EXECUTION COPY
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STOCK PURCHASE AGREEMENT
among
HERCULES HOLDINGS (CAYMAN) LIMITED,
AT&T CAPITAL CORPORATION,
THE STOCKHOLDERS THEREOF LISTED ON EXHIBIT A HERETO
and
NEWCOURT CREDIT GROUP INC.
for the purchase and sale
of
the outstanding capital stock
of
AT&T CAPITAL CORPORATION
Dated as of November 17, 1997
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS.............................................. 2
ARTICLE II
PURCHASE AND DELIVERY OF STOCK............................. 12
2.1 Delivery of Stock..................................................... 12
2.2 Consideration for Stock............................................... 12
2.3 Indemnity Escrow...................................................... 13
ARTICLE III
CLOSING DATE............................................. 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SELLERS.............................................. 14
4.1 Representations and Warranties of Sellers............................. 14
(a) Organization, Good Standing and
Qualification......................................................... 14
(b) Authority............................................................. 14
(c) Non-Contravention..................................................... 14
(d) Consents, etc......................................................... 15
(e) Share Ownership....................................................... 15
(f) Brokers and Finders................................................... 16
(g) Limitation on Liability............................................... 16
(h) Bank Act (Canada)..................................................... 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY........................................... 16
5.1 Representations and Warranties of
the Company........................................................... 16
(a) Organization, Good Standing and
Qualification......................................................... 16
(b) Capital Structure..................................................... 17
(c) Authority............................................................. 18
(d) Governmental Filings; Consents; No
Violations............................................................ 18
(e) Company Reports; Financial Statements................................. 20
(f) Absence of Certain Changes............................................ 20
(g) Litigation and Liabilities............................................ 21
(h) Compliance with Laws; Licenses........................................ 23
(i) Receivables........................................................... 24
(j) Material Contracts.................................................... 24
(k) Environmental Matters................................................. 25
(l) Taxes................................................................. 26
(m) Labor Matters......................................................... 27
(n) Intellectual Property................................................. 27
(o) Insurance............................................................. 28
(p) Lucent and Other Agreements........................................... 29
(q) Brokers and Finders................................................... 29
(r) Bank Act (Canada)..................................................... 29
(s) Employee Benefits..................................................... 29
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF PURCHASER............................................ 32
6.1 Representations and Warranties of Purchaser................................ 32
(a) Organization, Good Standing and
Qualification......................................................... 32
(b) Capital Structure..................................................... 33
(c) Authority............................................................. 34
(d) Governmental Filings; Consents; No
Violations............................................................ 35
(e) Purchaser Reports; Financial Statements............................... 36
(f) Absence of Certain Changes............................................ 37
(g) Liabilities........................................................... 38
(h) Compliance with Laws; Licenses........................................ 38
(i) Other Agreements...................................................... 39
(j) Brokers and Finders................................................... 40
(k) Available Funds....................................................... 40
(l) Validity of Shares.................................................... 41
(m) Investment Intent..................................................... 41
(n) Bank Act (Canada)..................................................... 41
(o) Limitation on Liability............................................... 41
ARTICLE VII
COVENANTS.............................................. 42
7.1 Interim Operations of the Company.......................................... 42
7.2 Interim Operations of Purchaser............................................ 45
7.3 Access; Confidentiality.................................................... 47
7.4 Filings; Other Actions; Notification....................................... 48
7.5 Publicity.................................................................. 50
7.6 Indemnification; Directors' and Officers'
Liability Insurance........................................................ 50
7.7 Reasonable Best Efforts and Cooperation.................................... 52
7.8 Further Assurances......................................................... 52
7.9 Expenses................................................................... 52
7.10 Taxes...................................................................... 52
7.11 Reporting Issuer Status and Listing........................................ 53
7.12 Execution of Indemnity Escrow Agreement.................................... 53
ARTICLE VIII
CONDITIONS TO THE CLOSING.................................... 53
8.1 Conditions of Obligation of Each Party..................................... 53
(a) No Injunction......................................................... 53
(b) Regulatory Authorizations............................................. 53
8.2 Additional Conditions to the Obligations
of Purchaser............................................................... 54
(a) Representations and Warranties........................................ 54
(b) Performance of Covenants.............................................. 54
(c) Certificate........................................................... 54
(d) Legal Opinion......................................................... 54
8.3 Additional Conditions to the Obligations
of Seller.................................................................. 54
(a) Representations and Warranties........................................ 55
(b) Performance of Covenants.............................................. 55
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(c) Certificate........................................................... 55
(d) Listing............................................................... 55
(e) Human Resources Agreement............................................. 55
(f) Legal Opinion......................................................... 55
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER............................... 55
9.1 Termination................................................................ 55
9.2 Effect of Termination...................................................... 58
ARTICLE X
GENERAL PROVISIONS......................................... 58
10.1 Survival and Indemnification.......................................... 58
(a) Survival.............................................................. 58
(b) Indemnification by Sellers............................................ 59
(c) Indemnification by Purchaser.......................................... 61
(d) Limitations on Indemnification........................................ 61
(e) Materiality Qualification............................................. 62
(f) Claims................................................................ 62
(g) Termination of Indemnification........................................ 63
(h) Exclusive Remedy...................................................... 64
(i) Insurance............................................................. 64
(j) Mitigation............................................................ 64
(k) Subrogation........................................................... 64
10.2 Notices................................................................... 65
10.3 Interpretation............................................................ 66
10.4 Amendment and Modification; Waiver........................................ 66
10.5 Entire Agreement.......................................................... 67
10.6 Third Party Beneficiaries................................................. 67
10.7 Assignment; Binding Effect................................................ 67
10.8 Governing Law............................................................. 67
10.9 Counterparts.............................................................. 69
10.10 Severability.............................................................. 69
Exhibit A: Stockholders of the Company
Exhibit B: Form of Custody Agreement and Power of Attorney
Exhibit C: Transfer Restriction Agreement
Exhibit D: Shareholders' Agreement
Exhibit E: Investment Agreement
Exhibit F: Registration Rights Agreement
Exhibit G: Human Resources Agreement
Exhibit H: Underwriting Agreement
Exhibit I-1: Form of Opinion of Counsel to the Company
Exhibit I-2: Form of Opinion of Counsel to Hercules
Exhibit I-3 Form of Opinion of Counsel to Nomura International
plc
Exhibit J: Form of Opinion of Purchaser
Exhibit K: AF Claim Procedure
Exhibit L: Form of Indemnity Escrow Agreement
Exhibit M: Form of Exclusivity Letter
Seller Disclosure Schedule
Company Disclosure Schedule
Purchaser Disclosure Schedule
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 17, 1997
("Agreement"), among HERCULES HOLDINGS (CAYMAN) LIMITED, a Cayman Islands
company ("Hercules"), AT&T CAPITAL CORPORATION, a Delaware corporation (the
"Company"), those stockholders of the Company listed on Exhibit A hereto (the
"Selling Stockholders" and, together with Hercules, individually a "Seller" and
collectively the "Sellers") and NEWCOURT CREDIT GROUP INC., an Ontario
corporation ("Purchaser").
WITNESSETH
WHEREAS, each Seller owns that number of shares ("Shares") of the
common stock, par value US$.01 per share ("Common Stock"), of the Company set
forth opposite the name of such Seller on Exhibit A hereto, which together
constitute all of the issued and outstanding shares of Common Stock of the
Company (the "Stock"); and
WHEREAS, under the Custody Agreement and Power of Attorney
(defined herein), Hercules may convey the Shares owned by the Selling
Stockholders on their behalf; and
WHEREAS, on the terms and subject to the conditions set forth
herein, in consideration for a combination of cash and common shares of
Purchaser (the "Purchaser Common Shares"), Hercules desires on its behalf and on
behalf of the Selling Stockholders to sell and Purchaser desires to purchase the
Stock; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition to Purchaser's willingness to enter into this
Agreement, Hercules, the other Selling Stockholders and Purchaser have entered
into a share restriction agreement (the "Transfer Restriction Agreement") and
Hercules and certain stockholders of Purchaser have entered into a shareholders'
voting agreement (the "Shareholders' Agreement"), and Hercules, Purchaser and
certain stockholders of Purchaser have entered into an investment agreement (the
"Investment Agreement", and together with the Shareholders' Agreement and the
Transfer Restriction Agreement, the "Stockholders' Agreements") each dated as of
the date hereof, copies of which are attached hereto as Exhibits C, D and E,
respectively; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the Sellers' willingness to enter
into this Agreement, Sellers and Purchaser have entered into a registration
rights agreement (the "Registration Rights Agreement") dated as of the date
hereof, a copy of which is attached as Exhibit F hereto; and
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WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the Company's willingness to
enter into this Agreement, the Company and Purchaser have entered into a human
resources agreement (the "Human Resources Agreement") dated as of the date
hereof, a copy of which is attached as Exhibit G hereto; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition to the Company's willingness to enter into this
Agreement, Purchaser has entered into an underwriting agreement with CIBC Wood
Gundy Securities Inc., Goldman Sachs Canada, Merrill Lynch Canada Inc.,
ScotiaMcLeod Inc., Nesbitt Burns Inc., RBC Dominion Securities Inc., Midland
Walwyn Capital Inc. and TD Securities Inc. (the "Underwriters"), a copy of which
is attached as Exhibit H hereto (the "Underwriting Agreement") and certain other
agreements regarding a public offering of common shares of Purchaser; and
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
The following terms when used in this Agreement shall have the
following meanings:
"AF Claim Procedure" means the indemnity claim procedure set
forth in Exhibit K attached hereto.
"AF Representation" is defined in Section 10.1(a)(ii).
"Affiliate" of a specified Person means a Person that directly,
or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"Agreement" is defined in the introductory paragraph
hereof.
"1996 Annual Report" is defined in Section 5.1(g).
"Article IV Surviving Representations" is defined in
Section 10.1(a).
"Auburn Facility" is defined in the AF Claim Procedure.
"Audit Date" is defined in Section 5.1(e).
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"Bankruptcy and Equity Exception" means that enforceability may
be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, and by general equitable
principles.
"Bought-Deal Financing" is defined in Section 6.1(k).
"Business Day" means any day which is not a Saturday, Sunday or a
day on which banks in New York City, Toronto or London are authorized or
obligated by law or executive order to be closed.
"CAL Claim" is defined in the CAL Claim Indemnification
Agreement.
"CAL Claim Indemnification Agreement" means the CAL Claim
Indemnification Agreement dated as of November 17, 1997 between Hercules
and Purchaser.
"Canadian GAAP" means the accounting principles recommended in
Canada, from time to time, in the Handbook of the Canadian Institute of
Chartered Accountants.
"Cash Consideration" means an amount of cash equal to the sum of
(a) US$1,031,951,747, (b) the product of (i) the per share amount of any
dividend declared on Purchaser Common Shares from and after the date of
this Agreement through the Closing and (ii) the number of Purchaser
Common Shares constituting the Common Share Consideration, and (c) the
product of (i) US$1,031,951,747 plus the amount calculated under clause
(b) hereof, (ii) the Equity Escrow Rate and (iii) a fraction the
numerator of which is the number of days that have elapsed during the
period from January 1, 1998 through the Closing Date and the denominator
of which is 365; provided that the amount in clause (c) shall not
accrue, and shall therefore not be added as part of the Cash
Consideration, during any period of delay of the Closing beyond January
1, 1998 that results from a wilful breach of any covenant or agreement
hereunder by Hercules.
"Closing" is defined in Article III.
"Closing Date" is defined in Article III.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Common Share Consideration" means 17,633,857 Purchaser
Common Shares.
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"Common Stock" is defined in the recitals to this
Agreement.
"Company" is defined in the introductory paragraph
hereof.
"Company Disclosure Schedule" means the disclosure schedule
delivered by the Company to Purchaser at the time of execution hereof.
"Company IP Rights" is defined in Section 5.1(n).
"Company License and Computer Rights" is defined in
Section 5.1(n).
"Company Material Adverse Effect" means a material adverse effect
on the financial condition or results of operations of the Company and
its Subsidiaries taken as a whole; provided, however, that any such
effect resulting from any change after the date hereof and prior to the
Closing (i) in any law, rule or regulation or generally accepted
accounting principles or interpretations thereof that applies generally
to companies operating in the same industries as the Company or (ii) in
general economic or business conditions in the industries in which the
Company operates, shall not be considered when determining if a Company
Material Adverse Effect has occurred.
"Company Material Breaches" is defined in Section
5.1(d)(ii).
"Company Material Subsidiary" means AT&T Commercial Finance
Corporation, AT&T Capital Leasing Services, Inc., AT&T Credit
Corporation, AT&T Systems Leasing Corporation, AT&T Capital Canada,
Inc., NCR Credit Corp., AT&T Capital Limited and The Capita Corporation
Hong Kong Limited.
"Company Options" means any options or rights to
acquire Shares.
"Company Plans" is defined in Section 5.1(s)(i).
"Company Properties" is defined in Section 5.1(k).
"Company Reports" is defined in Section 5.1(e).
"Company Subsidiary" means each Subsidiary of the
Company as of the date of this Agreement.
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"Confidentiality Agreement" means the Confidentiality Agreement,
dated August 29, 1997, as amended to the date hereof, among Hercules,
the Company and Purchaser relating to the confidentiality of certain
information provided to Purchaser with respect to the Company.
"Contract" means any written agreement, lease, contract, note,
mortgage, indenture, arrangement or other obligation not otherwise
terminable on 90 days' or less notice.
"Costs" is defined in Section 7.6(a).
"CSR" is defined in Section 6.1(e)
"Current Premium" is defined in Section 7.6(b).
"Custody Agreement and Power of Attorney" means each of the
agreements dated as of November 12, 1997 between Hercules and each of
the Selling Stockholders, substantially in the form attached hereto as
Exhibit B.
"D&O Insurance" is defined in Section 7.6(b).
"Deductible" is defined in Section 10.1(d).
"Dell Agreements" is defined in Section 6.1(i).
"Derivatives" is defined in Section 5.1(g)(iii).
"Disclosure Schedules" means the collective reference
to the Company Disclosure Schedule, the Seller Disclosure
Schedule and the Purchaser Disclosure Schedule.
"Dollars", "US$" and "$" means the lawful currency of
the United States of America.
"Environmental Law" means (i) any federal, state, provincial,
foreign or local law, statute, ordinance, rule, regulation, code,
license, permit, order, judgment, decree, injunction or agreement with
any Governmental Entity (A) relating to the protection, preservation or
restoration of the environment (including air, water vapor, surface
water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource), or (B) the
use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Hazardous Substances, in each case as amended and as now in effect and
(ii) the federal Comprehensive Environmental Response Compensation and
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Liability Act of 1980, the Superfund Amendments and Reauthorization Act,
the federal Water Pollution Control Act of 1972, the federal Clean Air
Act, the federal Clean Water Act, the federal Resource Conservation and
Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments
thereto), the federal Solid Waste Disposal and the federal Toxic
Substances Control Act and the federal Insecticide, Fungicide and
Rodenticide Act, each as amended and as now in effect.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" is defined in Section 5.1(s)(iv).
"Escrow Arrangement" is defined in Section 6.1(k).
"Equity Escrow Rate" means the annualized rate of return
(expressed as a percentage) earned on the proceeds from the Bought-Deal
Financing that are placed in escrow pending the Closing during the
period from January 1, 1998 through the second Business Day immediately
preceding the Closing Date, as reported to the Purchaser and Hercules in
writing by the escrow agent thereunder.
"Escrow Shares" is defined in Section 2.3.
"Exchange Act" means the United States Securities
Exchange Act of 1934, as amended.
"Exchange Offer" means any offer to certain of the Selling
Stockholders by Purchaser to exchange their Shares for a number of
Purchaser Common Shares.
"Exclusivity Letter" is defined in Section 9.1(d).
"Financing Documents" is defined in Section 6.1(k).
"Government Antitrust Entity" is defined in Section
7.4(b).
"Governmental Entity" means any United States or foreign
governmental or regulatory authority, court, agency, ministry,
commission, crown corporation, body or other governmental entity.
"Hazardous Substance" means any substance presently listed,
defined, designated, judicially interpreted or classified as hazardous,
toxic, radioactive or dangerous, under any Environmental Law, including
any toxic waste,
7
hazardous substance, toxic substance, hazardous waste, petroleum
radioactive material, friable asbestos and polychlorinated biphenyls.
"Hercules" is defined in the introductory paragraph
hereof.
"Hercules Information" is defined in Section 6.1(o).
"Hercules Surviving Representations" is defined in
Section 10.1(a).
