income tax expense 836
---------------
Net income $ 1,446
===============
</TABLE>
<PAGE>
BOULEVARD PRODUITS DE BUREAU, INC.
STATEMENT OF CASH FLOWS
( Unaudited )
(in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
July 31, 1996
-------------
<S> <C>
Operating Activities
Net income $ 1,446
Items not affecting cash:
Amortization of capital assets 427
Amortization of goodwill 53
Loss on disposal of capital assets 24
-------------
504
Change in non-cash operating working capital items 2,115
-------------
4,065
-------------
Investing Activities
Disposal of capital assets 20
Acquisition of capital assets (519)
-------------
(499)
-------------
Financing Activities
Repayment of long-term debt (1,147)
-------------
(1,147)
-------------
Net increase in cash position 2,419
Cash at beginning of period (4,308)
-------------
Cash at end of period $ (1,889)
=============
</TABLE>
<PAGE>
BOULEVARD PRODUITS DE BUREAU, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
-------------------------------
<S> <C> <C> <C>
Balance, October 31, 1995 $ 10 $ 11,224 $ 11,234
Net Income 1,446 1,446
-------------------------------
Balance, July 31, 1996 $ 10 $ 12,670 $ 12,680
===============================
</TABLE>
<PAGE>
CORPORATE EXPRESS, INC. AND BOULEVARD PRODUITS DE BUREAU, INC.
PRO FORMA COMBINED BALANCE SHEET
JUNE 1, 1996
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Corporate
Express
and
Boulevard
Corporate Pro Forma Pro Forma
ASSETS Express Boulevard Adjustments Combined
------------ ---------- -------------- ----------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 28,664 $ - $ (16,280)(1) $ 330,144
(740)(2)
318,500 (3)
Receivables, net 293,420 5,057 298,477
Inventories 101,995 5,476 (740)(1) 106,731
Other current assets 35,391 198 35,589
------------- ---------- -------------- ----------------
Total current assets 459,470 10,731 300,740 770,941
Property and Equipment, net 109,499 6,597 116,096
Goodwill, net 324,603 135 18,977 (1) 343,715
Other assets, net 16,951 - 6,500 (3) 23,451
------------- ---------- -------------- ----------------
Total assets 910,523 17,463 326,217 1,254,203
============= ========== ============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 137,132 5,481 142,613
Accrued liabilities 56,796 2,178 58,974
Accrued purchase costs 3,049 - 1,720 (1) 4,769
Accrued merger and related costs 24,880 - 24,880
Current portion of long-term debt and capital 20,151 27 20,178
Other non-current liabilities 219 - 219
------------- ---------- -------------- ----------------
Total current liabilities 242,227 7,686 1,720 251,633
Capital lease obligations 9,568 - 9,568
Long-term debt 127,900 394 9,620 (4) 453,294
325,000 (3)
(9,620)(2)
Deferred income taxes 7,374 - 7,374
Minority interest in subsidiaries 24,843 - 24,843
Other non-current liabilities 2,097 - 2,097
------------- ---------- -------------- ----------------
Total liabilities 414,009 8,080 326,720 748,809
Shareholders' equity:
Common stock 14 7 (7)(5) 14
Additional paid-in capital 502,559 - 8,880 (2) 511,439
Retained earnings (deficit) (6,712) 9,376 244 (5) (6,712)
(9,620)(4)
Foreign currency translation adjustment 653 - 653
------------- ---------- -------------- ----------------
Total shareholders' equity 496,514 9,383 (503) 505,394
------------- ---------- -------------- ----------------
Total liabilities and shareholders'
equity $ 910,523 $ 17,463 $ 326,217 $ 1,254,203
============= =========== ============== ===============
</TABLE>
- --------
(1) To record the acquisition of Boulevard's common stock and related purchase
price allocation (including estimated direct costs). The portion of the
consideration assigned to goodwill represents the excess of the cost over
the fair value of the net assets acquired.
(2) To record the issuance of 237,888 shares of Corporate Express common stock
and $740,000 in cash for the purchase of the Boulevard promissory notes.
(3) To record the net proceeds from the sale of the Notes and the
capitalization of debt issuance costs.
(4) To record the Boulevard shareholder distributions and related promissory
notes.
(5) To record the elimination of Boulevard's historical equity.
<PAGE>
CORPORATE EXPRESS, INC. AND BOULEVARD PRODUITS DE BUREAU, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
QUARTER ENDED JUNE 1, 1996
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Corporate
Express
and
Boulevard
Corporate Pro Forma Pro Forma
Express Boulevard Adjustments Combined
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $ 500,624 $ 14,738 $ 515,362
Cost of sales 369,178 11,654 380,832
----------- -------- ----------- ----------
Gross profit 131,446 3,084 134,530
Warehouse operating and selling expenses 95,309 2,179 97,488
Corporate general & administrative expenses 15,933 - $ 119 (1) 16,052
----------- -------- ----------- ----------
Operating profit (loss) 20,204 905 (119) 20,990
Interest expense, net 3,279 79 3,473 (2) 2,911
(4,245)(3)
325 (4)
Other income - - -
----------- -------- ----------- ----------
Income (loss) before income taxes 16,925 826 328 18,079
Income tax expense (benefit) 7,079 316 257 (5) 7,652
----------- -------- ----------- ----------
Income (loss) before minority interest 9,846 510 71 10,427
Minority interest 230 - 230
----------- -------- ----------- ----------
Income (loss) from continuing
operations $ 9,616 $ 510 $ 71 $ 10,197
=========== ======== =========== ==========
Net income (loss) per common share
Continuing operations $ 0.13 $ 0.14
=========== ==========
Weighted average common shares
outstanding 75,139 238 (6) 75,377
=========== =========== ==========
</TABLE>
- --------
(1) Adjustment to reflect the amortization of goodwill recorded as a result
of the Boulevard acquisition. The goodwill is being amortized over an
estimated life of 40 years.
(2) Adjustment to reflect increase in interest expense due to the sale of
the Notes.
(3) Adjustment to reflect the increase in interest income as a result of the
investment of the proceeds of the Notes in commercial paper.
(4) Adjustment to reflect amortization of debt issuance costs over the
term of the Notes.
(5) Adjustment to reflect the income tax effect of pro forma adjustments and
the adjustment of Boulevard's income tax provision to the Company's
Canadian effective tax rate.
(6) Adjustment to reflect the issuance of additional shares of Corporate
Express common stock as part of the consideration for the purchase of
the Boulevard promissory notes.
<PAGE>
CORPORATE EXPRESS, INC. AND BOULEVARD PRODUITS DE BUREAU, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 2, 1996
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Corporate
Express
and
Boulevard
Corporate Pro Forma Pro Forma
Express Boulevard Adjustments Combined
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $ 1,590,104 $ 58,424 $1,648,528
Cost of sales 1,173,255 45,542 1,218,797
Merger related inventory provisions 5,952 - 5,952
----------- ---------- ----------- ----------
Gross profit 410,897 12,882 - 423,779
Warehouse operating and selling expenses 297,275 9,866 307,141
Corporate general & administrative expenses 46,980 - $ 474 (1) 47,454
Merger and other non-recurring charges 36,838 - 36,838
----------- ---------- ----------- ----------
Operating profit (loss) 29,804 3,016 (474) 32,346
Interest expense, net 15,396 360 13,892 (2) 13,968
(16,980)(3)
1,300 (4)
Other income 724 - 724
----------- ---------- ----------- ----------
Income (loss) before income taxes 15,132 2,656 1,314 19,102
Income tax expense (benefit) 10,952 1,028 971 (5) 12,951
----------- ---------- ----------- ----------
Income (loss) before minority interest 4,180 1,628 343 6,151
Minority interest 1,436 - 1,436
----------- ---------- ----------- ----------
Income (loss) from continuing operations $ 2,744 $ 1,628 $ 343 $ 4,715
=========== ========== =========== ==========
Net income (loss) per common share
Continuing operations $ 0.04 $ 0.07
=========== ==========
Weighted average common shares outstanding 68,057 238 (6) 68,295
=========== ========== ==========
</TABLE>
- --------
(1) Adjustment to reflect the amortization of goodwill recorded as a result
of the Boulevard acquisition. The goodwill is being amortized over an
estimated life of 40 years.
(2) Adjustment to reflect increase in interest expense due to the sale of
the Notes.
(3) Adjustment to reflect the increase in interest income as a result of the
investment of the proceeds of the Notes in commercial paper.
(4) Adjustment to reflect amortization of debt issuance costs over the
term of the Notes.
(5) Adjustment to reflect the income tax effect of pro forma adjustments and
the adjustment of Boulevard's income tax provision to the Company's
Canadian effective tax rate.
(6) Adjustment to reflect the issuance of additional shares of Corporate
Express common stock as part of the consideration for the purchase of
the Boulevard promissory notes.
<PAGE>
EXHIBIT 2.1
SHARE PURCHASE AGREEMENT
By and Among
BOULEVARD PRODUITS DE BUREAU INC.
122897 CANADA INC., 122898 CANADA INC.,
CORPORATE EXPRESS CANADA, INC. AND
CORPORATE EXPRESS, INC.
