<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): December 31, 1999
OPTA FOOD INGREDIENTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19811 04-3117634
- ------------------ --------------------- ---------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
25 Wiggins Avenue
Bedford, Massachusetts 01730
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 276-5100
Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report: Not Applicable
___________________________________________________________
Page 1 of 4 Pages
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Item 2. Acquisition or Disposition of Assets.
On December 31, 1999, Opta Food Ingredients, Inc. ("Opta") acquired all of
the assets of privately held Canadian Harvest of Cambridge, Minnesota from DCV,
Inc., a Delaware-based holding company ("DCV"), and all of the outstanding
common stock of Canadian Harvest Process Ltd. ("CHPL"), a wholly owned
subsidiary of DCV, in an arms length transaction. The assets of Canadian Harvest
and CHPL include manufacturing facilities in Cambridge, Minnesota and St.
Thomas, Ontario and related assets. Pursuant to the Purchase and Sale Agreement
between DCV and Opta dated as of December 31, 1999, Opta paid DCV $12 million
for the Canadian Harvest assets and the stock of CHPL based on the historical
value of the assets (exclusive of net working capital) acquired. In addition,
Opta paid approximately $1.6 million for the net working capital of the
purchased entities, consisting of inventory plus accounts receivable less
accounts payable, as of December 31, 1999. Opta paid for this acquisition out of
available cash and cash equivalents. Opta will continue the purchased entities'
business of manufacturing and supplying dietary oat fiber to the food industry
and will integrate this business into its own.
A copy of the Opta press release announcing the acquisition of Canadian
Harvest which was issued on January 3, 2000 is filed herewith as Exhibit 99.1
and incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired. To be filed by amendment no
later than February 29, 2000.
(b) Pro forma financial information. To be filed by amendment no later than
February 29, 2000.
(c) Exhibits.
2.1 Purchase and Sale Agreement Between DCV, Inc., as Seller, and Opta
Food Ingredients, Inc., as Buyer, Dated as of December 30, 1999.
99.1 Press Release of the Registrant, dated January 3, 2000.
Pages 2 of 4 Pages
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OPTA FOOD INGREDIENTS, INC.
(Registrant)
Date: January 14, 2000 /s/ Scott A. Kumf
----------------------------------
Scott A. Kumf, Chief Financial Officer,
Vice President Administration and
Treasurer
Page 3 of 4 Pages
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EXHIBIT INDEX
-------------
Exhibit Sequential
Number Description Page Number
- ------- ----------- -----------
2.1 Purchase and Sale Agreement Between
DCV, Inc., as Seller and Opta Food
Ingredients, Inc., as Buyer Dated as of
December 30, 1999
99.1 Press Release of the Registrant, dated
January 3, 2000
<PAGE>
PURCHASE AND SALE AGREEMENT
BETWEEN
DCV, INC., AS SELLER
AND
OPTA FOOD INGREDIENTS, INC., AS BUYER
Dated as of December 30, 1999
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I DEFINITIONS......................................................... 1
1.1 Definitions............................................................ 1
1.2 Certain Interpretive Matters........................................... 8
ARTICLE II PURCHASE AND SALE.................................................. 8
2.1 Sale of Assets......................................................... 8
2.2 Excluded Assets........................................................ 9
2.3 Assumed Liabilities and Obligations.................................... 10
2.4 Excluded Liabilities................................................... 11
2.5 Intercompany Obligations............................................... 11
ARTICLE III THE CLOSING....................................................... 12
3.1 Closing................................................................ 12
3.2 Purchase Price......................................................... 12
3.3 Closing Payment of Purchase Price...................................... 12
3.4 Post-Closing Adjustment................................................ 12
3.5 Allocation of Purchase Price........................................... 14
3.6 Section 116 of the Income Tax Act (Canada)............................. 14
3.7 Deliveries by Seller................................................... 15
3.8 Deliveries by Buyer.................................................... 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER........................... 16
4.1 Organization: Qualification............................................ 16
4.2 Authority Relative to this Agreement................................... 16
4.3 Consents and Approvals: No Violation................................... 17
4.4 Financial Statements................................................... 17
4.5 Undisclosed Liabilities................................................ 17
4.6 Absence of Certain Changes or Events................................... 18
4.7 Title and Related Matters.............................................. 18
4.8 Leases................................................................. 18
4.9 Inventory.............................................................. 19
4.10 Accounts Receivable.................................................... 19
4.11 Insurance.............................................................. 19
4.12 Environmental Matters.................................................. 20
4.13 Employees.............................................................. 21
4.14 Labor Matters.......................................................... 21
4.15 ERISA: Benefit Plans................................................... 21
4.16 Real Property.......................................................... 23
4.17 Fixed Assets........................................................... 24
4.18 Certain Contracts and Arrangements..................................... 24
4.19 Litigation and Claims.................................................. 24
4.20 Permits................................................................ 25
4.21 Taxes.................................................................. 25
4.22 Year 2000 Qualification................................................ 26
4.23 Patents................................................................ 27
</TABLE>
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<TABLE>
<S> <C>
4.24 Certain Limitations on Representations and Warranties.................. 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER............................. 27
5.1 Organization........................................................... 27
5.2 Authority Relative to this Agreement................................... 27
5.3 Consents and Approvals: No Violation................................... 28
5.4 Availability of Funds.................................................. 28
5.5 Legal Proceedings...................................................... 28
ARTICLE VI COVENANTS OF THE PARTIES........................................... 28
6.1 Conduct of Business Relating to the Purchased Assets................... 28
6.2 Access to Information.................................................. 29
6.3 Expenses............................................................... 30
6.4 Further Assurances; Cooperation........................................ 30
6.5 Public Statements...................................................... 32
6.6 Consents and Approvals................................................. 32
6.7 Fees and Commissions................................................... 33
6.8 Tax Matters: Prorations................................................ 33
6.9 Employees.............................................................. 34
6.10 Noncompetition and Nonsolicitation..................................... 35
6.11 USDA Patents........................................................... 36
6.12 MIS Services........................................................... 37
ARTICLE VII CONDITIONS........................................................ 37
7.1 Conditions to Obligations of Buyer..................................... 37
7.2 Conditions to Obligations of Seller.................................... 38
ARTICLE VIII INDEMNIFICATION.................................................. 39
8.1 Indemnification........................................................ 39
8.2 Defense of Claims...................................................... 41
8.3 Arbitration............................................................ 43
8.4 No Third Party Beneficiary............................................. 43
ARTICLE IX TERMINATION........................................................ 43
9.1 Termination............................................................ 43
9.2 Procedure and Effect of No-Default Termination......................... 44
ARTICLE X MISCELLANEOUS PROVISIONS............................................ 45
10.1 Amendment and Modification............................................. 45
10.2 Waiver of Compliance: Consents......................................... 45
10.3 Survival of Representations. Warranties. Covenants and Obligations... 45
10.4 Notices................................................................ 45
10.5 Assignment............................................................. 47
10.6 Governing Law.......................................................... 47
10.7 Counterparts........................................................... 47
10.8 Severability........................................................... 47
10.9 Interpretation......................................................... 47
10.10 Schedules and Exhibits................................................. 47
10.11 Entire Agreement....................................................... 48
10.12 Bulk Sales Laws........................................................ 48
</TABLE>
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LIST OF EXHIBITS
----------------
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Bill of Sale
Exhibit C Form of FIRPTA Affidavit
Exhibit D Form of Opinion from Seller's Counsel
Exhibit E Form of Opinion from Buyer's Counsel
Exhibit F Form of Escrow Agreement
Exhibit G Form of Side Letter Agreement
<PAGE>
PURCHASE AND SALE AGREEMENT
---------------------------
PURCHASE AGREEMENT, dated as of December 30, 1999, between DCV, Inc., a
Delaware corporation ("Seller"), and Opta Food Ingredients, Inc., a Delaware
------
corporation ("Buyer"). Seller and Buyer are referred to individually as a
-----
"Party," and collectively as the "Parties."
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W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Seller is engaged through its Canadian Harvest division in the
processing and marketing of agricultural food additives and substitutes,
including but not limited to grain hulls and brans; and the manufacture and
marketing of whitened and delignified cellulosic material for human consumption
prepared from oat hulls (collectively, and including the business of Canadian
Harvest Process Ltd., a Canadian corporation ("CHP"), the "Business");
--------
WHEREAS, Buyer desires to purchase, and Seller desires to sell and assign,
the assets of the Business, including without limitation: (i) the real property,
the manufacturing facility and related equipment located in Cambridge, Minnesota
(the "Cambridge Facility") and (ii) all of the outstanding common shares of CHP,
------------------
and in connection therewith, Buyer has agreed to assume certain liabilities of
the Business, upon the terms and conditions hereinafter set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
1.1 Definitions. As used in this Agreement, the following terms have the
-----------
meanings specified in this Section 1.1.
"Accounts Receivable" means all of the accounts receivable of the
-------------------
Business as of the Closing Date.
"Accounts Payable" means all of the trade accounts payable of the
----------------
Business as of the Closing Date.
"Affiliate" has the meaning set forth in Rule 12b-2 of the General
---------
Rules and Regulations under the Securities Exchange Act of 1934, excluding CHP
except as specifically provided otherwise.
"Agreement" means this Purchase and Sale Agreement together with the
---------
Schedules and Exhibits hereto, as the same may be from time to time amended.
1
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"Assignment and Assumption Agreement" means the Assignment and Assumption
-----------------------------------
Agreement between Seller and Buyer, substantially in the form of Exhibit A
hereto, by which Seller, subject to the terms and conditions hereof, shall
assign the Seller's Agreements, the Transferable Permits and certain other
Purchased Assets to Buyer and whereby Buyer shall assume the Assumed Liabilities
and Obligations.
"Assumed Contacts" has the meaning set forth in Section 2.1(e).
----------------
"Assumed Liabilities and Obligations" has the meaning set forth in Section
-----------------------------------
2.3.
"Benefit Plans" has the meaning set forth in Section 4.15(a).
-------------
"Bill of Sale" means the Bill of Sale, substantially in the form of Exhibit
------------
B hereto, to be delivered by Seller to Buyer at the Closing, with respect to the
Tangible Personal Property (other than Tangible Personal Property owned by CHP).
"Business" has the meaning set forth in the Recitals.
--------
"Business Day" shall mean any day other than Saturday, Sunday and any day
------------
on which banking institutions in the State of Minnesota are authorized by law or
other governmental action to close.
"Buyer Indemnitee" has the meaning set forth in Section 8.1(b).
----------------
"Buyer's Required Regulatory Approvals" has the meaning set forth in
-------------------------------------
Section 5.3(b).
"CERCLA" means the Federal Comprehensive Environmental Response,
------
Compensation, and Liability Act, as amended, 42 U.S.C. (S)(S) 9601 et. seq.
"CHP Benefit Plans" has the meaning set forth in Section 4.15(c).
-----------------
"CHP Taxes" has the meaning set forth in Section 8.1(c).
---------
"Closing" has the meaning set forth in Section 3.1.
-------
"Closing Date" has the meaning set forth in Section 3.1.
------------
"Closing Date Working Capital Amount" has the meaning set forth in Section
-----------------------------------
3.2.
"Closing Payment" has the meaning set forth in Section 3.3.
---------------
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
-----
as amended, as codified in Section 4980B of the Code and Part 6 of Subtitle B of
Title I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
----
2
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"Commercially Reasonable Efforts" means efforts which are designed to
-------------------------------
enable a Party, directly or indirectly, to satisfy a condition to, or otherwise
assist in the consummation of, the transactions contemplated by this Agreement
and which do not require the performing Party to expend any funds or assume
liabilities other than expenditures and liabilities which are reasonable in
nature and amount in the context of the transactions contemplated by this
Agreement.
"Confidentiality Agreement" means the Confidentiality Agreement, dated
-------------------------
June 28, 1999, between Seller and Buyer.
"Contracts" has the meaning set forth in Section 4.18(c).
---------
"Direct Claim" has the meaning set forth in Section 8.2(c).
------------
"Encumbrances" means any mortgages, pledges, liens, writs of
------------
execution, security interests, or encumbrances of any kind.
"Environmental Claim" means any and all pending or threatened (in
-------------------
writing) administrative or judicial actions, suits, orders, claims, liens,
notices, notices of violation, investigations, complaints, requests for
information, proceedings, or other written communication, whether criminal or
civil, pursuant to or relating to any applicable Environmental Law by any person
based upon, alleging, asserting, or claiming any actual or potential (a)
violation of, or liability under any Environmental Law, (b) violation of any
Environmental Permit, or (c) liability for investigatory costs, cleanup costs,
removal costs, remedial costs, response costs, natural resource damages,
property damage, personal injury, fines, or penalties arising out of, based on,
resulting from, or related to the presence, release, or threatened release into
the environment of any Hazardous Substances at any location related to the
Purchased Assets, including, but not limited to, any off site location to which
Hazardous Substances, or materials containing Hazardous Substances, were sent
for handling, storage, treatment, or disposal.
"Environmental Condition" means the presence or release to the
-----------------------
environment, whether at a site or at an off-site location, of Hazardous
Substances, including any migration of those Hazardous Substances through air,
soil or groundwater to or from the site or any off site location regardless of
when such presence or release occurred or is discovered.
"Environmental Laws" means all federal, state and local, provincial
------------------
and foreign, civil and criminal laws, regulations, rules, ordinances, codes,
decrees, judgments, directives, published standards, criteria or guidelines or
judicial or administrative orders relating to pollution or protection of the
environment, natural resources or human health and safety, including, without
limitation, laws relating to releases or threatened releases of Hazardous
Substances (including, without limitation, releases to ambient air, surface
water, groundwater, land, surface and subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, Release,
transport, disposal or handling of Hazardous Substances. "Environmental Laws"
include, without limitation, CERCLA, the Hazardous
3
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Materials Transportation Act (49 U.S.C. (S)(S)1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. (S)(S) 1251 et seq.), the Clean Air Act (42
U.S. C. (S)(S) 7401 et seq.) , the Toxic Substances Control Act (15 U.S.C.
(S)(S) 2601 et seq.), the Oil Pollution Act (33 U.S.C. (S)(S) 2701 et seq.), the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S)(S) 11001 et
seq.), the Occupational Safety and Health Act (29 U.S.C. (S)(S) 651 et seq.),
and all other state, local, provincial and foreign laws analogous to any of the
above.
"Environmental Permits" has the meaning set forth in Section 4.12(a).
---------------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) which is or ever has been under common control, or which is or
ever has been treated as a single employer, with the Seller under Section 4
14(b), (c), (in) or (o) of the Code.
"ERISA Affiliate Plans" means any Benefit Plan to which Seller or any
---------------------
ERISA Affiliate contributed.
"Escrow Agent" has the meaning set forth in Section 3.2.
------------
"Escrow Amount" has the meaning set forth in Section 3.2.
-------------
"Excluded Assets" has the meaning set forth in Section 2.2.
---------------
"Excluded Liabilities" has the meaning set forth in Section 2.4.
--------------------
"FIRPTA Affidavit" means the Foreign Investment in Real Property Tax
----------------
Act Certification and Affidavit, substantially in the form of Exhibit C hereto.
"Governmental Authority" means any federal, state, provincial, local
----------------------
or other governmental, regulatory or administrative agency, commission,
department, board, or other governmental subdivision, court, tribunal,
arbitrating body or other governmental authority.
"Hazardous Substances" means (a) any petrochemical or petroleum
--------------------
products, oil or coal ash, radioactive materials, radon gas, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid which may contain
levels of polychiorinated biphenyls; (b)any chemicals, materials or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances," "toxic
wastes," "contaminants," "pollutants," "toxic pollutants" or words of similar
meaning and regulatory effect under any applicable Environmental Law; and (c)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any applicable Environmental Law.
4
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"Income Tax" means any federal, state, provincial, local or foreign
----------
Tax (a) based upon, measured by or calculated with respect to income, profits or
receipts (including, without limitation, capital gains Taxes and minimum Taxes)
or (b) based upon, measured by or calculated with respect to multiple bases
(including, without limitation, corporate franchise taxes) if one or more of the
bases on which such Tax may be based, measured by or calculated with respect to,
is described in clause (a), in each case together with any interest, penalties,
or additions to such Tax.
"Indemnifiable Loss" has the meaning set forth in Section 8.1(a).
------------------
"Indemnifying Party" has the meaning set forth in Section 8.1(d).
------------------
"Indemnitee" has the meaning set forth in Section 8.1(c).
----------
"Intellectual Property" means all patents and patent rights,
---------------------
trademarks and trademark rights, inventions, copyrights and copyright rights and
all pending applications for registrations of patents, trademarks, and
copyrights, owned by Seller and necessary for the operation of the Business, as
set forth in Schedule 4.23.
