Exhibit 2b
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[***]"). The Omitted Material Has Been Filed Separately
With The United States Securities and Exchange Commission.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of September 30,
1999, by Orkin Canada, Inc., a New Brunswick corporation ("Buyer"), Orkin
Expansion, Inc., a Delaware corporation ("Expansion"), S.C. Johnson Commercial
Markets, Inc., a Delaware corporation ("CMI") and S.C. Johnson Professional,
Inc., a Delaware corporation ("JPI" and together with CMI, the "Seller").
RECITALS
A. Seller desires to sell, and Buyer desires to purchase, all of the issued and
outstanding shares (the "Shares") in the capital of PCO Services, Inc., a
Canadian federal corporation (together with the NSULC (as defined below)
subsequent to the Amalgamation (as defined below), the "Company"), together with
certain other assets owned by Seller, and Buyer and Seller desire to enter into
certain other agreements all for the consideration and upon the terms set forth
in this Agreement.
B. Seller desires to sell, and Expansion desires to purchase, Seller's
Intellectual Property Assets (as hereinafter defined), for the consideration and
upon the terms set forth in this Agreement.
C. Prior to the Closing, CMI will contribute the Shares and the Seller's
Intellectual Property Assets to its wholly owned subsidiary JPI.
D. Prior to the Closing (as defined herein) Seller will cause (i) PCO Services,
Inc. to form a Nova Scotia unlimited liability company subsidiary (the "NSULC");
(ii) PCO Services, Inc. to continue from the federal jurisdiction to Nova Scotia
as a limited liability Nova Scotia company; and (iii) PCO Services, Inc. to
amalgamate and consolidate with and into the NSULC under the laws of Nova Scotia
and to continue as an unlimited liability company under the laws of Nova Scotia
(the "Amalgamation").
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Adjustment Amount" -- as defined in Section 2.5.
"Applicable Contract" -- any Contract (a) under which the Company has
any rights, or (b) under which the Company is subject to any obligation or
liability, in each case which Contract has an economic benefit or obligation to
the Company in excess of CDN [***].
"Balance Sheet" -- as defined in Section 3.4.
"Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved within the time frame contemplated by this Agreement; provided, that
an obligation to use Best Efforts under this Agreement does not require the
Person subject to that obligation to take any action or actions that would
result in a material reduction in the benefits of or a material increase in
costs under this Agreement and the Contemplated Transactions to such Person.
"Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any material inaccuracy in or breach of, or any failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such material inaccuracy, breach or
failure.
"Buyer" -- as defined in the first paragraph of this Agreement.
"Closing" -- as defined in Section 2.3.
"Closing Cash Payment" -- as defined in Section 2.6(a).
"Closing Date" -- as defined in Section 2.3.
"Company" -- as defined in the Recitals of this Agreement.
"Competition Act" -- the Competition Act (Canada), R.S.C. 1985, c.34,
as amended.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by the Seller to Buyer;
(b) the execution, delivery, and performance of the Noncompetition
Agreement, and the Seller's Release;
(c) the acquisition by Expansion of the Intellectual Property Assets;
(d) the performance by Buyer and Seller of their respective covenants
and obligations under this Agreement; and
(e) Buyer's acquisition of ownership of the Shares and the ability to
exercise control over the Company.
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"Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Damages" -- as defined in Section 10.2.
"Disclosure Letter" -- the disclosure letter delivered by Seller to
Buyer concurrently with the execution and delivery of this Agreement as
supplemented pursuant to this Agreement.
"Encumbrance" -- any mortgage, charge, claim, lien (statutory or
otherwise), hypothec, adverse claim, option, pledge, security interest, right of
first refusal, or restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"Employee Plans" -- as defined in Section 3.12.
"Environment" -- soil, land surface or subsurface strata, surface
waters (including, if applicable, navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air, plant and animal life.
"Environmental Liabilities" -- any cost, damages, expense, liability,
obligation, or other responsibility arising from or under any Environmental Law
consisting of or relating to:
(a) any environmental contamination existing as of the Closing Date;
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, or remedial, or inspection costs and expenses arising under
Environmental Law; or
(c) financial responsibility under Environmental Law for cleanup costs
or corrective action, including any investigation, cleanup, removal,
containment, or other remediation or response actions ("Cleanup"); or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law.
"Environmental Law" -- any formerly or currently applicable Legal
Requirement that requires :
(a) advising appropriate authorities, and the public of intended or
actual Releases of Hazardous Materials, violations of discharge limits, or other
prohibitions that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the Release of
Hazardous Materials into the Environment;
(c) reducing the quantities, preventing the Release, or minimizing the
hazardous characteristics of wastes that are generated;
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(d) protecting resources, species, or ecological amenities;
(e) reducing to acceptable levels the risks inherent in the
transportation of Hazardous Materials;
(f) cleaning up Hazardous Materials that have been Released, preventing
the threat of Release, or paying the costs of such clean up or prevention; or
(g) making responsible parties pay private parties, or groups of them,
for damages done to the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
"Environmental Permit" -- any Governmental Authorization issued,
granted, given or otherwise made available pursuant to any Environmental Law.
"Facilities" -- any real property, leaseholds, or other interests in
real property currently or formerly owned or operated by the Company and any
buildings, plants or structures currently or formerly owned or operated by the
Company.
"GAAP" -- generally accepted Canadian accounting principles, including
those set out in the Handbook of the Canadian Institute of Accountants, applied
on a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body.
"Governmental Body" -- any:
(a) nation, state, province, territory, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, provincial, territorial, local, municipal, foreign,
or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Hazardous Activity" -- the distribution, generation, application,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use
(including any withdrawal or other use of groundwater
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[***] - CONFIDENTIAL TREATMENT REQUESTED
containing Hazardous Materials in excess of Legal Requirements) of Hazardous
Materials in, on, under, about, or from the Facilities or any part thereof into
the Environment; provided, however, that the term "Hazardous Activity" shall not
include the use and application of pesticides and other Hazardous Materials in
connection with the lawful conduct of the business of the Company.
"Hazardous Materials" -- any waste or other substance listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Income Tax Act"-- the Income Tax Act (Canada) R.S.C. 1985 c.1 (5th
Supp) as amended.
"Independent Accounting Firm" -- as defined in Section 2.6(d).
"Intellectual Property Assets" -- as defined in Section 3.21.
"Interim Balance Sheet" -- as defined in Section 3.4.
"Investment Canada Act" -- the Investment Canada Act, R.S.C. 1985, c.28
as amended.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) in the case of the Seller, if a prudent individual could be
expected to discover or otherwise become aware of such fact or other matter in
the course of conducting the business of the Company in the Ordinary Course of
Business.
As used herein, "Knowledge" (including the phrase "to Seller's
Knowledge", "to Buyer's Knowledge" or similar phrases) shall mean, (1) with
respect to Seller, the Knowledge of [***], and (only with respect to the
representations in Section 3.17) [***]and (2) with respect to Buyer, the
Knowledge of [***], and [***].
"Legal Requirement" -- any federal, provincial, territorial, state,
local, municipal, foreign, or other administrative order, constitution, law,
ordinance, regulation, statute, or treaty formerly or currently in effect.
"Material Adverse Effect" or "Material Adverse Change" -- an occurrence
or event shall be deemed to have a Material Adverse Effect or to have caused a
Material Adverse Change
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if such effect or change materially adversely affects the business or financial
condition of the Company taken as a whole.
"Noncompetition Agreement" -- as defined in Section 2.4(a)(iv).
"Objections" -- as defined in Section 2.6(b).
"Occupational Safety and Health Law" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any mandatory program of a Governmental Body
designed to provide safe and healthful working conditions.
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); or
(c) such action is similar to actions customarily taken, without any
authorization by the board of directors (or by any Person or group of Persons
exercising similar authority), in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business as such
Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Purchase Price" -- as defined in Section 2.2.
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"Purchase Price Adjustment Calculation" --as defined in Section 2.6(b).
"Related Person" -- with respect to a specified person other than an
individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 50% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 50% of the
outstanding equity securities or equity interests in a Person.
"Release" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional other than usage or application in the Ordinary
Course of Business.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Seller" -- as defined in the first paragraph of this Agreement.
"Seller's Release" -- as defined in Section 2.4.
"Shares" -- as defined in the Recitals of this Agreement, together with
any shares issued as a result of the Amalgamation.
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body are held by the
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Owner or one or more of its Subsidiaries; when used without reference to a
particular Person, "Subsidiary" means a Subsidiary of the Company.
"Tax" -- any and all federal, provincial, state, local, municipal,
foreign or other taxes, charges, fees, imposts, duties or other assessments of
whatever nature, including any obligation to collect and pay over taxes imposed
on another Person, together with interest, penalties and additional amounts,
imposed by any taxing authority.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (either in writing, or to the Knowledge of the pertinent party, orally) or
any notice has been given (either in writing, or to the Knowledge of the
pertinent party, orally) that would lead a prudent Person to conclude that such
a claim, Proceeding, dispute, action, or other matter is reasonably likely to be
asserted, commenced, taken, or otherwise pursued in the future.
"Year 2000 Compliant" -- as defined in Section 3.26.
2. SALE AND TRANSFER; CLOSING
2.1 SHARES AND INTELLECTUAL PROPERTY ASSETS
Subject to the terms and conditions of this Agreement, at the Closing,
Seller will sell and transfer the Shares and the Intellectual Property Assets to
Buyer or Expansion, as the case may be, and Buyer or Expansion, as the case may
be, will purchase the Shares and the Intellectual Property Assets from Seller.
2.2 PURCHASE PRICE
The purchase price for the Shares, the Intellectual Property Assets,
and the Noncompetition Agreement will be Twenty Five Million United States
Dollars (US $25,000,000) plus or minus, as the case may be, (a) the Adjustment
Amount; (b) any adjustment made pursuant to Section 2.8(b); and (c) any payment
made pursuant to Article 10 of this Agreement (collectively, the "Purchase
Price").