August 30, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I AGREEMENT AND PURCHASE AND SALE;
CLOSING.................................................. 1
1.1 Purchase and Sale.................................. 1
1.2 Purchase Price; Adjustments and Rights of
Set-Off............................................ 2
1.3 Payment Shares Purchase Price and the Notes
Purchase Price..................................... 3
1.4 Closing............................................ 4
1.5 Escrow Arrangements................................ 4
1.6 Right of Set-Off................................... 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
COMPANY AND SELLERS...................................... 5
2.1 Capitalization..................................... 5
2.2 No Liens on Shares, the A Notes, B Notes or
Company interests.................................. 5
2.3 Other Rights to Acquire Capital Stock.............. 5
2.4 Due Organization................................... 6
2.5 Subsidiaries....................................... 6
2.6 Due Authorization.................................. 6
2.7 Financial Statements............................... 7
2.8 Absence of Changes or Events....................... 7
2.9 Properties......................................... 8
2.10 Licenses and Permits............................... 8
2.11 Patents; Trademarks................................ 9
2.12 Compliance with Laws and Other Instruments......... 9
2.13 Insurance.......................................... 10
2.14 Employee Benefits.................................. 10
2.15 Contracts and Agreements........................... 12
2.16 Claims and Proceedings............................. 12
2.17 Taxes.............................................. 12
2.18 Personnel.......................................... 13
2.19 Business Relations................................. 13
2.20 Accounts Receivable................................ 13
2.21 Bank Accounts...................................... 14
2.22 Agents............................................. 14
2.23 Warranties......................................... 14
2.24 No Brokers......................................... 14
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2.25 Interests in Competitors, Suppliers, Customers,
etc............................................... 14
2.26 Indebtedness to and from Officers, Directors,
Company, the Sellers and Employees................ 14
2.27 Undisclosed Liabilities........................... 15
2.28 Environmental Matters............................. 15
2.29 Information Furnished............................. 15
2.30 Residency......................................... 15
2.31 Conduct of the Business........................... 15
2.32 Books and Records................................. 15
2.33 Stand Alone....................................... 15
ARTICLE III BUYER'S AND CEI'S REPRESENTATIONS AND
WARRANTIES.............................................. 16
3.1 Due Organization.................................. 16
3.2 Capitalization.................................... 16
3.3 Due Authorization; Non-Contravention;
Approvals......................................... 16
3.4 No Brokers........................................ 16
3.5 CEI Shares........................................ 17
3.6 SEC Filings; Disclosure........................... 17
3.7 Exemption of Offering and Issuance of CEI
Shares............................................ 17
ARTICLE IV OTHER AGREEMENTS........................................ 17
4.1 Employment Agreements............................. 17
4.2 Resignations of Clermont Pouliot and Herman
Pouliot........................................... 18
4.3 Non-Competition Agreement......................... 18
4.4 Transfer Restriction Agreement.................... 18
4.5 Further Assurances................................ 18
4.6 Conduct of the Business........................... 18
ARTICLE V COVENANTS OF COMPANY AND SELLERS........................ 18
5.1 Conduct of Business Pending Closing............... 18
(a) Negative Covenants........................... 18
(b) Conduct of Business.......................... 19
(c) Notice of Breach............................. 19
(d) Other Parties................................ 19
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(e) Access to Information....................... 19
(f) Transfer Restrictions....................... 20
5.2 Consents of Others.............................. 20
5.3 Sellers' Efforts................................ 20
5.4 Powers of Attorney.............................. 20
ARTICLE VI CONDITIONS TO OBLIGATION OF PARTIES TO
CONSUMMATE CLOSING................................... 20
6.1 Conditions to Buyer's Obligations............... 20
(a) Covenants, Representations and
Warranties................................. 20
(b) Consents................................... 20
(c) Financial Condition........................ 21
(d) Material Adverse Change.................... 21
(e) Board Approval............................. 21
(f) Documents to be Delivered by the Sellers
and the Company............................ 22
(g) Employment Agreements...................... 22
(h) Litigation................................. 22
6.2 Conditions to the Sellers', Shareholders' and
Company's Obligations........................... 22
(a) Covenants, Representations and
Warranties................................. 22
(b) Consents................................... 23
(c) Payments................................... 23
(d) Documents to Be Delivered by Buyer or
CEI........................................ 23
ARTICLE VII INDEMNIFICATION...................................... 24
7.1 Indemnification of Buyer........................ 24
7.2 Defense of Claims............................... 25
7.3 Tax Audits, etc................................. 25
7.4 Indemnification of the Sellers.................. 25
7.5 Notice of Claim................................. 26
7.6 Arbitration Provisions.......................... 26
7.7 Trust Provision................................. 26
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND
WARRANTIES........................................... 26
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8.1 Survival.................................... 26
ARTICLE IX MISCELLANEOUS.................................... 27
9.1 Modifications............................... 27
9.2 Notices..................................... 27
9.3 Counterparts................................ 29
9.4 Expenses.................................... 29
9.5 Binding Effect; Assignment.................. 29
9.6 Entire and Sole Agreement................... 29
9.7 Governing Law............................... 29
9.8 Invalid Provisions.......................... 29
9.9 Public Announcements........................ 30
9.10 Waiver...................................... 30
9.11 Ratification; No Agency..................... 30
9.12 Headings.................................... 30
9.13 Language Clause............................. 30
9.14 Knowledge Definition........................ 30
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EXHIBITS AND SCHEDULES
Exhibits
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Exhibit A - Escrow Agreement
Exhibit B - Transfer Restriction Agreement
Exhibit C - Pouliot Non-Competition Agreement
Exhibit D - Opinion of Sellers and Company
Exhibit E - Joint Certificate of Payment
Exhibit F - Form of Amended Employment Agreements
Exhibit G - Opinion of CEI
Schedules
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2.1 Share Ownership
2.4A Articles of Association of the Company
2.4B Jurisdictions Qualified to do Business
2.7 Changes in Accounting Method and Practices
2.8 Changes in ordinary course
2.9 Property Interests
2.10 Licenses and Permits
2.11 Intellectual Property
2.13 Insurance Policies
2.14 Employee Benefits
2.15 Contracts
2.16 Litigation
2.18 Personnel List
2.20 Accounts Receivable
2.21 Bank Accounts
2.22 Agents
2.23 Warranties
2.25 Interests in Competitors
2.26 Shareholder Debt
2.27 Undisclosed Liabilities
2.29 Information Furnished
3.6 SEC Filings; Disclosure
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (the "Agreement") is entered into as of
August 30, 1996, by and among BOULEVARD PRODUITS DE BUREAU INC., a Quebec
corporation (the "Company"), 122897 CANADA INC. ("97 Inc."), 122898 CANADA INC.
("98 Inc."), each a Canadian corporation, (together, 97 Inc. and 98 Inc. shall
be referred to as the "Sellers"), CORPORATE EXPRESS CANADA, INC., an Ontario
corporation (the "Buyer") and CORPORATE EXPRESS, INC., a Colorado corporation
("Parent" or "CEI").
RECITALS
A. Sellers own all of the issued and outstanding shares of the
Company (the "Shares").
B. The Company is engaged in the sale and distribution of office
products (the "Business").
C. Buyer, an indirect, wholly-owned subsidiary of Parent desires to
purchase from the Sellers, and Sellers desire to sell to Buyer, the Shares and
the B Notes (as hereinafter defined), on the terms and subject to the conditions
set forth in this Agreement and CEI desires to purchase from Sellers the A Notes
(as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
AGREEMENT
ARTICLE I
AGREEMENT AND PURCHASE AND SALE; CLOSING
1.1 Purchase and Sale. Upon the basis of the representations and
warranties herein set forth, for the consideration to be received hereunder, and
subject to the terms and conditions hereof, the Sellers (i) agree to sell,
convey, transfer and deliver to Buyer at the Closing (as defined in Section 1.4
below), and Buyer agrees to purchase and accept from the Sellers at the Closing,
the Shares and the B Notes (as hereinafter defined) free and clear of any and
all liens, hypothecs, security interests, claims, charges, encumbrances and
rights of others whatsoever, and (ii) agree to sell, convey, transfer and
deliver to CEI at the Closing, and CEI agrees to purchase and accept from the
Sellers at the Closing, the A Notes (as hereinafter defined), free and clear of
any and all liens, hypothecs, security interests, claims, charges and
encumbrances and rights of others whatsoever.
<PAGE>
1.2 Purchase Price; Adjustments and Rights of Set-Off.
-------------------------------------------------
(a) The purchase price for the Shares shall be $22,000,000,
subject to the adjustments as set forth below (the "Shares Purchase Price"). All
dollar amounts in this Agreement refer to Canadian dollars.
(b) The Shares Purchase Price shall be adjusted dollar for
dollar as follows (the "Purchase Price Adjustment"):
(i) decreased by the amount that Tangible Shareholders' Equity
(as defined in this Section 1.2(b) below), as reflected on Company's
balance sheet for the period ended as of July 31, 1996 (the "Effective
Date Balance Sheet") prepared using Canadian generally accepted
accounting principles ("GAAP") in all material respects is less than
Tangible Shareholders' Equity as reflected on the Company's May 31,
1996 balance sheet (the "Beginning Balance Sheet").
For purposes of this Agreement, "Tangible Shareholders' Equity" shall
equal:
(A) the total value of the Company's tangible assets (i.e.
current assets plus fixed assets) as reflected on the Effective Date
Balance Sheet, minus
(B) the total amount of the liabilities reflected on the
Effective Date Balance Sheet.
For purposes of determining the value of the Company's assets as of
the Effective Date (as hereinafter defined), (i) new, undamaged
inventory purchased within the six-month period immediately preceding
the Effective Date shall be valued at the Company's actual net cost
thereof (net of all discounts, and allowances), (ii) fixed assets
(excluding buildings and computer equipment which shall be valued at
net book value) shall be valued at the lower of net book value or fair
market value, and (iii) all other inventory, if any, shall be valued
at zero.
(ii) decreased by the amount by which the Company's Debt as of
the Effective Date exceeds $4,800,000. As used herein, "Debt" shall
mean all long-term debt (including the current portion of long-term
debt), notes payable, bank debt, capital leases, operating leases
(excluding real estate leases) and accounts payable overstated terms,
all of which amounts are shown on the Effective Date Balance Sheet.
(iii) decreased by the amount, if any, by which the Company's
pre-tax income for the 12-month period ending October 31, 1996 is less
than $4,000,000, which amount will be calculated exclusive of any
interest paid under the terms of
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the A Notes and the B Notes (as hereinafter defined) or other
substituted instruments. For purposes of this Section 1.2(b), "pre-tax
income" shall mean the earnings before taxes of the Company as will be
shown on the Company's financial statements for the twelve months
ending October 31, 1996 (the "October 31, 1996 Financials") to be
audited (at the Company's sole expense) by Samson Belair Deloitte &
Touche, in accordance with GAAP, consistently applied.
(iv) Sellers agree that if any of the Company's accounts
receivable existing on the Effective Date (as hereinafter defined) are
not fully collected within 150 days thereafter, the Shares Purchase
Price shall be reduced by the amount by which the total amount of such
uncollected accounts exceed the reserve for doubtful accounts in the
Effective Date Balance Sheet (the "Excess Uncollected Accounts"). The
Excess Uncollected Accounts plus that amount's portion of the accrued
interest shall be deducted from the Escrow Sum (as defined in Section
1.5) and paid to Buyer (the "Accounts Adjustment"). Upon any
adjustment to the Shares Purchase Price pursuant to this subsection,
Buyer shall cause the Company to assign to Sellers the Excess
Uncollected Accounts.
(c) Prior to effecting any Purchase Price Adjustments pursuant to
Section 1.2(b), Buyer shall prepare and deliver to Sellers a written statement
setting forth the adjustments to the Shares Purchase Price (the "Price
Adjustment Statement"), which statement shall contain the reasonable details
supporting such adjustments. Upon receipt of the Price Adjustment Statement,
Sellers shall have 30 days to deliver to Buyer a written statement indicating
whether the Sellers dispute any adjustment set forth in the Price Adjustment
Statement and the reasons supporting such dispute (the "Notice of Dispute"). If
Sellers do not timely deliver a Notice of Dispute hereunder, the Purchase Price
Adjustments reflected in the Price Adjustment Statement shall be deemed accepted
by the Sellers. If a Notice of Dispute is timely delivered, the parties shall
use their best efforts to resolve such disputes promptly. However, if the
parties are unable to resolve the matters raised in the Notice of Dispute within
15 days of receipt by Buyer of the Notice of Dispute, the parties shall submit
the matters to the Montreal office of KPMG, which shall have 30 days from their
receipt of a joint notice of controversy from Buyer and Sellers to resolve the
matter. KPMG's resolution of the matters raised in the joint notice of
controversy shall be final and binding on the parties. The party that loses in
KPMG's resolution of the matters raised in the joint notice of controversy shall
pay the fees of KPMG. If each party prevails in part, KPMG shall determine the
appropriate allocation of the payment of its fees.
(d) 97 Inc. is the holder of a promissory note from the Company dated
August 29, 1996 in the face amount of $6,000,000 (the "97 Inc. A Note"), and a
promissory note from the Company dated August 29, 1996 in the face amount of
$500,000 (the "97 Inc. B Note"). 98 Inc. is the holder of a promissory note from
the Company dated August 29, 1996 in the face amount of $6,000,000 (the "98 Inc.
A Note"), and a promissory note from the Company dated August 29, 1996 in the
face amount of $500,000 (the "98 Inc. B Note"). The 97 Inc. A Note and the 98
Inc. A Note shall be referred to as the "A Notes". The 97 Inc. B Note and the 98
Inc. B Note shall
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be referred to as the "B Notes". The purchase price for the A Notes and the B
Notes shall be $13,000,000 (the "Notes Purchase Price").
