Exhibit 2.1(a)
PURCHASE AGREEMENT
BY AND AMONG
XXXXXXXX XXXXX CO.
XXXXXXXX XXXXX CANADA LTD.
SCHOOL SPECIALTY, INC.
AND
3956831 CANADA INC.
NOVEMBER 13, 2001
1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is entered into effective as of
November 13, 2001, by and among Xxxxxxxx Xxxxx Co., a Utah corporation ("FCC"),
Xxxxxxxx Xxxxx Canada, Ltd., an Ontario corporation ("FC Canada") (FCC and FC
Canada are collectively referred to herein as the "Sellers" and sometimes
individually referred to herein as a "Seller") and School Specialty, Inc., a
Wisconsin corporation or a subsidiary thereof ("SSI"), and 3956831 Canada Inc.,
a Canadian federal corporation ("SSI Canada") (SSI and SSI Canada are
collectively referred to as the "Buyers" and sometimes individually referred to
herein as a "Buyer"). For the purpose of this Agreement, Premier Agendas, Inc.,
a Washington corporation shall be known as "Premier Agendas" and Premier School
Agendas Ltd. Agenda Scolaire Premier Ltee, a corporation incorporated under the
Canada Business Corporations Act and registered to do business in British
Columbia shall be known as "PSA",
RECITALS
WHEREAS, FCC owns all of the issued and outstanding shares of capital stock
of Premier Agendas (the "Premier Agendas Shares"), and FC Canada owns all of the
issued and outstanding capital stock of PSA (the "PSA Shares") (the Premier
Agendas Shares and the PSA Shares are collectively referred to as the "Shares");
and
WHEREAS, SSI desires to purchase from FCC all of the Premier Agendas Shares
and SSI Canada wishes to purchase from FC Canada all of the PSA shares; and
WHEREAS, in order to induce SSI and SSI Canada to purchase the Premier
Agenda Shares and the PSA Shares on the terms and conditions set forth in this
Agreement, the Sellers are willing to make the representations, warranties,
covenants and indemnities set forth herein; and
WHEREAS, in order to induce Sellers to sell the Premier Agenda Shares and
the PSA Shares, Buyers are willing to make the representations, warranties and
covenants set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the respective representations,
warranties and covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF SHARES; CLOSING
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of
this Agreement, at the Closing, certain of the Sellers shall sell, transfer and
deliver to Buyers, and the Buyers will purchase from such Sellers the Shares as
follows:
2
(a) FCC shall sell, transfer and deliver to SSI and SSI shall purchase
from FCC, all of the Premier Agendas Shares.
(b) FC Canada shall sell, transfer and deliver to SSI Canada and SSI
Canada shall purchase from FC Canada, all of the PSA Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares shall be the following:
(a) One Hundred Fifty-Two Million Five Hundred Thousand Dollars (US
$152,500,000) (the "Purchase Price"), which shall be allocated between Premier
Agendas and PSA as set forth on Schedule 1.2(a) (the "Allocation Schedule"). SSI
shall pay to FCC that amount as described on Schedule 1.2(a) and SSI Canada
shall pay to FC Canada that amount as described on Schedule 1.2(a).
(b) All references to $ or money herein shall be to United States
dollars. If, for any purpose, it is or becomes necessary to calculate at any
time the United States currency equivalent of any amount expressed or determined
in Canadian currency, the United States currency equivalent of such Canadian
currency amount shall be determined at the spot rate at which Canadian currency
can be exchanged into United States currency as set out in the Money and
Investing Sections of The Wall Street Journal. The spot rate shall be determined
as of the Transaction Date.
Buyers shall be jointly and severally liable for payments described in
paragraph (a) above.
1.3 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the headquarters of FCC located in Salt Lake City,
Utah, upon satisfaction of all conditions of Closing in Articles IV and V, but
no later than December 21, 2001. All capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in Article X
hereof.