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2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement
will take place at the offices of Arnall Golden & Gregory, LLP in Atlanta,
Georgia, at 10:00 a.m. (local time) on October 29, 1999, to be effective as of
12:01 a.m., local time, on October 31, 1999, or at such other time and place as
the parties may agree. The effective date of the Closing shall be the "Closing
Date". Subject to the provisions of Section 9, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.3 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Seller will deliver:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed irrevocable stock powers) for
transfer to Buyer;
(ii) a release executed by Seller in form and substance
reasonably satisfactory to the Buyer ("Seller's Release");
(iii)an assignment or assignments, in form and content
acceptable to the Canadian Intellectual Property Office
("CIPO") and/or the United States Patent and Trademark
Office, as appropriate, evidencing the assignment and
transfer to Expansion of the
Intellectual Property Assets;
(iv) a noncompetition agreement in the form of Exhibit
2.4(a)(iv), executed by Seller (the "Noncompetition
Agreement"); and
(v) a certificate executed by Seller representing and
warranting to Buyer that each of Seller's representations
and warranties in this Agreement was accurate in all
material respects as of the date of this Agreement and is
accurate in all material respects as of the Closing Date as
if made on the Closing Date (giving full effect to any
supplements to the Disclosure Letter that were delivered by
Seller to Buyer prior to the Closing Date in accordance with
Section 5.5);
(vi) a duly executed resignation of each director and
officer (who is not an employee of the Company) of the
Company as Buyer may specify in writing, together with a
release from each such director and officer;
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[***] - CONFIDENTIAL TREATMENT REQUESTED
(vii)a duly executed resignation of the auditors of the
Company effective as at the Closing (if applicable);
(viii)an opinion of counsel of Seller, in form and
substance reasonably satisfactory to the Buyer; and
(ix) such other documents as are reasonably required to
consummate the Contemplated Transactions.
(b) Buyer or Expansion, as the case may be, will deliver:
(i)subject to Section 2.7, the Closing Cash Payment, by wire
transfer to an escrow account specified by Buyer, which
shall provide that the interest earned thereon (if any)
shall be retained by Seller, and that the Closing Cash
Payment shall be delivered to an account specified by Seller
on November 1, 1999;
(ii) a certificate executed by Buyer representing and
warranting to Seller that each of Buyer's representations
and warranties in this Agreement was accurate in all
material respects as of the date of this Agreement and is
accurate in all material respects as of the Closing Date as
if made on the Closing Date;
(iii)a letter of no action and/or an advance ruling
certificate under the Competition Act in respect of the
Buyer's pre-notification filing under the Competition Act;
(iv) an opinion of counsel to Buyer, in form and
substance reasonably satisfactory to the Seller; and
(v) such other documents as are reasonably required to
consummate the Contemplated Transactions.
2.5 ADJUSTMENT AMOUNT
The "Adjustment Amount" (which may be a positive or negative number)
will be equal to the amount determined by subtracting the Adjusted Net Worth of
the Company as of the date of the Balance Sheet, determined in accordance with
GAAP (adjusted, as applicable, in the manner set forth in Part 3.4 of the
Disclosure Letter), from the Adjusted Net Worth of the Company as of the Closing
Date. The "Adjusted Net Worth" of the Company shall be equal to the book value
of the assets of the Company, less the book value of the liabilities of the
Company; provided, however, that (a) the Adjusted Net Worth of the Company as of
the date of the Balance Sheet shall be further adjusted by subtracting from the
book value of the assets of the Company [***] of the cash included on
the Balance Sheet and (b) the Adjusted Net
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[***] - CONFIDENTIAL TREATMENT REQUESTED
Worth of the Company as of the Closing Date shall be adjusted by adding the
amount of any [***] for [***] contained on the Balance Sheet.
2.6 ADJUSTMENT PROCEDURE
(a) On or before two (2) business days prior to the Closing
Date, the Seller shall make a good faith estimate of the
Adjustment Amount (using the conversion rate between United
States and Canadian dollars in effect on such date), and shall
notify Buyer in writing of such estimate. Such estimate shall be
added to US $25,000,000, and the resulting number shall be the
"Closing Cash Payment".
(b) In order to finally determine the amount of the Purchase
Price, after the Closing, Seller shall perform an initial
calculation of the Adjustment Amount (the "Purchase Price
Adjustments Calculation") which shall be delivered to Buyer
within 30 days following the Closing Date (using the conversion
rate between United States and Canadian dollars in effect on the
Closing Date). All expenses incurred in connection therewith
shall be borne by Seller; provided, that Buyer shall cooperate
with and provide information and access to information to
Seller, at no cost, during such period. Buyer shall have a
period of 30 days after receipt of the Purchase Price
Adjustments Calculation to present to Seller in writing any
objections and the amounts related thereto (the "Objections")
which Buyer may have with respect to the Purchase Price
Adjustments Calculation, which Objections shall be presented in
reasonable detail. At its own expense, Buyer (including its
internal auditors) and its certified public
accountants/chartered accountants shall have the opportunity
during and following the preparation of the Purchase Price
Adjustments Calculation to consult with Arthur Andersen and the
chief financial officer, controller, or any other officer of
Seller engaged in the calculation, to observe, review, and
examine the work papers, schedules, and other documents prepared
or used in connection with the Purchase Price Adjustments
Calculation, and to review the books and records of Seller
related to such calculation. If no Objections are raised by
Buyer within such 30-day period, the Purchase Price Adjustments
Calculation shall be deemed accepted and approved by Buyer and
the Purchase Price shall be adjusted using the Adjustment Amount
as determined in the Purchase Price Adjustments Calculation.
(c) If, within such 30-day period, Buyer raises Objections,
Buyer and Seller shall attempt in good faith to resolve the
matter or matters in dispute and, if resolved, such resolution
shall be final, conclusive and binding upon the parties hereto
and the Purchase Price shall be finally determined using the
Adjustment Amount as so determined.
(d) If the dispute referred to in Section 2.6(c)is not resolved
by Buyer and Seller within 10 days after delivery of the
Objections, then the specific matters in dispute shall be
submitted to Ernst & Young or such other
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nationally recognized accounting firm as Buyer and Seller may
mutually agree upon (the "Independent Accounting Firm"), which
firm shall be requested to make a determination as to such
matter or matters as are in dispute within 30 days after such
submission of the dispute to the Independent Accounting Firm,
which determination shall be final, conclusive and binding upon
the parties hereto and the Purchase Price shall be finally
determined using the Adjustment Amount as so determined. The
Independent Accounting Firm shall act as experts and not as
arbitrators and shall decide only those matters in dispute. The
Independent Accounting Firm shall simultaneously deliver its
written determination to Buyer and Seller. Seller and Buyer
shall share the fees and expenses of the Independent Accounting
Firm equally. Seller and Buyer agree to cooperate in good faith
with each other, with each other's authorized representatives
and with the Independent Accounting Firm, if any, in order that
any and all matters in dispute may be resolved as soon as
practicable.
(e) If the final Purchase Price Adjustments Calculation results
in a Purchase Price that is greater than the Closing Cash
Payment, then Buyer shall pay the difference between the final
Purchase Price and the Closing Cash Payment to Seller. If the
final Purchase Price Adjustments Calculation results in a
Purchase Price that is less than the Closing Cash Payment, then
Seller shall pay the difference between the final Purchase Price
and the Closing Cash Payment to Buyer. No interest shall be due
or payable respecting any payments to be made pursuant to this
Section 2.6(e). Any and all payments required to be made by
Buyer or Seller as a result of adjustments made pursuant to this
Section 2.6(e) shall be made by wire transfer of immediately
available funds within five business days after the final
determination of the amount of the Purchase Price. The
determination and adjustment of the Purchase Price in accordance
with the provisions of this Section 2.6 shall not limit or
affect any other rights or causes of actions either Buyer or
Seller may have with respect to the representations, warranties,
covenants and indemnities in its favor contained in this
Agreement.
2.7 WITHHOLDING
(a) If a certificate acceptable to the Buyer, acting reasonably,
pursuant to Section 116(2) of the Income Tax Act with respect to
the Shares is not delivered to the Buyer at or before the
Closing, the Buyer shall be entitled to withhold from the
Purchase Price payable at the Closing the amount required to be
remitted to the Receiver General pursuant to Section 116 of the
Income Tax Act (the "Withheld Amount").
(b) If the Seller delivers to the Buyer prior to the 25th day
after the end of the month in which the Closing Date occurs a
certificate acceptable to the Buyer, acting reasonably, issued
by the Minister of National Revenue under Section 116(4) of the
Income Tax Act, the Buyer shall promptly pay to the Seller the
Withheld Amount.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
(c) If the Seller does not deliver to the Buyer within the
specified time the certificate described in Section 2.7(a) or
(b) above and the Buyer has withheld the Withheld Amount, the
Buyer shall (i) remit to the Receiver General the amount
required to be remitted pursuant to Section 116 of the Income
Tax Act (Canada) and the amount so remitted shall be credited to
the Buyer as a payment to the Seller on account of the Purchase
Price, and (ii) pay the remaining portion of the Withheld
Amount, if any, to the Seller.
2.8 RE-PURCHASE OF ACCOUNTS RECEIVABLE
(a) Within thirty (30) days after the Closing, Seller shall
cause the Company to deliver to Buyer a detailed listing of open
accounts receivable of the Company as of the day immediately
preceding the Closing (the "Accounts Receivable") together with
an aging schedule therefor.
