ASSET PURCHASE AGREEMENT
DATED the 17th 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 -
ABITIBI-CONSOLIDATED INC., a
corporation incorporated under the federal
laws of Canada
("ACI")
- and -
3553906 CANADA INC., a corporation
incorporated under the federal laws of Canada
(the "Purchaser")
- and -
MIAMI COMPUTER SUPPLY
CORPORATION, a corporation
incorporated under the laws of Ohio
("MCSC")
The parties agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions.
In this Agreement, except as otherwise expressly provided, capitalized
words or expressions shall have the meanings set out below:
(a) "Account Loan" shall have the meaning attributed thereto in
Section 2.8.
(b) "Accounts Receivable" means all trade accounts receivable and
other amounts receivable owing to Axidata relating solely to
the Purchased Business which are
-2-
outstanding as of the Effective Date (including
vendor/supplier accounts receivable such as, for example,
volume rebates, co-op and price protection), and the full
benefit of all security for such amounts, but does not include
any amounts owing from shareholders and Affiliates of Axidata.
(c) "Adjustment Date" means the date which is five Business Days
after the date on which the Closing Balance Sheet is final and
binding on the parties, as contemplated by Article II of this
Agreement.
(d) "Affiliate" shall have the meaning given it in the Business
Corporations Act (Ontario).
(e) "Agreement" means this Agreement and includes all schedules
set out in Section 1.3 of this Agreement.
(f) "Assumed Liabilities" means:
(i) all accrued Liabilities recorded in the Closing
Balance Sheet, being the same categories of
Liabilities recorded in the September 30 Balance
Sheet;
(ii) ordinary accounts payable relating to the Purchased
Business;
(iii) all Liabilities arising from and after the Effective
Date under and pursuant to the Contracts as listed on
Schedule 1.2;
(iv) all Liabilities which are specifically assumed by the
Purchaser pursuant to Article IV of this Agreement;
and
(v) all Liabilities which are specifically assumed by the
Purchaser pursuant to its assumption of the Trademark
Agreement, its assumption of the Tenex Transitional
Services Agreement and its assumption of the Tenex
Undertaking,
but excludes the Excluded Liabilities.
(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) "Azerty Division" means the Azerty Division of Axidata.
(i) "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.
-3-
(j) "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 and reflected in the accounting records of Axidata.
(k) "Claims" means any and all losses, 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.
(l) "Closing" means the completion of the transactions described
in this Agreement, "Closing Date" or "Date of Closing" means
December 11, 1998 (or such other date as the parties may agree
upon but in any event, no later than December 31, 1998) and
"Time of Closing" or "Closing Time" means 10:00 a.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).
(m) "Closing Balance Sheet" means the Purchased Assets and Assumed
Liabilities as at the Effective Date, together with a
calculation of the Net Assets.
(n) "Competitive Information" means competitively sensitive
information of the Vendor relating to the Purchased Business,
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.
(o) "Confidential Information" means any information relating to
the Purchased Business, the disclosure of which would result
in the violation of any confidentiality covenant to which the
Vendor is a party.
(p) "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.
(q) "CRT Division" means the Compu-Redi/Tenex Division of Axidata.
(r) "Effective Date" means 12:01 a.m. on December 1, 1998.
(s) "Employees" shall have the meaning set forth in Section 4.1
(t) "Encumbrance" means any mortgage, lien, pledge, charge,
hypothec or prior claim, security interest or other
encumbrance whatsoever.
(u) "Environmental Laws" means all applicable Laws relating in
whole or in part to the protection of the environment,
occupational or public health and safety.
-4-
(v) "Environmental Remediation" means all liability associated
with the remediation project which is being managed by ACI and
the Vendor under the direction of ACI to remediate the
historic leakage of toluene at the leased premises of Axidata
located at 45 Commander Drive, Scarborough to the extent that
such leakage is remediable under Environmental Laws in effect
at the Effective Date.
(w) "Equipment" means all machinery, furniture, office, handling
and other equipment and accessories owned by Axidata and used
exclusively in connection with the Purchased Business,
including computers, peripherals and MIS software that are not
included in Inventories including the equipment listed on
Schedule 1.4A but excluding the equipment listed on Schedule
1.4B.
(x) "Excluded Assets" means Cash, Accounts Receivable, amounts
owing from shareholders or Affiliates of Axidata, and all
property, assets and rights of every kind and description
wheresoever situate of Axidata (including without limitation,
all assets of the Tenex Data Division of Axidata) other than
those used solely and exclusively in connection with the
Purchased Business.
(y) "Excluded Liabilities" means all liabilities associated with
(i) taxes based upon the income, revenues or capital receipts
of the Vendor up to the Effective Date relating to the
Purchased Business; (ii) inter-company indebtedness of the
Vendor; (iii) any liabilities which may be associated with the
Environmental Remediation; (iv) liabilities arising from any
breach or default by the Vendor, prior to the Effective Date,
of or under any Contract or Real Property Lease; (v)
liabilities for any damages, penalties, fines or other claims
whatsoever arising or resulting from or relating to the
operations of the Purchased Business prior to the Effective
Date; (vi) liabilities of the Vendor incurred in connection
with any business or activity of the Vendor other than the
Purchased Business; and (vii) the special bonuses referred to
in subsection 5.1(o)(v).
(z) "Financial Statements" means the combined unaudited balance
sheet (containing the same components as set forth in the
definition of the Closing Balance Sheet) and statement of
earnings of the Purchased Business (including the notes
thereto) for the period ended September 30, 1998, a copy of
which is attached as Schedule 2.1.
(aa) "GAAP" shall have the meaning attributed thereto in subsection
1.2(d).
(bb) "Goodwill" means the goodwill of the Purchased Business,
together with the exclusive right of the Purchaser to
represent itself as carrying on the Purchased Business in
continuation of and in succession to Axidata, subject to
Section 8.3, and including all choses in action and other
intangibles relating solely and exclusively to the Purchased
Business which do not form part of the Intellectual Property
or Records (but is not restricted by the definition of
"goodwill" under GAAP).
(cc) "Governmental Authorization" means any authorization, permit,
approval, grant, licence, quota, consent, commitment, right or
privilege issued or granted by any
-5-
Authority.
(dd) "Intellectual Property" means all right, title, and interest
of Axidata in and to the trademarks, trade names, copyrights,
know-how, trade secrets or other intellectual property rights
(whether registered or unregistered), including any
application for any of the foregoing exclusively relating to,
or exclusively used in the Purchased Business including as set
out in Schedule 1.3 and ACI's right to the "Azerty" trademark,
subject to the limitations contained in the Trademark
Assignment and Administration Agreement dated April 3, 1998
among, inter alia ACI and United Stationers Supply Co.
("United").
(ee) "Inventories" means all inventories owned by Axidata relating
solely and exclusively to the Purchased Business, net of
reserves, including all finished goods, shipping supplies and
all other materials and supplies on hand.
(ff) "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.
(gg) "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
primarily to the Purchased Business and any liability in
respect of income, sales, property or gross receipts tax.
(hh) "Material Adverse Change" means a material adverse change to
the business, operations, assets or condition of the Purchased
Business when taken as a whole.
(ii) "Material Contracts" means any Contract that is required to be
disclosed by the Vendor as a result of such Contract involving
an amount, in the aggregate, in excess of $100,000 or
extending for at least one (1) year and involving an amount,
in the aggregate, in excess of $50,000.
(jj) "Net Assets" has the meaning attributed thereto in Section
2.5.