"Holder" is defined in Section 10.1(b).
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Human Resources Agreement" is defined in the recitals
to this Agreement.
"Indemnified Parties" is defined in Section 7.6(a).
"Indemnified Person" is defined in Section 10.1(c).
"Indemnity Escrow Agent" means such Indemnity Escrow Agent as the
Purchaser and Hercules shall reasonably agree upon prior to Closing,
appointed pursuant to the Indemnity Escrow Agreement.
"Indemnity Escrow Agreement" is defined in Section 2.3.
"Indemnity Escrow" is defined in Section 2.3.
"Installment Receipt and Pledge Agreement" means the installment
receipt and pledge agreement among Purchaser, CIBC Wood Gundy Inc. and
Canadian Imperial Bank of Commerce to be entered into in connection with
the Bought-Deal Financing.
"Instalment Receivables Loan Agreement" is defined in
the Underwriting Agreement.
"Investment Agreement" is defined in the recitals to
this Agreement.
"Knowledge", when used in this Agreement with respect to either
the Company or Purchaser, shall mean the actual knowledge of one or more
of the duly elected or appointed executive officers of the Company or
Purchaser,
8
respectively, and does not include information of which they may be
deemed to have constructive knowledge only.
"Law" means any law, by-law, ordinance, protocol, code,
guideline, policy, direction, regulation, judgment, order, writ, decree,
arbitration award, license or permit of any Governmental Entity.
"Leadership Forum" means the list of employees of the Company set
forth in Section 5.1(f)(iii) of the Company Disclosure Schedule.
"License" means any governmental or non-governmental
permit, franchise, concession or license.
"Lien" means any lien, pledge, security interest, claim
or other encumbrance.
"Losses and Expenses" is defined in Section 10.1(b).
"Lucent Agreements" is defined in Section 5.1(p).
"ME" means the Montreal Exchange.
"NYSE" means the New York Stock Exchange.
"Other Agreements" is defined in Section 5.1(p).
"Pension Plan" is defined in Section 5.1(s)(iii).
"Person" means an individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity of
whatever nature and any person in such person's capacity as trustee,
executor, administrator or other legal representative.
"Plan of Merger" is defined in Section 5.1(l).
"Pledge Agreement" means any of the Pledge Agreements entered
into between the Selling Stockholders and the Company.
"Preference Shares" is defined in Section 6.1(b).
"Preferred Shares" is defined in Section 5.1(b).
"Purchase Price" means the Cash Consideration plus the
Common Share Consideration.
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"Purchaser" is defined in the introductory paragraph
hereof.
"Purchaser Common Share Agreements" is defined in
Section 6.1(i).
"Purchaser Common Shares" is defined in the recitals to
this Agreement.
"Purchaser Confidentiality Agreement" means the Confidentiality
Agreement, dated October 21, 1997, between Purchaser and each of
Hercules and the Company relating to the confidentiality of certain
information provided to Hercules or the Company with respect to
Purchaser.
"Purchaser Disclosure Schedule" means the disclosure schedule
delivered by Purchaser to Sellers at the time of execution hereof.
"Purchaser Indemnified Person" is defined in Section
10.1(b).
"Purchaser Material Adverse Effect" means a material adverse
effect on the financial condition or results of operations of Purchaser
and its Subsidiaries taken as a whole; provided, however, that any such
effect resulting from any change after the date hereof and prior to the
Closing (i) in any law, rule or regulation or generally accepted
accounting principles or interpretations thereof that applies generally
to companies operating in the same industries as Purchaser or (ii) in
general economic or business conditions in the industries in which
Purchaser operates, shall not be considered when determining if a
Purchaser Material Adverse Effect has occurred.
"Purchaser Material Breaches" is defined in Section
6.1(d)(ii).
"Purchaser Material Subsidiary" means those entities described as
such in Section 6.1(a)(ii) of the Purchaser Disclosure Schedule.
"Purchaser Options" means any options or rights to
acquire Purchaser Common Shares.
"Purchaser Reports" is defined in Section 6.1(e).
"Purchaser Surviving Representations" is defined in
Section 10.1(a).
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"Receivables" of a Person means all loans, equipment leases, sale
contracts, credit or financing agreements or arrangements, portfolio
servicing agreements, account receivable invoices and other obligations
or rights to payments owned by such Person or any of its Subsidiaries.
"Registration Rights Agreement" is defined in the
recitals to this Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the United States Securities Act
of 1933, as amended.
"Seller" and "Sellers" are defined in the introductory
paragraph hereof.
"Seller Disclosure Schedule" means the disclosure schedule
delivered by Sellers to Purchaser at the time of execution hereof.
"Seller Indemnified Person" is defined in Section
10.1(c).
"Selling Stockholders" is defined in the introductory
paragraph hereof.
"Sellers' Surviving Representations" is defined in
Section 10.1(a).
"Shareholders' Agreement" is defined in the recitals to
this Agreement.
"Shares" is defined in the recitals to this Agreement.
"Special Shares" means Purchaser's non-voting special shares,
which are convertible into Purchaser Common Shares on a share-for-share
basis.
"Stock" is defined in the recitals to this Agreement.
"Stockholders' Agreements" is defined in the recitals
to this Agreement.
"Subsidiary" means, with respect to a party, any entity, whether
incorporated or unincorporated, of which at least a majority of the
securities or ownership interests having by their terms ordinary voting
power to elect a majority of the board of directors or other persons
performing similar functions is directly or indirectly owned
11
or controlled by such party or by one or more of its respective
Subsidiaries or by such party and any one or more of its respective
Subsidiaries.
"Tax" (including, with correlative meaning, the terms "Taxes",
"Taxable" and "Taxing") includes all federal, state, local and foreign
income, profits, franchise, gross receipts, environmental, customs duty,
capital stock, severances, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or
assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions.
"Tax Return" includes all returns and reports (including
elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority relating
to Taxes.
"TOPrS" means the 9.06% Trust Originated Preferred Securities
publicly issued in October 1996 by Capita Preferred Trust.
"Transfer Restriction Agreement" is defined in the
recitals to this Agreement.
"TSE" means The Toronto Stock Exchange.
"Underwriters" is defined in the recitals to this
Agreement.
"Underwriting Agreement" is defined in the recitals to
this Agreement.
"U.S. GAAP" means generally accepted accounting
principles in the United States.
"Voting Debt" of any Person means any bonds, debentures, notes or
other obligations the holders of which have the right to vote (or which
are convertible into or exercisable for securities having the right to
vote) with the stockholders of such Person on any matter.
"Voting Trust Agreement" means the Voting Trust Agreement dated
as of October 1, 1996 among the Sellers and Thomas Wajnert, as trustee
thereunder, as amended.
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ARTICLE II
PURCHASE AND DELIVERY OF STOCK
2.1 Delivery of Stock. (a) On the terms and subject to the
conditions of this Agreement, Hercules shall, on behalf of itself and
the other Sellers, at the Closing on the Closing Date, transfer, assign
and deliver to Purchaser or its designee certificates evidencing the
Stock. Such certificates evidencing the Stock shall be in form suitable
for transfer and (i) duly endorsed in blank or (ii) be accompanied by
stock transfer powers duly executed in blank, in either case with all
necessary stock transfer tax stamps affixed and cancelled.
(b) In the event that, subsequent to the date hereof and prior to
Closing, Hercules or any of its Affiliates acquires Shares of any
Selling Stockholder pursuant to the terms of the stock purchase
agreement to which such Selling Stockholder is a party, then such
Selling Stockholder shall be relieved of its obligations hereunder with
respect to such Shares and Hercules shall have the right and shall be
obligated to deliver such Shares to Purchaser on the terms and subject
to the conditions hereof. No such transaction shall affect Purchaser's
right to acquire all of the Stock or the Sellers' right to obtain the
aggregate Cash Consideration and Common Share Consideration in respect
thereof, subject in each case to the terms and conditions of this
Agreement. In such event, Exhibit A hereto will be appropriately
adjusted to reflect the transfer of Shares from such Selling Stockholder
to Hercules.
2.2 Consideration for Stock. On the terms and subject to the
conditions of this Agreement, Purchaser shall, at the Closing on the Closing
Date, and against delivery of certificates evidencing the Stock and any related
stock transfer forms as provided in Section 2.1:
(a) deliver to Hercules, for the account of itself and the other
Sellers, the Cash Consideration, by wire transfers of funds immediately
available in New York City or London to such account or accounts as
Hercules shall designate in writing to Purchaser not less than one
Business Day prior to the Closing Date; and
(b) deliver to Hercules or its designee, for the account of
itself and the other Sellers, certificates in such number as Hercules
shall designate in writing to the Purchaser not less than one Business
Day prior to the Closing Date (duly endorsed in blank, or accompanied by
stock transfer powers duly executed in blank, with all
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necessary stock transfer tax stamps affixed and cancelled) evidencing
the Common Share Consideration.
2.3 Indemnity Escrow. Immediately after the Closing, Hercules
shall deposit or cause to be deposited with the Indemnity Escrow Agent
the Common Share Consideration (the "Escrow Shares") to be used, to the
extent necessary, to fund indemnity payments for which Holders may
become liable under Section 10.1(b) (the "Indemnity Escrow"). All
matters relating to the Indemnity Escrow, to the extent not referred to
in this Agreement, shall be governed by the agreement among the
Indemnity Escrow Agent, Purchaser and Hercules to be executed prior to
Closing substantially in the form attached as Exhibit L hereto, with
such changes as the Indemnity Escrow Agent may reasonably request (the
"Indemnity Escrow Agreement"); provided that in the event of any
conflict between the terms of this Agreement and the Indemnity Escrow
Agreement, the terms of this Agreement shall be controlling. The
Indemnity Escrow Agent shall hold and transfer the Escrow Shares in
accordance with the Indemnity Escrow Agreement and the provisions of
Section 10.1(b) hereof. The Indemnity Escrow shall not be used for any
other purpose.
ARTICLE III
CLOSING DATE
Unless this Agreement shall have been terminated and the
transactions herein abandoned pursuant to Section 9.1, subject to the provisions
of Article VIII, the closing (the "Closing") of the purchase and sale of the
Stock provided for in Article II shall take place at the offices of Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York at 10:00 a.m., New
York City time, on the later of (i) the second Business Day following the
satisfaction or waiver of the conditions set forth in Section 8.1(b) and (ii)
January 30, 1998, or at such other place and time or on such other date as the
parties may agree. The date on which the Closing occurs is herein called the
"Closing Date".
14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
4.1 Representations and Warranties of Sellers. Each Seller
severally represents and warrants to Purchaser that, except as set forth on the
specific section of the Seller Disclosure Schedule referenced to in any
particular representation and warranty referenced below:
(a) Organization, Good Standing and Qualification. In the case of
Hercules only, Hercules is a corporation duly organized, validly
existing and in good standing under the laws of the Cayman Islands and
Hercules has delivered to Purchaser complete and correct copies of its
Memorandum and Articles of Association or other comparable documents.
(b) Authority. Such Seller has all requisite power and authority
and has taken all actions necessary in order to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Each of this Agreement and any Custody
Agreement and Power of Attorney, the Transfer Restriction Agreement and,
in the case of Hercules only, the Indemnity Escrow Agreement to which
such Seller is a party constitutes a valid and legally binding agreement
of such Seller enforceable against such Seller in accordance with its
terms, except as affected by the Bankruptcy and Equity Exception.
(c) Non-Contravention. The execution and delivery of this
Agreement by such Seller does not, and the consummation of the
transactions contemplated hereby and the performance by such Seller of
the obligations which such Seller is obligated to perform hereunder will
not: (a) in the case of Hercules only, violate any provision of any
organizational documents of such Seller; or (b) assuming that all
consents, authorizations, orders or approvals of, filings or
registrations with, and notices to, each Governmental Entity listed in
Section 4.1(d)(i) of the Seller Disclosure Schedule and all consents
listed in Section 4.1(d)(ii) of the Seller Disclosure Schedule have been
obtained or made, (i) violate any Law, order, judgment or decree to
which such Seller or its Shares are subject, or (ii) violate, result in
the termination or the acceleration of, or conflict with or constitute a
default under, any Contract to which such Seller is a party or by which
any of its property is bound, except, in the case of clauses (i) and
(ii), for such violations, terminations, accelerations, conflicts or
defaults as would not prevent, materially delay or
15
materially impair such Seller's ability to consummate the transactions
contemplated by this Agreement.
(d) Consents, etc. (i) Except as described in Section 4.1(d)(i)
of the Seller Disclosure Schedule, no consent, authorization, order or
approval of, filing or registration with, or notice to, any Governmental
Entity and (ii) except as described in Section 4.1(d)(ii) of the Seller
Disclosure Schedule, no consent, authorization, approval, waiver, order,
license, certificate or permit or act of or from, or notice to, any
party to any Contract to which such Seller is a party or by which any of
its property is bound is required for the execution and delivery of this
Agreement by such Seller and the consummation by such Seller of the
transactions contemplated hereby, except in each case for any such
consent, authorization, approval, waiver, order, license, certificate or
permit or act of or from, filing or registration with, or notice to, any
Person the failure of which to be obtained or made would not prevent,
materially delay or materially impair such Seller's ability to
consummate the transactions contemplated by this Agreement.
(e) Share Ownership. (i) Such Seller is the owner of,
beneficially and of record, all right, title and interest in and to the
number of Shares set forth opposite such Seller's name in Exhibit A
hereto. As of the Closing, such Seller will have good and marketable
title to all such Shares and the absolute right to sell, assign and
transfer the same to Purchaser, free and clear of any Lien (other than,
in the case of any Selling Stockholder, Liens, which shall not survive
the Closing, imposed by the Custody Agreement and Power of Attorney, the
Pledge Agreement and the Voting Trust Agreement to which such Selling
Stockholder is a party, and Liens created or incurred by Purchaser or
any of its Affiliates). Such Seller is not a party to any option,
warrant, right, contract, call, put or other agreement providing for the
disposition or acquisition of any of the capital stock of the Company,
including such Shares (other than each subscription agreement, stock
purchase agreement and sale participation agreement to which such Seller
is a party (each of which will terminate and have no further force and
effect as of the Closing), this Agreement and, in the case of any
Selling Stockholder, the Custody Agreement and Power of Attorney to
which such Selling Stockholder is a party).
(ii) In the case of each Selling Stockholder, Hercules has
the power and authority under the Custody Agreement and Power of
Attorney to which such Selling Stockholder is a party to convey the
Shares owned by such
16
Selling Stockholder to Purchaser without further consent by such Selling
Stockholder. Under the terms of the Custody Agreement and Power of
Attorney to which such Selling Stockholder is a party, such Selling
Stockholder has delivered to and deposited in custody with Hercules
(acting as custodian and attorney-in-fact) certificates representing the
Shares owned by such Selling Stockholder (duly endorsed in blank by the
registered owner or owners thereof) and has irrevocably appointed said
custodian and attorney-in-fact as such Selling Stockholder's agent and
attorney-in-fact with full power and authority to act under such Custody
Agreement and Power of Attorney on such Selling Stockholder's behalf
with respect to the conveyance of such Shares.
(f) Brokers and Finders. Such Seller has not employed any broker
or finder or incurred any liability for any brokerage fees, commissions
or finders fees in connection with the transactions contemplated by this
Agreement, except that Hercules has employed Morgan Stanley & Co. and
Nomura International plc to act as Sellers' financial advisors.
(g) Limitation on Liability. Each Seller understands and agrees
that neither Purchaser nor any of its respective Affiliates are making
any representation and warranty whatsoever, express or implied, other
than those representations and warranties of Purchaser expressly set
forth in Article VI. Each Seller understands and agrees that, following
the Closing, it shall not be entitled to indemnification from Purchaser
with respect to any claims arising out of any breach by Purchaser of
this Agreement, including any breach of a representation and warranty,
except as expressly provided in Section 10.1.
(h) Bank Act (Canada). In the case of Hercules only,
Hercules is not a "financial institution" as such term is
defined in the Bank Act (Canada).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
5.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchaser that, except as set forth on the
specific section of the Company Disclosure Schedule referenced to in any
particular representation and warranty referenced below:
(a) Organization, Good Standing and Qualification.