"Inventory" has the meaning set forth in Section 2.1(b).
---------
"IRS" means the United States Internal Revenue Service or any
---
successor agency thereto.
"Knowledge" means (a) with respect to Seller, the actual knowledge,
---------
after due inquiry, of the corporate officers or managerial representatives of
Seller listed on Schedule 1.1(a), and (b) with respect to Buyer, means the
actual knowledge, after due inquiry, of the corporate officers or managerial
representatives of Buyer listed on Schedule 1.1(b).
"Material Adverse Effect" means any change (or changes taken together)
-----------------------
in, or effect on, the Business or the Purchased Assets that results in, or is
likely to result in, a quantifiable, material adverse effect on the operation or
condition (financial or otherwise) of the Business or the Purchased Assets.
"Owned Real Property" has the meaning set forth in Section 4.16(a).
-------------------
"Party" (and the corresponding term "Parties") has the meaning set
-----
forth in the preamble.
"PBGC" means the Pension Benefit Guaranty Corporation established by
----
ERISA.
"Permits" has the meaning set forth in Section 4.20.
-------
"Permitted Encumbrances" means: (i) statutory liens for Taxes or other
----------------------
governmental charges or assessments not yet due or delinquent or that may be
thereafter paid without penalty; and (ii) zoning, entitlement, conservation
restriction and other land use and
5
<PAGE>
environmental regulations by Governmental Authorities, which do not,
individually or in the aggregate, materially affect the marketability of the
Purchased Assets or materially impair the use of the property subject thereto in
the Business as currently conducted.
"Person" means any individual, partnership, limited liability company,
------
joint venture, corporation, trust, unincorporated organization, or governmental
entity or any department or agency thereof
"Products" means all products manufactured or sold by Seller or CHP as
--------
part of the Business.
"Proprietary Information" of a Party means all information about the
-----------------------
Party or its Affiliates, including their respective properties or operations,
furnished to the other Party or its Representatives by the Party or its
Representatives regardless of the manner or medium in which it is furnished,
including information provided to a Party pursuant to the Confidentiality
Agreement and including information regarding the Purchased Assets or the
transactions contemplated by this Agreement. Proprietary Information does not
include information that: (a) is or becomes generally available to the public
(other than as a result of a disclosure by the other Party or its
Representatives in violation of the Confidentiality Agreement or this
Agreement); (b)was available to the other Party on a nonconfidential basis prior
to its disclosure by the Party or its Representatives; (c) becomes available to
the other Party on a nonconfidential basis from a person, other than the Party
or its Representatives, who is not otherwise bound by a confidentiality
agreement with the Party or its Representatives, or is not otherwise under any
obligation to the Party or any of its Representatives not to transmit the
information to the other Party or its Representatives; or (d) such Party can
prove was independently developed by the other Party.
"Purchased Assets" has the meaning set forth in Section 2.1.
----------------
"Purchase Price" has the meaning set forth in Section 3.2.
--------------
"Real Property" has the meaning set forth in Section 2.1(a).
-------------
"Real Property Leases" has the meaning set forth in Section 4.8(a).
--------------------
"Representatives" of a Party means the Party and its Affiliates and
their directors, officers, employees, agents, partners, advisors (including,
without limitation, accountants, counsel, environmental consultants, financial
advisors and other authorized representatives).
"Section 116 Amount" has the meaning set forth in Section 3.2.
------------------
"Seller" has the meaning set forth in the preamble.
------
"Seller's Agreements" has the meaning set forth in Section 4.18(a).
-------------------
"Seller's Indemnitee" has the meaning set forth in Section 8.1(a).
-------------------
6
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"Seller's Required Regulatory Approvals" has the meaning set forth in
--------------------------------------
Section 4.3(b).
"Subsidiary" when used in reference to any Person means any entity of
----------
which such Person, directly or indirectly, owns or controls ordinary voting
power to elect a majority of the Board of Directors, or other Persons performing
similar functions, of such entity.
"Tangible Personal Property" means all machinery, mobile or otherwise,
--------------------------
equipment (including computer hardware and software and communications
equipment), vehicles, tools, spare parts, fixtures, furniture and furnishings
and other personal property used in and necessary for the operation of the
Business, including, without limitation, the items of personal property which
are part of the Cambridge Facility as described in Schedule 4.16.
"Tangible Personal Property Leases" has the meaning set forth in
---------------------------------
Section 4.8(b).
"Taxes" means all taxes, charges, fees, levies, imposts, penalties or
-----
other assessments or similar charges in the nature of a tax imposed by any
federal, state, provincial, municipal or local or foreign taxing or governmental
authority, including, but not limited to, income, excise, real or personal
property, sales, transfer, franchise, payroll, withholding, social security,
use, goods and services, value added, capital, capital gains, alternative, net
worth, profits, employer health, gross receipts, license, stamp, occupation,
employment or other taxes, including any interest, penalties, fines or additions
attributable thereto.
"Tax Return" means any return, report, information return,
----------
declaration, claim for refund or other document (including any schedule or
related or supporting information) required to be supplied to any taxing
authority with respect to Taxes including amendments thereto.
"Termination Date" has the meaning set forth in Section 9.1(b).
----------------
"Third Party Claim" has the meaning set forth in Section 8.2(a).
-----------------
"Transferable Permits" means those Permits and Environmental Permits
--------------------
identified in Schedule 4.20(b), which may be transferred to Buyer without a
filing with, notice to, consent or approval of any Governmental Authority.
"Working Capital" has the meaning set forth in Section 3.4(c).
---------------
"Working Capital Adjustment" has the meaning set forth in Section
--------------------------
3.4(a).
"Working Capital Amount" means the final amount of Working Capital, as
----------------------
adjusted pursuant to Section 3.4.
"Year 2000 Compliant" and "Year 2000 Qualified" have the meanings set
------------------- -------------------
forth in Section 4.22. "Year 2000 Qualification" has a meaning correlative to
-----------------------
Year 2000 Qualified.
7
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1.2 Certain Interpretive Matters. In this Agreement, unless the context
----------------------------
otherwise requires, the singular shall include the plural, the masculine shall
include the feminine and neuter, and vice versa. The term "includes" or
"including" shall mean "including without limitation." References to a Section,
Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule
of this Agreement, and reference to a given agreement or instrument shall be a
reference to that agreement or instrument as modified, amended, supplemented and
restated through the date as of which such reference is made. $ refers to U.S.
dollars, and CDN$ refers to Canadian dollars.
ARTICLE II
----------
PURCHASE AND SALE
-----------------
2.1 Sale of Assets. Upon the terms and subject to the satisfaction of the
--------------
conditions contained in this Agreement, at the Closing, Seller will sell,
assign, convey, transfer and deliver to Buyer, and Buyer will purchase and
acquire from Seller, all of the Seller's right, title and interest in and to the
following assets constituting, or used in and necessary for the operation of,
the Business, other than Excluded Assets, and other than any of the following
that are owned by CHP, each as in existence on the Closing Date (collectively,
"Purchased Assets"):
(a) the lessee's interest in the leaseholds covered by the Real
Property Leases of Seller described in Schedules 4.8(a) and Seller's (x) fee
simple interest in 1001 Cleveland Street, Cambridge, Minnesota and (y) Seller's
right, title and interest in Block Two, Outlot A in Cambridge, Minnesota (as
more fully described in the deeds to be delivered to Buyer at Closing) together
with the right, title and interest of Seller in all buildings, improvements,
fixtures and other appurtenances thereto (collectively, and together with any
such property owned or leased by CHP, the "Real Property");
(b) the inventory of raw materials, work in process and finished
goods of Seller that as of the Closing is located on the Owned Real Property and
all other inventory of Seller on the Closing Date that is used or held for use
primarily in the Business (together with any such inventory, raw materials, work
in process and finished goods of CHP, the "Inventory");
(c) the machinery and equipment of Seller and other fixed assets of
the Business located at the Real Property of Seller described in Section 2.1(a)
as of the Closing;
(d) the prepaid expenses of Seller as of the Closing to the extent
relating to the Purchased Assets;
(e) the right, title and interest of Seller as of the Closing in, to
and under all Contracts ("Assumed Contracts") that are listed on Schedules
4.8(b) or 4.18, or which would be so listed but for any dollar, time or other
exclusion or exception in Section 4.8(b) or Section 4.18, as the case may be,
and any Contract primarily relating to the Business entered into in accordance
with this Agreement, including without limitation Section 6.1;
8
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(f) the right, title and interest of Seller as of the Closing in, to
and under the Intellectual Property listed or required to be listed on Schedule
4.23.
(g) the trade secrets, know how and goodwill owned by Seller as of
the Closing relating primarily to the Business;
(h) the books of account, general, financial, accounting, and
personnel records, files, invoices, customers' and suppliers' lists and other
written information owned by Seller as of the Closing and relating primarily to
the Business;
(i) the permits, licenses, franchises and other federal, state, local
and foreign governmental approvals and authorizations of Seller as of the
Closing relating primarily to the Business;
(j) the Accounts Receivable of Seller;
(k) the rolling stock owned by Seller and used primarily in the
Business as listed on Schedule 2.1; and
(l) the entire right, title and interest of Seller in all of the
issued and outstanding common shares of CHP (the "Shares").
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
---------------
Agreement other than Section 2.1(1), nothing in this Agreement will constitute
or be construed as conferring on Buyer, and Buyer is not acquiring, any right,
title or interest in or to the following specific assets which are associated
with the Purchased Assets, but which are hereby specifically excluded from the
sale and the definition of Purchased Assets herein, other than any of the
following that are owned by CHP as of the Closing which, except as expressly
provided otherwise herein, will be retained by CHP (the "Excluded Assets"):
---------------
(a) cash and cash equivalents on hand and on deposit in bank
accounts;
(b) any refund of costs or expenses borne by Seller attributable to
the period prior to the Closing Date;
(c) any rights that accrue or will accrue to Seller under this
Agreement;
(d) the Tax Returns of Seller and any rights to any of Seller's
claims existing at Closing for Tax refunds;
(e) the corporate seal, minute books, stock books and other records
relating to the corporate organization of Seller and the general ledger and
other books of original entry of the Seller;
(f) any rights of Seller in any pending litigation [as listed on
Schedule 2.2];
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(g) any asserted or unasserted rights or claims that relate to the
Excluded Assets or the Excluded Liabilities; and
(h) all other assets of Seller which are not used primarily in the
Business.
2.3 Assumed Liabilities and Obligations. On the Closing Date, Buyer shall
-----------------------------------
deliver to Seller the Assignment and Assumption Agreement pursuant to which
Buyer shall assume and agree to discharge when due, all of the following
liabilities and obligations of Seller, other than any of the following that are
liabilities or obligations of CHP as of the Closing, which, except as expressly
provided otherwise herein, will be retained by CHP (collectively, "Assumed
-------
Liabilities and Obligations"):
- ---------------------------
(a) All liabilities and obligations of Seller under the executory
portion of Seller's Agreements and under the Transferable Permits;
(b) All liabilities and obligations associated with the Purchased
Assets in respect of Taxes for which Buyer is liable pursuant to Sections 6.8(a)
hereof;
(c) With respect to the Purchased Assets, any Tax on the ownership,
sale, operation or use of the Purchased Assets first accruing on or after the
Closing Date, except for any Income Taxes attributable to income received by
Seller or any other Taxes payable under applicable law by the Seller;
(d) All trade accounts payable of Seller in respect of the Business;
(e) The obligation and liabilities of Seller, if any, (A) for bodily
or personal injury in respect of any and all Products manufactured by Buyer or
any of its Affiliates after the Closing and (B) for Product return, warranty or
similar liabilities or obligations in respect of any and all Products
manufactured or sold by CHP or by Buyer or any of its Affiliates prior to, on or
after the Closing Date (including without limitation obligations and liabilities
for refunds, adjustments, allowances, damages, repairs, exchanges and returns);
(f) The obligations and liabilities arising out of Buyer's conduct of
the Business after the Closing Date;
(g) The obligations and liabilities assumed by Buyer under Section
6.9; and
(h) The obligations and liabilities for any legal, accounting,
travel, printing or other expenses incurred on behalf of Buyer or any of its
Affiliates in connection with the transactions contemplated by this Agreement or
the financing thereof.
The provisions of Sections 2.3 (a) - (i) are independent, with the result that
any limitation in any such provision thereof will not apply to any other
provision thereof
Notwithstanding any other provision hereof or of applicable law to the
contrary, the parties' respective obligations under any covenant in this
Agreement, including without limitation Buyer's obligations under this Section
2.3, will not be subject to offset or reduction or
10
<PAGE>
otherwise affected by reason of any actual or alleged breach of any
representation, warranty or covenant contained in this Agreement or any document
contemplated by or delivered in connection herewith or any right or alleged
right to indemnification hereunder or thereunder or any other matter whatsoever.
2.4 Excluded Liabilities. Buyer shall not assume or be obligated to pay,
--------------------
perform or otherwise discharge the following liabilities or obligations, other
than any of the following that are liabilities or obligations of CHP on the
Closing Date, which, except as expressly provided otherwise herein, will be
retained by CHP (the "Excluded Liabilities"):
-------------------
(a) Any liabilities or obligations of Seller in respect of any
Excluded Assets or other assets of Seller which are not Purchased Assets;
(b) Any liabilities or obligations in respect of Taxes attributable
to the ownership, operation or use of Purchased Assets for taxable periods, or
portions thereof, ending before the Closing Date, except for Taxes for which
Buyer is liable pursuant to Section 6.8(a) hereof
(c) All liabilities and obligations relating to the non-executory
portion of Seller's Agreements as of the Closing Date;
(d) Any and all asserted or unasserted liabilities or obligations to
third parties for bodily or personal injury or tort, product return, warranty or
similar liabilities or obligations arising out of the ownership or operation of
the Purchased Assets (excluding the Shares) or the manufacture or sale of
Products prior to the Closing Date (including without limitation obligations and
liabilities for refunds, adjustments, allowances, damages, repairs, exchanges
and returns) other than any liabilities or obligations which have been expressly
assumed by Buyer under Section 2.3;
(e) Subject to Section 2.3 and Section 6.9, any obligations of Seller
to its employees or former employees for wages, overtime, employment taxes,
severance pay, transition payments in respect of compensation or similar
benefits accruing or arising prior to the Closing under any term or provision of
any contract, plan, instrument or agreement, including the change of control
letters listed on Schedule 4.13;
(f) Any liability of Seller arising out of a breach by Seller of any
of its obligations under this Agreement, the Bill of Sale or the Assignment and
Assumption Agreement; and
(g) Any other liability or obligation of Seller not specifically
assumed under this Agreement, including environmental liabilities covering the
period prior to the Closing, provided that Seller's obligation to indemnify
Buyer with respect to such environmental liabilities shall be governed
exclusively by Section 8.l(b)(v) and (vi).
2.5 Intercompany Obligations. Notwithstanding any other provision hereof,
------------------------
any amount owed to the Business (including CHP) by Seller or any of its
Affiliates other than the Business (including ClIP) (collectively, "Post-Closing
Affiliates"), or owed by the Business
11
<PAGE>
(including CHP) to Seller or any Post-Closing Affiliate, other than obligations
to third parties directly attributable to the conduct of business of the
Business, will be settled at or prior to the closing and will not constitute
Purchased Assets or Assumed Liabilities and Obligations.
ARTICLE III
-----------
THE CLOSING
-----------
3.1 Closing. Upon the terms and subject to the satisfaction of the
-------
conditions contained in Article VII of this Agreement, the sale, assignment,
conveyance, transfer and delivery of the Purchased Assets to Buyer, the payment
of the Closing Payment to Seller, and the consummation of the other respective
obligations of the Parties contemplated by this Agreement shall take place at a
closing (the "Closing"), to be held at the offices of Seller's counsel at 1201
Market Street, Suite 1500, Wilmington, Delaware 19801 and of Buyer's counsel at
One Financial Center, Boston, Massachusetts 02111, at 10:00 a.m. local time, or
another mutually acceptable time and location, on the later of (i) December 31,
1999 or (ii) the date that is two (2) Business Days following the date on which
the last of the conditions precedent to Closing set forth in Article VII of this
Agreement have been either satisfied or waived by the Party for whose benefit
such conditions precedent exist, or on such other date as the Parties may
mutually agree. The date of Closing is hereinafter called the "Closing Date."
The Closing shall be effective for all purposes as of 12:01 a.m. on the Closing
Date.
