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EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
AMONG
BELL SPORTS CORP.,
BELL SPORTS CANADA INC.
AND
ADVANCED ACCESSORY SYSTEMS CANADA INC./
LES SYSTEMES D'ACCESSOIRE ADVANCED CANADA INC.
Dated as of July 2, 1997
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LIST OF SCHEDULES
Schedule 1.1(i) - Tangible Personal Property
Schedule 1.1(ii) - Tooling
Schedule 1.1(iv) - Purchased Inventory
Schedule 1.1(vii) - Assigned Contracts
Schedule 1.1(viii) - Requisite Rights
Schedule 1.1(x) - Telephone, Telex and Telecopier Numbers
Schedule 1.1(xiv) - Permits
Schedule 1.3(c) - Open Customer Orders
Schedule 3.1(b) - Consents
Schedule 3.1(c) - Financial Information
Schedule 3.1(d) - Undisclosed Liabilities
Schedule 3.1(e) - Changes to the Business
Schedule 3.1(f) - Improvements
Schedule 3.1(g) - Exceptions to Title
Schedule 3.1(h)(i)(a) - Intellectual Property Rights
Schedule 3.1(h)(i)(b) - Exceptions to Intellectual Property Rights
Schedule 3.1(h)(ii) - Employee Invention Disclosures
Schedule 3.1(i)(i) - Environmental Permit Exceptions
Schedule 3.1(i)(ii) - Environmental Notice Exceptions
Schedule 3.1(i)(iii) - Hazardous Materials
Schedule 3.1(i)(iv) - CERCLA Claims
Schedule 3.1(j) - Contracts
Schedule 3.1(k) - Litigation
Schedule 3.1(l) - Permits
Schedule 3.1(n) - Inventories
Schedule 3.1(o) - Employees
Schedule 3.1(p) - Employee Plans
Schedule 3.1(r) - Brokers
Schedule 3.1(s) - Transactions with Affiliates
Schedule 3.1(t) - Principal Customers
Schedule 3.1(u) - Bank Accounts
Schedule 3.1(y) - Individuals with Knowledge
Schedule 6.3 - Additional Employee Offerees
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DEFINITIONS
The following terms which may appear in more than one Section
of this Agreement are defined in the following Sections:
Term Section or Other Location
- ---- -------------------------
Accountants' Determination 2.2(b)(ii)
Affiliate 3.1(s)
Arbitrating Accountants 2.2(b)(ii)
Assigned Contracts 1.1(a)(vii)
Assumed Obligations 1.3
Bill of Sale and Assumption Agree 1.5(a)
Business Preamble
Business Day 7.4
Buyer Preamble
Buyer Indemnification Event 5.1(a)
Buyer Indemnified Persons 5.1(b)
CERCLA 3.1(i)(iv)
CERCLIS 3.1(i)(iv)
Charter 3.1(a)
Claim 5.1(c)
Closing Article IV
Closing Balance Sheet 2.2(a)
Closing Date Article IV
Competitive Businesses 6.5
Confidential Information 6.6(c)
Contracts 3.1(j)
Conveyance Instruments 1.5(a)
Covered Persons 6.6(a)
CSST 1.4(l)
Current Employees 3.1(o)
Employee Plan 3.1(p)(i)
Encumbrances 1.1(a)
Environmental Law 3.1(i)(i)
ERISA Affiliate 3.1(p)(i)
ERISA 3.1(p)(i)
Excluded Assets 1.2
Excluded Earnout Liabilities 1.3(b)
Excluded Obligations 1.4
Final Determination Date 2.2(b)(iii)
Final Net Book Value 2.2(a)
Final Net Book Value Statement 2.2(a)
Financial Statements. 3.1(c)
First 30 Day Period 2.2(b)(ii)
GAAP 2.2(a)
Governmental Authority 3.1(b)
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Term Section or Other Location
- ---- -------------------------
GST 5.1(i)
GST Legislation 5.1(i)
Hazardous Materials 3.1(i)(i)
Hired Employees 6.3(a)
HSR Act 3.1(b)
Indemnified Persons 5.1(d)
Indemnifying Person 5.1(e)
Intellectual Property Rights 3.1(h)(iii)
Interim Balance Sheet 3.1(c)(ii)
Interim Balance Sheet Date 3.1(c)(ii)
Knowledge 3.1(x)
Leased Real Property 3.1(iii)
Leases 3.1(iii)
Legal Requirement 3.1(b)
Liability Letter 5.3(b)(i)
Losses 5.1(f)
NPL 3.1(i)
Objection Notice 2.2(b)(ii)
Original Purchase Agreement 1.3(b)
Overpayment Amount 2.2(c)(iii)
Parent Preamble
Patent License 1.1(a)(viii)
Permits 3.1(l)(ii)
Permitted Encumbrances 1.1
Person 3.1(b)
Principal Customers 3.1(t)
Proprietary Technology 3.1(h)(iii)
Purchase Price 2.1
Purchased Assets 1.1(a)
Purchased Inventory 1.1(a)(iv)
QST 5.1(i)
QST Legislation 5.1(i)
Related Documents 7.3
Related Person 3.1(q)
Requisite Rights 3.1(h)(i)
Returns 3.1(a)
Restricted Party 6.5
Seller Preamble
Seller Indemnification Event 5.1(g)
Seller Indemnified Persons 5.1(h)
Seller's Accountants 2.2(a)
Seller's Bulk Sales Statement 6.2
Seller's Notice of Adjustment 2.2(b)(i)
Settlement Agreement 2.2(b)(ii)
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Term Section or Other Location
- ---- -------------------------
Statement of Allocation 2.3
Survival Date 5.4(b)
Taxes 5.1(i)
Third Party Claim 5.3
Trademark License ?
Underpayment Amount 2.2(c)(i)
US EPA 3.1(i)(iv)
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TABLE OF CONTENTS
ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF LIABILITIES
AND RELATED MATTERS..................................................1
1.1 Transfer of Assets...................................................1
1.2 Assets Not Being Transferred.........................................4
1.3 Liabilities Being Assumed............................................5
1.4 Liabilities Not Being Assumed........................................6
1.5 Instruments of Conveyance and Transfer, Etc..........................8
1.6 Further Assurances, Etc..............................................8
1.7 Assignment of Contracts, Rights, Etc.................................8
1.8 Right of Endorsement, Etc............................................9
ARTICLE IIPURCHASE PRICE; ALLOCATION...........................................9
2.1 Acquisition Price....................................................9
2.2 Net Book Value Adjustment............................................9
2.3 Allocation of Purchase Price........................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................11
3.1 Representations and Warranties of the Seller........................11
3.2 Representations and Warranties of the Buyer.........................26
ARTICLE IV CLOSING............................................................27
ARTICLE V INDEMNIFICATION.....................................................27
5.1 Definitions.........................................................27
5.2 Indemnification Generally...........................................30
5.3 Notice and Defense of Third Party Claims............................31
5.4 Survival of Representations, Warranties, Agreements and Covenants...32
5.5 Indemnification Exclusive...........................................33
ARTICLE VI POST-CLOSING AGREEMENTS............................................33
6.1 Access..............................................................33
6.2 Bulk Sales Laws.....................................................33
6.3 Certain Employee Matters............................................33
6.4 Parent Guaranty.....................................................35
6.5 Non-Competition.....................................................35
6.6 Non-Disclosure......................................................36
6.7 Non-Solicitation of Employees and Customers.........................37
6.8 Usage of Tradenames.................................................37
6.9 Agreements in Respect of Inventory..................................37
6.10 Agreements Regarding Canadian Taxes.................................37
ARTICLE VII MISCELLANEOUS.....................................................37
7.1 Expenses; Transfer Taxes, Etc.......................................37
7.2 Entire Agreement....................................................38
7.3 Related Documents...................................................38
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7.4 Notices...........................................................38
7.5 Counterparts......................................................40
7.6 GOVERNING LAW; CONSENT TO JURISDICTION............................40
7.7 Benefits of Agreement; Assignment.................................41
7.8 Construction......................................................41
7.9 Pronouns..........................................................41
7.10 Descriptive Headings..............................................41
7.11 Severability......................................................41
7.12 Disclaimer of Warranties..........................................41
7.13 Amendment.........................................................42
7.14 No Third Party Beneficiaries......................................42
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ASSET PURCHASE
AGREEMENT dated as of July
2, 1997, among BELL SPORTS
CORP., a Delaware
corporation (the "Parent"),
BELL SPORTS CANADA INC., a
corporation existing under
the laws of Canada (the
"Seller"), and ADVANCED
ACCESSORY SYSTEMS CANADA
INC./LES SYSTEMES
D'ACCESSOIRE ADVANCED
CANADA INC., a corporation
existing under the laws of
Canada (the "Buyer").
The Seller is engaged, among other things, through its
"SportRack" division in the business (the "Business") of designing, engineering,
manufacturing, marketing, selling and distributing automotive roof rack systems,
and vehicular accessories (such as bike racks, ski racks and surfboard carriers)
and rear carriers and shuttles and related rear carrier and shuttle systems (to
the extent comprising part of the "SportRack" division). The parties hereto
desire that the Seller sell, transfer, convey and assign to the Buyer, and that
Buyer purchase from Seller, substantially all of the assets, properties,
interests in properties and rights of the Seller used primarily in the Business
(other than the Excluded Assets) and that the Buyer purchase and acquire the
same and assume certain specified liabilities and obligations of the Seller
relating to the Business, in each case, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements hereinafter set
forth, the parties hereto hereby agree as follows:
ARTICLE I
TRANSFER OF PURCHASED ASSETS,
ASSUMPTION OF LIABILITIES AND RELATED MATTERS
1.1 TRANSFER OF ASSETS.
(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Seller shall sell, transfer, convey and assign to
the Buyer, free and clear of all Encumbrances (other than Permitted
Encumbrances), and the Buyer shall purchase and acquire from the Seller, all of
the Seller's right, title and interest in, to and under the assets, properties,
interests in properties and rights of the Seller of every kind, nature and
description, whether real, personal or mixed, movable or immovable, tangible or
intangible, primarily used in or primarily held for use in the Business (other
than the Excluded Assets), wherever located, as the same shall exist immediately
prior to the Closing, including, without limitation, the following:
(i) all machinery and equipment, including, without limitation,
all manufacturing, production, maintenance, packaging, testing and other
machinery, equipment, molds, presses, rolling stock, motor vehicles,
tractors and other vehicles, spare or replacement parts, computer equipment
(including all computers and computer systems used in the Business),
furniture, fixtures, office equipment and software
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programs (including Seller's interest in the software used on
any computer systems), supplies and all other items of tangible personal
property, all of which are listed on Schedule 1.1(i);
(ii) all tooling owned by the Seller and used in connection
with the Business, including any tooling jointly owned with any customers
or Affiliates of the Seller and used primarily in connection with the
Business; provided that in the case of tooling jointly owned with
customers, Buyer shall only receive Seller's rights and interests in such
tooling, all of which are listed on Schedule 1.1(ii);
(iii) [intentionally ommitted];
(iv) all inventories of work-in-process, raw materials,
finished products, returned goods, stores and supplies, spare parts,
packaging, shipping containers and other materials in each case, to the
extent primarily related to the Business, all of which are listed on
Schedule 1.1 (iv)(the "Purchased Inventory");
(v) all prepaid expenses, advances, deposits (including
utility deposits) and accounts receivable, to the extent primarily
related to the Business;
(vi) all insurance and indemnity claims against third parties
relating to the Purchased Assets and the Assumed Obligations, to the extent
primarily related to the Business (including, without limitation, all
insurance proceeds paid or payable by any insurance provider for any
Purchased Asset that is destroyed or damaged on or prior to the Closing
Date) other than any of the foregoing to the extent that they relate to the
Excluded Assets or Excluded Obligations;
(vii) all contracts, agreements, licenses, personal property
leases, commitments, purchase orders, sales orders and other agreements in
each case, to the extent primarily related to the Business, all of which
are listed on Schedule 1.1(vii) (collectively, the "Assigned Contracts");
(viii) (A) all Requisite Rights, including, without limitation,
the names "SportRack", "Mondial", "SnapRack" and all other names primarily
used or held for use in the Business and owned by Seller or its Affiliates,
all of which are listed on Schedule 1.1(viii), (B) the rights to license
the assets set forth in the Patent License, dated as of the date hereof
between Bell Sports, Inc., a California corporation and the Buyer (the
"Patent License") to the extent and in the manner set forth therein and (C)
the rights to use the tradenames as set forth in Section 6.8 hereof to the
extent and in the manner set forth therein;
(ix) all records of the Seller, either in computer or original
or photostatic form (except in the case of computer software, which must be
in original form), whether or not in computer or machine readable format,
including, without limitation, property records, plans, specifications,
surveys, title policies, production records, engineering records,
purchasing and sales records, personnel and payroll records, accounting
records, mailing lists, customer and vendor lists and records, and computer
software and related
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licenses, manuals and other materials, in each case relating
primarily to the Purchased Assets or the Business;
(x) all telephone, telex and telecopier numbers and all
listings of such numbers in all telephone books and directories, in each
case, to the extent primarily related to the Business, all of which
numbers are listed on Schedule 1.1(x);
(xi) [intentionally omitted]
(xii) all warranties and guarantees received from vendors,
suppliers or manufacturers with respect to the Purchased Assets or the
Business (other than to extent such warranties relate to product liability
obligations of the Seller described in Section 1.4(b));
(xiii) all stationery, purchase orders, forms, labels, shipping
material, catalogues, brochures, art work, photographs and advertising
materials, related primarily to the Business;
(xiv) all Permits, all of which are listed on Schedule
1.1(xiv);
(xv) all rights (including experience ratings) with respect to
unemployment, workers' compensation, occupational health and safety and
other similar insurance reserves, in each case relating to employees of the
Seller who become employees of the Buyer;
(xvi) all rights (including rights in respect of QST or GST
payable by any Governmental Authority), recoveries, refunds, counterclaims,
rights to offset, other rights, choses in action and Claims (known or
unknown, matured or unmatured, accrued or contingent) against third parties
(including, but not limited to, all warranty and other contractual claims
(express, implied or otherwise) against third parties), other than any of
the foregoing to the extent that they relate to the Excluded Assets or
Excluded Obligations; and
(xvii) the goodwill and other intangible assets of the Seller
associated with the Business.