Each of the Company and the Company Material Subsidiaries is
17
a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority to own and
operate its properties and assets and to carry on its business as
presently conducted and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the
ownership or operation of its properties or conduct of its business
requires such qualification, except where the failure to be so qualified
or in good standing, when taken together with all other such failures,
would not reasonably be expected to have a Company Material Adverse
Effect. The Company has made available to Purchaser a complete and
correct copy of the Company's and its Subsidiaries' certificates of
incorporation and by-laws (or comparable documents), each as amended to
date. The Company's and its Subsidiaries' certificates of incorporation,
by-laws and other comparable documents so delivered are in full force
and effect, and neither the Company nor any of its Subsidiaries is in
default or violation of any provisions thereof except for such defaults
or violations which, when taken together with all other such defaults or
violations, would not reasonably be expected to have a Company Material
Adverse Effect. Section 5.1(a) of the Company Disclosure Schedule
contains a correct and complete list of each jurisdiction where the
Company and each of its Subsidiaries is organized and qualified to do
business. The only Subsidiaries of the Company are those set forth in
the Company Disclosure Schedule. Except as set forth in Section 5.1(a)
of the Company Disclosure Schedule, and except for securities acquired
in the ordinary course of business, including in connection with the
realization on collateral positions and the acquisition of securities as
part of any financing transaction, neither the Company nor any of its
Subsidiaries owns less than 100% of the outstanding voting securities or
other equity interests of any corporation, joint venture or other entity
(other than investments in marketable securities of any Person, none of
which exceed 5% of the outstanding capital stock or other equity
interests of such Person).
(b) Capital Structure. The authorized capital stock of the
Company consists of 150,000,000 Shares, of which 90,337,379 Shares were
outstanding on November 17, 1997, and 10,000,000 shares of preferred
stock, par value US$.01 per share (the "Preferred Shares"), of which
none are currently outstanding. All of the outstanding Shares have been
duly authorized and are validly issued, fully paid and nonassessable.
The Company has no Shares or Preferred Shares reserved for issuance. As
of November 17, 1997,
18
there were 4,333,055 Shares subject to outstanding Company Options. No
Shares have been issued and no Company Options have been authorized,
issued or granted on November 17, 1997. Section 5.1(b) of the Company
Disclosure Schedule contains a correct and complete list of each
outstanding Company Option, including the holder, date of grant,
exercise price and number of Shares subject thereto. Each of the
outstanding shares of capital stock or other equity securities of each
of the Company's Subsidiaries is duly authorized, validly issued, fully
paid and nonassessable and, except for directors' qualifying shares,
owned by the Company or a direct or indirect wholly owned subsidiary of
the Company, free and clear of any Lien. Except as set forth above and
in Section 5.1(b) of the Company Disclosure Schedule, there are no
preemptive or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights,
agreements, arrangements or commitments to issue or sell any shares of
capital stock or other equity securities of the Company or any of its
Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to
subscribe for or acquire, any equity securities of the Company or any of
its Subsidiaries, and no securities or obligations evidencing such
rights are authorized, issued or outstanding. The Company does not have
outstanding Voting Debt.
(c) Authority. The Company has all requisite corporate power and
authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement
constitutes a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, except as
affected by the Bankruptcy and Equity Exception.
(d) Governmental Filings; Consents; No Violations. (i) Other than
the filings and/or notices (A) pursuant to Section 7.4, (B) under the
HSR Act, the Competition Act (Canada), the Exon-Florio provisions of the
United States Defense Production Act and the Exchange Act and (C) set
forth in Section 5.1(d)(i) of the Company Disclosure Schedule, no
notices, reports or other filings are required to be made by the Company
or any of its Subsidiaries with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by the
Company or any of its Subsidiaries from, any Governmental Entity, in
connection with the execution and delivery of this Agreement by the
Company and the consummation by the Company of the
19
transactions contemplated hereby, except those as to which the failure
to make or obtain are not, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect or prevent, materially
delay or materially impair the ability of the Sellers to consummate the
transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this
Agreement by the Company do not, and the consummation by the Company of
the transactions contemplated hereby will not, constitute or result in
(A) a breach or violation of, or a default under, the certificate of
incorporation or by-laws of the Company or the comparable governing
instruments of any of its Subsidiaries, (B) a breach or violation of, or
a default under, the acceleration of any material obligations or the
creation of a Lien on any material assets of the Company or any of its
Subsidiaries (with or without notice, lapse of time or both) pursuant
to, or (except as set forth in Section 5.1(d)(ii) of the Company
Disclosure Schedule) give rise to any right of termination under, any
provision of any Contracts of the Company or any of its Subsidiaries or
any Law or License to which the Company or any of its Subsidiaries is
subject or (C) any change in the rights or obligations of any party
under any of the Contracts, except, in the case of clause (B) or (C)
above, for any breach, violation, default, acceleration, creation or
change that, individually or in the aggregate, is not reasonably likely
to have a Company Material Adverse Effect or prevent, materially delay
or materially impair the ability of Sellers to consummate the
transactions contemplated by this Agreement (collectively, "Company
Material Breaches"). Section 5.1(d)(ii) of the Company Disclosure
Schedule sets forth a correct and complete list of each Contract and
License of the Company and its Subsidiaries pursuant to which a consent
or waiver is required prior to consummation of the transactions
contemplated by this Agreement in order to avoid the occurrence of a
Company Material Breach under such Contract or License.
(iii) Neither the Company nor any of its Subsidiaries is
in breach or default under any Contract other than such breaches or
defaults that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect. No event has
occurred (except for the execution of this Agreement) which either
entitles, or would upon notice or with the lapse of time or both,
entitle the holder of any indebtedness of the Company or any of its
Subsidiaries to accelerate, or which does accelerate, the maturity of
any indebtedness which is
20
material to the Company and its Subsidiaries taken as a
whole.
(e) Company Reports; Financial Statements. The Company has
delivered to Purchaser each registration statement, Exchange Act report,
proxy statement or information statement prepared by the Company since
December 31, 1996 (the "Audit Date"), including (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 and (ii) the
Company's Quarterly Reports on Form 10-Q for the periods ended March 31,
1997, June 30, 1997 and September 30, 1997, each in the form (including
exhibits, annexes and any amendments thereto) filed with the SEC
(collectively, including any such reports filed subsequent to the date
hereof, the "Company Reports"). As of their respective dates, the
Company Reports did not, and any Company Reports filed with the SEC
subsequent to the date hereof will not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading. As of their
respective dates, the Company Reports complied, and any Company Reports
filed with the SEC subsequent to the date hereof will comply, as to
form, in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be. Each of the consolidated
balance sheets included in or incorporated by reference into the Company
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of the Company and its Subsidiaries as
of its date and each of the consolidated statements of income and of
changes in financial position included in or incorporated by reference
into the Company Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings and changes
in financial position, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments that are not
expected to be material in amount or effect), in each case in accordance
with U.S. GAAP consistently applied during the periods involved (except
as may be noted therein and except for the permitted omission of certain
footnote disclosures in the unaudited financial statements).
(f) Absence of Certain Changes. (i) Except as
disclosed in the Company Reports or in Section 5.1(f)(i) of
the Company Disclosure Schedule prior to the date hereof,
from the Audit Date to the date hereof, the Company and its
Subsidiaries have conducted their respective businesses only
21
in, and have not engaged in any transaction other than according to, the
ordinary and usual course of such businesses and there is not and has
not been (A) any change in the financial condition, properties, business
or results of operations of the Company and its Subsidiaries; or (B) any
damage, destruction or other casualty loss with respect to any material
asset or property owned, leased or otherwise used by the Company or any
of the Company Material Subsidiaries, whether or not covered by
insurance, with such exceptions to this Section 5.1(f)(i) that would
not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(ii) Except as disclosed in the Company Reports filed
prior to the date hereof or in Section 5.1(f)(ii) of the Company
Disclosure Schedule, since the Audit Date to the date hereof, there is
not and has not been (A) any declaration, setting aside or payment of
any dividend or other distribution in respect of the capital stock of
the Company (which for the avoidance of doubt shall not include any
payments made to holders of the TOPrS); or (B) any change by the Company
in accounting principles, practices or methods, except as required by
Law or U.S. GAAP; or (C) any event or action which, if it had taken
place or been taken following the execution of this Agreement would not
have been permitted by Section 7.1(a) without the prior written consent
of Purchaser.
(iii) From the Audit Date to the date hereof, except as
provided for herein or as disclosed in the Company Reports prior to the
date hereof or as set forth in Section 5.1(f)(iii) of the Company
Disclosure Schedule, there has not been any material increase in the
compensation payable or that could become payable by the Company and its
Subsidiaries to their executive officers or members of the Leadership
Forum or any amendment of any Company Plan other than increases or
amendments in the ordinary course and compensation arrangements for
newly-hired executives.
(g) Litigation and Liabilities. (i) Except as set forth in
Section 5.1(g)(i) of the Company Disclosure Schedule or the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(the "1996 Annual Report"), there are no civil, criminal or
administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the Knowledge of the Company, threatened
against the Company or any of its Subsidiaries or any other facts or
circumstances which to the Knowledge of the Company are reasonably
likely to result in any such suits, claims, hearings, investigations or
proceedings other
22
than such suits, claims, hearings, investigations or proceedings that,
individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect. There are no judgments, decrees,
injunctions, rules or orders of any Governmental Entity outstanding
against the Company or any of its Subsidiaries other than such
judgments, decrees, injunctions, rules or orders that, individually or
in the aggregate, would not reasonably be expected to have a Company
Material Adverse Effect.
(ii) There are no liabilities or obligations, whether
accrued, absolute, fixed, contingent or otherwise, of the Company and
its Subsidiaries as of the date hereof that would be required to be
reflected on a balance sheet prepared in accordance with U.S. GAAP that
are not so reflected on the consolidated balance sheet of the Company
and its consolidated Subsidiaries as of September 30, 1997, except such
liabilities or obligations that are described in Section 5.1(g)(ii) of
the Company Disclosure Schedule or such liabilities or obligations which
(when considered net of any associated financial benefit or asset of the
Company or such Subsidiary created or arising in connection therewith)
would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. For the avoidance of doubt, the
representation and warranty in this Section 5.1(g)(ii) shall not be
deemed to include any representation or warranty as to the amount or
quality of any assets of the Company or any of its Subsidiaries
(including any receivables or residuals) or the lack of any impairment
thereof.
(iii) Except as set forth in Section 5.1(g)(iii) of the
Company Disclosure Schedule or in the 1996 Annual Report, neither the
Company nor any of its Subsidiaries has any indebtedness, obligation or
liability of any kind relating to forward commodity contracts, commodity
futures and options, currency futures and options, stock index futures
and options, or interest rate swaps, options, caps, collars or floors,
or any hybrids of the foregoing derivative products (collectively
"Derivatives"), in each case which is material to the Company and its
Subsidiaries taken as a whole. Section 5.1(g)(iii) of the Company
Disclosure Schedule sets forth as to each Derivative (A) the applicable
notional amount, (B) the aggregate credit exposure of the Company or its
Subsidiary, as the case may be, (C) the existence of any netting
arrangements and (D) the counterparties.
23
(h) Compliance with Laws; Licenses. (i) Except as set forth in
the Company Reports prior to the date hereof, the businesses of each of
the Company and its Subsidiaries have not been, and are not being,
conducted in violation of any applicable Laws, except for possible
violations that are not, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect or prevent, materially
delay or materially impair the ability of Sellers to consummate the
transactions contemplated by this Agreement. Except as set forth in the
Company Reports prior to the date hereof or in Section 5.1(h) of the
Company Disclosure Schedule, no investigation or review by any
Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the Knowledge of the Company, threatened,
nor has any Governmental Entity indicated to the Company an intention to
conduct the same, except for those the outcome of which are not,
individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect or prevent, materially delay or materially
impair the ability of Sellers to consummate the transactions
contemplated by this Agreement. To the Knowledge of the Company, no
material change is required in the Company's or any of the Company
Material Subsidiaries' processes, properties or procedures in connection
with any such Laws, and neither the Company nor any of the Company
Material Subsidiaries has received any notice or communication of any
material noncompliance with any such Laws that has not been cured in all
material respects.
(ii) The Company and its Subsidiaries hold all Licenses
from, and have made all filings, applications and registrations with,
each Governmental Entity and other Persons necessary for the operation
of their respective businesses as presently conducted, except in each
case for such Licenses, filings, applications and registrations, the
failure of which to hold or make, individually or in the aggregate,
would not reasonably be expected to have a Company Material Adverse
Effect; all such Licenses are in full force and effect, except for such
Licenses, the failure of which to be in full force and effect,
individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect and no proceedings are pending
or, to the Knowledge of the Company, threatened by any Governmental
Entity or other Person for the suspension, revocation or termination of
any such License, except for such suspensions, revocations or
terminations that, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is in default in any
respect under any such License, except for such defaults
24
that, individually or in the aggregate, would not reasonably be expected
to have a Company Material Adverse Effect, and, except for statutory or
regulatory restrictions of general application and except as set forth
in Section 5.1(h)(ii) of the Company Disclosure Schedule, no
Governmental Entity has placed any restriction on the business or
properties of the Company or any of its Subsidiaries, except for such
restrictions that, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
(i) Receivables. All of the Receivables of the Company, together
with any instruments securing the same, (i) were made for valuable
consideration, (ii) to the Knowledge of the Company, constitute valid
obligations in all respects of the Persons shown as indebted thereon by
the records of the Company or its Subsidiaries and (iii) to the
Knowledge of the Company are legally enforceable in all respects
according to their terms (subject to the Bankruptcy and Equity
Exception), except in the case of clauses (i), (ii) and (iii) for such
Receivables, the failure of which to satisfy the requirements of such
clauses, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect. All of the
Receivables, together with any instruments securing same, (A) set forth
on Section 5.1(i) of the Company Disclosure Schedule are freely
assignable by the Company or its Subsidiaries (as the case may be) and
(B) other than those Receivables otherwise designated on Section 5.1(i)
of the Company Disclosure Schedule, are not subject to any valid right
of set-off or similar claim, except in the case of Receivables the
failure of which to be freely assignable or not subject to any valid
right of set-off or similar claim, individually or in the aggregate,
could not reasonably be expected to have a Company Material Adverse
Effect. The amounts shown on the records of the Company and its
Subsidiaries to be owing and unpaid on the respective Receivables
reflect, in all respects material to the Company, the true and correct
outstanding balances owing and unpaid thereon as of the respective dates
indicated therein.
(j) Material Contracts. Except as set forth in the Company
Reports prior to the date hereof or as disclosed in Section 5.1(j) of
the Company Disclosure Schedule, none of the Company or its Subsidiaries
has entered into or is otherwise bound by (i) any contract which
contains restrictions with respect to payment of dividends or any other
distributions in respect of its capital stock (except for those
contracts which restrict the payment of dividends upon the occurrence of
an event of default), (ii) any
25
material guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person (other than (A) the endorsement
of negotiable instruments for collection in the ordinary course of
business, (B) guarantees of letter of credit reimbursement obligations,
purchase orders and similar obligations issued for the benefit of
customers in the ordinary course of business and (C) guarantees of
indebtedness of or performance by any wholly owned Subsidiary of the
Company), (iii) any management service or consulting contract not
terminable on less than 90 days' notice which is reasonably expected to
involve the payment by the Company in any year of an amount in excess of
US$500,000, (iv) any Contract which would limit or restrict in any
manner the right or ability of the Company or any Subsidiary after the
Closing Date to engage in any line of business, or to compete with any
Persons, or (v) any Contract not entered into in the ordinary course of
business which is reasonably expected to involve the payment by the
Company of US$2,500,000 or more in any year and is not cancellable
without penalty within 90 days. Each Contract set forth in the Company
Disclosure Schedule in reference to this Section 5.1(j) is in full force
and effect and there exist no defaults or events of default or event,
occurrence, condition or act on the part of the Company or, to the
Company's Knowledge, any other party to such Contracts (including the
consummation of the transactions contemplated hereby) which, with the
giving of notice or the lapse of time, would reasonably be expected to
result in a Company Material Adverse Effect.
(k) Environmental Matters. Except as disclosed in the Company
Reports prior to the date hereof and except for such matters that,
individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect, (i) to the Company's Knowledge,
the Company and its Subsidiaries are in compliance with all applicable
Environmental Laws; (ii) to the Company's Knowledge, all properties
owned or operated by the Company or its Subsidiaries (the "Company
Properties") are not contaminated with any Hazardous Substance in
violation of any applicable Environmental Law and have not been operated
as a sanitary landfill or hazardous waste disposal site; (iii) neither
the Company nor any of its Subsidiaries has received any notices, demand
letters or requests for information from any Governmental Entity or any
third party indicating that the Company may be in violation of any
Environmental Law and none of the Company, its Subsidiaries or any of
the Company Properties are subject to any court order, administrative
order or decree arising under any Environmental Law; and (iv) to the
Company's Knowledge, no Hazardous Substance has
26
been disposed of, transferred, released or transported from any of the
Company Properties during the time such Company Property was owned or
operated by the Company or one of its Subsidiaries other than as
permitted under applicable Environmental Law.