(b) Within thirty (30)days after the [***] and [***] day
following the Closing Date, Buyer shall present Seller with a
detailed listing of the accounts and invoices which were listed
on the Accounts Receivable list delivered at Closing and which
remain outstanding on such date (the "Uncollected AR
Calculation"). Seller shall have a period of 30 days after
receipt of the Uncollected AR Calculation to present to Buyer in
writing any objections and the amounts related thereto (the "AR
Objections")which Seller may have with respect to the
Uncollected AR Calculation, which AR Objections shall be
presented in reasonable detail. At its own expense, Seller
(including its internal auditors) and its certified public
accountants/chartered accountants shall have the opportunity
during and following the preparation of the Uncollected AR
Calculation to consult with Arthur Andersen and the chief
financial officer, controller, or any other employee of Buyer or
the Company engaged in the calculation of the Uncollected AR
Calculation, to observe, review, and examine the work papers,
schedules, and other documents prepared or used in connection
with the Uncollected AR Calculation, and to review the books and
records of Buyer related to such calculation. If Seller raises
no AR Objections within such 30-day period, the Uncollected AR
Calculation shall be deemed accepted and approved by Seller. If,
within such 30-day period, Seller raises AR Objections, Buyer
and Seller shall attempt in good faith to resolve the matter or
matters in dispute and, if resolved, such resolution shall be
final, conclusive and binding upon the parties hereto. If the
parties fail to reach such resolution within ten (10) days after
delivery of the AR Objections, the dispute mechanism set forth
in Section 2.6(d) of this Agreement shall apply. Once the
Uncollected AR Calculation is finally determined and any
payments with respect to such invoices during the determination
period, together with any [***] on [***] or [***] which cannot
be [***] to [***] have been [***] thereto, then the reserve
against accounts receivable reflected in the final Purchase
Price Adjustments Calculation shall be subtracted therefrom.
If the result is a positive number, it is the "A/R Overpayment";
if negative, it is the "A/R Underpayment." If there is an A/R
Overpayment, then the Buyer shall be entitled to (A) cause the
13
[***] - CONFIDENTIAL TREATMENT REQUESTED
Seller to re-purchase all uncollected Accounts Receivable from
the Company for an amount equal to the A/R Overpayment or (B)
retain one or more Accounts Receivable included on the Accounts
Receivable list (the "Retained A/R"), and cause the Seller to
pay to Buyer the A/R Overpayment, [***] of the book amount of
the Retained A/R. If there is an A/R Underpayment, then
Purchaser shall pay Seller such amount (even though expressed as
a negative number). The Purchase Price shall be adjusted by the
A/R Overpayment or A/R Underpayment, as the case may be.
(c) Between the Closing Date and the date of its presentation of
the Uncollected AR Calculation, Buyer shall, and shall cause the
Company to, (i) undertake to collect the Accounts Receivable in
a manner consistent with the Company's past practices in the
Ordinary Course of Business, and (ii) apply any payments
received from any customer listed on the Accounts Receivable
list in the manner directed by such Customer, and, if the
customer fails to designate an invoice for payment, then the
payment shall be applied against the Accounts Receivable balance
of such customer as in existence immediately preceding the
Closing Date.
2.9 PURCHASE PRICE ALLOCATION
The parties agree to allocate, for all purposes including United
States and Canadian Tax purposes, the Purchase Price among the Shares, the
Intellectual Property Assets, and the Noncompetition Agreement as mutually
agreed by the parties on or before the Closing. Furthermore, the parties
acknowledge that, for United States Tax purposes, the Contemplated Transactions
will be treated as a sale of assets. Accordingly, the parties agree to further
allocate the Purchase Price attributable to the Shares among each class of
assets owned by the Company as mutually agreed by the parties on or before the
Closing. The Parties shall negotiate in good faith to reach an agreement
respecting such allocations prior to the Closing, including an allocation of
[***] to the [***] and at least [***] to the [***].
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that, except as set
forth in the Disclosure Letter:
3.1 ORGANIZATION AND EXISTENCE
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list for the Company of its jurisdiction of
incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of
each shareholder and the number of shares held by each). The
Company is a corporation duly incorporated, organized and
validly existing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use
the properties and assets
14
that it purports to own or use, and to perform all its
obligations under Applicable Contracts. The Company is duly
qualified to do business as a foreign corporation under the laws
of each jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
(b) Seller has delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect, and will
deliver copies of the Organizational Documents of the NSULC as
soon as practicable after formation.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights
of creditors generally and principles governing the availability
of equitable remedies. Seller has the right, power, authority,
and capacity to execute and deliver this Agreement, the Seller's
Release, and the Noncompetition Agreement and to perform its
obligations hereunder and thereunder .
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the
Company, or (B) any resolution adopted by the board of
directors or the shareholders of the Company;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to
exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Company, or any of the
assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the
Company;
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to
declare a default or
15
exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any
Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by
the Company.
Except as set forth in Part 3.2 of the Disclosure Letter or as may be
required under the Competition Act or the Investment Canada Act, neither Seller
nor the Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 CAPITALIZATION
The authorized capital of PCO Services, Inc. consists of an unlimited
number of common shares, of which 250,600,001 shares are issued and outstanding.
Upon the consummation of the Amalgamation, the authorized capital of the Company
shall consist of an unlimited number of common shares, of which 250,600,001
shares will be issued and outstanding before the Closing, and will constitute
the Shares. Seller is currently the owner of all of the issued and outstanding
shares of PCO Services, Inc., and, before the Closing, will be the record and
beneficial owner and holder of the Shares, free and clear of all Encumbrances.
With the exception of the Shares (which are, or before the Closing will be,
owned by Seller), all of the outstanding equity securities and other securities
of the Company are owned of record and beneficially by the Company, free and
clear of all Encumbrances. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the Company have been or
(before the Closing) will be duly authorized, validly issued, fully paid and
nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company. None of
the equity securities or other securities of the Company was or (before the
Closing) will be issued in violation of any Legal Requirement. The Company does
not own, or have any Contract to acquire, any equity securities or other
securities of any Person (other than the Company) or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Seller has delivered to Buyer: (a) the unaudited balance sheet of the
Company as at June 30 in each of the years 1996 through 1998, and the related
statement of income, and cash flow for each of the fiscal years then ended, (b)
an unaudited balance sheet of the Company as at June 30, 1999 (including the
notes thereto, the "Balance Sheet"), and the related statement of income, and
cash flow for the fiscal year then ended, and (c) an unaudited balance sheet of
the Company as at August 31, 1999 (the "Interim Balance Sheet") and the related
unaudited statement of income, and cash flow for the two (2) months then ended,
including in each case the notes thereto. Such financial statements and notes
fairly present the financial condition and the results of operations, and cash
flow of the Company as at the respective dates of and for the periods referred
to in such financial statements, all in accordance with GAAP, subject, in the
case of interim financial statements, to normal recurring year-end
16
adjustments (the effect of which will not, individually or in the aggregate,
have a Material Adverse Effect) and the absence of notes (that, if presented,
would not differ materially from those included in the Balance Sheet), and
except as set forth in Part 3.4 of the Disclosure Letter; the financial
statements referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved, except as disclosed
in the notes to such financial statements. No financial statements of any Person
other than the Company are required by GAAP to be included in the financial
statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, registers, share books, and other
records of the Company, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with Legal
Requirements and sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the Boards of Directors, and committees of
the Boards of Directors of the Company, and no meeting of any such shareholders,
Board of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list of
all real property, leaseholds, or other interests in real property owned or held
by the Company. Seller has delivered or made available to Buyer copies of the
deeds and other instruments (as recorded) by which the Company acquired such
real property and interests, and copies of all title insurance policies,
opinions, abstracts, and surveys in the possession of Seller or the Company and
relating to such property or interests. The Company owns all the properties and
assets reflected in the Balance Sheet and the Interim Balance Sheet (except for
assets held under capitalized leases disclosed or not required to be disclosed
in Part 3.6 of the Disclosure Letter and personal property sold since the date
of the Balance Sheet and the Interim Balance Sheet, as the case may be, in the
Ordinary Course of Business). All material properties and assets reflected in
the Balance Sheet and the Interim Balance Sheet as being owned by the Company
are free and clear of all Encumbrances and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) mortgages, hypothecs, or security interests
shown on the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
mortgages, hypothecs, or security interests incurred in connection with the
purchase of property or assets after the date of the Interim Balance Sheet (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (c) liens, levies and
assessments for current taxes not yet due, and (d) with respect to real
property, (i) minor imperfections of title, if any, none of which individually
or in the aggregate is substantial in amount, or materially impairs the present
use of the property by the Company, (ii) zoning laws and other land use
restrictions that do not impair
17
the present use of the property subject thereto, or (iii) as set forth in
the applicable deed or lease or as excepted in the applicable title insurance
policy or letter of counsel to the extent currently in Seller's possession.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the Company, taken as a
whole, are in good operating condition and repair (ordinary wear and tear
excepted), and are adequate for the uses to which they are being put, and none
of such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for maintenance and repairs that are not material in nature or
cost. The Company owns or has the right to use buildings, plants, structures,
and equipment which are sufficient for the continued conduct of the Company'
businesses after the Closing in substantially the same manner as conducted prior
to the Closing, subject to the obtaining of the consents set forth in Schedule
3.2 to the Disclosure Letter.
3.8 INVENTORY
All inventory of the Company, whether or not reflected in the Balance Sheet
or the Interim Balance Sheet, consists of a quality and quantity usable and
salable in the Ordinary Course of Business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down in
accordance with GAAP in the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date, as the case may be.
The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Company.
3.9 ACCOUNTS RECEIVABLE; CUSTOMER PREPAYMENTS; NO UNDISCLOSED
LIABILITIES
All Accounts Receivable of the Company that are reflected on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the Company
as of the Closing Date represent or will represent valid obligations arising
from sales actually made or services actually performed in the Ordinary Course
of Business. All payments received by the Company from customers in advance of
services being performed are properly reflected as liabilities on the Balance
Sheet and Interim Balance Sheet in accordance with GAAP. Except as set forth in
Part 3.9 of the Disclosure Letter, the Company has no liabilities or obligations
which would be required to be reflected or reserved against in the Balance Sheet
or the Interim Balance Sheet, in each case in accordance with GAAP and are not
so reflected except for current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
3.10 TAXES
(a) The Company has filed or caused to be filed on a timely
basis, all Tax Returns that are or were required to be filed by
or with respect to the Company, either separately or as a
member of a group of corporations, pursuant to applicable Legal
Requirements. Seller has made available to Buyer copies of,
18
and Part 3.10 of the Disclosure Letter contains a complete and
accurate list of, all such Tax Returns relating to income or
capital taxes filed for tax periods ending on June 30, 1995 and
thereafter. The Company has paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant
to those Tax Returns or otherwise (including, without
limitation, any payroll, sales, or other trust fund taxes), or
pursuant to any assessment received by Seller (with respect to
the Company) or the Company, except such Taxes, if any, as are
listed in Part 3.10 of the Disclosure Letter and are being
contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the
Balance Sheet and the Interim Balance Sheet.