(kk) "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.
(ll) "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
-6-
payable and which relate exclusively to Assumed Liabilities;
and (iii) the registrations under the Personal Property
Security Act (Ontario), all as set out in Schedule 1.6.
(mm) "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.
(nn) "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.
(oo) "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.
(pp) "Purchased Assets" means all property, assets and rights of
every kind and description wheresoever situate of Axidata used
solely in connection with the Purchased Business, including
all right, title and interest of Axidata in and to:
(i) Contracts;
(ii) Equipment;
(iii) Goodwill;
(iv) Intellectual Property;
(v) Inventories;
(vi) Prepaid Amounts;
(vii) Records;
(viii) Vehicles, and
(ix) Real Property Leases,
but excluding the Excluded Assets.
(qq) "Purchase Price" means the purchase price for the Purchased
Assets calculated in accordance with the provisions of Article
II.
(rr) "Purchased Business" means, collectively, the business of the
wholesale sale and
-7-
distribution of office products, computer consumables,
peripherals, paper, accessories and supplies conducted by the
Azerty Division in Canada and the business of the sale of
computer consumables, peripherals, paper, accessories and
supplies primarily to end user customers conducted by Axidata
in Canada through its CRT Division. The term "Purchased
Business" does not include the business of the sale of systems
data storage products to resellers conducted by Tenex Data
which is being sold to Bell Microproducts Inc.
(ss) "QST" shall have the meaning attributed thereto in Section
2.11.
(tt) "Real Property Leases" means the leases, offers to lease or
agreements in the nature of a lease of real property
(including occupancy arrangements) to which the Vendor is a
party, whether as lessor or lessee, which are related to the
Purchased Business and which are set out on Schedule 1.1.
(uu) "Records" means originals or copies of certain records
relating solely to the Purchased Business and Purchased
Assets, including operating data, files, books and records,
correspondence, credit information, research materials,
contract documents, records of past sales, supplier lists,
employee documents, inventory data, accounts receivable data,
financial statements and other similar records.
(vv) "September 30 Balance Sheet" means the combined unaudited
balance sheet of the Purchased Business as at September 30,
1998, included in the Financial Statements.
(ww) "Tenex Transition Services Agreement" means the assumption
agreement to be entered into as of the Effective Date between
the Vendor and the Purchaser respecting the assumption by the
Purchaser of all obligations of the Vendor pursuant to the
transitional services agreement to be entered into between the
Vendor and Bell Microproducts Inc. contemporaneously with the
completion of the sale of the Vendor's Tenex Data division and
obtain all of the Vendor's rights thereunder.
(xx) "Trademark Agreement" means the assumption agreement to be
entered into as at the Effective Date among the Purchaser,
MCSC, ACI and, if possible, United pursuant to which agreement
the Purchaser shall assume as at the Effective Date all of
ACI's obligations and obtain all of ACI's rights under the
Trademark Assignment and Administration Agreement dated April
3, 1998 among, inter alia, ACI and United.
(yy) "Uncollected Accounts" shall have the meaning attributed
thereto in Section 2.8.
(zz) "Vehicles" means all trucks, cars and other motor vehicles
owned or used by the Vendor solely in connection with the
Purchased Business which are listed in Schedule 1.5.
1.2 Construction.
In this Agreement, unless the context otherwise provides:
-8-
(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 - Real Property Leases
Schedule 1.2 - Contracts
Schedule 1.3 - Intellectual Property
Schedule 1.4A - Included Equipment
Schedule 1.4B - Excluded Equipment
Schedule 1.5 - Vehicles
Schedule 1.6 - Permitted Encumbrances
(b) Disclosure Schedules
Schedule 2.1 - Financial Statements
Schedule 2.2 - Employees
Schedule 2.3 - Consents
-9-
(c) Document Schedules
Schedule 3.1 - Form of Opinion of Goodman Phillips & Vineberg
Schedule 3.2 - Forms of Opinion of Fraser Milner and Elias, Matz,
Tiernan & Herrick L.L.P.
(d) Miscellaneous Schedules
Schedule 4.1 - Allocation of Purchase Price
Schedule 4.2 - Inventory Reserves
Schedule 4.3 - Arbitration Procedures
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 Purchase and Sale.
Subject to the terms and conditions of this Agreement, on the Closing
Date, but with effect from the Effective Date, the Vendor agrees to sell to the
Purchaser and the Purchaser agrees to purchase from the Vendor, the Purchased
Assets in consideration of the Purchase Price.
2.2 Calculation of Purchase Price.
The purchase price shall be $60,000,000, plus the amount of the Assumed
Liabilities, less the amount of the Accounts Receivable as of the Effective
Date, as adjusted in accordance with Sections 2.6, 2.8 and 2.9 (the "Purchase
Price"), plus simple interest on the cash portion of the Purchase Price at the
Prime Rate, from and including the Effective Date to the Closing Date.
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 Canadian provincial taxation statute
to give effect to such allocation.
2.4 Payment of Purchase Price.
The Purchaser shall satisfy the Purchase Price at Closing by paying the
cash amount thereof by certified cheque, wire transfer or bank draft to the
order of the Vendor, in accordance with the allocation of the purchase price set
out in Schedule 4.1 and by assuming the Assumed Liabilities.
2.5 Closing Balance Sheet.
(a) Within 45 days following the Closing Date, the Vendor and the
Purchaser shall participate in the preparation of and shall
cause their respective employees to
-10-
participate in the preparation of, and the Vendor shall
deliver to the Purchaser, the Closing Balance Sheet. The
Closing Balance Sheet shall be prepared in accordance with
GAAP and audited in accordance with Canadian generally
accepted auditing standards consistent with the accounting
policies, practices and procedures for the Vendor used in the
preparation of the Financial Statements, except as may
otherwise be required pursuant to this Article II and shall be
audited by PriceWaterhouseCoopers, Toronto in accordance with
Canadian generally accepted auditing principles 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, Toronto and appropriate
representatives of the Vendor during the preparation and audit
of the Closing Balance Sheet. The Closing 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 of the Purchased Assets; and (y)
shall reflect all required audit adjustments for known errors
exceeding $25,000, in the net aggregate amount, as determined
by PricewaterhouseCoopers, Toronto in order that the Closing
Balance Sheet will comply with GAAP. The cost of preparing the
Closing Date Balance Sheet shall be borne by the Vendor.
(b) The Closing Balance Sheet shall set forth a calculation of Net
Assets together with the report thereon of
PricewaterhouseCoopers, Toronto.
(c) Following the delivery of the Closing Balance Sheet to the
Vendor and the Purchaser and the execution by the Purchaser
and Vendor of standard indemnity releases in favour of
PricewaterhouseCoopers, Toronto, the Vendor shall provide the
Purchaser with access to the working papers of
PricewaterhouseCoopers, Toronto relating thereto.
(d) 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 Closing
Balance Sheet and PricewaterhouseCoopers, Toronto report as to
the amount of the Net Assets, then PricewaterhouseCoopers,
Cincinnati and the Purchaser, on the one hand, and
PricewaterhouseCoopers, Toronto and the Vendor, on the other
hand, shall in good faith make meaningful efforts to agree
upon the amount of the Net Assets (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, Cincinnati,
on the one hand, and PricewaterhouseCoopers, Toronto and the
Vendor, 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 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 Closing Balance Sheet,
together with a report of the Neutral
-11-
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, Toronto incurred by the Vendor shall
be the sole responsibility of the Vendor and the fees and
expenses of PricewaterhouseCoopers, Cincinnati incurred by the
Purchaser shall be the sole responsibility of the Purchaser.