(l) Taxes. Except to the extent that any breach, failure or
inaccuracy, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect:
(i) all Tax Returns that are required to be filed by or
with respect to the Company and each of its Subsidiaries have been duly
filed and all such Tax Returns are complete and accurate.
(ii) all Taxes shown to be due on the material
Tax Returns referred to in clause (i) have been paid in
full;
(iii) those Tax Returns referred to in clause (i) Section
5.1(l)(i) that are currently under examination by the Internal Revenue
Service or the appropriate state, local or foreign Taxing authority are
set forth in Section 5.1(l) of the Company Disclosure Schedule;
(iv) all assessments made as a result of the
examinations referred to in Section 5.1(l)(iii) have been
paid in full; and
(v) no waivers of statutes of limitation have been given
by or requested with respect to any Tax Returns of the Company or any of
its Subsidiaries other than those set forth in Section 5.1(l) of the
Company Disclosure Schedule.
Except as set forth in Section 5.1(l) of the Company Disclosure
Schedule, all amounts payable by the Company or any of its Subsidiaries
pursuant to Section 6.13(b) or 6.13(e) of the Agreement and Plan of
Merger among AT&T Capital Corporation, AT&T Corp., Hercules and Antigua
Acquisition Corporation, dated as of June 5, 1996, as amended to date
(the "Plan of Merger"), have been paid, and neither the Company nor any
of its Subsidiaries has any continuing liability with respect to any tax
sharing agreements referred to in Section 6.13(e) of the Plan of Merger
or otherwise. In addition, neither the Company nor any of its
Subsidiaries has indemnified or otherwise become obligated to any Person
with respect to any income tax liability.
27
(m) Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective
bargaining agreement, contract or other agreement or understanding with
a labor union or labor organization relating to employees of the
Company, nor is the Company or any of its Subsidiaries the subject of
any proceeding asserting that the Company or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain
with any labor union or labor organization nor is there, nor has there
been for the past five years, any labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving the Company or any of its
Subsidiaries pending or, to the Knowledge of the Company, threatened,
except in each case for those exceptions that would not, individually or
in the aggregate, reasonably be expected to have a Company Material
Adverse Effect. There have been no material work stoppages or other such
controversies during the past five years from the date hereof. The
Company and its Subsidiaries are in compliance in all respects with all
applicable Laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and are not engaged in
any unfair labor practice, except in each case with those exceptions
that would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.
(n) Intellectual Property. (i) Section 5.1(n)(i) of the Company
Disclosure Schedule lists, as of the date of this Agreement: (A) all
material foreign and domestic patents and patent applications which are
owned by the Company and its Subsidiaries; and (B) all material foreign
and domestic copyright registrations, trademark registrations, trademark
registration applications, service mark registrations, service mark
registration applications and trade names which are owned by the Company
and its Subsidiaries (collectively the "Company IP Rights"). Section
5.1(n)(i) of the Company Disclosure Schedule also lists: (1) all
material license agreements of foreign or domestic patent, trademark or
service mark rights entered into by or primarily for use by the Company
and its Subsidiaries; and (2) all material computer programs, databases
and other computer software utilized by the databases and other computer
software used by the Company and its Subsidiaries as of the Closing Date
(collectively the "Company License and Computer Rights").
(ii) Except as disclosed in the Company Reports filed with
the SEC prior to the date hereof, the Company owns, or is licensed to
use, all of the Company IP Rights
28
and the Company License and Computer Rights, with such exceptions and
would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect.
(iii) Unless otherwise indicated in Section 5.1(n)(iii) of
the Company Disclosure Schedule: (A) there are no existing or, to the
Knowledge of the Company, threatened claims by any third party based on
the use by, or challenging the ownership of, the Company IP Rights or
the Company License and Computer Rights; (B) to the Knowledge of the
Company, (1) none of the products, apparatus, methods or services which
the Company or any of its Subsidiaries makes, offers, sells or provides
infringes upon the intellectual property of others and (2) none of the
intellectual property of the Company or its Subsidiaries is being
infringed by others; (C) each item of Company IP Rights and Company
License and Computer Rights has been duly registered with, filed in or
issued by the appropriate domestic or foreign governmental agency, to
the extent required to protect such property, and each such
registration, filing and issuance remains in full force and effect; (D)
none of the Company or its Subsidiaries has received any oral or written
claim or demand from any person pertaining to or challenging the right
of the Company or its Subsidiaries to use any Company IP Rights or
Company License and Computer Rights, and no proceedings have been
instituted, are pending or, to the Knowledge of the Company, threatened
which challenge such rights; and (E) no litigation or claim is pending
or, to the Knowledge of the Company, threatened wherein the Company or
any of its Subsidiaries is accused of infringing or otherwise violating
the intellectual property right of another, or of breaching a contract
conveying rights regarding intellectual property, except in the case of
each of clauses (A), (B), (C), (D) and (E) for such exceptions that
would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. Within the six-year period
immediately prior to the date of this Agreement, to the Knowledge of the
Company, neither the Company nor its Subsidiaries made use of any
intellectual property material to the operation of their respective
businesses at the Closing Date other than rights under the Company IP
Rights and the Company License and Computer Rights, except as set forth
in Section 5.1(n)(iii) of the Company Disclosure Schedule and except
such uses as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(o) Insurance. True and complete copies of all
material insurance policies maintained by the Company and
29
its Subsidiaries (or, to the extent not yet finalized and available, the
commitments with respect thereto), together with written descriptions of
all formal self-insurance policies and programs maintained for the
benefit of the Company or any of its Subsidiaries by the Company or any
of its Affiliates, have been made available to Purchaser. Such material
policies provide coverage for the operations of the Company and its
Subsidiaries in amounts and covering such risks as the Company believes
is necessary to conduct its business. Neither the Company nor any of its
Subsidiaries has received formal notice that any such policy is invalid
or unenforceable.
(p) Lucent and Other Agreements. Section 5.1(p) of the Company
Disclosure Schedule sets forth a list of each operating agreement,
license agreement, intercompany agreement and other agreement which
involves annual payments in excess of $1,000,000 between the Company, on
the one hand, and each of Lucent Technologies Inc., AT&T Corp. or NCR
Corporation, on the other hand (all such agreements with Lucent
Technologies Inc. being referred to herein as the "Lucent Agreements"
and all such agreements with either AT&T Corp. or NCR Corporation being
referred to herein as the "Other Agreements"). Each Lucent Agreement is
in full force and effect and is a valid and binding agreement of the
parties thereto enforceable against each such party in accordance with
its terms, except as affected by the Bankruptcy and Equity Exception.
The Company has not received any notice that it is in default under any
of the Other Agreements.
(q) Brokers and Finders. Neither the Company nor any of its
Subsidiaries nor any of their respective officers, directors or
employees has employed any broker or finder or incurred any liability
for any brokerage fees, commissions or finders fees in connection with
the transactions contemplated by this Agreement, subject, however, to
the understanding set forth in Section 7.9 hereof.
(r) Bank Act (Canada). The Company is in compliance in all
material respects with the Bank Act (Canada).
(s) Employee Benefits. Except to the extent that any breach,
failure or inaccuracy, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect:
(i) Section 5.1(s) of the Company Disclosure Schedule
contains a true and complete list of each "employee benefit
plan" (within the meaning of
30
section 3(3) of ERISA, including, without limitation,
multiemployer plans (within the meaning of ERISA section 3(37)),
stock purchase, stock option, severance, employment, change-in-
control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other written employee benefit
plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA (including any funding mechanism
therefor now in effect or required in the future as a result of
the transactions contemplated by this Agreement or otherwise),
under which the Company or any of its Subsidiaries has any
present or future liability other than solely as a result of its
status as an ERISA Affiliate of a plan sponsor or any
contributing employer (provided, that, with respect to plans,
agreements, programs, policies and arrangements maintained
outside the United States, Section 5.1(s) of the Company
Disclosure Schedule contains a true and complete list of each
written plan, agreement, program, policy and arrangement). All
such plans, agreements, programs, policies and arrangements are
collectively referred to herein as "Company Plans".
(ii) To the extent requested by Purchaser, with
respect to each Company Plan for U.S. based employees, the
Company has delivered or made available to Purchaser a current,
accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent
applicable: (A) any related trust agreement or other funding
instrument; (B) the most recent determination letter, if
applicable; (C) any summary plan description; and (D) for the
three most recent years (I) the Form 5500 and attached schedules
and (II) audited financial statements.
(iii) All Company Plans are in substantial compliance
with all applicable laws, including the Code and ERISA. The
Company has received a favorable determination letter from the
Internal Revenue Service with respect to the qualified status of
each Company Plan that is an "employee pension benefit plan"
within the meaning of section 3(2) of ERISA (a "Pension Plan")
and that is intended to be qualified under section 401(a) of the
Code and the plan is so qualified and,
31
nothing has occurred, whether by action or failure to act, that
would be reasonably expected to cause the loss of such
qualification. Except as disclosed in Section 5.1(g)(i) of the
Company Disclosure Schedule, there is no pending or threatened
action, suit or claim relating to the Company Plans and, to the
knowledge of the Company, no facts exist which could give rise to
any such action, suit or claim. Neither the Company nor any
Subsidiary has engaged in any transactions with respect to any
Company Plan that could reasonably be expected to subject the
Company or any of its Subsidiaries to a tax or penalty imposed by
section 4975 of the Code.
(iv) As of the date hereof, no liability under Title
IV of ERISA has been or is expected to be incurred by the Company
or any Subsidiary with respect to any ongoing, frozen or
terminated "single-employer plan", within the meaning of section
4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single- employer plan of any entity which is
considered one employer with the Company under section 4001 of
ERISA or section 414 of the Code (an "ERISA Affiliate") other
than the payment of premiums of the Pension Benefit Guaranty
Corporation. None of the Company, its Subsidiaries or any ERISA
Affiliate have contributed, or been obligated to contribute, to a
multiemployer plan under Subtitle E of Title IV of ERISA at any
time during the six-year period prior to the date hereof.
(v) (A) No event has occurred and no condition exists
that would be reasonably likely to subject the Company or its
Subsidiaries to any tax, fine, lien or penalty imposed by ERISA,
the Code or other applicable laws, rules and regulations with
respect to a Company Plan; and (B) for each Company Plan with
resect to which a Form 5500 has been field, no material change
has occurred with respect to the matters covered by the most
recent Form 5500 since the date thereof.
(vi) All contributions required to be made by the
Company or any of its Subsidiaries under the terms of any Company
Plan have been timely made or have been reflected on the most
recent consolidated balance sheet filed or incorporated by
reference in the Company Reports prior to the
32
date hereof. Neither any Company Plan nor any single-employer
plan of an ERISA Affiliate has had an "accumulated funding
deficiency" (whether or not waived) within the meaning of section
412 of the Code or section 302 of ERISA. Neither the Company nor
its Subsidiaries has provided, or is required to provide,
security to any Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to section 401(a)(29) of the Code.
(vii) With respect to each single-employer plan of an
ERISA Affiliate, as of the last day of the most recent plan year
ended prior to the date hereof, the actuarially determined
present value of all "benefit liabilities" within the meaning of
section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation) did
not exceed the then current value of the assets of any such
single- employer plan. Neither the Company nor its Subsidiaries
maintain or contribute to a Company Plan subject to Title IV of
ERISA.
Notwithstanding anything in this Agreement to the contrary, the
Company shall be deemed to have made no representation or warranty whatsoever
and the Sellers shall be deemed to have granted no indemnity with respect to any
matter arising from, relating to or otherwise in respect of, the levels of
compensation (including bonuses and or severance arrangements) or the numbers or
ownership of outstanding stock options or phantom equity interests or stock
appreciation rights owned by employees of the Company or its Subsidiaries.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
6.1 Representations and Warranties of Purchaser. Purchaser
represents and warrants to Sellers that, except as set forth on the specific
section of the Purchaser Disclosure Schedule referenced to in any particular
representation and warranty referenced below:
(a) Organization, Good Standing and Qualification.
(i) Each of Purchaser and its Subsidiaries is a corporation
duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of organization and
has all requisite corporate or similar power and authority
to own and operate its properties and assets and to carry on
33
its business as presently conducted and is qualified to do business and
is in good standing as a foreign corporation in each jurisdiction where
the ownership or operation of its properties or conduct of its business
requires such qualification, except where the failure to be so qualified
or in good standing, when taken together with all other such failures,
would not reasonably be expected to have a Purchaser Material Adverse
Effect.
(ii) Section 6.1(a)(ii) of the Purchaser Disclosure
Schedule contains a complete list of each Subsidiary of Purchaser and
each Purchaser Material Subsidiary. Purchaser has made available to
Hercules a complete and correct copy of the certificates of
incorporation and by-laws (or comparable documents), each as amended to
date, of the Purchaser and each of the Purchaser Material Subsidiaries
(other than those of Newcourt DFS Inc.). Purchaser's and the Purchaser
Material Subsidiaries' certificates of incorporation and by-laws (or
comparable documents) so made available are in full force and effect,
and neither Purchaser nor any of its Subsidiaries is in default or
violation of any provisions of its respective certificate of
incorporation or by-laws except for such defaults or violations which,
when taken together with all other such defaults or violations, would
not reasonably be expected to have a Purchaser Material Adverse Effect.
Section 6.1(a)(ii) of the Purchaser Disclosure Schedule contains a
correct and complete list of each jurisdiction where Purchaser and each
of the Purchaser Material Subsidiaries is organized and qualified to do
business. Except as set forth in Section 6.1(a)(ii) of the Purchaser
Disclosure Schedule, and except for securities acquired in the ordinary
course of business, including in connection with the realization on
collateral positions and the acquisition of securities as part of any
financing transaction, neither Purchaser nor any of its Subsidiaries
owns less than 100% of the outstanding voting securities or other equity
interests of any corporation, joint venture or other entity that would
qualify as a Purchaser Material Subsidiary (other than investments in
marketable securities of any Person, none of which exceed 5% of the
outstanding capital stock or other equity interests of such Person).
(b) Capital Structure. The authorized capital stock of Purchaser
consists of an unlimited number of Purchaser Common Shares, of which
82,675,910 shares were outstanding on November 17, 1997; an unlimited
number of Special Shares, of which no shares were outstanding on
November 17, 1997; and an unlimited number of Class A preference shares
issuable in series ("Preference Shares"), of which no shares
34
were outstanding on November 17, 1997. All of the outstanding shares of
capital stock have been duly authorized and are validly issued, fully
paid and nonassessable. As of the date hereof, there are 4,228,490
outstanding Purchaser Options. On the date of this Agreement, no
Purchaser Common Shares, Special Shares or Preference Shares have been
issued except Purchaser Common Shares issued upon the exercise of
Purchaser Options. As of the date hereof, there are 3,845,010 Purchaser
Options that are "in-the-money" (by an aggregate amount of Canadian
$112.6 million), assuming that Purchaser Common Shares have a market
value of Canadian $50 per share. Each of the outstanding shares of
capital stock or other equity securities of each Purchaser Material
Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and, except for directors' qualifying shares, owned by
Purchaser or a direct or indirect wholly owned Subsidiary of Purchaser,
free and clear of any Lien. Except as set forth in Section 6.1(b) of the
Purchaser's Disclosure Schedule, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or sell any shares of capital stock
or other equity securities of Purchaser or any Purchaser Material
Subsidiary or any securities or obligations convertible or exchangeable
into or exercisable for, or giving any Person a right to subscribe for
or acquire, any equity securities of Purchaser or any Purchaser Material
Subsidiary, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. Purchaser does not have outstanding
Voting Debt.
(c) Authority. No vote, or other approval or consent or other
evidence of approval of holders of capital stock of Purchaser is
necessary (as a matter of law, as required by the TSE, ME or NYSE or
otherwise) to approve this Agreement, the Investment Agreement, the
Transfer Restriction Agreement, the Registration Rights Agreement, the
Financing Documents or any of the transactions contemplated hereby and
thereby (including the Bought-Deal Financing). Purchaser has all
requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its
obligations under this Agreement, the Investment Agreement, the Transfer
Restriction Agreement, the Registration Rights Agreement and the
Financing Documents and to consummate the transactions contemplated
hereby and thereby. Each of this Agreement, the Investment Agreement,
the Transfer Restriction Agreement, the Registration Rights Agreement
and the
35
Financing Documents constitutes a valid and legally binding agreement of
Purchaser enforceable against Purchaser in accordance with its terms,
except as affected by the Bankruptcy and Equity Exception.