For convenience of reference, the assets, properties, interests in properties
and rights described above that are to be sold, transferred, conveyed and
assigned to the Buyer by the Seller pursuant to this Section are collectively
called the "Purchased Assets" in this Agreement. Notwithstanding the foregoing,
the terms "Purchased Assets" and "Business" specifically exclude and the Buyer
is not acquiring (except, in each case, to the extent specifically constituting
part of the SportRack division of the Seller); (i) any business, properties or
assets of Bell Sports, Inc., Giro Ireland Limited, Giro Sport Design
International, Inc., American Recreation Company Holdings, Inc., Euro Bell S.A.,
American Recreation Company, Inc., Bell Sports Australia Pty. Limited (other
than as may be licensed to Buyer under the Related Documents and other than as
set forth in Section 6.8) including without limitation the business of
designing, developing, manufacturing, distributing, marketing, sourcing and
selling bicycle, in-line skate, ski, auto racing car, any other helmets, bicycle
parts and accessories, shuttles and rear
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rack carrier system in each case, under the "Bell", "Giro", "Rhode Gear",
"Vistalite", "Blackburn", "BSI", "Bike Star", "Copper Canyon", "Cycle Products",
"Bike Xtras", "Cycle Tech" or "Spoke Hedz" brand names or names licensed from
third parties, (ii) any business conducted through the IBD and Mass
Merchant/Sporting Goods divisions of the Seller and (iii) any rights to the
"Rhode Gear" patented hub system currently utilized by the Seller (other than as
may be licensed to Buyer under the Patent License). As used in this Agreement,
the term "Encumbrances" means, collectively, all security interests, hypothecs,
judgments, liens, pledges, charges, escrows, encumbrances, Claims, options,
rights of first refusal, rights of first offer, mortgages, indentures, loan
agreements, credit agreements, security agreements and other agreements,
arrangements, contracts, commitments, understandings or obligations, whether
written or oral and whether or not relating in any way to credit or the
borrowing of money. As used in this Agreement, the term "Permitted Encumbrances"
means, collectively, (i) Encumbrances arising under applicable law for current
taxes or other governmental assessments or charges not yet due and payable, (ii)
Encumbrances granted under any of the Assigned Contracts and any other
Encumbrances being assumed by the Buyer pursuant to Section 1.3 and (iii), with
respect to real property leased to the Seller (the "Leased Real Property"), any
Encumbrance indicated on the title commitment for such Leased Real Property.
(b) Anything contained in this Agreement to the contrary
notwithstanding, but subject to the provisions of Section 1.2, to the extent
that any asset, property, interest in property or right, in each case, used
primarily in the conduct of the Business is owned by any Affiliate of the Seller
or the Parent, such asset, property, interest in property or right shall be
deemed to be a Purchased Asset for all purposes of this Agreement, and the
Seller and the Parent shall do, and shall cause any such other Affiliate to do,
all things required to be done by the Seller with respect thereto, including,
but not limited to, those things set forth in Sections 1.5, 1.6, 1.7 and 1.8.
1.2 ASSETS NOT BEING TRANSFERRED.
Anything contained in this Agreement to the contrary notwithstanding,
there are expressly excluded from the Purchased Assets the following:
(a) the consideration delivered to the Seller pursuant to this
Agreement;
(b) all assets used primarily in connection with the Seller's corporate
functions (including, but not limited to, corporate charters, seals, minute
books, stock transfer ledgers, taxpayer and other identification numbers, tax
returns, tax information and tax records), whether or not used for the benefit
of the Business;
(c) claims or rights against third parties relating to any Excluded
Asset or Excluded Obligation;
(d) all records relating to pending lawsuits to which the Seller is a
party and which involve the Business;
(e) all assets related to or owned by any Employee Plan;
(f) all cash on hand or held on deposit on the Closing Date and owned
by the Seller and related to the Business, to the extent not reflected on the
Closing Balance Sheet;
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(g) the Seller's rights, claims or causes of action relating hereto or
any Related Document;
(h) all refunds of any Tax for which the Seller is liable pursuant to
this Agreement;
(i) all liabilities or obligations under any contracts, agreements,
licenses, personal property leases, commitments, purchase orders, sales orders,
and other agreements not effectively assigned under this Agreement or under any
Related Document;
(j) any information or records of the Seller, including, without
limitation, financial records, used by the Seller or its Affiliates in
connection with the conduct of its, or their, respective businesses generally
and not relating primarily to the Purchased Assets or the Business; and
(k) any right or interest in the tradenames or brand names "Bell,"
"Giro," "Rhode Gear," "Vistalite," "Blackburn," "BSI," "Bike Star," "Copper
Canyon," "Cycle Products," "Bike Xtras," "Cycle Tech" or "Spoke Hedz," other
than as specifically contemplated by Section 6.8 hereof.
For convenience of reference, the assets, properties, interests in
properties and rights of the Seller which do not constitute Purchased Assets
pursuant to Section 1.1 or Section 1.2 are collectively called the "Excluded
Assets" in this Agreement.
1.3 LIABILITIES BEING ASSUMED.
At the Closing, subject to the terms and conditions of this Agreement,
simultaneously with the sale, transfer, conveyance and assignment to the Buyer
of the Purchased Assets, the Buyer shall assume, pay and perform when due the
following, and only the following, liabilities and obligations of the Seller:
(a) accounts payable and accrued expenses of the Business (including
with respect to QST or GST and excluding accruals for any other Taxes) to the
extent accrued or otherwise properly reflected on the Closing Balance Sheet;
(b) all liabilities and obligations arising after the Closing under the
Assigned Contracts which are effectively assigned to the Buyer in accordance
with their respective terms; provided, however, that all liabilities and
obligations under Article III and Section 2.2(vi) of the Asset Purchase
Agreement, dated May 12, 1995 among the Seller, SportRack Canada Inc., Jean
Maynard, Richard Bedard, 2987988 Canada Inc. and Robert Choquette (as amended by
the First Amendment thereto, dated April 4, 1996 among such parties) (the
"Original Purchase Agreement") of the Seller to the extent arising out of or
related to periods prior to and including the period ending on the date of the
Closing Balance Sheet (the "Excluded Earnout Liabilities") shall not be assumed,
paid or performed by the Buyer (it being understood that the Seller shall
satisfy the Excluded Earnout Liabilities in full on or prior to the Closing);
(c) all obligations under open customer orders and purchase orders
relating to products or services of the Business included in the Assigned
Contracts which arose in the
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ordinary course of business of the Business prior to the Closing Date
or are set forth on Schedule 1.3(c);
(d) accrued payroll, sick leave and vacation expenses of the Seller
arising in the ordinary course of business of the Business and relating to the
Hired Employees to the extent reflected on the Closing Balance Sheet;
(e) the liabilities and obligations assumed by the Buyer under Section
6.3;
(f) liabilities and obligations arising out of the operation of the
Business after the Closing Date; and
(g) all Claims under warranties or product returns with respect to the
sale of products of the Business which arose or may arise before or after the
Closing Date; and
(h) all Claims, liabilities and obligations relating to product
liability claims with respect to any products sold by Buyer after the Closing
Date.
For convenience of reference, the foregoing liabilities and obligations of
the Seller being assumed by the Buyer are collectively called the "Assumed
Obligations" in this Agreement. The Buyer hereby expressly agrees to pay and
perform when due all of the Assumed Obligations.
1.4 LIABILITIES NOT BEING ASSUMED.
Anything contained in this Agreement to the contrary notwithstanding,
the Buyer is not assuming any liabilities or obligations (fixed or contingent,
known or unknown, matured or unmatured) of the Seller other than the Assumed
Obligations, whether or not relating to the Purchased Assets or the Business,
all of which liabilities and obligations shall at and after the Closing remain
the exclusive responsibility of the Seller. Without limiting the generality of
the foregoing, the Buyer is not assuming any of the following liabilities and
obligations:
(a) except as provided in Section 1.3(a), all liabilities and
obligations for Taxes of the Seller and all liabilities and obligations for
Taxes arising out of or in connection with the operation of the Business on or
prior to the Closing Date (in each case regardless of whether arising as a
result of or in connection with the transactions contemplated hereby or
otherwise);
(b) all Claims, liabilities and obligations of any nature (including
product liability claims with respect to any products to the extent sold on or
before the Closing Date) for any accidents, breach of contract, occupational
health and safety violations, illnesses, or any other type of Claim (other then
Claims under warranties or product returns as specified in Section 1.3(g)),
liability or obligation connected with or arising out of any matter, incident,
occurrence or set of facts or circumstances prior to the Closing Date;
(c) all liabilities and obligations of any nature whatsoever of the
Seller to any of its Affiliates;
(d) except as provided in Sections 1.3(d) and (e), all Claims by and
all liabilities and obligations to employees and independent contractors for
periods prior to the Closing,
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including, without limitation, any Claims, liabilities and obligations
arising out of workers' compensation, unemployment, occupational health and
safety, any Employee Plan sponsored by the Seller or its ERISA Affiliates, the
Seller's failure to deposit or fund any amounts withheld from employees pursuant
to any retirement plan or arrangement or retiree medical plan or arrangement,
any unfunded retirement plan or arrangement or retiree medical plan or
arrangement, any obligations to current or former plan participants or
beneficiaries under any plan or arrangement intended to provide benefits to
current or former employees of the Seller, or other remuneration required to be
paid to any employee of the Business (including for wages, earned vacations,
vacation pay and sick leave);
(e) all liabilities and obligations of the Seller to financial
institutions or other Persons for borrowed money or with respect to indebtedness
and obligations of others which the Seller has directly or indirectly
guaranteed;
(f) all liabilities and obligations of the Seller to the extent
relating to the Excluded Assets and all liabilities and obligations of the
Seller under or arising out of this Agreement and any Related Document or with
respect to the transactions contemplated hereby and thereby, including, without
limitation, (but subject to Section 7.1) legal and accounting fees, expenses and
Taxes incurred by the Seller;
(g) all cash overdrafts for any banking accounts maintained for the
benefit of the Business;
(h) all obligations to Hired Employees for stay bonuses established by
the Seller prior to Closing;
(i) all Excluded Earnout Liabilities;
(j) any liabilities or obligations which may arise under Article 1768
of the Civil Code of Quebec, as amended;
(k) all Claims, liabilities or obligations under any Environmental Law
arising directly or indirectly out of or in connection with the generation, use,
release (including as defined in 42 U.S.C. 9601(22)), emission, deposit,
discharge, treatment, storage, handling, recycling, disposal or transportation
of any Hazardous Materials, to the extent that the same arose out of facts or
circumstances commenced or occurring prior to the Closing Date; and
(l) all liabilities and obligations of the Seller arising out of or
relating to any Claims, adjustments, assessments or other charges (including
relating to interest or penalties) relating to any applicable legislation on
workers' compensation or occupational health and safety including with respect
to Commission de la Sante et Securite au Travail ("CSST"), connected with or
arising out of any matter, incident, occurrence or set of facts or circumstances
to the extent that any such matter, incident, occurrence or set of facts of
circumstances arose prior to the Closing, in each case, involving employees or
former employees of the Seller.
For convenience of reference, the liabilities and obligations of the Seller
which do not constitute Assumed Obligations are collectively called the
"Excluded Obligations" in this Agreement.
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1.5 INSTRUMENTS OF CONVEYANCE AND TRANSFER, ETC.
(a) Simultaneously with the execution herewith, the Seller is executing
and delivering (or causing to be executed and delivered) to the Buyer, such
deeds, bills of sale, endorsements, assignments and other good and sufficient
instruments of sale, transfer, conveyance and assignment (collectively, the
"Conveyance Instruments") as are necessary to sell, transfer, convey and assign
to the Buyer, in accordance with the terms hereof, the Purchased Assets, free
and clear of all Encumbrances (other than Permitted Encumbrances), including,
without limitation, a bill of sale, assignment and assumption agreement in a
form previously agreed upon by the Buyer and the Seller (the "Bill of Sale and
Assumption Agreement"). Simultaneously with the execution herewith, the Seller
shall relinquish to the Buyer possession and operating control of the Purchased
Assets and shall take all other steps that may be required or desirable to pass
title to the Purchased Assets to the Buyer.
(b) Simultaneously with the execution herewith, the Buyer is executing
and delivering to the Seller, such instruments of assumption as are necessary to
assume, in accordance with the terms hereof, the Assumed Obligations, including,
without limitation, the Bill of Sale and Assumption Agreement.
1.6 FURTHER ASSURANCES, ETC.
(a) The Seller shall promptly pay or deliver to the Buyer any amounts
or items which may be received by the Seller after the Closing which constitute
Purchased Assets and shall cause all customer orders and purchase orders placed
with Affiliates of the Seller and relating to the products or services of the
Business to be assigned at the Closing to the Buyer. The Seller shall, at any
time and from time to time after the Closing, upon the reasonable request of the
Buyer and at the expense of the Seller, do, execute, acknowledge, deliver and
file, or cause to be done, executed, acknowledged, delivered and filed, all such
further acts, transfers, conveyances, assignments or assurances as may
reasonably be required for better selling, transferring, conveying, assigning
and assuring to the Buyer, or for aiding and assisting in the collection of or
reducing to possession by the Buyer, any of the Purchased Assets.
(b) The Buyer shall promptly pay or deliver to the Seller any amounts
or items which may be received by the Buyer after the Closing which constitute
Excluded Assets. The Buyer shall, at any time and from time to time, after the
Closing, upon the reasonable request of the Seller and at the Buyer's expense,
do, execute, acknowledge, deliver and file, or cause to be done, executed,
acknowledged, delivered and filed, all such further acts, transfers,
conveyances, assignments or assurances as may reasonably be required for better
assuming the Assumed Obligations.
1.7 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC.
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement or attempted agreement to transfer,
sublease or assign any contract, license, real or personal property lease, sales
order, purchase order or other agreement, or any Claim or right with respect to
any benefit arising thereunder or resulting therefrom, or any Permit, if an
attempted transfer, sublease or assignment thereof, without the required consent
of
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any other party thereto, would constitute a breach thereof or in any
material respect affect the rights of the Buyer or the Seller thereunder. The
Seller shall use its commercially reasonable efforts to obtain the consent of
any such third party to any of the foregoing to the transfer or assignment
thereof to the Buyer in all cases in which such consent is required for such
transfer or assignment. If such consent is not obtained, the Seller shall make
any arrangements necessary or desirable to provide for the Buyer the benefits
thereunder, including, without limitation, enforcement by the Seller for the
benefit of the Buyer of any and all rights of the Seller thereunder against the
other party thereto.
1.8 RIGHT OF ENDORSEMENT, ETC.
The Seller hereby constitutes and appoints the Buyer and its successors
and assigns the true and lawful attorney of the Seller with full power of
substitution, in the name of the Buyer, or the name of the Seller (in such case
only if the Buyer clearly indicates that it is the assignee of the Seller), on
behalf of and for the benefit of the Buyer, to collect all accounts and notes
receivable and other items being sold, transferred, conveyed and assigned to the
Buyer to endorse, without recourse, checks, notes and other instruments
constituting the Purchased Assets in the name of the Seller, to institute and
prosecute all proceedings which the Buyer may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to the Purchased
Assets, to defend and compromise any and all actions, suits or proceedings in
respect of any of the Purchased Assets or the Business and to do all such acts
and things in relation thereto as the Buyer may deem advisable. The foregoing
powers are coupled with an interest and shall be irrevocable by the Seller,
directly or indirectly, whether by the dissolution of the Seller or in any
manner or for any reason. All costs and expenses incurred by Buyer in the
exercise of its rights under this Section 1.8 shall be borne by Buyer.
ARTICLE II
PURCHASE PRICE; ALLOCATION
2.1 ACQUISITION PRICE.
The aggregate consideration (the "Purchase Price") to be received by
the Seller from the Buyer for the Purchased Assets shall be Cnd. $18,650,000
(such amount being subject to adjustment pursuant to Section 2.2 below),
payable, subject to the conditions set forth herein, by the Buyer to the Seller.
2.2 NET BOOK VALUE ADJUSTMENT.
(a) Preparation of Closing Balance Sheet and Final Book Value
Statement. As promptly as practicable following the Closing Date (but in no
event later than 30 days after the Closing Date), the Seller shall prepare, and
cause Price Waterhouse LLP, the independent accountants of the Seller (the
"Seller's Accountants"), to review a balance sheet (the "Closing Balance Sheet")
of the Seller reflecting the financial position of the Business immediately
prior to the Closing Date and a statement (the "Final Net Book Value Statement")
setting forth the computation of the Final Net Book Value (as defined below)
derived therefrom, which statement shall be prepared in accordance with
generally accepted accounting principles in Canada as
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recommended in the Handbook of the Canadian Institute of Chartered
Accountants ("GAAP") consistently applied with the Financial Statements;
provided, however, that (i) reserves shall be made for uncollectible (or
doubtful) accounts receivable in an amount equal to Cnd. $150,000 and old,
obsolete, unmerchantable or slow moving inventory, in an amount equal to Cnd.
$265,156 whether or not consistent with past practices and (ii) any write-offs
or write-downs of prepaid expenses which are reflected on the Interim Balance
Sheet shall be made in accordance with GAAP, whether or not consistent with past
practices. In preparing the Closing Balance Sheet, the amount of goodwill to be
reflected from the payment on or before the Closing of the Excluded Earnout
Liabilities by the Seller shall not exceed the amount of Excluded Earnout
Liabilities actually paid by the Seller and shall be stated otherwise in
accordance with GAAP. For purposes of preparing the Final Net Book Value
Statement, "Final Net Book Value" shall mean total assets of the Business
immediately prior to the Closing Date (other than Excluded Assets) less total
liabilities of the Business immediately prior to the Closing Date (other than
Excluded Liabilities); provided, however, that no effect shall given to any
increase in property, plant, or equipment as a result of an "involuntary
conversion" as defined by GAAP.
(b) Review by the Buyer.
(i) Upon completion of the Final Net Book Value Statement, the
Seller shall promptly deliver the same to the Buyer with a notice
("Seller's Notice of Adjustment") of the Seller setting forth its proposed
adjustment, if any, of the Purchase Price as contemplated hereby. During
and after the preparation of the Final Net Book Value Statement until the
Final Determination Date (as defined below), the Seller shall provide the
Buyer and its advisors with reasonable and timely access to the employees
and records of the Seller and the work papers, trial balances and similar
materials used in connection with the preparation of the Final Net Book
Value Statement.
(ii) Following receipt of the Seller's Notice of Adjustment, the
Buyer will be afforded a period of 30 Business Days (the "First 30 Day
Period") to review the Seller's Notice of Adjustment. At or before the end
of the First 30 Day Period, the Buyer will either (A) accept the Final Net
Book Value (as set forth in the Seller's Notice of Adjustment) in its
entirety, in which case the Final Net Book Value will be as set forth in
the Seller's Notice of Adjustment or (B) deliver to the Seller a written
notice (the "Objection Notice") containing a written explanation of those
items in the Final Net Book Value Statement (as set forth in the Seller's
Notice of Adjustment) which the Buyer disputes, in which case the items
identified by the Buyer shall be deemed to be in dispute. The failure by
the Buyer to deliver the Objection Notice within the First 30 Day Period
shall constitute the Buyer's acceptance of the Final Book Value as set
forth in the Seller's Notice of Adjustment. If the Buyer delivers the
Objection Notice in a timely manner, then, within a further period of 20
Business Days from the end of the First 30 Day Period the parties and, if
mutually desired, their accountants will attempt to resolve in good faith
any disputed items and reach a written agreement (the "Settlement
Agreement") with respect thereto. Failing such resolution, the unresolved
disputed items will be referred for final binding resolution to an
independent recognized firm of certified public accountants mutually
acceptable to the Seller and the Buyer (the "Arbitrating Accountants"), the
fees and expenses of which shall be borne equally by the Seller, on the one
hand, and the Buyer, on the other hand. The Final Net Book Value will be
deemed to
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be as determined by the Arbitrating Accountants in accordance with
Section 2.2(a). Such determination (the "Accountants' Determination")
shall be (A) in writing, (B) furnished to the Seller and the Buyer as soon
as practicable after the items in dispute have been referred to the
Arbitrating Accountants, (C) made in accordance with GAAP and (D)
nonappealable and incontestable by the Seller, the Parent, the Buyer or
any of their respective Affiliates and not subject to collateral attack
for any reason.
(iii) For purposes of this Section 2.2, the "Final
Determination Date" shall mean the earliest to occur of (A) the
31st day following the receipt by the Buyer of the Seller's Notice of
Adjustment if the Buyer shall have failed to deliver the Objection Notice
to the Seller within the First 30-Day Period, (B) the date on which
either the Seller or the Buyer gives the other a written notice to the
effect that such party has no objection to the other party's
determination of the Final Net Book Value, (C) the date on which the
Seller and the Buyer execute and deliver a Settlement Agreement and (D)
the date as of which the Seller and the Buyer shall have received the
Accountants' Determination.
(c) Adjustment.
(i) If the Final Net Book Value is greater than Cnd.
$18,650,000 (the amount of such excess being referred to herein as the
"Underpayment Amount"), then, within five Business Days following the
Final Determination Date, the Purchase Price shall be increased by the
amount of the Underpayment Amount and the Buyer shall pay, or cause to be
paid, to the Seller the Underpayment Amount.
(ii) If the Final Net Book Value is less than Cnd. $18,650,000
(the amount of such shortfall being referred to herein as the "Overpayment
Amount"), then, within five Business Days following the Final
Determination Date, the Purchase Price shall be decreased by the amount of
the Overpayment Amount and the Seller and/or the Parent shall pay, or
cause to be paid, to the Buyer the Overpayment Amount. The Seller and
the Parent shall be jointly and severally liable for the obligations in
this Section 2.2.
2.3 ALLOCATION OF PURCHASE PRICE.
The Purchase Price shall be allocated to the Purchased Assets in a
statement (the "Statement of Allocation") prepared in good faith by the Buyer
and approved in writing by Seller, which approval shall not be unreasonably
withheld. The Buyer shall deliver the Statement of Allocation to the Seller
within 90 days of the Closing Date. None of the parties shall take any action
inconsistent with the Statement of Allocation prepared in accordance with this
Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller hereby represents and warrants to the Buyer as follows:
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(a) Organization; Corporate Authority; Good Standing. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate the Purchased Assets and to carry on the
Business as now being conducted, to execute and deliver this Agreement and the
Related Documents to which it is or will be a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The Seller has delivered to the Buyer a copy of its articles or
certificate of incorporation (the "Charter") and by-laws in effect on the
Closing Date.
(b) Corporate Action; No Conflict. The execution, delivery and
performance by each of the Seller and the Parent of this Agreement and the
Related Documents to which it is or will be a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of such Person. This
Agreement has been duly and validly executed and delivered by each of the Seller
and the Parent and is, and each of the Related Documents to which such Person is
or will be a party, when executed and delivered in accordance with its terms,
will be, the valid and binding obligation of such Person enforceable against it
in accordance with the terms thereof, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws now or hereafter in effect
relating to creditors' rights generally and subject to limitations on the remedy
of specific performance and injunctive and other forms of equitable relief.
Except as set forth on Schedule 3.1(b), neither the execution, delivery or
performance by any of the Seller or the Parent of this Agreement or any Related
Document to which it is or will be a party, nor the consummation by such Person
of the transactions contemplated hereby or thereby, nor compliance by such
Person with any provision hereof or thereof will (i) conflict with or result in
a breach of any provision of the Charter or by-laws of such Person, in each case
as in effect on the Closing Date, (ii) cause a default or give rise to any right
of termination, cancellation or acceleration under any of the terms, conditions
or provisions of any note, bond, lease, mortgage, indenture, license, agreement,
contract or other instrument or obligation to which such Person is a party or by
which it or its properties or assets may be bound or (iii) violate any law,
statute, ordinance, rule, regulation, order, writ, judgment, injunction, award,
decree, concession, grant, franchise, restriction or agreement (each, a "Legal
Requirement") of, from or with any Governmental Authority applicable to such
Person or any of its properties or assets. Except as set forth on Schedule
3.1(b), no Permit, consent or approval of or by, or any notification of or
filing with, any Person is required in connection with the execution, delivery
or performance by each of the Seller or the Parent of this Agreement and the
Related Documents to which it is or will be a party, or the consummation of the
transactions contemplated hereby or thereby, other than required filings, if
any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), the Competition Act (Canada) and the Investment Canada Act. For the
purposes of this Agreement, the term "Person" means any individual, corporation,
association, partnership, joint venture, trust or other entity or organization,
including a Governmental Authority, and "Governmental Authority" means any
international or federal, provincial, state, local or regional (whether domestic
or foreign) or other government, authority, instrumentality, department,
commission, board, bureau, agency or court.
(c) Financial Information. Schedule 3.1(c) contains a true and complete
copy of the following:
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(i) the internally-prepared unaudited balance sheet of the
Business as at June 30, 1996, and the related internally-prepared unaudited
statements of income and retained earnings for the fiscal period then ended
relating to the Business; and
(ii) the internally-prepared unaudited balance sheet (the
"Interim Balance Sheet") of the Business as at May 24, 1997 (the "Interim
Balance Sheet Date") and the related internally-prepared unaudited
statements of income and retained earnings for the 11-month period then
ended relating to the Business.
The financial statements described in the foregoing clauses (i) and (ii) are
collectively referred to herein as the "Financial Statements." The Financial
Statements (A) were prepared in accordance with the books and records of the
Business and (B) fairly present the financial position of the Business in each
case at and as of the dates indicated and the results of operations and retained
earnings of the Business for the periods indicated. Except as set forth on
Schedule 3.1(c), the financial statements described in the foregoing clauses (i)
and (ii) were prepared in accordance with GAAP consistently applied throughout
the periods covered thereby (except that any unaudited financial statements may
omit footnote disclosure). All allocations of corporate overhead by the Parent
to the Seller in the Financial Statements were fair, proper and made in
accordance with GAAP.
(d) Absence of Undisclosed Liabilities. Except for liabilities incurred
in the ordinary course of the Business not to exceed Cnd. $500,000 since the
Interim Balance Sheet Date, there are no liabilities of any nature (matured or
unmatured, fixed or contingent) affecting or relating to the Business which were
not provided for or disclosed on the Interim Balance Sheet and which are
required to have been provided for or disclosed thereon in accordance with GAAP,
except as disclosed on Schedule 3.1(d).
(e) Absence of Changes. Except as set forth on Schedule 3.1(e), since
the Interim Balance Sheet Date the Business has been operated in the ordinary
course and consistent with past practice, and there have not been any:
(i) adverse changes in the assets (including, without
limitation, levels of working capital and the components thereof),
properties, liabilities, financial condition, operations, results
of operations, or business of the Business (other than changes relating
solely to the Excluded Assets or the Excluded Liabilities);
(ii) occurrences resulting in the damage, destruction or loss
(whether or not covered by insurance) affecting any tangible asset or
property of the Business in excess of Cnd. $50,000 in the aggregate;
(iii) obligations or liabilities (whether absolute, accrued,
contingent or otherwise and whether due or to become due) created or
incurred or entered into, or any transactions, contracts or commitments
entered into, by the Business, other than in the ordinary course of the
business of the Business and consistent with past practice (other than as
related solely to the Excluded Liabilities);
(iv) licenses, sales, transfers, pledges, mortgages or other
hypothecations or dispositions of any tangible or intangible assets of the
Business, other than in the ordinary
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course of the business of the Business and consistent with past
practice (other than as related solely to the Excluded Assets);
(v) agreements or contracts entered into by or on behalf of
the Business which require the delivery by the Seller of a performance
bond;
(vi) any amendments, terminations or waivers of any rights of
value to the Business;
(vii) increases in, or changes in the method of computing, the
compensation of employees of the Seller who are employed in the Business
(including, without limitation, increases pursuant to or change in method
under any bonus, pension, profit sharing, deferred compensation arrangement
or other plan or commitment), or increase in compensation payable to any
officer, employee, consultant or agent of the Seller who are employed in
the Business, or entering into of any employment contract with or making of
any loan to, or engagement in any transaction with, any officer or employee
of the Seller who are employed in the Business, except for increases in
compensation in the ordinary course of the Business, consistent with past
practices and not in excess of 10% of any such employee's overall
compensation;
(viii) changes in the manner in which the Business extends
discounts or credits to customers or otherwise deals with customers;
(ix) changes in the accounting methods or practices followed by
or with respect to the Business, or any changes in depreciation or
amortization policies or rates theretofore adopted;
(x) forward purchase commitments in excess of normal operating
inventories or at prices higher than current market prices;
(xi) termination of employment of any key employee of the
Seller employed in the Business, or, to the Knowledge of the Seller, any
expression of intention by any key employee of the Seller employed in the
Business to terminate his or her employment;
(xii) cancellation or termination of any insurance policy
maintained by or with respect to the Business;
(xiii) any account receivable with a face amount in excess of
Cnd. $100,000 having (i) become past due in excess of 90 days in its
payment, (ii) had asserted against it any claim, refusal to pay or right of
set-off or (iii) been placed in jeopardy;
(xiv) any write-down or write-up of the value of any inventory
of the Business, or any write-off of any accounts receivable or notes
receivable of the Business or any portion thereof;
(xv) any changes in the manner in which corporate overhead is
allocated to the Business; or
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(xvi) agreements or understandings, whether in writing or
otherwise, for the Seller to take any of the actions specified in items (i)
through (xv) above.
(f) Leased Real Property.
(i) Neither the Seller nor any Affiliate (including the Parent)
owns any real property or interest therein that is held for use primarily
in connection with the Business.
(ii) (A) Each lease set forth on Schedule 3.1(f) (collectively,
the "Leases") is in full force and effect and all rent and other sums and
charges payable by the Seller thereunder are current, (B) no notice of
default or termination under any Lease is outstanding, (C) no event or
condition which, with the giving of notice or the lapse of time or both,
would constitute a default or termination event or condition under any
Lease exists or has occurred, and (D) no lessor under any Lease has any
Encumbrance (other than Permitted Encumbrances) under any Lease or
otherwise against the Purchased Assets. The Seller's leasehold estate under
and the Seller's leasehold interest in each Lease is held free and clear of
all Encumbrances (other than Permitted Encumbrances) and other matters
adversely affecting title thereto, which is claimed by or through the
Seller. The Seller has delivered to the Buyer true and complete copies of
all Leases (including all amendments, waivers, modifications and
supplements thereto).
(iii) Except as set forth on Schedule 3.1(f), (A) all
improvements on the real property leased to the Seller (the "Leased Real
Property"), insofar as they relate to the Business, conform in all respects
to all applicable Legal Requirements (including applicable environmental
and occupational safety and health laws and regulations) and zoning and
building ordinances of Governmental Authorities, and all of the Leased Real
Property is zoned for the purposes for which such Leased Real Property is
presently being used, (B) all improvements on the Leased Real Property,
insofar as they relate to the Business, are in good condition, normal wear
and tear excepted, and there does not exist any condition which interferes
with the present economic value or use thereof by the Business, (C) none of
the buildings and structures located on the Leased Real Property, the
appurtenances thereto or the equipment therein or the operation or
maintenance thereof, insofar as they relate to the Business, violates any
restrictive covenant or encroaches on any property owned by others or any
servitude easement, right of way or other encumbrance or restriction
affecting such Leased Real Property, nor does any building or structure of
any third party encroach upon the Leased Real Property or any servitude
easement or right of way benefitting the Leased Real Property, and (D) no
condemnation proceeding is pending or, to the Knowledge of the Seller,
threatened, which would preclude or impair the use by the Business of any
Leased Real Property for the uses for which it is intended.
(g) Title to Assets, Properties, Interests in Properties and Rights and
Related Matters. The Seller has good, valid and marketable title to all of
the Purchased Assets, free and clear of all Encumbrances, other than
Permitted Encumbrances. Except as disclosed on Schedule 3.1(g), no
Affiliate of the Seller or the Parent owns any assets, properties,
interests in properties or rights, of any kind or description, used in the
Business, other than the Excluded Assets. There does not exist any
condition which interferes with the use of any tangible personal property
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included in the Purchased Assets. The Purchased Assets are in good
operating condition, normal wear and tear excepted. The Purchased Assets
include all assets and properties (real, personal and mixed, tangible and
intangible), interests in properties and rights necessary to permit the
Buyer to carry on the Business as presently conducted by the Seller. The
Seller has the complete and unrestricted power and the unqualified right to
sell, transfer, convey and assign the Purchased Assets owned by it.
(h) Intellectual Property Rights.
(i) Schedule 3.1(h)(i)(a) attached hereto, sets forth a list of
all extant patents, rademarks, service marks, and registrations thereof,
trade names and copyrights, applications and registrations for the
foregoing owned by the Seller and licenses of Intellectual Property
granted to the Seller that are used or held for use in the Business; and
invention disclosures of the employees on Schedule 3.1(h)(ii), which
invention disclosures relate to the Business and for which patent
applications have not been filed. As used herein, the term "Requisite
Rights" means the Intellectual Property Rights of the Seller listed on
Schedule 3.1(h)(i)(a). Except as set forth or disclosed in Schedule
3.1(h)(i)(b):
(A) the Seller owns, and possesses all incidents of
ownership of, the Requisite Rights;
(B) no royalties or other fees are payable by the Seller
to other persons by reason of the ownership, sale, license or use of the
Requisite Rights in the Business as presently conducted;
(C) no product or service manufactured, marketed or sold
presently by the Business violates or infringes on any Intellectual
Property Rights of any other Person;
(D) there is no pending or, to the Knowledge of the
Seller, threatened claim or litigation (nor, to the Knowledge of the
Seller, does there exist any basis therefor) contesting the validity of
or the right to bring actions for infringement (to the extent any such
right presently exists with the Seller) or the right to use in the
Business as presently conducted any of the Requisite Rights, nor has the
Seller received any notice that any of the Requisite Rights or the
operation or proposed operation of the Business conflicts or will
conflict with the asserted rights of any other Person; and
(E) the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
will not breach, violate or conflict with any instrument or agreement
governing any Requisite Right and will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any
Requisite Right or in any way impair the right of the Buyer to use,
sell, license or dispose of or bring any action for the infringement (to
the extent any such right presently exists) of any Requisite Right or
portion thereof.
(ii) Schedule 3.1(h)(ii) sets forth a list of the employees of
the Seller who have signed any agreement which provides for such
employees to assign or otherwise
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transfer to the Seller all of their respective right, title and
interest in and to any Intellectual Property Rights relating to the
Business.
(iii) As used herein, the term "Intellectual Property Rights"
means all intellectual property rights including, without limitation,
Proprietary Technology, patents, patent applications, patent rights,
trademarks, trademark registrations, trademark applications, trade
names, service marks, service mark registrations, service mark
applications, logos, copyrights (statutory and common law), copyright
applications, copyright registrations, know-how, licenses, trade
secrets, industrial designs, industrial registrations, industrial design
or registration applications, proprietary processes and formulae,
layouts, processes, inventions, development tools and all documentation
and media constituting, describing or relating to any of the foregoing,
including, without limitations, manuals, memoranda and records. As used
herein, the term "Proprietary Technology" means all proprietary
processes, formulae, inventions, trade secrets, know-how, development
tools and other proprietary rights owned by the Seller pertaining to any
product or service currently or previously manufactured, sold,
distributed or marketed or proposed to be manufactured, sold,
distributed or marketed (as the case may be), by the Business or used,
employed or exploited in the development, manufacture, license, sale,
distribution, marketing or maintenance of the business thereof, and all
documentation and media constituting, describing or relating to the
foregoing.
(i) Environmental Matters. Except as disclosed on Schedule
3.1(i)(i),
(i) the Seller has obtained all Permits which are required to
conduct the Business under all Environmental Laws. The Seller is as of
the Closing Date and for the past five years has been in compliance with
the terms and conditions of all such Permits and with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
Environmental Law applicable to the Business or in any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. As used herein,
"Environmental Law" shall mean, without limitation, any federal, state,
provincial or local statute, law, rule, regulation, ordinance, code,
guideline, policy or rule of common or civil law of the United States or
Canada including, without limitation, the Environmental Quality Act
(Quebec), the Canadian Environmental Protection Act (Canada), the Clean
Air Act (Canada), the Transportation of Dangerous Goods Act (Canada),
the Hazardous Materials Information Review Act (Canada), the Act
Respecting Pesticides (Quebec), the Act Respecting Ecological Reserves
(Quebec), the Act Respecting Occupational Health and Safety (Quebec),
the Use of Petroleum Products Act (Quebec), Regulation no. 87 (Montreal
Urban Community), Regulation no. 90 (Montreal Urban Community) or of any
other jurisdiction in which the Seller owns or leases any real property
or conducts operations in respect of the Business, in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree of
judgment relating to the environment, health, safety or Hazardous
Materials. As used herein, "Hazardous Materials" shall mean all
infectious, toxic or hazardous pollutants, contaminants (including
contaminants as defined in the Environmental Quality Act, R.S.Q., c. Q-2
(Canada), as amended from time to time), chemicals, substances,
materials or wastes of whatever kind or nature,
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whether liquid, solid or gaseous, referenced, described, defined or
included in any Environmental Law. Hazardous Materials
include, without limitation, petroleum products, heavy metals, asbestos
and PCBs.
(ii) Except as disclosed on Schedule 3.1(i)(ii), no notice,
notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending or, to the Knowledge
of the Seller, threatened by any Governmental Authority with respect to
any alleged failure by the Seller to comply with any Environmental Law
or to have any Permit required in connection with the conduct of the
Business or with respect to any generation, treatment, storage,
recycling, transportation, release or disposal, or any release
(including as such term is defined in 42 U.S.C. Section 9601(22)) of any
Hazardous Materials.
(iii) Except as disclosed on Schedule 3.1(i)(iii), in the
conduct of the Business, (A) the Seller has not handled any Hazardous
Material so as to require a hazardous waste management permit, and the
Seller has not generated, recycled, treated, stored, disposed of or
Released any Hazardous Material in violation of any Environmental Law in
the conduct of the Business; (B) no PCB is or has been present, in
violation of any Environmental Law, at any property occupied by the
Business; (C) no asbestos is or has been present, in violation of any
Environmental Law, at any property occupied by the Business; (D) there
are no underground storage tanks for Hazardous Materials, active or
abandoned, in violation of any Environmental Law, at any property
occupied by the Business; and (E) no Hazardous Materials have been
Released in excess of a "reportable quantity" established by statute,
ordinance, rule, regulation or order or in a quantity or manner that
would support an order from any Governmental Authority or other legal
obligation under Environmental Laws requiring Buyer to perform or pay
for investigation, remediation, or other relief or response to such
Release.
(iv) Except as disclosed on Schedule 3.1(i)(iv), the Seller
has not transported or arranged for the transportation of any Hazardous
Material to any location which is listed on the National Priorities List
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), listed on the
Comprehensive Environmental Response Compensation and Liability and
Information System ("CERCLIS") maintained by the U.S. Environmental
Protection Agency ("US EPA"), or listed on any similar state list or
provincial list under any Environmental Law, or which may lead to any
Claim under Environmental Laws against the Seller or the Business for or
with respect to clean-up costs, remedial work, damages to natural
resources or personal injury claims, including, but not limited to,
Claims under CERCLA.
Except as disclosed on Schedule 3.1(i)(i), no oral or written notification of a
Release of a Hazardous Material has been filed by or on behalf of the Seller and
no property now or previously owned or leased by the Seller in the conduct of
the Business is listed on the National Priorities List ("NPL") promulgated
pursuant to CERCLA, on CERCLIS or on any similar state list of sites or
provincial list under any Environmental Law, potentially requiring investigation
or clean-up or formally proposed for listing by the US EPA or any other
Governmental Authority.
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(j) Contracts, Etc. Schedule 3.1(j) and, with respect to Intellectual
Property Rights, Schedule 3.1(h) contains a list of all oral and written
contracts, agreements and other instruments to which the Seller is a party and
which relate solely or in principal part to the Business, which are outside the
ordinary course of business or which are referred to in clauses (i) through
(xvi) below (collectively, the "Contracts"). Except as set forth in Schedule
3.1(j), the Seller is not, with respect to the Business, a party to any of the
following:
(i) any distributor, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar contract or any other
contract requiring the payment of any commissions in excess of Cnd. $25,000
per year;
(ii) any continuing contract for the future purchase of
inventory, material, supplies, equipment or services or for the future sale
of products or services, in each case which is not terminable within 60
days of the Closing Date without cost or other liability;
(iii) any license or other agreement or arrangement providing
for the payment of a royalty or licensing fee to or by the Seller;
(iv) any contract with or commitment for the employment or
retention of any officer, employee or consultant or any other type of
contract with any officer, employee or consultant for services rendered to
the Seller;
(v) any profit-sharing, bonus, stock option, pension,
retirement, stock purchase, disability, hospitalization, insurance or
similar plan or agreement, formal or informal, providing benefits to any
current or former director, officer or employee of or consultant to the
Seller employed in or retained with respect to the Business;
(vi) except as may relate to any Excluded Liabilities, any
indenture, mortgage, promissory note, loan agreement or other agreement or
commitment for the borrowing of money, for a line of credit or for any
leasing transaction of a type required to be capitalized in accordance with
Statement of Financial Accounting Standards No. 13 issued by the Financial
Accounting Standards Board;
(vii) any contract or commitment for capital expenditures
involving more than Cnd. $25,000 each or Cnd. $50,000 in the aggregate;
(viii) any lease, sublease or other agreement pursuant to
which it is a lessee of or holds or operates any real or personal property
owned by any third party;
(ix) any option or other agreement to purchase or otherwise
acquire or sell or otherwise dispose of any interest in real property;
(x) any contract or commitment for charitable
contributions;
(xi) any agreement or contract with a "disqualified
individual" (as defined in Section 280G(c) of the Code) which would result
in a disallowance of the deduction for any "excess parachute payment" (as
defined under Section 280G(b)(i) of the Code) if the Seller were subject to
such provisions;
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(xii) any guaranty of the obligations of third parties;
(xiii) any agreement which restricts it from conducting the
Business anywhere in the world;
(xiv) any agreement under which it has agreed to indemnify
any third party with respect to, or to share, the tax liability of any third
party;
(xv) any agreement or arrangement for the purchase or other
acquisition of or sale or other disposition of any assets, properties or
rights other than in the ordinary course of business; or
(xvi) any other agreement or contract which is material to
the Business, the Purchased Assets or Assumed Obligations (including, without
limitation, levels of working capital and the components thereof), other than
this Agreement, the Related Documents and any other agreement related to the
transactions contemplated hereby and thereby. The Seller has not received
notice alleging it to be in default in any respect, and the Seller has in all
respects performed all the obligations required to be performed by it to date
and is not in default in any respect under any Contract, and there exists no
event, condition or occurrence which, with the giving of notice or lapse of
time, or both, would constitute a default under any Contract.
The Seller has not received from any party to any Contract notice of its
intention to cancel or terminate such Contract. The Seller has furnished to the
Buyer true and complete copies of all of the Contracts (including all
amendments, supplements and modifications in respect thereof) or a description
thereof as set forth on Schedule 3.1(j).
(k) Litigation, Etc. Except as set forth on Schedule 3.1(h) or (k),
there are no (i) claims (whether legal, administrative, arbitration or
otherwise) pending or, to the Knowledge of the Seller, threatened affecting the
Business or the Purchased Assets or Assumed Obligations, whether at law or in
equity, or before or by any Governmental Authority or (ii) judgments, decrees,
injunctions or orders of any Governmental Authority, or arbitrator affecting the
Business or the Purchased Assets or Assumed Obligations. The Seller has
delivered to the Buyer true and complete copies of all documents and
correspondence relating to matters referred to in Schedule 3.1(k) which are
included in the Assumed Obligations.
(l) Compliance with Law; Governmental Authorizations.
(i) The Seller is not in violation of any Legal Requirement
applicable to the Business.
(ii) (A) The Seller has all licenses, permits, orders,
approvals and other authorizations of or from all Governmental Authorities
which are necessary in the conduct of the Business (collectively, the
"Permits"), (B) such Permits are in full force and effect, (C) no violations
are currently pending with respect to any such Permit, and (D) no proceeding
is pending or, to the Knowledge of the Seller, threatened to revoke or limit
any such Permit. Schedule 3.1(l) contains a true and complete list of all of
the Permits and the Seller has furnished to the Buyer true and complete copies
thereof.
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(iii) Within the past five years, neither the United States
Occupational Safety and Health Administration, CSST nor any other
Governmental Authority has alleged or requested a correction by the Seller
in respect of the Business of any such occupational health or safety
problem.
(m) Warranties of Products; Products Liability; Regulatory Compliance
Regarding Products.
(i) The products manufactured, sold or distributed, by the
Seller in connection with the Business are free from any material defects,
and conform in all respects with all standards for products of such type.
(ii) No Governmental Authority regulating the marketing, testing
or advertising of any of the products manufactured, sold or distributed by
the Business has requested that any such product be removed from the
market, that substantial new product testing be undertaken as a condition
to the continued manufacturing, selling or distribution of any such
product or that such product be modified.
(n) Inventories; Accounts and Notes Receivable.
(i) Except as set forth on Schedule 3.1(n), the inventories of
the Seller with respect to the Business include no items which are
obsolete, of below standard quality or of a quality or quantity not usable
or salable in the normal course of business of the Business, the aggregate
value of which has not been written down on the books of account of the
Seller to realizable market value or with respect to which adequate
reserves have not been, or will not be in the Closing Balance Sheet in
accordance with GAAP and Section 2.2(b), provided.
(ii) Except as set forth on Schedule 3.1(n), all of the accounts
receivable and notes receivable owing to the Seller as of the Closing Date
constitute, and as of the Closing will constitute, valid and enforceable
claims arising from bona fide transactions in the ordinary course of
business, and there are no known or asserted claims, refusals to pay or
other rights of set-off against any thereof. Except as set forth on
Schedule 3.1(n) as of the Closing Date, there is (i) no account debtor or
note debtor delinquent in its payment by more than 90 days, (ii) no
account debtor or note debtor that has refused or threatened to refuse to
pay its obligations for any reason, (iii) no account debtor or note debtor
that is insolvent or bankrupt, (iv) no account receivable or note
receivable pledged to any third party by the Seller and (v) no account or
note receivable that is in jeopardy for any reason.
(o) Labor Relations; Employees. Schedule 3.1(o) contains a true and
complete list of the persons employed by the Seller in the Business as of
the Closing Date (the "Current Employees"). Except as set forth on
Schedule 3.1(o), (i)the Seller has not been notified by any Current
Employee of any grievance or problem existing between the Seller and such
Current Employee; (ii) the Seller is not delinquent in payments to any of
the Current Employees for any wages, salaries, commissions, bonuses or
other direct or indirect compensation for any services performed by them
to the Closing Date or for amounts required to be reimbursed to the
Current
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Employees;(iii) upon termination of the employment of any of the
Current Employees, neither the Seller nor the Buyer will by reason of
anything done prior to the Closing, or by reason of the consummation of
the transactions contemplated hereby, be liable for any excise taxes
pursuant to Section 4980B of the Code or to any of the Current Employees
for so-called "severance pay" or any other payments; (iv) the Seller is in
compliance in all respects with all Legal Requirements respecting labor,
employment and employment practices, terms and conditions of employment
and wages and hours (including, without limitation, all Legal Requirements
promulgated by the Equal Employment Opportunity Commission and the
Department of Labor under the Occupational Safety Hazards Act and the
Worker Adjustment and Retraining Notification Act); (v) there is no unfair
labor practice complaint against the Seller relating to or arising out of
the conduct of the Business pending or, to the Knowledge of the Seller,
threatened before the National Labor Relations Board or any comparable
state, provincial, local or foreign agency; (vi) there is no labor strike,
dispute, slowdown or stoppage pending or, to the Knowledge of the Seller,
threatened against or involving the Seller affecting the Business; (vii)
no representation question exists regarding the Current Employees; (viii)
no grievance and no arbitration proceeding arising out of or under
collective bargaining agreements is pending in respect of the Business and
no Claim therefor has been asserted; and (ix) no collective bargaining
agreement or other contract with or commitment to any labor union is in
effect or currently being negotiated by the Seller. The Seller has
delivered to the Buyer true and complete copies of all handbooks, manuals
and other policies describing the employment policies with respect to the
Business.
(p) Employee Plans.
(i) Except as set forth on Schedule 3.1(p), the Seller has not
been within the past five years a party to, sponsored or maintained any
Employee Plans. As used herein, the term "Employee Plan" means any
employee benefit plan (including as such term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), as well as any other plan, program or arrangement organized,
maintained and/or administered pursuant to any provincial pension plan act
(e.g., the Supplemental Pension Plan Act (Quebec)) involving direct or
indirect compensation, under which the Seller may have any present or
future obligations or liability on behalf of its employees or former
employees, contractual employees or their dependents or beneficiaries, and
which relates primarily to the Business. As used herein, the term "ERISA
Affiliate" means any entity that is a member of a "controlled group of
corporations" with or is under "common control" with the Seller as defined
in Section 414(b) or (c) of the Code.
(ii) Schedule 3.1(p) contains a true and complete list of all
Employee Plans.
(iii) No Employee Plan currently maintained by the Seller is or
was within the past five years a "multiple employer plan" (including as
such term is defined within the meaning of Section 413 of the Code).
(iv) The Seller is not and has not been for the past five years
obligated to contribute to any Employee Plan which is a "multiemployer
plan" (as such term is defined within the meaning of Section 3(37) of
ERISA).
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(v) Neither the Seller nor any other "disqualified person" or
"party in interest" (as such terms are defined in Section 4975 of the Code
and Section 3(14) of ERISA, respectively) with respect to an Employee Plan
has breached the fiduciary rules of ERISA (or any other statute pursuant
to which the Seller maintains any other Employee Plan) or engaged in a
prohibited transaction which could subject the Seller to any tax or
penalty imposed under any Legal Requirement including, without limitation,
Section 4975 of the Code or Section 502(i), (j) or (l) of ERISA.
(vi) Each Employee Plan has been maintained and operated in
accordance with its terms and is in substantial compliance with the
requirements of all Legal Requirements including, without limitation,
ERISA and the Code and in accordance with the provisions of any
applicable collective bargaining agreement.
(vii) Each Employee Plan for which the Seller has claimed a
deduction under Section 404 of the Code, as if such Employee Plan were
qualified under Section 401 of the Code, has received or has timely
applied for a favorable determination letter from the Internal Revenue
Service as to the qualification of such Employee Plan, and such favorable
determination letter has not been modified, revoked or limited in any way.
(viii) All contributions due and payable on or before the
Closing Date in respect of the Employee Plans will be made in full and in
proper form, and adequate accruals have been provided for in the financial
statements for all other contributions or amounts in respect of the
Employee Plans for periods ending on the Closing Date.
(ix) No Employee Plan subject to, any applicable employee
benefits Law including, without limitation, Part (3) of Subtitle B of
Title I of ERISA or Section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in Section 412(a) of the Code), whether or
not waived.
(x) The Seller has neither made nor agreed to make, nor is it
required to make (in order to bring any of the Employee Plans into
substantial compliance with any applicable employee benefits Legal
Requirement including, without limitation, ERISA or the Code), any change
in benefits that would increase the costs of maintaining any of the
Employee Plans.
(xi) As of the Closing Date, there are no actions, suits,
disputes, arbitrations or claims pending (other than routine claims for
benefits) or legal, administrative or other proceedings or governmental
investigations pending or, to the knowledge of the Seller, threatened
against any Employee Plan or against the assets of any Employee Plan.
(xii) No Employee Plan subject to Title IV of ERISA (or any
equivalent Canadian Legal Requirement) has been terminated within the past
four years, and no proceeding has been initiated to terminate any Employee
Plan.
(xiii) Neither the Seller nor its ERISA Affiliates nor any
member of a controlled group including the Seller or any of its ERISA
Affiliates has incurred within the past five years, nor reasonably expects
to incur, any termination, liability in respect of
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any Employee Plan under any applicable employee benefits Legal
Requirement including, without limitation, Section 4064 or 4069 of ERISA.
(xiv) No "reportable event" under any applicable employee
benefits Legal Requirement (within the meaning of Section 4043 of ERISA)
has occurred within the past five years with respect to any Employee Plan
subject to ERISA.
(xv) Each Employee Plan which is a "group health plan" (as
defined in any applicable employee benefits Legal Requirement including as
defined in Section 5000 of the Code) has been maintained in compliance
with all applicable employee benefits Legal Requirements including,
without limitation, Section 4980B of the Code and Title I, Subtitle B,
Part 6 of ERISA and no tax payable on account of any applicable employee
benefits Law including, without limitation, Section 4980B of the Code has
been or is expected to be incurred by Seller with respect to an Employee
Plan.
(xvi) No benefit payable or which may become payable by the
Seller pursuant to any Employee Plan shall constitute an "excess parachute
payment" (as defined in any applicable employee benefits Legal Requirement
including within the meaning of Section 280G of the Code) which is subject
to the imposition of an excise tax under any applicable employee benefits
Legal Requirement including, without limitation, Section 4999 of the Code
or which would not be deductible by reason of Section 280G of the Code.
(xvii) No Employee Plan currently maintained by the Seller
provides any post-retirement health or life insurance benefits, and the
Seller does not maintain any obligations to provide any post-retirement
benefits in the future.
(q) Tax Matters. (i) The Seller has paid (or the Parent on behalf of
the Seller has paid) all Taxes required to be paid through the Closing Date and
will pay all Taxes required to be paid by it, in respect of the Business, for
periods ending on or prior to the Closing Date and has properly and timely
filed and will, prior to the Closing, properly and timely file all returns,
declarations of estimated Tax, Tax reports, information returns and statements
required to be filed by it (collectively, "Returns"), in respect of the
Business, prior to the Closing (other than those for which extensions shall
have been granted prior to Closing) relating to any Taxes with respect to any
income, properties or operations of the Seller prior to the Closing; (ii) no
tax liens have been filed with respect to any of the Purchased Assets, and
there are no pending tax audits of any of the Seller or the Parent relating to
the Business; (iii) the Seller has withheld from each payment made to any of
its present or former employees, officers and directors, and to all Persons who
are non-residents of Canada for the purposes of the Income Tax Act (Canada),
all amounts required by Law, and has remitted such withheld amounts within the
prescribed periods to the appropriate Governmental Authority; (iv) the Seller
has remitted all Canada Pension Plan and Quebec Pension Plan contributions,
unemployment insurance premiums, employer health taxes and other Taxes payable
by it in respect of its employees to the proper Governmental Authority within
the time required by applicable Law; (v) the Seller has charged, collected and
remitted on a timely basis all amounts as required by applicable Law on any
sale, supply or delivery whatsoever, made by the Seller in respect to the
Business including, without limitation, sales and goods and services taxes;
(v) the Seller is a registrant for the purposes of the goods and
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services tax provided for under the Excise Tax Act and its registration
number is 140640236RT; (vi) the Seller is a registrant for the purposes of the
Taxes provided for under the Quebec Sales Tax Act and its registration number
is 1017799629TQ0001; (vii) The Seller has never acquired or had the use of any
of the Purchased Assets from a Person (a "Related Person") with whom the Seller
was not dealing at arm's length, as determined under the Income Tax Act
(Canada); and the Seller is not a party to or bound by any agreement with, it
is not indebted to, and no amount is owing to the Seller by any Person, not
dealing at arm's length, within the meaning of the Income Tax Act (Canada),
with the Seller.
(r) Brokers. Except as set forth on Schedule 3.1(r), neither Seller nor
any of its officers, directors, stockholders or employees has employed any
investment banker, broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
(s) Distributions; Transactions with Affiliates. Except as set forth on
Schedule 3.1(s), no Affiliate of the Seller has purchased, acquired or leased
any property or services from (or made any payments or incurred any
indebtedness with respect thereto), or sold, transferred or leased any property
or services to, or entered into any management, consulting or similar agreement
or tax-sharing agreement with, the Business. For purposes of this Agreement,
the term "Affiliate," as to any Person, means any other Person that, directly
or indirectly, through one or more intermediaries, controls, is controlled by
or is under common control with such Person; provided, however, that with
respect to the Parent and the Seller, the term "Affiliate" shall not be deemed
to include Chase Capital Partners.
(t) Principal Customers. Schedule 3.1(t) sets forth a list of each
customer of the Seller to which the Seller, individually or in the aggregate,
sold more than Cnd. $250,000 in goods or services in connection with the
Business in its most recent fiscal year (the "Principal Customers"). Except as
set forth on Schedule 3.1(t), (1) no disagreement or problem exists between the
Seller and any of the Principal Customers with an amount in controversy in
excess of Cnd. $250,000, (2) the business relationship between the Seller and
each of the Principal Customers is good and (3) no Principal Customer has
threatened to terminate its relationship and dealings with the Business,
whether as a result of the transactions contemplated by this Agreement or
otherwise.
(u) Bank Accounts; Powers of Attorney. Schedule 3.1(u) sets forth a
complete and correct list of (i) the names of each bank account in which the
Seller has an account or safe deposit box used for the Business, and the names
of all persons authorized to draw thereon, or have access thereto and (ii) the
names of all persons, firms, associations, corporations or business
organizations, holding general or special powers of attorney from the Seller in
respect of the Business and a summary of the terms thereof.
(v) Suppliers and Vendors. Since June 30, 1996, no material supplier or
vendor of the Seller has canceled or otherwise terminated, or threatened to
cancel or otherwise terminate, its relationship with the Seller or has
decreased, limited or otherwise modified, or threatened to decrease, limit or
otherwise modify, the services, supplies or materials it provides to the
Seller.
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(w) Original Purchase Agreement. The Seller or the Parent has, prior to
the Closing, paid in full all Excluded Earnout Liabilities. The full amount of
the liabilities or obligations of the Seller under (i) Article III of the
Original Purchase Agreement (including under Sections 3.3(ii) and 3.3(vi) for
the Performance Measurement Period (as such term is defined therein)) ending
June 30, 1997 does not exceed Cnd. $1,250,000, and (ii)(x) Section 2.2(vi) of
the Original Purchase Agreement (as it relates to clause (a) of Schedule
2.2(vi) thereunder) for the period ending on the Closing Date shall be deemed
to be Excluded Obligations hereunder and (y) Section 2.2(vi) of the Original
Purchase Agreement (as it relates to clause (b) of Schedule 2.2(vi) thereunder
shall either have been satisfied in full on or prior to the Closing or shall be
reflected as a liability on the Closing Balance Sheet in accordance with GAAP.
Immediately prior to the Closing, the Seller has no obligations then owing to
any Person under Sections 2.2(vi), 2.3 or 3.5 of the Original Purchase
Agreement.
(x) Definition of Knowledge. As used in this Agreement, the term
"Knowledge" of the Seller means and includes actual knowledge of those persons
listed on Schedule 3.1(y).
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Seller as follows:
(a) Organization; Corporate Authority; Good Standing. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Buyer has all requisite power and authority to
execute and deliver this Agreement and the Related Documents to which it is or
will be a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.
(b) Capitalization. The authorized capital of the Buyer consists of 100
Class A shares of common stock which are all issued and outstanding and owned
by Advanced Accessory Systems, LLC, a Delaware limited liability company.
Immediately after the Closing, all such issued and outstanding shares of common
stock will be duly authorized and validly issued and outstanding.
(c) Corporate Action; No Conflict. The execution, delivery and
performance by the Buyer of this Agreement and the Related Documents to which
the Buyer is or will be a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Buyer. This Agreement has been
duly and validly executed and delivered by the Buyer and is, and each of the
Related Documents to which the Buyer is or will be a party, when executed and
delivered in accordance with its terms, will be, the valid and binding
obligation of the Buyer, enforceable in accordance with the terms thereof.
Neither the execution, delivery or performance by the Buyer of this Agreement
or any of the Related Documents to which the Buyer is or will be a party, nor
the consummation by the Buyer of the transactions contemplated hereby or
thereby, nor compliance by the Buyer with any provision hereof or thereof will
(i) conflict with or result in a breach of any provision of the certificate of
incorporation or by-laws of the Buyer, in each case as in effect on the Closing
Date, (ii) cause a default (or give rise to any right of termination,
cancellation or
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acceleration) under any of the terms, conditions or provisions of any
note, bond, lease, mortgage, indenture, license, agreement, contract or other
instrument or obligation to which the Buyer is a party or by which it or any of
its properties or assets is or may be bound or (iii) violate any Legal
Requirement of, from or with any Governmental Authority applicable to the Buyer
or any of its properties or assets. No Permit, consent or approval of or by, or
any notification of or filing with, any Person is required in connection with
the execution, delivery or performance by the Buyer of this Agreement and the
Related Documents to which the Buyer is or will be a party, or the consummation
by the Buyer of the transactions contemplated hereby or thereby, other than
required filings under the HSR Act or under Canadian Legal Requirements.
(d) Brokers. Neither the Buyer nor any of its officers, managers or
employees has employed any investment banker, broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
(e) No Prior Business. The Buyer was formed for the purpose of
acquiring the Business and has not conducted any business in the past, except
in connection with the transactions contemplated by this Agreement and related
activities.
(f) GST and QST. The Buyer has applied to the Quebec Ministry of
Revenue for the issuance to it of GST and QST numbers and has been assured that
the same will be issued to it retroactively to no later than the Closing Date.
ARTICLE IV
CLOSING
The closing (the "Closing") for the consummation of the
transactions contemplated by this Agreement shall take place at the offices of
Martineau Walker simultaneously with the execution and delivery herewith on July
2, 1997 (the "Closing Date").
ARTICLE V
INDEMNIFICATION
5.1 DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Buyer Indemnification Event" means any of the following:
(i) the untruthfulness, inaccuracy or breach of any
representation or warranty of the Seller contained in this Agreement or
any Related Document, any Schedule attached hereto or thereto or any
certificate delivered by the Seller in connection herewith or therewith;
(ii) the breach by the Seller of any agreement or covenant of
the Seller contained in this Agreement or any Related Document;
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(iii) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Buyer Indemnified Person
that arose in connection with, or is in any way related to any Excluded
Obligations;
(iv) the assertion against or payment by any Buyer Indemnified
Person of any Claim or Loss to the extent related to such Claim as a
result of non-compliance by the Seller or the Buyer with the "bulk sales
laws" of any jurisdiction which may be applicable to the transactions
contemplated hereby (including, without limitation, under Article 1768 of
the Civil Code of Quebec, as amended (including, without limitation, the
sale of enterprise provisions thereunder));
(v) the assertion of any Claim against or payment of any
Loss to the extent related to such Claim by any Buyer Indemnified Person
relating in any way to Taxes of any kind whatsoever, or expenses, interest
or penalties relating thereto, with respect to periods ending on or prior
to the Closing Date, other than Taxes relating to the conduct of the
Business after the Closing Date or as may be specified in Section 1.3(a);
(vi) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Buyer Indemnified Person
relating to or arising out of the environmental matters existing or
occurring prior to the Closing Date;
(vii) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Buyer Indemnified Person
relating to or arising out of any Excluded Earnout Liabilities; and
(viii) all reasonable fees, costs and expenses (including,
without limitation, reasonable attorneys', accountants' and other
professional fees and expenses) incurred by any Buyer Indemnified Person
in connection with any action, suit, proceeding, demand, assessment or
judgment arising out of any of the matters indemnified against under this
Article or in connection with the enforcement by any Buyer Indemnified
Person of its rights under this Article.
(b) "Buyer Indemnified Persons" means and includes the Buyer and its
officers, directors, employees, Affiliates, successors and assigns of all or
any portion of the Business.
(c) "Claim" means any claim, demand, assessment, action, suit,
proceeding, investigation, cause of action, litigation, judgment, order or
decree.
(d) "Indemnified Persons" means the Buyer Indemnified Persons or the
Seller Indemnified Persons, as the case may be.
(e) "Indemnifying Person" means the Buyer, in the case of any Seller
Indemnification Event, or the Seller, in the case of any Buyer Indemnification
Event, as the case may be.
(f) "Losses" means any and all losses, claims, shortages, damages,
liabilities, obligations, expenses, assessments, tax deficiencies and Taxes,
and fees, costs and expenses (including, without limitation, reasonable
attorneys', accountants' and other professional fees and
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expenses) sustained, suffered or incurred by any Indemnified Person in
connection with any Claim incident to or otherwise arising from any matter
which is the subject of indemnification under this Article or in connection
with the enforcement by the Indemnified Persons or any of them of their
respective rights under this Article; provided, however, that in computing the
amount of any Losses for purposes of determining the liability of any
Indemnifying Party under Section 5.2, the amount of any insurance proceeds
actually received by the Indemnified Person, less any deductibles and any
resulting premium increases, shall be deducted from such Losses.
(g) "Seller Indemnification Event" means the following:
(i) the untruthfulness, inaccuracy or breach of any
representation or warranty of the Buyer contained in this Agreement or any
Related Document, any Schedule attached hereto or thereto or any
certificate delivered by the Buyer in connection herewith or therewith;
(ii) the breach of any agreement or covenant of the Buyer
contained in this Agreement or any Related Document;
(iii) the assertion of any Claim against or payment of any
Loss to the extent related to such Claim by any Seller Indemnified Person
that arose in connection with or is in any way related to any
Assumed Obligation;
(iv) the assertion of any Claim against or payment of any
Loss to the extent related to such Claim by any Seller Indemnified Person
relating in any way to Taxes of any kind whatsoever, or expenses, interest
or penalties relating thereto, with respect to periods after the Closing
Date (other than to the extent assumed under Section 1.3(a));
(v) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Seller Indemnified Person
relating to any legal action against such Seller Indemnified Person
arising as a result of the agreements in Section 6.8 hereof;
(vi) the assertion of any Claim against or the payment of any
Loss to the extent directly related to such Claim by any Seller
Indemnified Person relating to any legal action against such Seller
Indemnified Person arising as a direct result of the grossly negligent use
by the Buyer of the power of attorney in a manner in contravention of
Section 1.8 hereof;
(vii) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Seller Indemnified Person
resulting from the Seller's failure to collect and remit any applicable
GST and QST with respect to the transactions contemplated hereunder; and
(viii) all reasonable fees, costs and expenses (including,
without limitation, reasonable attorneys', accountants' and other
professional fees and expenses) incurred by any Seller Indemnified Person
in connection with any action, suit, proceeding, demand, assessment or
judgment arising out of any of the matters indemnified against under this
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Article or in connection with the enforcement by any Seller
Indemnified Person of its rights under this Article.
(h) "Seller Indemnified Persons" means and includes the Seller and its
respective officers, directors, employees, Affiliates and successors.
(i) "Taxes" means, with respect to any Person, (A) all income taxes
(including any tax on or based upon net income, or gross income, or income as
specially defined, or earnings, or profits, or selected items of income,
earnings or profits) and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, real property taxes,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any
Governmental Authority and (B) any liability for the payment of any amount of
the type described in the immediately preceding clause (A) as a result of being
a "transferee" (within the meaning of Section 6901 of the Code or any other
applicable law) of another Person or a member of an affiliated or combined
group. Without limiting the foregoing, the term "Taxes" shall include GST and
QST. The term "GST" shall mean taxes, interest, penalties and fines imposed
under Part IX of the Excise Tax Act (Canada) and the regulations made
thereunder as well as any Notice of Ways and Means Motion or Bill tabled in the
House of Commons or any press release or publicly disseminated statement by the
Minster of Finance, which sets forth a proposal to amend or a proposed
amendment to the Excise Tax Act (Canada) or the regulations made thereunder
which, when enacted, shall have retroactive effect to the date of its enactment
and all provincial sales taxes integrated with such federal taxes, as the case
may be (collectively, the "GST Legislation"). The term "QST" means taxes,
interest, penalties and fines imposed under the Quebec Sales Tax Act and the
regulations made thereunder including any proposed amendment to such
legislation announced by way of press release from time to time by the Minister
of Finance for the Province of Quebec or such other minister charged with the
administration of the Quebec Sales Tax Act, which announcement confirms that
such proposed amendment, when enacted, shall have retroactive effect to a date
prior to the date of its enactment (collectively, the "QST Legislation").
5.2 INDEMNIFICATION GENERALLY.
(a) Buyer Indemnification. The Seller shall indemnify the Buyer
Indemnified Persons for, and hold each of them harmless from and against, any
and all Losses resulting from any Buyer Indemnification Event; provided,
however, that the Seller shall have no obligation or liability to indemnify and
hold harmless the Buyer Indemnified Persons from and against Losses resulting
from a Buyer Indemnification Event described in Section 5.1(a)(i) (other than a
Buyer Indemnification Event relating to a breach of the representations set
forth in Sections 3.1(a), (b), (d), (n), (r) and (w)) unless and until the
aggregate amount of all such Losses shall exceed Cnd. $300,000 and then only to
the extent of such Losses in excess of Cnd. $300,000 and the aggregate
liability of the Seller under this Section 5.2(a) for such Losses shall not
exceed, when aggregated with any other payment by the Seller to the Buyer
Indemnified Persons under this Agreement, Cnd. $5,000,000. Notwithstanding
anything to the contrary contained herein, the foregoing limitation shall not
apply to the willful breach of any representation or warranty.
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(b) Seller Indemnification. The Buyer shall indemnify the Seller
Indemnified Persons for, and hold each of them harmless from and against, any
and all Losses resulting from any Seller Indemnification Event provided that
the aggregate liability of the Buyer under this Section 5.2(b) for such Losses
(except Losses resulting from the failure by the Buyer to assume, perform, pay
or discharge in accordance with this Agreement, any Assumed Obligation) shall
not exceed when aggregated with any other payment by the Buyer to the Seller
Indemnified Persons under this Agreement Cnd. $5,000,000.
5.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
The obligations and liabilities of the Indemnifying Persons with
respect to Claims resulting from the assertion of liability by third parties
(each, a "Third Party Claim") shall be subject to the following terms and
conditions:
(a) The Indemnified Persons shall give prompt written notice to the
Indemnifying Persons of any Third Party Claim which might give rise to a Claim
by the Indemnified Persons against the Indemnifying Persons based on the
indemnity agreements contained in Section 5.2, stating the nature and basis of
said Third Party Claim, and the amount thereof to the extent known. Such notice
shall be accompanied by copies of all relevant documentation with respect to
such Third Party Claim, including, without limitation, any summons, complaint
or other pleading which may have been served or written demand, or other
document or other instrument. Failure to give notice within the terms of this
Section 5.3(a) shall serve to excuse the Indemnifying Person from its
obligation under Section 5.2 only if and to the extent that the Indemnifying
Person can establish that it was materially prejudiced or injured by the
failure.
(b) (Insert Title Here)
(i) The Indemnifying Persons will have the right to participate
in or, if the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that the Indemnifying Persons shall
be obligated under the terms of their indemnity hereunder in connection
with such Third Party Claim (a "Liability Letter"), then the Indemnifying
Persons shall have the right to assume the defense of any Third Party
Claim at their own expense and by their own counsel (satisfactory to the
Indemnified Persons); provided, however, that the Indemnifying Persons
shall not have the right to assume the defense of any Third Party Claim if
(x) such Third Party Claim seeks an injunction, restraining order,
declaratory relief or other non-monetary relief, (y) the named parties to
any such action or proceeding (including any impleaded parties) include
both the Indemnified Persons and the Indemnifying Persons and the former
shall have been advised in writing by counsel (with a copy to the
Indemnifying Persons) that there are one or more legal or equitable
defenses available to them which are different from or additional to those
available to Indemnifying Persons or (z) such action or proceeding
involves matters beyond the scope of the indemnification obligation of the
Indemnifying Persons, and in such event under subsection (y) or (z) the
suit or proceeding may, at the election of the Indemnifying Person, be
defended jointly as provided in (ii) below.
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(ii) Notwithstanding the foregoing subsection (b)(i), if the
Indemnifying Persons desire to participate in the defense of any Third
Party Claim without delivering a Liability Letter to the Indemnified
Persons, the Indemnifying Persons and the Indemnified Persons shall
jointly assume the defense against such Third Party Claim under the
following conditions:
(A) a law firm will be selected by agreement between the
Indemnifying Persons and the Indemnified Persons to represent the
interests of both such parties in defending against the Third Party Claim;
(B) if such law firm determines at any time that a
conflict of interest exists between the Indemnifying Persons and the
Indemnified Persons for any reason and that such law firm can not
adequately represent the interests of both parties, then such law firm
shall promptly notify the Indemnified Persons and the Indemnifying Persons
in writing of such determination and the Indemnified Persons and
Indemnifying Persons shall decide by agreement, based upon which party is
more likely to be more liable for the Third Party Claim, which party the
law firm will continue to represent;
(C) if the party which is no longer represented by the law
firm as a result of subclause (B) desires to continue to participate in
the defense of the Third Party Claim, such party may do so and may retain
its own counsel at its own expense; provided, however, that if such party
is found to have no liability in connection with such Third Party Claim,
its reasonable fees and expenses in connection with this subclause (C)
shall be reimbursed by the other party.
(c) (Insert Title Here)
(i) If the Indemnifying Persons exercise their right to assume
the defense of a Third Party Claim pursuant to subsection (b)(i) or
(b)(ii) above, they shall not make any settlement of any claims without
the prior written consent of the Indemnified Persons.
(ii) If the Indemnifying Persons do not exercise their right to
assume the defense of a Third Party Claim, the Indemnified Persons shall
not make any settlement of any claims for which they may seek
indemnification hereunder unless (A) they first provide written notice to
the Indemnifying Persons describing the material terms of the settlement
and (B) the Indemnifying Persons fail to deliver a Liability Letter within
ten days of receiving such notice.
5.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS.
The representations and warranties of the Seller in Section 3.1
and the representations and warranties of the Buyer contained in
Section 3.2 shall survive the Closing and remain in full force and effect for a
period of 24 months and thereafter shall terminate; provided, however, that (a)
the representations and warranties of the Seller set forth in Section 3.1(q)
shall survive the Closing and remain in full force and effect for the
applicable statute of limitations, (b) the representations and warranties of
the Seller set forth in Sections 3.1(a), (b), (d), (n), (r) and (w), and the
representations and warranties of the Buyer set forth in Sections 3.2(a), (c)
and (e) shall
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survive the Closing and remain in full force and effect without time
limit (without regard to any statute of limitations). Except as otherwise
expressly provided in this Agreement, all agreements and covenants requiring
future performance contained in this Agreement shall survive the Closing and
remain in full force and effect without time limit, provided, however, that the
obligation of the Buyer to indemnify the Seller Indemnified Parties under
Section 5.2(b) as it relates to a Seller Indemnification Event specified in
Section 5.1(g)(v) shall terminate upon the expiration of the applicable statute
of limitations relating to the subject matter of such event. For convenience of
reference, the date upon which any representation, warranty, agreement or
covenant shall terminate, if any, shall be referred to herein as the "Survival
Date".
5.5 INDEMNIFICATION EXCLUSIVE.
The parties hereto acknowledge agree that, from and after the Closing,
the sole and exclusive remedy with respect to any and all Claims relating to the
subject matter of this Agreement and the transactions contemplated hereby (other
than the Sub-Lease) shall be pursuant to Article V hereof.
ARTICLE VI
POST-CLOSING AGREEMENTS
6.1 ACCESS.
In connection with any financial audit of the Seller or any tax audit
or other governmental investigation of the Seller for any matter relating to any
period prior to the Closing, the Buyer shall, upon written request, permit the
Parent or the Seller and their respective representatives to have access, at
reasonable times during normal business hours and in a manner which is not
disruptive to the operations of the Buyer, to the work papers, books and records
of the Buyer relating to the Seller and the conduct of the Business prior to the
Closing which shall have been in the possession of the Buyer as of the Closing
and which remain in the possession of the Buyer; provided, however, that this
Section 6.1 shall not create any obligation on the part of the Buyer to retain
any such work papers, books and records, so long as prior to destroying any such
work papers, books, and records, the Buyer shall notify the Parent and provide
the Parent an opportunity (at the Parent's sole expense) to retrieve such work
papers, books and records.
6.2 BULK SALES LAWS.
The Seller shall deliver to the Buyer at Closing an officer's
certificate containing the aggregate indebtedness of each of the Business and
the Seller, and indicating that the Purchased Assets are not subject to any
security (the "Seller's Bulk Sales Statement").
6.3 CERTAIN EMPLOYEE MATTERS.
(a) On the Closing Date, the Buyer shall offer employment as of the
Closing Date to the employees of the Seller who are actively employed
by the Seller in the Business on the Closing Date and identified on Schedule
6.3 (any such employees who accept such offer of employment being referred to
herein as the "Hired Employees"); such offer of employment to be on
substantially the same terms as applicable to such employees immediately prior
to the
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Closing; except for Hired Employees, the Buyer shall have no liability
to any employees of the Seller who, on the Closing Date, are not actively
employed or are on disability, leave of absence, military service leave or
lay-off (whether or not with recall rights), or whose employment has been
terminated (voluntarily or involuntarily) or who have retired prior to the
Closing Date. After the Closing Date, each Hired Employee shall cease to be
employees of the Seller or entitled to participate in Seller's employee benefit
plans, programs, policies and arrangements except to the extent required by
applicable Legal Requirements. Subject to the provisions of this Section 6.3,
for periods on and after the Closing Date, each Hired Employee shall be
eligible to participate in employee benefit plans, programs, policies and
arrangements, if any, maintained from time to time by the Buyer for the benefit
of Hired Employees, as determined in the sole discretion of the Buyer so long
as such Hired Employee shall satisfy the eligibility criteria thereunder.
Nothing contained in this Agreement shall confer upon any Hired
Employee any rights or remedies of any nature or kind whatsoever under
or by reason of this Agreement, including, without limitation, any right
to employment or continued employment or to any benefits that may be provided,
directly or indirectly, under any employee benefit plan, policy or arrangement
of the Buyer or Seller, nor shall anything contained in this Agreement
constitute a limitation on or restriction against the right of the Buyer or
Seller to amend, modify or terminate any such plan, policy or arrangement or
the terms or conditions of employment. The Seller shall retain all liabilities
and obligations arising from the termination or severance of all employees of
the Business who do not become Hired Employees on the Closing Date.
(b) To the extent permitted by Legal Requirement or any applicable
Employee Benefit Plans the Seller shall cause all Hired Employees to be
fully vested as of the Closing Date under each defined benefit pension plan,
profit sharing plan, benefit restoration programs, savings plan and other
employee pension benefit plan and retirement arrangements of the Seller
covering such employees. To the extent applicable, Hired Employees (and their
eligible dependents) shall be given credit under employee benefit plans,
programs, policies and arrangements, if any, that are established or maintained
by the Buyer for the benefit of Hired Employees for their service with the
Seller (i) for purposes of eligibility to participate and vesting (but not
benefit accrual) to the extent such service was taken into account under a
corresponding Seller's plan, program, policy or arrangement and (ii) for
purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any pre-existing condition limitations and
shall be given credit for amounts paid under a corresponding Seller's plan,
program, policy or arrangement during the same period for purposes of applying
deductibles, copayments and out-of-pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of the Buyer's plans,
programs, policies or arrangements. Notwithstanding the foregoing, service and
other amounts shall not be credited to Hired Employees (or their eligible
dependents) to the extent the crediting of such service or other amounts would
produce benefits which are substantially more favorable to Hired Employees than
are provided to the current similarly situated employees of the Buyer or its
affiliates who are covered by similar plans, programs, policies and
arrangements.
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6.4 PARENT GUARANTY.
The Parent hereby irrevocably and unconditionally guarantees to Buyer
the prompt and complete payment and performance when due of all obligations of
the Seller under Article V of this Agreement and any Related Documents. The
obligations of the Parent (i) are absolute and unconditional and shall continue
in full force and effect until the payment and performance of all of the
obligations of the Seller that are guaranteed hereunder, (ii) are not
conditioned upon any event or contingency, or upon any attempt to enforce the
Seller's performance under this Agreement or any Related Document or any other
right or remedy against the Seller or to collect from the Seller through the
commencement of legal proceedings or otherwise, and (iii) shall be binding upon
and enforceable in full against the Parent without regard to any circumstance
which might otherwise constitute a legal defense available to, or a discharge
of, the Parent in respect of the obligations guaranteed hereby; provided,
however, that the Parent shall be entitled to assert any rights or defenses
which the Seller may have against the Buyer or its assigns and the Buyer's and
its assigns' rights hereunder shall be subject thereto (excluding any defenses
based upon the insolvency of the Seller).