(b) The Tax Returns of the Company subject to such Taxes have
been audited by the relevant tax authorities or are closed by
the applicable statute of limitations for all taxable years
through June 30,1995. Part 3.10 of the Disclosure Letter
contains a complete and accurate list of all audits of all such
Tax Returns, including a description of the nature and outcome
of each audit. All deficiencies proposed as a result of such
audits have been paid, reserved against, settled, or, as
described in Part 3.10 of the Disclosure Letter, are being
contested in good faith by appropriate proceedings. Part 3.10
of the Disclosure Letter describes all adjustments to the
income Tax Returns filed by the Company or any group of
corporations including the Company for all taxable years since
June 30, 1993, and the resulting proposal or deficiencies.
Except as described in Part 3.10 of the Disclosure Letter,
neither Seller nor the Company has given or been requested to
give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute
of limitations relating to the payment of Taxes of the Company
or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate (determined
in accordance with GAAP) and are, to Seller's Knowledge at
least equal to the Company's liability for Taxes. There exists
no proposed tax assessment against the Company except as
disclosed in the Balance Sheet or in Part 3.10 of the
Disclosure Letter. All Taxes that the Company is or was
required by Legal Requirements to withhold or collect have been
duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated
basis) the Company are true, correct, and complete. There is no
tax sharing agreement that will require any payment by the
Company after the date of this Agreement.
(e) The corporate actions described in recital (D) of this
Agreement will not cause Buyer or the Company to become subject
to, or to become liable for the payment of, any Tax.
(f) Seller is not a registrant for the purpose of Part IX of
the Excise Tax Act (Canada).
19
3.11 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any Material
Adverse Change in the Company, and no event has occurred or circumstance exists
that is reasonably likely to result in such a Material Adverse Change.
3.12 EMPLOYEE BENEFITS
(a) As used in this Section 3.12, 3.15 and Section 3.19, the
following term has the meaning set forth below.
"Employee Plans" -- means all the employee benefit,
fringe benefit, supplemental unemployment benefit, bonus,
incentive, profit sharing, termination, severance, change of
control, pension, retirement, stock option, stock purchase,
stock appreciation, health, welfare, medical, dental,
disability, life insurance and similar plans, programs,
arrangements or practices relating to the current or former
employees, officers or directors of the Company maintained,
sponsored or funded by the Company, whether written or oral,
funded or unfunded, insured or self-insured, registered or
unregistered.
(b) Part 3.12(b) of the Disclosure Letter lists and describes
all Employee Plans. The Seller has furnished to the Buyer
true, correct and complete copies of all the Employee Plans as
amended as of the date hereof, together with all material
related documentation.
(c) All of the Employee Plans are and have been established,
registered, invested and administered in all substantial
respects in accordance with their terms and are in good
standing under all applicable Legal Requirements, including
Tax laws. None of the Employee Plans are defined benefit
plans.
(d) All Company contributions or premiums under the Employee
Plans have been made in accordance with the terms of the
Employee Plans.
(e) All employee data necessary to administer each Employee
Plan has been provided by the Seller to the Buyer to the
extent permitted by law and is true and correct as of the date
of this Agreement and the Seller will notify the Buyer of any
changes thereto occurring prior to the Closing Date.
(f) No Employee Plan is subject to any pending investigation,
examination or other proceeding, action or claim initiated by
any regulatory authority, or by any other party (other than
routine claims for benefits), and to Seller's Knowledge there
exists no state of facts which could reasonably be expected to
give rise to any such investigation, examination or other
proceeding, action or claim or to affect the registration of
any Employee Plan required to be registered.
20
(g) No insurance policy or any other agreement affecting any
Employee Plan requires or permits a retroactive increase in
contributions, premiums or other payments due thereunder.
(h) None of the Employee Plans (other than pension plans)
provide benefits to retired employees or to the beneficiaries
or dependents of retired employees.
3.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Part 3.13 of the Disclosure Letter contains a complete and
accurate list of each material Governmental Authorization that
is held by the Company or that is otherwise necessary for the
conduct of the business of, or to any of the assets owned or
used by, the Company (other than Licenses held directly by
employees of the Company as to which Seller has no Knowledge
of any breach, revocation, withdrawal, cancellation or
termination of any material number thereof). Except (i) as set
forth in Part 3.13 of the Disclosure Letter and (ii) with
respect to environmental matters which are addressed solely
and exclusively in Section 3.18 hereof:
(i) each Governmental Authorization is valid, subsisting
and in good standing and the Company is, and at all times
since January 1, 1998 has been, in substantial compliance
with each Legal Requirement or Governmental Authorization
that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any
of its assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may
constitute or result in a violation by the Company of, or
a failure on the part of the Company to comply with, any
Legal Requirement Known to Seller or Governmental
Authorization; (B) may give rise to any obligation on the
part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature;
or (C) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of,
or any modification to, of any Governmental Authorization;
(iii) the Company has not received, at any time since
January 1, 1998, any notice or other communication either
in writing, or to the Seller's Knowledge, orally) from any
Governmental Body regarding (A) any actual or alleged
violation of, or failure to comply with, any Legal
Requirement or Governmental Authorization, (B) any actual
or alleged obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of,
any remedial action of any nature; or (C) any actual
21
or alleged revocation, withdrawal, suspension,
cancellation, termination of, or modification to any
Governmental Authorization;
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed in Part
3.13 of the Disclosure Letter have been duly filed on a
timely basis with the appropriate Governmental Bodies, and
all other filings required to have been made with respect
to such Governmental Authorizations have been duly made on
a timely basis with the appropriate Governmental Bodies.
3.14 LEGAL PROCEEDINGS; ORDERS
(a) Except(i)as set forth in Part3.14 of the Disclosure Letter
and (ii) with respect to environmental matters which are
addressed solely and exclusively in Section 3.18 hereof, there
is no pending Proceeding that has been commenced by or against
the Seller or the Company:
(i) that relates to or may affect the business of, or any
of the assets owned or used by, the Company; or
(ii)that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
To the Knowledge of Seller no such Proceeding has
been Threatened, and no event has occurred or circumstance
exists that may give rise to or serve as a basis for the
commencement of any Proceeding of the kind set forth in
3.14(a)(ii) above. Seller has provided Buyer with access to
copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Part 3.14 of the
Disclosure Letter.
(b) Except(i) as set forth in Part 3.14 of the Disclosure
Letter and (ii) with respect to environmental matters which
are addressed solely and exclusively in Section 3.18 hereof:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii)Seller is not subject to any Order that relates to
the business of, or any of the assets owned or used
by the Company; and
(iii)to the Knowledge of Seller, no officer or employee of
the Company is specifically and directly subject to any
Order that prohibits such officer or employee from
engaging in or continuing any conduct, activity, or
practice relating to the business of the Company.
22
(c) Except as (i) set forth in Part 3.14 of the Disclosure
Letter and (ii) with respect to environmental matters which
are addressed solely and exclusively in Section 3.18 hereof:
(i) the Company is, and at all times since January 1, 1998
has been, in substantial compliance with the terms and
requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that
could reasonably be expected to constitute or result in
(with or without notice or lapse of time) a violation of
or failure to materially comply with the terms or
requirements of any Order to which the Company, or any of
the assets owned or used by the Company, is subject; and
(iii)the Company has not received, at any time since
January 1, 1998, any notice or other communication (either
in writing, or to the Seller's Knowledge, oral) from any
Governmental Body regarding any actual or alleged
violation of, or failure to comply with, any term or
requirement of any Order to which the Company, or any of
the assets owned or used by the Company, is or has been
subject.
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.15 of the Disclosure Letter, since the date
of the Balance Sheet, the Company has conducted its business only in the
Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital
(except in connection with the Amalgamation); grant of any
stock option or right to purchase shares in the capital of the
Company; issuance of any security convertible into such
capital; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by the Company of
any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in
respect of shares in the capital;
(b) amendment to the Organizational Documents of the Company
except in connection with the Amalgamation;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any shareholder, director,
officer(as such), or (except in the Ordinary Course of
Business) employee or entry into any employment, severance, or
similar Contract with any director, officer, or employee;
23
[***] - CONFIDENTIAL TREATMENT REQUESTED
(d) adoption of, or increase in the level of payments to or
level of benefits under, any Employee Plans for or with any
employees or former employees of the Company;
(e) damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, which had
a Material Adverse Effect;
(f) entry into, termination of (other than by expiration), or
receipt of notice of termination of (i) any license,
distributorship, dealer, sales representative, joint venture,
or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of
at least CDN [***];
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease (other than leases of vehicles in the
Ordinary Course of Business), or other disposition of any
asset or property of the Company (other than dispositions of
vehicles in the Ordinary Course of Business) or mortgage,
pledge, hypothec, or imposition of any lien or other
Encumbrance on any material asset or property of the Company,
including the sale, lease, or other disposition of any of the
Intellectual Property Assets except for the transfer of the
United States trademark registration of "PCO Services, Inc."
by the Company to Seller;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of CDN [***];
(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.16 CONTRACTS; NO DEFAULTS
(a) Part 3.16(a) of the Disclosure Letter contains a complete
and accurate list, and Seller has delivered to Buyer true and
complete copies (or, where applicable, forms), of:
(i) each Contract that involves performance of services or
delivery of goods or materials by the Company of an amount
or value in excess of CDN [***];
(ii)each Contract that involves performance of services or
delivery of goods or materials to the Company of an amount
or value in excess of CDN [***];
24
[***] - CONFIDENTIAL TREATMENT REQUESTED
(iii)each Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures
or receipts of the Company in excess of CDN [***];
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other
Contract affecting the ownership of, leasing of, title to,
use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and
installment and conditional sales agreements having a
value per item or aggregate payments of less than CDN
[***] and with terms of less than one year);
(v) each licensing agreement or other Contract with
respect to patents, trademarks, copyrights, and form
agreements generally used with employees, consultants and
contractors in respect thereof;
(vi)each collective bargaining agreement and other
Contract to or with any labor union or other employee
representative of a group of employees;
(vii)each joint venture, partnership, and other Contract
(however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person
other than payments to employees under an Employee Plan;
(viii)each Contract containing covenants that in any way
purport to restrict the business activity of the Company
or limit the freedom of the Company to engage in any line
of business or to compete with any Person;
(ix) each Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than
direct payments for goods or services performed except for
payments to employees pursuant to written policies);
(x) each power of attorney or procuration that is
currently effective and outstanding, except as executed in
the Ordinary Course of Business (with respect to customs);
(xi) each Contract obligating the Company for capital
expenditures in excess of CDN [***];
(xii)each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course
of Business; and
25
(xiii)each amendment, supplement, and modification
(whether oral or written) in respect of any of the
foregoing.
(b) Except as set forth in Part 3.16(b) of the Disclosure
Letter:
(i) Seller (and no Related Person of Seller) does not have
nor may Seller acquire any rights under, and Seller does
not have, nor may Seller become subject to any obligation
or liability under, any Contract that relates solely to
the business of, or any of the assets owned or used by,
the Company; and
(ii) there is no shareholder agreement that restricts, in
whole or in part, the ability of the directors to manage
the business and affairs of the Company.
(c) Except as set forth in Part 3.16(c) of the Disclosure
Letter,each Applicable Contract identified or required to be
identified in Part 3.16(a) of the Disclosure Letter is in full
force and effect and is valid and enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
rights of creditors generally and principles governing the
availability of equitable remedies.
(d) Except as set forth in Part 3.16(d) of the Disclosure
Letter:
(i) the Company is, and at all times since January 1,
1999, has been, in substantial compliance with the terms
and requirements of each Applicable Contract;
(ii) to the Knowledge of Seller, each other Person that
has or had any obligation or liability under each
Applicable Contract at all times since January 1, 1999 has
been, in substantial compliance with the terms and
requirements of such Contract;
(iii)no event has occurred or circumstance exists that
(with or without notice or lapse of time) is reasonably
likely to contravene, conflict with, or result in a
violation or breach of, or give the Company or other
Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) the Company has not given to or received from any
other Person, at any time since January 1, 1999, any
notice or other communication (either in writing, or to
the Seller's Knowledge, oral) regarding any actual or
alleged violation or breach of, or default under, any
Applicable Contract.
26
[***] - CONFIDENTIAL TREATMENT REQUESTED
(e) There are no renegotiations of or outstanding rights to
renegotiate any material amounts paid or payable to the
Company under current or completed Applicable Contracts with
any Person and, to the Knowledge of Seller, no such Person has
made written demand for such renegotiation.
(f) The Applicable Contracts relating to the sale, design,
manufacture, or provision of products or services by the
Company have been entered into in the Ordinary Course of
Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would
be in violation of any Legal Requirement.
3.17 INSURANCE
(a) Seller has delivered to Buyer:
(i) true and complete copies of all policies of insurance
to which the Company is a party or under which the
Company, or any director of the Company, is or has been
covered at any time within the three (3) years preceding
the date of this Agreement;
(ii) true and complete copies of all pending applications
for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Part 3.17(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established
thereunder; and
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the
Company.
(c) Part 3.17(c) of the Disclosure Letter sets forth, by year,
for the current policy year and each of the three preceding
policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of CDN [***], which sets
forth:
(A) the name of the claimant;
27
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(iii)a statement describing the loss experience for all
claims that were self-insured, including the number and
aggregate cost of such claims.
(d) Except as set forth on Part 3.17(d) of the Disclosure
Letter:
(i) To Seller's Knowledge, all policies to which the
Company is a party or that provide coverage to either
Seller, the Company, or any director or officer of the
Company:
(A) are valid, outstanding, and enforceable, subject
to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of
creditors generally and principles governing the
availability of equitable remedies;
(B) are issued by an insurer that is financially sound
and reputable;
(C) are sufficient for compliance with all Legal
Requirements and Applicable Contracts to which the
Company is a party; and
(D) will continue in full force and effect following
the consummation of the Contemplated Transactions to
the extent that they provide "occurrence based"
coverage.
(ii) The Company has not received (A) any refusal of
coverage or any notice that a defense will be
afforded with reservation of rights in response to a
currently open claim, or (B) any notice of
cancellation or any other indication that any
insurance policy is no longer in full force or effect
or that the issuer of any policy is not willing or
able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its obligations, under each
policy to which the Company is a party or that provides
coverage to the Company or any director thereof.
(iv) The Company has given notice to the insurer of all
current claims of which it has Knowledge that may be
insured thereby.
28
[***] - CONFIDENTIAL TREATMENT REQUESTED
3.18 ENVIRONMENTAL MATTERS
Except as set forth in part 3.18 of the Disclosure Letter:
(a) (i) no event has occurred during the last [***] years or
circumstance exists that (with or without notice or lapse of
time) (A) is likely to give rise to any obligation on the part
of the Company to undertake, or to bear all or any portion of
the cost of, any Environmental Liabilities; or (B) is likely
to result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or
requirement to obtain any material modification to, any
Environmental Permit;
(ii) the Company has not received any actual, or to the
Knowledge of Seller Threatened, Order, notice, or other
communication from (i) any Governmental Body or private
citizen acting in the public interest, or (ii) the current or
prior owner or operator of any Facilities, regarding (A) any
actual or alleged violation of, or failure by the Company to
comply with, any Environmental Law or Environmental Permit,
(B) any actual or to the Knowledge of Seller Threatened
obligation on the part of the Company to undertake, or to bear
all or any portion of the cost of, any Environmental
Liabilities; or (C) any actual or to the Knowledge of Seller
Threatened revocation, withdrawal, suspension, cancellation,
termination of, or material modification to any Environmental
Permit; and
(iii) each Environmental Permit is valid, subsisting and
in good standing and the Company is, and at all times during
the last [***] years has been, in material compliance with
each Environmental Law or Environmental Permit that is or was
applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets.
(b) There are no pending or, to the Knowledge of Seller,
Threatened claims against the Seller or the Company resulting
from any Environmental Liabilities or arising under or
pursuant to any Environmental Law, with respect to or
affecting any of the Facilities.
(c) There are no Hazardous Materials present, at, on, in or
under the Environment at any of the Facilities, other than (i)
as used in the lawful conduct of the business by the Company,
or (ii) which were present at the Facility in question at the
later of the time the Seller acquired the Company and the
Company entered into occupation of the Facility in question.
The Company has not, to the Knowledge of Seller, permitted or
conducted any Hazardous Activity at the Facilities except in
material compliance with all applicable Environmental Laws.
There are no pest control products stored at any of the
Facilities currently owned, leased or operated by the Company
which (a) were manufactured prior to October 30, 1996 or (b)
are listed in Part I of Schedule II to the Canadian
29
[***] - CONFIDENTIAL TREATMENT REQUESTED
Environmental Protection Act (as in force as of the date of
Closing), and which the cost to properly dispose of such
products would exceed [***].
Seller has delivered to Buyer true and complete
copies and results of any reports, and any material studies,
analyses, tests, or monitoring possessed by Seller or the
Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities or any other
properties and assets (whether real, personal, or mixed) in
which the Company has or had an interest, or concerning
compliance by the Company with Environmental Laws.
3.19 EMPLOYEES
(a) Part 3.19 of the Disclosure Letter contains, to the extent
permitted by law, complete and accurate list of the following
information for each employee of the Company, including each
employee on leave of absence or layoff status: employer; name;
age, job title; current compensation and any change in
compensation since June 30, 1999; vacation accrued; banked
sick days/personal choice days, if any; bonus days with pay,
if any; and recognized service date for purposes of vesting
and eligibility to participate in any Employee Plan or
vacation plan.
(b) The Company does not have any written employment
agreements (including any confidentiality, non-competition or
proprietary rights agreements hereinafter "Proprietary Rights
Agreements") with any Person except (i) form non-competition
agreements with all employees; or (ii) as are listed in Part
3.16(a) of the Disclosure Letter. Further, to Seller's
Knowledge no employee of the Company is a party to, or is
otherwise bound by, any agreement, including any
confidentiality, non competition, or proprietary rights
agreement, between such employee and any other Person
("Proprietary Rights Agreement") that adversely affects (i)
his ability to perform his duties as an employee of the
Company, or (ii) the ability of the Company to conduct its
business, including any Proprietary Rights Agreement with
Seller or the Company by any such employee. To Seller's
Knowledge (excluding the knowledge of the officer or key
employee in question), no officer or other key employee of the
Company intends to terminate his employment with the Company.
(c) No retired employee or director of the Company, or their
dependents are currently receiving benefits or scheduled to
receive benefits from the Company in the future; other than
pursuant to the terms of an Employee Plan or pursuant to a
Legal Requirement.
(d) The Company is in substantial compliance with Legal
Requirements respecting employment and employment practices,
terms and conditions of employment, pay equity, wages and
hours of work, immigration, human rights, health and safety.
The Company is not liable for the payment of any compensation,
damages, taxes, fine, penalties or other amounts, however
30
designated, for the failure to comply with any of the
foregoing Legal Requirements.
(e) All amounts due or accruals due for all salary, wages,
bonuses, commissions, vacations with pay, banked sick days,
personal choice days, bonus days, pension benefits or other
employee benefits are reflected in the Balance Sheet if and to
the extent required by GAAP to be so reflected.
(f) Except as set forth in Part 3.19 of the Disclosure Letter,
no individual employee, officer, director, agent, consultant
or advisor has any agreement as to length of employment or
retainer, length of notice or severance or termination payment
required to terminate his or her employment or retainer or any
combination thereof or any entitlement upon change of control
of the Company or the contemplated transactions, other than
such as results from Legal Requirements or a written policy of
the Company applicable to any particular class or classes of
employees, which policy is set forth in the Company's Policy
Manual or in Schedule 3.12 to the Disclosure Letter.
3.20 LABOR RELATIONS; COMPLIANCE
Except as set forth in Part 3.20 of the Disclosure Letter, since January 1,
1999 the Company has not been and is not a party to any collective bargaining or
other labor Contract with any trade union or employee association nor is any
collective agreement being negotiated except that a collective bargaining
agreement is currently being negotiated with respect to certain employees of the
Company located in the province of Quebec. Except as set forth in Part 3.20 of
the Disclosure Letter, since January 1, 1999, there has not been, there is not
presently pending or existing, and to Seller's Knowledge there is not
Threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any Proceeding against the Company relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with any applicable labor relations board or any comparable government
body or under any applicable human rights, employment standards, workers
compensation or occupational health and safety legislation, or (c) any
application for certification of a collective bargaining agent received by or
advised to the Company. To Seller's Knowledge no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by the Company, and the
Company contemplates no such action. No trade union or employee association has
applied to have the Company declared a related or successor employer pursuant to
any applicable labor relations or employment Legal Requirement.
3.21 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets -- The term "Intellectual
Property Assets" means:
31
[***] - CONFIDENTIAL TREATMENT REQUESTED
(i) the name "PCO Services", all business names, trading
names, registered and unregistered trademarks, service
marks, and applications which are used in the conduct of
the business of the Company as currently conducted and are
described on Part 3.21(e) of the Disclosure Letter
(collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable which are used in the
conduct of the business of the Company as currently
conducted (collectively, "Patents");
(iii)all copyrights in both published works and
unpublished works which are used in the conduct of the
business of the Company as currently conducted
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, customer lists, software, technical
information, data, process technology, plans, drawings,
and blue prints; owned, used, or licensed by the Seller or
the Company as licensee or licensor with respect to the
business of the Company as currently conducted
(collectively, "Trade Secrets").
(b) Agreements -- Part 3.21(b) of the Disclosure Letter
contains a complete and accurate list of all Applicable
Contracts relating to Intellectual Property Assets to which
the Company is a party or by which the Company is bound,
except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software
programs with a value of less than CDN [***] under which the
Company is the licensee. There are no outstanding and, to
Seller's Knowledge, no Threatened disputes or disagreements
with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those
necessary for the operation of the Company's business as
it is currently conducted.
(d) Patents - Neither Seller nor the Company holds any Patents
applicable to the business of the Company.
(e) (i) Part 3.21(e) of the Disclosure Letter contains a
complete and accurate list and summary description of all
Marks. One or more of the Seller or the Company is the owner
of all right, title, and interest in and to each of the Marks,
free and clear of all liens, security interests, charges,
Encumbrances, equities, and other adverse claims.
(ii) All Marks that have been registered with the US
Patent and Trademark Office or the CIPO are currently in
substantial compliance with all formal legal requirements
(including the timely post-registration
32
filing of affidavits of use and payment of renewal fees),
and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the Closing
Date.
(iii) No Mark has been or is now involved in any
opposition or cancellation proceeding and, to Seller's
Knowledge, no such action is Threatened with the respect
to any of the Marks.
(iv) To Seller's Knowledge, there is no potentially
interfering trademark or trademark application of any
third party.
(v) To Seller's Knowledge, no Mark is infringed or has
been challenged or threatened in any way and none of the
Marks used by the Company infringes or is alleged to
infringe any trade name, trademark, or service mark of any
third party.
(f) Copyrights - Neither Seller nor the Company has any
registered copyrights applicable to the business of the
Company.
(g) Trade Secrets
(i) Seller and the Company have taken all reasonable
precautions to protect the secrecy, confidentiality, and
value of their Trade Secrets.
(ii)Either the Seller or the Company has the right (but
not necessarily exclusive) to use the Trade Secrets.
To Seller's Knowledge, no Trade Secret has been Threatened
in any way.
3.22 CERTAIN PAYMENTS
Since January 1, 1989, neither the Company nor any director, officer,
agent, or employee of the Company, or to Seller's Knowledge any other Person
associated with or acting for or on behalf of the Company, while acting on
behalf of the Company has (a) directly or indirectly made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in money, property,
or services (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any Affiliate of the Company, or (iv) in violation of any Legal
Requirement, or (b) intentionally established or maintained any fund or asset
that has not been recorded in the books and records of the Company.
3.23 DISCLOSURE
(a) No representation or warranty of Seller in this Agreement
and no statement in the Disclosure Letter omits to state a
material fact necessary to make
33
the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of
the circumstances in which they were made, not misleading.
3.24 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.24 of the Disclosure Letter, neither Seller
nor any Related Person of Seller or of the Company has any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in or pertaining to the Company' businesses. Except as set forth in Part
3.24 of the Disclosure Letter, neither Seller nor any Related Person of Seller
or of the Company has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with the
Company other than business dealings or transactions conducted in the Ordinary
Course of Business with the Company at substantially prevailing market prices
and on substantially prevailing market terms, or (ii) engaged in competition
with the Company with respect to any line of the products or services of the
Company (a "Competing Business") in any market presently served by the Company.
Except as set forth in Part 3.24 of the Disclosure Letter, neither Seller nor
any Related Person of Seller or of the Company is a party to any Contract with,
or has any claim or right against, the Company.
3.25 BROKERS OR FINDERS
Seller and its agents have incurred no obligation or liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3.26 YEAR 2000 COMPLIANCE
Seller and the Company have (i) undertaken a detailed inventory, review,
and assessment of all areas within and affecting the Company' business and
operations that could be adversely affected by the failure of the Company to be
"Year 2000 Compliant" (as hereinafter defined), (ii) developed a plan and time
line for the Company becoming Year 2000 Compliant, (iii) implemented that plan
in accordance with the specified timetable, and (iv) as a result thereof, the
operations and business of the Company is currently, or will be Year 2000
Compliant on or before the Closing Date. As used herein, "Year 2000 Compliant"
shall mean that all software, embedded microchips and other processing
capabilities utilized by the Company on existing computer hardware resources
which are critical to the functioning of the business of the Company will
correctly process, sequence, and calculate, without interruption, all date and
date related data for all dates to, through and for 20 years after January 1,
2000, including leap year calculations.
34
3.27 INVESTMENT CANADA ACT
The book value of the assets of the Company as shown on the most recent year-end
balance sheet of the Company prepared in accordance with GAAP was less than CDN.
$184 million. The Company is not engaged in any of the following businesses:
(i) production of uranium or ownership of an interest in a
producing uranium property in Canada;
(ii) any service of a financial nature offered by a financial
institution excluding the underwriting and selling of
insurance policies;
(iii) carriage of passengers or goods from one place to
another by any means, including carriage by air, by rail, by
water, by land and by pipeline (except for its own internal
distribution);
(iv) the publication, distribution or sale of books,
magazines, periodicals or newspapers in print or machine
readable form, other than the sole activity of printing or
typesetting of books, magazines, periodicals or newspapers
(except for (x) advertising materials or (y) training
materials used by the Company's employees);
(v) the production, distribution, sale or exhibition of film
or video recordings (except for (x) advertising materials or
(y) training materials used by the Company's employees);
(vi) the production, distribution, sale or exhibition of audio
or video music recordings;
(vii) the publication, distribution or sale of music in print
or machine readable form; or
(viii) radio communication in which the transmissions are
intended for direct reception by the general public, any radio
or television broadcasting undertakings and any satellite
programming and broadcast network services.
3.28 LIMITATION ON WARRANTIES
Except as expressly set forth in this Article 3, Seller makes no express or
implied warranty of any kind whatsoever including, without limitation, any
representation as to the value of any of the assets of the Company or the future
profitability or future earnings of the Company. ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
35
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly incorporated, organized, validly
existing, and in good standing under the laws of the province
of New Brunswick.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance
with its terms. Buyer has the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement and
to perform its obligations under this Agreement.
(b) Except as set forth in Schedule 4.2, neither the execution
and delivery of this Agreement by Buyer nor the consummation
or performance of any of the Contemplated Transactions by
Buyer will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii)any resolution adopted by the board of directors or
the shareholders of Buyer;
(iii)any Legal Requirement or Order to which Buyer may be
subject; or
(iv)any Contract to which Buyer is a party or by which
Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required
to give any notice to or obtain any Consent from any Person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions.
4.3 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act of
1933, as amended.
36
4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, (i) no such Proceeding has been Threatened, and (ii) no event has
occurred or circumstance exists that may serve as a basis for commencement of
any such Proceeding.