(d) Governmental Filings; Consents; No Violations. (i) Other than
the filings and/or notices (A) pursuant to Section 7.4, (B) under the
HSR Act, the Exon-Florio provisions of the United States Defense
Production Act, the Competition Act (Canada), the Exchange Act and the
applicable rules of the NYSE, TSE and ME and (C) set forth in Section
6.1(d)(i) of the Purchaser Disclosure Schedule, no notices, reports or
other filings are required to be made by Purchaser or any of its
Subsidiaries with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by Purchaser or any of
its Subsidiaries from, any Governmental Entity, in connection with the
execution and delivery of this Agreement, the Investment Agreement, the
Transfer Restriction Agreement, the Registration Rights Agreement and
the Financing Documents by Purchaser and the consummation by Purchaser
of the transactions contemplated hereby and thereby, except those as to
which the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Purchaser Material Adverse Effect
or prevent, materially delay or materially impair the ability of
Purchaser to consummate the transactions contemplated by this Agreement,
the Investment Agreement, the Transfer Restriction Agreement, the
Registration Rights Agreement and the Financing Documents.
(ii) The execution, delivery and performance of this
Agreement, the Investment Agreement, the Transfer Restriction Agreement,
the Registration Rights Agreement and the Financing Documents by
Purchaser do not, and the consummation by Purchaser of the transactions
contemplated hereby and thereby will not, constitute or result in (A) a
breach or violation of, or a default under, the certificate of
incorporation or by-laws of Purchaser or the comparable governing
instruments of any of its Subsidiaries, (B) a breach or violation of, or
a default under, the acceleration of any material obligations or the
creation of a Lien on any material assets of Purchaser or any of its
Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any provision of any Contracts of Purchaser or any of its
Subsidiaries or any Law or License to which Purchaser or any of its
Subsidiaries is subject or (C) any change in the rights or obligations
of any party under any of the Contracts (including, without limitation,
the Dell Agreements), except, in the case of clause (B) or (C) above,
36
for any breach, violation, default, acceleration, creation or change
that, individually or in the aggregate, is not reasonably likely to have
a Purchaser Material Adverse Effect or prevent, materially delay or
materially impair the ability of Purchaser to consummate the
transactions contemplated by this Agreement, the Investment Agreement,
the Transfer Restriction Agreement, the Registration Rights Agreement
and the Financing Documents (collectively, "Purchaser Material
Breaches"). Section 6.1(d)(ii) of the Purchaser Disclosure Schedule sets
forth a correct and complete list of each Contract and License of
Purchaser and its Subsidiaries pursuant to which a consent or waiver is
required prior to consummation of the transactions contemplated by this
Agreement, the Investment Agreement, the Transfer Restriction Agreement,
the Registration Rights Agreement and the Financing Documents in order
to avoid the occurrence of a Purchaser Material Breach under such
Contract or License.
(iii) Neither Purchaser nor any of its Subsidiaries is in
breach or default under any Contract other than such breaches or
defaults that, individually or in the aggregate, would not reasonably be
expected to have a Purchaser Material Adverse Effect. No event has
occurred (except for the execution of this Agreement) which either
entitles, or would upon notice or with the lapse of time or both,
entitle the holder of any indebtedness of Purchaser or any of its
Subsidiaries to accelerate, or which does accelerate, the maturity of
any indebtedness which is material to Purchaser and its Subsidiaries
taken as a whole.
(e) Purchaser Reports; Financial Statements. Purchaser has made
available to Hercules each registration statement, prospectus, report,
proxy statement, information circular or material change report prepared
by Purchaser since the Audit Date, including (i) Purchaser's Annual
Report for the year ended December 31, 1996, (ii) Purchaser's Annual
Information Form for the year ended December 31, 1996, (iii) any
offering memorandum, prospectus, registration statement, proxy
statement, information circular or material change report prepared by
Purchaser or its representatives since the Audit Date, including any
prepared in connection with the financing of the transaction
contemplated by this Agreement and (iii) Purchaser's quarterly reports
for the periods ended March 31, 1997 and June 30, 1997, each in the form
(including exhibits, annexes and any amendments thereto) filed with the
securities regulatory authorities in each of the Provinces of Canada
("CSR"), SEC, NYSE, ME and/or TSE (collectively, including any such
reports filed subsequent to the date
37
hereof, the "Purchaser Reports"). As of their respective dates, the
Purchaser Reports did not, and any Purchaser Reports filed with the CSR,
SEC, NYSE, ME and/or TSE subsequent to the date hereof will not, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading. As of their respective dates, the Purchaser Reports
complied, and any Purchaser Reports filed with the CSR, SEC, NYSE, ME
and/or TSE subsequent to the date hereof will comply, as to form, in all
material respects with the requirements of all rules and regulations of
any Governmental Entity applicable thereto, as well as those of the
NYSE, ME and TSE. Each of the consolidated balance sheets included in or
incorporated by reference into the Purchaser Reports (including the
related notes and schedules) fairly presents the consolidated financial
position of Purchaser and its Subsidiaries as of its date and each of
the consolidated statements of income and retained earnings and
consolidated statements of cash flows included in or incorporated by
reference into the Purchaser Reports (including any related notes and
schedules) fairly presents the results of operations, retained earnings
and cash flows, as the case may be, of Purchaser and its Subsidiaries
for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments that are not expected
to be material in amount or effect), in each case in accordance with
Canadian GAAP consistently applied during the periods involved.
(f) Absence of Certain Changes. (i) Except as disclosed in the
Purchaser Reports prior to the date hereof or in Section 6.1(f) of the
Purchaser Disclosure Schedule, from the Audit Date to the date hereof,
Purchaser and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any transaction other than
according to, the ordinary and usual course of such businesses and there
is not and has not been (A) any change in the financial condition,
properties, business or results of operations of Purchaser and its
Subsidiaries; or (B) any damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise
used by Purchaser or any of the Purchaser Material Subsidiaries, whether
or not covered by insurance, with such exceptions to this Section
6.1(f)(i) that would not, individually or in the aggregate, reasonably
be expected to have a Purchaser Material Adverse Effect.
38
(ii) Except as disclosed in the Purchaser Reports prior to
the date hereof or in Section 6.1(f) of the Purchaser Disclosure
Schedule, since the Audit Date to the date hereof, there is not and has
not been (A) any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of Purchaser; or
(B) any change by Purchaser in accounting principles, practices or
methods, except as required by Law or Canadian GAAP; or (C) any event or
action which, if it had taken place or been taken following the
execution of this Agreement would not have been permitted by Section 7.2
without the prior written consent of Hercules.
(g) Liabilities. There are no liabilities or obligations, whether
accrued, absolute, fixed, contingent or otherwise, of Purchaser and its
Subsidiaries as of the date hereof that would be required to be
reflected on a balance sheet prepared in accordance with Canadian GAAP
that are not so reflected on the consolidated balance sheet of Purchaser
and its consolidated Subsidiaries as of September 30, 1997, except such
liabilities or obligations that are described in Section 6.1(g) of the
Purchaser Disclosure Schedule or such liabilities or obligations which
(when considered net of any associated financial benefit or asset of
Purchaser or such Subsidiary created or arising in connection therewith)
would not, individually or in the aggregate, reasonably be expected to
have a Purchaser Material Adverse Effect. For the avoidance of doubt,
the representation and warranty in this Section 6.1(g) shall not be
deemed to include any representation or warranty as to the amount or
quality of any assets of Purchaser or any of its Subsidiaries (including
any receivables or residuals) or the lack of any impairment thereof.
(h) Compliance with Laws; Licenses. (i) Except as set forth in
the Purchaser Reports prior to the date hereof, the businesses of each
of Purchaser and its Subsidiaries have not been, and are not being,
conducted in violation of any applicable Laws, except for possible
violations that are not, individually or in the aggregate, reasonably
likely to have a Purchaser Material Adverse Effect or prevent,
materially delay or materially impair the ability of Purchaser to
consummate the transactions contemplated by this Agreement, the
Stockholders' Agreements or the Registration Rights Agreement. Except as
set forth in the Purchaser Reports prior to the date hereof, no
investigation or review (other than reviews taking place in the ordinary
course of business) by any Governmental Entity with respect to Purchaser
or any of its Subsidiaries is pending or, to the Knowledge of Purchaser,
threatened, nor has any
39
Governmental Entity indicated to Purchaser an intention to conduct the
same, except for those the outcome of which are not, individually or in
the aggregate, reasonably likely to have a Purchaser Material Adverse
Effect or prevent, materially delay or materially impair the ability of
Purchaser to consummate the transactions contemplated by this Agreement,
the Stockholders' Agreements or the Registration Rights Agreement. To
the Knowledge of Purchaser, no material change is required in
Purchaser's or any of its Subsidiaries' processes, properties or
procedures in connection with any such Laws, and neither Purchaser nor
any of its Subsidiaries has received any notice or communication of any
material noncompliance with any such Laws that has not been cured in all
material respects.
(ii) Purchaser and its Subsidiaries hold all Licenses
from, and have made all filings, applications and registrations with,
each Governmental Entity and other Persons necessary for the operation
of their respective businesses as presently conducted, except in each
case for such Licenses, filings, applications and registrations, the
failure of which to hold or make, individually or in the aggregate,
would not reasonably be expected to have a Purchaser Material Adverse
Effect; all such Licenses are in full force and effect, except for such
Licenses, the failure of which to be in full force and effect,
individually or in the aggregate, would not reasonably be expected to
have a Purchaser Material Adverse Effect and no proceedings are pending
or, to the Knowledge of Purchaser, threatened by any Governmental Entity
or other Person for the suspension, revocation or termination of any
such License, except for such suspensions, revocations or terminations
that, individually or in the aggregate, would not reasonably be expected
to have a Purchaser Material Adverse Effect. Except as set forth in
Section 6.1(h)(ii) of the Purchaser Disclosure Schedule, neither
Purchaser nor any of its Subsidiaries is in default in any respect under
any such License, except for such defaults that, individually or in the
aggregate, would not reasonably be expected to have a Purchaser Material
Adverse Effect, and, except for statutory or regulatory restrictions of
general application, no Governmental Entity has placed any restriction
on the business or properties of Purchaser or any of its Subsidiaries,
except for such restrictions that, individually or in the aggregate,
would not reasonably be expected to have a Purchaser Material Adverse
Effect.
(i) Other Agreements. (i) Section 6.1(i)(i) of the
Purchaser Disclosure Schedule sets forth a list of each
material contract between Purchaser or any of its
40
Subsidiaries, on the one hand, and Dell Computer Corporation or any of
its respective Subsidiaries, on the other hand (the "Dell Agreements").
Each Dell Agreement is in full force and effect and is a valid and
binding agreement of the parties thereto enforceable against each such
party in accordance with its terms, except as affected by the Bankruptcy
and Equity Exception. Purchaser has not received any notice that it is
in default under any of the Dell Agreements. Purchaser represents and
warrants that neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby shall cause a
termination of any of the Dell Agreements.
(ii) Purchaser has provided Hercules with copies of each
shareholders' agreement, transfer restriction agreement, registration
rights agreement, voting agreement or other similar agreement concerning
the Purchaser Common Shares to which Purchaser is a party or of which
Purchaser has Knowledge (together with the Stockholders' Agreements, the
"Purchaser Common Share Agreements"), each as in effect on the date
hereof. All such agreements are set forth in Section 6.1(i)(ii) of the
Purchaser Disclosure Schedule.
(j) Brokers and Finders. Purchaser has not employed any broker or
finder or incurred any liability for any brokerage fees, commissions or
finders fees in connection with the transactions contemplated by this
Agreement, the Stockholders Agreement or the Registration Rights
Agreement, except that Purchaser has employed CIBC Wood Gundy Securities
Inc., Goldman, Sachs & Co. and Merrill Lynch to act as its financial
advisors, the arrangements with which have been disclosed to Sellers
prior to the date hereof and the fees of which will be borne entirely by
Purchaser.
(k) Available Funds. Attached hereto as Exhibit H is a fully
executed copy of the Underwriting Agreement and commitment letter for a
"bought deal" regarding a public offering of Purchaser Common Shares and
the commitment letter to enter into the Installment Receipt and Pledge
Agreement (which together with the other documents entered into or to be
entered into in connection with the Bought-Deal Financing are referred
to as the "Financing Documents") which, if completed in accordance with
its terms, will yield net proceeds of not less than US$1,100,000,000
(the "Bought-Deal Financing") available, subject to escrow arrangements
with respect to the public offering of subscription receipts for
Purchaser Common Shares in the Installment Receipt and Pledge Agreement
(the "Escrow Arrangement"), within three weeks following the date
hereof. After due inquiry, Purchaser has no reason to believe that any
of the
41
conditions that it is required to satisfy under the Underwriting
Agreement or any other Financing Document will not be satisfied on a
timely basis.
(l) Validity of Shares. The issuance of the Purchaser Common
Shares comprising part of the Purchase Price has been duly authorized by
all necessary corporate action on the part of Purchaser and, when such
Purchaser Common Shares are issued and delivered in accordance with the
terms of this Agreement, such Purchaser Common Shares will be validly
issued, fully paid and nonassessable and shall be free and clear of any
Liens (other than pursuant to the Transfer Restriction Agreement and the
Indemnity Escrow Agreement or to the extent created by any Holder). The
Purchaser is a reporting issuer under the Securities Act (Ontario) and
the Securities Act (Quebec) and is not in default in any material
respect of any requirement of either such Act or the regulations
thereunder; the Purchaser Common Shares are registered under the
Exchange Act, and the Purchaser has made all filings and reports
required by the Exchange Act, the Securities Act and the rules and
regulations of the SEC thereunder; and the Purchaser is in compliance in
all material respects with all of the rules and regulations of the NYSE.
All of the issued and outstanding Purchaser Common Shares are, and the
Purchaser Common Shares to be issued under Section 2.2(b) will at the
time of such issuance be, listed and posted for trading on each of the
NYSE, TSE and ME. There is no undertaking required or other condition
imposed by any of the NYSE, TSE or ME in connection with the
transactions contemplated herein which would have the effect of
restricting the transferability of the Purchaser Common Shares.
(m) Investment Intent. Purchaser is acquiring the
Stock for its own account, for investment and not with a
view to, or for resale in connection with, the distribution
thereof.
(n) Bank Act (Canada). Purchaser is not a "financial
institution" as such term is defined in the Bank Act (Canada).
(o) Limitation on Liability. Purchaser understands and agrees
that none of the Sellers, the Company nor any of their respective
Affiliates are making any representation and warranty whatsoever,
express or implied, other than those representations and warranties of
Sellers and the Company expressly set forth in Articles IV and V,
respectively. Purchaser understands and agrees that, following the
Closing, it shall not be entitled to
42
indemnification from Sellers with respect to any claims arising out of
any breach by Sellers or the Company of this Agreement, including any
breach of a representation and warranty, except as expressly provided in
Section 10.1. Purchaser acknowledges that neither Hercules nor the
Company nor any of their respective Affiliates, directors, officers,
employees, counsel, accountants or other representatives shall have any
liability to Purchaser or any of the underwriters in the Bought-Deal
Financing whatsoever in connection with any offering memorandum,
prospectus, registration statement or proxy statement prepared by
Purchaser or its representatives in connection with the Purchaser's
financing of the transactions contemplated by this Agreement, except
with respect to the written information about Hercules furnished by
Hercules specifically for inclusion in such documents which is set forth
in Section 6.1(o) of the Seller Disclosure Schedule (the "Hercules
Information").