1.4 CLOSING OBLIGATIONS. At the Closing:
(a) FCC, or FCC Canada, as applicable, will deliver to Buyers:
(i) certificates representing all of the Premier Agendas Shares
and the PSA Shares duly endorsed for transfer (or accompanied by duly executed
stock powers), to SSI and SSI Canada, respectively;
(ii) Releases executed by each of the Sellers releasing any claim
of such Seller, other than those created by this Agreement, or arising under
other contracts between the parties, against Premier Agendas or PSA
(collectively, the "Sellers' Releases");
3
(iii) a certificate executed by the President of each of
Premier Agendas and PSA representing and warranting to Buyers that each of the
representations and warranties made by the Acquired Companies in this Agreement
(other than the individual representations and warranties made by the Sellers in
Sections 2.28 through 2.30 hereof) was accurate in all material respects as of
the date of this Agreement and is accurate as of the Closing Date as if made on
the Closing Date (giving full effect to any supplements to the Disclosure Letter
that were delivered by the Sellers and the Acquired Companies to Buyers prior to
the Closing Date under the terms of Section 6.8); and
(iv) such other documents as are required to be provided
pursuant to Articles IV and VI or as reasonably requested by Buyers to close the
transactions contemplated hereby.
(b) Buyer will deliver to Sellers:
(i) the amounts, as set forth in the Allocation Schedule, to be
paid at the Closing to FCC and FC Canada, by bank cashier's, certified check or
by wire transfer to accounts specified by FCC and FC Canada and/or the Working
Capital Note as provided in Sections 1.5 hereof;
(ii) a certificate executed by an authorized officer of Buyers
to the effect that each of Buyers' representations and warranties in this
Agreement was accurate in all material respects as of the date of this Agreement
and is accurate in all material respects as of the Closing Date as if made on
the Closing Date;
(iii) such other documents as are required to be provided
pursuant to Articles V and VII or as reasonably requested by Sellers to close
the transactions contemplated hereby.
1.5 WORKING CAPITAL PAYMENTS. In addition to the amounts due under Section
1.2 (a) herein, the Sellers, operating the business of the Acquired Companies in
the Ordinary Course of Business, shall have the right (i) up through and
including the Closing Date, to withdraw all cash in accounts of the Acquired
Companies, and (ii) on the Closing Date, to withdraw the lesser of (a) Twelve
Million Nine Hundred Thousand Dollars ($12,900,000.00) or (b) the amount of the
Combined Working Capital, determined in accordance with GAAP, as of the Closing
Date (the "Working Capital Payment"). In no event shall the Acquired Companies'
line of credit balance exceed $0.00 as of the Closing Date and in no event shall
the Combined Working Capital be less than $0.00 as of the Closing Date. The
amount by which the Working Capital Payment exceeds the cash balance of the
Acquired Companies as of the Closing Date, if any, shall then be tendered from
SSI to FCC in the form of a promissory note dated as of the Closing Date, which
shall be due six (6) months from the Closing Date and which shall bear an
interest rate of two percent (2%) plus LIBOR as of the Closing Date (the
"Working Capital Note"). All interest and principal under this note shall be due
upon its maturity. All other payments and distributions not defined in this
Section 1.5 or elsewhere in this Agreement made from the Acquired Companies to
the Sellers from the date of this Agreement through the Closing Date shall be
prohibited.
4
1.6 BALANCE SHEET.
(a) Within fifteen (15) days following the Closing Date, Sellers
shall prepare and deliver to Buyers a combined balance sheet effective as of the
Closing Date (the "Closing Balance Sheet"), and a related combined statement of
income for the period beginning September 1, 2001 and ending as of the Closing
Date, of the Acquired Companies, showing the final status of all assets and
liabilities (including Combined Working Capital) as of the Closing Date and the
results of its operations for the periods then ended, all prepared in accordance
with GAAP. The Closing Balance Sheet shall be reviewed by the Buyers and, if the
Buyers have any objections to the Closing Balance Sheet, Buyers and Sellers
shall work reasonably and in good faith to resolve such objections.
(b) If Buyers and Sellers are not able to resolve their disagreements
and objections with respect to the Closing Balance Sheet within thirty (30) days
after Sellers deliver the Closing Balance Sheet to Buyers, then the issues in
dispute will be submitted to the Denver, Colorado office of Xxxxxx Xxxxxxxx, LLP
independent certified public accountants (the "Accountants") for resolution. If
issues in dispute are submitted to the Accountants for resolution, (i) each
party will furnish to the Accountants such work papers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the Accountants
any material relating to the determination and to discuss the determination with
the Accountants; and (ii) in addition to the material submitted in subparagraph
(i) above, the Accountants shall consider compliance by the Sellers in the
operation of the businesses of the Acquired Companies under the standard of the
Ordinary Course of Business. The determination by the Accountants, as set forth
in a notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties. Buyers and Sellers shall each bear 50% of the fees of
the Accountants for such determination.