3.2 Purchase Price. The Purchase Price for the Purchased Assets shall
--------------
equal the sum of (i) $12,000,000; plus (ii) an amount to be agreed upon by Buyer
and Seller representing the parties' calculation as of the Closing Date of the
Working Capital Amount, which amount shall equal the sum of: (a) the value of
the Inventory of the Business, based upon an Inventory count of the Business to
be completed on December 30, 1999; and (b) the dollar value of the Accounts
Receivable of the Business on Seller's and CHP's-books and records on December
30 1999; less (c) the dollar value of the Accounts Payable of the Business on
Seller's and CHP's books and records on December 30, 1999 (the "Closing Date
Working Capital Amount"), subject to adjustment in accordance with the
procedures set forth in Section 3.4 hereof (collectively, and as so adjusted,
the "Purchase Price"), of which (x) $250,000 (the "Escrow Amount") shall be held
in escrow for a period of six (6) months following the Closing by Wilmington
Trust Company (the "Escrow Agent") to secure the indemnification obligations of
the Seller pursuant to Section 8.1(b) and (c), and (y) $390,000 shall be held in
escrow to secure the obligation of Seller to obtain the Section 116 Certificate
referred to in Section 3.6 (the "Section 116 Amount").
3.3 Closing Payment of Purchase Price. At the Closing, as a payment on
---------------------------------
account of the Purchase Price, Buyer will pay or cause to be paid (i) to Seller,
the amount equal to the sum of(a) $12,000,000; plus (b)the Closing Date Working
Capital Amount; less (c) the Escrow Amount and the Section 116 Amount (the
"Closing Payment"), by wire transfer of immediately available funds denominated
in U.S. dollars or by such other means as are agreed upon by Seller and Buyer
and (ii) to the Escrow Agent, the Escrow Amount and the Section 116 Amount by
wire transfer of immediately available funds to an account designated by the
Escrow Agent.
3.4 Post-Closing Adjustment.
-----------------------
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<PAGE>
(a) The Seller will complete by December 30, 1999 a physical count of
the Inventory which Buyer will have the opportunity to observe and during which
Buyer or Buyer's accountant will conduct test counts, and will agree on the
Closing Date Working Capital Amount prior to Closing. This agreement will be
evidenced by a letter substantially in the form of Exhibit G. In connection
therewith, Seller will deliver to Buyer a list of (i) the Inventory, (ii) the
Accounts Receivable at December 30, 1999 and (iii) the Accounts Payable at
December 30, 1999, certified by Seller as a true and correct listing of the
Inventory, Accounts Receivable and Accounts Payable on Seller's books and
records. After the Closing Date, Buyer and its accountants will be permitted to
conduct an audit of the Closing Date Working Capital Amount for the purpose of
determining whether any adjustment is necessary to the Closing Date Working
Capital Amount, in accordance with generally accepted accounting principles and
consistent with Seller's past practices. As promptly as possible, but in any
event, within forty-five (45) days after the Closing Date, the Buyer will
deliver to the Seller a schedule (the "Adjustment Schedule") setting forth its
calculation of the Working Capital Amount and the difference between (i) the
Closing Date Working Capital Amount and (ii) the Working Capital Amount as
calculated by Buyer (such difference the "Working Capital Adjustment"), together
with an explanation in reasonable detail of the reasons for and the amount of
Buyer's proposed Working Capital adjustment. The Seller shall have the right to
observe and comment upon the preparation of such schedule. The failure of Buyer
to deliver the Adjustment Schedule in a timely manner shall constitute Buyer's
acceptance of the Closing Date Working Capital Amount as the Working Capital
Amount. Within seven (7) days after delivery of the Adjustment Schedule, the
Seller may notify the Buyer in writing that such schedule does not, in its
opinion, fairly state the Working Capital Adjustment in accordance with the
provisions of this Agreement, setting forth in reasonable detail the respects in
which it fails to do so. In the event that the Seller and Buyer are unable to
resolve any dispute so raised within thirty (30) days after delivery of the
Adjustment Schedule, they shall appoint a "big five" accounting firm acceptable
to both of them, whose expenses will be shared equally by the Seller and the
Buyer (the "Independent Accounting Firm"). The Independent Accounting Firm
shall, as promptly as possible, determine the items in dispute. The
determination of the Working Capital Adjustment by such Independent Accounting
Firm shall be made in a writing delivered to both parties and shall be
conclusive and binding on the parties.
(b) Within five (5) days after delivery of the report by such
Independent Accounting Firm or after the settlement of any dispute or within ten
(10) days following delivery of the Adjustment Schedule if no dispute exists,
payment shall be made (i) by the Seller if the Working Capital Adjustment is a
positive number, or (ii) by the Buyer if the Working Capital Adjustment is a
negative number.
(c) For purposes of calculating the Closing Date Working Capital, the
Working Capital Amount and the Working Capital Adjustment, the term "Working
Capital" shall mean the sum of (i) the Inventory, and (ii) the Accounts
Receivable, less (iii) the Accounts Payable of the Business (including in each
case CHP), as of December 30, 1999. The parties agree that the Working Capital
of CHP will be valued in United States dollars, and that the conversion into
U.S. dollars of any amounts reflected on CHP's books and records in Canadian
dollars shall be accomplished by using the cross-exchange rate for conversion of
Canadian
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<PAGE>
dollars into United States dollars appearing in the "Markets Diary" section of
The Wall Street Journal on December 30, 1999.
3.5 Allocation of Purchase Price. The parties agree that the Purchase
----------------------------
Price shall be allocated to the Purchased Assets in accordance with Schedule
3.5. The parties acknowledge that such allocation (subject to post-Closing
adjustments for the final Working Capital Amount) represents the fair market
value of the Assets and shall be binding upon the parties hereto for federal,
state, provincial, foreign and local tax purposes. Each party covenants to
report gain or loss or cost basis, as the case may be, in a manner consistent
with Schedule 3.5 for federal, provincial, foreign state and local tax purposes.
3.6 Section 116 of the Income Tax Act (Canada).
------------------------------------------
(a) The Seller shall, on or before Closing, deliver to the Buyer a
certificate, satisfactory in form and substance to the Buyer, issued by the
Canada Customs and Revenue Agency pursuant to subsection 116(2) of the Income
Tax Act (Canada) (a "Section 116 Certificate") in respect of the proposed
disposition by the Seller of the Shares. The Section 116 Certificate shall
specify a "certificate limit" in an amount no less than the purchase price
allocated to the Shares (the "CHP Purchase Price") in accordance with Section
3.5 of this Agreement.
(b) In the event that a Section 116 Certificate required under
Section 3.6(a) has not been delivered by the Seller to the Buyer on or before
Closing, or in the event that a Section 116 Certificate that is delivered by the
Seller to the Buyer on or before Closing specifies a "certificate limit" that is
less than the CHP Purchase Price, the Buyer shall be entitled to withhold from
the Purchase Price an amount equal to (i) 33-1/3% of the CHP Purchase Price if
no Section 116 Certificate is delivered, or (ii) 33-1/3% of the difference
between the CHP Purchase Price and the "certificate limit" if a Section 116
Certificate is delivered (in either case, the "Withheld Amount"). The Withheld
Amount shall be deposited by the Buyer in an interest bearing bank account, and
shall be remitted to the Receiver General of Canada on the day that the Withheld
Amount is required to be so remitted pursuant to subsection 116(5) of the Income
Tax Act (Canada) (the "Remittance Date"). All interest received by the Buyer on
the Withheld Amount shall be for the account of the Seller, and the full amount
of such interest less any Tax required to be deducted or withheld from such
interest shall be paid to the Seller on the Remittance Date.
(c) Notwithstanding the foregoing, if the Seller delivers a Section
116 Certificate or a replacement Section 116 Certificate to the Buyer at any
time after Closing and prior to three Business Days before the Remittance Date,
the Buyer shall pay to the Seller, on account of the Withheld Amount, an amount
equal to the Withheld Amount less 33-1/3% of the amount, if any, by which the
CHP Purchase Price exceeds the "certificate limit" specified in such Section 116
Certificate. This amount, together with all interest received by the Buyer on
this amount less any Tax required to be deducted or withheld from such interest,
shall be paid by the Buyer to the Seller within three Business Days after the
Section 116 Certificate or replacement Section 116 Certificate is delivered to
the Buyer.
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<PAGE>
(d) In any case where the Buyer withholds and remits to the Canada
Customs and Revenue Agency any amount pursuant to this section, the Buyer shall
be deemed to have paid such amount to the Seller on account of the CHP Purchase
Price.
3.7 Deliveries by Seller. At the Closing, the Seller will deliver, or
--------------------
cause to be delivered, the following to Buyer:
(a) The Bill of Sale, duly executed by Seller;
(b) Copies of any and all governmental and other third party
consents, waivers or approvals obtained by Seller with respect to the transfer
of the Purchased Assets, or the consummation of the transactions contemplated by
this Agreement;
(c) The opinion of counsel and officer's certificates contemplated by
Section 7.1;
(d) A limited warranty deed (as to 1001 Cleveland Street only) and a
quitclaim deed (as to Outlot A only) conveying the Owned Real Property in
Cambridge, MN (the "Minnesota Property"), to Buyer, in a customary form mutually
agreed upon prior to Closing by Buyer and Seller, duly executed and acknowledged
by the Seller in recordable form, and any owner's affidavits or similar
documents reasonably required by the title company, together with a "well
disclosure certificate" relating to the Minnesota Property;
(e) The Assignment and Assumption Agreement, duly executed by the
Seller;
(f) A FIRPTA Affidavit, duly executed by the Seller;
(g) A Certificate of Compliance with respect to CHP, issued by
Industry Canada;
(h) The Shares and associated stock transfer power, transferring the
shares to such person as Seller may direct;
(i) The Section 116 Certificate, if available;
(j) Resignations and releases of the directors of CHP (other than any
directors who are Employees who will be retained by Buyer following the
Closing);
(k) Resolutions of the directors of CHP authorizing the transfer of
the Shares;
(1) The Escrow Agreement set forth as Exhibit F hereto (the "Escrow
Agreement"), duly executed by Seller; and
(m) All such other instruments of assignment, transfer or conveyance
as shall, in the reasonable opinion of Buyer and its counsel, be necessary or
desirable to transfer to Buyer the Purchased Assets, in accordance with this
Agreement and where necessary or desirable in recordable form.
15
<PAGE>
3.8 Deliveries by Buyer. At the Closing, Buyer will deliver, or cause to
-------------------
be delivered, the following to Seller:
(a) The Closing Payment;
(b) The opinion of counsel and certificates contemplated by Section
7.2;
(c) The Assignment and Assumption Agreement, duly executed by Buyer;
(d) Releases of the directors of CHP delivering resignations pursuant
to Section 3.7(j);
(e) The Escrow Agreement, duly executed by Buyer; and
(f) All such other instruments of assumption as shall, in the
reasonable opinion of Seller and its counsel, be necessary for Buyer to assume
the Assumed Liabilities and Obligations in accordance with this Agreement.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Subject to Section 4.24 Seller hereby represents and warrants to Buyer as
follows:
4.1 Organization: Qualification. Each of Seller and CHP is a corporation
---------------------------
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its business
as it is now being conducted. Each of Seller and CHP is duly qualified or
licensed to do business as a foreign or extra-provincial corporation and is in
good standing in each jurisdiction in which the Purchased Assets owned, leased
or operated by it or the nature of the Business makes such qualification
necessary, except in each case in those jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not create a Material
Adverse Effect. Seller has heretofore delivered to Buyer complete and correct
copies of CHP's Articles of Incorporation and Bylaws as currently in effect.
Seller represents that it is the successor by merger to Canadian Harvest L.P., a
Delaware limited partnership.
4.2 Authority Relative to this Agreement. Seller has the requisite
------------------------------------
corporate power and authority to execute and deliver this Agreement and the
other documents and instruments contemplated hereby and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the other documents and instruments contemplated hereby and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action required on the part of Seller. This Agreement
has been, and the other documents and instruments contemplated hereby upon their
execution by Seller will be, duly and validly executed and delivered by Seller,
and assuming that this Agreement and the other documents and instruments
contemplated hereby constitute a valid and binding agreement of Buyer,
constitutes the legal, valid and binding agreement of Seller,
16
<PAGE>
enforceable against Seller in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting or relating to the enforcement of creditors rights generally or
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
4.3 Consents and Approvals: No Violation.
------------------------------------
(a) Except as set forth in Schedule 4.3(a), neither the execution and
delivery of this Agreement and the other documents and instruments contemplated
hereby by Seller nor the consummation of the transactions contemplated hereby
will (i) conflict with or result in the breach or violation of any provision of
the Certificate of Incorporation or Bylaws of Seller or the Articles of
Incorporation or By-laws of CHP, (ii) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which Seller or CHP is a party or
by which Seller or CHP, or any of the Purchased Assets may be bound, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained; or (iii) constitute
violations of any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller or CHP in relation to the Business, or to any of the
Purchased Assets.
(b) Except as set forth in Schedule 4.3(b) (the filings and approvals
referred to in Schedule 4.3(b) are collectively referred to as "Seller's
Required Regulatory Approvals"), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of any governmental or
regulatory body or authority is necessary for the consummation by Seller of the
transactions contemplated hereby.
4.4 Financial Statements. Seller has delivered to Buyer complete and
--------------------
correct copies of the following financial statements: (i) unaudited combined pro
forma balance sheets of the Business as of December 31, 1998 and as of September
30, 1999 and November 30, 1999 and statements of income for the fiscal periods
then ended; and (ii) unaudited balance sheets of CHP as of December 31, 1998 and
as of September 30, 1999 and November 30, 1999 and the related statements of
income for the fiscal periods then ended (collectively, the "Financial
Statements"). The Financial Statements have been prepared based on the books and
records of the Seller and CHP in accordance with Seller's past practices. Except
as disclosed in Schedule 4.4, the Financial Statements present fairly in all
material respects the financial position, results of operations of the Business
and of CHP at the dates and for the periods covered.
4.5 Undisclosed Liabilities. Except as set forth on Schedule 4.5, neither
-----------------------
Seller nor CHP is liable for or subject to, and Seller has no Knowledge of any
basis for assertion against either Seller or CHP of, any material liabilities of
a nature or in an amount that would be required under U.S. or Canadian generally
accepted accounting principles, as the case may be ("GAAP"), to be reflected in,
reserved against or disclosed in financial statements, that are not adequately
reflected in, reserved against or disclosed in the Financial Statements, except
such as have arisen in the ordinary course of business consistent with past
practice since September 30, 1999.
17
<PAGE>
4.6 Absence of Certain Changes or Events. Since September 30, 1999,
------------------------------------
except as set forth in Schedule 4.6, there has not been: (a) any Material
Adverse Effect; (b) any material damage, destruction or casualty loss to the
Purchased Assets, taken as a whole, whether or not covered by insurance, (c) any
agreement, commitment or transaction entered into by Seller that is material to
the ownership or operation of the Purchased Assets and remains in full force and
effect on the date hereof and not disclosed on a schedule hereto, (d) any sale
or disposition of any fixed assets of the Business other than in the ordinary
course of business of the Business, and (e) any change in any accounting method,
practice or policy used by the Seller.
4.7 Title and Related Matters.
-------------------------
(a) Except for Permitted Encumbrances, and except as listed or
described on Schedule 4.7, (a) Seller has fee simple title to the Owned Real
Property to be conveyed by it hereunder free and clear of all Encumbrances, and
(b) CHP has fee simple title to the Owned Real Property owned by it free and
clear of all Encumbrances. The Real Property constitutes all of the real
property necessary to operate the Business as currently operated. Except for
Permitted Encumbrances, and except as listed or described on Schedule 4.7,
Seller owns each of the Purchased Assets not constituting Real Property free and
clear of all Encumbrances.
(b) Seller has no knowledge of any "wells" (as defined in Minnesota
Statutes Section 1031.005, subd. 21) located about the Minnesota Property,
except as disclosed in the well disclosure certificate attached hereto and
incorporated herein as Exhibit G. This representation is intended to satisfy the
requirements of this Statute.
(c) The transactions contemplated herein do not contravene the
subdivision control provisions of the Planning Act (Ontario).
4.8 Leases.
------
(a) Schedule 4.8(a) lists all real property leases (collectively, the
"Real Property Leases") to which Seller or CHP is a party and which (i) in the
--------------------
case of Real Property Leases of Seller, are to be transferred and assigned to
Buyer on the Closing Date, and (ii) affect all or any part of any real property
used in the Business, other than the Real Property. Except as set forth in
Schedule 4.8(a), (w) to Seller's Knowledge, all such Real Property Leases are
valid, binding and enforceable in accordance with their terms, and are in full
force and effect; (x) there are no existing material defaults by Seller or CHP
or to Seller's Knowledge, any other party thereunder; (y) no event has occurred
which (whether with or without notice, lapse of time or both) would constitute a
material default by Seller or CHP or to Seller's Knowledge, any other party
thereunder; and (z) all rent and other charges have been paid through the date
hereof and will have been paid through the Closing Date.
(b) Schedule 4.8(b) lists, as of the date of this Agreement, all
leases of personal property (collectively, the "Tangible Personal Property
--------------------------
Leases") to which Seller or CHP is a party and which (i) in the case of Tangible
- ------
Personal Property Leases of Seller, are to be transferred and assigned to Buyer
on the Closing Date, (ii) affect all or any part of any Tangible Personal
Property used in the Business and (iii) (A) provide for annual payments of more
than
18
<PAGE>
$10,000 or (B) are material to the ownership or operation of the Purchased
Assets. Except as set forth in Schedule 4.8(b), (i) to Seller's Knowledge, all
such Tangible Personal Property Leases are valid, binding and enforceable in
accordance with their terms, and are in full force and effect; (ii) there are no
existing material defaults by Seller or CHP or to Seller's Knowledge, any other
party thereunder; (iii) no event has occurred which (whether with or without
notice, lapse of time or both) would constitute a material default by Seller or
CHP or to Seller's Knowledge, any other party thereunder; and (iv) all rent and
other charges have been paid through the date hereof and will have been paid
through the Closing Date.
4.9 Inventory. All of the Inventory reflected in the Financial Statements
---------
or thereafter acquired (and not subsequently sold in the ordinary course of
business) (including the Inventory described in the listing provided to Buyer on
December 30, 1999) consists of items of quality and quantity usable or
merchantable in the ordinary course of the Business as first quality goods. Each
tem of such Inventory is valued in the Financial Statements in accordance with
historic inventory practices of the Seller. The current level of Inventory is at
a normal and adequate level for the continuation of the Business in the ordinary
course and consistent with the Seller's past practices, provided that Seller
hereby informs Buyer that it maintains excess amounts of its "600" product for
sale to Israel. The Inventory does not and will not consist of any goods held on
consignment. Neither Seller nor CHP is under any obligation or liability with
respect to accepting returns of items of Inventory in the possession of its
customers other than in the ordinary course of business consistent with past
practice and the policies of the Seller. Neither Seller nor CHP has committed
and neither of them will commit to acquire Inventory for sale which is not of a
quality and quantity usable in the ordinary course of the Business within a
reasonable period of time consistent with past practice, nor has the Seller or
CHP changed or will change the price of any Inventory except for (i) price
reductions to reflect any reduction in the cost thereof to the Seller or CHP,
(ii) reductions and increases responsive to normal competitive conditions and
consistent with the Seller's or CHP's past sale practices, and (iii) increases
to reflect any increase in the cost thereof to the Seller or CHP.
4.10 Accounts Receivable. Seller has delivered to Buyer a list and the
-------------------
aging of the Accounts Receivable of Seller and CHP. All Accounts Receivable
(including those described in the listing provided to Buyer on December 30,
1999) (a) are valid and genuine, (b) arise out of bona fide sales and deliveries
of goods, performance of services or other transactions in connection with the
Business, (c) to Seller's Knowledge, are not subject to defenses, set-offs or
counterclaims other than normal returns and allowances, (d) have been billed
and, except for international shipments, are generally due within thirty (30)
days of such billing, (e) are owned by Seller or CHP; and (f) the Accounts
Receivable of Seller will be transferred to Buyer at Closing free of claims
relating to their ownership. To Seller's Knowledge, there is no reason to
believe that the Accounts Receivable are not collectible in the ordinary course
of business of the Business.
4.11 Insurance. Schedule 4.11 sets forth list of all policies of insurance
---------
insuring the Business. Except as set forth in Schedule 4.11, all material
policies of fire, liability, worker's compensation and other forms of insurance
owned or held by Seller or CHP and insuring the Purchased Assets or the Business
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the date of this Agreement have been paid (other
than retroactive premiums which may be payable with respect to comprehensive
general liability and
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worker's compensation insurance policies), and no notice of cancellation or
termination has been received with respect to any such policy which was not
replaced on substantially similar terms prior to the date of such cancellation.
Except as described in Schedule 4.11, as of the date of this Agreement, neither
Seller nor CHP has been refused any insurance with respect to the Purchased
Assets or the Business nor has its coverage been limited by any insurance cater
to which they have applied for any such insurance or with which they have
carried insurance during the last twelve months.
4.12 Environmental Matters. Except as disclosed in Schedule 4.12 or in the
---------------------
"Phase I" or supplemental environmental site assessments prepared by Buyer's
environmental consultants, to Seller's Knowledge:
(a) Seller and CHP hold, and are in compliance with, all permits,
certificates, licenses, regulations and governmental authorizations under
applicable Environmental Laws ("Environmental Permits") required for Seller and
CHP to own and operate the Purchased Assets and the Business, all such
Environmental Permits are in full force and effect, and are listed on Schedule
4.12, and Seller and CHP are otherwise in compliance with applicable
Environmental Laws with respect to ownership and operation of the Purchased
Assets and the Business and the assets and real property owned or leased by CHP
("CHP Real Property") or otherwise occupied by CHP;
(b) There are no Hazardous Substances present on the Real Property in
quantities which would require remediation pursuant to any Environmental Law or
create any liability of either Seller, CHP or Buyer;
(c) Neither Seller nor CUP is subject to any Environmental Claim or
has received any written request for information, or been notified that they are
a potentially responsible party, under CERCLA or any similar state, Canadian or
provincial law with respect to the Real Property;
(d) Neither Seller nor CHP has been requested to enter into or has
entered into or agreed to any obligation, consent decree or order with respect
to or affecting the Purchased Assets relating to compliance with any
Environmental Law or to investigation or cleanup of Hazardous Substances under
any Environmental Law;
(e) There are no underground storage tanks, monochlorinated or
polychlorinated biphenyls ("PCBs") or asbestos containing material on the Real
Property;
(f) During Seller's or CHP's tenure, (i) no hazardous substances have
ever been stored, buried, spilled, leaked, discharged, emitted or released
(collectively, "Release") in violation of applicable law by Seller or CHP in,
on, under or onto the Real Property or the Business, and (ii) there has been no
Release in, on, under or onto the Real Property by any other person; and
(g) During Seller's or CHP's tenure, neither Seller nor CHP has
manufactured, stored, used, distributed, treated, dispersed, transported or
handled any Hazardous
20
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Substance in violation of applicable law on the Real Property or in connection
with the operation of the Purchased Assets or the Business.
4.13 Employees. Schedule 4.13 lists all of the present employees of Seller
---------
and CHP employed in the Business and each such employee's position, location,
date of hire, and current annual salary rate or hourly wage. Except as described
in Schedule 4.13 or as previously disclosed to Buyer, neither Seller nor CHP is
a party to or is bound by any written employment agreement, confidentiality
agreement or consulting agreement or with any employee or former employee
(including with any management employee, officer or consultant to the Business),
in connection with or relating to the Business.
4.14 Labor Matters. Seller has previously delivered or caused CHP to
-------------
deliver to Buyer true, correct and complete copies of all collective bargaining
agreements to which Seller or CHP is a party or is subject and which relate to
the Purchased Assets. With respect to the ownership or operation of the
Purchased Assets, except to the extent set forth in Schedule 4.14 (which matters
as they relate to Seller (but not CHP) shall remain the sole responsibility of
Seller): (a) each of Seller and CHP is in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours including, with respect to CHP
only, those laws pertaining to withholding requirements for income and other
taxes, employment insurance, pay equity, health insurance, workers compensation
and statutory pension plans; (b) Seller has not received notice of any unfair
labor practice complaint pending before the National Labor Relations Board or
the Ontario Labor Relations Board; (c) there are no labor controversies, labor
strikes, picketing, lock-outs, boycotts, slowdown, or stoppage or applications
for declaration of successor employer or charges or similar disputes or labor-
related proceedings actually pending or to Seller's Knowledge, threatened by any
authorized representative of any union or other representative of employees
against or affecting Seller or CHP; (d) Seller has not received notice that any
representation petition respecting the employees of Seller has been filed with
the National Labor Relations Board and CHP has not received any suit or notice
that any similar filing has been made with the Ontario Labor Relations Board;
(e) no arbitration or grievance proceeding arising out of or under collective
bargaining agreements is pending against Seller or CUP; (f) neither Seller nor
CUP has experienced any primary work stoppage since at least December 31, 1997;
(g) Seller has not received any demand letters, civil rights charges, suits or
drafts of suits with respect to claims made by or obligations to, any employee
or potential employee; (h) there are no threatened or pending claims, charges,
actions, or lawsuits alleging claims against Seller or CHP brought by any
employee or potential employee relating in any way to their employment (or
prospective employment); and (i) all individuals who are performing services and
are or were classified by Seller or CHP as "independent contractors" at the
Closing Date qualify for such classification; and 6) there are no current or
threatened penalty assessments affecting CHP or the employees of CHP relating to
worker compensation benefits and all current assessments relating thereto that
are due have been paid to date.
4.15 ERISA: Benefit Plans.
--------------------
(a) Schedule 4.15(a) lists all deferred compensation, profit-sharing,
retirement and pension plans, including multiemployer plans, as defined by
Section 3(3 7) of ERISA, and all bonus and other employee benefit plans as
defined by Section 3(3) of ERISA or fringe benefit
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plans, maintained or with respect to which contributions are made by Seller with
respect to current or former employees employed in the Business ("Benefit
Plans"). True, correct, and complete copies of all such Benefit Plans have been
made available to Buyer.
(b) Except as set forth in Schedule 4.15%, Seller and its ERISA
Affiliates have fulfilled their respective obligations under the minimum funding
requirements of Section 302 of ERISA and Section 412 of the Code with respect to
each Benefit Plan subject to such provisions. To the best of Seller's Knowledge,
each Benefit Plan has been maintained in accordance with its terms and is in
compliance in all material respects with the presently applicable provisions of
ERISA and the Code and the regulations and rulings promulgated thereunder.
Neither Seller nor any ERISA Affiliate has incurred any liability under Sections
4062(b), 4063 or 4064 of ERISA to the PBGC in connection with any Benefit Plan,
nor any withdrawal liability to any multiemployer pension plan under Section
4201 et. seq. of ERISA or to any multi-employer welfare benefit plan, nor is
there or has there been any reportable event (as defined in Section 4043 of
ERISA) with respect to any Benefit Plan except as set forth in Schedule 4.15
(b). Except as set forth in Schedule 4.15 (b), the IRS has issued a letter for
each Benefit Plan which is intended to be a qualified plan determining that such
plan is qualified under Section 40 1(a) of the Code, and there has been no
occurrence since the date of any such determination letter which has or could
have adversely affected such qualification. For each Benefit Plan from which the
Buyer Benefit Plans will receive a rollover or transfer in accordance with
Section 6.9(d), true and correct copies of all plan documents, amendments,
summary plan descriptions and summaries of material modifications, as well as
for each Qualified Plan, the most recent favorable determination letter, have
been delivered to the Buyer.
(c) Schedule 4.15(c) sets forth all the employee benefit, health,
welfare, supplemental unemployment benefit, bonus, pension, profit sharing,
deferred compensation, stock compensation, stock purchase, retirement,
hospitalization insurance, medical, dental, legal, disability and similar plans
or arrangements or practices relating to the employees employed by CHP (the "CHP
Employees") which are currently maintained or contributed to by CHP (such plans,
arrangements or practices, other than the United Food & Commercial Workers Union
pension plan (the "Union Plan"), the "CHP Benefit Plans");
(d) All of the CHP Benefit Plans are and have been established,
registered, qualified, invested and administered, in all respects, in material
compliance with all laws, regulations, orders or other legislative,
administrative or judicial promulgations applicable to the CUP Benefit Plans
("Applicable Benefits Laws") and in accordance with all written understandings
between CHP, the Seller and the CHP Employees. To Seller's Knowledge, no fact or
circumstance exists that could reasonably be expected to adversely affect the
tax-exempt status of any CHP Benefit Plan that is currently tax-exempt;
(e) All obligations of CHP and the Seller regarding the CHP Benefit
Plans due or owing prior to the date hereof have been satisfied, there are no
outstanding defaults or violations by any party thereto and no taxes, penalties
or fees are owing under any of the CHP Benefit Plans by CHP or the Seller;
22
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(f) To Seller's Knowledge, no CHP Benefit Plan, nor any related trust
or other funding medium thereunder, is subject to any pending investigation,
examination or other proceeding, action or claim initiated by any Governmental
Authority, or by any other party (other than routine claims for benefits);
(g) All contributions or premiums required to be made by CHP and/or
the Seller under the terms of each CHP Benefit Plan or the Union Plan or by
Applicable Benefits Laws have been made in a timely fashion in accordance with
Applicable Benefits Laws and the terms of the CHP Benefit Plans and the Union
Plan, and neither CHP nor the Seller has, and as of Closing will not have, any
liability (other than liabilities accruing after the Closing Date) with respect
to contributions or premiums under any of the CHP Benefit Plans or the Union
Plan;
(h) The Seller has furnished to the Buyer true, correct and complete
copies of all the CHP Benefit 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 with respect to each CHP Benefit Plan,
plan summaries, booklets and personnel manuals;
(i) Except as disclosed in Schedule 4.15(i), none of the CHP Benefit
Plans provides benefits to retired employees or to the beneficiaries or
dependents of retired employees;
(j) All obligations of CHP and the Seller regarding the CHP Benefit
Plans have been satisfied, there are no outstanding defaults or violations by
any party thereto and no taxes, penalties or fees are owing or eligible under
any of the CHP Benefit Plans by CHP or the Seller. Further, there are no
undisclosed liabilities relating to the CHP Benefit Plans or any pension or
other benefit plan maintained or contributed to by CHP over the past five (5)
years; and
(k) All employee data necessary to administer each CHP Benefit Plan
and the Union Plan will be made available to the Buyer (through CHP) at Closing
and, to Seller's knowledge, such data is true and correct as of the date hereof
4.16 Real Property.
-------------
(a) Schedule 4.16 contains a description of the real property owned
by Seller and included in the Purchased Assets, together with the real property
owned by CHP (the "Owned Real Property"). True and complete copies of any
current surveys in Seller's possession or any policies of title insurance
currently in force and in the possession of Seller with respect to the Owned
Real Property have heretofore been delivered by Seller to Buyer.
(b) To Seller's Knowledge, the current use of the Owned Real Property
is in compliance in all material respects with all applicable zoning, building
code, safety code, subdivision and similar regulations, and neither Seller nor
CHP has received written notice of any material alleged violation of the
foregoing. The consummation of the transactions contemplated hereby will not (i)
prevent Buyer or CHP from utilizing, in accordance with such
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<PAGE>
zoning ordinances and regulations, any or all of the Owned Real Property
following the Closing in substantially the same manner as Seller or CUP is
utilizing such Owned Real Property as of the Closing or (ii) require Buyer, as a
condition of continuing such use, to comply with any existing zoning or other
similar ordinances or regulations beyond or in addition to those to which
Seller's or CHP's use of the Owned Real Property is currently subject.
(c) Seller has obtained all licenses and rights-of-way, including
proofs-of dedication, necessary to ensure vehicular and pedestrian ingress and
egress to and from the Owned Real Property. There are no restrictions on
entrance to or exit from the Owned Real Property to adjacent public streets and,
to Seller's Knowledge, no conditions that will result in the termination of the
present access from the Owned Real Property to existing highways and roads,
except restrictions or conditions that would not materially impair Buyer's or
CHP's ability to conduct the Business as currently conducted at the Owned Real
Property.
4.17 Fixed Assets. Seller has previously furnished to Buyer a list of the
------------
fixed assets of Seller and CHP listed on Seller's or CHP's books and records as
of September 30, 1999. All fixed assets, whether leased or owned, that are part
of the Purchased Assets are in good operating condition and repair, subject to
normal wear and tear, are useable in the ordinary course of business of the
Business consistent with past practice.
4.18 Certain Contracts and Arrangements.
----------------------------------
(a) Listed on Schedule 4.18(a) are all of the material contracts,
agreements, licenses, and leases that constitute part of the Business and which
are material to the ownership or operation of the Purchased Assets or the
Business, other than the Real Property Leases and the Tangible Property Leases
("Contracts", and together with the Real Property Leases and the Tangible
Property Leases, the "Seller's Agreements").
(b) Except as disclosed in Schedule 4.18(b), each of the Contracts
(i) constitutes the legal, valid and binding obligation of Seller or CHP, as the
case may be, and to Seller's Knowledge, constitutes the legal, valid and binding
obligation of the other parties thereto, (ii) is in full force and effect, and
(iii) may (in the case of the Contracts to which Seller is a party) be
transferred or assigned to Buyer at the Closing without consent or approval of
the other parties thereto.
(c) Except as set forth in Schedule 4.18(c), to Seller's Knowledge,
there is not, under any of the Contracts, any default or event which, with
notice or lapse of time or both, would constitute a default on the part of any
of the parties thereto, except such events of default and other events as to
which requisite waivers or consents have been obtained.
4.19 Litigation and Claims. Except as disclosed in Schedule 4.19, there is
---------------------
no claim, action, proceeding or investigation pending or, to Seller's Knowledge,
threatened in writing against Seller or CHP with respect to the Business. To
Seller's Knowledge, neither Seller nor any of its Affiliates nor CHP is in
default under the terms of any judgment, order or decree of any Governmental
Authority with respect to the Business or the Real Property, except for such
defaults that would not reasonably be expected to have a Material Adverse
Effect.
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4.20 Permits.
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(a) Each of Seller and CHP has all permits, licenses, franchises and
other governmental authorizations, consents, registrations and approvals,
whether federal, state, municipal or provincial (collectively, "Permits"), used
in or necessary for the ownership and operation of the Purchased Assets or the
Business, except where the failure to obtain any such Permit would not result in
a Material Adverse Effect. Except as set forth in Schedule 4.20, neither Seller
nor CHP has received any written notification and has no Knowledge that it is
currently in violation of any of such Permits, or any law, statute, order, rule,
regulation, ordinance or judgment of any governmental or regulatory body or
authority applicable to it. Except as set forth in Exhibit 4.20, Seller and CHP
are in compliance in all material respects with all Permits, laws, statutes,
orders, rules, regulations, ordinances, or judgments of any governmental or
regulatory body or authority applicable to the Purchased Assets or the operation
of the Business.
(b) Schedule 4.20 sets forth all material Permits and all
Environmental Permits applicable to the Purchased Assets, and identifies which
of the foregoing are Transferable Permits.
4.21 Taxes.
-----
(a) Seller has paid or caused to be paid all real estate taxes and
assessments due and owing on or prior to the date hereof on the Owned Real
Property and no appeals relating to any such tax are pending. Except as set
forth in Schedule 4.21, there are no outstanding agreements or waivers extending
the applicable statutory periods of limitation for Taxes associated with the
Purchased Assets for any period. Schedule 4.21 sets forth the taxing
jurisdictions in which Seller or CHP owns assets or conducts business that
require a notification to a taxing authority of the transactions contemplated by
this Agreement, if the failure to make such notification, or obtain Tax
clearances in connection therewith, would either require Buyer to withhold any
portion of the Purchase Price or would subject Buyer to any liability for any
Taxes of Seller.
(b) Canadian Taxes.
--------------
(i) Tax Filings. CUP has prepared and filed on time (taking
into account all applicable extensions) with all appropriate governmental bodies
all tax returns, declarations, remittances, information returns, reports and
other documents of every nature required to be filed by or on behalf of CHP in
respect of any CHP Taxes or in respect of any other provision in any domestic or
foreign federal, provincial, municipal, state, territorial or other taxing
statute for all fiscal periods ending prior to the date hereof and will continue
to do so for all fiscal periods ending on or prior to the Closing Date, provided
that Buyer causes CHP to give Seller access to all books and records Seller
believes are reasonably necessary for the preparation of such returns. All such
returns, declarations, remittances, information returns, reports and other
documents filed prior to the date hereof are correct and complete in all
material respects, and no material fact has been omitted therefrom. No extension
of time in which to file any such returns, declarations, remittances,
information returns, reports or other documents is in effect.
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All CHP Taxes shown on all such returns, or on any assessments or reassessments
in respect of any such returns filed prior to the date hereof have been paid in
full or provided for on CHP's Financial Statements.
(ii) Taxes Paid. CHP has paid in full all CHP Taxes required to
be paid on or prior to the date hereof and has made adequate provision in CHP's
Financial Statements in accordance with generally accepted accounting principles
for the payment of all Taxes in respect of all fiscal periods ending on or
before September 30, 1999. No other Taxes in respect of any fiscal period ending
on or before the Closing Date are payable by CHP, except to the extent such CHP
Taxes are reflected on CHP's Financial Statements or included as Accounts
Payable in the calculation of the Working Capital Amount.
(iii) Reassessments of Taxes. There are no reassessments of CHP's
Taxes that have been issued and are outstanding and there are no outstanding
issues which have been raised and communicated to CHP by a governmental body for
any taxation year in respect of which a Tax Return of CUP has been audited. CHP
is not negotiating any draft assessment or reassessment with any governmental
body. Neither CHP nor the Seller has received a written notice of reassessment
of CUP in respect of any CUP Taxes. No governmental body has challenged,
disputed or questioned CHP in respect of CHP Taxes or of any returns, filings or
other reports filed under any statute providing for Taxes. To Seller's
Knowledge, neither CHP nor the Seller has any contingent liabilities for Taxes
or any grounds for an assessment or reassessment of CHP other than as disclosed
in the CUP Financial Statements. Neither CHP nor the Seller has received any
indication from any governmental body that an assessment or reassessment of CHP
is proposed in respect of any CUP Taxes, regardless of its merits. CHP has not
executed or filed with any governmental body any agreement or waiver extending
the period for assessment, reassessment or collection of any CHP Taxes.
(iv) Withholdings and Remittances. CUP has withheld from each
payment made to any of its present or former employees, officers and directors,
and to all persons who are non-residents of Canada for the purposes of the
Income Tax Act (Canada) all amounts required by law to be withheld, and
furthermore, has remitted such withheld amounts within the prescribed periods to
the appropriate governmental body. CHP has remitted all Canada Pension Plan
contributions, provincial pension plan contributions, unemployment and
employment insurance premiums, employer health taxes and other Taxes payable by
it in respect of its employees and has remitted such amounts to the proper
governmental body within the time required under the applicable legislation. CHP
has charged, collected and remitted on a timely basis all Taxes as required
under applicable legislation on any sale, supply or delivery whatsoever, made by
CHP.
4.22 Year 2000 Qualification. Except as listed on Schedule 4.22, all of
-----------------------
the hardware and software products (including embedded microcontrollors in non-
computer equipment) which are included in the Purchased Assets or which are
owned or used primarily by CHP in the Business are Year 2000 Qualified. For
purposes of this Agreement, "Year 2000 Qualified" shall mean that all
constituent software, controllers, central processing units, and other computer
equipment, including all components, applications and modules thereof, are "Year
2000 Compliant." As used herein the term "Year 2000 Compliant" means computer
systems or applications that accurately process date/time data (including but
not limited to calculating,
26
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comparing, and sequencing) from, into, and between the twentieth and twenty-
first centuries, the years 1999 and 2000, and leap-year calculation.
4.23 Patents. Copyrights and Trademarks. Except as listed on Schedule
-------
4.23, the Business does not (a) utilize any (i) patents, (ii) registered or
unregistered copyrights, trademarks or service marks, or (iii) applications for
any of the foregoing, or (b) to the Knowledge of the Seller, conflict with or
infringe upon any such patents, copyrights, trademarks, service marks or
applications that are owned or claimed by any third party. Seller lawfully owns
or possesses the right to use all proprietary information used in the conduct of
the Business, and, except as disclosed on Schedule 4.23, Seller is not required
to pay any royalty, license fee or similar type of compensation with respect to
such copyrights, trademarks or service marks. Seller has filed all applications
necessary to register "Canadian Harvest" as a trademark in the United States and
in the countries listed on Schedule 4.23, and has paid all related application
costs.
4.24 Certain Limitations on Representations and Warranties. Each of the
-----------------------------------------------------
Parties is a sophisticated legal entity that was advised by experienced counsel
and, to the extent it deemed necessary, other advisors in connection with this
Agreement. Accordingly, each of the Parties hereby acknowledges that (i) no
Party has relied or will rely upon any document or written or oral information
previously furnished or made available to or discovered by it or its
Representatives, other than this Agreement (including the Schedules hereto) or
such of the foregoing as are delivered at the Closing, (ii) there are no
representations or warranties by or on behalf of any Party or any of its
respective Affiliates or Representatives other than those expressly set forth in
this Agreement, and (iii) the Parties' respective rights, obligations and
remedies with respect to this Agreement and the events giving rise thereto will
be solely and exclusively as set forth in this Agreement and the Confidentiality
Agreement. BUYER ACKNOWLEDGES THAT, SHOULD THE CLOSING OCCUR, BUYER WILL ACQUIRE
THE ACQUIRED ASSETS WITHOUT ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE, IN AN "AS IS" CONDITION AND ON A "WHERE
IS" BASIS, EXCEPT AS OTHERWISE EXPRESSLY REPRESENTED AND WARRANTED HEREIN.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation validly existing under the laws
------------
of the State of Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as is now
being conducted.
5.2 Authority Relative to this Agreement. Buyer has requisite corporate
------------------------------------
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action required on the part of
Buyer. This Agreement has been duly and validly executed and delivered by Buyer,
and assuming that this Agreement constitutes a valid and
27
<PAGE>
binding agreement of Seller, constitutes a valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally or general
principles of equity.
5.3 Consents and Approvals: No Violation.
------------------------------------
(a) Except as set forth in Schedule 5.3(a), neither the execution and
delivery of this Agreement by Buyer nor the purchase by Buyer of the Purchased
Assets pursuant to this Agreement will (i) conflict with or result in any breach
of any provision of the certificate of incorporation or bylaws of Buyer, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except under the Investment Canada
Act, (iii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, agreement, lease or other instrument or
obligation to which Buyer is a party or by which any of its assets may be bound,
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which would not, individually or in the aggregate, have a material adverse
effect on the business, assets, operations or condition (financial or otherwise)
of Buyer or (iv) violate any law, regulation, order, judgment or decree
applicable to Buyer.
(b) Except as set forth in Schedule 5.3(b) (the filings and approvals
referred to such Schedule are collectively referred to as the "Buyer's Required
Regulatory Approvals"), no declaration, filing or registration with, or notice
to, or authorization, consent or approval of any Governmental Authority is
necessary for the consummation by Buyer of the transactions contemplated hereby.
5.4 Availability of Funds. Buyer has sufficient availability of funds to
---------------------
pay the Closing Payment on the Closing Date and to enable Buyer to timely to
perform all of its obligations under this Agreement.
5.5 Legal Proceedings. There are no actions, suits or proceedings pending
-----------------
or, to Buyer's knowledge, threatened in writing against Buyer or its members
before any court, arbitrator or governmental or regulatory body or authority
that could affect the transactions contemplated by this Agreement. Buyer is not
subject to any outstanding judgments, rules, orders, writs, injunctions or
decrees of any court, arbitrator or governmental or regulatory body or authority
that could affect the transactions contemplated by this Agreement.
ARTICLE VI
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COVENANTS OF THE PARTIES
------------------------
6.1 Conduct of Business Relating to the Purchased Assets. Except (i) in
----------------------------------------------------
connection with or as a result of any matter listed or described on any
Schedule; (ii) as expressly contemplated in this Agreement as described in
Schedule 6.1 or (iii) to the extent Buyer
28
<PAGE>
otherwise consents in writing, during the period from the date of this Agreement
to the Closing Date, Seller shall operate the Business in the ordinary course
consistent with past practice; shall use reasonable efforts to preserve intact
the Purchased Assets and the assets of CHP and preserve the goodwill and
relationships with customers, employees, suppliers and others having business
dealings with it and with CHP with respect thereto; and shall maintain the
insurance coverage described in Section 4.11. Without limiting the generality of
the foregoing, and, except as contemplated in this Agreement or as described
above, or as required under applicable law or by any Governmental Authority,
prior to the Closing Date, without the prior written consent of Buyer, Seller
will not, and will not permit CHP, with respect to the Business (including CHP)
or the Purchased Assets:
(a) except for Permitted Encumbrances, sell, lease (as lessor),
pledge, encumber, restrict, transfer or otherwise dispose of, or grant any right
with respect to, any of the Purchased Assets or assets of CHP, other than assets
used, consumed or replaced in the ordinary course of business consistent with
past practices;
(b) modify, amend or voluntarily terminate prior to the expiration
date thereof any of Seller's Agreements or material contracts of or relating to
CHP or any material Permit or Environmental Permits or waive any default by, or
release, settle or compromise any claim against, any other party thereto, other
than (i) in the ordinary course of business, to the extent consistent with past
practices, or (ii) as may be required in connection with Seller's obligations to
Buyer under this Agreement;
(c) amend in any material respect or cancel any liability or casualty
insurance policies related thereto, or fail to maintain by self insurance or
with financially responsible insurance companies insurance in such amounts and
against such risks and losses as are customary for such assets and business
other than in connection with any general renewal or revision of Seller's or
CHP's insurance policies or practices;
(d) enter into any commitment or contract for goods or services not
addressed in clauses (a) through (c) above that will be delivered or provided
after December 31, 1999 or such other date that the parties mutually agree to be
the date on which the Closing is expected to occur that exceeds $10,000 in the
aggregate, unless such commitment or contract is terminable by Seller or CHP (or
after the Closing Date by Buyer or CHP) without further liability, upon not more
than 30 days' notice;
(e) (i) hire any new employees, or transfer any existing employees,
other than to fill vacancies in existing positions, (ii) enter into any
employment or consulting agreement, or increase salaries or wages of employees,
except in the ordinary course of business, (iii) enter into any other collective
bargaining or representation agreement for employees, or (iv) take any action to
increase the aggregate benefits payable to employees; or
(f) enter into any written or oral contract, agreement, commitment or
arrangement with respect to any of the transactions set forth in the foregoing
paragraphs (a) through (e).
6.2 Access to Information.
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(a) In addition to the rights granted by Section 6.1, between the
date of this Agreement and the Closing Date, Seller will, during ordinary
business hours and upon reasonable notice (i) give Buyer and its representatives
reasonable access to all books, records, plants, offices and other facilities
and properties of CHP or constituting the Purchased Assets; (ii) permit Buyer to
make such reasonable inspections thereof as Buyer may reasonably request; and
(iii) furnish Buyer with such financial and operating data and other information
with respect to the Seller, the Business and the Purchased Assets as Buyer may
from time to time reasonably request.
(b) For a period of five (5) years after the Closing Date, each Party
and their respective Representatives shall have reasonable access to all of the
books and records of the Purchased Assets in the possession of the other Party
or Parties to the extent that such access may reasonably be required by such
Party in connection with the Assumed Liabilities and Obligations or the Excluded
Liabilities, or other matters relating to or affected by the operation of the
Purchased Assets. Such access shall be afforded by the Party or Parties in
possession of such books and records upon receipt of reasonable advance notice
and during normal business hours. The Party or Parties exercising this right of
access shall be solely responsible for any costs or expenses incurred by it or
them pursuant to this Section 6.2(b). If the Party or Parties in possession of
such books and records shall desire to dispose of any such books and records
upon or prior to the expiration of such seven-year period, such Party or Parties
shall, prior to such disposition, give the other Party or Parties a reasonable
opportunity at such other Party's or Parties' expense, to segregate and remove
such books and records as such other Party or Parties may select.
(c) Seller agrees (i) not to release any Person (other than Buyer)
from any confidentiality agreement now existing with respect to the Purchased
Assets or CHP, or waive or amend any provision thereof, and (ii) to assign any
rights arising under any such confidentiality agreement (to the extent
assignable) to Buyer.
6.3 Expenses. Except to the extent specifically provided herein, whether
--------
or not the transactions contemplated hereby are consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs and
expenses. Notwithstanding anything to the contrary herein, Buyer will be
responsible for all costs and expenses associated with the obtaining of any
title insurance policy and all endorsements thereto That Buyer elects to obtain.
6.4 Further Assurances; Cooperation.
-------------------------------
(a) Subject to the terms and conditions of this Agreement, each of
the Parties hereto will use Commercially Reasonable Efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the sale of the Purchased Assets pursuant to this Agreement, including
without limitation using Commercially Reasonable Efforts to ensure satisfaction
of the conditions precedent to each Party's obligations hereunder.
Notwithstanding anything in the previous sentence to the contrary, Seller, CUP
and Buyer shall use Commercially Reasonable Efforts to obtain all Permits and
Environmental Permits necessary for Buyer to
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acquire and operate the Business. Neither of the Parties hereto will, without
the prior written consent of the other Party, take or fail to take any action,
which would reasonably be expected to prevent or materially impede, interfere
with or delay the transactions contemplated by this Agreement.
(b) From time to time after the Closing Date, without further
consideration, Seller will, at its own expense, execute and deliver such
documents to Buyer as Buyer may reasonably request in order to more effectively
consummate the sale and purchase of the Purchased Assets or to more effectively
vest in Buyer good and marketable title to the Purchased Assets subject to the
Permitted Encumbrances. From time to time after the Closing Date, without
further consideration, Buyer will, at its own expense, execute and deliver such
documents to Seller as Seller may reasonably request in order to evidence
Buyer's assumption of the Assumed Liabilities and Obligations.
(c) Notwithstanding anything to the contrary in this Agreement, to
the extent that (i) any Seller's Agreement (other than the Real Property Leases)
is not capable of being assigned to Buyer in connection with the Closing without
the consent or waiver of a third Person (including without limitation a
Governmental Entity) which has not been obtained on or before the Closing Date,
or (ii) any of the transactions contemplated by this Agreement constituted or
would constitute a breach of any Seller's Agreement (other than the Real
Property Leases) or a violation of any law or order or other governmental edict,
Seller will be deemed not to have transferred, and will not be obligated to
transfer to Buyer any direct or indirect right, title or interest in or to any
such Seller's Agreement (other than the Real Property Leases) without first
having obtained all necessary consents and waivers. Seller will use reasonable
efforts to obtain such consents and waivers as may be necessary to cure such
potential breach or violation; provided, however, but without affecting Seller's
obligations under Section 8.2, Seller will not be obligated to pay any
consideration therefor to the party from whom the consent or waiver is
requested. Buyer agrees that neither Seller nor any of its Affiliates will have
any liability whatsoever arising out of or relating to the failure to obtain any
consents or waivers that may have been or may be required in connection with the
transactions contemplated by this Agreement or because of a breach of, default
under or termination of any Seller's Agreement as a result thereof, except in
connection with a breach of the representation in Section 4.17(c).
(d) To the extent that the consents and waivers referred to in the
immediately preceding paragraph are not obtained, or until the breaches or
violations referred to in the immediately preceding paragraph are not obtained,
or until the breaches or violations referred to in the immediately preceding
paragraph are resolved, Seller will use reasonable efforts, with reasonable
costs of Seller and its Affiliates related thereto to be promptly reimbursed by
Buyer, to (i) provide to Purchaser, at its request, the benefits of any such
Seller's Agreement, (ii) cooperate in any reasonable and lawful arrangement
designed to provide such benefits to Buyer, without incurring any financial
obligation to Seller or any of its Affiliates, and (iii) enforce, at the request
and for the account of Buyer, any rights of Seller arising from any such
Seller's Agreement against the other party or parties to such Seller's Agreement
(including the right to elect to terminate in accordance with the terms thereof
upon the advice of Buyer). Notwithstanding any provision to the contrary
contained herein, Buyer will perform or pay for the benefit of the other party
or parties thereto the obligations of Seller under or in connection
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with any such Seller's Agreement and will indemnify and hold Seller and its
Affiliates harmless from any Indemnifiable Losses relating to, resulting from or
arising out of any failure by Buyer so to perform or pay. Buyer will comply with
all reasonable requests of Seller for cooperation in connection with the
performance of Seller's obligations under Sections 6.4(c) or (d).
6.5 Public Statements. Prior to the Closing Date, the Parties shall
-----------------
consult with each other before issuing any public announcement, statement or
other disclosure with respect to this Agreement or the transactions contemplated
hereby and shall not issue any such public announcement, statement or other
disclosure prior to such consultation, except as may be required by law or stock
exchange rules.
6.6 Consents and Approvals.
----------------------
(a) As promptly as practicable after the date of this Agreement,
Seller and Buyer, as applicable, shall file with any Governmental Authority
having jurisdiction over the Purchased Assets or the Business, any filings
required to be made with respect to the transactions contemplated hereby. The
Parties shall respond promptly to any requests for additional information made
by such agencies, and use their respective best efforts to cause regulatory
approval to be obtained at the earliest possible date after the date of filing.
Each Party will bear its own costs of the preparation of any such filing.
(b) Seller and Buyer shall cooperate with each other and (i) promptly
prepare and file all necessary documentation, (ii) effect all necessary
applications, notices, petitions and filings and execute all agreements and
documents, (iii) use reasonable efforts to obtain the transfer or reissuance to
Buyer of all necessary consents, approvals and authorizations of all
Governmental Authorities and (iv) use reasonable efforts to obtain all necessary
consents, approvals and authorizations of all other parties, necessary to
consummate the transactions contemplated by this Agreement or required by the
terms of any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument to which Seller or Buyer
is a party or by which any of them is bound. Each of Seller and Buyer shall have
the right to review in advance all characterizations of the information relating
to the transactions contemplated by this Agreement which appear in any filing
made in connection with the transactions contemplated hereby.
(c) Subject to Section 3.6 of this Agreement, Seller and Buyer shall
cooperate with each other and promptly prepare and file notifications with, and
request Tax clearances from, state and local taxing authorities in jurisdictions
in which a portion of the Purchase Price may be required to be withheld or in
which Buyer would otherwise be liable for any Tax liabilities of Seller pursuant
to such state and local Tax law.
(d) Buyer shall have the primary responsibility for securing the
transfer, reissuance or procurement of the Permits and Environmental Permits
provided that the cost of such transfer shall be borne equally by Seller and
Buyer. Seller shall cooperate with Buyer's efforts in this regard and assist in
any transfer or reissuance of a Permit or Environmental Permit held by Seller or
the procurement of any other Permit or Environmental Permit when so requested by
Buyer.
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6.7 Fees and Commissions. Seller and Buyer each represent and warrant to
--------------------
the other that, except for Seller's obligations, if any, to Arthur Andersen, LLP
("AA") under an agreement between Seller and AA, which shall be Seller's sole
responsibility, no broker, finder or other Person is entitled to any brokerage
fees, commissions or finder's fees in connection with the transaction
contemplated hereby by reason of any action taken by the Party making such
representation. Seller and Buyer will pay to the other or otherwise discharge,
and will indemnify and hold the other harmless from and against, any and all
claims or liabilities for all brokerage fees, commissions and finder's fees
incurred by reason of any action taken by the indemnifying party.
6.8 Tax Matters: Prorations.
-----------------------
(a) All transfer and sales taxes incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne equally by
Seller and Buyer. Seller will file, to the extent required by applicable law,
all necessary Tax Returns and other documentation with respect to all such
transfer or sales taxes, subject to Buyer's approval, which approval shall not
be unreasonably withheld or delayed, and Buyer will be entitled to review such
returns and other documentation fifteen (15) Business Days in advance of the due
date for filing such Tax Returns and other documentation and, if required by
applicable law, will join in the execution of any such Tax Returns or other
documentation. Prior to the Closing Date, Seller will provide to Buyer, to the
extent possible, and Buyer will execute and deliver to Seller, an appropriate
resale tax exemption certificate in connection with this Agreement and the
transactions contemplated hereby, due from each applicable taxing authority.
(b) Buyer and Seller shall provide each other with such assistance as
may reasonably be requested by the other Party in connection with the
preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each will retain and provide the requesting Party with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. Any information obtained pursuant to
this Section 6.8(b) or pursuant to any other Section hereof providing for the
sharing of information or review of any Tax Return or other schedule relating to
Taxes shall be kept confidential by the Parties hereto.
(c) In the event that a dispute arises between Seller and Buyer as to
the amount of Taxes covered by this Section 6.8, the Parties shall attempt in
good faith to resolve such dispute, and any amount so agreed upon shall be paid
to the appropriate party. If such dispute is not resolved thirty (30) days
thereafter, the Parties shall submit the dispute to the Independent Accounting
Firm, for resolution, which resolution shall be final, conclusive and binding on
the Parties. Notwithstanding anything in this Agreement to the contrary, the
reasonable fees and expenses of the Independent Accounting Firm in resolving the
dispute shall be borne equally by Seller and by Buyer. Any payment required to
be made as a result of the resolution of the dispute by the Independent
Accounting Firm shall be made within ten days after such resolution, together
with any interest determined by the Independent Accounting Firm to be
appropriate.
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(d) Except as otherwise expressly provided herein, all charges for
utilities, rent, premiums on insurance required by the Real Property Leases or
by the Tangible Personal Property Royalties, Property Leases, Property Taxes and
other similar charges of a recurring nature relating to the operation of the
Purchased Assets or the Business, shall be prorated as of the Closing Date, and
an appropriate payment or other adjustment to the Purchase Price shall be made
at the Closing.
6.9 Employees.
---------
(a) Conditioned upon the occurrence of the Closing of the transaction
contemplated herein, and the absence of all legal or contractual impediments,
Buyer will make an offer of at-will employment, effective as of 5:00 p.m. local
time, on the Closing Date, to employees of the Seller who are employed in the
Business, as determined by Buyer. Buyer will offer employment to such employees
at their current salaries. Those employees who accept Buyer's offer of
employment shall be referred to herein as "Transferred Employees." All offers of
employment made pursuant to this Section 6.9(a) shall be made in accordance with
all applicable laws, rules and regulations.
(b) All Transferred Employees shall commence participation in welfare
benefit plans to be established by Buyer or its Affiliates (the "Replacement
Welfare Plans") effective as of each Transferred Employee's date of hire. Buyer
shall cause the insurer of each Replacement Welfare Plan to (i) waive all
limitations as to pre-existing condition exclusions and waiting periods under
the Replacement Welfare Plans with respect to the Transferred Employees, other
than, but only to the extent of, limitations or waiting periods that were in
effect with respect to such Employees under the welfare plans maintained by
Seller and that have not been satisfied as of the Closing Date, and (ii) provide
each Transferred Employee with credit for any co-payments and deductibles paid
during the year in which the Closing occurs and prior to the Closing Date in
satisfying any deductible or out-of pocket requirements under the Replacement
Welfare Plans (on a pro-rata basis in the event of a difference in plan years),
provided that, such waiver and credit shall be provided conditioned upon
Seller's timely delivery to Buyer of documentation deemed sufficient by Buyer as
to amounts to be credited or time waived for each Transferred Employee and his
or her dependents.
(c) The Transferred Employees shall be given credit for all service
with Seller under each employee pension benefit plan, as defined by Section 3(2)
of ERISA, fringe benefit and other employee benefit plans as defined by Section
3(3) of ERISA, programs and arrangements covering employees of Buyer ("Buyer
-----
Benefit Plans") in which a Transferred Employee becomes a participant. The
- -------------
service credit so given shall be for purposes of eligibility and vesting, but
not for level of benefits and benefit accrual except to the extent the Buyer
Benefit Plans otherwise provide.
(d) (i) To the extent allowable by law, Buyer shall take any and all
necessary action to cause the trustee of any defined contribution plan covering
employees of Buyer in which any Transferred Employee becomes a participant to
accept a direct "rollover" in cash or other acceptable form of all or a portion
of said Employee's "eligible rollover
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distribution" within the meaning of Section 402 of the Code from the defined
contribution plan sponsored by Seller if requested to do so by the Transferred
Employee.
(ii) If it is determined by Buyer and Seller that Transferred
Employees are not eligible to receive a distribution from the defined
contribution plan sponsored by Seller ("Seller's DC Plan"), Buyer, in its sole
discretion may, but will not be obligated to, accept a plan-to-plan transfer of
such amounts from Seller's DC Plan in accordance with the provisions of this
subsection (d)(ii). If Buyer decides to accept such a transfer, Seller shall
cause the transfer from Seller's DC Plan of assets attributable to the total
vested and forfeitable accrued benefit of each such Transferred Employee to the
defined contribution plan sponsored by Buyer ("Buyer's DC Plan"), which shall
accept such assets and the liability and obligation to pay such transferred
accrued benefit. Any such transfer of assets and liabilities shall be in
accordance with all applicable provisions of the Code and ERISA, and Buyer shall
be responsible for satisfying any and all filing requirements associated with
such transfer. If such transfer is to be made, Buyer shall advise Seller and the
administrator of Seller's DC Plan shall certify in writing the amount of vested
and forfeitable benefits of each affected Transferred Employee, whose
determination shall be conclusive and binding. Seller shall remain exclusively
liable for any claims for benefits by participants or their beneficiaries for
claimed benefits in excess of the amount so determined. Seller's liability shall
continue for the duration of any applicable statute of limitations period. Based
on the administrator's certification, the trustee of Seller's DC Plan shall
segregate the assets attributable to such benefits, identify the composition of
such assets to the trustee of Buyer's defined contribution plan, and, in
accordance with the instructions of the trustee of Buyer's DC Plan, transfer
such assets to the trustee of Buyer's DC Plan. As a condition to any such
transfer, Buyer shall represent in writing that Buyer's DC Plan has received a
current favorable determination from the IRS that it is qualified under Section
40 1(a) of the Code, has been administered in accordance with the Code, ERISA
and the terms of its governing document and that no event has occurred affecting
such plan's qualification. The parties hereto and the trustees and plan
administrators of the respective plans may enter into such additional
agreement(s) as are deemed necessary to effectuate this provision.
(e) Prior to the Closing Date, Seller shall permit Buyer to review
employee performance, job description and other relevant information Buyer deems
necessary to determine which of Seller's employees will be offered continued
employment in accordance with Section 6.9(a). Promptly after the Closing, Seller
shall deliver to Buyer the personnel records and files of Seller for the
Employees, and Seller shall have reasonable access to such records and files
following Closing.
(f) Buyer acknowledges that, as of the Closing, CHP shall continue to
be obligated under the Collective Bargaining Agreement between CHP and United
Food and Commercial Workers International Union Region 18 Canada, Local 61 7P,
and that the employees of CHP will remain as of the Closing employees of CHP,
without regard to Sections 6.9(a)-(e) hereof.
6.10 Noncompetition and Nonsolicitation.
----------------------------------
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(a) Noncompetition. From the Closing Date until the fifth (5th)
anniversary thereof (the "Noncompete Period"), except with Buyer's prior written
-----------------
consent, Seller will not, and will cause its Affiliates not to, (directly or
indirectly) own, manage, operate, join, control, finance or participate in the
ownership, management, operation, control or financing of, or be connected as an
officer, director, employee, principal, agent, representative, consultant,
investor, owner, partner, manager, joint venturer or otherwise with, or permit
their name to be used by or in connection with, any business or enterprise which
is engaged in the processing and marketing of agricultural fiber additives and
substitutes, including but not limited to grain hulls and brans and the
manufacture and marketing of whitened and delignified cellulosic material for
human consumption prepared from oat hulls anywhere in the world.
(b) Hiring of Seller's Employees. During the Noncompete Period,
Seller will not, and will cause its Affiliates not to, (directly or indirectly)
solicit for employment, or induce any other person to hire or offer employment
to, any employee of the Business who is employed by Buyer after the Closing
Date, nor will Seller induce any such employee to terminate his or her
employment with Buyer. Nothing contained in this Section 6.10(b) shall affect
or be deemed to affect in any manner any other provision of this Agreement.
(c) Remedies for Breach. Seller acknowledges that:
(i) The provisions of this Section 6.10 are reasonable and
necessary to protect the legitimate interests of Buyer, that any violation of
this Section 6.10 may result in irreparable injury to Buyer and that damages at
law would not be reasonable or adequate compensation to Buyer for a violation of
this Section 6.10; and
(ii) Buyer shall be entitled to have the provisions of this
Section 6.10 specifically enforced by preliminary and permanent injunctive
relief without the necessity of proving actual damages and without posting bond
or other security, as well as to have an equitable accounting of all earnings,
profits and other benefits arising out of any violation of this Section 6.10. If
the provisions of this Section 6.10 should ever be deemed to exceed the time,
geographic, product or other limitations permitted by applicable law, then such
provisions shall be deemed reformed to the maximum time, geographic, product or
other limitations permitted by law. If a breach of one or more of Sections
6.10(a) or (b) occurs, the period specified in such section or sections shall
abate during the time of such violation and shall not continue to- run until
such violation has been fully and finally cured.
6.11 USDA Patents. Buyer understands that Seller and the United States
------------
Department of Agriculture ("USDA") are in dispute with respect to certain
matters relating to the two patent licenses described on Schedule 4.23 (the
"Licenses"). In order to permit Seller to resolve such differences and to
prevent USDA from asserting claims against Buyer with respect to the licenses,
effective as of the Closing Date, Buyer hereby constitutes and appoints Seller
as its true and lawful agent and attorney-in-fact for the sole purpose of
permitting Seller to use its best efforts (with any costs thereof being borne by
Buyer) to negotiate with USDA mutually agreeable revisions to the Licenses,
provided that the Licenses, as so revised, (i) grant Buyer a non-exclusive right
to use the processes currently covered thereby to produce products for human
consumption, (ii) extend for the same period of time as the Licenses currently
provide, and (iii) provide for a royalty payment not to exceed $25,000 per
annum. Buyer hereby ratifies
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and approves any revisions to the Licenses to which Seller may agree, provided
only that the terms described in clauses (i), (ii) and (iii) are met.
6.12 MIS Services. Following the Closing the Management Information
------------
Systems ("MIS") Department of Seller will continue to provide access to the
PRISM inventory management software, MIS support and J.D. Edwards software in
use in the Business as of the date hereof. Seller's MIS Department will also
provide reasonable help and support to the users of the foregoing software. The
foregoing services will be provided to Buyer or to CHP, as the case may be, for
a period of six (6) months following the Closing Date, subject to cancellation
by Buyer at the end of any month upon fifteen (15) days' advance notice to
Seller. Buyer shall pay to Seller within fifteen (15) days following receipt of
a monthly invoice from Seller a reasonable monthly fee for such services to be
mutually agreed to by the parties in good faith, agreement on such fee being a
condition precedent to Seller providing or continuing to provide such services.
Any additions or replacements of hardware, including personal computers,
peripheral equipment, system equipment or communications equipment, requested by
Buyer or reasonably incurred by Seller in connection with providing the services
described herein will be made at Buyer's sole expense. In no event shall Seller
be required to provide any of the services described above if the provision of
such services could reasonably be expected to materially impair the ability of
Seller's MIS Department to provide service to Seller and its operations.
ARTICLE VII
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CONDITIONS
----------
7.1 Conditions to Obligations of Buyer. The obligations of Buyer to
----------------------------------
purchase the Purchased Assets and to consummate the other transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date (or the waiver by Buyer) of the following conditions:
(a) No preliminary or permanent injunction or other order or decree
by any federal, state or provincial court or Governmental Authority which
prevents the consummation of the sale of the Purchased Assets contemplated
herein shall have been issued and remain in effect (each Party agreeing to
cooperate in all efforts to have any such injunction, order or decree lifted)
and no statute, rule or regulation shall have been enacted by any state or
federal government or Governmental Authority which prohibits the consummation of
the sale of the Purchased Assets;
(b) Buyer shall have received all of Buyer's Required Regulatory
Approvals, in form and substance reasonably satisfactory (including no material
adverse conditions) to it and such approvals shall be final and non-appealable;
(c) Seller shall have performed and complied in all material respects
with the covenants and agreements contained in this Agreement which are required
to be performed and complied with by Seller on or prior to the Closing Date;
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(d) The representations and warranties of Seller set forth in this
Agreement shall be true and correct in all material respects as of the Closing
Date;
(e) Buyer shall have received certificates from an authorized officer
of Seller, dated the Closing Date, to the effect that the conditions set forth
in Section 7.1(c), and (d) have been satisfied by Seller;
(f) Buyer shall have received an opinion from Seller's Delaware and
Canadian counsel reasonably acceptable to Buyer, dated the Closing Date and
reasonably satisfactory in form and substance to Buyer and its counsel, covering
the issues described in Exhibit D hereto;
(g) Seller shall have delivered, or caused to be delivered, to Buyer
at the Closing, Seller's closing deliveries described in Section 3.7;
(h) The Escrow Agent shall have executed and delivered the Escrow
Agreement; and
(i) Since the date of this Agreement, no Material Adverse Effect
shall have occurred and be continuing.
7.2 Conditions to Obligations of Seller. The obligation of Seller to sell
-----------------------------------
the Purchased Assets and the shares and to consummate the other transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date (or the waiver by Seller) of the following conditions:
(a) No preliminary or permanent injunction or other order or decree
by any federal, state or provincial court which prevents the consummation of the
sale of the Purchased Assets contemplated herein shall have been issued and
remain in effect (each Party agreeing to use its Commercially Reasonable Efforts
to have any such injunction, order or decree lifted) and no statute, rule or
regulation shall have been enacted by any state, federal or provincial
government or Governmental Authority in the United States or Canada which
prohibits the consummation of the sale of the Purchased Assets;
(b) Seller shall have received all of Seller's Required Regulatory
Approvals, in form and substance reasonably satisfactory (including no material
adverse conditions) to them and such approvals shall be final and non-
appealable;
(c) All consents and approvals for the consummation of the sale of
the Purchased Assets described in Schedule 4.3(a) shall have been obtained or
waived;
(d) Buyer shall have performed and complied with in all material
respects the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Buyer on or prior to the Closing
Date;
(e) The representations and warranties of Buyer set forth in this
Agreement that are qualified by materiality shall be true and correct as of the
Closing Date and all other
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representations and warranties shall be true and correct in all material
respects as of the Closing Date, in each case as though made at and as of the
Closing Date;
(f) Seller shall have received a certificate from an authorized
officer of Buyer, dated the Closing Date, to the effect that, the conditions set
forth in Sections 7.2(d) and (e) have been satisfied by Buyer;
(g) Seller shall have received an opinion from Buyer's counsel
reasonably acceptable to Seller, dated the Closing Date and satisfactory in form
and substance to Seller and its Delaware and Canadian counsel, covering the
issues described in Exhibit E hereto;
(h) Buyer shall have delivered, or caused to be delivered, to Seller
at the Closing, Buyer's closing deliveries described in Section 3.8; and
(i) The Escrow Agent shall have executed and delivered the Escrow
Agreement.
ARTICLE VIII
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INDEMNIFICATION
---------------
8.1 Indemnification.
---------------
(a) Buyer shall indemnify, defend and hold harmless Seller, its
Affiliates and their respective officers, directors, employees, shareholders,
representatives and agents (each, a "Seller's Indemnitee") from and against any
-------------------
and all claims, demands, suits, losses, liabilities, damages, obligations,
payments, costs and expenses (including, without limitation, the costs and
expenses of any and all actions, suits, proceedings, assessments, judgments,
settlements and compromises relating thereto and reasonable attorneys' fees and
reasonable disbursements in connection therewith) (each, an "Indemnifiable
-------------
Loss"), asserted against or suffered by any Seller's Indemnitee relating to,
- ----
resulting from or arising out of (i) any breach by Buyer of any representations,
warranties or covenants contained in this Agreement, (ii) Buyer's failure to pay
or otherwise satisfy when due, the Assumed Liabilities and Obligations, or (iii)
any Third Party Claims against a Seller's Indemnitee arising out of or in
connection with Buyer's ownership or operation of Purchased Assets on or after
the Closing Date.
(b) Seller shall indemnify, defend and hold harmless Buyer, its
Affiliates (including, after Closing, CHP) and their respective officers,
directors, members, employees, shareholders, representatives and agents (each, a
"Buyer Indemnitee") from and against any and all Indemnifiable Losses asserted
against or suffered by any Buyer Indemnitee relating to, resulting from or
arising out of (i) any breach by Seller of any representations, warranties or
covenants contained in this Agreement, (ii) the Excluded Liabilities, (iii) any
Third Party Claims against a Buyer Indemnitee arising out of or in connection
with Seller's ownership or operation of the Purchased Assets or the Business on
or prior to the Closing Date, including but not limited to any royalty or other
claims by the USDA under the patent licenses described on Schedule 4.23, (iv)
any Third Party Claims against a Buyer Indemnitee arising out of or in
connection with
39
<PAGE>
Seller's ownership or operation of the Excluded Assets, (v) the presence prior
to the Closing Date on, under or from the Real Property or any other property
occupied by CHP or the Seller of any Hazardous Substances, and violations of, or
noncompliance with, prior to the Closing Date, any Environmental Permit or any
Environmental Law, or (vi) the matters listed on Schedule 8.1.
(c) In addition to and without limiting the generality of Section
8.1(b), the Seller shall indemnify the Buyer Indemnitees and save them fully
harmless against any Taxes and customs duties, fees, assessments or similar
changes in the nature of a tax, Canada Pension Plan and provincial pension plan
contributions, unemployment and employment insurance payments, workers'
compensation premiums, together with any installments with respect thereto of
CHP ("CHP Taxes"), and any costs, expenses and liabilities including reasonable
legal fees which may be suffered or incurred by any of the Buyer Indemnitees as
a result of, or arising out of or relating to any CHP Taxes required to be paid
by CHP or any successor relating to any period ended on or before the Closing
Date or the portion of any CHP Taxes for any taxation year or period ending
after the Closing Date that is attributable to the portion of such year or
period ending on the Closing Date, except to the extent that such CHP Taxes were
specifically accrued as a liability on the CHP Financial Statements or included
as Accounts Payable in the calculation of the Working Capital Amount. Whenever
it is necessary for purposes of this Section 8.1(c) to determine liability for
CHP Taxes for a taxation year or period that begins before and ends after the
Closing Date, the determination shall be made by assuming that the entity had a
taxation year or period which ended immediately before the Closing Date. This
indemnity shall survive for the same period as the representations, warranties,
covenants and obligations of the Seller with respect to CHP Taxes which is set
out in Section 10.3 of this Agreement.
(d) Notwithstanding anything to the contrary contained herein:
(i) Any Person entitled to receive indemnification under this
Agreement (an "Indemnitee") shall use Commercially Reasonable Efforts to
----------
mitigate all losses, damages and the like relating to a claim under these
indemnification provisions, including availing itself of any defenses,
limitations, rights of contribution, claims against third Persons and other
rights at law or equity. The Indemnitee's Commercially Reasonable Efforts shall
include the reasonable expenditure of money to mitigate or otherwise reduce or
eliminate any loss or expenses for which indemnification would otherwise be due,
and the Indemnitee shall advise Indemnitor promptly of such expenditure (or
provide Indemnitor with the opportunity to pay such expenditures directly).
The Indemnitor shall promptly reimburse the Indemnitee for the Indemnitee's
reasonable expenditures in undertaking the mitigation (together with interest
thereon from the date of payment thereof to the date of repayment at the "prime
rate" as published in The Wall Street Journal).
-----------------------
(ii) Any Indemnifiable Loss shall be net of (i) the dollar amount
of any insurance or other proceeds actually received by the Indemnitee or any of
its Affiliates with respect to the Indemnifiable Loss, and (ii) the present
value of income tax benefits to the Indemnitee, to the extent realized by the
Indemnitee, but such net amount shall be increased to give effect to the Income
Taxes payable as a result of the receipt of any indemnification payments
hereunder so that the Indemnitee is held harmless after Tax. Any Party seeking
40
<PAGE>
indemnity hereunder shall use best efforts to make claims (including both costs
of defense and indemnity) under applicable insurance policies with respect to
any such Indemnifiable Loss.
(iii) The amount of any indemnity claim submitted under this
Section 8.1 as damages or by way of indemnification as determined without regard
to this Section 8.1 (d)(iii) shall be increased by an amount equal to the rate
of goods and services tax applicable to such amount, if any.
(e) The expiration or termination of any representation or warranty
shall not affect the Parties' obligations under this Section 8.1 if the
Indemnitee provided the Person required to provide indemnification under this
Agreement (the "Indemnifying Party") with proper notice of the claim or event
------------------
for which indemnification is sought prior to such expiration, termination or
extinguishment.
8.2 Defense of Claims.
-----------------
(a) If any Indemnitee receives notice of the assertion of any claim
or of the commencement of any claim, action, or proceeding made or brought by
any Person who is not a Party to this Agreement or any Affiliate of a Party to
this Agreement (a "Third Party Claim") with respect to which indemnification is
-----------------
to be sought from an Indemnifying Party, the Indemnitee shall give such
Indemnifying Party reasonably prompt written notice thereof, but in any event
such notice shall not be given later than twenty (20) calendar days after the
Indemnitee's receipt of notice of such Third Party Claim. Such notice shall
describe the nature of the Third Party Claim in reasonable detail and shall
indicate the estimated amount if practicable, of the Indemnifiable Loss that has
been or may be sustained by the Indemnitee. The Indemnifying Party will have the
right to participate in or, by giving written notice to the Indemnitee, to elect
to assume the defense of any Third Party Claim at such Indemnifying Party's
expense and by such Indemnifying Party's own counsel, provided that the counsel
for the Indemnifying Party who shall conduct the defense of such Third Party
Claim shall be reasonably satisfactory to the Indemnitee. The Indemnitee shall
cooperate in good faith in such defense at the Indemnifying Party's expense. If
an Indemnifying Party elects not to assume the defense of any Third Party Claim,
the Indemnitee may compromise or settle such Third Party Claim over the
objection of the Indemnifying Party, which settlement or compromise shall
conclusively establish the Indemnifying Party's liability pursuant to this
Agreement.
(b) (i) It within twenty (20) calendar days after an Indemnitee
provides written notice to the Indemnifying Party of any Third Party Claims, the
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in Section 8.2 (a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party shall
fail to take reasonable steps necessary to defend diligently such Third Party
Claim within twenty (20) calendar days after receiving notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense and the Indemnifying
Party shall be liable for all reasonable expenses thereof.
41
<PAGE>
(ii) Without the prior written consent of the Indemnitee, the
Indemnifying Party shall not enter into any settlement of any Third Party Claim
which would lead to liability or create any financial or other obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder. If a firm offer is made to settle a Third Party
Claim without leading to liability or the creation of a financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party shall give written notice
to the Indemnitee to that effect. If the Indemnitee fails to consent to such
firm offer within twenty (20) calendar days after its receipt of such notice,
the Indemnifying Party shall be relieved of its obligations to defend such Third
Party Claim and the Indemnitee may contest or defend such Third Party Claim. In
such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will be the amount of such settlement offer plus reasonable costs
and expenses paid or incurred by Indemnitee up to the date of said notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "Direct Claim") shall be
------------
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof; stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, and the Indemnifying Party shall have a
period of twenty (20) calendar days within which to respond to such Direct
Claim. If the Indemnifying Party does not respond within such twenty (20)
calendar day period, the Indemnifying Party shall be deemed to have accepted
such claim. if the Indemnifying Party rejects such claim, the Indemnitee will
be free to seek enforcement of its right to indemnification under this
Agreement.
(d) If the amount of any Indemnifiable Loss, at any time subsequent
to the making of an indemnity payment in respect thereof, is reduced by
recovery, settlement or otherwise under or pursuant to any insurance coverage,
or pursuant to any claim, recovery, settlement or payment by, from or against
any other entity, the amount of such reduction, less any costs, expenses or
premiums incurred in connection therewith (together with interest thereon from
the date of payment thereof to the date or repayment at the "prime rate" as
published in The Wall Street Journal) shall promptly be repaid by the Indemnitee
-----------------------
to the Indemnifying Party.
(e) A failure to give timely notice as provided in this Section 8.2
shall not affect the rights or obligations of any Party hereunder except if, and
only to the extent that, as a result of such failure, the Party which was
entitled to receive such notice was actually prejudiced as a result of such
failure.
(f) Seller shall not have any obligation to indemnify the Buyer
Indemnitees for claims under Section 8.1(b)(i) (other than claims under Sections
4.12 or 4.20, which shall be governed by paragraph (g)) until the Indemnifiable
Losses of the Buyer Indemnitees with respect to such claims exceed in the
aggregate $50,000, and then only for amounts in excess of $50,000.
(g) Buyer agrees that any claims for indemnification from Seller
relating to environmental matters (other than the matters described in Section
8.1 (b)(vi)) shall be brought exclusively under Section 8.l%(v) and not under
any other provision of Section 8.1(b). In addition, Seller shall not have any
obligation to indemnify the Buyer Indemnities for claims for
42
<PAGE>
indemnification under Section 8.1%(v), until the Indemnifiable Losses of the
Buyer Indemnitees with respect to such claims exceeds in the aggregate $50,000,
and then only for amounts in excess of $50,000. In no event shall Seller's
liability for claims under Section 8.1%(v) exceed $3,500,000. In no event shall
Seller's liability for claims under Section 8.1(b) or Section 8.1(c) or under
any other Section of this Agreement exceed the Purchase Price.
8.3 Arbitration.
-----------
All disputes under this Article 8 shall be settled by arbitration in
New York City, New York, before a single arbitrator pursuant to the rules of the
American Arbitration Association. Arbitration may be commenced at any time by
any party hereto giving written notice to each other party to a dispute that
such dispute has been referred to arbitration under this Section 8.3. The
arbitrator shall be selected by the joint agreement of Seller and Buyer, but if
they do not so agree within twenty days after the date of the notice referred to
above, the selection shall be made pursuant to the rules from the panels of
arbitrators maintained by such Association. Any award rendered by the
arbitrator shall be conclusive and binding upon the parties hereto; provided,
however that any such award shall be accompanied by a written opinion of the
arbitrator giving the reasons for the award. This provision for arbitration
shall be specifically enforceable by the parties and the decision of the
arbitrator in accordance herewith shall be final and binding and there shall be
no right of appeal therefrom. Each party shall pay its own expenses or
arbitration and the expenses of the arbitrator shall be equally shared;
provided, however, that if in the opinion of the arbitrator of any claim for
indemnification or any defense or objection thereto was unreasonable, the
arbitrator may assess, as part of his award, all of any part of the arbitration
expenses of the other party (including reasonable attorneys' fees) and of the
arbitrator against the party raising such unreasonable claim, defense or
objection.
To the extent that arbitration may not be legally permitted hereunder
and the parties to any dispute hereunder may not at the time of such dispute
mutually agree to submit such dispute to arbitration any party may commence a
civil action in a court of appropriate jurisdiction to solve disputes hereunder.
Nothing contained in this Section 8.3 shall prevent the parties from settling
any dispute by mutual agreement at any time.
8.4 No Third Party Beneficiary. The parties hereto acknowledge and agree
--------------------------
that the provisions of this Article 8 are solely for the benefit of the
Indemnified Parties and are not intended, and shall not create, any third-party
beneficiary rights in any other person or entity.
ARTICLE IX
----------
TERMINATION
-----------
9.1 Termination.
-----------
(a) This Agreement may be terminated at any time prior to the Closing
Date by mutual written consent of Seller and Buyer.
(b) This Agreement may be terminated by Seller or Buyer, if:
43
<PAGE>
(i) any Federal or state court of competent jurisdiction shall
have issued an order, judgment or decree permanently restraining, enjoining or
otherwise prohibiting the Closing, and such order, judgment or decree shall have
become final and nonappealable; or
(ii) the Closing contemplated hereby shall have not occurred on
or before January 31, 2000 (the "Termination Date") provided that the right to
----------------
terminate this Agreement under this Section 9.1(b) (ii) shall not be available
to any Party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date.
(c) This Agreement may be terminated by Buyer if any of Buyer's
Required Regulatory Approvals, the receipt of which is a condition to the
obligation of Buyer to consummate the Closing as set forth in Section 7.1(c),
shall have been denied (and a petition for rehearing or refiling of an
application initially denied without prejudice shall also have been denied) or
shall have been granted but are not in form and substance reasonably
satisfactory to Buyer because such Approval contains conditions that would have
a Material Adverse Effect or a Material Adverse Effect on the business, assets,
operations or condition (financial or otherwise) of Buyer.
(d) This Agreement may be terminated by Seller, if any of Seller's
Required Regulatory Approvals, the receipt of which is a condition to the
obligation of Seller to consummate the Closing as set forth in Section 7.2(c),
shall have been denied (and a petition for rehearing or refiling of an
application initially denied without prejudice shall also have been denied) or
shall have been granted but are not in form and substance reasonably
satisfactory to Seller, because such Approval contains conditions that would
have a material adverse effect on the business, assets, operations or condition
(financial or otherwise) of Seller.
(e) This Agreement may be terminated prior to Closing by Buyer if
there has been a material violation or breach by Seller of any covenant,
representation or warranty contained in this Agreement and such violation or
breach is not cured to Buyer's satisfaction in its sole discretion exercised in
good faith by the earlier of the Closing Date or the date ten (10) days after
receipt by Seller of notice specifying particularly such violation or breach,
and such violation or breach has not been waived by Buyer.
(f) This Agreement may be terminated prior to Closing by Seller if
there has been a material violation or breach by Buyer of any covenant,
representation or warranty contained in this Agreement and such violation or
breach is not cured by the earlier of the Closing Date or the date ten (10) days
after receipt by Buyer of notice specifying particularly such violation or
breach, and such violation or breach has not been waived by Seller.
9.2 Procedure and Effect of No-Default Termination. In the event of
----------------------------------------------
termination of this Agreement by either or both of the Parties pursuant to this
Section 9, written notice thereof shall forthwith be given by the terminating
Party to the other Party, whereupon, if this Agreement is terminated pursuant to
any of Sections 9.1(a) through (d), the liabilities of the Parties hereunder
will terminate, except as otherwise expressly provided in this Agreement, and
thereafter neither Party shall have any recourse against the other by reason of
this Agreement.
44
<PAGE>
ARTICLE X
---------
MISCELLANEOUS PROVISIONS
------------------------
10.1 Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified or supplemented only by written agreement of
Seller and Buyer.
10.2 Waiver of Compliance: Consents. Except as otherwise provided in this
------------------------------
Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the Party entitled to
the benefits thereof only by a written instrument signed by the Party granting
such waiver, but such waiver of such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
10.3 Survival of Representations. Warranties. Covenants and Obligations.
------------------------------------------------------------------
(a) The representations and warranties given or made by any Party to
this Agreement or in any certificate or other writing furnished in connection
herewith shall survive the Closing for a period of two (2) years after the
Closing Date and shall thereafter terminate and be of no further force or
effect, except that (a) all representations and warranties relating to Taxes and
Tax Returns, title to the Purchased Assets or the Shares shall survive the
Closing for the period of the applicable statutes of limitation or the
applicable assessment or reassessment period, as the case may be, plus any
extensions or waivers thereof; (b)the representations and warranties in Section
4.12 hereof shall survive the Closing for a period of five (5) years after the
Closing Date; and (c) any representation or warranty as to which a claim
(including without limitation a contingent claim) shall have been asserted prior
to the expiration of such representation or warranty shall continue in effect
with respect to such claim until such claim shall have been finally resolved or
settled. Each Party shall be entitled to rely upon the representations and
warranties of the other Party or Parties set forth herein, notwithstanding any
investigation or audit conducted before or after the Closing Date or the
decision of any Party to complete the Closing.
(b) The covenants and obligations of Seller and Buyer set forth in
this Agreement, including without limitation the indemnification obligations of
the parties under Article VIII hereof, shall survive the Closing indefinitely,
and the Parties shall be entitled to the full performance thereof by the other
Parties hereto without limitation as to time or amount (except as otherwise
specifically set forth herein); provided that the obligations of Seller under
Section 8.1 (b)(v) shall expire five (5) years after the Closing Date, so that
Seller shall have no further responsibility for indemnification with respect to
environmental matters after such period except pursuant to Section 8.1 (b)(vi).
10.4 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by facsimile
transmission, or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
address (or at such other address or facsimile number for a Party as shall be
45
<PAGE>
specified by like notice; provided however, that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to Seller, to:
DCV, Inc.
3521 Silverside Road
Quillen Building
Wilmington, DE 19810
Attention: President
Facsimile: (302) 695-5350
with a copy to:
Duane, Morris & Heckscher LLP
1201 Market Street
Wilmington, DE 19801
Attention: John F. Grossbauer, Esq.
Facsimile: (302) 571-5560
(b) if to Buyer, to:
Opta Food Ingredients, Inc.
25 Wiggins Avenue
Bedford, MA 01730
Attention: Lewis C. Paine, III
Chairman and Chief Executive Officer
Facsimile: (781) 276-5102
with a copy to:
Mintz, Levin, Cohen, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Douglas A. Zingale,
Esquire Mary-Laura Greely, Esquire
Facsimile: (617) 542-2241
and
Blake, Cassels & Graydon
Box 25, Commerce Court West
Toronto, Canada M5L 1A9
Attention: Gordon A. M. Curie, Esquire
Facsimile: (416) 863-2653
46
<PAGE>
10.5 Assignment. This Agreement and all of the provisions hereof shall be
----------
binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any Party
hereto, including by operation of law, without the prior written consent of each
other Party, such consent not to be unreasonably withheld, nor is this Agreement
intended to confer upon any other Person except the Parties hereto any rights,
interests, obligations or remedies hereunder. No provision of this Agreement
shall create any third party beneficiary rights in any employee or former
employee of Seller (including any beneficiary or dependent thereof) in respect
of continued employment or resumed employment, and no provision of this
Agreement shall create any rights in any such Persons in respect of any benefits
that may be provided, directly or indirectly, under any employee benefit plan or
arrangement except as expressly provided for thereunder. Notwithstanding the
foregoing, Buyer may assign its rights, interests and obligations hereunder at
any time to an Affiliate, provided that no such assignment shall relieve Buyer
from its obligations hereunder.
10.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the law of the State of Delaware (without giving effect to
conflict of law principles) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies. THE PARTIES
HERETO AGREE THAT VENUE IN ANY AND ALL ACTIONS AND PROCEEDINGS RELATED TO THE
SUBJECT MATTER OF THIS AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS IN THE
STATE OF DELAWARE, WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION FOR SUCH
PURPOSE, AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION
OF SUCH COURTS AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN
ANY MANNER RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
10.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Severability. Any provision of this Agreement that is invalid or
------------
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 Interpretation. The articles, section and schedule headings
--------------
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the Parties and shall not in any way affect the meaning
or interpretation of this Agreement.
10.10 Schedules and Exhibits. Except as otherwise provided in this
----------------------
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are specifically made a
47
<PAGE>
part of this Agreement. Any item disclosed in a Schedule hereto in response to
one Section of this Agreement shall be deemed disclosed in response to any other
Section hereof only if the item disclosed in the Schedule not referred to
specifically cross references the representation and warranty to be qualified by
such item or the relevance of any item in any Schedule to such representation
and warranty is reasonably apparent on its face.
10.11 Entire Agreement. This Agreement, the Confidentiality Agreement, the
----------------
Assignment and Assumption Agreement and the Bill of Sale, including the
Exhibits, Schedules, documents, certificates and instruments referred to herein
or therein, embody the entire agreement and understanding of the Parties hereto
in respect of the transactions contemplated by this Agreement.
10.12 Bulk Sales Laws. Buyer acknowledges that, notwithstanding anything
---------------
in this Agreement to the contrary, Seller will not comply with the provision of
the bulk sales laws of any jurisdiction in connection with the transactions
contemplated by this Agreement. Buyer hereby waives compliance by Seller with
the provisions of the bulk sales laws of all applicable jurisdictions; provided,
however, that Seller shall fully and promptly indemnify, defend and hold Buyer
harmless.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
DCV, INC.
By:_______________________________
Name:
Title:
OPTA FOOD INGREDIENTS, INC.
By:______________________________
Name:
Title:
48
<PAGE>
Notes To Disclosure Schedules
The following is a list of Schedules furnished in connection with the
Purchase and Sale Agreement dated as of December 30, 1999, between DCV, Inc.
(the "Company") and Opta Food Ingredients, Inc., ("Opta"). The inclusion of any
information in the Schedules shall not be deemed to be an admission or
acknowledgment, in and of itself, that such information is material to, or
outside the ordinary course of business of, the Company. Opta hereby agrees to
furnish supplementally a copy of any omitted schedule to the Commission upon
request.
Schedule 1.1(a)
Seller's Knowledge
- ------------------
Schedule 2.1
Rolling Stock
- -------------
Schedule 3.5
Allocation of Purchase Price
- ----------------------------
Schedule 4.3(a)
Consents and Approvals; No Violation
- ------------------------------------
Schedule 4.3(b)
Seller's Required Regulatory Approvals
- --------------------------------------
Schedule 4.4
Financial Statements
- --------------------
Schedule 4.5
Undisclosed Liabilities
- -----------------------
Schedule 4.6
Absence of Certain Changes or Events
- ------------------------------------
Schedule 4.7
Title and Related Matters
- -------------------------
Schedule 4.8(a)
Real Property Leases
- --------------------
Schedule 4.8(b)
Tangible Personal Property Leases
- ---------------------------------
** Transferable.
<PAGE>
Schedule 4.11
Insurance
- ---------
Schedule 4.12
Environmental Matters
- ---------------------
Schedule 4.13
Employees
- ---------
Schedule 4.14
Labor Matters
- -------------
Schedule 4.15
ERISA; Benefit Plans
- --------------------
Schedule 4.16
Owned Real Property
- -------------------
Schedule 4.18
Certain Contracts and Arrangements
- ----------------------------------
Schedule 4.19
Litigation and Claims
- ---------------------
Schedule 4.20
Permits
- -------
Schedule 4.21
Taxes
- -----
Schedule 4.22
Year 2000 Qualification
- -----------------------
Schedule 4.23
Patents, Copyrights and Trademarks
- ----------------------------------
Schedule 5.3(a)
Consents and Approvals (Buyer)
- ------------------------------
Schedule 5.3(b)
Buyer's Required Regulatory approvals
- -------------------------------------
** Transferable.
<PAGE>
Schedule 6.1
Conduct of Business Relating to the Purchased Assets
- ----------------------------------------------------
Schedule 8.1
Additional Indemnification Items
- --------------------------------
** Transferable.
<PAGE>
Exhibit 99.1
Monday January 3, 9:01 am Eastern Time
Company Press Release
Opta Food Ingredients Purchases Oat Fiber Company
BEDFORD, Mass.--(BUSINESS WIRE)--Jan. 3, 2000--Opta Food Ingredients, Inc.
(Nasdaq:OPTS - news) today announced it has acquired privately held Canadian
---- ----
Harvest of Cambridge, MN. With operations in the U.S. and Canada, and 1999
global sales of approximately $7 million, Canadian Harvest is a major
international manufacturer and supplier of dietary fiber. The acquisition makes
Opta the world's largest supplier of oat fiber to the food industry.
Under the terms of the acquisition, Opta paid approximately $12 million in cash
to acquire Canadian Harvest, including its U.S. operations and Canadian
operations from DCV, Inc., a Delaware-based holding company. The transaction
closed December 31 and will be reflected in the company's balance sheet as of
December 31, 1999. Opta will continue to operate the business as Canadian
Harvest, which will report directly to Lewis C. Paine, Opta chairman and chief
executive officer.
"The acquisition of Canadian Harvest solidifies Opta's position as the leading
global oat fiber supplier to the food industry," said Paine. "This purchase is
consistent with the acquisition strategy we outlined in the past. It will
immediately add incremental revenue and will enable Opta to strengthen its
current business activities and attract new customers, by giving us access to a
highly complementary value-added product line, additional fiber production
capacity, and a strong customer portfolio of major domestic and international
food companies that has little overlap with Opta's existing customer base."
"We believe we are well positioned for growth, because we are now the only oat
fiber company in the world with three separate sources of supply. In addition,
we see excellent synergies for cross selling product lines and expanding
international sales," he added.
Canadian Harvest is well known and highly regarded throughout the food industry
for its line of oat fiber products. Its product line includes Snowite(R) oat
fibers as well as a line of stabilized fibers. It has two manufacturing
facilities located in Cambridge, Minn. and St. Thomas, Ontario. Paine noted that
Opta plans to retain all employees in both Canadian Harvest locations and to
expand production capacity at the Minnesota plant this year. Once the two newly
acquired plants are at full capacity, he said, the company plans to establish an
overseas oat fiber processing facility. Headquartered in Bedford, Massachusetts
and with locations in Louisville, Kentucky; Galesburg, Illinois; and St. Louis,
Missouri, Opta Food Ingredients, Inc. is a leading innovator, manufacturer and
marketer of proprietary food ingredients that improve the nutritional content,
healthfulness, texture and taste of its customers' food products. Opta's food
ingredients are used by more than 200 food companies, including ten of the 15
largest U.S. consumer packaged food companies and three of the world's largest
quick service restaurant chains. For more information, visit www.opta-food.com.
-----------------
Note: This press release contains forward-looking statements based on
management's current expectations. Factors which could cause actual results to
differ from such expectations are discussed in the Company's periodic reports
filed with the Securities and Exchange Commission (including Reports on Form 10-
K and Form 10-Q) and include unanticipated difficulties integrating the
operations and personnel of newly acquired businesses into Opta's continuing
operations; the size and timing of significant orders, as well as deferral of
orders, over which the Company has no control; the extended product testing and
launch cycles of the Company's potential customers; the variation of the
Company's sales cycles from customer to customer; increased competition posed by
food ingredient manufacturers; changes in pricing policies by the Company or its
competitors; possible delays in securing production equipment and retrofitting
production facilities and processes; the Company's success in expanding its
sales and marketing programs and its ability to gain increased market acceptance
for its existing product lines; the Company's ability to timely develop and
successfully introduce new products in its pipeline at acceptable costs; the
potential for significant quarterly variations in the mix of sales among the
Company's products; and general economic conditions.
==============
<PAGE>
Contact:
Opta Food Ingredients, Inc.
Kristina Rychlik, Director, Corporate Information
(781) 276-5171
[email protected]
----------------------
or
Scott Kumf, Chief Financial Officer
(781) 276-5153
[email protected]
-------------------
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