ARTICLE VII
COVENANTS
7.1 Interim Operations of the Company. (a) Hercules and the
Company agree that, after the date hereof and prior to the Closing
(unless Purchaser shall otherwise approve in writing, which approval
shall not be unreasonably withheld or delayed, and except as otherwise
expressly contemplated by this Agreement or Section 7.1(a) of the
Company Disclosure Schedule and Section 7.1(a) of the Seller Disclosure
Schedule):
(i) the business of the Company and its Subsidiaries
shall, subject to the further provisions of this Section 7.1(a),
be conducted in the ordinary and usual course and, to the extent
consistent therewith, the Company and its Subsidiaries shall use
reasonable efforts to preserve its business organization intact
and maintain its existing relations and goodwill with customers,
suppliers, distributors, creditors, lessors and business
associates;
(ii) the Company shall not (A) sell or pledge any capital
stock owned by it in any of its Subsidiaries (other than pursuant
to a merger of two or more wholly owned Subsidiaries); (B) amend
its or its Subsidiaries' charter or by-laws (or comparable
documents); (C) split, combine or reclassify, or issue or
authorize the issuance of any other securities in respect of, in
lieu of or in substitution for, its outstanding shares of
43
capital stock; (D) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property in respect
of any capital stock; or (E) repurchase, redeem or otherwise
acquire, or permit any of its Subsidiaries to purchase, redeem or
otherwise acquire, any shares of its capital stock or any
securities convertible into or exchangeable or exercisable for
any shares of its capital stock;
(iii) neither the Company nor any of its Subsidiaries
shall: (A) issue, sell, pledge, dispose of or encumber, or
authorize or propose the issuance, sale, pledge, disposition or
encumbrance of, any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its
capital stock of any class (other than Shares issuable pursuant
to Company Options outstanding on the date hereof); or (B) other
than (1) pursuant to a merger of two or more wholly owned
Subsidiaries, (2) in connection with securitization transactions
undertaken in the ordinary and usual course of business, (3) in
the ordinary and usual course of business and in an amount not in
excess of US$20,000,000 in any transaction or series of new
related transactions or (4) in connection with lease renewals or
sales of leased property to the lessee thereof, transfer, lease,
license, guarantee, sell, mortgage, pledge or dispose of any
other property or assets (including capital stock of any of its
Subsidiaries) or encumber any property or assets (including
capital stock of any of its Subsidiaries); or (C) other than in
the ordinary and usual course of business, incur or modify any
material indebtedness or other liability; or (D) purchase or
acquire assets or other property (other than for the purpose of
financing the purchase or lease thereof by a third party) (x)
which purchase or acquisition is not in the ordinary and usual
course of business or (y) which assets or other property has a
fair market value in excess of US$10,000,000 in any transaction
or series of related transactions; or (E) expend funds in excess
of US$50,000 in the aggregate for environmental remedial actions
at the Auburn Facility;
(iv) neither the Company nor any of its Subsidiaries shall
terminate, establish, adopt, enter into, make any new grants or
awards under, amend or otherwise modify, any Company Plans or
employment agreements or increase the salary, wage, bonus or
other
44
compensation of any employees (other than payments required or
permitted under the Company's retirement plans, severance plans
and annual incentive plans) except (A) grants, awards and
increases that are contemplated by existing board resolutions or
this Agreement as set forth in Section 7.1(a)(iv) of the Company
Disclosure Schedule or (B) increases occurring in the ordinary
and usual course of business (which shall include normal periodic
performance reviews and related compensation and benefit
increases) or (C) otherwise required by applicable law or the
terms of such plans;
(v) neither the Company nor any of its Subsidiaries shall
settle or compromise any claim or litigation for an amount in
excess of US$5,000,000 or, except in the ordinary and usual
course of business modify, amend or terminate any of its material
Contracts or waive, release or assign any material rights or
claims;
(vi) neither the Company nor any of its Subsidiaries shall
make any Tax election or permit any insurance policy naming it as
a beneficiary or loss- payable payee to be cancelled or
terminated except in the ordinary and usual course of business;
(vii) the Company and its Subsidiaries shall promptly
notify the Purchaser of receipt of any notice from any
significant customer of the Company or any of its Subsidiaries of
such customer's intention to terminate any material Contract with
the Company or any of its Subsidiaries;
(viii) neither the Company nor any of its Subsidiaries
shall change any accounting principle used by the Company or any
of its Subsidiaries other than as required by U.S. GAAP or
applicable law (in which case the Company will give Purchaser
notice of such change);
(ix) neither the Company nor any of its Subsidiaries shall
(A) pay any dividend or other distribution to Hercules or any of
its Affiliates in cash, stock or property (other than, for the
avoidance of doubt, the $750,000 management fee payable to
Hercules or its Affiliates by the Company on or prior to December
31, 1997, but in no event for any period or portion thereof
thereafter), (B) issue any capital stock, options, warrants or
similar instruments, or (C) transfer any property or assets to,
or make other
45
financial accommodations to, Hercules or any of its Affiliates
(other than the $750,000 management fee payable to Hercules or
its Affiliates by the Company on or prior to December 31, 1997,
but in no event for any period or portion thereof thereafter);
(x) the Company will not make and Hercules will not cause
the Company to make any amendments or modifications to its credit
manual; and
(xi) neither the Company nor any of its Subsidiaries will
authorize or enter into any binding, non-cancellable agreement to
do any of the foregoing that may not be terminated without
penalty immediately after the Closing.
(b) Sellers agree that, after the date hereof and prior to the
Closing (unless Purchaser shall otherwise approve in writing) none of
them shall sell, assign, pledge, dispose of or encumber any Shares owned
by them or any of their Affiliates, except as contemplated by Section
2.1(b).
7.2 Interim Operations of Purchaser. Purchaser agrees that, after
the date hereof and prior to the Closing (unless Hercules shall
otherwise approve in writing, which approval shall not be unreasonably
withheld or delayed, and except as otherwise expressly contemplated by
this Agreement or Section 7.2 of the Purchaser Disclosure Schedule):
(i) the business of Purchaser and its Subsidiaries shall
be conducted in the ordinary and usual course (except to the
extent such conduct would not otherwise adversely affect the
value of the Purchaser and its Subsidiaries, taken as a whole, or
impair or delay the Purchaser's ability to consummate the
transactions contemplated by this Agreement, including the
Bought-Deal Financing, in each case, in any material respect)
and, to the extent consistent therewith, Purchaser and its
Subsidiaries shall use all reasonable efforts to preserve its
business organization intact and maintain its existing relations
and goodwill with material customers, material suppliers,
material distributors, material creditors, material lessors and
material business associates, provided that to the extent that
any of the foregoing (other than financing or credit transactions
entered into by the Purchaser) would require Purchaser to obtain
prior consent under the Investment Agreement, Purchaser shall
obtain the prior consent of Hercules,
46
which consent right it shall exercise reasonably, in
good faith and in the best interests of the Purchaser;
(ii) Purchaser shall not (A) amend its charter or by-laws
(or comparable documents); (B) split, combine or reclassify, or
issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for, its outstanding
shares of capital stock; (C) declare, set aside or pay any
dividend payable in cash, stock or property in respect of any
capital stock, except for cash dividends declared and paid with
board approval in the ordinary course of business; or (D)
repurchase, redeem or otherwise acquire any shares of its capital
stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock;
(iii) neither Purchaser nor any of the Purchaser Material
Subsidiaries shall issue, sell, pledge, dispose of or encumber,
or authorize or propose the issuance, sale, pledge, disposition
or encumbrance of, any shares of, or securities convertible into
or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of, its
capital stock of any class, other than (A) Purchaser Common
Shares issuable pursuant to Purchaser Options outstanding on the
date hereof, (B) in respect of the Bought-Deal Financing, (C)
issuances of shares or grants of options for the purpose of
compensating employees, officers and directors consistent with
past business practice, provided that in no event shall the
aggregate number of shares so issued and options so granted
represent greater than 5% of the total number of shares
outstanding as of the date of this Agreement, (D) issuances of
shares for the purpose of effecting acquisitions of businesses,
properties or assets having a purchase price not in excess of
US$20,000,000 or (E) transactions solely between Purchaser and
one or more of its wholly-owned Subsidiaries or transactions
solely between or among wholly-owned Subsidiaries;
(iv) Purchaser shall not amend or authorize an amendment
to, waive or authorize any waiver of rights under, or terminate
any of the Financing Documents or any of the Purchaser Common
Share Agreements (other than the Shareholders' Agreement) to
which it is a party or any other agreement relating to the
transactions contemplated by this Agreement without the
47
prior written approval of Hercules, which approval will
not be unreasonably withheld or delayed; and
(v) neither Purchaser nor any of its Subsidiaries will
authorize or enter into any binding, non-cancellable agreement to
do any of the foregoing that may not be terminated without
penalty immediately after the Closing.
7.3 Access; Confidentiality. (a) Upon reasonable notice, and
except as may otherwise be required by applicable law, Hercules shall
(and shall cause the Company and its Subsidiaries to) afford Purchaser's
directors, officers, employees, counsel, accountants and other
authorized representatives access, during normal business hours
throughout the period prior to the Closing, to the properties, books,
Contracts and records of the Company and, during such period, shall (and
shall cause the Company and its Subsidiaries to) furnish promptly to
Purchaser all information concerning the business, properties and
personnel of the Company as may reasonably be requested, provided that
no investigation pursuant to this Section shall affect or be deemed to
modify any representation or warranty made by Sellers, and provided,
further, that the foregoing shall not require Hercules or the Company to
permit any inspection, or to disclose any information, that in the
reasonable judgment of Hercules would result in the disclosure of any
trade secrets of third parties or violate any of its or the Company's
obligations with respect to confidentiality. All requests for
information made pursuant to this Section shall be directed to an
executive officer of Hercules or such Person as may be designated by its
executive officers, as the case may be. Any information regarding the
Company heretofore or hereafter obtained by Purchaser or its
representatives from either Hercules or the Company shall be subject to
the terms of the Confidentiality Agreement, and such information shall
be held by Purchaser and its representatives in accordance with the
terms of the Confidentiality Agreement. Purchaser agrees to comply, and
to ensure that its representatives comply, with all reasonable
restrictions imposed upon Purchaser by Hercules or the Company in
connection with the access provided pursuant hereto and, in the event
this Agreement is terminated, will indemnify and hold harmless the
Sellers for Losses and Expenses arising as a direct result of any act or
omission by Hercules, the Company or any of the Company's Subsidiaries
taken or not taken, as the case may be, at the direction of Purchaser or
its representatives.
48
(b) Upon reasonable notice, and except as may otherwise be
required by applicable law, Purchaser shall (and shall cause its
Subsidiaries to) afford Hercules's directors, officers, employees,
counsel, accountants and other authorized representatives access, during
normal business hours throughout the period prior to the Closing, to the
properties, books, Contracts and records of Purchaser and, during such
period, shall (and shall cause its Subsidiaries to) furnish promptly to
Hercules all information concerning the business, properties and
personnel of Purchaser as may reasonably be requested, provided that no
investigation pursuant to this Section shall affect or be deemed to
modify any representation or warranty made by Purchaser, and provided,
further, that the foregoing shall not require Purchaser to permit any
inspection, or to disclose any information, that in the reasonable
judgment of Purchaser would result in the disclosure of any trade
secrets of third parties or violate any of its obligations with respect
to confidentiality. All requests for information made pursuant to this
Section shall be directed to an executive officer of Purchaser or such
Person as may be designated by its executive officers, as the case may
be. Any information regarding Purchaser heretofore or hereafter obtained
by Hercules or its representatives from Purchaser shall be subject to
the terms of the Purchaser Confidentiality Agreement, and such
information shall be held by Hercules and the Company and their
representatives in accordance with the terms of the Purchaser
Confidentiality Agreement. Hercules agrees to comply, and to ensure that
its representatives comply, with all reasonable restrictions imposed
upon Hercules by Purchaser in connection with the access provided
pursuant hereto and, in the event this Agreement is terminated, will
indemnify and hold harmless the Purchaser for Losses and Expenses
arising as a direct result of any act or omission by Purchaser or any of
the Purchaser's Subsidiaries taken or not taken, as the case may be, at
the direction of Hercules or its representatives.
7.4 Filings; Other Actions; Notification. (a) Sellers and
Purchaser shall cooperate with each other and use (and cause their
respective Subsidiaries to use) their respective reasonable best efforts
to prepare and file as promptly as practicable all documentation to
effect all necessary applications, notices, petitions, filings and other
documents, including notification and report under the HSR Act, the
Exon-Florio provisions of the United States Defense Production Act and
the Competition Act (Canada) and to obtain as promptly as practicable
all permits, consents, approvals and authorizations necessary or
advisable to be
49
obtained from any Governmental Entity in connection with the
transactions contemplated by this Agreement; provided that Sellers shall
not be required to prepare and file any such documentation or to obtain
any such permits, consents, approvals and authorizations in connection
with the Purchaser's financing of its purchase of Stock under this
Agreement, all of which shall be the sole responsibility of Purchaser.
Subject to applicable laws relating to the exchange of information,
Hercules and Purchaser shall have the right to review in advance, and to
the extent practicable each will consult the other on, all the
information relating to the Company, Sellers or Purchaser, as the case
may be, and any of their respective Subsidiaries, that appear in any
filing made with, or written materials submitted to, any Governmental
Entity in connection with the transactions (including Purchaser's
financing of its purchase of Stock hereunder) contemplated by this
Agreement. In exercising the foregoing right, each of Hercules and
Purchaser shall act reasonably and as promptly as practicable.
(b) Without limiting the generality of the undertakings pursuant
to this Section, Hercules and Purchaser each agree to take or cause to
be taken the following actions: (i) provide promptly to any and all
federal, state, local or foreign court or Government Entity with
jurisdiction over enforcement of any applicable antitrust laws
("Government Antitrust Entity") information and documents requested by
any Government Antitrust Entity or necessary, proper or advisable to
permit consummation of the transactions contemplated by this Agreement;
and (ii) take promptly, in the event that any permanent or preliminary
injunction or other order is entered or becomes reasonably foreseeable
to be entered in any proceeding that would make consummation of such
transactions in accordance with the terms of this Agreement unlawful or
that would prevent or delay consummation of the transactions
contemplated by this Agreement, any and all commercially reasonable
steps (including the appeal thereof or the posting of a bond, but not
including undertaking the sale or other disposition of, or the holding
separate of, any assets, categories of assets or businesses of Hercules,
the Company or Purchaser or the respective Subsidiaries of any of them
having an aggregate value in excess of 10% of the pro forma combined
assets of the Company and the Purchaser following the Closing) necessary
to vacate, modify or suspend such injunction or order so as to permit
such consummation on a schedule as close as possible to that
contemplated by this Agreement; provided that Sellers shall not be
required to take any action contemplated by clauses
50
(i) and (ii) above with respect to or in connection with the Purchaser's
financing of its purchase of Stock under this Agreement, it being
understood that the taking of all such actions shall be the sole
responsibility of Purchaser.
(c) Hercules and Purchaser each shall, upon request by the other,
furnish the other with all information concerning themselves, their
Subsidiaries, directors, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection with
any statement, filing, notice or application made by or on behalf of
Sellers, the Company, Purchaser or any of their respective Subsidiaries
to any Governmental Entity in connection with the transactions
contemplated by this Agreement.
(d) Hercules and Purchaser each shall keep the other apprised of
the status of matters relating to completion of the transactions
contemplated hereby, including promptly furnishing the other with copies
of notices or other communications received by Hercules or Purchaser, as
the case may be, or any of their respective Subsidiaries, from any
Governmental Entity with respect to the transactions contemplated by
this Agreement. Hercules and Purchaser each shall give prompt notice to
the other of any change that is reasonably likely to prevent, materially
delay or materially impair the ability of Hercules or Purchaser to
consummate the transactions contemplated by this Agreement.
(e) Sellers, the Company and Purchaser shall use reasonable
efforts to obtain each consent or approval of each other Person whose
consent or approval is required in order to permit the maintenance by
the Company or Purchaser, as applicable, following the Closing of any
obligation, right or interest of the Company or Purchaser, as
applicable, under any Contract or any non-governmental permit,
franchise, concession or license to which the Company, Purchaser or any
of their respective Subsidiaries is a party or is subject.
7.5 Publicity. Unless otherwise required by law or in order to
continue doing business in the ordinary course, prior to the earlier of (x) the
Closing Date and (y) the second anniversary of the date of termination of this
Agreement, no news release or other public announcement pertaining to the
transactions contemplated by this Agreement shall be made by or on behalf of
either party hereto without the prior approval of the other party.
7.6 Indemnification; Directors' and Officers' Liability
Insurance. (a) On and after the Closing Date,
51
until October 1, 2002, Purchaser shall, or shall cause the Company to,
indemnify and hold harmless, to the fullest extent permitted under
applicable law (and Purchaser shall, or shall cause the Company to,
advance expenses as incurred to the fullest extent permitted under
applicable law provided the Person to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification), each
present and former director, officer and employee of the Company and its
Subsidiaries (including any predecessor companies) (collectively, the
"Indemnified Parties") against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages
or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Closing, including
the transactions contemplated by this Agreement.