(c) Upon finalization of the Closing Balance Sheet and the
calculation of the Combined Working Capital of the Acquired Companies in
accordance with Sections 1.6(a) or 1.6(b), any adjustment to the Combined
Working Capital which would have an effect on the amount of the Working Capital
Payment, should be reflected by the revision of the amount of the Working
Capital Note including the interest accruals thereon. In the event of such a
revision, the Working Capital Note issued as of the Closing Date shall be
retired and replaced in its entirety by a Working Capital Note in the amount as
determined under this Section 1.6(c) within ten (10) days after receiving the
Accountants' binding determination.
1.7 [This Section is intentionally deleted.]
1.8 [This Section is intentionally deleted.]
1.9 ALLOCATION. FCC agrees that the Purchase Price and Working Capital
Note shall be made to FCC and FC Canada allocated between FCC and FC Canada in
accordance with the Allocation Schedule, without regard to specific adjustments
to the financial statements of individual Acquired Companies.
5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the Disclosure Letter pursuant to Section 9.5, FCC
and FC Canada, jointly and severally, represent and warrant to SSI with respect
to each representation and warranty set forth below which is applicable to
Premier Agendas as follows; FCC and FC Canada, jointly and severally, represents
and warrants to SSI Canada with respect to each representation and warranty set
forth below which is applicable to PSA as follows; and each Seller hereby
represents and warrants as to itself with respect to the representations and
warranties set forth in Sections 2.28 through 2.30, as follows:
2.1 ORGANIZATION AND GOOD STANDING; SUBSIDIARIES; RESIDENCE.
(a) Part 2.1(a) of the Disclosure Letter contains a complete and
accurate list for each of the Acquired Companies of such entity's name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
and the number of shares held by each). Each Acquired Company is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of organization, with full corporate power and authority to conduct
its business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its obligations under
Applicable Contracts. Each Acquired Company is duly qualified to do business and
is in good standing under the laws of each state, province or other jurisdiction
in which either the ownership or use of the properties owned, leased or used by
it, or the nature of the activities conducted by it, requires such
qualification, except where the failure to so qualify would not have a Material
Adverse Effect on such Acquired Company or its operations.
(b) Sellers have delivered to Buyers copies of the Organizational
Documents of each Acquired Company, as currently in effect on or prior to the
date hereof.
(c) Other than as listed on Part 2.1(c) of the Disclosure Letter, the
Acquired Companies (i) have no Subsidiaries, (ii) do not own or control
(directly or indirectly) any capital stock, bonds or other securities of, and do
not have any proprietary interest in, any other corporation, general or limited
partnership, firm, association or business organization, entity or enterprise,
and (iii) do not control (directly or indirectly) the management or policies of
any other corporation, partnership, firm, association or business organization,
entity or enterprise.
(d) FC Canada is not a non-resident of Canada within the meaning of
the Tax Act.
2.2 AUTHORITY; NO CONFLICT.
6
(a) This Agreement constitutes the legal, valid, and binding
obligation of FCC and FC Canada enforceable against FCC and FC Canada in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws affecting creditor's rights generally. FCC and FC Canada each has the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and to perform its respective obligations under this
Agreement.
(b) Except as set forth in Part 2.2(b) of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Acquired Companies, FCC or FC
Canada, or (B) any resolution adopted by the Board of Directors or the
shareholders of any Acquired Company, or any Seller;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any Acquired Company or any Seller,
or any of the assets owned, leased or used by, any Acquired Company, may be
subject which would have a Material Adverse Effect on any Acquired Company;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by any Acquired Company or that otherwise relates to
the business of, or any of the assets owned, leased or used by, any Acquired
Company;
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned, leased or used by any Acquired
Company.
Except as set forth in Part 2.2(b) of the Disclosure Letter, no Seller or
any Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
2.3 CAPITALIZATION.
(a) The authorized equity securities of Premier Agendas consist of
1,000,000 shares of common stock, no par value, 11,200 of which are issued and
outstanding and constitute
7
the Premier Agendas Shares. No equity securities of any class or nature are
authorized or issued with respect to Premier Agendas, except the Premier Agenda
Shares. The authorized equity securities of PSA consist of an unlimited number
of common shares for an unlimited consideration, 100 of which are issued and
outstanding and constitute the PSA Shares. No equity securities of any class or
nature are authorized or issued with respect to PSA, except the PSA Shares.
Sellers are and will be on the Closing Date the record and beneficial
owners and holders of the Shares free and clear of all Encumbrances. The Shares
listed on Schedule 2.3(a) represent all of the holdings of securities of the
Acquired Companies, all of which are owned by the Sellers. Other than as set
forth on Part 2.3 of the Disclosure Letter, no legend or other reference to any
purported Encumbrance appears upon any certificate representing equity
securities of each Acquired Company. All of the outstanding equity securities of
any Acquired Company have been duly authorized and validly issued and are fully
paid and nonassessable.
(b) There are no outstanding options, warrants or other securities or
rights that may be exercised to purchase or are convertible into equity or debt
securities of the Acquired Companies and there are no Applicable Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of any Acquired Company. None of the outstanding securities of any
Acquired Company was issued in violation of the Securities Act or any equivalent
securities laws in Canada or any state of the United States or province of
Canada or any other Legal Requirement. Other than as set forth on Part 2.3 of
the Disclosure Letter, no Acquired Company owns, or has any Contract to acquire,
any securities of any Person (other than Acquired Companies) or any direct or
indirect equity or ownership interest in any other business.
2.4 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Sellers and the
Acquired Companies have, or will have prior to the Closing, delivered or made
available to Buyers:
(a) Combined balance sheets, together with combining schedules, of
the Acquired Companies as of August 31st in each of the years 1999 through 2001,
and the related statements of income together with combining schedules for the
years then ended, as such balance sheets with together with combining schedules
and the related statements of income together with combining schedules for the
years then ended have been included in the audited consolidated financial
statements of the Sellers. Sellers have, or will have prior to Closing,
delivered to the Buyers unaudited combined balance sheets together with
combining schedules of the Acquired Companies as of November 24, 2001, and the
related statements of income together with combining schedules for the three (3)
periods then ended which fairly present the financial condition and results of
operations of the Acquired Companies as of November 24, 2001, and for the period
then ended, all in accordance with GAAP, except for the lack of year end
adjustments which are not anticipated to be material, and statements in changes
of shareholders' equity and cash flows and notes thereto (the "Interim Financial
Statements"). The Sellers shall deliver to the Buyers under terms of Section 1.6
the financial statements as therein required and in combination with the Interim
Financial Statements, shall be considered the "Financial Statements" under the
terms of this Section 2.4. Such Financial Statements fairly
8
present the financial condition and the results of operations of the Acquired
Companies as at the respective dates of and for the periods referred to in such
Financial Statements, all in accordance with GAAP (except for the lack of year
end adjustments in the Interim Financial Statements which are not anticipated to
be material, and statements in changes of shareholders' equity and cash flows
and notes thereto). No Financial Statements of any Person other than the
Acquired Companies are required by GAAP to be included in the Financial
Statements of the Acquired Companies. The combined balance sheets which are part
of the Financial Statements shall separately break out the inventory reserves
and accounts receivable reserves. Part 2.4(a) of the Disclosure Letter sets
forth the accounting treatment of certain items that may be an exception to this
representation and warranty.
(b) All information in the Sellers' and Acquired Companies'
possession or control, or of which the Acquired Companies or Sellers have
Knowledge, concerning the operation, business and prospects of the Acquired
Companies as may be requested by either Buyer, including, without limitation,
making the working papers of the Acquired Companies' Accountants available for
inspection and copying by the Buyers' Auditors (except for proprietary
information of Sellers' and Acquired Companies' Accountants), and all other
information requested by the Buyers concerning any of the Acquired Companies'
assets, liabilities, and any aspect of the Acquired Companies' business.
2.5 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Acquired Companies, all of which will be made
available prior to the Closing to Buyers, are complete and correct in all
material respects and have been maintained in accordance with reasonable
business practices. At the Closing, all of those books and records will be in
the possession or control of the Acquired Companies.
2.6 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) The Acquired Companies own (with good and marketable fee
title in the case of real property, subject only to the matters permitted by
Section 2.6(b)), all the properties and assets (whether real, personal, or mixed
and whether tangible or intangible) reflected as owned in the books and records
of the Acquired Companies, including all of the properties and assets reflected
in the Balance Sheet (except for assets held under capitalized leases disclosed
or not required to be disclosed in Part 2.6 of the Disclosure Letter and
properties and assets sold since the date of the Balance Sheet, as the case may
be, in the Ordinary Course of Business), and all of the properties and assets
purchased or otherwise acquired by the Acquired Companies since the date of the
Balance Sheet (except for properties and assets acquired and sold since the date
of the Balance Sheet in the Ordinary Course of Business) up to and including the
Closing Date as reflected on the Closing Balance Sheet, which subsequently
purchased or acquired properties and assets having an individual value in excess
of $50,000.00 are listed in Part 2.6 of the Disclosure Letter.
(b) Except as set forth in Part 2.6 of the Disclosure Letter, all
properties and assets reflected in the Balance Sheet and the Closing Balance
Sheet are free and clear of all Encumbrances and are not, in the case of real
property, subject to any boundary disputes, rights of way, easements, building,
mining or other use restrictions, variances, or reservations, (but,
9
with respect to Canadian real property, such property is subject to reservations
in the original or any subsequent grant from the Crown), of any nature, except,
with respect to all such properties and assets, (i) mortgages or security
interests shown on the Balance Sheet and as updated through Closing, as
reflected on the Closing Balance Sheet, as securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (ii) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default, or event that, with notice or lapse of time or both, is
reasonably likely to constitute a default exists, (iii) liens for current taxes
and assessments not yet due, or in the case of real property due but not yet
delinquent, and (iv) with respect to real property, (x) easements or
restrictions which, individually or in the aggregate, would not have a Material
Adverse Effect on the use of such real property by the Acquired Company for the
purposes for which it is intended, and (y) current zoning laws and other land
use restrictions.
(c) Part 2.6 of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other interests in real
property owned or leased by any Acquired Company. The Acquired Companies have
already delivered or made available to Buyers copies of the recorded deeds by
which the Acquired Companies acquired fee title to all such real property owned
by the Acquired Companies and copies of fully executed leases pertaining to real
property currently leased by the Acquired Companies. FCC and the Acquired
Companies will deliver, prior to the Closing Date, copies of all title insurance
policies, opinions, abstracts, permits, certificates, plans (including all
reclamation plans), studies, investigations, reports and surveys in the
possession of any Acquired Company or Seller and relating to the ownership, use
or operation of such real property.
(d) Except as set forth in Part 2.6 of the Disclosure Letter,
no Acquired Company has received notice of a proposed general plan amendment,
zone reclassification, modification, expiration or cancellation of any
conditional use permit or other public land use action which would affect any
part of the real property owned or leased by any Acquired Company. No current
use of the real property owned or leased by any Acquired Company, or any
currently anticipated future use, conflicts with any present general plan or
zoning classification or use permit which affects any part of such real
property. All buildings, plants and structures owned by any of the Acquired
Companies lie wholly within the legal boundaries of the real property owned by
or leased by such Acquired Company and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person. Except as set
forth on Part 2.6 of the Disclosure Letter, no Acquired Company has received or
been threatened with any notice or communication of any violation of any Legal
Requirement pertaining to the real property owned or leased by any Acquired
Company, including without limitation, environmental regulations affecting the
Property. No commitment to or agreement with any Governmental Body exists which
could affect such real property, including but not limited to any dedication
agreement, operation restrictions, and formation of any special assessment or
taxing district, except as disclosed in this Agreement. None of such real
property is located in an area designated as (i) having special flood hazards on
any official flood hazard map published by the United States Department of
Housing and Urban Development (except as may pertain to possible 100 year flood
plan status), or (ii) a wetland area on any official wetland inventory map
10
published by the United States Department of the Interior, or similar state law.
Each real property owned or leased by any Acquired Company has valid legal
access to a public street or road and no restrictions exist pertaining to truck
traffic to and from such real property except for general vehicular
registrations governing speed and weight limits. The buildings and structures
located on any real property owned, leased, or used by the Acquired Companies
have not been insulated with a urea formaldehyde foam type installation.