4.5 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Seller will, and
will cause the Company and its Representatives to, (a) afford Buyer and its
Representatives and prospective lenders and their Representatives (collectively,
"Buyer's Advisors") reasonable access during normal business hours to the
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data (provided, however, to the extent
Buyer deems subsurface testing to be necessary, Buyer will coordinate with
Seller to ensure (i) minimum disruption of the business of the Company, (ii)
that such subsurface testing will be subject to such reasonable terms and
conditions as Seller may impose including indemnity of Seller and the Company
for all liabilities and expenses relating to or caused by such testing and (iii)
that a representative of Seller will be present at all times and shall be
entitled to obtain split samples), (b) furnish Buyer and Buyer's Advisors with
copies of all such contracts, books and records, and other existing documents
and data as Buyer may reasonably request, and (c) furnish Buyer and Buyer's
Advisors with such additional financial, operating, and other data and
information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY
Between the date of this Agreement and the Closing Date, unless Buyer
consents otherwise, Seller will, and will cause the Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business (except for the continuance of the Company
to Nova Scotia and the consummation of the Amalgamation);
(b) use its Best Efforts (consistent with its past practices)
to preserve intact the current business organization of the
Company, keep available the services of the current officers,
employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords,
37
creditors, employees, agents, and others having business
relationships with the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of the
Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date
of this Agreement and the Closing Date, Seller will not, and will cause the
Company not to, without the prior consent of Buyer, take any reasonable
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.15 is more likely than not to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Seller will,
and will cause the Company to, make all filings required by Legal Requirements
to be made by or reasonably deemed advisable by the Buyer to be made by them, in
order to consummate the Contemplated Transactions (including all filings under
the Competition Act and the Investment Canada Act, if applicable) to the extent
such filings have not been made prior to the date hereof. Between the date of
this Agreement and the Closing Date, Seller will, and will cause the Company to,
(a) cooperate with Buyer with respect to all filings that Buyer reasonably
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
consents identified in Schedule 7.3; provided that except as provided in Section
11.1, this Agreement will not require Seller to pay funds to third parties or
dispose of or make any change in any portion of its business or to incur any
other burden in order to cooperate or to obtain a Governmental Authorization.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, Seller will
promptly notify Buyer in writing if Seller or the Company becomes aware of any
fact or condition that causes or constitutes a Breach of any of Seller's
representations and warranties as of the date of this Agreement, or if Seller or
the Company becomes aware of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Disclosure Letter if the Disclosure Letter were dated the date
of the occurrence or discovery of any such fact or condition, Seller will
promptly deliver to Buyer a supplement to the Disclosure Letter specifying such
change. Any such supplements, shall have the effect of modifying the
representations and warranties of Seller from and after the Closing for purposes
of Article 10 hereof. During the
38
[***] - CONFIDENTIAL TREATMENT REQUESTED
same period, Seller will promptly notify Buyer of the occurrence of any Breach
of any covenant of Seller in this Section 5 or of the occurrence of any event
that will make the satisfaction of the conditions in Section 7 impossible or
likely not to occur.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Seller will cause all
indebtedness owed to [***] by either [***] or any [***] of either [***] to be
paid in full prior to Closing and will terminate all existing lines of credit
(other than as provided under the leases set forth in the Disclosure Letter)
available to the Company to the extent it has not done so prior to the date
hereof.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Seller will not, and will cause the Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer or as otherwise contemplated
hereby) relating to any transaction involving the sale of the business or assets
(other than in the Ordinary Course of Business) of the Company, or any of the
capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company.
5.8 BEST EFFORTS
Except as set forth in the proviso to Section 5.4, between the date of this
Agreement and the Closing Date, Seller will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to or deemed advisable by the Buyer to be
made by them, in order to consummate the Contemplated Transactions (including
all filings under the Competition Act and the Investment Canada Act, if
applicable). Between the date of this Agreement and the Closing Date, Buyer
will, and will cause each Related Person to, (i) cooperate with Seller with
respect to all filings that Seller is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with Seller in
obtaining all consents identified in Schedule 7.3 of the Disclosure Letter;
provided that this Agreement will not require Buyer to dispose of or make any
change in any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
39
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Buyer will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
6.3 KNOWLEDGE OF MISREPRESENTATIONS AND OMISSIONS
As of the date hereof, Buyer has no Knowledge of any material
misrepresentations or omissions in the representations and warranties of the
Seller in this Agreement and the Disclosure Letter, and prior to the Closing,
Buyer shall promptly notify Seller if Buyer obtains Knowledge that the
representations and warranties of Seller in this Agreement and the Disclosure
Letter are not true and correct in all material respects or if any of them
contain errors or omissions. Buyer shall cause Zia Siddiqui (who is a former
employee of Seller, and is a current employee of Buyer) to reasonably cooperate
with Seller in the preparation of the Disclosure Letter.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of Seller's representations and warranties in this
Agreement (considered collectively) must have been accurate in
all material respects as of the date of this Agreement and
must be accurate in all material respects as of the Closing
Date as if made on the Closing, without giving effect to any
supplement to the Disclosure Letter; and each of Seller's
representations and warranties (considered individually), if
not accurate in all material respects as of the date of this
Agreement or as of the Closing Date, must not have a Material
Adverse Effect.
(b) Each of Seller's representations and warranties in
Sections 3.3, 3.12 and 3.24 must have been accurate in all
respects as of the date of this Agreement, and must be
accurate in all respects as of the Closing Date as if made on
the Closing Date, without giving effect to any supplement to
the Disclosure Letter.
7.2 SELLER'S PERFORMANCE
(a) All of the covenants and obligations that Seller is
required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered
40
collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.4 must have been delivered, and each of the other covenants
and obligations in Section 5.4 must have been performed and
complied with in all respects.
7.3 CONSENTS
Each of the Consents identified Schedule 7.3 which the parties have agreed
are the material Consents out of those set forth in Part 3.2 of the Disclosure
Letter and Schedule 4.2, must have been obtained and must be in full force and
effect.
7.4 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.5 NO CLAIM REGARDING SHARES OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person (other than
Seller) any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
shares of, or any other voting, equity, or ownership interest in, the Company,
or (b) is entitled to all or any portion of the Purchase Price payable for the
Shares.
7.6 COMPETITION ACT
The Seller, the Company and the Buyer shall each have filed all notices and
information required under Part IX of the Competition Act or deemed advisable by
the Buyer, and shall have satisfied any request for additional information
thereunder and the applicable waiting periods and any extensions thereof shall
have expired without the threat of restraint or challenge, or the Buyer shall
have received an Advance Ruling Certificate ("ARC") pursuant to section 102 of
the Competition Act stating that the Commissioner of Competition appointed
thereunder is satisfied that he would not have sufficient grounds on which to
apply for an order in respect of the transaction contemplated by this Agreement.
7.7 BOARD APPROVAL
The Contemplated Transactions shall have been approved by the Board of
Directors of Orkin Exterminating Company, Inc. ("Orkin"), Buyer's parent
corporation.
41
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Shares and to take the other
actions required to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement (considered
collectively) must have been accurate in all material respects as of the date of
this Agreement and must be accurate in all material respects as of the Closing
Date as if made on the Closing.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively)
, and each of these covenants and obligations (considered
individually), must have been performed and complied with in
all material respects.
(b) Buyer must have delivered each of the documents required
to be delivered by Buyer pursuant to Section 2.4, must have
delivered the Closing Cash Payment in the manner contemplated
in Section 2.4, subject to any withholding under Section 2.7
and each of the covenants and obligations in Section 6.1 must
have been performed and complied with in all respects.
8.3 CONSENTS
Each of the Consents identified in Schedule 7.3 must have been obtained and
must be in full force and effect; provided, however, that Buyer may waive the
requirement to obtain a Consent, if such waiver will not have an economic
consequence to Seller, and if such requirement is waived, then the failure to
obtain the applicable Consent shall not be a condition precedent to Seller's
obligation to close.
8.4 AMALGAMATION
The Amalgamation shall have occurred and the Company shall be continuing as
a NSULC.
8.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Seller, or against any Person affiliated with Seller, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the
42
Contemplated Transactions or the Amalgamation, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions or the Amalgamation.
8.6 BOARD APPROVAL
The Contemplated Transactions shall have been approved by the Boards of
Directors of Seller and of S.C. Johnson & Son, Inc.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Seller if a material Breach of any
provision of this Agreement has been committed by the other
party and such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 have
not been satisfied as of the Closing Date or if satisfaction
of such a condition is or becomes impossible (other than
through the failure of Buyer to comply with its obligations
under this Agreement) and Buyer has not waived such condition
on or before the Closing Date; or (ii) by Seller, if any of
the conditions in Section 8 have not been satisfied of the
Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Seller
to comply with its obligations under this Agreement) and
Seller has not waived such condition on or before the Closing
Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not occurred
(other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations
under this Agreement) on or before November 5, 1999, or such
later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not
43
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificates delivered pursuant to Sections 2.4(a)(v) and 2.4(b)(ii), and any
other certificate or document delivered pursuant to this Agreement will survive
the Closing.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Seller will indemnify and hold harmless Buyer and the Company, and their
respective Representatives, shareholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Seller in this Agreement, the Disclosure Letter, the
supplements to the Disclosure Letter, or any other certificate
or document delivered by Seller pursuant to this Agreement;
(b) any Breach by Seller of any covenant or obligation of
Seller in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person
with Seller or the Company (or any Person acting on their
behalf) in connection with any of the Contemplated
Transactions;
(d) any loss, cost, or liability (including punitive damages,
legal fees and other expenses) not otherwise covered by
insurance that the Buyer or the Company may incur as a result
of, or relating to, those items set forth in Part 3.14 of the
Disclosure Schedule; or
(e) any fixed obligation for a specified sum of money which
arose or accrued before the Closing Date which should have
been (in accordance with GAAP) reflected on the Company's
balance sheet used in the determination of Adjusted Net Worth,
but which was not so reflected .
44
[***] - CONFIDENTIAL TREATMENT REQUESTED
10.3 EXCLUSIVE REMEDY
Buyer acknowledges and agrees that, from and after the Closing, its sole
and exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement and the Contemplated Transactions shall be pursuant to
the indemnification provisions set forth in this Article 10; provided, however,
that notwithstanding the foregoing, Buyer shall be entitled to seek equitable
remedies (including, without limitation, specific performance) with respect to
Breaches, or contemplated Breaches, of Sections 2.1, 2.5, 5.1, 5.4, 11.3, 11.6
and any breach of the Noncompetition Agreement. Except with respect to the
indemnification claims under this Article 10, equitable remedies as set forth in
the preceding sentence, remedies based on fraud, intentional breaches of this
Agreement, or intentional misrepresentations, Buyer hereby waives, from and
after the Closing, to the fullest extent permitted under applicable law, any and
all rights, claims and causes of action it may have against Seller, including
without limitation any such rights, claims or causes or action relating to
environmental matters, relating to the subject matter of this Agreement and the
Contemplated Transactions arising under or based upon any federal, provincial,
state, local or foreign statute, law, ordinance, rule or regulation or
otherwise. Buyer further acknowledges and agrees that (i) other than the
representations and warranties of Seller specifically contained in this
Agreement, there are no representations or warranties of Seller or its
Representatives or any other Person or entity either express or implied with
respect to the Company and (ii) except as expressly provided in this Article 10,
it shall have no claim or right to indemnification based on any information,
documents or materials furnished by Seller or its Representatives or any other
Person, including any information, documents or material made available to Buyer
in expectation of the Contemplated Transactions.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Seller and its Representatives,
shareholders, controlling persons and affiliates, and will pay to Seller or such
persons the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made by Buyer
in this Agreement or in any certificate or document delivered by Buyer pursuant
to this Agreement, (b) any Breach by Buyer of any covenant or obligation of
Buyer in this Agreement, (c) any liabilities of the Company which accrue on or
after the Closing Date, or which are not subject to indemnification by Seller
pursuant to Section 10.2(d) hereof; (d) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Buyer (or any Person
acting on its behalf) in connection with any of the Contemplated Transactions or
(e) any actual or alleged failure of Buyer to comply with the Investment Canada
Act in connection with the Contemplated Transactions.