(b) Purchaser shall ensure that the Company shall from and after
the Closing Date until October 1, 2002, have in place officers' and
directors' liability insurance providing insurance protection to the
Company's and its Subsidiaries' officers and directors substantially
similar (including as to scope, deductible and maximum liability) as the
insurance maintained by or for the Company as of June 5, 1996 ("D&O
Insurance"), so long as the annual premium therefor is not in excess of
$750,000 (the "Current Premium"); provided, however, if a future annual
premium exceeds the Current Premium, Purchaser shall cause the Company
to use its best efforts to obtain as much D&O Insurance as can be
obtained for the remainder of such period for a premium not in excess of
the Current Premium.
(c) If the Company or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all
of its Properties and assets to any individual, corporation or other
entity, then and in each such case, proper provisions shall be made so
that the successors and assigns of the Company shall assume all of the
obligations set forth in this Section.
(d) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified
Parties, their heirs and their representatives.
52
7.7 Reasonable Best Efforts and Cooperation. Sellers, the Company
and Purchaser each shall use (and shall cause their Subsidiaries to use) its
reasonable best efforts to cause the conditions set forth in Article VIII hereof
to be satisfied and to consummate the transactions contemplated by this
Agreement (provided that, for the avoidance of doubt, it is understood and
agreed that neither Sellers nor the Company shall be required to exercise
reasonable best efforts with respect to the Bought-Deal Financing and shall have
no obligation to furnish any information (other than the Hercules Information)
to any Person for purposes of, or otherwise in connection with, the Bought-Deal
Financing). Without limiting the foregoing, Purchaser shall use its reasonable
best efforts to cause the Bought-Deal Financing to be consummated on a timely
basis.
7.8 Further Assurances. Each party shall cooperate with the
other, and execute and deliver, or use its best efforts to cause to be executed
and delivered, all such other instruments, including instruments of conveyance,
assignment and transfer, and to make all filings with and to obtain all
consents, approvals or authorizations of any Governmental Entity or any other
Person under any permit, license, agreement, indenture or other instruments, and
take all such other actions as such party may reasonably be requested to take by
the other party hereto from time to time, consistent with the terms of this
Agreement, in order to effectuate the provisions and purposes of this Agreement
and the transactions contemplated hereby.
7.9 Expenses. Whether or not the transactions contemplated hereby
are consummated, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (other than those third-party
fees and expenses incurred by or on behalf of Hercules, the Company or any of
their respective Affiliates in connection with the Bought-Deal Financing, which
shall be payable, in any case, by Purchaser, but including, without limitation,
broker's and finder's fees and attorneys' fees and expenses) shall be paid by
the party incurring such expenses, provided, however, that, notwithstanding the
foregoing, it is understood and agreed that the Company will bear US$3 million
(less the amount of reasonable fees paid by the Company to its public relations
firm and to Sidley & Austin in connection with the transactions contemplated
hereby) of third party fees and expenses which may be allocated to it by
Hercules or certain of its Affiliates (on behalf of the Sellers) and that
Sellers will bear any and all such third party fees and expenses incurred by the
Sellers and allocated to the Company in excess of such amount.
7.10 Taxes. Purchaser shall be liable for and shall
pay all applicable sales, transfer, recording, deed, stamp and
53
other similar taxes resulting from the consummation of the transactions
contemplated hereby.
7.11 Reporting Issuer Status and Listing. Purchaser undertakes to
remain a reporting issuer under the Securities Act (Ontario) and the Securities
Act (Quebec) not in default of any requirement of either such Act or the
regulations thereunder, and to maintain its status as a reporting company under
the Exchange Act and to maintain the listing of the Purchaser Common Shares
(including those to be issued pursuant hereto) on each of the NYSE and the TSE
for a period of no less than twenty four months immediately following the
Closing Date; provided, however, that no breach of this covenant shall be deemed
to have occurred unless (and then only to the extent that) any Holder shall, as
a result of Purchaser's non-compliance herewith, not be able or be materially
impaired in its ability to sell the Purchaser Common Shares conveyed to it
hereunder.
7.12 Execution of Indemnity Escrow Agreement. Hercules and
Purchaser agree to enter into the Indemnity Escrow Agreement prior to the
Closing with the Indemnity Escrow Agent.
ARTICLE VIII
CONDITIONS TO THE CLOSING
8.1 Conditions of Obligation of Each Party. The respective
obligations of Purchaser and Sellers hereunder are subject to the satisfaction
or waiver, at or prior to the Closing Date, of the following conditions:
(a) No Injunction. At the Closing Date, there shall be no (i)
injunction, restraining order or decree of any nature of any court or
Governmental Entity of competent jurisdiction in effect that restrains
or prohibits the purchase of the Stock hereunder or (ii) pending action,
suit or proceeding brought by any Governmental Entity which seeks to
restrain or prohibit the purchase of the Stock hereunder.
(b) Regulatory Authorizations. All consents, authorizations,
orders or approvals of each Governmental Entity listed in Part I of
Section 4.1(d)(i) of the Seller Disclosure Schedule, Part I of Section
5.1(d)(i) of the Company Disclosure Schedule and Part I of Section
6.1(d)(i) of the Purchaser Disclosure Schedule and the filings required
or permitted under the HSR Act, the Exon-Florio provisions of the United
States Defense Production Act and the Competition Act (Canada) shall
have been obtained and any applicable waiting periods in respect thereof
(including all applicable waiting periods specified under the HSR Act
54
and other applicable anti-trust laws) shall have expired or
been terminated.
8.2 Additional Conditions to the Obligations of Purchaser. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement is subject to the satisfaction at or prior to the Closing Date of each
of the following additional conditions (any of which may be waived in writing by
Purchaser):
(a) Representations and Warranties. The representations and
warranties of Sellers and the Company contained in Articles IV and V of
this Agreement, respectively, shall be true and correct in all material
respects as of the Closing Date as though made at and as of the Closing
Date, except to the extent that any representation and warranty is made
as of a specified date other than the Closing Date, in which case such
representation and warranty shall be true and correct in all material
respects as of such date.
(b) Performance of Covenants. Sellers shall have performed in all
material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by them prior to or at the
Closing Date.
(c) Certificate. Purchaser shall have received a certificate of
Hercules, executed by a director of Hercules and dated the Closing Date,
on behalf of the Sellers, to the effect that the conditions specified in
paragraphs (a) and (b) above have been fulfilled (provided that
statements therein with respect to any Selling Stockholder may be based
solely on representations made by such Selling Stockholder in the
Custody Agreement and Power of Attorney to which such Selling
Stockholder is a party).
(d) Legal Opinion. Purchaser shall have received opinions of
Robert J. Ingato, general counsel of the Company, Maples and Calder,
general counsel to Hercules, and the legal department of Nomura
International plc, each dated the Closing Date and addressed to
Purchaser, in the forms set forth in Exhibits I-1, I-2 and I-3,
respectively.
8.3 Additional Conditions to the Obligations of Sellers. The
obligation of Sellers to consummate the transactions contemplated by this
Agreement is subject to the satisfaction at or prior to the Closing Date of each
of the
55
following additional conditions (any of which may be waived in writing by
Hercules on behalf of the Sellers):
(a) Representations and Warranties. The representations and
warranties of Purchaser contained in Article VI of this Agreement shall
be true and correct in all material respects as of the Closing Date as
though made at and as of the Closing Date, except to the extent that any
representation and warranty is made as of a specified date other than
the Closing Date, in which case such representation and warranty shall
be true and correct in all material respects as of such date.
(b) Performance of Covenants. Purchaser shall have performed in
all material respects all obligations and agreements, and complied in
all material respects with all covenants and conditions, contained in
this Agreement to be performed or complied with by it prior to or at the
Closing Date.
(c) Certificate. Hercules shall have received a certificate of
Purchaser, executed by an executive officer of Purchaser and dated the
Closing Date, to the effect that the conditions specified in paragraphs
(a) and (b) above have been fulfilled.
(d) Listing. The Purchaser Common Shares to be issued by
Purchaser as consideration pursuant to Section 2.2 hereof shall have
been listed and posted for trading on each of the NYSE, TSE and ME.
(e) Human Resources Agreement. The payment in respect of vested
options of the Company contemplated by the Human Resources Agreement
shall have occurred simultaneously with the Closing.
(f) Legal Opinion. Hercules shall have received an opinion of
Jamie Johnson, counsel to Purchaser, dated the Closing Date and
addressed to the Sellers, in the form set forth in Exhibit J.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing
Date:
56
(a) By mutual written consent of Hercules and Purchaser; or
(b) By either Hercules or Purchaser upon written notice to the
other party in the event that any Governmental Entity (including any
court of competent jurisdiction), the consent of which is necessary for
the consummation of the transactions contemplated hereby pursuant to
Section 8.1(b), shall have issued an order, decree or ruling or taken
any other official action enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or denying approval of any
application or notice for approval to consummate such transactions, and
such order, decree, ruling or other action shall have become final and
non-appealable; provided that the right to terminate this Agreement
pursuant to this clause (b) shall not be available to any party that has
breached in any material respect its obligations under this Agreement in
any manner that has proximately contributed to the occurrence of such
injunction, prohibition or demand; or
(c) By either Hercules or the Purchaser upon written notice given
to the other party in the event that the Closing shall not have taken
place on or before February 27, 1998, provided that the failure of the
Closing to occur on or before such date is not the result of a wilful
breach of any covenant or agreement hereunder by the party seeking such
termination; or
(d) By Hercules upon written notice given to Purchaser at any
time later than December 8, 1997 and prior to Hercules having received
written notice from the Montreal Trust Company of Canada (in its
capacity as custodian under the Installment Receipt Agreement and as
depository under the Installment Receivable Loan Agreement, each as
defined in the Underwriting Agreement) that funds raised pursuant to the
Bought-Deal Financing have been deposited under the Escrow Arrangement;
provided that Hercules' right to terminate this Agreement pursuant to
this clause (d) shall terminate on (i) December 22, 1997 unless Hercules
shall have executed a letter substantially in the form attached hereto
as Exhibit M (the "Exclusivity Letter") with a term determined by
Hercules not to exceed eight weeks, or (ii) the date of termination of
the Exclusivity Letter after giving effect to any written extensions
thereof which have been mutually agreed by Hercules and Purchaser; or
(e) By Hercules or Purchaser upon written notice given to the
other party at any time in the event that:
57
(x) Underwriters underwriting more than 8% of the securities
being offered in the Bought-Deal Financing have given
notice of termination of their obligations under the
Underwriting Agreement pursuant to Section 12(1)(b) of the
Underwriting Agreement; and
(y) there shall have occurred (i) any change (actual,
anticipated, contemplated or threatened, financial or
otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or capital of
Purchaser or any of its Subsidiaries or the Company or any
of its Subsidiaries, that would be material to Purchaser,
its Subsidiaries, the Company and its Subsidiaries,
considered as a whole, or (ii) any change in any material
fact in the Preliminary Prospectuses, Prospectuses,
Registration Statement or Supplementary Material (each as
defined in the Underwriting Agreement), or the existence
of any new material fact, which change or new material
fact has had or would reasonably be expected to have a
significant adverse effect on the market price or value of
the Purchaser Common Shares; provided that Purchaser may
not exercise the right of termination under this Section
9.1(e) if the basis for such termination is (1) any breach
or default by Purchaser of any of its representations,
warranties or agreements under any of this Agreement or
any of the Financing Documents or (2) the failure of the
financial institutions to enter into the Instalment
Receivables Loan Agreement and to advance funds as
contemplated by the commitment letter; or
(f) By Hercules or Purchaser upon written notice given to the
other party in the event that:
(x) Underwriters underwriting more than 8% of the securities
being offered in the Bought-Deal Financing have given
notice of termination of their obligations under the
Underwriting Agreement pursuant to Section 12(2) of the
Underwriting Agreement; and
(y) there shall occur or come into effect any occurrence or
any catastrophe of national or international consequence
or any action, governmental law or regulation, inquiry or
other occurrence of any nature whatsoever which
58
seriously adversely affects or will seriously adversely
affect the Canadian or United States financial markets or
the business of the Purchaser, its Subsidiaries and the
Company and its Subsidiaries, considered as a whole.
9.2 Effect of Termination. In the event of the termination of
this Agreement as provided above, this Agreement (other than this Section) shall
become void and of no further force and effect and there shall be no duties,
liabilities or obligations of any kind or nature whatsoever on the part of
either party hereto to the other party based either upon this Agreement or the
transactions contemplated hereby; provided, however, that (i) nothing in this
Section 9.2 shall relieve any party from liability in respect of any wilful
breach of this Agreement by it or wilful failure by it to perform its
obligations hereunder, and (ii) the obligations of the parties referred to in
the last sentences of Section 7.3(a) and 7.3(b) and in Sections 7.5 and 7.9
shall continue to apply following any such termination of this Agreement. No
termination of this Agreement shall affect the rights and obligations of the
parties under the Confidentiality Agreement and the Purchaser Confidentiality
Agreement.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival and Indemnification.
(a) Survival. The following representations and warranties shall
survive the Closing for the periods specified:
(i) the representations and warranties of Sellers
contained in Article IV and the AF Representation (the "Article
IV Surviving Representations") shall survive until the first
anniversary of the date of this Agreement; provided, however,
that, the representation and warranty contained in the first two
sentences of Section 4.1(e)(i) shall survive indefinitely;
(ii) the representations and warranties of the Company
(subject to the last paragraph of Article 5) contained in
Sections 5.1(g)(ii), 5.1(i), 5.1(k) and 5.1(p) (the "Hercules
Surviving Representations" and together with the Article IV
Surviving Representations the "Sellers' Surviving
Representations") shall survive until the first anniversary of
the date of this Agreement; provided, however, that, the
representations
59
and warranties of the Company contained in Section 5.1(k) solely
insofar as they relate to the Auburn Facility (the "AF
Representation") shall survive only until the six-month
anniversary of the date of this Agreement; and
(iii) the representations and warranties of Purchaser
contained in Sections 6.1(a)(i), 6.1(c), 6.1(d)(i), 6.1(d)(ii),
6.1(g), 6.1(i), 6.1(j), 6.1(l), 6.1(m) and 6.1(o) (together the
"Purchaser Surviving Representations") shall survive until the
first anniversary of the date of this Agreement; provided,
however, that, the representation and warranty contained in the
first sentence of Section 6.1(l) shall survive indefinitely.
The agreements of the parties contained in Sections 7.6, 7.9,
7.10 and 7.11 and this Article X shall survive the Closing until the
expiration of the term of the undertaking set forth in such covenant, if
any, and otherwise until the first anniversary of the date of this
Agreement. The indemnification obligations in respect of the agreement
of Hercules and the Company contained in Section 7.1(a)(ix) (the
"Hercules Surviving Covenant") shall survive until the first anniversary
of the date of this Agreement. All other representations, warranties,
covenants and agreements of the parties hereunder (including those
representations and warranties contained in the certificates provided
under Sections 8.2(c) and 8.3(c)), shall terminate and be of no further
force or effect immediately after the Closing. No party shall have any
liability or obligation of any nature with respect to any
representation, warranty, covenant or agreement (including those
representations and warranties contained in the certificates provided
under Sections 8.2(c) and 8.3(c)) after the termination thereof.
(b) Indemnification by Sellers. (i) Subject to the other
provisions of this Section 10.1, from and after the Closing Date:
(A) Hercules and each of the Selling Stockholders listed on
Exhibit A to the Indemnity Escrow Agreement (together with
Hercules, individually a "Holder" and collectively the
"Holders") shall jointly and severally indemnify and hold
harmless Purchaser, Purchaser's Affiliates, each of their
respective directors, officers, employees and agents, and
each of the heirs, executors, successors and assigns of
any of the foregoing (each a "Purchaser Indemnified
Person" and
60
collectively the "Purchaser Indemnified Persons") from and
against any and all damages, claims, losses, expenses,
costs, obligations and liabilities, including, without
limiting the generality of the foregoing, liabilities for
all reasonable attorneys' fees and expenses (collectively,
"Losses and Expenses") suffered or incurred by any such
Purchaser Indemnified Persons arising from, relating to or
otherwise in respect of, any breach of any representation
or warranty of the Company contained in the Hercules
Surviving Representations; provided that, for purposes of
the AF Representation, the representations and warranties
(or any disclosures noted with respect thereto in the
Company Reports) shall be deemed to be read without any
"Knowledge" qualification contained therein; and provided,
further, that the procedures for making claims under this
Section 10.1(b)(i)(A) in respect of any breach of the AF
Representation shall be governed by the AF Claim
Procedure; and
(B) each Seller (including, for the avoidance of doubt,
Hercules) shall severally indemnify and hold harmless the
Purchaser Indemnified Persons from and against any and all
Losses and Expenses suffered or incurred by any such
Purchaser Indemnified Persons arising from, relating to or
otherwise in respect of, any breach of any representation
and warranty given by such Seller contained in the Article
IV Surviving Representations.
provided that the obligations of the Holders under clauses (A) and (B)
above and sub-paragraph (ii) below shall be satisfied solely out of and
to the extent of the Indemnity Escrow and in accordance with the
procedures contained in the Indemnity Escrow Agreement.