2.7 INTELLECTUAL PROPERTY. The term "Intellectual Property Assets" shall
include the names of the Acquired Companies, all other fictitious business names
and trade names under which the Acquired Companies have conducted their
businesses, registered and unregistered trademarks, service marks and
applications (collectively, "Marks") used in connection with the Acquired
Companies' businesses, all copyrights in both published works and unpublished
works (collectively, "Copyrights") owned, developed or used by any of the
Acquired Companies in connection with the operation of the businesses, all
patents and patent applications, both domestic and foreign (collectively,
"Patents") the inventions covered by which are owned or used or have been
developed by any of the Acquired Companies in connection with the operation of
the businesses, and all designs, inventions, know-how, trade secrets,
confidential information, software, technical information, workbooks, consulting
plans and products (collectively, "Trade Secrets") owned, developed or used by
any of the Acquired Companies in connection with the operation of the
businesses. All of the Intellectual Property Assets of the Acquired Companies
are described in Part 2.7 of the Disclosure Letter. The Intellectual Property
Assets are all the intellectual property necessary or used in the operation of
the Acquired Companies' business and are sufficient for the continued conduct of
the Acquired Companies' businesses after the closing in substantially the same
manner as conducted prior to the Closing. There are no pending Proceedings or
threatened disputes or disagreements with respect to the Intellectual Property
Assets, and to the Knowledge of the Acquired Companies there is no basis,
whether or not pending or threatened, for any challenge to the validity,
enforceability, or ownership of any Intellectual Property. The Acquired
Companies are the owners of all right, title and interest in and to each of the
Intellectual Property Assets free and clear of all Encumbrances. No such
Intellectual Property Asset infringes upon or, to the Knowledge of Acquired
Companies, has been alleged to infringe upon the Intellectual property rights of
any other Person.
2.8 CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth on Part 2.8 of
the Disclosure Letter, the buildings, plants, structures, and equipment of the
Acquired Companies, including all equipment not shown on the Balance Sheet and
as updated through Closing, as reflected on the Closing Balance Sheet, of each
Acquired Company which is held by such Acquired Company pursuant to the terms of
operating leases, are structurally sound, are in reasonable operating condition
and repair, subject to ordinary wear and tear, and are adequate for the uses to
which they are being put. All buildings, plants, structures and equipment of the
Acquired Companies that are capitalized on the Balance Sheet and as updated
through Closing, as reflected on the Closing Balance Sheet, and all equipment
held under operating leases are described in Part 2.8 of the Disclosure Letter.
The building, plants, structures, and equipment of the Acquired Companies are
sufficient for the continued conduct of the Acquired Companies' businesses after
the Closing in substantially the same manner as conducted prior to the Closing.
11
2.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Acquired Companies
that are reflected on the Balance Sheet and as updated as of the Closing Date on
the Closing Balance Sheet (collectively, the "Accounts Receivable") represent or
will represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. The Sellers make no
representation or warranty regarding the collectibility of the Acquired
Companies' accounts receivable, however except as set forth in Section 2.9 of
the Disclosure Letter, the Accounts Receivable are current and the respective
reserves shown on the Acquired Companies' books and records were calculated in
accordance with GAAP. Except as set forth in Part 2.9 of the Disclosure Letter,
there is no material contest or claim other than returns in the Ordinary Course
of Business, under any Applicable Contract with any maker of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. A
complete and accurate list of all Accounts Receivable posted on each of the
Acquired Companies' books as of August 31, 2001, and an aging of such Accounts
Receivable, updated through the close of business on the last business day prior
to the Closing Date for the purposes of calculations as required under Section
1.5 herein has been and will be provided to the Buyer.
2.10 INVENTORY. The inventory of the Acquired Companies consists of raw
materials and supplies, manufactured and purchased parts, goods in process and
finished goods. Such inventory is not excessive but reasonable in amount in the
present circumstances of the Acquired Companies and is not obsolete, subject to
a GAAP reserve for inventory set forth on the Balance Sheet and as updated
through Closing, as reflected on the Closing Balance Sheet. A complete and
accurate list of all inventory of each of the Acquired Companies as of August
31, 2001, updated through the close of business on the last business day prior
to the Closing Date for the purposes of calculations as required under Section
1.5 herein has been and will be provided to the Buyer.
2.11 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 2.11 of the
Disclosure Letter, none of the Acquired Companies has any material liabilities
or obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise), or guarantees of any material liabilities or
obligations, except for liabilities or obligations reflected or reserved against
in the Balance Sheet as updated through Closing in the Closing Balance Sheet,
Applicable Contracts and liabilities incurred in the Ordinary Course of Business
since the respective dates thereof. None of such liabilities relate to a
criminal proceeding, violation of law, breach of contract or tort obligation.