It is understood that the Purchaser shall retain
PricewaterhouseCoopers, Toronto to audit the historical
financial statements of the Purchased Business which are
required to be filed by the Purchaser with the Securities and
Exchange Commission and the Purchaser shall be solely
responsible for all fees and expenses associated with the
preparation of such audited financial statements.
(e) As used in this Agreement, "Net Assets" means, as of the
Effective Date and immediately prior to the consummation of
the transactions contemplated hereby, as derived from the
Closing Balance Sheet, an amount equal to total assets, minus
total current liabilities, minus other long-term liabilities,
if any, (excluding all capital, income and sales taxes) all of
which relate solely to the Purchased Business, excluding the
net assets of the Tenex Data division being sold by Axidata.
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 Closing
Balance Sheet are more or less than $35,868,000 minus $31,777,000 of Accounts
Receivable, being $4,091,000 (the difference being referred to herein as the
"Net Asset Difference"), being the Net Assets of the Purchased Business set out
in the unaudited September 30 Balance Sheet, the Purchase Price shall be
decreased dollar for dollar by an amount equal to the Net Asset Difference if
the Net Assets reflected on the Closing Balance Sheet are less than $4,091,000,
or shall be increased dollar for dollar by an amount equal to the Net Asset
Difference if the Net Assets reflected on the Closing Balance Sheet are greater
than $4,091,000. 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 simple interest thereon at the Prime Rate 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.
2.7 Inventory Valuation.
As part of the preparation of the Closing Balance Sheet, the Vendor
shall take a physical stock of the Inventory as of the Effective Date. Such
physical stock taking shall be completed on November 30, 1998 or December 1,
1998 in accordance with standard procedures consistent with
-12-
past practice (which will be 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 shall be valued (on a first in first out
basis) at the lower of cost or fair market value. The Purchaser acknowledges
that it has done a review of the information respecting the Inventory. The basis
of the calculation of Inventory reserves will be as set out on Schedule 4.2.
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 $175,000
less than the book value of the Accounts Receivable as of the
Effective Date for a term of 120 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 5%
from the maturity date until paid in full. The Vendor hereby
grants to the Purchaser, effective as of the Closing Date, a
first lien security interest in the Accounts Receivable to
secure the Account Loan. The Vendor further agrees not to
otherwise encumber the Accounts Receivable during the Loan
Period.
(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 writing (stating with
reasonable specificity the reasons for its objections) and
then PricewaterhouseCoopers, Toronto and the Vendor, on the
one hand, and PricewaterhouseCoopers, Cincinnati 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, Cincinnati, 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, Cincinnati 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
-13-
Purchaser, then such amount, together with interest thereon at
the simple annual rate of Prime Rate plus 5%, 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) The Purchaser shall have the right after Closing to endorse
all payments received by the Purchaser, as collecting agent on
behalf of the Vendor, in respect of the Accounts Receivable in
the name of the Purchaser and to deposit the same 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 best 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. The Vendor
shall indemnify and hold the Purchaser harmless for any Claims
made by a third party against the Purchaser in connection with
the Purchaser's conduct as collection agent for the Vendor,
except for actions or omissions by the Purchaser which
constitute gross negligence or an intentional violation of
applicable law or regulations. After receipt of payment of the
remaining balance of the Account Loan in accordance with (a)
above, for an additional 120 days following the maturity of
the Account Loan, the Purchaser shall use its reasonable best
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
120 day period. At the end of such 120 day period or at any
time during such additional 120 day period following the
Vendor's election to assume responsibility for the Uncollected
Accounts, the Purchaser shall, forthwith upon the request of
the Vendor, transfer all pertinent data regarding such
Uncollected Accounts to the Vendor. 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.
2.9 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"), the
Purchased Business shall be owned, 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, as verified
by PricewaterhouseCoopers, Toronto, equal to:
(A) the cash balance (including outstanding cheques,
which shall be deemed to
-14-
have been cashed) on the books of account of the
Purchased Business as of the Closing Date
representing cash transactions during the Interim
Period; and
(B) interest, calculated at the Prime Rate, on the
average daily cash 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 verified
by PricewaterhouseCoopers, Toronto, equal to:
(A) any negative cash balance on the books of account of
the Purchased Business as of the Closing Date
representing cash transactions during the Interim
Period, provided such balance is negative; and
(B) interest, calculated at the Prime Rate, on the
average daily negative cash balance on the books of
account of the Purchased Business during the Interim
Period, provided such balance is negative.
2.10 Transfer Taxes.
After the Effective Date, 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 to the Vendor 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 amounts
under any other applicable provincial sales tax legislation.
2.11 GST Election.
The Purchaser and the Vendor elect to have the provisions of subsection
167(1) of the Excise Tax Act (Canada) and Section 75 of an Act respecting the
Quebec sales tax ("QST") 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) and Section 75 of the QST on or before the first date on
which the Purchaser must submit its GST returns for the reporting periods in
which the Closing occurs.
-15-
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 assign Non-Assignable Contracts to
the Purchaser when such assignment is permitted and as the Purchaser may from
time to time direct.
ARTICLE III
ASSUMPTION OF LIABILITIES
3.1 Assumption by the Purchaser.
The Purchaser shall assume the Assumed Liabilities as of the Effective
Date and shall pay, discharge and perform the Assumed Liabilities from and after
the Effective 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 Effective Date other than the Assumed Liabilities.
ARTICLE IV
EMPLOYMENT AND BENEFIT MATTERS
4.1 Employees.
(a) On the Closing Date, but effective as of January 1, 1999 (the
"Employee Transfer Date"), the Purchaser shall extend to all
employees of the Vendor who are 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. The
Employees who accept the offer from the Purchaser shall be the
"Transferred Employees" for the purposes hereof.
(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) All liabilities and costs in respect of employees who are
Employees including premiums for employment insurance, Canada
Pension Plan, Quebec Pension Plan, 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 relate to the period preceding the
Employee Transfer Date and of
-16-
the Purchaser, in respect of the Transferred Employees only,
to the extent they relate to the period following 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) The Purchaser agrees to indemnify and save harmless the
Vendor, in accordance with Article IX , 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
employees of the Vendor who are Transferred Employees or the
termination of the employment of any of such employees by the
Vendor or the Purchaser, which Claims arise from facts after
the Closing Date, including the continuation, discontinuation
or provision to any employee of the of the employment
policies, benefit plans or other benefits previously provided
by the Vendor or its Affiliates.
(e) The Vendor agrees to indemnify and save harmless the Purchaser
in accordance with Article IX , 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 employees
of the Vendor or the termination of any of such employees by
the Vendor, which Claims arise from facts prior to the
Employee Transfer Date, including continuation,
discontinuation or provision to any employee of the employment
policies, benefit plans or other benefits provided by the
Vendor or its Affiliates, provided that the Vendor shall not
be liable for any Claims which relate to the termination of
employment or constructive dismissal of an Employee in
connection with the sale of the Purchased Assets to the
Purchaser on or after the Closing Date (other than Claims by
Employees who resign their employment on or prior to the
Closing Date).
4.2 Employee Benefits.
The Vendor shall retain and be obligated to satisfy all liabilities and
funding requirements under all of its group benefit plans for benefits or
compensation to employees of the Vendor incurred or arising with respect to the
time period ending at the Employee Transfer Date, regardless of when such
liabilities are asserted, and shall, at its own expense, pay or cause its
insurance carriers to pay such liabilities in accordance with the terms and
conditions of its group benefit plans or applicable statutes. The Purchaser
shall be obligated to satisfy all liabilities for benefits or compensation to
any Transferred Employees incurred or arising immediately subsequent to the
Effective 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; in respect of a claim or medical or dental benefits, the date of
treatment; and in respect of a claim for drug benefits, the date the
prescription is filled. Nothing contained herein shall confer upon any
Transferred Employee, or upon 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.
-17-
4.3 Lease of Employees.
On the Closing Date, notwithstanding Sections 4.1 and 4.2, the Vendor
and Purchaser shall enter into an agreement pursuant to which the Vendor shall
continue to employ the Transferred Employees until the Employee Transfer Date
and the Purchaser shall reimburse the Vendor for all costs associated with the
Transferred Employees between Closing and the Employee Transfer Date including
salary and benefits.
ARTICLE V
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.
(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) Title to Purchased Assets. 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.
The Vendor has not received any notice from any Authority
having jurisdiction over the Purchased Assets and Purchased
Business that the premises from which the Vendor operates the
Purchased Business are the subject of any condemnation,
special assessment or similar charge or proceeding.
(d) 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.
(e) Contracts. Schedule 1.2 contains a complete and accurate list
of all the Material Contracts other than Competitive
Information, including customer contracts. Each Material
Contract constitutes a valid and binding obligation of the
parties thereto, enforceable in accordance with its terms.
None of the parties to any of the Material
-18-
Contracts is in breach of its obligations thereunder except
for minor breaches which would not, in the aggregate,
materially and adversely affect the operation of the Purchased
Business. All of the Material Contracts were entered into in
the ordinary course of business.
(f) Real Property Leases. Schedule 1.1 contains a complete and
accurate list of all Real Property Leases. Each Real Property
Lease constitutes a valid and binding obligation of the
parties thereto, enforceable in accordance with its terms.
None of the parties to any of the Real Property Leases is in
breach of its obligations thereunder except for minor breaches
which would not, in the aggregate, materially and adversely
affect the operation of the Purchased Business. All of the
Real Property Leases were entered into in the ordinary course
of business.
(g) Customers and Vendors. The Vendor has not received formal
notice from any of the ten largest customers or vendors of the
Purchased Business that such customer or vendor intends to
terminate its business relationship with Axidata, including,
as a result of the proposed sale of the Purchased Business.
(h) Intellectual Property.
(i) Except as set forth in Schedule 1.3, the Vendor is
the legal and beneficial owner of the Intellectual
Property, free and clear of all Encumbrances, other
than Permitted Encumbrances, and the Vendor 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
consummation of the transactions contemplated hereby.
(ii) The Vendor has not received any notice that the
conduct of the Purchased Business, including the use
of the Intellectual Property, infringes upon or
breaches any intellectual property rights of any
other Person and the Vendor has no knowledge of any
infringement or violation of any of the rights of the
Vendor in the Intellectual Property.
(i) Inventories and Equipment. Except for stale-dated or damaged
goods in respect of which reserves have been taken in
accordance with Section 2.7, substantially all of the
Inventories and Equipment being sold as part of the Purchased
Assets are workable and useable in the ordinary course of
business, are suitable for the uses for which they were
intended and are used, and have been reflected on the books of
the Vendor in accordance with GAAP.
(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
-19-
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.
(k) Financial Statements. The Financial Statements:
(i) have been prepared in accordance with GAAP, except as
otherwise noted in this Agreement;
(ii) are in accordance with the Records; and
(iii) present fairly, in all material respects, the assets,
liabilities (whether accrued, absolute, contingent or
otherwise) and financial condition of the Purchased
Business as at the end of the periods covered by such
results.
No information has become available to the Vendor that would render the
Financial Statements materially and adversely incomplete or inaccurate.
(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, accurately and completely recorded in the Records in
accordance with GAAP, consistently applied and fairly,
accurately and completely present and disclose (i) the
financial position of the Purchased Business, and (ii) all
transactions of the Vendor relating to the Purchased Business.
All records, systems, controls, data or information relating
to the current conduct of the Purchased Business or the
Purchased Assets (including any digital, electronic,
mechanical, photographic or other technological process or
device, whether computerized or not) are in the full
possession and control of and are owned exclusively by the
Vendor and are included in the Purchased Assets. 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 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.
(m) Taxes. All federal and provincial sales, employment, excise,
withholding, property, GST, taxes and other similar taxes
(including all interest, fines, penalties or additional
amounts relating thereto) 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 Time of Closing.
-20-
(n) Non-Resident. The Vendor is not a non-resident of Canada for
the purposes of the Income Tax Act (Canada).
(o) Employee Matters.
(i) No trade union, council of trade unions, employee
bargaining agency, employee association 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;
(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 Transferred Employees; 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.
(ii) There are, to the best of the Vendor's knowledge, no
actual, threatened or pending organizing activities
of any trade union, council 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.
(iii) The Vendor has complied with all Laws relating to
employment including the Pay Equity Act (Ontario),
the Employment Standards Act (Ontario), the
Occupational Health and Safety Act and equivalent
legislation of other provinces where the Purchased
Business has employees, and provincial and federal
human rights legislation in connection with the
Purchased Business except for non-compliances which
would not, in the aggregate, materially and adversely
affect the Purchased Business. To the knowledge of
the Vendor, there are no unfair labour practice
charges, complaints or proceedings pending,
threatened or involving the Vendor.
(iv) All levies, assessments and penalties under relevant
workers' compensation legislation in respect of the
employees who are Employees have been paid or, to the
knowledge of the Vendor, are reflected and accrued in
the books and Records of the Vendor.
(v) All vacation pay and accrued bonuses (save and except
for special bonuses to be paid to certain employees
of the Vendor in connection with services provided by
them to facilitate the transaction contemplated
herein) for the Employees is properly reflected and
accrued in the Records.
-21-
(vi) The Vendor has delivered or made available to the
Purchaser, true, complete and up-to-date copies of
all benefit plans and related employee booklets and
compensation policies and all amendments thereto
together with the most recent actuarial reports.
(vii) To the knowledge of the Vendor, no fact, condition or
circumstance exists that would materially affect the
information contained in the documents referenced in
Paragraph 5.1(o)(vi).
(viii) With the exception of the former ACI Axidata
divisional employees, as disclosed to the Purchaser,
no registered pension benefits are payable to any
employee of the Purchased Business.
(p) Validity of Transactions. 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 material
breach (with or without the giving of notice or lapse
of time, or both) or acceleration of any material
obligations (including Material Contracts) of the
Vendor or require the consent of any Person under:
(A) the laws applicable to the Vendor other than
the bulk sales legislation in each province
in which the Purchased Assets are located,
(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
(D) the provisions of any material Contract,
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 terminate its
obligations thereunder; or
(iii) result in the creation or imposition of any
Encumbrance on any of the Purchased Assets.
(q) Compliance with Laws. The Vendor has conducted the Purchased
Business in compliance with all applicable Laws except for
non-compliances which would not, in the aggregate, materially
and adversely affect the operation of the Purchased Business.
(r) Litigation. 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,
in progress, pending or, to the
-22-
knowledge of the Vendor, threatened against the Vendor or
relating to the Purchased Business or any of the Purchased
Assets which if determined adversely to the Vendor would
materially and adversely affect the Purchased Business.
(s) Environmental Claims. With the exception of the toluene
leakage which is currently being remediated, the Purchased
Business has been and is being carried on by the Vendor, and
the Purchased Assets are, in compliance with Environmental
Laws except for non-compliances which would not, in the
aggregate, materially and adversely affect the operation of
the Purchased Business.
(t) Absence of Certain Changes. Since September 30, 1998, in
connection with the Purchased Business:
(i) there has not been any material adverse change in the
financial condition, results of operations, assets,
liabilities, business, personnel or operations of the
Purchased Business;
(ii) there has not been any loss, damage or destruction in
any material respect, whether covered by insurance or
not, affecting the Purchased Business or Purchased
Assets;
(iii) the Vendor has not waived, or agreed to become bound
to waive, any right of substantial value relating to
the Purchased Business, or entered into any
commitment or transaction relating to the Purchased
Business not in the ordinary course of business,
other than any single Inventory purchase and the
agreement to sell the Tenex Data division of the
Vendor; and
(iv) the Vendor has not created, or agreed to become bound
to create, or permitted the creation of, any material
Encumbrance on any of the Purchased Assets or the
property or assets of the Purchased Business (except
for any lien for unpaid taxes not yet due).
(u) Updating of Schedules. Up to and including the Closing Date,
the Vendor shall notify the Purchaser of any changes,
additions or events which may cause any change in or addition
to any Schedules delivered by them under this Agreement,
promptly after the occurrence of same and no later than the
Closing Date by delivery of updates of any changed Schedules.
No notification made pursuant to this subsection 5.1(u) shall
be deemed to cure any breach of any representation or warranty
made in this Agreement or any Schedule nor shall any such
notification be considered to constitute or give rise to a
waiver by the Purchaser of any condition set forth in this
Agreement unless specifically waived in writing by the
Purchaser.
(v) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Vendor in respect of any
Purchased Asset.
(w) GST. The Vendor is a registrant for the purposes of the Excise
Tax Act (Canada) and its business identification number is
__________________, and in respect of the QST, its
registration number being __________________.
-23-
(x) No Competing Interest. Neither the Vendor nor ACI, directly or
indirectly, have any direct or indirect beneficial interest in
any Person which is engaged in a business similar to, or is a
direct or indirect competitor of, the Purchased Business in
North America.
(y) No Pending Transactions. Except for the transactions
contemplated by this Agreement, the Vendor is not a party to
or bound by or subject to any agreement, undertaking or
commitment to: (i) merge or consolidate with, or acquire all
or substantially all of the property or assets of, any other
Person which would materially adversely affect the Purchased
Business or the Purchased Assets; or (ii) sell, lease or
exchange all or substantially all of the Vendor's property and
assets to any other Person.
(z) Truth and Accuracy of Representations. The representations and
warranties of the Vendor included in this Agreement and in any
agreement, certificate or other document delivered or given
pursuant to this Agreement are true and correct in all
material respects and do not contain any materially untrue
statement of a material fact or omit to state a material fact
necessary to make the statements contained in such
representations and warranties not misleading to a prospective
purchaser of the Purchased Assets or the Purchased Business.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
6.1 Representations and Warranties.
The Purchaser hereby makes the following representations and warranties
and 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 a corporation organized under the
laws of Canada 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 other than the
bulk sales legislation in each province in which the
Purchased Assets are located;
-24-
(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 contract, agreement or
arrangement to which the Purchaser is a party or by
which it is bound.
(d) Investment Canada. The Purchaser is a WTO investor (as such
terms are defined in the Investment Canada Act (Canada)) for
the purposes of the Investment Canada Act (Canada).
(e) 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.
(f) GST. At Closing, the Purchaser will be a registrant for the
purposes of the Excise Tax Act (Canada) and the QST and will
provide its business identification numbers to the Vendor.
ARTICLE VII
COVENANTS OF THE VENDOR
7.1 Disclosure of Transaction.
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) The Purchaser acknowledges that it has met with management of
the Vendor and has been granted access to, and has reviewed,
all Records and other documents relating to the Purchased
Business and the Purchased Assets which have been made
available for review to the Purchaser or its representatives
by the Vendor save and except for Confidential Information and
Competitive Information which shall be dealt with in
accordance with subsections 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 Michael E.
Peppel, Ira H. Stanley and any other individuals who are
pre-approved by the Vendor, and their legal advisors and
-25-
PricewaterhouseCoopers, Cincinnati (provided that a
confidentiality agreement in form acceptable to the Vendor,
acting reasonably, shall have been executed prior to such
disclosure), 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, and who have been
pre-approved by the Vendor, acting reasonably, (all of such
named individuals and such reports are collectively the
"Specified Individuals") on behalf of the Purchaser for a
period of 2 Business Days prior to the Closing Date. The
Purchaser shall cause the Specified Individuals not to share
such Competitive Information with any other employee, officer
or shareholder of the Purchaser who does not have a need to
know such information or any other Person prior to Closing.
(c) The Purchaser acknowledges that the Vendor's vendor contracts
for products and/or services have not been disclosed to the
Purchaser or its representatives on the grounds that the
Vendor views them as containing Confidential Information. The
Vendor 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 vendor contract, 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 2 Business Days
prior to the Closing Date to review all such Confidential
Information. The Confidential Information relates only to
vendor and pricing arrangements and will not have a material
adverse affect on the Purchased Business or the Purchased
Assets as at the Time of Closing.
7.3 Conduct of Business Prior to Closing
During the period from the date of this Agreement to the Time of
Closing:
(a) the Vendor shall promote the interests and maintain the
goodwill of the Purchased Business and continue to operate, in
consultation with the Purchaser, the Purchased Business in the
ordinary course consistent with past practice, including
paying and satisfying all obligations with respect to the
Purchased Business as such obligations mature or within a
reasonable period thereafter;
(b) the Vendor shall not, without the prior written consent of the
Purchaser, enter into any contract, commitment or transaction
not in the ordinary course of business or which would have a
material adverse effect on the Purchased Business or which
would constitute a material breach of the covenants,
representations or warranties of the Vendor contained in this
Agreement;
(c) the Vendor shall not enter into single Inventory purchase
commitment in excess of $500,000 without the prior written
consent of the Purchaser, not to be unreasonably withheld;
-26-
(d) the Vendor shall give prompt notice to the Purchaser of any
potential material defaults or material breaches of
representations, warranties or covenants of the Vendor
forthwith upon becoming aware of such matters;
(e) the Vendor shall continue to maintain in full force and effect
all policies of insurance currently in effect in respect of
the Purchased Assets and the Purchased Business and give all
notices and present all claims under all policies of insurance
in a due and timely fashion;
(f) the Vendor shall not sell, transfer or encumber the Purchased
Assets other than in the ordinary course of business;
(g) the Vendor shall not authorize or enter into any agreement,
understanding or commitment with respect to any merger,
consolidation or business combination, any material change in
capitalization or any release or relinquishment of any
material contract rights;
(h) the Vendor shall not permit an Intellectual Property right to
lapse;
(i) except for special bonuses to be paid to certain employees of
the Vendor in connection with services provided by them to
facilitate the transaction contemplated herein (of which the
Vendor has notified the Purchaser), the Vendor shall not pay
or agree to pay to any employee of the Purchased Business
compensation that is in excess of the current compensation
level of such employee, except for normal compensation
increases to current employees which are made in the ordinary
course of business consistent with past practice, nor enter
into any new written employment agreement or severance
agreement, insurance agreement or benefit plan or amend any
current benefit plans or compensation policies without the
Purchaser's consent; and
(j) the Vendor shall not agree to do any of the foregoing.
7.4 Contractual Consents.
The Vendor shall 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 or required under any of the material
agreements, contracts, licenses, or leases (including requesting landlord
estoppel certificates for the Real Property Leases in respect of which the
Purchaser requests the Vendor to so request, provided that any and all costs
associated therewith shall be for the account of the Purchaser) of the Vendor
relating exclusively to the Purchased Business (other than such consents or
authorizations relating to the Non-Assignable Contracts which shall be dealt
with in accordance with Section 2.12).
7.5 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 (other than compliance with
the bulk sales legislation in each province in which the Purchased Assets may be
located) and the transactions contemplated hereby and will promptly
-27-
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 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. The parties shall fully cooperate
with each other in making the pre-notification filing under the Competition Act
(Canada).
7.6 Change of Name.
The Vendor agrees to deliver to the Purchaser on the Closing Date
originally executed articles of amendment changing its corporate name to a name
which does not contain the word "Axidata" or any name similar thereto.
7.7 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
the transactions contemplated by this Agreement.
7.8 Non-Solicitation.
From the date of this Agreement until the Closing Date, the Vendor
agrees not to directly or indirectly solicit, initiate or engage in discussions
or negotiations with any Person other than the Purchaser or MCSC concerning the
terms and conditions of this Agreement or the acquisition of the Purchased
Business or any part thereof.
7.9 Covenant Not to Disclose.
ACI and the Vendor hereby covenant and agree that they will not, at any
time after the Effective Date, reveal, divulge or make known to any Person
(other than the Purchaser or its Affiliates) or use for their own account or the
account of any Person, any confidential or proprietary information relating
exclusively to the Purchased Assets and Purchased Business. This covenant not to
disclose shall not apply to information which:
(i) is or becomes part of the public domain other than through a
breach of this Agreement;
(ii) is or becomes available to ACI or the Vendor from a third
party, who upon inquiry, states that it has no obligation of
confidentiality to the Purchaser;
(iii) is required to be disclosed by law, provided that ACI or the
Vendor gives the Purchaser immediate notice of any such
required disclosure to enable the Purchaser
-28-
to seek a protective order or other appropriate remedy, and
further provided that ACI or the Vendor cooperates with the
Purchaser, at the expense of the Purchaser, in seeking a
protective order. If a protective order or other remedy is not
obtained and ACI or the Vendor is obligated to disclose any of
the information, ACI or the Vendor will restrict its
disclosure to that portion of the information which it is
advised by legal counsel that it is legally required to
disclose; or
(iv) is independently developed by employees of ACI or the Vendor
without access to the confidential information.
7.10 Non-Interference Agreement.
ACI and the Vendor hereby covenant and agree that they will not, for a
period of three (3) years after the Closing Date, directly or indirectly,
whether for their own account or for the account of any other Person:
(i) except to the extent required to carry on the Tenex Data
business, as presently conducted, until the sale of such
business, engage in the wholesale sale and distribution of
office products, computer consumables, peripherals,
accessories and supplies 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 internal job posting and employment is
offered only after response to such public advertisement or
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 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 or the acquisition of ACI by
such Person is not primarily motivated by a desire to carry on a business which
Competes.
7.11 Trademark Agreement.
The Vendor hereby covenants and agrees to enter into the Trademark
Agreement on the Closing Date.
7.12 Environmental Remediation
ACI and the Vendor accept full responsibility for the Environmental
Remediation and will indemnify and hold the Purchaser harmless with respect to
any liability associated therewith. ACI shall provide the Purchaser with
reasonable prior notice of actions to be taken by ACI and the
-29-
requirements to enable the Purchaser to co-operate with ACI and the Vendor as
required under Section 8.5.
7.13 Sale of Tenex Data Division
Whether or not the sale of the Tenex Data division of the Vendor
proceeds, the Vendor will ensure that the part of the premises at Commander
Drive, Scarborough used by such division and its employees will be vacated by no
later than March 31, 1999.
ARTICLE VIII
COVENANTS OF THE PURCHASER
8.1 Disclosure of Transaction.
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. This section does not prohibit disclosure to
the board of directors, 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.
8.3 Use of Trademarks.
(a) The Purchaser agrees to enter into the Trademark Agreement as
of the Effective Date. The Purchaser agrees not to take any
action which may constitute a breach of the Trademark
Agreement.
(b) The Purchaser agrees that it shall be limited in its use of
the "Tenex" name to the present uses of such name by the CRT
Division on the terms and conditions of the trademark license
agreement to be entered into between the Vendor and Bell
Microproducts Inc. and assigned by the Vendor to the Purchaser
on Closing, and the Purchaser acknowledges that Bell
Microproducts Inc. will own all other rights to the "Tenex"
name.
8.4 Tenex Obligations.
The Purchaser agrees to enter into an assumption agreement as of the
Effective Date pursuant to which the Purchaser will agree to assume the Vendor's
obligation under the undertaking to the former Tenex Data shareholders (the
"Tenex Undertaking") to maintain all paper SKU's until December 31, 1998 on the
terms and conditions set out therein.
-30-
8.5 Environmental Remediation
The Purchaser agrees to co-operate with ACI and the Vendor in allowing
ACI and the Vendor to manage the Environmental Remediation, including providing
the services of Gary Heffernan and John Arnott, or their replacements, as
on-site managers of the Environmental Remediation (provided the Vendor
reimburses the Purchaser for any out-of-pocket costs associated therewith) and
granting access to ACI and the Vendor and their respective representatives,
engineers, contractors, subcontractors and consultants to enter the leased
premises of Axidata located at 45 and 70 Commander Drive, Scarborough to take
whatever steps may be necessary to complete the Environmental Remediation, to
monitor data from the wells, to liaise with the landlord of such premises and to
liaise with the Ministry of the Environment. The Purchaser also agrees not to
take any steps which might constitute interference with the Environmental
Remediation, including entering into any correspondence or discussions about the
Environmental Remediation with the landlord of such premises or with the
Ministry of the Environment, without the prior written consent of ACI.
8.6 Non-Interference Agreement.
MCSC and the Purchaser hereby covenant and agree that they will not,
for a period of three (3) years after the Closing Date, directly or indirectly,
whether for their own account or for the account of any other Person:
(i) solicit or attempt to solicit any person who, at the date of
this Agreement, is an employee of ACI or the Vendor, other
than by solicitation which is solely by way of public
advertisement or internal job posting and employment is
offered only after response to such public advertisement or
internal job posting without any other enticement or
solicitation; or
(ii) intentionally induce or attempt to persuade any supplier,
distribution or client of ACI or the Vendor to terminate or
breach any contract with ACI or the Vendor, or not to do
business or to reduce its volume of business with ACI or the
Vendor.
8.7 Advance Ruling Certificate.
The Purchaser shall not apply to the Director of the Competition Bureau
for an advance ruling certificate in connection with this transaction unless it
notifies the Director of the Competition Bureau, as part of such application,
that the parties wish to close this transaction as soon as possible and that
this transaction is conditional upon the receipt of a "no-action" from the
Director of the Competition Bureau but not upon the receipt of an advance ruling
certificate.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 Survival of Covenants, Representations and Warranties of the Vendor.
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
-31-
of the purchase and sale of the Purchased Assets and 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 twenty-four months 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 twenty-four months 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 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;
(ii) an incident, occurrence or circumstance commencing or
in existence prior to the Closing Date relating to
the Purchased Business or the Purchased Assets, but
excluding the Assumed Liabilities and excluding any
Claim which relates to any matter which has already
been specifically addressed in a representation,
warranty, covenant or indemnity in this Agreement as
such Claim shall be made under such specific
provisions rather than under this Paragraph
9.3(a)(ii);
(iii) any inaccuracy in, or breach of, the Vendor's
representations or warranties contained in this
Agreement; and
(iv) any non-compliance with the provisions of the bulk
sales legislation in any
-32-
province where the Purchased Assets are located and
other similar legislation (A) in respect of the
transaction of purchase and sale contemplated by this
Agreement, compliance with which the parties
acknowledge they have agreed to waive or (B) in
respect of the sale of the Vendor's Tenex Data
division.
(b) The Purchaser indemnifies and holds the Vendor harmless from
and against any Claim 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;
(ii) the Assumed Liabilities;
(iii) commencing on the Closing Date, the ownership or
condition of the Purchased Assets, the operation of
the Purchased Business, or any other incident,
occurrence or circumstance arising subsequent to the
Closing Date as a result of the Purchaser's operation
of the Purchased Business subsequent to the Closing
Date, but excluding any Claim which relates to a
matter which has already been specifically addressed
in a representation, warranty, covenant or indemnity
in this Agreement as such Claim shall be made under
such specific provision rather than under this
Paragraph 9.3(b)(iii); and
(iv) any inaccuracy in or breach of any of the Purchaser's
representations or warranties contained in this
Agreement.
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 subsection 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.
-33-
(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 and the
Indemnifying Party shall be bound by the results
obtained by the Indemnified Party with respect to
such Third Party Claim.
(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.
-34-
(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.
(v) Except in the circumstances contemplated by Paragraph
9.4(b)(iii) above, and whether or not the
Indemnifying Party assumes control of the
negotiation, settlement or defence of any Third Party
Claim, the Indemnifying Party shall not settle or
compromise any Third Party Claim except with the
prior written consent of the Indemnified Party (which
consent shall not be unreasonably withheld). A
failure by the Indemnified Party to respond in
writing to a written request by the Indemnifying
Party for consent for a period of ten days or more,
shall be deemed a consent by the Indemnified Party to
such request.
9.5 Indemnification Limitations and Mitigation.
Notwithstanding anything else contained in this Agreement:
(a) the indemnification rights provided for in Section 9.3 shall
be subject to the limitation that no indemnification or other
such Claim shall be payable under Section 9.3 or otherwise, as
the case may be, unless the total of all Claims exceeds
$250,000 in the aggregate, whereupon the full amount of such
Claims (including such initial $250,000 but subject to
subsection 9.5(b)) in the aggregate shall be recoverable in
accordance with the terms hereof provided the foregoing
limitation shall not apply to any indemnification with respect
to the Environmental Remediation, the employee and benefit
matters contained in Article IV or Section 7.13;
(b) the indemnification rights provided for in Section 9.3 shall
be subject to the further limitation that any and all payments
payable to the Purchaser or Vendor, as applicable, pursuant to
Section 9.3 or pursuant to any other Claim made by either the
Purchaser or Vendor in connection with this Agreement shall
not, in the aggregate, exceed the Purchase Price;
(c) without prejudice to either party's rights of recovery against
the other, except as provided in subsections 9.5(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 party making
such Claim shall make commercially reasonable efforts to
ensure that such Claim is also made against the relevant
insurer and pursued with all reasonable expedition;
(d) where the Vendor or Purchaser, as applicable, 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 Purchaser or Vendor, as applicable,
shall take commercially reasonable steps to enforce the
recovery or reimbursement; and
(e) the liability of the Vendor or the Purchaser under this
Agreement shall be reduced by the amount of any recoveries
which have been actually received or obtained by the other
party from any insurer or third party responsible or party
responsible for the act, matter or circumstances giving rise
to such breach or claim or from any insurance
-35-
policy covering such breach or claim, less any expenses
incurred by the other party in connection with any such
recoveries. If any recovery is made after the Vendor or the
Purchaser has made full payment to the other party in full
satisfaction of any such liability or claim, the other party
shall refund or procure that there is refunded to the Vendor
or the Purchaser the lesser of:
(i) the amount of such payment by the Vendor or the
Purchaser to the other party; and
(ii) the amount of such recovery, less any expenses
incurred by the Purchaser or the Vendor in connection
therewith.
ARTICLE X
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 a 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 IX.
(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.
(c) Consents. All consents listed on Schedule 2.3 which the Vendor
has agreed to obtain in connection with the completion of the
transaction contemplated by this Agreement shall have been
obtained by the Vendor at or prior to the Time of Closing.
(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
-36-
dated the Closing Date from Goodman Phillips & Vineberg
substantially in the form attached hereto as Schedule 3.1.
(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) Competition Act. The parties will have made all required
pre-notification filings under the Competition Act (Canada)
and the applicable 7 day waiting period shall have expired and
the Purchaser shall have received a "no-action" letter from
the Director of the Competition Bureau.
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 XI
CONDITIONS OF CLOSING IN FAVOUR OF THE VENDOR
11.1 Conditions.
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 a 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
-37-
effect for the benefit of the Vendor as provided in Article
IX.
(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.
(c) Opinion of Counsel to the Purchaser. The Vendor shall have
received an opinion dated the Closing Date from Fraser Milner
and Elias, Matz, Tiernan & Herrick L.L.P. substantially in the
forms attached hereto as Schedule 3.3.
(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) Tenex Transition Services Agreement. The Tenex Transition
Services Agreement shall have been completed and executed by
the Purchaser and MCSC.
(f) Trademark Agreement. The Trademark Agreement shall have been
completed and executed by the Purchaser and MCSC.
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 their 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 their 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 XII
ACI GUARANTEE
12.1 ACI Guarantee.
In consideration of the transaction referred to herein and of other
good and valuable consideration, ACI hereby guarantees to the Purchaser
irrevocably, absolutely and unconditionally, the complete performance of all of
the Vendor's obligations under this Agreement, including without limitation, its
indemnification obligations pursuant to Article IX . The obligations of ACI
hereunder shall arise if and to the extent any payment to the Purchaser by the
Vendor under this Agreement is not made when due or the Vendor fails to perform
any of its other obligations as a result of the
-38-
insolvency of the Vendor, the Vendor's failure to maintain its corporate
existence or otherwise.
12.2 ACI Representations.
ACI hereby represents and warrants that as of the Effective Date:
(a) Corporate. ACI is a corporation organized under the laws of
Canada and has not been dissolved.
(b) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by ACI and constitutes a
valid and binding obligation of ACI, enforceable against it in
accordance with its terms.
(c) Validity of Transactions. Neither the execution and delivery
of this Agreement by ACI, the consummation of the transactions
contemplated hereby nor the fulfilment by ACI 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 other than the
bulk sales legislation in each province in which the
Purchased Assets are located;
(ii) any judgement, order, writ, injunction or decree of
any court or of any Authority;
(iii) the articles, by-laws or any resolutions of ACI or
any amendments thereto or restatements thereof;
(iv) the provisions of any contract, agreement or
arrangement to which ACI is a party or by which it is
bound.
(d) Liability. ACI's liability hereunder shall not be affected by
any amendments to or waivers of any provisions of this
Agreement or any of the other agreements entered into in
connection with the completion of the transactions
contemplated herein (the "Acquisition Agreements"), any
bankruptcy or insolvency of the Purchaser or MCSC, any
defaults by any other parties (except the Vendor) to the
Acquisition Agreements, any failure to enforce remedies
against the Purchaser or MCSC, any change in the relationship
between the Purchaser and ACI, any dissent, set-off,
counterclaim, recoupement or termination whatsoever available
to the Purchaser or MCSC (other than the defence of
performance) or any other defence or discharge available to a
guarantor or a surety. ACI waives diligence, presentment and
demand of payment of performance, protest in all notices
whatsoever.
-39-
ARTICLE XIII
MCSC GUARANTEE
13.1 MCSC Guarantee.
In consideration of the transaction referred to herein and of other
good and valuable consideration, MCSC hereby guarantees to the Vendor
irrevocably, absolutely and unconditionally, the complete performance of all of
the Purchaser's obligations under this Agreement, including without limitation,
its indemnification obligations pursuant to Article IX . The obligations of MCSC
hereunder shall arise if and to the extent any payment to the Vendor by the
Purchaser under this Agreement is not made when due or the Purchaser fails to
perform any of its other obligations as a result of the insolvency of the
Purchaser, the Purchaser's failure to maintain its corporate existence or
otherwise.
13.2 MCSC Representations.
MCSC hereby represents and warrants that as of the Effective Date:
(a) Corporate. MCSC is a corporation organized under the laws of
Ohio and has not been dissolved.
(b) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by MCSC and constitutes a
valid and binding obligation of MCSC, enforceable against it
in accordance with its terms.
(c) Validity of Transactions. Neither the execution and delivery
of this Agreement by MCSC, the consummation of the
transactions contemplated hereby nor the fulfilment by MCSC 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 other than the
bulk sales legislation in each province in which the
Purchased Assets are located;
(ii) any judgement, order, writ, injunction or decree of
any court or of any Authority;
(iii) the articles, by-laws or any resolutions of MCSC or
any amendments thereto or restatements thereof;
(iv) the provisions of any contract, agreement or
arrangement to which MCSC is a party or by which it
is bound.
(d) Liability. MCSC's liability hereunder shall not be affected by
any amendments to or waivers of any provisions of this
Agreement or any of the other agreements entered into in
connection with the completion of the transactions
contemplated herein (the "Acquisition Agreements"), any
bankruptcy or insolvency of the Vendor or ACI, any defaults by
any other parties (except the Purchaser) to the Acquisition
-40-
Agreements, any failure to enforce remedies against the Vendor
or ACI, any change in the relationship between the Vendor and
MCSC, any dissent, set-off, counterclaim, recoupement or
termination whatsoever available to the Vendor or ACI (other
than the defence of performance) or any other defence or
discharge available to a guarantor or a surety. MCSC waives
diligence, presentment and demand of payment of performance,
protest in all notices whatsoever.
ARTICLE XIV
RISK OF LOSS
14.1 Damage or Destruction.
The Purchased Assets shall be and remain at the risk of the Vendor up
to and including the Time of Closing. If, prior to the Time of Closing, all or
any substantial part of the Purchased Assets are destroyed or damaged by fire or
any other casualty or shall be appropriated, expropriated or seized by
governmental or other lawful authority, the Purchaser shall have the option,
exercisable by notice in writing given no later than two Business Days after the
Purchaser receives written notice from the Vendor of such destruction, damage,
appropriation, expropriation or seizure to:
(a) complete the purchase without reduction of the Purchase Price
in which event all proceeds of insurance payable in respect of
such damage or destruction or any compensation or award
payable in respect of such appropriation, expropriation or
seizure shall be paid to the Purchaser and all rights and
claims of the Vendor to any such proceeds or amounts not paid
to the Purchaser by the Time of Closing shall be assigned by
the Vendor to the Purchaser at the Time of Closing by way of
assignment in a form acceptable to the Purchaser;
(b) to terminate its obligations under this Agreement without
further liability to the Vendor if the value of the Purchased
Assets destroyed, damaged, appropriated, expropriated or
seized exceeds $12,000,000; or
(c) to terminate its obligation under this Agreement if the
insurance proceeds are not sufficient to replace the assets
damaged or destroyed.
14.2 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.
-41-
ARTICLE XV
CLOSING PROCEDURE
15.1 Closing.
Notwithstanding the Effective Date, 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.
15.2 Procedure.
At the Time of Closing, upon satisfaction of all the conditions set out
in Article X and Article XI 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 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; and
(ii) the Purchased Assets;
(b) the Purchaser shall make the payment required by Article II ;
and
(c) the Purchaser shall execute all necessary documents evidencing
its assumption of the Assumed Liabilities.
ARTICLE XVI
GENERAL
16.1 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 Closing Balance Sheet or calculation of Net Assets, which shall
be resolved exclusively in accordance with Section 2.5) 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. The parties
shall in good faith make meaningful efforts to resolve the Dispute, which shall
include a submission by the parties to non-binding evaluative mediation by a
qualified mediator in the City of Toronto. 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 binding arbitration of the Dispute in accordance with the
procedures set forth on Schedule 4.1. The fees of the arbitrator shall be borne
by the parties in inverse proportion to their respective successes
-42-
in the determination of the arbitrator, and the decision of the arbitrator shall
be conclusive, final and binding upon the Vendor and the Purchaser.
16.2 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:
Miami Computer Supply Corporation
4750 Hempstead Station Drive
Dayton, Ohio
USA 45429
Attention: Ira Stanley, Vice-President Finance
Fax Number: (937) 291-8250
Tel. Number: (937) 291-8282
with a copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
12th Floor, 735 - 15th Street N.W.
Washington, D.C.
USA 20005
Attention: Jeffrey A. Koeppel
Fax Number: (202) 347-2172
with a copy to:
Fraser Milner
1 First Canadian Place
100 King Street West
Toronto, Ontario
M5X 1B2
Attention: Christopher Turney
Fax Number: (416) 863-4592
(b) the Vendor Prior
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
-43-
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/Pat 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.
16.3 Public Announcements.
No public announcement or press release concerning the purchase and
sale of the Purchased Assets may be made by any of the parties hereto without
the prior consent of the others and the joint approval of the text of such
announcement except as required by law or applicable regulation.
16.4 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.
16.5 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.
16.6 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.
-44-
16.7 Jurisdiction.
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.
16.8 Amendment.
This Agreement may be amended only by written agreement of the parties.
16.9 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.
16.10 Entire Agreement.
This Agreement and the Schedules attached to this Agreement constitute
the entire agreement among the parties pertaining to all the matters herein.
16.11 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. If any term or provision of this Agreement is held or
deemed to be unenforceable, in whole or in part, by a court of competent
jurisdiction, such term or provision shall be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement which shall be construed to
preserve to the maximum permissible extent the intent and purposes of this
Agreement. Any such invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such terms or provisions in any other
jurisdiction.
16.12 Counterparts.
This Agreement may be executed in one or more counterparts (by original
or facsimile signature) 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.
16.13 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 a
wholly-owned subsidiary and upon such assignment shall remain jointly and
severally liable with such subsidiary for all obligations of the Purchaser
pursuant
-45-
to this Agreement. Any other assignment without such consent shall be null and
void.
16.14 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:
Per:
ABITIBI-CONSOLIDATED INC.
Per:
Per:
3553906 CANADA INC.
Per:
Per:
MIAMI COMPUTER SUPPLY
CORPORATION
Per:
Per:
Asset Purchase Agreement - Axidata Inc., Abitibi-Consolidated Inc., 3553906 Canada inc. and Miami Computer Supply Corp.
Was this helpful?