1.3 Payment of Shares Purchase Price and the Notes Purchase Price
-------------------------------------------------------------
(a) The Shares Purchase Price shall be paid as follows:
(i) At the Closing, as defined in Section 1.4, $17,000,000 shall be
paid by the Buyer to Sellers, in proportion to their respective ownership
interests in the Company immediately prior to Closing, in cash by wire
transfer of funds pursuant to written instructions provided to Buyer by
Sellers prior to Closing;
(ii) At the Closing, as defined in Section 1.4, $5,000,000 shall be
paid to the Escrow Agent, as defined in Section 1.5, in cash by wire
transfer of funds to be held in escrow in accordance with the terms of
Section 1.5 below.
(b) The Notes Purchase Price shall be paid as follows:
(i) At the Closing, as defined in Section 1.4, 237,888 shares of
Corporate Express, Inc. voting common stock, par value $.0002 per share
("CEI Shares"), having a value of $12,000,000 (as determined pursuant to
subsection (c) below), shall be delivered by CEI to Sellers in exchange for
the A Notes (118,944 shares to each of the Sellers);
(ii) At the Closing, as defined in Section 1.4, $1,000,000 shall be
paid by Buyer to Sellers in exchange for the B Notes, in cash by wire
transfer of funds pursuant to written instructions provided to Buyer prior
to Closing.
(c) For purposes of determining the number of CEI Shares to be
delivered pursuant to Section 1.3(b) (i) above, the CEI Shares shall be valued
at the price equal to the average of the closing price of CEI Shares on the
NASDAQ National Market for the five trading days immediately preceding the two
business days immediately prior to the Closing (the "CEI Shares Price"). The
number of CEI Shares issued to the Sellers shall equal the result of the
division of $12,000,000 (converted to U.S. Dollars as of the Closing Date using
the conversion rate set forth in the Wall Street Journal published on the date
two days prior to Closing Date) by the CEI Shares Price.
(d) Share issuance confirmations will be delivered to each Seller at
Closing with share certificates for the CEI Shares to be delivered to each
Seller within three business days after Closing. The CEI Shares delivered to
Sellers shall be issued pursuant to Regulation S as promulgated by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933
as amended (the "1933 Act").
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1.4 Closing. The closing (the "Closing") for the purchase of the Shares
shall occur at 9:00 a.m. on August 30, 1996 (the "Closing Date"), at the offices
of Sellers' counsel, or by facsimile and wire transfer should the parties
otherwise agree. Notwithstanding the actual date of the Closing, the Closing
shall be deemed effective for all purposes as of August 1, 1996 (the "Effective
Date"). Buyer and the Sellers (as a group) shall each have a one-time right to
postpone the Closing Date and/or the Effective Date for up to one month.
1.5 Escrow Arrangements. Pursuant to an Escrow Agreement to be entered
into among Buyer, the Sellers and Montreal Trust Company (the "Escrow Agent"),
in substantially the form attached hereto as Exhibit A (the "Escrow Agreement"),
$5,000,000 shall be delivered by Buyer to the Escrow Agent at the Closing. Such
monies, together with all interest accrued thereon, are hereinafter referred to
as the "Escrow Sum." On December 31, 1996, such portion of the Escrow Sum not
previously claimed by or paid to Buyer as a Purchase Price Adjustment pursuant
to Section 1.2(b) or as otherwise may be due Buyer under this Agreement, shall
be disbursed to the Sellers in accordance with the terms of the Escrow Agreement
in proportion to their percentage ownership of the Company immediately prior to
the Closing.
1.6 Right of Set-Off. If any payment due from Sellers to Buyer pursuant to
the terms hereof as a result of any Purchase Price Adjustment or otherwise, is
not made when due, the parties hereto agree that the Escrow Agreement shall give
the Buyer the right to assert a claim to offset such amount against any payments
that may be due to Sellers pursuant to the Escrow Agreement referred to in
Section 1.5 above.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SELLERS
Sellers and the Company jointly and severally represent and warrant to
Buyer that:
2.1 Capitalization. The authorized capital stock of the Company consists
of 1,000 common shares with a par value of $10, an unlimited number of preferred
shares, without par value, an unlimited number of special preferred shares,
without par value and an unlimited number of special II preferred shares,
without par value, of which 1,000 common shares (and no more) have been validly
subscribed and issued and are outstanding as fully paid and non-assessable. All
of the Shares are owned of record and beneficially by the Sellers, as shown on
Schedule 2.1 hereto. None of the Shares were issued or will be transferred under
this Agreement in violation of any preemptive or preferential rights of any
person or entity.
2.2 No Liens on Shares, the A Notes, B Notes or Company Interests. Sellers
own the Shares, the A Notes and B Notes free and clear of any mortgages,
hypothecs, liens, restrictions, security interests, claims, rights of another,
adverse interests, or encumbrances other than the rights and obligations arising
under this Agreement, and none of the Shares is subject to any outstanding
option, warrant, call, or similar right of any other person to acquire the same,
and
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none of the Shares is subject to any restriction on transfer thereof except for
restrictions imposed by the Company's articles and by-laws and any unanimous
shareholders agreement. Sellers have full power and authority to convey good and
valid title to the Shares, the A Notes and B Notes free and clear of any
mortgages, hypothecs, liens, restrictions, security interests, claims, rights of
another or encumbrances.
2.3 Other Rights to Acquire Capital Stock. Except as set forth in this
Agreement, there are no authorized or outstanding warrants, options, or rights
of any kind to acquire from the Company any equity or debt securities of the
Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require or may require the Company to
issue, sell or deliver any additional shares of its equity or debt securities.
2.4 Due Organization. The Company is a corporation, duly organized,
validly existing, and in good standing under the Companies Act (Quebec) and has
all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted through the Closing. Complete and
correct copies of the letters patent and articles of continuance of the Company,
and all amendments thereto, have been heretofore delivered to Buyer and are
attached hereto as Schedule 2.4A. Set forth in Schedule 2.4B hereto is a list of
each jurisdiction in which the Company is qualified to do business. Subject to
the Company presently registering in the other jurisdictions listed in Schedule
2.4B hereto, the Company is qualified to do business in each jurisdiction in
which the nature of its business or the ownership of its properties requires
such qualification except where the failure to be so qualified does not and
would not have a Material Adverse Effect (as defined in Section 2.8 below) on
the Company. The Company is a private company within the meaning of the
Securities Act (Quebec).
2.5 Subsidiaries. The Company does not directly or indirectly have any
subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, association, joint venture, trust, or other
entity.
2.6 Due Authorization. The Company and each of the Sellers have all
requisite power and authority to execute, deliver and perform this Agreement and
to carry out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company and
the Sellers and by their respective officers and directors. This Agreement has
been duly and validly executed and delivered by the Company and each of the
Sellers and constitutes the valid and binding obligations of the Company and
each of the Sellers, enforceable in accordance with its terms. The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by the Company
and the Sellers do not (a) violate any federal, provincial, municipal, or local
law, rule, or regulation or any decree or judgment of any court or governmental,
regulatory or administrative authority applicable to the Company or either of
the Sellers, or their respective properties or assets, (b) violate or conflict
with, or permit the
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<PAGE>
cancellation of, or constitute a default under, any agreement to which the
Company or either of the Sellers, as applicable, is a party, or by which any of
them or any of their respective properties or assets are bound, (c) permit the
acceleration of the maturity of any indebtedness of, or indebtedness secured by
the properties or assets of, the Company or any of the Sellers, (d) violate or
conflict with any provision of the articles or by-laws, as amended, of the
Company, or of either of the Sellers, or (e) save and except for the consent of
the board of directors of the Company and the consent of the shareholders of the
Sellers (which consent have been obtained) require the consent of any person or
entity, other than consents required to be obtained by Buyer.
2.7 Financial Statements. The following Financial Statements of the
Company have been delivered to Buyer by the Sellers and the Company except for
the Financial Statements to be delivered pursuant to Section 2.7(c) below:
(a) Audited balance sheet of the Company, dated as of October 31,
1995 and the unaudited May 31, 1996 (the "Balance Sheets");
(b) Audited income statement of the Company for the 12 months ended
October 31, 1995 and the unaudited income statement for the seven months ended
May 31, 1996 (the "Income Statements"); and
(c) Sellers and the Company shall prepare and deliver to Buyer the
Effective Date Balance Sheet.
Together, the Balance Sheets, Income Statements, and the Effective Date
Balance Sheet, and the notes thereto shall be referred to herein as the
"Financial Statements." The Financial Statements are (or will be) accurate, true
and complete in all material respects, have been or will be prepared from the
books and records of the Company in accordance with GAAP, consistently applied,
and fairly or will fairly present the financial condition of the Company as of
their respective dates and the results of operations for the periods covered
thereby.
Such Financial Statements do not (or will not) contain any items of special
or non-recurring income or any other income not earned in the ordinary course of
business except as expressly specified therein, and such Financial Statements
include or will include all adjustments (including all normal recurring accruals
for unusual or non-recurring items) considered necessary for a fair
presentation, and no adjustments or restatements are necessary in respect of any
items of an unusual or non-recurring nature, except as expressly specified
therein. Except as disclosed in Schedule 2.7, there has been no material change
in the method of accounting or keeping of its books of account or accounting
practices of the Company for the two-year period ended on the Effective Date.
2.8 Absence of Changes or Events. Except as disclosed in Schedule 2.8 and
subject to Section 4.5 hereto, since May 31, 1996 (i) the Company has conducted
its business only in the ordinary course and consistent with the requirements of
Section 5.1 below, (ii) the Company has not suffered any change, event or
condition which has had or may have a Material Adverse Effect,
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<PAGE>
as defined in this Section below, on the Company, and (iii) the Company has not
acquired or disposed of any material assets or engaged in any material
transaction other than in the ordinary course of business or as expressly
contemplated by the terms of this Agreement.
As used in this Agreement, "Material Adverse Effect" means any material
adverse change in or effect on the condition (financial or otherwise), operating
results, business, properties, assets, liabilities (contingent or otherwise),
operations or prospects, or any adverse change in revenues, costs, backlog or
relations with employees, agents, customers or suppliers, whether attributable
to a single circumstance or event or an aggregation of circumstances or events.
A Material Adverse Effect will not be deemed to occur unless such effect exceeds
$10,000.
2.9 Properties. Attached hereto as Schedule 2.9 is a list containing a
description of all interests in real and immoveable property (including, without
limitation, leasehold interests) and personal and moveable property utilized by
the Company in the conduct of the Business. Except as expressly set forth on
Schedule 2.9, such real, personal, immoveable and moveable properties are free
and clear of liens, security interests, hypothecs, mortgages, claims, adverse
interests, rights of another, and encumbrances. The tangible assets of the
Company, including, without limitation, the real premises leased or owned by the
Company, are in good operating condition and repair, normal wear and tear
excepted, and are free from any defects that would have a Material Adverse
Effect on the Company. The Company has delivered or made available to Buyer
copies of the deeds and other instruments as recorded by which the Company
acquired its real and immoveable property and interests, and copies of all title
insurance policies (if any), title opinions, abstracts, and surveys in the
possession of the Company or the Sellers and relating to such property or
interests. The Company is the sole and unconditional owner of (with good and
marketable title in the case of real and immoveable property, subject only to
the matters permitted by the following sentence) all the properties and assets
(whether real and/or personal, and whether tangible or intangible) that it
purports to own, including all the properties reflected on the Financial
Statements and all the properties, if any, acquired by the Company since the
date of the last Financial Statements (except for personal property acquired and
sold since the date of the last Financial Statements in the ordinary course of
business and consistent with past practice). Except as set forth on Schedule
2.9, all material properties and assets of the Company are free and clear of all
encumbrances and are not, in the case of real and immoveable property, subject
to any rights of way, encroachments, homologations building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (a) any mortgages or security
interests shown on the Financial Statements as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) any hypothecs or
security interests incurred in connection with the purchase of property or
assets after the date of the last Financial Statement (such mortgages and
security interests being limited to the property or assets so acquired), with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (c) any liens and hypothecs for
current taxes not yet due, and (d) with respect to real and immoveable property,
minor imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of or could have a Material Adverse Effect on
the Company. The
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operation of the properties and Business of the Company in the manner in which
they are now and have been operated does not violate any zoning ordinances,
municipal regulations, by-laws, building codes or other rules, regulations, or
laws, except for any such violations which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. There are no
outstanding work orders or any matters under discussion by the Company in
connection with work orders relating to the Business or any premises occupied or
used by the Company. There are no covenants, servitudes, rights-of-way, or
regulations of record which impair the uses of the respective properties of the
Company for the purposes for which they are now operated.
2.10 Licenses and Permits. Attached hereto as Schedule 2.10 is a list of
all federal, provincial, municipal and local governmental licenses, regulatory
and administrative licenses, certificates, and permits held or applied for by
the Company which have a material effect on the Business, properties, or assets
of the Company. The Company has complied with the terms and conditions of all
such certificates, licenses, and permits, and no violation of any such
certificate, license, or permit or the laws or rules governing the issuance or
continued validity thereof has occurred other than violations (if any) which
would not individually or in the aggregate have a Material Adverse Effect on the
Company. No additional license, certificate, or permit is required from any
federal, provincial, municipal or local government, regulatory or administrative
agency or body thereof in connection with the conduct of the Business of the
Company, which license, certificate or permit, if not obtained, would have a
Material Adverse Effect on the Company.
2.11 Patents; Trademarks. Attached hereto as Schedule 2.11 is a list and
brief description of all patents, industrial designs, trademarks, trade names,
copyrights, service marks or other intellectual property, or applications
therefor, owned by or registered in the name of the Company or in which the
Company has any rights, licenses, or immunities. The Company has furnished Buyer
with copies of all license agreements to which Company is a party, either as
licensor or licensee, with respect to any patents, industrial designs, trade
marks, trade names, copyrights, service marks or other intellectual property.
Except as described on Schedule 2.11 hereto, the Company has good and marketable
title to, or the right to use, such assets, free and clear of any lien, pledge,
hypothec, or claim or right of others, and all inventions, processes, designs,
formulae, trade secrets and know-how necessary for the conduct of the Company's
Business as presently conducted without the payment of any royalty or similar
payment. To the knowledge of the Sellers, the Company is not infringing on any
patent right, industrial design, trade name, copyright, service mark or trade
mark right of others, and neither Company nor any Seller is aware of any
infringement by others of any such rights owned by the Company.
2.12 Compliance with Laws and Other Instruments. (i) The Company has
complied with all laws, rules, regulations, ordinances, orders, judgments and
decrees (collectively, "Laws") now applicable to its Business, properties,
assets or operations as presently conducted, save and except for such Laws the
violation of which (if any) would not individually or in the aggregate have a
Material Adverse Effect on the Company and (ii) the Company has not received any
citations, notices or orders of non-compliance under any Law within the five
years immediately preceding the Closing Date. Neither the ownership nor use of
the Company's properties or assets nor the conduct of its Business conflicts
with the rights of any other person, firm or corporation, violates
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or, with or without the giving of notice or the passage of time, or both, will
violate, conflict with or result in a default, right to accelerate or loss of
rights under, any terms or provisions of its Articles or Bylaws as presently in
effect, or any lien, hypothec, encumbrance, mortgage, deed of trust, lease,
license, agreement, understanding, law, ordinance, rule or regulation, or any
order, judgment or decree to which the Company is a party or by which it or its
properties or assets may be bound or affected. Neither the Company nor any
Seller is aware of any proposed Law, governmental taking, condemnation or other
proceeding which would be applicable to the Company's Business, operations,
properties or assets and which might have a Material Adverse Effect on the
Company or the Business either before or after the Effective Date. No consent,
qualification, order, approval or authorization of, or filing with, any
governmental, regulatory or administrative authority is required in connection
with the Sellers' or the Company's execution, delivery and performance of this
Agreement and the consummation of any transaction contemplated hereby, except
for such notification filings or other authorizations as Buyer may be required
to make or obtain.
2.13 Insurance. Attached hereto as Schedule 2.13 is a list of all policies
of fire, liability, or other forms of insurance and all fidelity bonds held by
or applicable to the Company or any property owned or leased by the Company,
which Schedule sets forth in respect of each such policy the policy name, policy
number, carrier, term, type of coverage, deductible or self-insured retention
amount, limits of coverage, annual premium and expiry or renewal date. No event
relating to the Company has occurred which will result in a retroactive upward
adjustment of premiums under any such insurance policies, or which is likely to
result in any prospective upward adjustment in such premiums and which would
have a Material Adverse Effect on the Company. Premium amounts due and payable
for all such insurance policies are paid in full through the Closing Date.
2.14 Employee Benefits.
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(a) Schedule 2.14 lists all Employee Plans covering persons
currently or formerly employed by the Company ("Employees"). The term "Employee
Plan" includes any pension, retirement, savings, supplemental unemployment
benefits, disability, medical, dental, health, life (including, without
limitation, any individual life insurance policy under which any Employee is the
named insured and as to which the Company makes premium payments, whether or not
the Company is the owner, beneficiary or both of such policy), death benefit,
group insurance, profit-sharing, deferred compensation, stock option, stock
purchase bonus, incentive, vacation pay, severance pay, or other employee
benefit plan, trust, arrangement, agreement, policy or commitment, whether or
not any of the foregoing is funded or insured and whether written or oral, which
is intended to provide or does in fact provide benefits to any or all current
Employees, and (i) to which the Company is party or by which the Company (or any
of the rights, properties or assets of the Company) is bound, (ii) with respect
to which the Company has made any payments, contributions or commitments, or may
otherwise have any liability (whether or not the Company still maintains such
plan, trust, arrangement, contract, agreement, policy or commitment) or (iii)
under which any current director, Employee or agent of the Company is a
beneficiary as a result of his employment or affiliation with the Company. None
of the Employee
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Plans, nor any related trusts thereunder, is subject to any pending
investigation, examination or other proceeding, action or claim initiated by any
governmental agency or instrumentality and, to the knowledge of the Sellers,
there exists no state of facts which after notice or lapse of time or both could
reasonably be expected to give rise to any investigation or proceeding.
(b) Except as disclosed on Schedule 2.14, with respect to any
Employee, the Company has no obligation to contribute to (or any other liability
with respect to) any funded or unfunded Employee Plan, whether or not
terminated, which provides medical, health, life insurance or other welfare-type
benefits for current or future retirees or current, future or former Employees
(including their dependents and spouses) except for limited continued medical
benefit coverage for former Employees, their spouses and their other dependents,
and the Company is in compliance in all material respects with the continued
medical and other welfare benefit coverage requirements of all applicable
employee benefit laws.
(c) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to each
Employee Plan or are reflected as a liability on the books of the Company and
all contributions for any period ending on or before the Effective Date which
are not yet due have been paid to each such Employee Plan or accrued in
accordance with the past custom and practice of Seller. All premiums or other
payments for all periods ending on or before the Closing Date have been paid
with respect to each such Employee Plan.
(d) Except as disclosed on Schedule 2.14, there is no agreement or
promise, written or oral, of the Company to the effect that any Employee Plan
may not be terminated at the Company's discretion at any time, subject to
applicable law. Schedules 2.14 and 2.15 set forth a list and a summary
description of all collective bargaining agreements, employment and consulting
agreements, Employee Plans and other agreements, arrangements or commitments,
whether or not legally binding, including, without limitation, holiday,
vacation, Christmas and other bonus practices, to which the Company is a party
or is bound or which relate to the operation of the Business with respect to
current Employees. The Effective Date Balance Sheet reflects all accrued
vacation and other benefits for the Company's employees, including, without
limitation, any amounts due under any profit sharing agreements, as of the date
thereof.
(e) All of the Employee Plans are and have been established,
registered, qualified, invested and administered, in all respects, in accordance
with all laws, regulations, orders or other legislative, administrative or
judicial promulgations applicable to the Employee Plans. To the knowledge of the
Sellers, no fact or circumstance exists that could adversely affect the tax-
exempt status of any Employee Plan.
(f) All obligations regarding the Employee Plans have been satisfied,
there are no outstanding defaults or violations by any party to any Employee
Plan, and no taxes, penalties or fees are owing or exigible under any of the
Employee Plans.
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(g) No amendments have been made to any Employee Plan, no
improvements to any Employee Plan have been promised, and no amendments or
improvements to any Employee Plan will be made or promised prior to the Closing
Date.
(h) There have been no improper withdrawals, applications or
transfers of assets from any Employee Plan or the trust or other funding medium
relating thereto, and neither the Company nor any of its agents or delegates has
been in breach of any fiduciary obligation with respect to the administration of
the Employee Plans or the trusts or other funding media relating thereto.
(i) Each Employee Plan which is a funded plan is fully funded as of
the Closing Date on both a going concern and a solvency basis pursuant to the
actuarial assumptions and methodology utilized in the most recent actuarial
valuation therefor.
(j) The Company has furnished to the Buyer true, correct and complete
copies of all the Employee Plans as amended as of the date hereof together with
all related documentation including, without limitation, funding agreements,
actuarial reports, funding and financial information returns and statements, all
professional opinions (whether or not internally prepared) with respect to each
Employee Plan, all material internal memoranda concerning the Employee Plans,
copies of material correspondence with all regulatory authorities with respect
to each Employee Plan and plan summaries, booklets and personnel manuals. No
material changes have occurred to the Employee Plans or are expected to occur
which would materially affect the actuarial reports or financial statements
required to be provided to the Buyer pursuant to this provision.
(k) All employee data necessary to administer each Employee Plan have
been provided by the Company to the Buyer and are true and correct as of the
date of this Agreement and the Company will notify the Buyer of any changes
thereto.
2.15 Contracts and Agreements. Attached hereto as Schedule 2.15 is a true
and complete list and brief description of all written or oral contracts,
commitments, leases, and other agreements (including, without limitation,
promissory notes, loan agreements, and other evidences of indebtedness,
guarantees, agreements with distributors, suppliers, dealers, franchisors and
customers, service agreements, collective bargaining agreements and union
agreements) to which the Company is a party or by which the Company, its
properties or assets are bound pursuant to which the obligations thereunder of
either party thereto are, or are contemplated as being, $2,500 or more
(collectively, the "Contracts"). Except as set forth at Schedule 2.15, the
Company is not and, to the best knowledge of the Sellers and the Company, no
other party thereto is in default (and no event has occurred which, with the
passage of time or the giving of notice, or both, would constitute a default)
under any of the Contracts, and has not waived any right under any of the
Contracts. Except as set forth in Schedule 2.15, the Company has not guaranteed
any obligations of any other person or entity. Except as set forth in Section B
of Schedule 2.15, the Company has obtained all consents required under the
Contracts listed in Schedule 2.15. In connection with the Contracts listed in
Section B of Schedule 2.15, the parties hereto shall use their reasonable best
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efforts to obtain, as soon as practicable after Closing, any required consents
under the Contracts listed in Section B of Schedule 2.15.
2.16 Claims and Proceedings. Except as set forth in Schedule 2.16, there
are no actions, suits, legal, administrative or regulatory proceedings or
investigations pending or, to the knowledge of the Company and/or Sellers,
threatened, against or relating to the Company or either of the Sellers, their
properties, assets or the Business or the transactions contemplated by this
Agreement, and neither any of the Sellers nor the Company knows of, nor has any
reason to be aware of, any basis for the same. There are no outstanding
judgments, orders, decrees, writs, injunctions or awards with respect or
affecting the Company, its properties or the Shares. To the knowledge of the
Company and/or Sellers, there are no actions, suits, legal, administrative or
regulatory proceedings or investigations pending or threatened against any of
the Company's or the Sellers' officers and directors in connection with the
Business.
2.17 Taxes. With respect to the Business and the Company, the Company has
duly and timely filed with the appropriate Canadian, federal and provincial or
municipal government agencies, all Tax Returns (as hereinafter defined) required
to be filed by it prior to the date hereof in respect of any Taxes (as
hereinafter defined); such Tax Returns are true, accurate and complete; all
elections required to be made by the Company and all necessary filings in
respect of matters reported in such Tax Returns have been filed on a timely
basis and are true, accurate and complete; and the Company has paid or will pay
in full all Taxes which are due and payable and there are no outstanding
assessments or reassessments of Taxes relating to the Company or the Business.
The Company has made all withholding of Taxes required to be made under all
applicable statutes and regulations and such withholdings have either been paid
to the appropriate governmental agencies or set aside in accounts for such
purposes or been accrued, reserved against and entered upon the appropriate
books of the Company. The Company has not executed any presently effective
waiver or extension of any statute of limitations against assessments and
collection of Taxes. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, use, transfer,
license, payroll, goods and services tax (GST), federal and provincial capital
taxes, social services, health, franchise, social security, workmen's
compensation and unemployment taxes or payments imposed by or required to be
withheld for or paid to any Canadian, or any provincial or local, government or
subdivision or agency thereof; and such term shall include any interest,
penalties and additions to tax. Neither the Company nor any Seller owns or
leases any properties, real or personal, located in the United States, and
neither the Company nor any Seller is or has previously been engaged in a trade
or business in the United States. For purposes of this Agreement, the term "Tax
Return" shall mean any report, return, information return or other information
required to be supplied to a taxing authority in connection with Taxes.
2.18 Personnel. Attached hereto as Schedule 2.18 is a list of the names
of the directors and executive officers of the Company, and the names and annual
rates of compensation of the employees of Company whose annual rates of
compensation (including base salary, bonus and incentive pay) are expected to
exceed by the Closing Date $25,000 annually. Schedule 2.18 also
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contains a list of all employment contracts of the Company, true and accurate
copies of which (including all amendments) have been delivered to Buyer. The
employee relations of the Company are good and there is no pending or, to the
best knowledge of the Sellers, and the Company, threatened labor dispute or
union organization campaign except as disclosed in Schedule 2.16. Copies of all
current collective bargaining agreements and labor agreements have been
delivered to Buyer and the Company is in compliance, in all material respects,
with all such agreements. The Company is in compliance in all material respects
with all federal and provincial laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and is not
engaged in any unfair labor practices.
2.19 Business Relations. None of the Company or the Sellers knows nor has
any reason to believe that any customer or supplier of the Company will cease to
do business with the Company, in the same manner and at the same levels as
previously conducted with the Company, as a result of the consummation of the
transactions contemplated hereby.
2.20 Accounts Receivable. All of the accounts, notes, and loans
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered. Except as
disclosed on Schedule 2.20 hereto (a) all of such accounts, notes, and loans
receivable are free and clear of any security interest, lien, hypothec,
encumbrance, adverse interest or other charge; and (b) none of the obligors of
such accounts, notes, or loans receivable has given notice to the Company that
it will or may refuse to pay the full amount or any portion thereof.
2.21 Bank Accounts. Attached hereto as Schedule 2.21 is a list of all
banks or other financial institutions with which the Company, or any Seller (in
the conduct of the Business), has an account or maintains a safe deposit box,
showing the type and account number of each such account and safe deposit box
and the names of the persons authorized as signatories thereon or to act or deal
in connection therewith.
2.22 Agents. Except as set forth on Schedule 2.22 hereto, the Company has
not designated or appointed any person or other entity to act for it or on its
behalf pursuant to any power of attorney or agency which is presently in effect
or could become effective in the future.
2.23 Warranties. Except as set forth on Schedule 2.23 and except for
warranty claims that are typical and in the ordinary course of the Company's
Business, there is no outstanding claim against the Company for breach of
product or service warranty to any customer. To the best knowledge of the
Sellers and the Company, no state of facts exists, and no event has occurred,
which may form the basis of any present claim against the Company for liability
on account of any express or implied warranty to any third party in connection
with products sold or services rendered by the Company.
2.24 No Brokers. The Company and the Sellers have not, individually or in
concert, engaged, or caused to be incurred any obligation or liability to any
finder, broker, or sales agent for brokerage or finders' fees or agents'
commissions or like payment in connection with the
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origin, negotiation, execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.25 Interests in Competitors, Suppliers, Customers, etc. Except as
disclosed in Schedule 2.25 hereto, no officer, director or shareholder of the
Company or any Affiliate (as defined hereinafter) of any such officer, director
or Shareholder, nor any officer, director or shareholder of the Sellers (or
either of them) has any ownership interest in any competitor, supplier, or
customer of the Company (other than ownership of securities of a publicly-held
corporation of which such person owns, or has real or contingent rights to own,
less than one percent of any class of outstanding securities and other than
ownership by the Sellers of the CEI Shares upon Closing) or any property used in
the operation of the Company's Business. For purposes of this Agreement,
"Affiliate" shall have the meaning assigned to it in Section 2(1) of the Canada
Business Corporations Act.
2.26 Indebtedness to and from Officers, Directors, Company, the Sellers
and Employees. Attached hereto as Schedule 2.26 is a true and complete list and
brief description of the payment terms of all indebtedness of the Company to any
officer, director, shareholder or employee of the Company or the Sellers and all
indebtedness of any officer, director, shareholder, or employee of the Company
or the Sellers to the Company, excluding indebtedness for travel advances or
similar advances for expenses incurred on behalf of and in the ordinary course
of the Company's Business and consistent with its past practices.
2.27 Undisclosed Liabilities. Except as indicated in Schedule 2.27 hereto
and the other Schedules hereto, the Company has no material liabilities (whether
absolute, accrued, contingent or otherwise), of a nature required by GAAP
applied on a consistent basis to be reflected on a corporate balance sheet or
disclosed in the notes thereto, except such liabilities which are accrued or
reserved against in the Balance Sheets or disclosed in any notes thereto.
2.28 Environmental Matters. The Company has conducted its Business, and
the Company and all its properties are, in compliance in all material respects
with all federal, provincial and local energy, public utility, health, safety
and environmental laws, regulations, orders, permits, licenses, approvals,
ordinances and directives including, but not limited to, the Environment Quality
Act (Quebec) and the Canadian Environmental Protection Act (Canada) and any
similar federal, provincial or local laws (collectively, "Environmental
Obligations") and all other federal, provincial or local regulations, except
where failure to comply would not have a Material Adverse Effect on the Company.
No claim has been made by any governmental authority (and to the best of the
knowledge of the Company, no such claim is anticipated) to the effect that the
Business conducted by the Company fails to comply with any Environmental
Obligation.
2.29 Information Furnished. The Company and the Sellers have made
available to Buyer true and correct copies of all corporate records of the
Company and all agreements, documents, and other items listed on the Schedules
to this Agreement or referred to in Article II of this Agreement and except as
disclosed in Schedule 2.29 hereto, neither this Agreement, the Schedules
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hereto, nor any information, instrument, or document delivered to Buyer pursuant
to this Agreement contains any untrue statement or a material fact or omits any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
2.30 Residency. Each of Sellers hereby represents to Buyer that it is not
a non-resident of Canada within the meaning of the Income Tax Act of Canada.
2.31 Conduct of the Business. As of and since May 31, 1996, and except as
disclosed in this Agreement and any Schedules hereto, neither the Company nor
any of the Sellers have engaged in any activity or entered into any transaction,
agreement or understanding which would constitute a direct or indirect breach of
any covenant of the Sellers or the Company set forth in Section 5.1 hereof as if
the Company and the Sellers were bound by Section 5.1 as of and following May
31, 1996 through the date hereof.
2.32 Books and Records. The minute books of the Company are complete and
accurate, and contain copies of all by-laws and resolutions passed by the
Sellers and directors since the date of its incorporation by letters patent, all
of which by-laws and resolutions have been duly passed. The share certificate
books, registers of shareholders, registers of transfers and registers of
directors of the Company are complete and accurate.
2.33 Stand Alone. No part of the business of the Company is conducted
through any person or entity other than the Company. None of the Sellers has any
interest in any property, immoveable or real, moveable or personal, tangible or
intangible, used in or pertaining to the Business of the Company.
ARTICLE III
BUYER'S AND CEI'S REPRESENTATIONS AND WARRANTIES
Buyer and CEI hereby jointly and severally represent and warrant to the
Sellers as follows:
3.1 Due Organization. Each of CEI and Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the state or
province of its incorporation and has all requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of CEI and Buyer is qualified to
do business in the places and in the manner now conducted except where the
failure to be so authorized or qualified would not have a Material Adverse
Effect on its business.
3.2 Capitalization. The authorized capital stock of CEI consists of (i)
300,000,000 shares of CEI common stock, par value $0.0002 per share, of which
70,351,327 shares were outstanding as of August 29, 1996, (ii) 3,000,000 shares
of non-voting common stock, par value $0.0002 per share, none of which was
outstanding as of August 29, 1996, and (iii) 25,000,000 shares of preferred
stock, par value of $.0001 per share, none of which was outstanding as of
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August 29, 1996. All of the issued and outstanding shares of CEI are validly
issued and are fully paid, nonassessable and free of preemptive rights.
3.3 Due Authorization; Non-Contravention; Approvals. Each of CEI and Buyer
has all requisite power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance of this Agreement has been duly authorized by all
necessary corporate action of CEI and Buyer, and the Agreement has been duly and
validly executed and delivered by Buyer and CEI and constitutes valid and
binding obligations of CEI and Buyer, enforceable in accordance with its terms.
The execution, delivery, and performance of this Agreement (as well as all other
instruments, agreements, certificates or other documents contemplated hereby) by
CEI and Buyer, shall not (a) violate any federal, provincial, county, or local
law, rule, or regulation or any decree or judgment of any court or governmental,
administrative or regulatory authority applicable to CEI or Buyer or their
property or assets, (b) violate or conflict with, or permit the cancellation of,
or constitute a default under any agreement to which CEI or Buyer is a party or
by which CEI or Buyer or their respective properties or assets are bound, (c)
permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property or assets of CEI or Buyer, or (d) violate
or conflict with any provision of the charter or bylaws of CEI or Buyer. Each
of CEI and Buyer has or will obtain or complete, as applicable, within the
requisite time periods all consents, qualifications, orders, approvals,
authorizations or filings with any governmental, regulatory or administrative
authority which are required of CEI or Buyer in connection with the transactions
contemplated by this Agreement.
3.4 No Brokers. Neither CEI nor Buyer has engaged, or caused to be
incurred any liability or obligation to any finder, broker or sales agent for
brokerage or finders' fees or agents' commissions or like payment in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
3.5 CEI Shares. The CEI Shares to be issued to the Sellers pursuant to
this Agreement, when issued in accordance to the terms hereof, will be duly
authorized, validly issued, fully paid and nonassessable. Subject to Sellers'
compliance with the Transfer Restriction Agreement (as defined below) executed
and delivered to CEI by the Sellers, the CEI Shares will be freely tradeable
pursuant to Regulation S as promulgated by the Securities and Exchange
Commission ("SEC") under the 1933 Act, as amended.
3.6 SEC Filings; Disclosure. CEI has filed with the SEC all material
forms, statements, reports and documents required to be filed by it under each
of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and their respective rules and regulations, all of which, as amended, if
applicable, complied when filed in all material respects with all applicable
requirements of the appropriate Act and the rules and regulations thereunder.
The Annual Report on Form 10-K of CEI for the fiscal year ended March 2, 1996
(the "CEI 10-K") filed with the SEC under the 1934 Act, and all other reports
and proxy statements filed or required to be filed by CEI under the 1934 Act
since March 2, 1996 have been duly and timely filed by CEI, were in substantial
compliance with the requirements of their respective forms and
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applicable rules and regulations and were complete and correct in all material
respects as of the dates at which the information was furnished, and contained
no untrue statement of a material fact and did not omit to state any material
fact required to be included therein or necessary in light of the circumstances
under which the statements made therein were made in order to make the
statements made therein not misleading. A true and complete list of all such
filings with the SEC under the 1934 Act (excluding exhibits) since March 2, 1996
is set forth in Schedule 3.6 hereto and copies of such filings have been
delivered by Buyer to the Sellers.
3.7 Exemption of Offering and Issuance of CEI Shares. Assuming the
validity of the Sellers' representations and warranties under Article III of
this Agreement and under the Transfer Restriction Agreement (as hereinafter
defined), the offer and issuance of the CEI Shares to Sellers in accordance with
this Agreement constitutes a transaction exempt from the registration
requirements of Section 5 of the U.S. Securities Act of 1933, as amended and
[the securities laws and regulations of Canada and its provinces and other
subdivisions (the "Acts"), and neither CEI nor Buyer nor any other person acting
on behalf of either of them will take any action hereafter that could cause the
loss of such exemptions.
ARTICLE IV
OTHER AGREEMENTS
4.1 Employment Agreements. CEI and Buyer acknowledge receipt of all
employment agreements delivered by the Company to the Buyer pursuant to Section
2.18 (the "Company's Employment Agreements"). Buyer undertakes to respect the
terms and conditions of the Company's Employment Contracts. Notwithstanding the
foregoing, Buyer agrees to modify the employment agreements of Donald Pouliot,
Jacques Marotte and Claude Valentine (together, the "Management Employment
Agreements") (i) to eliminate any profit sharing component of such contracts
after the Company's fiscal year ending October 31, 1996, and (ii) to add an
incentive bonus system and non-compete provision to each such contract. The
incentive bonus provision will be based on actual yearly results of the Company
compared to budget objectives and, if such criteria were satisfied, the
incentive bonus would equal at least ten percent (10%) of the person's annual
salary. The non-competition provision shall provide that for a period of one or
two years, as the case may be, following the person's employment with the
Company, that the person may not, without the prior written consent of CEI,
signed by its Chief Executive Officer, directly or indirectly, engage in, become
associated with, or employed in the office products business anywhere in the
Province of Quebec. The modifications to the Management Employment Agreements
are attached hereto as Exhibit F.
4.2 Resignations of Clermont Pouliot and Herman Pouliot. At Closing,
Clermont Pouliot and Herman Pouliot shall tender their resignation as employees
and board members of the Company.
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4.3 Non-Competition Agreement. On the Closing Date, Clermont Pouliot and
Herman shall execute and deliver to Buyer the Non-Competition Agreements
substantially in the form of Exhibit C attached hereto.
4.4 Transfer Restriction Agreement. At Closing, the Sellers shall deliver
to CEI and Buyer the Transfer Restriction Agreement substantially in the form of
Exhibit B hereto.
4.5 Further Assurances. From time to time after the Closing, at the
request of Buyer, the Sellers without further consideration, will each execute
and deliver to Buyer such other instruments of conveyance, assignment, transfer,
and delivery and take such other action as the Buyer may reasonably request in
order to consummate the transactions contemplated hereby.
4.6 Conduct of the Business. From the Closing Date until October 31, 1996,
Buyer shall (i) cause the Company not to engage in any activity or enter into
any transaction outside the ordinary or usual course of its business or its past
practices, (ii) maintain the accounting methods used by the Company immediately
prior to Closing and (iii) maintain the Company's corporate existence. The
October 31, 1996 Financials of the Company shall be prepared from the books and
records of the Company kept in accordance with GAAP, consistently applied and
consistent with the past practice of the Company so as to fairly present the
financial condition of the Company as of October 31, 1996.
ARTICLE V
COVENANTS OF COMPANY AND SELLERS
5.1 Conduct of Business Pending Closing. From the Effective Date to the
Closing Date:
(a) Negative Covenants. Except as otherwise contemplated by this
Agreement, or as Buyer may otherwise consent to in writing, the Company shall
not, and the Sellers shall cause the Company not to engage in any activity or
enter into any transaction outside of the ordinary and usual course of its
business or its past practices. Without limiting the generality of the
foregoing, except as expressly contemplated by this Agreement, the Company shall
not and the Sellers shall cause the Company not to: (i) subject to Section 4.5
hereof, make, declare, set aside, or pay any dividend or other distribution to
its shareholders or officers, except for regular compensation and commissions
required under existing employment agreements; (ii) enter into any compensation
arrangement with any of the officers, directors or key employees of the Company
except in the ordinary course of business and in compliance with existing
employment agreements of the Company; (iii) acquire or accrue any capital assets
having an individual cost in excess of $5,000, or an aggregate cost in excess of
$15,000 or incur any liability (other than in the ordinary course of business)
in excess of $15,000 without Buyer's prior written consent which shall not be
unreasonably withheld or delayed; (iv) enter into any lease agreement or other
material agreement in connection with any property owned by the Company; (v)
take any action that could reasonably be expected to adversely affect the
consummation of the transactions
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<PAGE>
contemplated by this Agreement, or the Business, operations, properties,
financial condition or prospects of the Company, or (vi) agree to do any of the
foregoing.
(b) Conduct of Business. The Company shall, and the Sellers shall use
their best efforts to cause the Company to, preserve substantially intact its
business organizations and present relationships with its customers, suppliers
and employees and to maintain all of its insurance currently in effect. The
Company will not take any action that could reasonably be expected to have a
Material Adverse Effect on the Company.
(c) Notice of Breach. The Company and the Sellers shall give prompt
notice to Buyer of any notice of material default received by the Company under
any material instrument or agreement, or any Material Adverse Change occurring
in the Business prior to the Closing Date.
(d) Other Parties. Prior to the Closing, neither the Company nor
either Seller, nor any of their representatives, advisors or affiliates shall
solicit, encourage or discuss any Acquisition Proposal (as defined below) or
supply any non-public information concerning the Company or the Business or its
properties or assets to anyone who may be contemplating an Acquisition Proposal
other than Buyer, CEI and their affiliates and representatives, or disclose to
anyone (other than representatives and legal or accounting advisors on a "need-
to-know" basis) the existence or terms of this Agreement. For purposes of this
Agreement, an "Acquisition Proposal" is any proposal other than the transactions
contemplated by this Agreement, for (i) any merger or other business combination
involving any or all of the Company or the Sellers, or (ii) the acquisition of
all or a material equity interest in or a material portion of the assets of the
Company, or (iii) the dissolution or liquidation of the Company.
(e) Access to Information. The Company shall, and the Sellers shall
cause the Company to afford Buyer, CEI and their representatives full and
unrestricted access, during normal business hours and upon reasonable notice, to
all of the assets, properties, operations, books, records, contracts, documents
and agreements of the Company (including financial, tax basis, budget
projections, auditors' workpapers and other information as Buyer may request),
and to the personnel, customers, suppliers and independent auditors of the
Company, and Buyer, CEI and their representatives shall be entitled to make
copies of all such materials. Information and materials made available to
Buyer, CEI and their representatives pursuant to this subsection shall be used
to conduct a due diligence examination of the Company for the purpose of
determining whether Buyer should consummate the transactions contemplated
hereby. If the Closing does not occur, all documents, materials, copies and
computer information provided by the Company to Buyer shall be returned to the
Company forthwith. Prior to the Closing, Buyer, CEI and their representatives
shall maintain in confidence all information and materials made available to
Buyer, CEI and their representatives pursuant to this subsection.
(f) Transfer Restrictions. The Sellers and the Company shall not sell,
transfer, pledge, hypothecate or grant a security interest in, or otherwise
dispose of or encumber, any of the Shares or any ownership interest in the
Company without the prior written consent of Buyer.
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<PAGE>
5.2 Consents of Others. Prior to the Closing, the Company and the Sellers
shall use their best efforts to obtain and to cause the Company to obtain all
authorizations, consents and permits required, if any, to permit them to
consummate the transactions contemplated by this Agreement.
5.3 Sellers' Efforts. The Company and the Sellers, jointly and severally,
shall use their reasonable efforts to cause all conditions for the Closing to be
met.
5.4 Powers of Attorney. The Sellers shall cause the Company to terminate
at or prior to Closing all powers of attorney granted by the Company, other than
those relating to service of process, qualification or pursuant to governmental
regulatory or licensing agreements.
ARTICLE VI
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
6.1 Conditions to Buyer's Obligations. The obligation of Buyer under this
Agreement to consummate the Closing and purchase the Shares is conditioned upon
satisfaction of the following conditions precedent:
(a) Covenants, Representations and Warranties. The Company and the
Sellers shall have performed all obligations and agreements and complied in all
material respects with all covenants contained in this Agreement to be performed
and complied with by each of them prior to or at the Closing Date. The
representations and warranties of the Company and the Sellers set forth in this
Agreement shall be accurate, true and complete at and as of the Closing Date
with the same force and effect as though made on and as of the Closing Date
except for any changes resulting from activities or transactions which may have
taken place after the date hereof and which are permitted or contemplated by the
Agreement or which have been entered into in the ordinary course of business and
except to the extent that such representations and warranties are expressly made
as of another specified date and, as to such representations, the same shall be
true as of such specified date.
(b) Consents. All statutory requirements for the valid consummation by
the Company, the Sellers, and Buyer of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents, approvals
and waivers, including those of all third parties and all federal, provincial,
local and foreign governmental agencies and regulatory authorities necessary or
desirable to be obtained in order to permit the consummation of the transactions
contemplated hereby and by the documents and agreements referred to herein shall
have been obtained in form and substance reasonably satisfactory to Buyer. All
approvals of the Boards of Directors and/or the shareholders, as the case may
be, of the Company and the Sellers necessary for the consummation of this
Agreement and the transactions contemplated hereby shall have been obtained,
unless the failure to obtain any such authorization, consent or approval shall
not have a Material Adverse Effect on the Company.
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(c) Financial Condition. Each of the following shall be true and
complete as of the Effective Date (the "Financial Assumptions"):
(i) The Company's cash position shall be positive (or, if
negative, the negative balance shall be considered Debt as defined below
for purposes of this Agreement);
(ii) The aggregate total Debt of the Company shall not exceed
$4,800,000. "Debt" shall mean all long-term debt (including the current
portion of long-term debt), notes payable, bank debt, capital leases,
operating leases (excluding real estate leases and accounts payable over
stated terms, all of which amounts are reflected in the Effective Date
Balance Sheet);
(iii) The Company shall have no past due taxes and no current
liability for any taxes other than current taxes not yet due or payable
which shall be properly accrued on dated the Effective Date Balance Sheet;
(iv) The Company's accounts payable outstanding shall in the
aggregate not be greater than historical levels;
(v) The Company's accrued liabilities shall not be greater
than historical levels; and
(vi) The Company's inventory of regular warehouse stocking
items shall be approximately at historical levels.
For purposes of this sub-section (c), "historical levels" means an amount
not to exceed 120% of the amount shown on the unaudited balance sheet of the
Company for the corresponding time immediately preceding the Effective Date.
(d) Material Adverse Change. Except as disclosed in Section 2.8 of
this Agreement and Schedules 2.8 hereto, since May 31, 1996, there has been no
change which would have a Material Adverse Effect on the Company.
(e) Board Approval. Upon completion of Buyer's due diligence
examination, Buyer shall have received final approval of this Agreement and the
transactions contemplated hereby by the Board of Directors of CEI and Buyer.
(f) Documents to be Delivered by the Sellers and the Company. The
following documents shall be delivered at the Closing by the Sellers and the
Company:
(i) A Notes and B Notes. Sellers shall have transfered and
assigned to Buyer the B Notes. Sellers shall have transfered and assigned
to CEI the A Notes.
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<PAGE>
(ii) Non-Competition Agreement. The Shareholders shall have
executed and delivered the Non-Competition Agreement in substantially the
form attached as Exhibit C hereto.
(iii) Share Certificates. The Sellers shall have delivered the
share certificates representing the Shares, duly endorsed for transfer to
Buyer.
(iv) [intentionally deleted].
(v) Escrow Agent. The Sellers shall have delivered to Buyer at
the Closing the duly executed Escrow Agreement required pursuant to Section
1.5 hereof in substantially the form attached as Exhibit A hereto.
(vi) Opinion of Counsel to the Sellers and the Company. Buyer
shall have received an opinion of Lavery, de Billy, counsel to the Sellers
and the Company, dated the Closing Date, in substantially the form attached
as Exhibit D hereto.
(vii) Joint Certificate of Payment. The Sellers shall have
executed and delivered the cross-receipt in substantially the form attached
as Exhibit E hereto.
(viii) The Transfer Restriction Agreement. Sellers shall have
executed and delivered the Transfer Restriction Agreement in substantially
the form attached as Exhibit B.
(g) Employment Agreements. Messrs. Marotte, Pouliot and Valentine
shall have amended their respective employment agreements in the manner provided
in Section 4.1 and in the form attached as Exhibit F.
(h) Litigation. There shall be no actions, claims, investigations, or
other proceedings pending or threatened to restrain, enjoin or invalidate any
transaction contemplated by this Agreement.
6.2 Conditions to the Sellers', Shareholders' and Company's Obligations.
The obligation of the Sellers, the Shareholders and the Company under this
Agreement to consummate the Closing is conditioned upon satisfaction of the
following conditions precedent:
(a) Covenants, Representations and Warranties. Buyer and, where
applicable, CEI shall have performed in all material respects all obligations
and agreements and complied in all material respects with all covenants
contained in this Agreement to be performed and complied with by Buyer or CEI
prior to or at the Closing and the representations and warranties of Buyer and
CEI set forth in Article III hereof shall be accurate, true and complete in all
material respects, at and as of the Closing Date, with the same force and effect
as though made on and as of the Closing Date except for any changes resulting
from activities or transactions which may have taken place after the date hereof
and which are permitted or contemplated by the Agreement or
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<PAGE>
which have been entered into in the ordinary course of business and except to
the extent that such representations and warranties are expressly made as of
another specified date and, as to such representations and warranties, the same
shall be true as of such specified date.
(b) Consents. All statutory requirements for the valid consummation by
Buyer and CEI of the transactions contemplated by this Agreement shall have been
fulfilled and all authorizations, consents and approvals, including those of all
federal, state, local and foreign governmental agencies and regulatory
authorities required to be obtained in order to permit the consummation by Buyer
of the transactions contemplated hereby shall have been obtained unless the
failure to obtain any such authorization, consent or approval shall not have a
Material Adverse Effect on the Company.
(c) Payments.
(i) Shares Purchase Price. Buyer shall have paid to the
Sellers $17,000,000, which amount equals the Shares Purchase Price minus
the Escrow Sum.
(ii) Escrow Funds. Buyer shall have delivered to the Escrow
Agent the Escrow Sum.
(iii) Notes Purchase Price. Buyer shall have paid to the Sellers
$1,000,000 for delivery of the B Notes. CEI shall have delivered share
issuance confirmations to the Sellers for the delivery of CEI Shares having
a value of $12,000,000 (which amount shall first be converted to U.S.
Dollars as set forth in Section 1.3(c)) in exchange for the A Notes. The
actual CEI Share certificates (which shall contain legends as required)
will be delivered to the Sellers within three business days after Closing;
(d) Documents to Be Delivered by Buyer or CEI. The following documents
shall be delivered at the Closing by Buyer or CEI:
(i) [intentionally deleted]
(ii) Escrow Agreement. Buyer and the Escrow Agent shall have
delivered to the Sellers at the Closing the duly executed Escrow Agreement
required pursuant to Section 1.5 hereof in substantially the form attached
as Exhibit A hereto.
(iii) [intentionally deleted].
(iv) Joint Certificate of Payment. A certificate of payment
substantially in the form of Exhibit E attached hereto.
(v) CEI Shares. CEI shall have delivered share issuance
confirmations for the CEI Shares pursuant to Section 1.3(d) hereof.
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(vi) The Transfer Restriction Agreement. CEI shall have executed
and delivered the Transfer Restriction Agreement in substantially the form
attached as Exhibit B.
(vii) Employment Agreements. Messrs. Valentine, Pouliot and
Marotte shall have amended their respective employment agreement in the
manner provided in Section 4.1 and in the form attached hereto as Exhibit
F.
(viii) Opinion of Counsel for CEI. Sellers shall have received
an opinion from Richard L. Millett, Jr., Esq., general counsel to CEI,
dated the Closing Date, in substantially the form attached as Exhibit G.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of Buyer. The Sellers agree to jointly and severally
indemnify and hold harmless Buyer and each officer, director, and affiliate of
Buyer, including, without limitation, CEI or any successor of Buyer or CEI
(collectively, the "Indemnified Parties") from and against any and all damages,
losses, claims, liabilities, demands, charges, suits, penalties, costs and
expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating, preparing and pursuing for any litigation or
proceeding) (collectively, the "Indemnifiable Costs"), which any of the
Indemnified Parties may directly or indirectly sustain, or to which any of the
Indemnified Parties may be subjected, arising out of (A) any misrepresentation,
breach or default by the Sellers or the Company of or under any of the
covenants, agreements or other provisions of this Agreement or any agreement or
document executed in connection herewith; and (B) the Company's tortious acts or
omissions to act prior to the Closing for which the Company did not carry
sufficient liability insurance for itself as the insured party, whether or not
such acts or omissions to act result in a breach or violation of any
representation or warranty; and (C) any Indemnifiable Costs arising in
connection with certain discrepancies noted in connection with the certificates
of location and local municipal regulations for the Company's properties located
at 850 Des Rocailles, Quebec City, Quebec and 10350 Renaude Lapointe, Ville
d'Anjou, Quebec; provided, however, Sellers shall have no liability to Buyer for
Indemnified Costs in connection with subsections (A) and (B) above unless and
until such Indemnified Costs exceed $50,000, in which case Sellers' liability to
Buyer shall only include those amounts in excess of $50,000. The amount of any
Indemnifiable Costs shall be reduced by the amount of the insurance proceeds, if
any, received by the Indemnified Party with respect to the Indemnifiable Costs.
Notwithstanding anything to the contrary herein contained, the maximum liability
of each of the Sellers arising pursuant to this Section shall not exceed an
amount equal to the sum of the Purchase Price plus the amount of Buyer's August
30, 1996 loan to the Company.
7.2 Defense of Claims. If any legal proceeding shall be instituted, or any
claim or demand made, against any Indemnified Party in respect of which the
Sellers may be liable
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<PAGE>
hereunder, such Indemnified Party shall give prompt written notice thereof to
the Sellers and, except as otherwise provided in Section 7.3 below, the Sellers
shall have the right to defend, or cause the Company or its successor to defend,
any litigation, action, suit, demand, or claim for which it may seek
indemnification unless, in the reasonable judgment of Buyer, such litigation,
action, suit, demand, or claim, or the resolution thereof, would have an ongoing
effect on Buyer, the Company or their successors, in which event, the Buyer
shall be entitled to defend any such litigation. In the event Buyer determines
that it shall defend such litigation, the Sellers may nevertheless participate
in such litigation in a manner that does not adversely affect the outcome of the
litigation for the Buyer. If the Sellers defend the litigation, suit or claim,
the Indemnified Party shall extend reasonable cooperation in connection with
such defense, which shall be at the Sellers' expense. If Sellers elect to
participate in any such litigation, Buyer shall not settle such litigation
without the prior consent of Sellers which consent will not be unreasonably
withheld. If the Sellers fail to defend the same within a reasonable length of
time, the Indemnified Parties shall be entitled to assume the defense thereof,
and the Sellers shall be liable to repay the Indemnified Parties for all
expenses reasonably incurred in connection with said defense (including
reasonable attorneys' fees and settlement payments) if it is determined that
such request for indemnification was proper. If the Sellers fail to defend or
elect not to participate in the defense of any litigation, action, suit, demand,
or claim, the Indemnified Parties shall have the absolute right to control the
defense of and to settle, in their sole discretion and without the consent of
the Sellers, such litigation, action, suit, demand, or claim.
7.3 Tax Audits, etc. In the event of an audit of a return of the Company
with respect to which an Indemnified Party might be entitled to indemnification
pursuant to this Article VII, Buyer shall have the right to control any and all
such audits which may result in the assessment of additional Taxes against the
Company and any and all subsequent proceedings in connection therewith,
including appeals. The Sellers (who may participate in such litigation in a
manner that does not adversely affect the Buyer) shall cooperate fully in all
matters relating to any such audit or other Tax proceeding (including according
access to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. If Sellers elect to participate in any such
litigation, Buyer shall not settle such litigation without the prior consent of
Sellers which consent will not be unreasonably withheld. If additional Taxes
are payable by the Company as a result of any such audit or other proceeding,
the Sellers shall be responsible for and shall promptly pay all Taxes, interest,
and penalties (which become due as a result of any such audit) for taxes accrued
as of the Effective Date.
7.4 Indemnification of the Sellers. Buyer and CEI agree to indemnify and
hold harmless the Sellers from and against any Indemnifiable Costs arising out
of (A) any misrepresentation, breach or default by Buyer or CEI, as the case may
be, of or under any of the covenants, agreements or other provisions of this
Agreement or any agreement or document executed in connection herewith and (B)
any tortious acts or omissions by Buyer or CEI, as the case may be, after the
Closing, whether or not such acts or omissions to act result in a breach or
violation of any representation or warranty.
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7.5 Notice of Claim. Before Buyer or the Sellers may claim against any of
the other parties under the indemnity provided in Article VII of this Agreement,
the party claiming that it is entitled to indemnification (the "Indemnitee")
shall first serve written notice of any alleged breach, nonperformance,
misrepresentation, omission or the like giving rise to the claim for
indemnification, along with supporting documentation, and no action shall
commence to enforce the indemnity if the other party cures the breach and
compensates the Indemnitee for all such damages or other amounts due within
thirty days after delivery of the written notice and supporting documentation.
Prior to the arbitration of any such claims, the parties shall make a good faith
effort to meet and resolve the dispute.
7.6 Arbitration Provisions. If the parties have been unable to resolve any
dispute arising under this Article VII or the escrow payout provisions of
Section 1.5 of this Agreement, then any dispute or controversy arising with
respect to a claim of indemnification hereunder shall be settled by arbitration
by a single arbitrator under the rules of The Arbitration Act and such
arbitration shall be administered in Montreal, Quebec. All proceedings shall be
conducted in English. The expenses of the party that prevails in the
arbitration, including attorneys' fees and arbitration expenses, shall be paid
by the losing party. If each party prevails in part, the arbitrators will
determine the appropriate allocation of expenses among the parties. Judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof, and the parties consent to the jurisdiction of the Quebec
courts for this purpose. The parties may pursue all other remedies with respect
to any claim not subject to arbitration.
7.7 Trust Provision. To the extent that the indemnity contained in this
Article is given in favor of persons who are not parties to this Agreement, the
benefit of such indemnities shall be held by Buyer in trust for the persons
named in Section 7.1 and by the Sellers in trust for the persons named in
Section 7.4 and may be enforced directly by such persons.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Survival. Each statement, representation, warranty, indemnity,
covenant and agreement made by the Company in this Agreement and in any
document, Schedule, certificate or other instrument delivered by or on behalf of
the Sellers or the Company pursuant to this Agreement or in connection herewith
shall be deemed the joint and several statement, representation, warranty,
indemnity, covenant and agreement of the Sellers and the Company. All
representations and warranties made by each of the parties hereto shall survive
Closing for a period of three years following Closing, except for the
representation contained in Section 2.28 which shall survive for five years and
the representation contained in Section 2.17 which shall survive for the period
of the applicable statute of limitations. All covenants and agreements made by
each of the parties hereto shall survive the Closing Date without limitation.
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ARTICLE IX
MISCELLANEOUS
9.1 Modifications. Any amendment, change or modification of this Agreement
shall be void unless in writing and signed by all parties hereto. No failure or
delay by any party hereto in exercising any right, power or privilege hereunder
(and no course of dealing between or among any of the parties) shall operate as
a waiver of any such right, power or privilege. No waiver of any default on any
one occasion shall constitute a waiver of any subsequent or other default. No
single or partial exercise of any such right, power or privilege shall preclude
the further or full exercise thereof.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
mailed by certified mail, return receipt requested, or via Federal Express or
similar overnight courier service, or by facsimile. Such notices or other
communications shall be sent to the following addresses, unless other addresses
are subsequently specified in writing:
Company:
Boulevard Produits de Bureau Inc.
1616 Eiffel Street
Boucherville, Quebec
CANADA
J4B 7W1
Attention: Donald Pouliot
Fax No.: (514) 449-2063
Tel. No.: (514) 449-4449
Buyer:
Corporate Express Canada, Inc.
120 Traders Blvd. E.
Mississauga, Ontario
CANADA
L4Z 2H7
Attn: Thomas Kennedy
Fax No.: (905) 501-4200
Tel. No.: (905) 501-1166
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<PAGE>
with a copy to:
Corporate Express, Inc.
325 Interlocken Parkway
Broomfield, Colorado 80021
Attention: Richard L. Millett, Jr., Esq.
Fax No.: (303) 438-5180
Tel. No.: (303) 373-2800
and:
Davis, Graham & Stubbs LLP
370 Seventeenth Street, Suite 4700
Denver, Colorado 80202
Attention: Christopher L. Richardson, Esq.
Fax No.: (303) 893-1379
Tel. No.: (303) 892-9400
Sellers:
-------
122897 Canada Inc.
122898 Canada Inc.
1616 Eiffel Street
Boucherville, Quebec
CANADA
J4B 7W1
Attention: Donald Pouliot
Fax No.: (514) 449-2063
Tel. No.: (514) 449-4449
with a copy to:
Marie Andree-Gravel, Esq.
Lavery, de Billy
1 Place Ville Marie, Suite 4000
Montreal, Quebec
CANADA H3B 4M4
Fax No.: (514) 871-8977
Tel. No.: (514) 871-1522
Any such notice so given shall be deemed conclusively to have been given and
received when so personally delivered or sent by telecopier or on the fifth day
following the sending thereof by private courier or mail. Any party may from
time to time change its address herein set forth by notice to the other parties
in accordance with this Section.
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9.3 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original but all of which counterparts
collectively shall constitute one instrument. Signatures may be exchanged by
telecopy, with original signatures to follow. Each party hereto agrees that it
will be bound by its own telecopied signature and that it accepts the telecopied
signature of the other parties hereto.
9.4 Expenses. Each of the parties hereto will bear all costs, charges and
expenses incurred by such party in connection with this Agreement and the
consummation of the transactions contemplated herein. Buyer and the Sellers
shall share equally any costs associated with establishment and administration
of the escrow arrangement set forth in Section 1.5 above.
9.5 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of Buyer, CEI, the Sellers and the Company and their
respective successors and permitted assigns, in accordance with the terms
hereof. This Agreement shall not be assignable by the Sellers without the prior
written consent of Buyer. This Agreement shall be assignable by Buyer to an
affiliate of Buyer without the prior written consent of the Sellers or the
Company.
9.6 Entire and Sole Agreement. This Agreement and the other schedules and
agreements referred to herein, constitute the entire agreement between the
parties hereto and supersede all prior agreements, representations, warranties,
statements, promises, information, arrangements and understandings, whether oral
or written, express or implied, with respect to the subject matter hereof.
9.7 Governing Law. This Agreement and its validity, construction,
enforcement, and interpretation shall be governed by the laws of the Province of
Quebec. The parties agree that the courts of the province of Quebec shall have
jurisdiction to entertain any action or legal proceedings based on any provision
of this Agreement. The language used herein shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any person. The parties hereto agree that
all matters involving the construction, interpretation and enforcement of this
Agreement (but not the agreements executed in connection herewith unless
expressly so provided therein) as to which the parties cannot agree following
good faith efforts by at least one of the parties hereto, shall be submitted to
binding arbitration in accordance with the procedure set forth at Section 7.6 of
this Agreement.
9.8 Invalid Provisions. If any provision of this Agreement is deemed or
held to be illegal, invalid or unenforceable, this Agreement shall be considered
divisible and inoperative as to such provision to the extent it is deemed to be
illegal, invalid or unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any provision
of this Agreement is deemed or held to be illegal, invalid or unenforceable
there shall be added hereto automatically a provision as similar as possible to
such illegal, invalid or unenforceable provision and be legal, valid and
enforceable. Further, should any provision contained in this Agreement ever be
reformed or rewritten by any judicial body of competent jurisdiction, such
provision as so reformed or rewritten shall be binding upon all parties hereto.
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9.9 Public Announcements. Neither party shall make any public
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.10 Waiver. No failure or delay on the part of any party in exercising
any right, power, or privilege hereunder or under any of the documents delivered
in connection with this Agreement shall operate as a waiver of such right,
power, or privilege; nor shall any single or partial exercise of any such right,
power, or privilege preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege.
9.11 Ratification; No Agency. This Agreement and all agreements attached
as Exhibits hereto shall be executed by the stated representative of the
Company, the Sellers, CEI and Buyer and by their execution hereof such parties
warrant that they have actual authority to bind their principals. Each of the
Sellers, the Company, CEI and Buyer warrant and represent that they are acting
on their own behalf and not on behalf of any undisclosed principal or principals
in connection with negotiations leading to the completion of the transactions
contemplated by this Agreement and the Exhibits hereto.
9.12 Headings. The descriptive section headings are for convenience of
reference only and shall not control or affect the meaning or construction of
any provision of this Agreement.
9.13 Language Clause. The parties hereby acknowledge that it is their
express wish that this Agreement and all documents related hereto be drawn up in
the English language. Les parties reconnaissent qui il est de leur volonte
expresse que la presente entente et tous les documents s'y rapportant soient
rediges en langue anglaise.
9.14 Knowledge Definition. As used herein, the phrase to the "knowledge of
the Sellers" shall mean the actual knowledge of the Sellers, Clermont Pouliot,
Herman Pouliot, and Claude Valentine, after reasonable investigation. As used
herein "knowledge of the Company" shall mean the actual knowledge of the
Company, including, without limitation, Donald Pouliot, Jacques Marotte and
Claude Valentine, after reasonable investigation.
* * * *
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date and year first above written.
BUYER:
CORPORATE EXPRESS CANADA, INC.
By:_______________________________
Name: Thomas Kennedy
Title: President
CORPORATE EXPRESS, INC.
By:_______________________________
Name: Gary M. Jacobs
Title: Executive Vice President
COMPANY:
BOULEVARD PRODUITS DE BUREAU INC.
By:_______________________________
Name: Herman Pouliot
Title: President
SELLERS:
122897 CANADA INC.
By:_______________________________
Name: Clermont Pouliot
Title: President
<PAGE>
122898 CANADA INC.
By:__________________
Name: Herman Pouliot
Title: President
INTERVENTION
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The undersigned, Clermont Pouliot and Herman Pouliot (together, "Messers.
Pouliot"), hereby represent and warrant that Trust Clermont Pouliot and Clermont
Pouliot directly own all of the issued and outstanding shares in the share
capital of 97 Inc. and that Trust Herman Pouliot and Herman Pouliot directly own
all of the issued and outstanding shares in the share capital of 98 Inc.
Messers. Pouliot covenant and declare that, as controlling shareholders of the
Sellers, they shall cause the Sellers each, for a period of three years
following the Closing Date, (i) to maintain their corporate existence, and (ii)
to maintain Liquid Assets (as hereinafter defined) having a realizable value of
not less than three million dollars ($3,000,000) (for a combined amount of at
least $6,000,000) less the aggregate amount of all finally determined
Indemnifiable Claims paid to Buyer by Sellers. As used herein, Liquid Assets
shall mean assets that are cash or certified funds or funds convertible into
cash, upon notice of 30 days or less to the debtor including certificates of
deposits, guaranteed investment contracts, annuities, deposit accounts and other
similar liquid assets.
Messers. Pouliot covenant and agree that if during the three-year period
beginning on the Closing Date and ending on the third anniversary of the Closing
Date Indemnifiable Claims are asserted by Buyer against Sellers, then Messers.
Pouliot shall jointly and severally be liable to Buyer for the difference
between the aggregate amount, up to but not exceeding $6,000,000, of all finally
determined Indemnifiable Claims and the value of the Liquid Assets retained by
and available to the Sellers to satisfy an Indemnifiable Claim; provided,
however, that in no event shall Messers. Pouliot's liability under this
intervention exceed the difference between $6,000,000 and the sum of (i) the
value of the Liquid Assets so retained by and available to the Sellers to
satisfy the Indemnifiable Claims plus (ii) the amount of any finally determined
Indemnifiable Claims paid by Sellers to Buyer; provided, further, however, that
nothing herein shall modify the terms of the last sentence of Section 7.1 of the
Purchase Agreement. Messers. Pouliot understand and agree that their undertaking
hereunder relates to any finally determined Indemnifiable Claims that are
asserted against Sellers during the three years immediately following the
Closing, whether or not such Claims are finally determined by arbitration or the
agreement of the parties prior to the termination of the three year period.
The undertaking hereunder applies to the value of the Liquid Assets net of any
costs or expenses (including legal fees) incurred by the Sellers and Messers.
Pouliot in connection with the determination of any Indemnifiable Claim asserted
by the Buyer.
________________________ __________________________
CLERMONT POULIOT HERMAN POULIOT
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Corporate Express, Inc. on Form S-3 of our report dated December 5th, 1995 on
our audit of the financial statements of Boulevard Office Products, Inc. as of
October 31, 1995 and for the year ended 1995, which report is included in this
document on Form 8-K.
/s/ Samson Belair Deloitte & Touche