2.12 TAXES.
(a) The Sellers and/or the Acquired Companies filed or caused to be
filed on a timely basis all Tax Returns that are or were required to be filed by
or with respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. The Sellers and/or the
Acquired Companies have delivered or will deliver within five (5) days of the
execution and delivery of this Agreement to Buyers copies of, and Part 2.12 of
the Disclosure Letter contains a complete and accurate list of, all such Tax
Returns relating to income or franchise taxes filed since September 1, 1998. The
Sellers and/or the Acquired Companies have paid, or made provision for the
payment of, all Taxes whether or not shown on any Tax Returns or otherwise, or
pursuant to any assessment received by any Acquired
12
Company, except such Taxes, if any, as are listed in Part 2.12 of the Disclosure
Letter and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet and
updated as of the Closing Date in the Closing Balance Sheet and updated as of
the Closing Date in the Closing Balance Sheet.
(b) Federal Canadian income tax assessments have been issued to PSA
covering all past periods through the fiscal year ended August 31, 2000 (and
such assessments, if any amounts were owing in respect thereof, have been paid,
accrued in the Balance Sheet and as updated through Closing, as reflected on the
Closing Balance Sheet, or, where permitted by law, security therefore has been
provided. Except as set forth on Part 2.12(b) of the Disclosure Letter, the
United States federal and state income Tax Returns of each Acquired Company
subject to the United States Taxes described in Section 2.12(a) have not been
audited by the IRS or relevant state tax authorities and the Canadian federal
and provincial Tax Returns of each Acquired Company subject to the Canadian
Taxes described in Section 2.12(a) have not been audited by Canada Customs and
Revenue Agency or applicable provincial taxing authorities. Except as described
in Part 2.12 of the Disclosure Letter, no Seller or Acquired Company has given
or been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of Taxes of any Acquired Company or for which any
Acquired Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each Acquired Company are adequate (determined in accordance
with GAAP) and are at least equal to that Acquired Company's liability for
Taxes. To the Knowledge of the Acquired Companies, there exists no proposed tax
assessment against any Acquired Company except as disclosed in the Balance Sheet
and/or the Closing Balance Sheet and in Part 2.12 of the Disclosure Letter. No
consent to the application of Section 341(f)(2) of the Code has been filed with
respect to any property or assets held, acquired, or to be acquired by any
Acquired Company. All Taxes that any Acquired Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper governmental Body or
other Person.
(d) All Tax Returns filed by (or that include on a combined basis)
any Acquired Company are true, correct, and complete.
2.13 NO MATERIAL ADVERSE EFFECT. Since August 31, 2001 other than for
general economic conditions or as disclosed in Part 2.13 of the Disclosure
Letter, there has not been any Material Adverse Effect, taken as a whole, and no
event has occurred or circumstance exists that is reasonably likely to result in
such a Material Adverse Effect. In addition, since August 31, 2001, there has
been no Material Adverse Effect in the composition of the assets of the Acquired
Companies.
2.14 EMPLOYEE BENEFITS. Except as described in Part 2.14 of the Disclosure
Letter, none of the Acquired Companies maintains or operates any Employee
Benefit Plan nor has any such Employee Benefit Plan been maintained or operated
during the past three years. None of the Acquired Companies maintains or
contributes to any Guaranteed Pension Plan or
13
Multiemployer Plan. With respect to each Employee Benefit Plan listed in Part
2.14 of the Disclosure Letter, to the extent applicable,
(a) each such Employee Benefit Plan affecting employees of Premier
Agendas has been maintained and operated in all material respects in compliance
with its terms and with all applicable provisions of ERISA, the Code and all
applicable regulations, rulings and other authority issued thereunder and, in
the case of PSA, all applicable legislation, regulations, rulings and other
authority issued thereunder;
(b) all contributions required by law to have been made under each
such Employee Benefit Plan to any fund or trust established thereunder or in
connection therewith have been made by the due date thereof;
(c) each such Employee Benefit Plan intended to qualify under Section
401(a) of the Code is the subject of a favorable unrevoked determination letter
issued by the Internal Revenue Service as to its qualified status under the
Code, which determination letter may still be relied upon as to such tax
qualified status, and no circumstances have occurred that would adversely affect
qualified status of any such Employee Benefit Plan;
(d) no Employee Benefit Plan affecting employees of Premier Agendas
is subject to Title IV of ERISA;
(e) none of such Employee Benefit Plans affecting employees of
Premier Agendas that are "employee welfare benefit plans" as defined in section
3(a) of ERISA provides for continuing benefits or coverage for any participant
or beneficiary of a participant after such participant's termination of
employment except as required by applicable law, including section 4980B of the
Code or Section 6701 of ERISA; and
(f) Premier Agendas, or any trade or business (whether or not
incorporated) under common control with Premier Agendas within the meaning of
Section 401 of ERISA has, or at any time has had, any obligation to contribute
to any "Multiemployer Plan."