(ii) Notwithstanding the limitations of Section 10.1(d),
from and after the Closing Date, the Holders shall indemnify and hold
harmless the Purchaser Indemnified Persons from and against any and all
Losses and Expenses suffered or incurred by any such Purchaser
Indemnified Persons arising from, relating to or otherwise in respect
of, any breach of the agreements contained in the Hercules Surviving
Covenant or in Section 7.9.
61
(iii) Notwithstanding anything to the contrary contained
herein, no Holder shall have any liability under this Agreement with
respect to the CAL Claim.
(c) Indemnification by Purchaser. Subject to the other provisions
of this Section 10.1, from and after the Closing Date: (i) Purchaser
shall indemnify and hold harmless Sellers, their respective Affiliates,
and each of their respective directors, officers, employees and agents,
and each of the heirs, executors, successors and assigns of any of the
foregoing (each a "Seller Indemnified Person" and collectively the
"Seller Indemnified Persons" and, together with the Purchaser
Indemnified Persons, collectively the "Indemnified Persons" and
individually an "Indemnified Person") from and against any and all
Losses and Expenses suffered or incurred by any such Seller Indemnified
Persons arising from, relating to or otherwise in respect of, any breach
of any representation and warranty of Purchaser contained in the
Purchaser Surviving Representations; and (ii) Purchaser shall indemnify
and hold harmless the Seller Indemnified Persons from and against any
and all Losses and Expenses suffered or incurred by any such Seller
Indemnified Persons arising from, relating to or otherwise in respect of
claims arising out of (x) the Bought-Deal Financing or the Exchange
Offer other than Losses and Expenses arising out of (A) claims from
third parties (other than Purchaser or any of its Affiliates) which are
based solely on material misstatements in any SEC filing made by the
Company prior to the date of this Agreement or (B) with respect to the
Hercules Information or (y) any breach of the agreements contained in
Sections 7.6, 7.9, 7.10 and 7.11.
(d) Limitations on Indemnification. Neither Sellers nor Purchaser
shall have any obligation to indemnify any Purchaser Indemnified Person
pursuant to Section 10.1(b)(i) or any Seller Indemnified Person pursuant
to Section 10.1(c)(i), respectively, unless and until the aggregate
amount of Losses and Expenses (net of insurance proceeds recoverable by
such Indemnified Person) incurred by Purchaser Indemnified Persons or
Seller Indemnified Persons, respectively, exceeds US$50,000,000 (the
"Deductible"), in which case Sellers or Purchaser, as applicable, shall,
subject to the two immediately succeeding sentences, be liable only for
Losses and Expenses in excess of such Deductible. Subject to the last
sentence of this Section 10.1(d), the maximum aggregate liability of
Sellers on the one hand and Purchaser on the other hand under Sections
10.1(b)(i) and 10.1(c)(i), as applicable, is US$500,000,000, and neither
Sellers nor Purchaser shall have any obligation or liability pursuant to
such clauses in excess of such
62
amount). Only those Losses and Expenses indemnifiable under Sections
10.1(b)(i) or 10.1(c)(i) that are equal to or in excess of US$500,000
(net of relevant insurance proceeds recoverable by such Indemnified
Person) per claim (notwithstanding that multiple claims may arise from a
breach of a single representation, warranty or covenant) shall be
indemnifiable under this Section 10.1 or otherwise count towards
satisfaction of the Deductible. Any Losses and Expenses for which any
Holder is obligated to indemnify any Purchaser Indemnified Person shall
be satisfied solely out of and to the extent of the Indemnity Escrow and
in accordance with the procedures contained in the Indemnity Escrow
Agreement.
(e) Materiality Qualification. For purposes of this Section 10.1,
Losses and Expenses arising out of, or resulting from, breaches of (i)
any Hercules Surviving Representations or (ii) the Purchaser Surviving
Representations set forth in Sections 6.1(g) and 6.1(i) shall, in each
case, be determined as if references in the relevant representation or
warranty to a "Company Material Adverse Effect" or a "Purchaser Material
Adverse Effect", as the case may be, were to an adverse effect
representing an amount in excess of US$500,000, and as if references in
the relevant representation or warranty to the word "material" were to
an amount in excess of US$500,000; provided that, for the avoidance of
doubt, all such representations and warranties shall continue to be
qualified by reference to any items (other than materiality) included in
any corresponding section of the relevant Disclosure Schedule.
(f) Claims. (i) All indemnification claims under this Agreement
by Purchaser Indemnified Persons against the Holders shall be governed
by the terms and procedures contained in Article III of the Indemnity
Escrow Agreement.
(ii) If a claim by a third party is made against an
Indemnified Person hereunder, and if such Indemnified Person intends to
seek indemnity with respect thereto under this Section 10.1, such
Indemnified Person shall promptly notify the indemnifying Person in
writing of such claims setting forth such claims in reasonable detail;
provided that failure of such Indemnified Person to give prompt notice
as provided herein shall not relieve the indemnifying Person of any of
its obligations hereunder, except to the extent that the indemnifying
Person is materially prejudiced by such failure. The indemnifying Person
shall have 30 days after receipt of such notice to assume and undertake,
through counsel of its own choosing, the settlement or defense thereof,
and the Indemnified Person shall cooperate
63
with it in connection therewith; provided, however, that the Indemnified
Person may participate in such settlement or defense through counsel
chosen by such Indemnified Person; provided that the fees and expenses
of such separate counsel shall be borne by such Indemnified Person
unless there exists a conflict between the Indemnified Person and
indemnifying Person as to their respective legal defenses (other than
one that is of a monetary nature), in which case the Indemnified Person
shall be entitled to retain separate counsel, the reasonable fees and
expenses of which shall be reimbursed by the indemnifying Person. If the
indemnifying Person shall assume the defense of a claim, it shall not
settle or compromise such claim without the prior written consent of the
Indemnified Person (which consent shall not be unreasonably withheld)
unless (A) the indemnifying Person agrees in writing that the
Indemnified Person is entitled to indemnification in respect of such
claim pursuant to this Section 10.1, (B) such settlement or compromise
includes as an unconditional term thereof the giving by the claimant of
a release of the Indemnified Person from all liability with respect to
such claim, (C) such settlement or compromise does not admit criminal
liability or culpability or impugn the reputation of the Indemnified
Person in any respect and (D) such settlement or compromise does not
involve the imposition of equitable remedies or the imposition of any
obligations on such Indemnified Person other than financial obligations
for which such Indemnified Person will be indemnified hereunder. If the
indemnifying Person does not notify the Indemnified Person within 30
days after the receipt of the Indemnified Person's notice of a claim of
indemnity hereunder that it elects to undertake the defense thereof, the
Indemnified Person shall have the right to defend the claim at the cost
and expense of the indemnifying Person, but shall not settle or
compromise the claim without the consent of the indemnifying Person
(which consent will not be unreasonably withheld) unless the Indemnified
Person agrees in writing that it is not entitled to any indemnities
pursuant to this Section 10.1.
(g) Termination of Indemnification. The obligations to indemnify
and hold harmless an Indemnified Person pursuant to Section 10.1(b) or
10.1(c), as the case may be, shall terminate when the applicable
representation, warranty or covenant terminates pursuant to Section
10.1(a); provided, however, that such obligation to indemnify and hold
harmless shall not terminate with respect to any item as to which the
Indemnified Person shall have, after the Closing Date but before the
expiration of the applicable survival period, previously made a claim by
delivering a written notice (stating in reasonable detail the basis of
64
such claim, the representation, warranty or covenant alleged to have
been breached and the relevant facts and circumstances surrounding such
claim) to the indemnifying Person.
(h) Exclusive Remedy. After the Closing Date, the indemnification
provided pursuant to this Section 10.1, if any, shall be the sole and
exclusive remedy of any party hereto for any Losses and Expenses arising
out of or relating to any breach of any representation, warranty or
covenant contained in this Agreement; provided, however, that the
limitations of this Section 10.1(h) shall not apply to any claim based
upon actual fraud or wilful misconduct. In addition, for the avoidance
of doubt, Losses and Expenses with respect to the CAL Claim shall not be
so limited, and shall be governed by the CAL Claim Indemnification
Agreement (including the limitations set forth therein).
(i) Insurance. Each Indemnified Person shall be obligated in
connection with any claim for indemnification under this Section 10.1 to
use all commercially reasonable efforts to obtain any insurance proceeds
available to such Indemnified Person with regard to the applicable
claims. The amount which the indemnifying Person is or may be required
to pay to any Indemnified Person pursuant to this Section 10.1 shall be
reduced (retroactively, if necessary) by any insurance proceeds or other
amounts actually recovered by or on behalf of such Indemnified Person in
reduction of the related Losses and Expenses. If an Indemnified Person
shall have received any payment pursuant to this Section 10.1 from an
indemnifying Person in respect of Losses and Expenses of such
Indemnified Person and shall subsequently receive insurance proceeds or
other amounts in respect of such Losses and Expenses, then such
Indemnified Person shall promptly repay to the indemnifying Person a sum
equal to the amount of such insurance proceeds or other amounts actually
received by or on behalf of such Indemnified Person.
(j) Mitigation. In addition to the requirements of Section
10.1(i), each Indemnified Person shall be obligated in connection with
any claim for indemnification under this Section 10.1 to use all
commercially reasonable efforts to mitigate Losses and Expenses upon and
after becoming aware of any event which could reasonably be expected to
give rise to such Losses and Expenses.
(k) Subrogation. An indemnifying Person shall be subrogated to
any right of action which the Indemnified
65
Person may have against any other Person with respect to any matter
giving rise to a claim for indemnification hereunder.
10.2 Notices. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed given if
delivered Personally, transmitted by facsimile (and telephonically confirmed),
mailed by registered or certified mail with postage prepaid and return receipt
requested, or sent by commercial overnight courier, courier fees prepaid (if
available; otherwise, by the next best class of service available), to the
parties at the following addresses:
(a) if to Purchaser, to it at:
BCE Place, 181 Bay Street
Suite 3500, P.O. Box 827
Toronto, Ontario
Canada M5J 2TS
Attn: President
Telecopy: (416) 777-6206
Confirmation: (416) 777-6100
with a copy to:
BCE Place, 181 Bay Street
Suite 3500, P.O. Box 827
Toronto, Ontario
Canada M5J 2TS
Attn: General Counsel
Telecopy: (416) 594-2525
Confirmation: (416) 777-6158
(b) if to Sellers, to Hercules at:
c/o Maples and Calder
Ugland House, PO Box 309, George Town
Grand Cayman, Cayman Islands, BW1
Attn: Rebecca Steller
Telecopy: (345) 949-8088
Confirmation: (345) 949-8066
with a copy to:
Dorsey & Whitney
250 Park Avenue
New York, New York 10010-1709
Attn: Owen Marx
Telecopy: (212) 953-7201
Confirmation: (212) 415-9310
66
and with a copy to:
Nomura International plc
Principal Finance
Nomura House, 1 St. Martins-le-Grand
London EC1A 4NP
Attn: Guy Hands
Telecopy: (171) 521-3565
Confirmation: (171) 521-2224
(c) if to the Company, to it at:
44 Whippany Road
Morristown, NJ 07962-1983
Attn: Robert J. Ingato, General Counsel
Telecopy: (201) 397-3220
Confirmation: (201) 397-3191
or to such other Person or address as either party shall specify by notice in
writing to the other party in accordance with this Section 10.2. All such
notices or other communications shall be deemed to have been received on the
date of the Personal delivery or on the third Business Day after the mailing or
dispatch thereof; provided that notice of change of address shall be effective
only upon receipt.
10.3 Interpretation. The table of contents and headings herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof. Where a reference in this Agreement is made to a Section or Exhibit,
such reference shall be to a Section of or Exhibit to this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Purchaser acknowledges and agrees that this Agreement has
been extensively negotiated at arm's length between sophisticated parties and
there shall be no presumption that any ambiguity or inconsistency contained in
this Agreement will be interpreted against the party principally responsible for
the drafting of such provision.
10.4 Amendment and Modification; Waiver. (a) This Agreement and
the exhibits and Disclosure Schedules hereto may not be amended except by an
instrument or instruments in writing signed and delivered on behalf of each of
the parties hereto.
(b) At any time prior to the Closing Date, any party hereto which
is entitled to the benefits hereof may (a) extend the time for the performance
of any of the obligations or other
67
acts of the other party, (b) waive any inaccuracy in the representations and
warranties of the other party contained herein or in any schedule hereto or in
any document delivered pursuant hereto, and (c) waive compliance with any of the
agreements of the other party or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed and delivered on behalf of such party.
10.5 Entire Agreement. This Agreement (including the Disclosure
Schedules and the documents included as exhibits hereto), the Confidentiality
Agreement, the Purchaser Confidentiality Agreement and the CAL Claim
Indemnification Agreement constitute the entire agreement and supersede all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof. EACH PARTY HERETO AGREES
THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT,
NEITHER SELLERS NOR PURCHASER MAKE ANY OTHER REPRESENTATIONS OR WARRANTIES, AND
EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR
ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE REPRESENTATIVES WITH RESPECT TO
THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S
REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY
ONE OR MORE OF THE FOREGOING.
10.6 Third Party Beneficiaries. Except as expressly provided in
Sections 7.6(d), nothing in this Agreement, express or implied, is intended to
confer upon any Person other than the parties hereto (including each of the
Selling Stockholders) and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
10.7 Assignment; Binding Effect. This Agreement shall not be
assigned by either party hereto without the prior written consent of the other
party. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
10.8 Governing Law and Venue; Waiver of Jury Trial. (A) THIS
AGREEMENT, OTHER THAN ANY MATTERS RELATING TO SECTION 10.1 HEREOF, SHALL
BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. The parties hereby irrevocably submit to the
jurisdiction of the courts of the State of New York and the Federal
courts of the United States of America located in the State of New York
solely in respect of the
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interpretation and enforcement of the provisions of this Agreement
(other than any matters relating to Section 10.1 hereof) and of the
documents referred to in this Agreement, and in respect of the
transactions contemplated hereby, and hereby waive, and agree not to
assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in said courts or that the venue thereof
may not be appropriate or that this Agreement (other than any matters
relating to Section 10.1 hereof) or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree
that all claims with respect to such action or proceeding shall be heard
and determined in such a New York State or Federal court. The parties
hereby consent to and grant any such court jurisdiction over the Person
of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section 10.2 or in such
other manner as may be permitted by law, shall be valid and sufficient
service thereof.
(B) MATTERS RELATING TO SECTION 10.1 OF THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF ENGLAND. The parties hereby irrevocably submit
to the jurisdiction of the courts of England solely in respect of any
matters relating to the provisions of Section 10.1, and hereby waive,
and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof, that it is not subject
thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be
appropriate or that Section 10.1 may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in
such an English court. The parties hereby consent to and grant any such
court jurisdiction over the Person of such parties and over the subject
matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided
in Section 10.2 or in such other manner as may be permitted by law,
shall be valid and sufficient service thereof.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY
IN
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RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF OR
RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.8.
10.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
10.10 Severability. Subject to the proviso to the immediately
succeeding sentence, the provisions of this Agreement shall be deemed several
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. If any provision of
this Agreement, or the application thereof to any person or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction; provided, however, that the invalidity or unenforceability
of such provision, in the reasonable determination of Hercules or Purchaser,
does not materially impair the rights of Sellers or Purchaser, respectively,
under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on their behalf by their respective officers hereunto duly
authorized all as of the date first written above.
HERCULES HOLDINGS (CAYMAN)
LIMITED
By:_________________________________
Name:
Title:
THE SELLING STOCKHOLDERS
LISTED ON EXHIBIT A
By: HERCULES HOLDINGS
(CAYMAN) LIMITED (as
Custodian and Attorney-
In-Fact for the Selling
Stockholders)
By:____________________________
Name:
Title:
AT&T CAPITAL CORPORATION
By:_________________________________
Name:
Title:
NEWCOURT CREDIT GROUP INC.
By:_________________________________
Name:
Title: