SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Act of 1934
November 19, 1998
------------------------------------------------
Date of Report (Date of earliest event reported)
Bell Microproducts Inc.
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(Exact name of Registrant as specified in its charter)
California
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(State or other jurisdiction of incorporation)
005-43709 94-3057566
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(Commission File No.) (IRS Employer Identification Number)
1941 Ringwood Avenue
San Jose, California 95131-1721
(408) 451-9400
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(Address of Principal Executive Offices)
Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On November 19, 1998 (the "Closing Date"), Bell Microproducts Inc., a
California corporation (the "Company"), completed its acquisition of
Toronto-based Tenex Data ("Tenex"), division of Axidata Inc. ("Axidata").
The acquisition was accounted for as a purchase. The consideration paid
by the Company to Axidata was approximately CDN$9.4 million consisting of (i)
CDN$8.8 million as a 90-day loan to Axidata for the accounts receivable (which
loan principal will be reduced by the amounts collected on such receivables) and
(ii) CDN$632,000 (representing the net book value of the other purchased assets
minus the net book value of the assumed liabilities plus CDN$1.5 million). The
Company financed the acquisition by using its bank line. In addition,
Abitibi-Consolidated, Inc., parent company of Axidata, guaranteed the
performance of Axidata.
Tenex is a leading Canadian computer products distributor and the only
major distributor in Canada focused on the mass storage components and systems
market. Tenex distributes disk, tape and optical drives in addition to other
data storage subsystems. Tenex reported revenues of US$35 million in 1997.
Item 7. Financial Statements and Exhibits
(a) The purchase of Tenex does not meet the materiality threshold of
Regulation S-K and therefore the Company will not present audited financial
statements nor pro forma financial information related thereto.
(b) Not applicable
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<PAGE>
(c) Exhibit
2.4 Asset Purchase Agreement between the Company, Axidata,
Bell Microproducts Canada-Tenex Data ULC and Abitibi Consolidated Inc. dated
November 19, 1998.
Certain schedules to the Agreement are listed on pages (7) and
(8) thereto and the Registrant agrees to furnish them supplementally to the
Securities and Exchange Commission upon request.
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<PAGE>
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.
Bell Microproducts Inc.
By: /s/ Bruce M. Jaffe
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Senior Vice President
and CFO
Dated: December 4, 1998
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<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT
TO
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
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Bell Microproducts Inc.
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November 19, 1998
================================================================================
<PAGE>
INDEX TO EXHIBIT
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
2.4 Asset Purchase Agreement between the Company, 8
Axidata, Bell Microproducts Canada-Tenex Data
ULC and Abitibi Consolidated Inc. dated
November 19, 1998.
ASSET PURCHASE AGREEMENT
DATED the 19th day of November, 1998.
B E T W E E N:
AXIDATA INC., a corporation amalgamated
under the laws of Canada
(the "Vendor" or "Axidata")
- and -
BELL MICROPRODUCTS CANADA - TENEX DATA ULC,
an unlimited liability corporation
incorporated under the laws of the Province
of Nova Scotia
(the "Purchaser")
- and -
BELL MICROPRODUCTS INC., a corporation
incorporated under the laws of the State of
California
("BMI")
- and -
ABITIBI CONSOLIDATED INC., a corporation
amalgamated under the laws of Canada
("ACI")
The parties agree as follows:
Article 1
INTERPRETATION
1.1 Definitions.
In this Agreement, except as otherwise expressly provided, capitalized
words or expressions shall have the meanings set out below:
(a) "Accounts Receivable" means all trade accounts receivable and
other amounts receivable owing to Axidata relating solely to
the Purchased Business which are outstanding on the Effective
Date (including vendor/supplier accounts receivable such as,
for example, volume rebates, co-op and price protection) or
accrued for in the Effective Date Balance Sheet and the full
benefit of all security for such amounts, but does not include
any amounts owing from shareholders and
<PAGE>
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Affiliates of Axidata or specific Seagate receivables in
dispute as agreed upon by the parties.
(b) "Adjustment Date" means the date which is five Business Days
after the date on which the Effective Date Balance Sheet or
the Adjusted Effective Date Balance Sheet, as the case may be,
is final and binding on the parties, as contemplated by
Article 2 of this Agreement.
(c) "Affiliate" shall have the meaning given it in the Business
Corporations Act (Ontario).
(d) "Adjusted Effective Date Balance Sheet" has the meaning
attributed thereto in section 2.7.
(e) "Agreement" means this agreement and includes all schedules
set out in section 1.3 of this agreement.
(f) "Assumed Liabilities" means:
(i) ordinary trade accounts payable, including accruals
and accruals for customer rebates, relating to the
Purchased Business as at the Effective Date (listed
as "accounts payable" and "accounts payable other" in
Schedule 2.1);
(ii) Liabilities arising from and after the Effective Date
under and pursuant to the Contracts (except for those
equipment leases that will be dealt with in
accordance with section 2.13);
(iii) Liabilities which are specifically assumed by the
Purchaser pursuant to Article 4 of this Agreement;
and
(iv) all Liabilities related to the Purchased Assets which
constitute Permitted Encumbrances,
as set out in the October 31 Balance Sheet and as will be
adjusted in accordance with the Effective Date Balance Sheet.
(g) "Authority" means any governmental or regulatory authority,
body, agency or department, whether federal, provincial,
municipal or local, and any court, tribunal or similar body.
(h) "Business Day" means every day except a Saturday, Sunday or
any other day on which principal commercial banks are not
permitted to be open in the City of Toronto, Ontario.
(i) "Cash" means all cash, bank balances, monies in possession of
banks and other depositories, term or time deposits and
similar cash items and cash equivalents of, owned or held by
or for the account of Axidata in connection with the Purchased
Business.
(j) "Claims" means any and all losses (excluding loss of profits),
damages, taxes, expenses, liabilities (whether accrued,
actual, contingent or otherwise), claims, demands, actions of
whatever nature or kind, including legal fees and expenses on
a solicitor/attorney and client basis and other professional
fees and disbursements.
(k) "Closing" means the completion of the transactions described
in this Agreement, "Closing
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Date" or "Date of Closing" means November 19, 1998 (or such
other date as the parties may agree upon) and "Time of
Closing" or "Closing Time" means 5:00 p.m. at the offices of
Goodman Phillips & Vineberg (250 Yonge Street, Suite 2400,
Toronto, Ontario) on the Closing Date (or such other time or
place as the parties may agree upon).
(l) "Effective Date Balance Sheet" means the audited balance sheet
of the Purchased Business including Assumed Liabilities as at
the Effective Date, together with a calculation of the Net
Assets.
(m) "Competitive Information" means competitively sensitive
information of the Vendor, including customer lists, pricing,
volumes and specific product mix by customer or region, and
supplier information relating to specific contract terms such
as rebates and co-op advertising terms and pricing.
(n) "Confidential Information" means any information, the
disclosure of which would result in the violation of any
confidentiality covenant to which the Vendor is a party.
(o) "Contracts" means all oral or written purchase contracts,
purchase orders, supply commitments, contracts, agreements,
licences, equipment warranties, commitments and other
arrangements of Axidata relating solely to the Purchased
Business, including equipment leases.
(p) "Effective Date" means 11:59 p.m. on October 31, 1998.
(q) "Encumbrance" means any mortgage, lien, pledge, charge,
security interest or other encumbrance whatsoever.
(r) "Environmental, Health and Safety Laws" means federal,
provincial or local laws, statutes, regulations, ordinances
and other provisions having the force of law, all judicial and
administrative orders and determinations, if legally binding,
concerning public health and safety, worker health and safety,
and pollution or protection of the environment, including
without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment,
storage, disposal, distribution, labelling, testing,
processing, discharge, release, threatened release, control,
or cleanup of any Hazardous Substances.
(s) "Equipment" means all machinery, furniture, office, handling
and other equipment and accessories owned by Axidata and used
in connection with the Purchased Business, including
computers, peripherals and MIS software, and including those
listed in Schedule 1.3, and including all tangible personal
property relating solely and exclusively to the Purchased
Business, that are not included in Inventories.
(t) "Excluded Assets" means Accounts Receivable, book Cash
(including outstanding cheques, which are assumed cashed),
amounts owing from shareholders or Affiliates of Axidata, and
all property, assets and rights of every kind and description
wheresoever situate of Axidata other than those used solely
and exclusively in connection with the Purchased Business and
includes, without limitation, the use of the "Tenex Data" name
and the use of the "Tenex Data
<PAGE>
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Corporation" name in connection with certain private label
magnetic media products sold by the Compu-Redi/Tenex division
of the Vendor to end users.
(u) "Financial Statements" means the October 31 Balance Sheet, a
copy of which is attached as Schedule 2.1.
(v) "Goodwill" means the exclusive right of the Purchaser to
represent itself as carrying on the Purchased Business in
continuation of and in succession to Axidata and including the
Telephone, Fax and Modem Numbers, all choses in action and
other intangibles relating to the Purchased Business which do
not form part of the Intellectual Property or Records but, for
greater certainty, does not include the use of the "Tenex"
name alone, in connection with the end user computer
consumable supplies business conducted by Axidata (and its
assigns) under the "Compu-Redi/Tenex" name or the use of the
"Tenex Data" name and use of the "Tenex Data Corporation" name
in connection with certain private label magnetic media
products sold by the Compu-Redi/Tenex division of the Vendor
to end users.
(w) "Governmental Authorization" means any authorization, permit,
approval, grant, licence, quota, consent, commitment, right or
privilege issued or granted by any Authority.
(x) "Hazardous Substances" means polychlorinated byphenyls,
asbestos, urea formaldehyde foam insulation, or any other
solid, liquid, gas, sound, radiations or other substance or
material that is prohibited, controlled or regulated under
Environmental Health and Safety Laws.
(y) "Intellectual Property" means all right, title, and interest
of Axidata in and to the patents, industrial designs,
trademarks, service marks, trade names, copyrights, domain
names, technology, inventions, know-how, techniques, trade
secrets, and processes or other intellectual property rights
(whether registered or unregistered), including any
application for any of the foregoing, necessary for,
exclusively relating to, or exclusively used in the Purchased
Business and all confidential and proprietary information
related thereto, and including the intellectual property set
out in Schedule 1.2, but excluding the use of the "Tenex Data"
name and the use of the "Tenex Data Corporation" name in
connection with certain private label magnetic media products
sold by the Compu-Redi/Tenex division of the Vendor to end
users.
(z) "Inventories" means all inventories owned by Axidata as of the
Effective Date relating solely and exclusively to the
Purchased Business, including all finished goods, work in
process, stock-in-trade, merchandise, raw materials,
production and shipping supplies, goods in transit, goods
ordered but not yet received and all other materials and
supplies on hand as determined in accordance with the
methodology set out in Schedule 4.3.
(aa) "Laws" means all legally binding applicable federal,
provincial, municipal or local laws, statutes, regulations,
ordinances, rules, guidelines, orders, directives or other
requirements of any Authority.
(bb) "Transition Services Agreement" means the agreement to be
entered into on the Closing between the Vendor and the
Purchaser regarding the lease to be entered into between the
<PAGE>
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Purchaser and the Vendor and the provision of transition
services to the Purchaser by the Vendor in the form attached
hereto as Schedule 3.1
(cc) "Liability" means any direct or indirect indebtedness,
liability, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed
or unfixed, known or unknown, asserted or unasserted,
liquidated or unliquidated, secured or unsecured, relating
solely and exclusively to the Purchased Business and any
liability in respect of income, sales, property or gross
receipts tax.
(dd) "License Agreement" means the agreement to be entered into on
Closing between the Vendor and the Purchaser regarding the
licensing of the "Tenex" trademark by the Purchaser to the
Vendor in the form attached as Schedule 3.2
(ee) "Net Assets" has the meaning attributed thereto in section
2.5.
(ff) "Non-Assignable Contract" means any Contract which would be
assigned to the Purchaser under this Agreement but in respect
of which an assignment or attempted assignment would
constitute a breach thereof or would contravene any applicable
Law.
(gg) "October 31 Balance Sheet" means the unaudited balance sheet
of the Purchased Business as at October 31, 1998.
(hh) "Permitted Encumbrances" means (i) statutory liens for taxes,
assessments or similar charges incurred in the ordinary course
of business that are not yet due and payable and which relate
exclusively to Assumed Liabilities; and (ii) liens of
mechanics, materialmen, warehousemen, carriers, or other like
liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable and which relate
exclusively to Assumed Liabilities.
(ii) "Person" includes any individual, legal or personal
representative, partnership, company, corporation,
incorporated syndicate, unincorporated association, trust,
government body, regulatory authority or any other entity,
however designated or constituted.
(jj) "Prepaid Amounts" means all amounts prepaid by Axidata
relating solely to the Purchased Business, but not including
any prepaid amounts or part thereof in respect of which the
Purchaser will derive no benefit.
(kk) "Prime Rate" means the annual rate of interest announced from
time to time by the Canadian Imperial Bank of Commerce at its
main branch in Toronto, Ontario as being its reference rate
then in effect for determining interest rates on commercial
loans in Canadian Dollars made in Canada by such bank.
(ll) "Purchase Price" means the purchase price for the Purchased
Assets calculated in accordance with the provisions of Article
2.
(mm) "Purchased Assets" means, as at the Effective Date, all
property, assets and rights of every kind
<PAGE>
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and description wheresoever situate of Axidata used solely in
connection with the Purchased Business, including without
limitation, all right, title and interest (without liability)
of Axidata in and to:
(i) Contracts;
(ii) Equipment;
(iii) Goodwill;
(iv) Intellectual Property;
(v) Inventories;
(vi) Prepaid Amounts;
(vii) Records; and
(viii) Vehicles,
but excluding the Excluded Assets.
(nn) "Purchased Business" means the system storage wholesale
distribution business currently carried on by Axidata through
its Tenex Data division, as reflected in the Financial
Statements.
(oo) "Records" means all records relating solely to the Purchased
Business and Purchased Assets, including operating data,
files, books and records, correspondence, credit information,
research materials, sales and advertising materials, contract
documents, records of past sales, lists of present and former
customers and suppliers, employee documents, inventory data,
accounts receivable data, financial statements and other
similar records.
(pp) "Tax, Accounting and Employee Records" means all Records and
source documents, relating to, inter alia, tax, accounting and
employee matters, which the Vendor is required to retain under
applicable Laws.
(qq) "Telephone, Fax and Modem Numbers" means the following
telephone, facsimile and modem numbers used in connection with
the Purchased Business: (416) 291-5452, (416) 291-5964, (416)
298-4051, (416) 291-3050, (416) 291-5625, (800) 387-5149 and
(800) 268-8474.
(rr) "Transferred Employees" means all employees of the Vendor who
accept offers of employment from and commence employment with
the Purchaser.
(ss) "Vehicles" means all trucks, cars and other motor vehicles
owned or used by the Vendor solely in connection with the
Purchased Business including those listed in Schedule 1.4.
1.2 Construction.
In this Agreement, unless the context otherwise provides:
<PAGE>
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(a) words denoting the singular include the plural and vice versa
and words denoting any gender include all genders;
(b) the word "including" shall mean "including without
limitation";
(c) the use of headings is for convenience of reference only and
shall not affect the construction of this Agreement and all
references to Articles and sections are references to Articles
and sections of this Agreement;
(d) whenever in this Agreement reference is made to a calculation
or determination to be made in accordance with generally
accepted accounting principles or GAAP, such reference shall
be deemed to be the generally accepted accounting principles
approved as of the date hereof by the Canadian Institute of
Chartered Accountants, or any successor institute, as used by
the Vendor, consistently applied and applied consistently with
the Financial Statements and applicable as at the date on
which such calculation or determination is made or required to
be made.
(e) when calculating the period of time within which or following
which any act is to be done or step taken, the date which is
the reference day in calculating such period shall be
excluded. If the last day of such period is not a Business
Day, the period shall end on the next Business Day; and
(f) all dollar amounts are expressed in Canadian funds
1.3 Schedules.
The following attached Schedules form part of this Agreement:
(a) Asset Schedules
Schedule 1.1 - Contracts
Schedule 1.2 - Intellectual Property
Schedule 1.3 - Equipment
Schedule 1.4 - Vehicles
(b) Disclosure Schedules
Schedule 2.1 - Financial Statements
Schedule 2.2 - Employees
Schedule 2.3 - Locations where Purchased Business is
carried on
Schedule 2.4 - Major Customers and Suppliers
Schedule 2.5 - Consents
Schedule 2.6 - Litigation
Schedule 2.7 - Non-Arm's Length Transactions
Schedule 2.8 - Assumed Liabilities
Schedule 2.9 - Standard Sales Terms
Schedule 2.10 - Insurance
<PAGE>
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Schedule 2.11 - Mercer Letter Agreement
Schedule 2.12 - Agreements, Contracts and Commitments
Schedule 2.13 - Intentionally Deleted
Schedule 2.14 - Restrictions on Business
Schedule 2.15 - Encumbrances
Schedule 2.16 - Supplemental Employees
(c) Document Schedules
Schedule 3.1 - Transition Services Agreement
Schedule 3.2 - License Agreement
(d) Miscellaneous Schedules
Schedule 4.1 - Allocation of Purchase Price
Schedule 4.2 - Mediation Procedures
Schedule 4.3 - Inventory Valuation Principles
Article 2
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 Purchase and Sale.
Subject to the terms and conditions of this Agreement, the
Vendor hereby agrees to sell to the Purchaser and the Purchaser hereby agrees to
purchase from the Vendor, the Purchased Assets, from the close of business on
the Closing Date but with effect from the Effective Date, in consideration of
the Purchase Price.
2.2 Calculation of Purchase Price.
The purchase price shall be $632,000, (being the net book
value of the Purchased Assets minus the net book value of the Assumed
Liabilities, as of the Effective Date, plus $1,500,000) plus an amount equal to
interest, at the Prime Rate, on such aggregate amount, calculated from the
Effective Date, as adjusted in accordance with sections 2.6 and 2.8 (the
"Purchase Price").
2.3 Allocation of Purchase Price.
The Purchase Price shall be allocated among the Purchased
Assets as set out in Schedule 4.1. Such allocation shall be binding on the
parties, and the Vendor and the Purchaser shall file all filings which are
necessary or desirable under the Income Tax Act (Canada) or other taxation
statute to give effect to such allocation.
2.4 Payment of Purchase Price.
The Purchaser shall satisfy the Purchase Price by paying the
amount of $632,000
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by promissory note, certified cheque, wire transfer or bank draft to the order
of the Vendor on Closing, in accordance with the allocation of the purchase
price set out in Schedule 4.1 and by paying the amount equal to interest, at the
Prime Rate, on such amount calculated from the Effective Date to the Closing
Date.
2.5 Effective Date Balance Sheet.
(a) Prior to December 31, 1998, the Vendor and the Purchaser shall
participate in the preparation of and shall cause their
respective employees to participate in the preparation of, and
the Vendor shall deliver to the Purchaser, the Effective Date
Balance Sheet. The Effective Date Balance Sheet shall be
prepared and audited in accordance with Canadian generally
accepted accounting principles consistent with the accounting
policies, practices and procedures for the Vendor, except as
may otherwise be required pursuant to this Article 2 and shall
be audited by PricewaterhouseCoopers (Toronto)
("PricewaterhouseCoopers"), in accordance with Canadian
generally accepted auditing standards and accompanied by a
written opinion thereon. Each of the Purchaser and the Vendor
shall have the right to consult, at reasonable times and with
reasonable notice, with PricewaterhouseCoopers and appropriate
representatives of the Vendor during the preparation and audit
of the Effective Date Balance Sheet. The Effective Date
Balance Sheet (x) shall be prepared without regard to (A) any
effect from the closing of the transactions contemplated
hereby or any financing relating thereto, (B) the Purchaser's
existing or future plans to modify or adjust the business,
operations or accounting practices of the Purchased Business
after the Closing Time, or (C) adjustments relating to the
recording of the disposition by the Vendor; and (y) shall
reflect all required audit adjustments exceeding $10,000.00,
in the net aggregate amount, as determined by
PricewaterhouseCoopers to be necessary in order that the
Effective Date Balance Sheet will comply with Canadian
generally accepted accounting principles on a basis consistent
with such prior accounting policies, practices and procedures.
The cost of preparing the Effective Date Balance Sheet shall
be borne by the Vendor.
(b) The Effective Date Balance Sheet shall set forth a calculation
of Net Assets together with the report of
PricewaterhouseCoopers.
(c) Following the delivery of the Effective Date Balance Sheet
(and, if applicable, the Adjusted Effective Date Balance
Sheet) to the Vendor and the Purchaser and the execution by
the Vendor and the Purchaser of standard indemnity releases in
favour of PricewaterhouseCoopers, the Vendor shall provide the
Purchaser with access to the working papers of
PricewaterhouseCoopers relating thereto.
(d) Provided that neither party will object to the calculation of
the amount of Net Assets if the disputed amount is less than
$25,000.00 in the aggregate, in the event that the Purchaser
objects in writing (stating with reasonable specificity the
reasons for its objections) within 10 Business Days following
receipt of the Effective Date Balance Sheet and
PricewaterhouseCoopers report as to the amount of the Net
Assets (and, if applicable, the Adjusted Effective Date
Balance Sheet), then the Purchaser's auditor and the
Purchaser, on the one hand, and
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PricewaterhouseCoopers and the Vendor, on the other hand,
shall in good faith make meaningful efforts to agree upon the
amount of the Net Assets (which shall include, if necessary, a
submission by the parties to non-binding mediation by a
qualified mediator in the City of Toronto, Ontario) and, if
applicable, the Adjusted Effective Date Balance Sheet,
provided, that if the Purchaser, on the one hand, and
PricewaterhouseCoopers and the Vendor, on the other hand, are
unable to so agree within 30 days after delivery to the Vendor
of the Effective Date Balance Sheet and the
PricewaterhouseCoopers report as to the Net Assets (and, if
applicable, the Adjusted Effective Date Balance Sheet), then
the Vendor and the Purchaser shall retain the independent
chartered accounting firm, of Deloitte & Touche (the "Neutral
Auditors") to resolve the differences on specific points of
disagreement and to provide an opinion on a revised Effective
Date Balance Sheet (and, if applicable, the Adjusted Effective
Date Balance Sheet), together with a report of the Neutral
Auditors setting forth a revised calculation of the Net
Assets, in each case prepared in accordance with the
principles set forth in this section 2.5. The fees of the
Neutral Auditors shall be borne by the parties in inverse
proportion to their respective successes in the determinations
of the Neutral Auditors, and the decision of the Neutral
Auditors shall be conclusive, final and binding upon the
Vendor and the Purchaser. The fees and expenses of
PricewaterhouseCoopers shall be the sole responsibility of the
Vendor and the fees and expenses of the Purchaser's auditor
shall be the sole responsibility of the Purchaser.
(e) As used in this Agreement, "Net Assets" means, as of the
Effective Date, as derived from the Effective Date Balance
Sheet (or, if applicable, the Adjusted Effective Date Balance
Sheet), an amount equal to the net book value of the Purchased
Assets minus the Assumed Liabilities plus $1,500,000.
2.6 Determination of Purchase Price and Adjustment of Amount Paid
on Closing Date.
If the Net Assets of the Purchased Business as shown on the
Effective Date Balance Sheet (or, if applicable, the Adjusted Effective Date
Balance Sheet) are more or less than $632,000, being the Net Assets of the
Purchased Business set out in the unaudited October 31 Balance Sheet, the
Purchase Price shall be decreased by an amount equal to the difference if the
Net Assets reflected on the Effective Date Balance Sheet (or, if applicable, the
Adjusted Effective Date Balance Sheet) are less than $632,000, (the difference
being referred to herein as the "Net Asset Difference") or shall be increased by
an amount equal to the Net Asset Difference if the Net Assets reflected on the
Effective Date Balance Sheet (or, if applicable, the Adjusted Effective Date
Balance Sheet) are greater than $632,000. If the Purchase Price is to be so
decreased, the Vendor shall pay to the Purchaser on the Adjustment Date an
amount in cash equal to the Net Asset Difference. If the Purchase Price is to be
so increased, the Purchaser shall pay to the Vendor on the Adjustment Date an
amount equal to the Net Asset Difference. In either case, payment of the Net
Asset Difference shall be made with interest thereon at the Prime Rate,
compounded monthly, from and including the Closing Date to and excluding the
Adjustment Date. The amount, if any, of an adjustment to the Purchase Price in
accordance with this section 2.6 shall be allocated in accordance with the
methodology set out in Schedule 4.1 and shall be payable by the Purchaser or the
Vendor, as the case may be, by bank draft, certified cheque or wire transfer.
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2.7 Inventory Valuation.
As part of the preparation of the Effective Date Balance
Sheet, the Purchaser acknowledges that Vendor has taken a physical stock of the
Inventory as at the close of business on the Effective Date. The parties
acknowledge that such physical stock taking was completed in accordance with
standard procedures consistent with past practice (which have been reviewed with
the Purchaser prior to the Effective Date) in the presence of representatives of
the Purchaser. For purposes of valuing the Inventory, all Inventory has been
valued in accordance with the inventory valuation principles set forth on
Schedule 4.3 attached hereto. These principles will be applied to determine the
valuation of the Inventory on the Effective Date. Notwithstanding the foregoing
inventory valuation principles, the Inventory listed in Schedule 4.3 and the
value ascribed to such Inventory by the parties hereto by mutual agreement (the
"Deducted Inventory Amounts") has been deducted from the aggregate value of the
Inventory determined by the inventory valuation principles. This valuation
mechanism for the inventory described in this Section 2.7 will be applied by the
Purchaser and reviewed by PriceWaterhouseCoopers (or the Neutral Auditor, as the
case may be) to compute the valuation of the inventory for the purposes of
preparing the Effective Date Balance Sheet (or the Adjusted Effective Date
Balance Sheet, if applicable). If, in the period between September 30, 1998 and
the date of the Effective Date Balance Sheet, there has been a material change
in the Purchased Business causing the Effective Date Balance Sheet not to be
fairly stated in accordance with GAAP in the judgement of PricewaterhouseCoopers
(or, if applicable, the Neutral Auditor), the Effective Date Balance Sheet will
be adjusted so that the Effective Date Balance Sheet is fairly stated in
accordance with GAAP and, if the reserves on the Effective Date Balance Sheet
are less than the aggregate of the reserves as determined by the parties prior
to the Closing Date, an adjusted Effective Date Balance Sheet (the "Adjusted
Effective Date Balance Sheet") will be reviewed and audited (with agreed upon
procedures) by PricewaterhouseCoopers (or, if applicable, the Neutral Auditor)
reflecting the reserves determined by the parties prior to the Effective Date
and the Net Assets shall be derived from such Adjusted Effective Date Balance
Sheet.
2.8 Accounts Receivable.
(a) On the Closing Date, the Purchaser shall loan (the "Account
Loan") to the Vendor a cash sum in an amount equal to
$8,805,000 (the "Loan Amount") for a term of 90 days
subsequent to the Closing Date (the "Loan Period"), without
interest. To the extent the Purchaser collects the Accounts
Receivable during the Loan Period, the principal balance of
the Account Loan shall be decreased. On the maturity date of
the Account Loan, the Vendor shall repay the remaining
principal balance of the Account Loan (the "Uncollected
Accounts"). Should the Vendor fail to pay such Account Loan on
the maturity date thereof, interest shall accrue on the unpaid
principal balance of the Account Loan at the simple annual
rate of Prime Rate plus 1% from the maturity date until paid
in full.
(b) Following the Loan Period, the Vendor shall have the right to
retain PricewaterhouseCoopers, Toronto to audit the amount of
the Uncollected Accounts and to the extent that such audit
discloses Uncollected Accounts which were collected by the
Purchaser, the Vendor may object in
<PAGE>
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writing (stating with reasonable specificity the reasons for
its objections) and then PricewaterhouseCoopers, Toronto and
the Vendor, on the one hand, and PricewaterhouseCoopers,
California and the Purchaser, on the other hand, shall in good
faith make meaningful efforts to agree on the amount of the
Uncollected Accounts (which, unless waived by both the Vendor
and the Purchaser, shall include a submission by the parties
to non-binding evaluative mediation by a qualified mediator in
the City of Toronto, Ontario), provided, that if the Purchaser
and PricewaterhouseCoopers, Toronto, on the one hand, and the
Vendor and PricewaterhouseCoopers, California, on the other
hand, are unable to so agree within 30 days after the date of
objection, then the Vendor and the Purchaser shall retain the
Neutral Auditors to resolve the differences on specific points
of disagreement and to provide an opinion on the amount of the
Uncollected Accounts. The fees of the Neutral Auditors shall
be borne by the parties in inverse proportion to their
respective successes in the determinations of the Neutral
Auditors, and the decision of the Neutral Auditors shall be
conclusive, final and binding upon the Vendor and the
Purchaser. The fees and expenses of PricewaterhouseCoopers,
Toronto incurred by the Vendor shall be the sole
responsibility of the Vendor and the fees and expenses of
PricewaterhouseCoopers, California incurred by the Purchaser
shall be the sole responsibility of the Purchaser. If the
Neutral Auditors determine that there is an amount of
Uncollected Accounts which were collected by the Purchaser,
then such amount, together with interest thereon at the simple
annual rate of Prime Rate plus 1%, from the end of the Loan
Period until such amount is paid in full, shall be forthwith
paid to the Vendor by the Purchaser.
(c) All payments received by the Purchaser, or by the Vendor after
the Effective Date, in respect of the Accounts Receivable
shall be immediately endorsed in the name of the Purchaser and
deposited into the Purchaser's bank account up to the Loan
Amount in satisfaction of the Purchaser's loan of such amount
to the Vendor. The Purchaser shall use its reasonable
commercial efforts to collect the Accounts Receivable as
collecting agent on behalf of the Vendor, at no charge to the
Vendor other than reimbursement for any reasonable third party
collection expenses. If, after the Purchaser has used
reasonable commercial efforts to collect any Accounts
Receivable, as collecting agent on behalf of the Vendor, any
Accounts Receivable remain outstanding 90 days following the
Closing Date and the Vendor has repaid the remaining balance
of the Account Loan in accordance with (a) above, for an
additional 90 days following maturity of the Account Loan, the
Purchaser shall use reasonable commercial efforts to continue
to collect any payments made in respect of the Uncollected
Accounts on behalf of, and as agent for, the Vendor and shall
remit any such payments to the Vendor forthwith upon receipt
thereof. The Vendor shall be entitled to elect to assume all
responsibility for the collection of the Uncollected Accounts
at any time during such additional 90 day period. The Vendor
shall reimburse the Purchaser for any expenses incurred by the
Purchaser which are payable to third parties in the course of
collecting payments made in respect of the Uncollected
Accounts. The Vendor and the Purchaser shall from time to time
jointly determine which Uncollected Accounts remain
collectable by the Purchaser on behalf of the Vendor.
Following the Closing, the Purchaser shall apply any payments
received from account debtors against specific invoices, if
identifiable, otherwise, any unidentifiable payments so
received from identifiable debtors shall be applied first to
the oldest outstanding accounts receivable, until fully paid.
<PAGE>
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2.9 Returns.
The Vendor shall reimburse the Purchaser in an amount equal to
the gross margin otherwise recorded on any goods shipped by the Vendor prior to
the Effective Date and returned to the Purchaser within 90 days following the
Effective Date forthwith upon being provided with evidence of any such returns
satisfactory to the Vendor, acting reasonably.
2.10 Transfer Taxes.
The Purchaser shall be liable for and pay, within the time
period in the applicable legislation, all federal and provincial sales taxes,
duties, fees, registration charges or other like charges which are properly
payable in connection with the transfer of the Purchased Assets contemplated by
this Agreement, including without limitation, Ontario retail sales tax under the
Retail Sales Tax Act (Ontario) and any other sales tax amounts under any other
applicable provincial sales tax legislation, but excluding any taxes based upon
the income revenues or capital receipts of the Vendor. Notwithstanding the
foregoing, on or before Closing, the Purchaser shall (i) provide the Vendor with
a purchase exemption certificate with respect to tangible personal property held
for resale or for incorporation into goods to be held for resale and with
respect to any exempt manufacturing equipment and (ii) pay the applicable retail
sales tax under the Retail Sales Tax Act (Ontario) or the regulations thereto on
the other taxable Purchased Assets directly to the Ministry of Finance, Retail
Sales Tax Branch and pay any other sales tax and any other sales tax amounts
under any other applicable provincial sales tax legislation.
2.11 G.S.T. Election.
The Purchaser and the Vendor elect to have the provisions of
subsection 167(1) of the Excise Tax Act (Canada) apply to the sale of the
Purchased Assets by the Vendor to the Purchaser. The parties shall take all
necessary actions in order to complete and file a joint election as provided for
in subsection 167(1) of the Excise Tax Act (Canada) on or before the first date
on which the Purchaser must submit its GST returns for the reporting period in
which the Closing occurs.
2.12 Non-Assignable Contracts.
Neither this Agreement nor any document delivered in
connection herewith shall constitute an assignment or attempted assignment of
any Non-Assignable Contract. The Vendor agrees to use reasonable commercial
efforts to assign Non-Assignable Contracts to the Purchaser when such assignment
is permitted and as the Purchaser may from time to time direct. To the extent
permitted by any applicable law, if any of the Non-Assignable Contracts are not
assignable by the terms thereof, such Non-Assignable Contracts shall be held by
the Vendor in trust for the Purchaser and the covenants and obligations
thereunder shall be performed by the Purchaser in the name of the Vendor and all
benefits existing thereunder shall be for the account of the Purchaser. The
Vendor shall take or cause to be taken such action in its name or otherwise as
the Purchaser may reasonably require so as to provide the Purchaser with the
benefits thereof and to effect collection of money to become due and payable
under the Non-Assignable
<PAGE>
-14-
Contracts and shall promptly pay over to the Purchaser all money received by the
Vendor in respect of all Non-Assignable Contracts from the Closing Time. The
Vendor authorizes the Purchaser, to the extent permitted by any applicable law,
at the Purchaser's expense, to perform all of the Vendor's obligations under the
Non-Assignable Contracts and constitutes the Purchaser its attorney to act in
its name and on its behalf with respect to thereto.
2.13 Leased Equipment and Encumbrances.
The parties acknowledge that certain of the equipment
(including all machinery, furniture, office, handling and other equipment and
accessories) used in connection with the Purchased Business (the "Leased
Equipment") is leased from third parties. The parties further acknowledge that
certain third parties have registered security pursuant to the Personal Property
Security Act (Ontario) as set out in Schedule 2.15 hereto. The Vendor undertakes
to cause the discharge of the encumbrances listed in Schedule 2.15 to the extent
necessary to effect the valid transfer of the Purchased Assets to the Purchaser
on Closing free and clear of all Encumbrances and to either assign the leases
relating to the Leased Equipment to the Purchaser or transfer the Leased
Equipment to the Purchaser on or prior to the Adjustment Date. The leases in
respect of the Leased Equipment shall be either assigned to the Purchaser (with
the Purchaser's consent, not to be unreasonably withheld) prior to the
Adjustment Date or paid out and in such circumstances such Leased Equipment
shall be sold to the Purchasers prior to the Adjustment Date. In the event the
parties agree that any Leased Equipment is to be transferred to the Purchaser,
the Vendor shall transfer such equipment free and clear of all Encumbrances
prior to the Adjustment Date at a purchase price equal to the book value thereof
at the time of transfer. The parties agree that the purchase price to be paid by
the Purchaser for all the equipment that is currently leased by the Vendor from
General Electric Capital Canada Inc. shall be no greater than $25,000.
2.14 Effective Date Adjustments.
Subject to compliance with the terms and conditions hereof,
the sale, transfer, conveyance, assignment and delivery of the Purchased Assets
shall be deemed to take place as at the Effective Date. During the period from
and after the Effective Date through to the Time of Closing (the "Interim
Period"), other than as contemplated by the Transition Services Agreement, the
Purchased Business shall have been managed and operated by the Vendor for the
exclusive account of the Purchaser. In particular, and without otherwise
limiting the foregoing, on the Adjustment Date:
(i) the Vendor shall pay to the Purchaser an amount,
reviewed and opined on by PricewaterhouseCoopers,
equal to:
(A) the cash balance (including outstanding
cheques, which shall be deemed to have been
cashed) on the books of account of the
Purchased Business as of the Closing Date
representing the net cash transactions in
the ordinary course of business (excluding
any inter-company payments or payments to
Affiliates of ACI or Axidata) during the
Interim Period (excluding transactions
governed by the Transition Services
Agreement); and
<PAGE>
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(B) interest, calculated at the Prime Rate, on
the average daily balance on the books of
account of the Purchased Business during the
Interim Period, provided such balance is
positive, and
(ii) the Purchaser shall pay to the Vendor an amount, as
determined by PricewaterhouseCoopers, equal to:
(A) any negative cash balance (including
outstanding cheques, which shall be deemed
to have been cashed) on the books of account
of the Purchased Business as of the Closing
Date representing net cash transactions in
the ordinary course of business (excluding
any inter-company payments or payments to
Affiliates of ACI or Axidata) during the
Interim Period (excluding transactions
governed by the Transition Services
Agreement), provided such balance is
negative; and
(B) interest, calculated at the Prime Rate, on
the average daily balance on the books of
account of the Purchased Business during the
Interim Period, provided such balance is
negative.
Notwithstanding the foregoing, during the Interim Period, the
salaries and expenses associated with the seven employees
listed in Schedule 2.16 in the approximate amount of $15,000
to $20,000, in the aggregate, shall been borne equally by the
Vendor and the Purchaser.
2.15 ACI Non-Interference Agreement.
ACI hereby covenants and agrees that it and its Affiliates
will not, for a period of two (2) years after the Closing Date, directly or
indirectly, whether for its own account or for the account of any other Person:
(i) except to the extent required to carry on the
remaining businesses of Axidata, as presently
conducted, until the sale of such businesses, engage
in the system storage wholesale distribution business
in North America (collectively, "Compete");
(ii) solicit or attempt to solicit any person who, at the
date of this Agreement, is an employee of the
Purchased Business, other than by solicitation which
is solely by way of public advertisement or general
internal job posting and employment is offered only
after response to such public advertisement or
general internal job posting without any other
enticement or solicitation; or
(iii) intentionally induce or attempt to persuade any
supplier, distributor or client of the Purchased
Business to terminate or breach any Contract with the
Purchaser, or not to do business or to reduce its
volume of business with the Purchaser in connection
with the Purchased Business.
Notwithstanding the foregoing, ACI and/or its Affiliates shall
not be restricted from acquiring or merging, amalgamating or otherwise combining
its business with a Person who Competes, provided that the portion of such
Person's business which Competes constitutes less than 50% of such Person's
business and the acquisition of such Person or such Person's business by ACI
and/or its Affiliates or the acquisition of ACI and/or its Affiliates by such
Person is not primarily motivated by a desire to carry on a business which
Competes.
<PAGE>
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2.16 Purchaser and BMI Non-Solicitation Agreement.
The Purchaser and BMI hereby covenant and agree that they and
their respective Affiliates will not, for a period of two (2) years after the
Closing Date, directly or indirectly, whether for their own account or for the
account of any other Person, solicit or attempt to solicit any person who, at
the date of this Agreement, is an employee of Axidata (other than an Employee),
other than by solicitation which is solely by way of public advertisement or
general internal job posting and employment is offered only after response to
such public advertisement or general internal job posting without any other
enticement or solicitation and with the consent of ACI, acting reasonably.
Article 3
ASSUMPTION OF LIABILITIES
3.1 Assumption by the Purchaser.
The Purchaser shall assume only the Assumed Liabilities as of
the close of business on the Effective Date and shall pay, discharge and perform
the Assumed Liabilities from and after the close of business on the Closing
Date. The Purchaser shall not be liable for or assume any Liabilities of the
Vendor nor any Liability arising as a consequence, direct or indirect, of any
event, fact, condition or circumstance existing or accruing on or prior to the
Closing other than the Assumed Liabilities.
Article 4
EMPLOYMENT AND PENSION MATTERS
4.1 Employees.
(a) As of January 1, 1999 (the "Employee Transfer Date"), the
Purchaser shall extend to all employees of the Vendor listed
on Schedule 2.2 (the "Employees") offers of employment on
substantially the same or comparable terms and conditions as
to salary, commission structure, if any, benefits, duties and
working conditions as those in force immediately prior to the
Effective Date.
(b) Nothing contained herein shall confer upon any former, current
or future employee of the Vendor or the Purchaser or any legal
representative or beneficiary thereof any rights or remedies,
including without limitation, any right to employment or
continued employment of any nature, for any specified period.
(c) Other than as contemplated by the Transition Services
Agreement, all items in respect of the Transferred Employees
including premiums for employment insurance, employer health
tax, applicable statutory hospitalization insurance, workers'
compensation assessments, accrued wages, salaries and
commissions, vacation pay, employee benefit plan payments and
employee bonus and incentive payments will be adjusted to the
Employee Transfer Date and shall be for the account of the
Vendor to the extent they precede the Employee Transfer Date
and of the
<PAGE>
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Purchaser to the extent they post-date the Employee Transfer
Date. For greater certainty, the Purchaser shall, following
the Employee Transfer Date, honour all obligations of
whatsoever nature, including normal compensation and severance
arrangements, due to Transferred Employees.
(d) Other than as contemplated by the Transition Services
Agreement, the Purchaser agrees to indemnify and save harmless
the Vendor, in accordance with Article 9, with respect to any
Claims (including claims for severance, notice of termination,
breach of contract, constructive dismissal or damages in
connection therewith) relating to the employment of any of the
Transferred Employees or the termination of the employment of
any of such Transferred Employees by the Purchaser, which
Claims arise from facts occuring after January 1, 1999,
including the continuation, discontinuation or provision to
any Transferred Employee of the employment policies, benefit
plans or other benefits previously provided by the Vendor or
its Affiliates or arising out of any changes in the
Transferred Employees' working conditions, salary or benefits.
(e) The Vendor agrees to indemnify the Purchaser with respect to
severance costs, to a maximum of three months' of severance
costs, payable by the Purchaser to Michael Mercer pursuant to
the employment letter agreement to be entered into between
Michael Mercer and the Purchaser in substantially the form
attached as Schedule 2.11 hereto.
(f) The expenses relating to the Employees (and their termination,
if any) during the period commencing on the Effective Date and
terminating on the Employee Transfer Date shall be dealt with
by the parties in accordance with the terms of the Transition
Services Agreement.
4.2 Employee Benefits.
Other than as contemplated by the Transition Services
Agreement, the Vendor shall retain and be obligated to satisfy all liabilities
for benefits or compensation to employees of the Vendor, including the
Transferred Employees, incurred or arising with respect to the time period
ending at the Employee Transfer Date and shall, at its own expense, pay or cause
its insurance carriers to pay such liabilities in accordance with the terms and
conditions of the benefit and pension plans maintained by the Vendor on behalf
of such employees of the Purchased Business immediately prior to the Effective
Date or applicable statutes. The Purchaser shall assume and be obligated to
satisfy all liabilities for benefits or compensation to any Employee incurred or
arising with respect to the time period commencing at the Employee Transfer
Date, regardless of when such liabilities are asserted. For the purposes of the
foregoing, the date on which a benefit or benefit cost is incurred or arises
shall be: in respect of a death claim, the date that the person dies and in
respect of all other claims, the date of the first event which gave rise to such
claim whether the first date of illness, the making of a claim, or the treatment
date. The Vendor will provide the Purchaser with such information in respect of
the Employees as the Purchaser reasonably requires to administer the plans
properly and that is in the possession or control of the Vendor.
<PAGE>
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Article 5
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
5.1 Representations and Warranties.
The Vendor hereby makes the following representations and
warranties and acknowledges that the Purchaser is relying on such
representations and warranties in entering into this Agreement and in purchasing
the Purchased Business and the Purchased Assets from the Vendor:
(a) Corporate. The Vendor is a corporation duly amalgamated and
organized, and is validly existing under the laws of Ontario
and has not been dissolved. The Vendor has the requisite
corporate power and authority to own or lease its property and
to sell the Purchased Assets to the Purchaser and otherwise
perform its obligations pursuant to this Agreement and to
carry on the Purchased Business. Schedule 2.3 contains a
complete list of the jurisdictions in which the Purchased
Business is carried on by the Vendor and the Purchaser is in
good standing and has all the required permits, licences and
any other qualifications necessary in such jurisdictions where
the failure to be in good standing or be so qualified would
have a materially adverse effect on the Purchased Business.
(b) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Vendor and
constitutes a valid and binding obligation of the Vendor
enforceable against it in accordance with its terms.
(c) Real Property.
(i) The Vendor is not the owner of, or a party to any
agreement to own, any real property used solely in
connection with the Purchased Business.
(ii) The Vendor is not a party to any leases of, or offers
to lease of real property used solely in connection
with the Purchased Business.
(d) Title to Purchased Assets.
(i) The Vendor is the sole legal and beneficial owner of
the Purchased Assets and has good marketable title
thereto free and clear of all Encumbrances except for
the Permitted Encumbrances. There is not now any
basis upon which any of the Purchased Assets might
become subject to any Encumbrances other than
Permitted Encumbrances.
(ii) The Equipment and Vehicles are in good operating
condition, in all material respects, and free, in all
material respects, from defects, except for ordinary
wear and tear, and repair and is reasonably fit and
usable for the purposes for which they are presently
being used.
(iii) The Purchased Assets comprise all of the assets,
properties, and rights of every type and description,
real, personal, tangible, and intangible necessary
for and/or used by the Vendor in the Purchased
Business as currently conducted.
<PAGE>
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(iv) The Vendor is in custody and control of all the
Purchased Assets being sold and transferred to the
Vendor pursuant to this Agreement or any assignments
or other instruments of transfer delivered or to be
delivered to Purchaser pursuant hereto or thereto.
(e) Rights to Acquire Purchased Assets. Except as provided for in
this Agreement, no Person has any agreement, option,
understanding, commitment (or right or any right or privilege
capable of becoming a right) to purchase (directly or
indirectly) any of the Purchased Assets from the Vendor.
(f) Contracts. Schedule 1.1 contains a complete and accurate list
of all the material Contracts. Each such Contract constitutes
a valid and binding obligation of the parties thereto,
enforceable in accordance with its terms. None of the parties
to any of such Contracts is in breach of its obligations
thereunder and no act or event has occurred which, with notice
or lapse of time, or both, would constitute a breach of or
grounds for terminating any of such Contracts. All of such
Contracts were entered into in the ordinary course of
business, are now in good standing, in full force and effect
and unamended, except as otherwise set forth in Schedule 1.1,
and the Vendor is entitled to all benefits, rights and
privileges thereunder. The Vendor has not received notice that
any other party to any of such Contracts has breached, intends
to breach or intends to terminate such Contract. The Vendor
has paid in full or accrued all amounts now due under such
Contracts and has satisfied in full or provided for all of its
liabilities and obligations thereunder that are presently
required to be satisfied or provided for.
(g) Intellectual Property.
(i) Schedule 1.2 is a complete and accurate list of all
Intellectual Property owned or used by or licensed to
the Vendor in carrying on the Purchased Business. No
person who has licensed intellectual property to the
Vendor for use in the operation of the Purchased
Business has ownership rights or license rights to
improvements made by the Vendor in such intellectual
property which has been licensed to the Vendor and
forming part of the Intellectual Property, including
particulars of any registrations thereof, and all
applications therefore, and also including, without
limitation, all contracts, licences, registered user
agreements and all like rights used by or granted to
the Vendor in connection with the Purchased Business.
(ii) To the extent that the Vendor currently uses or
otherwise relies on inventions, know-how and trade
secrets of any person in carrying on the Purchased
Business (collectively, the "Know-How"), such
Know-How is owned by the Vendor or is licensed to the
Vendor.
(iii) Except as set forth in Schedule 1.2, the Vendor owns
or is licensed under, irrevocably and without future
payment to any other person, all Intellectual
Property used or to be used in the Purchased
Business. Except as set forth in Schedule 1.2 the
Vendor is the beneficial owner of the Intellectual
Property, free and clear of all Encumbrances, other
than Permitted Encumbrances, and is not a party to or
bound by any Contract or other obligation whatsoever
that limits or impairs its ability to use, sell,
transfer, assign, convey or licence, or that requires
payment to any other Person for the use of, the
Intellectual Property, or that otherwise affects the
Intellectual Property. The Intellectual Property will
remain in full force and effect following the
<PAGE>
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consummation of the transactions contemplated hereby.
Except as set forth in Schedule 1.2, no person or
entity other than the Vendor has any interest in the
Intellectual Property. All Intellectual Property
owned or maintained by the Vendor and all federal,
provincial, state and foreign registrations thereof
are valid and in full force and effect and are not
subject to any taxes, maintenance fees or actions
falling due within 90 days after the date hereof.
(iv) Except as described in Schedule 1.2, no Person has
been granted any interest or right to use all or any
portion of the Intellectual Property. The Vendor is
not aware of, nor has the Vendor received any
communication from, any Person concerning a claim or
any infringement or breach of any industrial or
intellectual property rights of any other Person by
the Vendor nor has the Vendor received any notice
that the conduct of the Purchased Business, including
the use of the Intellectual Property, infringes upon
or breaches any industrial or intellectual property
rights of any other Person or breaches any obligation
of the Vendor not to use or disclose any confidential
information provided by a third party or that the
Vendor has engaged in unfair competition or trade
practices, and the Vendor has no knowledge of any
infringement or violation of any of the rights of the
Vendor in the Intellectual Property. To its best
knowledge, the Vendor has not engaged in any act or
omission which adversely affects the validity or
enforceability of any of the Intellectual Property.
The Vendor is not aware of any state of facts that
casts doubt on the validity or enforceability of any
of the Intellectual Property.
(v) To the extent that third party rights exist in the
Intellectual Property, the same have been identified
in Schedule 1.2, and all appropriate rights and
interests from such third parties have been obtained
to allow and permit the Vendor to use the said
Intellectual Property as if the Vendor were the
owner, without accounting, and without royalties or
other payments due to such third parties, except as
identified in Schedule 1.2.
(vi) Except as set forth in Schedule 1.2, to the knowledge
of the Vendor, the operation of the Purchased
Business as currently conducted by the Vendor
(including but not limited to the design,
development, distribution, marketing, use, import,
manufacture, license and sale of the products,
technology or services (including products,
technology or services currently under development)
of the Vendor) has not, does not and will not
infringe or misappropriate the intellectual property
of any person, violate the rights of any person
(including rights to privacy or publicity), or
constitute unfair competition or trade practices
under the laws of any jurisdiction in which the
Purchased Business is currently being conducted.
(vii) All necessary registration, maintenance and renewal
fees in connection with the Vendor's registered
Intellectual Property have been paid and all
necessary documents and certificates in connection
with Vendor's registered Intellectual Property have
been filed with the relevant patent, copyright,
trademark or other authorities in Canada or foreign
jurisdictions, as the case may be, for the purposes
of maintaining such registered Intellectual Property.
(viii) The Vendor has taken all steps that are required to
protect the Vendor's rights in confidential
information and trade secrets of the Purchased
Business.
(h) Location of Assets. The Purchased Business is carried on at
the locations set forth in Schedule
<PAGE>
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2.3 and the Purchased Assets are situate in the Province of
Ontario at the head office of the Vendor.
(i) Inventories. The Inventories are labelled and stored in
compliance with all applicable Laws. The parties have agreed
to the inventory valuation principles set forth in Schedule
4.3. All items included in the Inventories are owned by the
Vendor.
(j) Insurance. The Vendor has all the Purchased Assets and the
Purchased Business insured against loss or damage by all
insurable hazards or risks on a replacement cost basis and
such insurance coverage will be continued in full force and
effect (with all premiums paid) up to and including the
Closing Date. The Vendor is not in default with respect to any
of the provisions contained in any such insurance policy and
the Vendor has not failed to give any notice or present any
claim under any such insurance policy in a due and timely
fashion. Nothing has been done or omitted to be done by the
Vendor which could make any policy of insurance void or
voidable. Schedule 2.10 describes the insurance coverage over
the Purchased Business and the Purchased Assets. There is no
claim by the Vendor pending under any of such policies or
bonds as to which coverage has been questioned, denied, or
disputed by the underwriters of such policies or bonds.
(k) Financial Statements. To the best of the Vendor's knowledge,
the Financial Statements:
(i) have been prepared in accordance with Canadian
generally accepted accounting principles on a basis
consistent with that of prior fiscal periods;
(ii) are in accordance with the Records with appropriate
adjusting entries to reflect a separation of the
Purchased Business from the other businesses
conducted by the Vendor and are complete and accurate
in all material respects; and
(iii) present fairly, in all material respects, the assets,
liabilities (whether accrued, absolute, contingent or
otherwise) and financial condition of the Purchased
Business.
(l) Books and Records. The Records are duly maintained in
accordance with all applicable legal requirements and in
accordance with sound business practices and contain full and
accurate records of all matters required to be dealt with in
such records. All material financial transactions relating to
the Purchased Business and the Purchased Assets have been
fairly and completely presented in all material respects and
recorded in the Records in accordance with GAAP, consistently
applied, and fairly, in all material respects, present and
disclose (i) the financial position of the Purchased Business,
and (ii) all transactions of the Vendor relating to the
Purchased Business. The Vendor has not received any notice of
allegation that any of the Records or statutory books are
incorrect or should be rectified. The statutory books
(including all registers and minute books) of the Vendor,
which have been furnished to the Purchaser, are true, complete
and accurate, and contain copies of all the matters which
should be dealt with in those books, including all constating
documents, by-laws and resolutions passed by the shareholders
and directors, and the minutes of every meeting of its board
of directors and every committee thereof and of its
shareholders, since the date of incorporation, all of which
constating documents, by-laws and resolutions have been duly
passed or minutes duly authorized.
<PAGE>
-22-
(m) Taxes.
(i) Other than certain provincial sales tax payments
relating to inter-provincial sales, all federal and
provincial sales taxes and other similar taxes
applicable to the Purchased Business or to the
Purchased Assets with respect to all periods up to
the Effective Date have been or will have been paid,
accrued or satisfied at the Effective Date or
reflected in the Financial Statements and all reports
relating thereto have been timely filed.
(ii) To the extent a failure to do so would adversely
affect Purchaser, any Purchased Asset, or the
Purchaser's use of any Purchased Asset, the Vendor
has (i) timely filed within the time period for
filing or any extension granted with respect thereto
all Tax returns which it is required to file relating
to or pertaining to any and all Taxes attributable or
levied upon a Purchased Asset and (ii) paid any and
all Taxes it is required to pay in connection with
period to which such Tax returns are related. There
are (and immediately following the Closing there will
be) no liens on any Purchased Asset relating to or
pertaining to any Taxes, except Permitted
Encumbrances.
(iii) As used herein, a reference to "Tax" or,
collectively, "Taxes" means any federal, provincial,
local, or foreign taxes, assessments and other
governmental charges, duties, impositions and
liabilities, including taxes based upon or measured
by gross receipts, income, profits, sales, use,
occupation, value added, ad valorem, transfer,
franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with
all interest, penalties and additions imposed with
respect to such amounts and any obligations under any
agreements or arrangement with any other person with
respect to such amounts, and including any
liabilities for taxes of a predecessor entity.
(n) Non-Resident. The Vendor is not a non-resident of Canada for
the purposes of the Income Tax Act (Canada).
(o) GST. The Vendor has not been and is not a financial
institution for the purposes of the Excise Tax Act (Canada).
The Vendor is duly registered under subdivision (d) of
Division V of Part IX of the Excise Tax Act (Canada) in
respect of goods and services tax and harmonized sales tax and
its Business Number is R894511898.
(p) Employee Matters.
(i) Schedule 2.2 contains a complete and correct list of
all employees of the Vendor in the Purchased
Business, setting out each employee's title, age and
length of service. The Vendor has disclosed each such
employee's salary, bonus and commission to the
Purchaser.
(ii) No trade union, counsel of trade unions, employee
bargaining agency or affiliated bargaining agent or
similar Person:
(A) holds bargaining rights with respect to the
Purchased Assets or Purchased Business by
way of certification, interim certification,
voluntary recognition, designation or
successor rights;
<PAGE>
-23-
(B) has, to the best of the Vendor's knowledge
applied to be certified as the bargaining
agent of any of the employees of the Vendor
who are Actively Employed in the Purchased
Business; or
(C) has, to the best of the Vendor's knowledge,
applied to have the Vendor declared a
related employer or a successor employer
pursuant to any labour or employment
legislation.
(iii) There are, to the best of the Vendor's knowledge, no
actual, threatened or pending organizing activities
of any trade union, counsel of trade unions, employee
bargaining agency, affiliated bargaining agent or
employee association or similar Person or any actual,
threatened or pending unfair labour practice
complaints pertaining to the Purchased Assets or
Purchased Business, nor, to the best of the Vendor's
knowledge, have there been any such activities or
complaints within the last two years. The Purchased
Business is not engaged in unfair labor practices.
(iv) Schedule 2.2 contains a list of all written
employment and consulting agreements affecting the
Vendor in connection with the Purchased Business, and
all compensation policies and practices, benefits and
other terms and conditions of employment of all
employees in the Purchased Business, and the Vendor
has fully disclosed to the Purchaser the terms
pertaining thereto.
(v) All vacation pay for employees who are Actively
Employed in the Purchased Business is properly
reflected and accrued in the books and accounts of
the Vendor.
(vi) The Vendor:
(A) is in material compliance with all Laws
relating to employment including the Pay
Equity Act (Ontario) and provincial and
federal human rights legislation in
connection with the Purchased Business;
(B) is in material compliance with all
applicable safety laws;
(C) has withheld all amounts required by law or
by agreement to be withheld from the wages,
salaries and other payments to Employees;
and
(D) is not liable for any arrears of wages or
any taxes or any penalty for failure to
comply with any of the foregoing.
(vii) All levies, assessments and penalties under relevant
workers' compensation legislation in respect of the
employees who are Actively Employed in the Purchased
Business have been paid or, to the knowledge of the
Vendor, are reflected and accrued in the books and
Records of the Vendor, and all claims, current
assessments rates and special assessments under such
legislation have been disclosed to the Purchaser.
(viii) To the best knowledge of the Vendor, no shareholder,
officer, employee or consultant of the Vendor is
obligated under any contract or agreement subject to
any judgement, decree or order of any court or
administrative agency, that would materially
interfere with such person's efforts to promote the
interests of the Vendor in connection with the
Purchased Business, or that would
<PAGE>
-24-
interfere with the Purchased Business. Neither the
execution nor delivery of this Agreement, nor the
carrying on of the Purchased Business nor any
activity of such officers, directors, employees or
consultants in connection with the carrying on of the
Purchased Business as presently conducted, will, to
the Vendor's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or
constitute a default under, any contract or agreement
under which any of such officers, directors,
employees or consultants is now bound.
(ix) To the best of the Vendor's knowledge, no previous
employees of the Vendor have made a claim for
re-instatement and, to the best of the Vendor's
knowledge, there is no existing employee of the
Vendor under a fixed term employment contract who
could make a valid claim that he or she has an
agreement of indefinite duration.
(q) Employee Benefit Matters.
(i) Schedule 2.2 contains a complete and correct list of
each written or unwritten bonus, deferred
compensation and incentive compensation, stock
purchase, stock option, severance or termination pay,
hospitalization or other medical or dental benefits,
disability, life or other insurance, legal services,
supplemental unemployment benefits, profit sharing,
pension, or retirement plan, program, agreement or
arrangement, and each other employee benefit plan,
program, agreement or arrangement, sponsored,
maintained or contributed to or required to be
contributed by the Vendor in connection with the
Purchased Business, or by any other person for the
benefit of any employee or former employee of the
Purchased Business, whether formal or informal and
whether legally binding or not (the "Plans"). The
Vendor does not have a formal plan or commitment and
has made no promises, whether legally binding or not,
to create any additional plan or modify or change any
existing plan that would affect any employee or
former employee of the Vendor.
(ii) The Vendor does not now have, nor has it ever,
maintained, established, sponsored, participated in,
or contributed to, any retirement or pension plan in
respect of the employees of the Purchased Business.
(r) Validity of Transactions. Except as disclosed in Schedule 2.5,
the execution and delivery of this Agreement by the Vendor,
the consummation of the transactions contemplated hereby and
the fulfilment by the Vendor of the terms, conditions and
provisions hereof will not:
(i) contravene or violate or result in the breach (with
or without the giving of notice or lapse of time, or
both) or acceleration of any obligations of the
Vendor or require the consent of any Person under:
(A) the laws applicable to the Vendor,
(B) any judgement, order, writ, injunction or
decree of any court or Authority,
(C) the articles, by-laws or any resolutions of
the Vendor or any amendments thereto or
restatements thereof, or
<PAGE>
-25-
(D) the provisions of any material contract,
agreement, arrangement or understanding to
which the Vendor is a party or by which it
is bound;
(ii) relieve any other party to a Contract of its
obligations thereunder or enable it to determine its
obligations thereunder; or
(iii) result in the creation or imposition of any
Encumbrance on any of the Purchased Assets.
(s) Compliance with Laws. Other than as disclosed herein, the
Vendor has conducted and is conducting the Purchased Business
in compliance with all applicable Laws. The Vendor is duly
licensed, registered, qualified and duly possesses all
Governmental Authorizations to enable the Purchased Business
to be carried on as now conducted in compliance with all Laws.
The Governmental Authorizations are valid and subsisting and
in good standing and there has been no violation in respect
thereof nor are there any proceedings pending or, to the
Principals' knowledge, threatened, to revoke, limit or impose
any condition on any of the Government Authorizations. There
are no material limitations or restrictions on carrying on the
Purchased Business from the lands and premises from which it
is now carried on.
(t) Litigation. Except as disclosed in Schedule 2.7, there is no
suit, action, dispute, civil or criminal litigation, claim,
arbitration or legal, administrative or other proceeding or
governmental investigation, including appeals and applications
for review (collectively, "Proceedings"), pending or, to the
best knowledge of the Vendor, threatened against the Vendor or
relating to the Purchased Business or any of the Purchased
Assets or affecting the transactions contemplated by this
Agreement. To the best knowledge of the Vendor, there are no
facts which will give rise to any Proceedings. Except as
disclosed in Schedule 2.7, there is not presently outstanding
against the Vendor any judgement, execution, order,
injunction, decree or rule of any court, administrative
agency, governmental authority or arbitrator.
(u) Environmental, Health and Safety Claims.
(i) The Purchased Business has been and is being carried
on by the Vendor, and the Purchased Assets are, in
compliance in all material respects with
Environmental, Health and Safety Laws.
(ii) Without limiting the generality of the foregoing,
Vendor has obtained and complied with, and is in
compliance with, all permits, licenses and other
authorizations that are required pursuant to
Environmental, Health, and Safety Laws for the
operation of the Purchased Business.
(iii) The Vendor has not received any written notice,
regarding any actual violation of Environmental,
Health, and Safety Laws relating to the Purchased
Business.
(v) Absence of Certain Changes. Since the date of the October 31
Balance Sheet, the Vendor has conducted the business of the
Purchased Business only in the ordinary course of business
and, without limiting the generality of the foregoing:
(i) There has not been any material adverse change in the
business, financial condition, operations,
<PAGE>
-26-
or results of operations of the Purchased Business;
(ii) The Vendor has not sold, leased, licensed, or
disposed of any material assets relating to the
Purchased Business (whether by way of merger,
purchase, or otherwise) other than in the ordinary
course of business;
(iii) The Vendor has not accelerated, terminated, modified
or cancelled any Contract, material agreement,
contract, lease, or license (or series of related
agreements, Contracts, leases, and licenses) which
relates to the Purchased Business;
(iv) The Vendor has not delayed or postponed the payment
of material accounts payable and other liabilities
relating to the Purchased Business beyond their due
date outside the ordinary course of business, except
with respect to accounts or liabilities that are
subject to dispute in good faith by the Vendor;
(v) The Vendor has no reason to believe that any vendors,
licensors, licensees, distributors, or customers for
any Purchased Asset intends to discontinue with the
Purchaser a business relationship on terms at least
as favourable as the relationship such vendors,
licensors, licensees, distributors, and customers
currently have with the Vendor;
(vi) No Purchased Asset has been materially damaged,
destroyed, or lost (whether or not covered by
insurance), and no material customer of the Purchased
Business has been lost;
(vii) The Vendor has not entered into any employment
contract or collective bargaining agreement, or
modified the terms of any existing employment
contract or collective bargaining agreement, relating
to the Purchased Business, except in the ordinary
course of business;
(viii) The Vendor has not changed employment or compensation
terms for any employee specified on Schedule 2.2
hereto, except in the ordinary course of business;
(ix) To the knowledge of the Vendor, there has not been
any other occurrence, event, incident, action,
failure to act, or transaction outside the ordinary
course of business involving the Purchased Business
which would have a material adverse effect on the
Purchased Business;
(x) The Vendor has not entered into any capital
commitments in relation to the Purchased Business;
(xi) The Vendor has not accelerated the collection or
conversion of accounts receivable or notes receivable
relating to the Purchased Business by offering any
incentive for such acceleration, including but not
limited to prepayment discounts, allowances, or
enhancements, except in the ordinary course of
business;
(xii) The Vendor has not revalued any of the assets of the
Purchased Business, other than in accordance with the
principles of valuation of the inventory set out in
Schedule 4.3 and the valuation of fixed assets agreed
to by the parties;
(xiii) The Vendor has not received notice of any claim or
potential claim of ownership of the
<PAGE>
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Purchased Assets by any person, and to the best
knowledge of the Vendor, no basis exists for any such
claim of ownership;
(xiv) The Vendor has not received notice of any claim or
potential claim, and to the best knowledge of the
Vendor, no basis exists for any claim or potential
claim that the Purchased Business has infringed the
rights of any person or entity;
(xv) The Vendor has not done, committed to do, or omitted
to do anything that could reasonably be expected to
have a material adverse effect on the Purchased
Business; and
(xvi) The Vendor has not negotiated with respect to or
otherwise committed or agreed to do any of the
foregoing (other than negotiations with Purchaser and
other purchasers and their respective representatives
regarding the purchase and sale of the Purchased
Business and the Purchased Assets or transactions
contemplated by this Agreement).
(xvii) Other than as listed in Schedule 2.14 and as
otherwise disclosed by the Vendor to the Purchaser,
to the knowledge of the Vendor, as at the Effective
Date there is no agreement (non-competition, field of
use, or otherwise), judgment, injunction, order or
decree which has or reasonably could be expected to
have the effect of prohibiting, in a material way,
the operation of the Purchased Business.
(w) Agreements, Contracts and Commitments. Except as contemplated
by this Agreement or as set forth on Schedule 2.12 the Vendor
does not currently have, is not a party to, nor is bound by
with respect to the Purchased Business:
(i) any agreement, contract, or commitment relating to
the disposition or acquisition of assets or any
interest in any business enterprise;
(ii) any agreement (or group of related agreements) for
the lease of personal property to or from any person
or entity having a value individually in excess of
$100,000;
(iii) any agreement of indemnification, guarantee,
fidelity, surety, or completion bond;
(iv) any agreement pursuant to which the Vendor has
advanced or loaned any amount of money to any
director, officer, employee, or consultant, other
than business travel advances in the ordinary course
of business;
(v) any purchase order or contract for the purchase of
materials in excess of $500,000;
(vi) any agreement (or group of related agreements)
containing any covenant limiting the freedom of the
Vendor to engage in any line of business or to
compete with any person or entity that could
reasonably be expected to impair or encumber the
Purchased Assets;
(vii) any agreement (or group of related agreements)
relating to capital expenditures and involving future
payments in excess of $500,000;
<PAGE>
-28-
(viii) any agreement (or group of related agreements) under
which payment has already been received by the Vendor
(whether in whole or in part) but which requires the
performance of services after the Closing Date;
(ix) scheduled any mortgages, indentures, loans or credit
agreements, security agreements or other agreements
or instruments relating to the borrowing of money by
the Vendor or extension of credit to the Vendor,
involving obligations in excess of $500,000 under
which the Vendor has imposed any lien on any of the
Purchased Assets;
(x) any purchase order or contract for the purchase of
materials (excluding capital expenditures) involving
$500,000 or more;
(xi) any agreement concerning confidentiality;
(xii) any construction contracts;
(xiii) any distribution, joint marketing, development or
partnership or joint venture agreement;
(xiv) any agreement pursuant to which the Vendor has
granted, or may grant in the future, to any party a
source-code license or option or other right to use
or acquire source-code; or
(xv) any other agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and
licenses) that involves payment of $500,000 or more.
The Vendor has delivered to the Purchaser a correct and
complete copy of each written agreement listed in Schedule 1.1
and 1.2. The Vendor has not breached, violated, or defaulted
under, or received notice that it has breached, violated, or
defaulted under, any of the terms of or conditions of any
agreement, contract, or commitment required to be set forth on
Schedule 1.1 and 1.2 except where any such breach would not
have a materially adverse effect on the Purchased Business.
Each Contract is in full force and effect and, except as
otherwise disclosed in Schedule 2.12, is not subject to any
material default thereunder of which the Vendor has knowledge
by any party obligated to a Vendor pursuant thereto.
(x) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Vendor in respect of any
Purchased Asset.
(y) Insolvency. No insolvency proceedings of any character,
including bankruptcy, receivership, reorganization, winding
up, or arrangement with creditors, voluntary or involuntary,
affecting any of the Purchased Assets are pending or, to the
best knowledge of the Vendor, are threatened, and the Vendor
has not made any assignment for the benefit of creditors, nor
taken any other action which would constitute the basis for
the institution of such insolvency proceedings.
(z) Consents. Schedule 2.5 sets forth a true, correct, and
complete list of the identities of any person
<PAGE>
-29-
or entity (including a governmental entity) whose consent or
approval is required, and the matter, agreement, or contract
to which such consent relates, in connection with the
transfer, assignment or conveyance by the Vendor of any
Purchased Asset.
(aa) Product Warranty. Each product sold, leased, or delivered by
the Vendor in the Purchased Business has been in conformity
with all material applicable contractual commitments and all
material express and implied warranties, except where failure
to do so would not have a material adverse effect on the
Purchased Business, and, other than as disclosed in Schedule
2.9, the Vendor has no material liability (and there is no
basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand
against any of them giving rise to any material liability) for
replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty
claims that will be set forth on the Effective Date Balance
Sheet. Other than as disclosed in Schedule 2.9, no product
manufactured, sold, leased, or delivered by Vendor in the
Purchased Business is subject to any guaranty, warranty, or
other indemnity beyond the applicable standard terms and
conditions of sale or lease. Schedule 2.9 includes a copy of
the Vendor's standard terms and conditions of sale, license or
lease.
(bb) Product Liability. To the knowledge of the Vendor, the Vendor
has no liability (and there is no basis for any present or
future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving
rise to any liability) arising out of any injury to
individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased,
or delivered by the Vendor in the Purchased Business.
(cc) Trade Accounts Receivable. The Vendor has delivered to
Purchaser a complete and accurate ageing of all trade accounts
receivable of the Company as of September 30, 1998. No trade
account receivable reflected on the October 31 Balance Sheet
and no trade account receivable arising after the date of the
Effective Date Balance Sheet and reflected on the books of the
Vendor is uncollectible, in management's opinion, or subject
to counterclaim or offset, except to the extent reserved
against thereon. All trade accounts receivable have been
generated in the ordinary course of business and reflect a
bona fide obligation for the payment of goods or services
provided by the Vendor.
(dd) To the knowledge of the Vendor, the representations and
warranties made by the Vendor (as modified by the Vendor's
Schedules), and the statements made in any schedule or
certificate furnished by the Vendor pursuant to this
Agreement, do not contain any untrue statement of a material
fact, nor omit to state any material fact that would have a
materially adverse effect on the Purchased Business as at the
Effective Date.
Article 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
6.1 Representations and Warranties.
The Purchaser hereby makes the following representations and
warranties and
<PAGE>
-30-
acknowledges that the Vendor is relying on such representations and warranties
in entering into this Agreement and in selling the Purchased Business and the
Purchased Assets to the Purchaser:
(a) Corporate. The Purchaser is an unlimited liability company
organized under the laws of the Province of Nova Scotia and
has not been dissolved.
(b) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Purchaser and
constitutes a valid and binding obligation of the Purchaser,
enforceable against it in accordance with its terms.
(c) Validity of Transactions. Neither the execution and delivery
of this Agreement by the Purchaser, the consummation of the
transactions contemplated hereby nor the fulfilment by the
Purchaser of the terms, conditions and provisions hereof will
contravene or violate or result in the breach (with or without
the giving of notice or lapse of time, or both) or require the
consent of any Person under:
(i) any law, regulation, rule or policy;
(ii) any judgement, order, writ, injunction or decree of
any court or of any Authority;
(iii) the articles, by-laws or any resolutions of the
Purchaser or any amendments thereto or restatements
thereof; or
(iv) the provisions of any material contract, agreement,
arrangement to which the Purchaser is a party or by
which it is bound.
(d) Investment Canada. The Purchaser is a Canadian or a WTO
investor (as such terms are defined in the Investment Canada
Act (Canada)) for the purposes of the Investment Canada Act
(Canada).
(e) GST. The Purchaser is duly registered under subdivision (d) of
Division V of Part IX of the Excise Tax Act (Canada) in
respect of goods and services tax and harmonized sales tax and
its Business Number is 882198625.
(f) Financial Capability. The Purchaser has sufficient financial
capabilities to fulfil all of its obligations under this
Agreement, and any other agreements provided for herein, on
the due date thereof.
(g) Sufficiency of Transferred Assets. The Purchased Assets
represent all or substantially all of the property required by
the Purchaser to carry on the Purchased Business as a business
(as such term is defined in the Excise Tax Act (Canada)).
Article 7
COVENANTS OF THE VENDOR
AND JOINT COVENANTS OF THE VENDOR AND PURCHASER
7.1 Disclosure of Transaction.
<PAGE>
-31-
The Vendor shall not (and the Vendor shall ensure that its
agents, employees, officers and directors do not), without the prior written
consent of the Purchaser, disclose or permit to be disclosed to anyone any
information relating to the Purchaser, this Agreement and the transactions
contemplated in this Agreement. This section does not prohibit disclosure to the
professional advisors, bankers and employees of the Vendor who need to know such
information, or to the extent necessary to authorize the purchase and sale of
the Purchased Assets pursuant to this Agreement, or as may be required by law.
7.2 Examinations and Investigations.
(a) Except as provided for herein, the Vendor has granted the
Purchaser and its Agents, and the Purchaser acknowledges that
it has been granted, unrestricted access to, and has reviewed,
all Records and other documents relating to the Purchased
Business and the Purchased Assets in the possession or under
the control of the Vendor, save and except for Confidential
Information and Competitive Information which shall be dealt
with in accordance with sections 7.2(b) and 7.2(c).
(b) The Vendor shall grant access to and a reasonable opportunity
to review the Competitive Information only to authorized
representatives of the Purchaser (together with those of their
reports who have specialized expertise in the area under
consideration and whose input is reasonably required by such
named individuals in respect of such area under consideration,
all of such named individuals and such reports are
collectively the "Specified Individuals") on behalf of the
Purchaser for a period of 1 Business Day prior to the Closing
Date. The Purchaser shall cause such Specified Individuals not
to share such Competitive Information with any Person who is
not involved in the sale of the Purchased Assets, except for
Purchaser's officers involved in this transaction and the
Purchaser's directors prior to Closing.
(c) The Purchaser acknowledges that the Vendor has delivered to
the Purchaser a list of material documents of the Corporation
which have not been disclosed to the Purchaser or its
representatives on the grounds that the Vendor views them as
containing Confidential Information. The Vendor, in preparing
such list, represents and warrants that it has disclosed such
information regarding the subject matter and substance of such
agreements as in its opinion could reasonably be disclosed
without violating any applicable confidentiality covenant.
Upon the request of the Purchaser for a document set out in
such list, the Vendor shall use commercially reasonable
efforts to obtain the consent of the third party in favour of
whom the Confidential Information covenant operates to
disclose such Confidential Information to the Purchaser, and
the Specified Individuals on behalf of the Purchaser shall
have a period of 1 Business Day prior to the Closing Date to
review all such Confidential Information. The Purchaser shall
cause such Specified Individuals not to share such
Confidential Information with any Person who is not involved
in the sale of the Purchased Assets, except for Purchaser's
officers involved in this transaction and the Purchaser's
directors prior to Closing.
7.3 Retention of Records
From and after the Time of Closing, the Vendor shall retain
the Tax and Employee Records for at least six years. Upon reasonable request,
the Vendor shall make copies
<PAGE>
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of the Tax, Accounting and Employee Records for the Purchaser, to the extent
practicable, otherwise, the Vendor shall permit the Purchaser and its
representatives to inspect and take copies of such Tax and Employee Records to
the extent reasonably required to operate the Purchased Business, upon
reasonable notice, during normal business hours.
7.4 Subsection 20(24) Election.
Upon request by the Purchaser, acting reasonably, the Vendor
shall execute an election in respect of the amount of unearned revenue, if any,
applicable to the Purchased Business in accordance with subsection 20(24) of the
Income Tax Act (Canada). For greater certainty, the amount designated in the
election shall equal the unearned revenue of the Purchased Business at the
Closing Date as set out in the Effective Date Balance Sheet.
7.5 Contractual Consents.
The Vendor shall promptly apply for or otherwise seek and use
its reasonable commercial efforts to obtain, all consents and approvals required
to be obtained by it for the consummation of the transactions contemplated
hereby, and the Vendor shall use reasonable commercial efforts to obtain all
required consents, waivers, or approvals under any of the agreements, Contracts,
licenses, or leases of the Vendor in order to preserve for the Purchaser the
benefits of the Purchased Business and the Purchased Assets (other than such
consents or authorizations relating to the Non-Assignable Contracts which shall
be dealt with in accordance with section 2.11).
7.6 Legal Conditions to Acquisition.
The Purchaser and the Vendor shall take all commercially
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on such party with respect to this Agreement and the
transactions contemplated hereby and will promptly cooperate with and furnish
information to any other party hereto in connection with any such requirements
imposed upon such other party in connection herewith. Each party will take all
commercially reasonable actions to obtain (and will cooperate with the other
parties in obtaining) any consent, authorization, order or approval of, or any
registration, declaration, or filing with, or an exemption by, any Governmental
Authority, or other third party, required to be obtained or made by such party
or its subsidiaries in connection with this Agreement and consummating the
transactions contemplated hereby or the taking of any action contemplated
thereby or by this Agreement.
7.7 Best Efforts; Additional Documents and Further Assurances.
Each of the parties to this Agreement shall use commercially
reasonable efforts to effectuate the transactions contemplated hereby and to
fulfil and cause to be fulfilled the conditions to closing under this Agreement.
Each party hereto, at the request of the other party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things as
may be reasonably necessary or desirable for effecting completely the
consummation of
<PAGE>
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the transactions contemplated by this Agreement.
7.8 Notification of Certain Matters.
The parties shall give prompt notice to each other of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Vendor or the
Purchaser, as the case may be, contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing Date except as
contemplated by this Agreement (including the Vendor's Schedules) and (ii) any
failure of the Vendor or Purchaser, as the case may be, to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 7.9 shall not limit or otherwise affect
any remedies available to the party receiving such notice.
7.9 Payment of Trade and Other Creditors.
The Vendor shall comply with its obligation to satisfy amounts
due to trade and other creditors of the Vendor relating to the Purchased
Business. The Vendor shall continue to pay on a current basis and shall be
responsible for all obligations included in the Assumed Liabilities up to the
Closing Date.
7.10 No Solicitation.
From and after the date of this Agreement until the earlier to
occur of the Closing Date, termination of this Agreement pursuant to its terms
or November 30, 1998, the Vendor will not, and the Vendor will instruct its
respective directors, officers, employees, representatives, investment bankers,
agents, and affiliates not to, directly or indirectly (i) solicit or encourage
submission of any Acquisition Proposal (as defined herein) by any person,
entity, or group (other than Purchaser and its Affiliates, agents, and
representatives) or (ii) participate in any discussions or negotiations with, or
disclose any non-public information concerning the Purchased Business to, or
afford access to the properties, books, or records of the Purchased Business to,
or otherwise assist or facilitate, initiate, or enter into any agreement or
understanding with, any person, entity, or group (other than Purchaser and its
Affiliates, agents, and representatives) in connection with any Acquisition
Proposal with respect to the Purchased Business. For purposes of this Agreement,
an "Acquisition Proposal" means any proposal or offer relating to any merger,
consolidation, sale or license of substantial assets or similar transactions
involving or affecting the Purchased Business (other than sales or licenses in
the ordinary course of business or as permitted by this Agreement). The Vendor
will immediately cease any and all existing activities, discussion, or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. In addition, from and after the date of this Agreement, until the
earlier to occur of the Closing Date, termination of this Agreement pursuant to
its terms or November 30, 1998, the Vendor will not, and will instruct its
directors, officers, employees, representatives, investment bankers, agents, and
affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation, or solicitation in support of any Acquisition
Proposal made by any person, entity, or group (other than the Purchaser).
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7.11 Transitional Services
The parties agree that the Purchaser, for some period of time
after the Closing, not to exceed 6 months, will License to the Vendor the use of
the premises currently used by the Purchased Business, and that Vendor will
provide at cost to Purchaser the facilities necessary for the conduct of the
Purchased Business as it is currently conducted, including, but not limited to,
lighting, parking, telephone systems, utilities, access to the premises and
facilities, along with the provision of certain shared services such as credit
and collections, and shipping and receiving. In addition, the parties agree that
the Vendor will provide to the Purchaser, at the Vendor's cost, use of the
Vendor's current management information systems ("MIS"), with appropriate
firewalls to maintain the separateness of the Purchased Business, until the
Purchaser can modify its current system to manage the operations of the
Purchased Business and the use of the employees set out in Schedule 2.2. The
parties will enter into a Transition Services Agreement on mutually agreed upon
terms to effect the intent of this provision.
Article 8
COVENANTS OF THE PURCHASER
8.1 Disclosure of Transaction.
Until the Closing, the Purchaser shall not (and shall use its
best efforts to ensure that its agents, employees, officers and directors do
not) without the prior written consent of the Vendor, disclose or permit to be
disclosed any confidential information relating to the Vendor except such
information as is or becomes (i) available to the Purchaser from third parties
not subject to an undertaking of confidentiality; (ii) generally available to
the public other than as a result of a breach by the Purchaser hereunder; or
(iii) required to be disclosed under applicable law; and except such information
as was in the possession of the Purchaser prior to obtaining such information
from the Vendor as to which the fact of prior possession the Purchaser shall
have the burden of proof. This section does not prohibit disclosure to the
professional advisors, bankers and employees of the Purchaser who need to know
such information, or to the extent necessary to authorize the purchase and sale
of the Purchased Assets pursuant to this Agreement, or as may be required by
law.
8.2 Retention of Records.
From and after the Time of Closing, the Purchaser shall retain
the Records delivered at Closing for at least six years. The Purchaser shall
permit the Vendor and its representatives to inspect and take copies of such
Records, upon reasonable notice, during normal business hours, subject to
undertakings of confidentiality requested by Purchaser, acting reasonably.
Article 9
SURVIVAL AND INDEMNIFICATION
9.1 Survival of Covenants, Representations and Warranties of the
Vendor.
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The covenants, representations and warranties of the Vendor
contained in this Agreement or contained in any agreement delivered in
connection with this Agreement shall survive the Closing of the purchase and
sale of the Purchased Assets and, notwithstanding such Closing or any
investigations by or on behalf of the Purchaser with respect thereto (except as
contemplated hereby), shall continue in full force and effect for the benefit of
the Purchaser:
(a) with respect to representations and warranties relating to
title to the Purchased Assets, indefinitely;
(b) with respect to all other representations and warranties, for
a period of two years subsequent to the Closing Date; and
(c) with respect to any covenants, until they are performed or
fulfilled in accordance with their respective terms.
9.2 Survival of Covenants, Representations and Warranties of the
Purchaser.
The covenants, representations and warranties of the Purchaser
contained in this Agreement or contained in any agreement delivered in
connection with this Agreement shall survive the Closing of the purchase and
sale of the Purchased Assets and, notwithstanding such Closing or any
investigations by or on behalf of the Vendor with respect thereto, shall
continue in full force and effect for the benefit of the Vendor:
(a) with respect to all representations and warranties, for a
period of two years subsequent to the Closing Date; and
(b) with respect to any covenants, until they are performed or
fulfilled in accordance with their terms.
9.3 Indemnification.
(a) Subject to section 9.6, the Vendor indemnifies and holds the
Purchaser harmless from and against any claim, demand, action,
cause of action, damage, loss (including lost profits), cost,
liability or expense (including any and all reasonable legal
fees and costs) which may be made or brought against the
Purchaser or which the Purchaser may suffer or incur, directly
or indirectly, in respect of, as a result of, or arising out
of:
(i) any non-fulfilment of any covenant on the part of the
Vendor contained in this Agreement or under any other
agreement, certificate or instrument executed and
delivered pursuant to this Agreement; or
(ii) any inaccuracy in, or breach of, the Vendor's
representations or warranties contained in this
Agreement or under any other agreement, certificate
or instrument executed and delivered pursuant to this
Agreement; or
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(iii) any non-compliance with the provisions of the Bulk
Sales Act (Ontario) and other similar legislation in
respect of the transaction of purchase and sale
contemplated by this Agreement, compliance with which
the parties acknowledge they have agreed to waive;
(iv) any liability or obligation with respect to the
Purchased Business or the Purchased Assets arising
out of or related to acts occurring or taken or
conditions existing on or prior to the Closing; or
(v) any liability or obligation with respect to the
payment of provincial sales tax relating to the
Purchased Business and/or the Purchased Assets
preceding the Effective Date.
(b) The Purchaser indemnifies and holds the Vendor harmless from
and against any claim, demand, action, cause of action,
assessment, damage, loss (including lost profits), cost,
liability (including interest and penalties) or expense
(including legal fees and costs) which may be made or brought
against the Vendor or which the Vendor may suffer or incur, in
respect of, or arising out of:
(i) any non-fulfilment of any covenant on the part of the
Purchaser contained in this Agreement or under any
other agreement, certificate or instrument executed
and delivered pursuant to this Agreement; or
(ii) the Assumed Liabilities; or
(iii) any inaccuracy in or breach of any of the Purchaser's
representations or warranties contained in this
Agreement or under any other agreement, certificate
or instrument executed and delivered pursuant to this
Agreement; or
(iv) the Vendor's failure to collect from the Purchaser,
and the failure of the Purchaser to pay, any goods
and services tax payable pursuant to the Excise Tax
Act (Canada) in connection with the transactions
contemplated hereby or the Vendor's completion of the
election under S.167(1) of the Excise Tax Act
(Canada) pursuant to the section 2.11 hereof.
9.4 Procedure for Indemnification.
(a) Claims Other Than Third Party Claims. Following receipt from
the Vendor or the Purchaser, as the case may be (the
"Indemnified Party"), of a written notice of a claim for
indemnification which has not arisen in respect of a Third
Party Claim (as defined in section 9.4(b) below), the party
who is in receipt of such notice (the "Indemnifying Party")
shall have 30 days to make such investigation of the claim as
the Indemnifying Party considers necessary or desirable. For
the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information
relied upon by the Indemnified Party to substantiate the
claim. If the Indemnified Party and the Indemnifying Party
agree at or prior to the expiration of such 30 day period (or
any mutually agreed upon extension thereof) to the validity
and amount of the claim, the Indemnifying Party shall
immediately pay to the Indemnified Party the full agreed upon
amount of the claim. If the Indemnified Party and the
Indemnifying Party do not agree within such period (or any
mutually agreed upon extension thereof), such dispute shall be
resolved in accordance with section 14.1.
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(b) Third Party Claims.
(i) The Indemnified Party shall notify the Indemnifying
Party in writing as soon as is reasonably practicable
after being informed in writing that facts exist
which may result in a claim originating from a Person
other than the Indemnified Party (a "Third Party
Claim") and in respect of which a right of
indemnification given pursuant to section 9.3 may
apply. The Indemnifying Party shall have the right to
elect, by written notice delivered to the Indemnified
Party within 10 Business Days following receipt by
the Indemnifying Party of the notice from the
Indemnified Party in respect of the Third Party
Claim, at the sole expense of the Indemnifying Party,
to participate in or assume control of the
negotiation, settlement or defence of the Third Party
Claim, provided that:
(A) such will be done at all times in a diligent
and bona fide manner;
(B) the Indemnifying Party acknowledges in
writing its obligation to indemnify the
Indemnified Party in accordance with the
terms contained in this Agreement in respect
of that Third Party Claim; and
(C) the Indemnifying Party shall pay all
reasonable out-of-pocket expenses incurred
by the Indemnified Party as a result of such
participation or assumption.
(ii) If the Indemnifying Party elects to assume such
control, the Indemnified Party shall cooperate with
the Indemnifying Party and its counsel and shall have
the right to participate in the negotiation,
settlement or defence of such Third Party Claim at
its own expense. If the Indemnifying Party does not
so elect or, having elected to assume such control,
thereafter fails to proceed with the settlement or
defence of any such Third Party Claim, with
reasonable diligence, the Indemnified Party shall be
entitled to assume such control. In such case, the
Indemnifying Party shall cooperate where necessary
with the Indemnified Party and its counsel in
connection with such Third Party Claim shall pay all
reasonable out-of-pocket expenses (including legal
fees and costs) of the Indemnifying Party, and the
Indemnifying Party shall be bound by the results
obtained by the Indemnified Party with respect to
such Third Party Claim; provided that any settlement
entered into by the Indemnified Party that does not
contain a full and complete release of the
Indemnified and Indemnifying Parties and an
acknowledgement that neither party is admitting any
guilt or responsibility, must be consented to by the
Indemnifying Party, which consent will not be
unreasonably withheld.
(iii) If any Third Party Claim is of a nature such that the
Indemnified Party is required by applicable law to
make a payment to any Person (a "Third Party") with
respect to such Third Party Claim before the
completion of settlement negotiations or related
legal proceedings, the Indemnifying Party shall make
such payment, forthwith after demand by the
Indemnified Party. If the amount of any liability
under the Third Party Claim in respect of which such
a payment was made, as finally determined, is less
than the amount which was paid by the Indemnifying
Party to the Indemnified Party, the Indemnified Party
shall, forthwith after receipt of the difference from
the Third Party, pay such difference to the
Indemnifying Party.
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(iv) If the Indemnifying Party fails to assume control of
the defence of any Third Party Claim, the Indemnified
Party shall have the exclusive right to contest,
settle or pay the amount claimed, provided that any
settlement entered into by the Indemnified Party that
does not contain a full and complete release of the
Indemnified and Indemnifying Parties and an
acknowledgement that neither party is admitting any
guilt or responsibility, must be consented to by the
Indemnifying Party, which consent will not be
unreasonably withheld.
(v) A failure by one party to respond in writing to a
written request by the other party for consent for a
period of five days or more, shall be deemed a
consent by such party to such request.
Notwithstanding the foregoing, any matter or claim in respect of which
an adjustment to the Purchase Price is made pursuant to the terms
hereof that is also otherwise indemnifiable pursuant to this Section 9,
shall not be an indemnifiable matter or claim for the purposes of this
Agreement to the extent of the Purchase Price adjustment for such
matter or claim.
9.5 Sole Remedy.
Subject to any adjustments to the Purchase Price contemplated
by Article 2 and the termination rights in sections 10.2 and 11.2 herein, any
available remedies for fraud or intentional non-disclosure, and any available
equitable remedies for enforcing any non-competition, non-interference,
non-solicitation or confidentiality obligations pursuant to the terms hereof,
the rights of indemnification contained in this Article 9 are the sole and
exclusive rights and remedies of either party arising from a breach of any
covenant, representation or warranty contained in this Agreement by the other
party.
9.6 Indemnification Limitations and Mitigation.
Notwithstanding anything else contained in this Agreement:
(a) the indemnification rights provided for in sections 9.3(a) and
9.3(b) shall be subject to the limitation that no
indemnification or other such claim shall be payable under
sections 9.3(a), 9.3(b) or otherwise, as the case may be,
unless the total of all Claims exceeds the Threshold (as
defined below) in the aggregate (excluding any payments made
by the Vendor pursuant to sections 2.9, 4.1(g) and 9.3(a)(v)
hereof; excluding any failure by the Vendor to pay the Account
Loan or failure by the Purchaser to remit payments received by
the Purchaser as collecting agent on behalf of the Vendor
pursuant to section 2.8; excluding any failure by either party
to make any Purchase Price adjustments in accordance with
sections 2.6 and 2.8; and excluding any Claims by the Vendor
pursuant to section 9.3(b)(iv)), whereupon the full amount of
such Claims (including the Threshold, but subject to section
9.6(b) for payments made to the Purchaser) in the aggregate
shall be recoverable in accordance with the terms hereof;
(b) For purposes of paragraph (a) above, the "Threshold" shall be
$75,000 less any cost, liability or expense for which
indemnification is not available because the representation or
warranty is qualified by materiality and the amount of the
Claim is determined to not be material.
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(c) the indemnification rights provided for in section 9.3(a)
shall be subject to the further limitation that any and all
payments payable to the Purchaser pursuant to section 9.3(a)
or pursuant to any other claim made by the Purchaser in
connection with this Agreement (except for fraud or
intentional non-disclosure) by the Vendor shall not, in the
aggregate, exceed the Purchase Price;
(d) without prejudice to parties' rights of recovery hereunder,
except as provided in sections 9.6(a), (b) or (c) herein,
where any claim hereunder relates to any matter which is in
whole or in part insured by any insurance policy in respect of
the Vendor or the Purchaser, the Indemnified Party shall make
commercially reasonable efforts to ensure that such claim is
also made against the relevant insurer and pursued with all
reasonable expedition;
(e) where an Indemnified Party is entitled to recover from a third
party or claim reimbursement of any sum in respect of which it
also has a claim or potential claim under this Agreement, the
Indemnified Party shall take commercially reasonable steps to
enforce the recovery or reimbursement;
(f) the liability of a party under this Agreement shall be reduced
by the amount of any recoveries which have been actually
received or obtained by such party from any insurer or third
party responsible or partly responsible for the act, matter or
circumstances giving rise to such breach or claim or from any
insurance policy covering such breach or claim, less any
expenses incurred by such party in connection with any such
recoveries. If any recovery is made after the Indemnifying
Party has made full payment to the Indemnified Party in full
satisfaction of any such liability or claim, the Indemnified
Party shall refund or procure that there is refunded to the
Indemnifying Party the lesser of:
(i) the amount of such payment by the Indemnifying Party
to the Indemnified Party; and
(ii) the amount of such recovery, less any expenses
incurred by the Purchaser or the Vendor in connection
therewith; and
(g) notwithstanding anything to the contrary contained herein,
neither party shall have any right to make any claim for
indemnification hereunder to the extent that its officers or
agents involved in this transaction had knowledge, at the Time
of Closing, of the facts giving rise to such claim.
9.7 BMI Agreement.
In consideration of the Vendor entering into this Agreement,
BMI covenants with and in favour of the Vendor that the Purchaser shall perform
all of its obligations under this Agreement and the other agreements
contemplated hereby and agrees, subject to the limits in Section 9.6 as
qualified by Sections 9.2, 9.3, 9.4 and 9.5, to hold harmless the Vendor against
any breach by the Purchaser of the Purchaser's covenants, representations and
warranties set out in this Agreement and other agreements contemplated hereby.
Neither any bankruptcy of the Purchaser nor any other act, omission, thing or
circumstance which would otherwise constitute a legal or equitable discharge or
defence of a surety shall apply to relieve BMI of its obligations hereunder;
provided that the obligations of BMI shall be not greater than those of the
Purchaser
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contained hereunder and in the other agreements contemplated hereby.
9.8 ACI Agreement.
In consideration of the Purchaser entering into this
Agreement, ACI covenants with and in favour of the Purchaser that the Vendor
shall perform all of its obligations under the Agreement and other agreements
contemplated hereby and agrees, subject to the limits in Section 9.6 as
qualified by Sections 9.1, 9.3, 9.4 and 9.5, to hold harmless the Purchaser
against any breach by the Vendor of the Vendor's covenants, representations and
warranties set out in this Agreement and the other agreements contemplated
hereby. Neither any bankruptcy of the Vendor nor any act, omission, thing or
circumstances which would otherwise constitute a legal or equitable discharge or
defence of a surety shall apply to relieve ACI of its obligations hereunder;
provided that the obligations of ACI shall be no greater than those of the
Vendor contained hereunder and in the other agreements contemplated hereby.
Article 10
CONDITIONS OF CLOSING IN FAVOUR OF THE PURCHASER
10.1 Conditions.
The obligation of the Purchaser to purchase the Purchased
Assets is subject to the fulfilment, performance and satisfaction of each of the
conditions set forth below. The Vendor acknowledges that the following
conditions are for the exclusive benefit of the Purchaser.
(a) Representations and Warranties. All representations and
warranties of the Vendor contained in this Agreement shall be
true and correct in all material respects at the Time of
Closing with the same force and effect as if made at and as of
such time and date, and the Vendor shall have delivered to the
Purchaser, at the Time of Closing, a certificate dated the
Closing Date duly executed by an authorized senior officer of
the Vendor to such effect. The receipt of such certificate and
the closing of the transaction of purchase and sale provided
for in this Agreement shall not be (or deemed to be) a waiver
of the representations and warranties contained in this
Agreement, which representations and warranties shall continue
in full force and effect for the benefit of the Purchaser as
provided in Article 9.
(b) Performance of Covenants. The Vendor shall have performed or
complied with, in all material respects, all of its
obligations, covenants and agreements in this Agreement which
are to be performed or complied with by the Vendor at or prior
to the Time of Closing. The Vendor shall not be in breach of
any covenant contained in this Agreement and the Vendor shall
have delivered to the Purchaser, at the Time of Closing, a
certificate duly executed by an authorized senior officer of
the Vendor to such effect.
(c) Consents and Approvals. All actions, approvals and consents
listed on Schedule 2.6 and the consents or authorizations of
any other Persons that are, in the opinion of the Purchaser,
acting
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reasonably, required to be obtained in connection with the
completion of the transaction contemplated by this Agreement,
the execution of this Agreement, the Closing or the
performance of any of the terms and conditions hereof (other
than any which are the responsibility of the Purchaser to
obtain), shall have been obtained by the Vendor at or prior to
the Time of Closing on terms and conditions acceptable to the
Purchaser. Notwithstanding the foregoing, any consents or
authorizations relating to the Non-Assignable Contracts shall
be dealt with in accordance with section 2.11.
(d) No Action to Restrain. No order or judgement of a court or any
governmental or regulatory agency shall have been issued
enjoining, restraining or prohibiting the completion of the
transactions contemplated by this Agreement.
(e) Opinion of Counsel to the Vendor. The Purchaser shall have
received an opinion dated the Closing Date from Goodman
Phillips & Vineberg in form satisfactory to the Purchaser and
its counsel.
(f) Closing Documents and Proceedings. All documentation relating
to the purchase and sale of the Purchased Assets and the due
authorization of the performance by the Vendor of its
obligations under this Agreement shall have been completed and
executed by the Vendor and copies of same and of all such
documentation or other evidence as the Purchaser may
reasonably request have been delivered to the Purchaser.
(g) Transition Services Agreement. The Transition Services
Agreement shall have been completed and executed by the
Vendor.
(h) Competitive and Confidential Information. The Purchaser shall
have been given an opportunity to review the Competitive and
Confidential Information.
10.2 Waiver.
If any of the conditions set forth in this Article have not
been fulfilled, performed and satisfied at or prior to the Closing, the
Purchaser may, by written notice to the Vendor, terminate all of its obligations
hereunder and the Purchaser shall be released from all its obligations under
this Agreement. Any of these conditions may be waived in whole or in part by the
Purchaser by instrument in writing, without prejudice to any of its rights of
termination in the event of non-performance of any other condition, obligation
or covenant in whole or in part, and without prejudice to its right to complete
the transaction of purchase and sale contemplated by this Agreement and claim
damages for breach of any other representation, warranty or covenant which has
not been so waived.
Article 11
CONDITIONS OF CLOSING IN FAVOUR OF THE VENDOR
11.1 Conditions.
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The obligation of the Vendor to sell the Purchased Assets is
subject to the fulfilment, performance and satisfaction of each of the
conditions set forth below. The Purchaser acknowledges that the following
conditions are for the exclusive benefit of the Vendor.
(a) Representations and Warranties. All representations and
warranties of the Purchaser made in or pursuant to this
Agreement shall be true and correct in all material respects
at the Time of Closing with the same force and effect as if
made at and as of such time and date, and the Purchaser shall
have delivered to the Vendor at the Time of Closing a
certificate dated the Closing Date, duly executed by an
authorized senior officer of the Purchaser, to such effect.
The receipt of such certificate and the Closing of the
transaction of purchase and sale provided for in this
Agreement shall not be nor be deemed to be a waiver of the
representations and warranties contained in this Agreement,
which representations and warranties shall continue in full
force and effect for the benefit of the Vendor as provided in
Article 9.
(b) Performance of Covenants. The Purchaser shall have performed
or complied with, in all material respects, all of the
obligations, covenants and agreements in this Agreement to be
performed or complied with by the Purchaser at or prior to the
Time of Closing. The Purchaser shall not be in material breach
of any covenant on its part contained in this Agreement and
shall have delivered to the Vendor at the Time of Closing a
certificate duly executed by an authorized senior officer of
the Purchaser, to such effect.
(c) Opinion of Counsel to the Purchaser. The Vendor shall have
received an opinion dated the Closing Date from Wilson,
Sonsini, Goodrich & Rosati in form satisfactory to the Vendor
and its counsel.
(d) Closing Documents and Proceedings. All documentation relating
to the purchase and sale of the Purchased Assets and all
documentation relating to the due authorization of the
performance by the Purchaser of its obligations under this
Agreement shall have been completed and executed by the
Purchaser and copies of same and of all such documentation or
other evidence as they may reasonably request have been
delivered to the Vendor.
(e) Transition Services Agreement. The Transition Services
Agreement shall have been completed and executed by the
Purchaser.
(f) License Agreement. The License Agreement shall have been
completed and executed by the Purchaser.
11.2 Waiver.
If any of the conditions set forth in this Article have not
been fulfilled, performed or satisfied at or prior to the Closing, the Vendor
may, by written notice to the Purchaser, terminate all of its obligations
hereunder and the Vendor shall be released from all of its obligations under
this Agreement. Any of these conditions may be waived in whole or in part by the
Vendor by instrument in writing, without prejudice to any of its rights of
termination in the event of non-performance of any other condition, obligation
or covenant in whole or in part, and
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without prejudice to its right to complete the transaction of purchase and sale
contemplated by this Agreement and claim damages for breach of any other
representation, warranty or covenant, which has not been so waived.
Article 12
RISK OF LOSS
12.1 Damage or Destruction.
The Purchased Assets shall be and remain at the risk of the
Vendor up to and including the Effective Date.
12.2 Notice.
Upon the occurrence of any damage or destruction to, or
appropriation, expropriation or seizure of, the Purchased Assets, the Vendor
shall forthwith give notice thereof in writing to the Purchaser.
Article 13
CLOSING PROCEDURE
13.1 Closing.
The Closing shall take place at the offices of Goodman
Phillips & Vineberg, 250 Yonge Street, Suite 2400, Toronto, Ontario at the Time
of Closing or at such other place and time as may be agreed to by the parties.
13.2 Procedure.
At the Time of Closing, upon satisfaction of all the
conditions set out in Articles 10 and 11 which have not been waived as provided
therein,
(a) The Vendor shall deliver to the Purchaser:
(i) all deeds, conveyances, bills of sale, transfers,
assignments, assurances, transfer of all bank
accounts consents and any other documents necessary
or reasonably required to effectively transfer the
Purchased Assets and Purchased Business to the
Purchaser with good and marketable title free and
clear of all Encumbrances, other than Permitted
Encumbrances such documents to be in registrable form
to the extent registrable including, if necessary, an
assignment of contracts agreement; and
(ii) actual possession of the Purchased Assets, other than
the Tax and Employee Records, for which copies will
be provided if reasonably required;
(b) the Purchaser shall make the payment required by Article 2;
and
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(c) the Purchaser shall execute all necessary documents evidencing
its assumption of the Assumed Liabilities.
Article 14
GENERAL
14.1 Dispute Resolution.
The parties shall attempt in good faith to promptly resolve
any dispute (a "Dispute") arising out of or relating to this Agreement (other
than a Dispute relating to the Effective Date Balance Sheet, calculation of Net
Assets or Uncollected Accounts, which shall be resolved exclusively in
accordance with sections 2.5 and 2.8(b), as applicable) by negotiations between
executives or other representatives of each party with authority to settle the
Dispute. Any party may give the other party written notice of any Dispute not
resolved in the ordinary course of business. Within 20 days of said notice,
executives or other representatives of each party to the Dispute shall meet at a
mutually acceptable time and place, and thereafter as they deem necessary, to
exchange relevant information and to attempt to resolve the Dispute. If the
matter has not been resolved within 60 days of the date of the disputing party's
initial written notice, or if the parties fail to meet within 20 days of such
written notice, either party may initiate mediation of the Dispute in accordance
with the procedures set forth on Schedule 4.1. If the Dispute cannot be resolved
after each party has adhered to the procedures for mediation set forth in
Schedule 4.1, any party may initiate procedures for binding arbitration.
14.2 Notice.
All notices required or permitted by this Agreement shall be
in writing and delivered by hand or sent by telecopier to:
(a) the Purchaser at: Bell Microproducts Inc.
1941 Ringwood Avenue
San Jose, California 95131-1721
Attention: Bruce M. Jaffe,
Chief Financial Officer
Telephone: 408 451-1685
Fax Number: 408 451-1600
with a copy to Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94303-1050
U.S.A.
Attention: Thomas C. Klein
Telephone: 650 493-9300
Fax Number 650 493-6811
(b) the Vendor Prior
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to Closing at: c/o Abitibi Consolidated Inc.
207 Queens's Quay West, Suite 595
Toronto, Ontario
M5J 1A7
Attention: Robert P. Kanee
Fax Number 416-203-1553
the Vendor
Post-Closing at: c/o Abitibi Consolidated Inc.
800 Rene-Levesque Blvd. West,
P.O. Box 69
Montreal, Quebec H3B 1Y9
Attention: Robert P. Kanee/
Patrick Crowley
Fax Number: (514) 394-2334
with a copy to: Goodman Phillips & Vineberg
250 Yonge Street, Suite 2400
Toronto, Ontario M5B 2M6
Attention: Stephen H. Halperin
Fax Number: (416) 979-1234
or at such other address or fax number as the addressee may specify in writing
to the address from time to time. A notice shall be deemed to have been sent and
received on the day it is delivered by hand, or if telecopied, on the day on
which transmission is confirmed. If such day is not a Business Day or if the
notice is received after ordinary office hours, the notice shall be deemed to
have been sent and received on the next Business Day.
14.3 Costs.
Except as otherwise provided in this Agreement, each party
shall be responsible for its own fees, expenses, and other costs incurred in
connection with the transaction contemplated herein including any fees to agents
or brokers.
14.4 Time of the Essence.
Time is of the essence to every provision of this Agreement.
Extension, waiver or variation of any provision of this Agreement shall not be
deemed to affect this provision and there shall be no implied waiver of this
provision.
14.5 Further Acts.
The parties acknowledge that their co-operation is required to
facilitate the Closing. The parties shall do or cause to be done all such
further acts and things as may be necessary or desirable to give full effect to
this Agreement.
14.6 Jurisdiction.
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This Agreement shall be governed by the laws of the Province
of Ontario and the laws of Canada applicable therein. Each party hereby
irrevocably attorns to the non-exclusive jurisdiction of the courts of the
Province of Ontario.
14.7 Amendment.
This Agreement may be amended only by written agreement of the
parties.
14.8 Waiver.
No waiver of any provision of this Agreement shall be binding
unless it is in writing. No indulgence or forbearance by a party shall
constitute a waiver of such party's right to insist on performance in full and
in a timely manner of all covenants in this Agreement. Waiver of any provision
shall not be deemed to waive the same provision thereafter or any other
provision of this Agreement at any time.
14.9 Entire Agreement.
This Agreement and the Schedules attached to this Agreement
constitute the entire agreement among the parties pertaining to all the matters
herein, and supersedes all prior agreements and understandings.
14.10 Severability.
If any provision of this Agreement is invalid or
unenforceable, such provision shall be severed and the remainder of this
Agreement shall be unaffected thereby but shall continue to be valid and
enforceable to the fullest extent permitted by law.
14.11 Counterparts.
This Agreement may be executed in one or more counterparts
which, together, shall constitute one and the same Agreement. This Agreement
shall not be binding upon any party until it has been executed by each of the
parties and delivered to all other parties.
[THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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14.12 Assignment.
Neither this Agreement nor any rights or obligations hereunder
may be assigned, directly or indirectly, by any party without the prior written
consent of the other parties, provided that the Purchaser may assign this
Agreement to an affiliate or successor in interest and upon such assignment
shall remain jointly and severally liable with such entity for all obligations
of the Purchaser pursuant to this Agreement. Any other assignment without such
consent shall be null and void.
14.13 Enurement and Binding Effect
This Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective successors, heirs, executors,
administrators, personal representatives and permitted assigns.
AXIDATA INC.
Per: /s/ Robert Kanee
-------------------------------
Per: /s/ Gary Heffernan
-------------------------------
BELL MICROPRODUCTS CANADA -
TENEX DATA ULC
Per: /s/ Bruce M. Jaffe
-------------------------------
Per: /s/ Bruce M. Jaffe
-------------------------------
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BELL MICROPRODUCTS INC.
Per: /s/ Bruce M. Jaffe
-------------------------------
Per: /s/ Bruce M. Jaffe
-------------------------------
ABITIBI CONSOLIDATED INC.
Per: /s/ Patrick Crowley
-------------------------------
Per: /s/ Michael Medline
-------------------------------