10.5 TIME LIMITATIONS
If the Closing occurs, Seller will have no liability (for indemnification
or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Sections 3.3, 3.10, 3.12, and 3.18, unless on or before the
[***] of the Closing Date a claim has arisen, or Buyer has a reasonable good
faith basis for determining that a claim will be
45
[***] - CONFIDENTIAL TREATMENT REQUESTED
asserted, and Buyer notifies Seller of such claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Buyer; a claim
with respect to Section 3.3, 3.10, 3.12, or 3.18, or a claim for indemnification
or reimbursement not based upon any representation or warranty or any covenant
or obligation to be performed and complied with on or prior to the Closing Date,
may be made at any time during the applicable statute of limitations for such
underlying claim.
10.6 LIMITATIONS ON AMOUNT - SELLER
Seller will have no liability (for indemnification or otherwise) with
respect to the matters described in Section 10.2 until the total of all Damages
with respect to such matters exceeds US [***] (the "Basket") and then only
for the amount by which such Damages exceed the Basket. Seller shall also have
no liability for Damages in excess of [***] of the Purchase Price
(the "Cap"); provided that the Basket and the Cap shall be inapplicable to any
Damages attributable to intentional breaches of this Agreement, intentional
misrepresentation, or fraud. Furthermore, and notwithstanding the foregoing, (A)
neither the Basket nor the Cap shall be applicable to Damages attributable to
(i) the indemnification obligation contained in Sections 10.2(d) and 10.2(e)
hereof; (ii) a Breach of the representation and warranty with respect to
environmental matters set forth in Section 3.18; or (iii) a Breach of the
representation and warranty with respect to tax matters contained in Section
3.10; and (B) the Basket shall not be applicable to Damages attributable to a
Breach of the representation and warranty on Year 2000 compliance set forth in
Section 3.26 (notwithstanding any qualifiers to such representations and
warranties included in Part 3.26 of the Disclosure letter), provided that Seller
will have no liability (for indemnification or otherwise) with respect to such
Damages until the total of all Damages with respect to such Section 3.26 exceeds
US [***] and then only for the amount by which such Damages exceed US [***].
10.7 LIMITATIONS ON AMOUNT - BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in Section 10.4 until the total of all Damages
with respect to such matters exceeds the Basket and then only for the amount by
which such Damages exceed the Basket. Buyer shall also have no liability for
Damages in excess of the Cap; provided that the Basket and the Cap shall be
inapplicable to any Damages attributable to intentional breaches of this
Agreement, intentional misrepresentation, or fraud. Furthermore, and
notwithstanding the foregoing, neither the Basket nor the Cap shall be
applicable to Damages attributable to the indemnification obligation contained
in Sections 10.4(c) and 10.4(e) hereof.
10.8 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Section 10.2 or 10.4 of notice of the commencement of any
Proceeding against it (or, in the case of a claim for
indemnification by Buyer under Section 10.2(d) hereof, upon
receipt of a notice from an insurance carrier denying coverage
or rejecting a claim relating to the litigation referenced in
such Section), such indemnified party will, if a claim is to
be made against an indemnifying party under such Section, give
46
notice to the indemnifying party of the commencement of such
Proceeding, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that
it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of
such action is prejudiced by the indemnifying party's failure
to give such notice.
(b) If any Proceeding referred to in Section 10.8(a) is
brought against an indemnified party and it gives notice to
the indemnifying party of the commencement of such Proceeding,
the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to
the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with
counsel reasonably satisfactory to the indemnified party and,
after notice from the indemnifying party to the indemnified
party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified
party under this Section 10 for any fees of other counsel or
any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such
Proceeding. If the indemnifying party assumes the defense of a
Proceeding, no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified
party's consent (which consent shall not be unreasonably
withheld or delayed) unless (A) there is no finding or
admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party,
and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and the indemnified
party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement
of any Proceeding and the indemnifying party does not, within
ten business days after the indemnified party's notice is
given, give notice to the indemnified party of its election to
assume the defense of such Proceeding or its determination
that the claim is not subject to indemnification hereunder,
the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by
the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its
affiliates other than as a result of monetary damages for
which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding
so defended or any
47
compromise or settlement effected without its consent (which
may not be unreasonably withheld).
10.9 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Buyer will pay one-half and Seller will pay one-half
of (i) the Competition Act filing fee, and (ii) any amounts required to obtain
the consents listed on Schedule 7.3. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a Breach of this Agreement by another
party. Upon consummation of the Contemplated Transactions, Buyer shall pay, in
addition to the Purchase Price, any Taxes applicable in connection with the
purchase of the Seller Intellectual Property Assets and/or the execution of the
Noncompetition Agreement (including, without limitation, any applicable Goods
and Services Tax in Canada).
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement
or the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer determines; provided, however, that Buyer shall give
reasonable notice to Seller before making any public announcement with respect
to such matters, and shall allow Seller reasonable time to comment on such
release or announcement in advance of such release or announcement. Unless
consented to by Buyer in advance or required by Legal Requirements, prior to the
Closing Seller, shall, and shall cause the Company to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person who does not have the "need to know". Seller and Buyer will consult with
each other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for any
such communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and Seller
will maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Company to maintain in confidence, any
written information furnished by another party or the Company in connection with
this Agreement or the Contemplated
48
Transactions, unless (a) such information is already known to such party or is
provided to such party by another not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by or necessary in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Notwithstanding any implication to the contrary contained
herein, the Confidentiality Agreement dated as of July 26, 1999, between Seller
and Orkin shall remain in full force and effect.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to Seller: S.C. Johnson Commercial Markets, Inc.
8310 16th Street
Sturtevant, Wisconsin 53177
Attn: General Counsel
Telecopy number: (414) 631-4021
If to Buyer: Orkin Canada, Inc.
2170 Piedmont Road, N.E.
Atlanta, Georgia 30324
Attn: President
Telecopy number: (404) 888-2279
49
With a copy to: General Counsel
Rollins, Inc.
P.O. Box 647
Atlanta, Georgia 30301
Telecopy number: (404) 888-2731
and to: Arnall Golden & Gregory, LLP
1201 West Peachtree Street
2800 One Atlantic Center
Atlanta, Georgia 30309-3450
Attn: Jonathan Golden, Esq.
Telecopy number: (404) 873-8701
11.5 ARBITRATION
Any controversy, dispute or claim arising out of or relating in any way to
this Agreement or the other agreements contemplated hereby shall, except with
respect to seeking equitable remedies, be settled exclusively by arbitration in
the City of Washington, D.C. Such arbitration shall be administered by the
American Arbitration Association ("AAA") in accordance with its then prevailing
rules (except as otherwise provided herein), by one independent and impartial
arbitrator. Notwithstanding anything to the contrary provided above, the
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. ss.
1 et seq. The fees and expenses of the AAA and the arbitrator shall be shared
equally by the parties and advanced by them from time to time as required;
provided that at the conclusion of the arbitration, the arbitrator shall award
costs and expenses (including the costs of the arbitration previously advanced
and the fees and expenses of attorneys, accountants and other experts) and
interest at the prime interest rate as set forth in the "Money Rates" section of
the Wall Street Journal on the date of such award to the prevailing party.
Pre-arbitration discovery shall be permitted in accordance with the rules of the
AAA. The arbitrator shall render his award within 90 days of the conclusion of
the arbitration hearing. The arbitrator shall not be empowered to award to
either party any punitive damages in connection with any dispute between them
arising out of or relating in any way to this Agreement or the Contemplated
Transactions arising hereunder or thereunder, and each party hereby irrevocably
waives any right to recover such damages. Notwithstanding anything to the
contrary provided in this Section 11.5 and without prejudice to the above
procedures, either party may apply to any court of competent jurisdiction for
temporary injunctive or other provisional judicial relief if such action is
necessary to avoid irreparable damage or to preserve the status quo until such
time as the arbitration panel is convened and available to hear such party's
request for temporary relief. The award rendered by the arbitrator shall be
final and not subject to judicial review and judgment thereon may be entered in
any court of competent jurisdiction.
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
50
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Terms Sheet between Buyer and
Seller dated August 27, 1999) and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
11.9 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, shall relate only to the representations
and warranties in the Section of the Agreement to which they
expressly relate and not to any other representation or
warranty in this Agreement; provided, however, that the
Disclosure Letter may, by explicit reference, cross-reference
specific disclosures that may be applicable to more than one
Section of the Agreement.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Disclosure
Letter (other than an exception set forth as such in the
Disclosure Letter with respect to a specifically identified
representation or warranty), the statements in the body of
this Agreement will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer provided that in such
case Buyer shall continue to remain
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liable under this Agreement. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Delaware
without regard to conflicts of laws principles.
11.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
ORKIN CANADA, INC.
By:____________________________
Its:___________________________
CMI:
S.C. JOHNSON COMMERCIAL MARKETS, INC.
By:____________________________
Its:___________________________
EXPANSION:
ORKIN EXPANSION, INC.
By:____________________________
Its:___________________________
JPI:
S.C. JOHNSON PROFESSIONAL, INC.
By:____________________________
Its:___________________________
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