6.5 NON-COMPETITION.
For a period commencing on the Closing Date and terminating on the
fourth anniversary thereof, no Restricted Party (as defined below) will,
directly or indirectly, own, manage or control or have any equity interest in
any sole proprietorship, partnership, corporation or business or any other
Person (whether as a partner, agent, security holder, creditor, consultant or
otherwise) that directly or indirectly is engaged in the business of designing,
engineering, manufacturing, marketing, selling and distributing automotive roof
rack systems and vehicular accessories (such as bike racks, ski racks and
surfboard carriers) other than rear carriers and shuttles and related rear
carrier and shuttle systems (collectively "Competitive Businesses") in the
United States of America or Canada; provided, however, that nothing herein shall
be deemed to prevent any Restricted Party from (i) acquiring through market
purchases and owning, solely as an investment, less than two percent of the
equity securities of any class of any issuer whose shares are registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
are listed or admitted for trading on any United States national securities
exchange or are quoted on the National Association of Securities Dealers
Automated Quotations System or on any Canadian stock exchange or any similar
system of automated dissemination of quotations of securities prices in common
use, so long as the Restricted Party is not a member of any "control group"
(within the meaning of the rules and regulations of the United States Securities
and Exchange Commission) of any such issuer and which is engaged in a
Competitive Business, (ii) from owning one Competitive Business with aggregate
annual revenues less than Cnd. $5,000,000, provided, however, that in the event
such Competitive Business has aggregate annual revenues equal to or in excess of
Cnd. $5,000,000, the Seller shall not be deemed to be in violation of this
Section 6.5 until one year after the date that the financial statements of such
Competitive Business shall reflect such fact, or (iii) owning an interest
acquired as a creditor in bankruptcy provided that the Restricted Party makes
arrangements reasonably satisfactory to the Buyer to dispose of such interest as
promptly as reasonably practicable after the acquisition of such investment (and
in any event within one year after the acquisition of such investment). In the
event that any Restricted Party shall own, manage or control, directly or
indirectly any Competitive Business, the Parent or Seller shall immediately
notify Buyer in writing and, from
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time to time, upon Buyer's request, deliver such financial or other information
and certifications to the Buyer to enable the Buyer to monitor the Restricted
Parties' compliance with this Section 6.5. The Restricted Parties agree that the
covenant provided for in this Section 6.5 is reasonable and necessary in terms
of time, activity and territory to protect the Buyer's interest as a buyer of
the Purchased Assets and the Business. To the extent that the covenant provided
for in this Section 6.5 may later be deemed by a court to be too broad to be
enforced with respect to its duration or with respect to any particular activity
or geographic area, the court making such determination shall have the power to
reduce the duration or scope of the provision, and to add or delete specific
words or phrases to or from the provision. The provision as modified shall then
be enforced. As used in this Agreement, a "Restricted Party" is the Seller, the
Parent and any of their Affiliates; provided, however, that the restrictions of
this Section 6.5 shall not be deemed to apply to any Person (other than any
controlled Affiliate of the Parent or any subsidiary) that acquires, whether by
purchase, merger or otherwise, all or any portion of the assets or capital stock
of the Parent or any subsidiary thereof solely to the extent that any actions
that would otherwise be limited or prohibited by the provisions of this Section
6.5 are conducted by or on behalf of any Person through an entity other than the
Parent or any subsidiary of the Parent.
6.6 NON-DISCLOSURE.
(a) Neither the Seller, the Parent nor any of their respective
controlled Affiliates (collectively, the "Covered Persons") shall disclose,
divulge, furnish or make accessible to anyone (other than the Buyer or any of
its Affiliates or representatives) any Confidential Information (as defined
below), or in any way use any such Confidential Information in the conduct of
any business.
(b) Nothing in this Section 6.6 shall prohibit the disclosure by any
Covered Person of any Confidential Information to (i) any federal, provincial,
state or other regulatory authority having jurisdiction over such Covered Person
or (ii) any other Person to which such disclosure shall, in the opinion of
counsel, be legally necessary (x) to effect compliance with any law, rule,
regulation or order applicable to such Covered Person, (y) in response to any
subpoena or other legal process, (z) in connection with any litigation to which
such Covered Person is a party; provided, however, that no disclosure shall be
made until such Covered Person shall give written notice to the Buyer of the
intention to disclose such Confidential Information so that the Buyer may
contest the need for disclosure, and such Covered Person shall reasonably
cooperate at the request of the Buyer with the Buyer in connection with any such
proceeding.
(c) For purposes of this Section 6.6, "Confidential Information" means
any confidential information pertaining to the Purchased Assets or the Business
immediately prior to the Closing, including, but not limited to, information
concerning its financial condition, prospects, customers, sources of leads,
methods of doing business, and the manner of design, manufacture, financing,
marketing and distribution of its products; provided, however, that Confidential
Information does not include information that is or becomes generally available
to the public other than as a result of a disclosure in violation of this
Section 6.6 by any Covered Person.
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6.7 NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS.
For a period of four years following the Closing Date with respect to
senior executives or key management and employees of the Buyer, and for a period
of one year following the Closing Date with respect to the Buyers's other
employees, no Restricted Party will, directly or indirectly, for itself or for
any other Person, attempt to employ or enter into any contractual employment
arrangement with any employee of the Buyer or any former employee of the Buyer
until six months after such Person's employment with the Buyer ended.
6.8 USAGE OF TRADENAMES.
The Buyer shall, for no additional consideration in excess of the
Purchase Price, have the right to sell inventory of the Business existing as of
the Closing under the tradenames "Bell" and "Rhode Gear" to the extent such
tradenames currently appear on such inventory. The Parent shall not and shall,
not permit its subsidiaries to prevent or in any way interfere with the Buyer's
rights under this Section 6.8.
6.9 AGREEMENTS IN RESPECT OF INVENTORY.
For a period of 90 days after the Closing Date, the Parent shall or
shall cause any of its Affiliates to provide reasonable access from time to time
to Buyer or its agents for the purpose of removing any portion of the Purchased
Assets located at Route 136E, Rantoul, Illinois 61866. During such period, the
Parent shall safekeep and store such Purchased Assets in a safe and commercially
reasonable manner.
6.10 AGREEMENTS REGARDING CANADIAN TAXES.
The Buyer and the Seller shall each execute and file a joint election
under Section 167 of the Income Tax Act (Canada) and the corresponding
provisions of any other applicable tax Law, within the prescribed time periods,
in respect of the Purchased Assets. The Seller and the Buyer agree to prepare
and file their respective tax returns in a manner consistent with such elections
and the allocation of the Purchase Price set out in Section 2.3.
ARTICLE VII
MISCELLANEOUS
7.1 EXPENSES; TRANSFER TAXES, ETC.
All fees, costs and expenses incurred by any party to this Agreement or
any Related Document in connection with, relating to or arising out of the
execution, delivery and performance of this Agreement or any Related Document
and the consummation of the transactions contemplated hereby, including, without
limitation, attorneys', accountants' and other professional fees and expenses,
shall be borne by such party; provided, however, that up to U.S. $50,000 of the
reasonable fees and expenses of the Seller shall be reimbursed by the Buyer at
the Closing or promptly thereafter upon delivery of satisfactory back-up
documentation. The Seller shall pay all sales, use, gains and excise taxes and
all registration, or transfer taxes which
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may be payable in connection with the transactions contemplated by
this Agreement and the Related Documents.
7.2 ENTIRE AGREEMENT.
This Agreement and the Related Documents (including the Schedules and
the Exhibits attached hereto and thereto) and the other documents, instruments
and certificates referred to herein and therein contain the entire agreement
among the parties hereto with respect to the transactions contemplated hereby
and thereby and supersede all prior agreements or understandings between the
parties with respect hereto and thereto.
7.3 RELATED DOCUMENTS.
As used in this Agreement, the term "Related Documents" means,
collectively, the Bill of Sale and Assumption Agreement and the other Conveyance
Instruments the Patent License and the Sub-Lease, dated as of the date hereof
between the Seller and the Buyer.
7.4 NOTICES.
All notices or other communications which are required or permitted
hereunder shall be in writing and shall be deemed to have been given if (a)
personally delivered or sent by telecopier, (b) sent by nationally-recognized
overnight courier or (c) sent by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
if to the Buyer, to:
Advanced Accessory Systems Canada Inc./
Les systemes d'accessoire Advanced Canada inc.
c/o Advanced Accessory Systems, LLC
Sterling Town Center
12900 Hall Road
Suite 2000
Sterling Heights, Michigan 48313
Attention: Chief Executive Officer
Telephone: (810) 997-2900
Telecopier: (810) 997-6839
with a copy to:
c/o Chase Capital Partners
380 Madison Avenue
12th Floor
New York, New York 10017
Attention: Donald Hofmann
Telephone: (212) 622-3100
Telecopier: (212) 622-3101
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with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telephone: 212-408-2400
Telecopier: 212-408-2467;
if to the Seller, to:
Bell Sports Canada Inc.
c/o Bell Sports Corp.
6350 San Ignacio
San Jose, CA 95119
Attention: Chief Financial Officer
Telephone: 408-574-3436
Telecopier: 408-574-3590
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden
Telephone: 312-853-7785
Telecopier: 312-853-7036; and
if to the Parent, to:
Bell Sports Corp.
6350 San Ignacio
San Jose, CA 95119
Attention: Chief Financial Officer
Telephone: 408-574-3436
Telecopier: 408-574-3590
with a copy to Sidley & Austin at the address specified above;
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been received (i) when delivered, if
personally delivered or sent by telecopier, (ii) on the Business Day after
dispatch, if sent by nationally recognized, overnight courier and (iii) on the
fifth Business Day following the date on which the piece of mail containing such
communication is posted, if sent by mail. As used herein, the term "Business
Day" means a day that is not a
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Saturday, Sunday or a day on which banking institutions in New York City are
not required to be open.
7.5 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement; provided, however,
that in proving this Agreement, it shall not be necessary to produce or account
for more than one counterpart hereof.
7.6 GOVERNING LAW; CONSENT TO JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAWS (EXCEPT FOR THOSE PRINCIPLES SET FORTH IN SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW).
(B) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, ANY RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE SELLER, PARENT
OR BUYER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL AND
NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE
PARTIES FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW
YORK. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY, TO THE EXTENT
PERMITTED BY LAW, HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS.
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7.7 BENEFITS OF AGREEMENT; ASSIGNMENT.
The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Anything contained herein to the contrary notwithstanding,
this Agreement shall not be assignable by any party hereto without the written
consent of the other parties hereto; provided, however, that (a) the Buyer may,
without the consent of any other party, transfer or assign, in whole or from
time to time in part, to one or more of its Affiliates, any of its rights in, to
and under this Agreement, including, without limitation, the right to purchase
all or any part of the Purchased Assets, (b) the Buyer may, without the consent
of any other party, assign its rights to indemnification hereunder to or for the
benefit of any Person, (c) the Seller may, without the consent of any other
party, assign its rights to indemnification hereunder to or for the benefit of
any Affiliate and (d) the Buyer may, without the consent of any other party,
assign any or all of its rights and interests hereunder to any lenders providing
financing for the transactions contemplated hereby.
7.8 CONSTRUCTION.
The provisions of this Agreement shall be construed according to their
fair meaning and neither for nor against any party hereto irrespective of which
party caused such provisions to be drafted. Each of the parties acknowledges
that it has been represented by an attorney in connection with the preparation
and execution of this Agreement.
7.9 PRONOUNS.
As used herein, all pronouns shall include the masculine, feminine,
neuter, singular and plural thereof whenever the context and facts require such
construction.
7.10 DESCRIPTIVE HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect the meaning or construction of any provisions of this Agreement.
7.11 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement shall be adjudicated to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
provision shall be automatically deemed amended, but only to the extent
necessary to render such provision valid, legal and enforceable in such
jurisdiction, such amendment to apply only with respect to the operation of such
provision in such jurisdiction, and the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
7.12 DISCLAIMER OF WARRANTIES.
The Seller makes no representations or warranties with respect to any
projections, forecasts or forward-looking information provided to the Buyer.
There is no assurance that any
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such projected or forecasted results will be achieved. EXCEPT AS TO
THOSE MATTERS EXPRESSLY COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS
AGREEMENT AND THE RELATED DOCUMENTS, THE SELLER IS SELLING THE PURCHASED ASSETS
(AND THE BUSINESS) ON AN "AS IS, WHERE IS" BASIS AND DISCLAIMS ALL OTHER
WARRANTIES AND REPRESENTATIONS WHETHER EXPRESS OR IMPLIED. THE SELLER MAKES NO
REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER.
7.13 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed by the Buyer, the Seller and the Parent.
7.14 NO THIRD PARTY BENEFICIARIES.
Nothing in the Agreement shall confer any rights upon any Person other
than the parties hereto and their respective heirs, successors and permitted
assigns.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Asset Purchase Agreement to be executed on its behalf as of the day and year
first above written.
BELL SPORTS CANADA INC.
By:___________________________
Name:
Title:
BELL SPORTS CORP.
By:___________________________
Name:
Title:
ADVANCED ACCESSORY SYSTEMS
CANADA INC./LES SYSTEMES
D'ACCESSOIRE ADVANCED CANADA INC.
By:___________________________
Name:
Title:
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