PSA does not maintain a pension plan for the employees in its Canadian
operations. No Acquired Company is party to any management agreement, pay equity
plan, vacation or vacation pay policy, employee insurance, hospital or medical
expense program or pension, retirement, profit sharing, stock bonus, deferred
profit sharing, supplemental retirement, unemployment benefit, group registered
retirement savings plan, disability insurance, dental services or other employee
benefit plan, program or arrangement or to any executive or key personnel
incentive or other special compensation arrangement or to other contracts or
agreements with or with respect to officers, employees or agents other than
those listed and described in Part 2.14 of the Disclosure Letter and those
required to be maintained, paid or contributed to by law.
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth in Part 2.15 of the Disclosure Letter:
14
(i) each Acquired Company is in material compliance with each
Legal Requirement that is or was applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets;
(ii) to the Knowledge of the Acquired Companies no event has
occurred or circumstance exists that (with or without notice or lapse of time)
(A) is reasonably likely to constitute or result in a violation by any Acquired
Company of, or a failure on the part of any Acquired Company to comply with, any
Legal Requirement, or (B) is reasonably likely to give rise to any obligation on
the part of any Acquired Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature; and
(iii) no Acquired Company has received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of,
or failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of any Acquired Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(b) Part 2.15 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by any Acquired
Company or that otherwise relates to the business of, or to any of the assets
owned, leased or used by, any Acquired Company. Each Governmental Authorization
listed or required to be listed in Part 2.15 of the Disclosure Letter is valid
and in full force and effect. Except as set forth in Part 2.15 of the Disclosure
Letter:
(i) each Acquired Company is in material compliance with all of
the terms and requirements of each Governmental Authorization identified or
required to be identified in Part 2.15 of the Disclosure Letter;
(ii) to the Knowledge of the Acquired Companies no event has
occurred or circumstance exists that is reasonably likely to (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Part 2.15 of the
Disclosure Letter, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any modification to,
any Governmental Authorization listed or required to be listed in Part 2.15 of
the Disclosure Letter;
(iii) no Acquired Company has received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any material, actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any material, actual, proposed, possible, or
potential revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
15
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Part 2.15 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental bodies.
The Governmental Authorizations listed in Part 2.15 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
as at the Closing Date to permit each of the Acquired Companies to lawfully
conduct and operate its business in the manner it currently conducts and
operates such business and to permit the Acquired Companies to own and use their
assets in the manner in which they currently own and use such assets.
2.16 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.16 of the Disclosure Letter, there
is no pending Proceeding:
(i) that has been commenced by or against any Acquired Company;
or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions; or
(iii) relating to the Shares.
To the Knowledge of the Acquired Companies, no such Proceeding has been
threatened, and no event has occurred or circumstance exists that is reasonably
likely to give rise to or serve as a basis for the commencement of any such
Proceeding. Sellers have delivered or will deliver to Buyers copies of all
pleadings, correspondence, and other documents relating to each Proceeding
listed in Part 2.16 of the Disclosure Letter.
(b) Except as set forth in Part 2.16 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies,
or any of the assets owned, leased or used by any of the Acquired Companies is
subject;
(ii) no officer, director or, to the Knowledge of the Acquired
Companies, no agent, or employee of any Acquired Company is subject to any Order
that prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of any
Acquired Company.
(c) Except as set forth in Part 2.16 of the Disclosure Letter:
(i) each Acquired Company is, and at all times has been, in
material compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned, leased or used by it, is or has been
subject;
16
(ii) to the Knowledge of the Acquired Companies, no event has
occurred or circumstance exists that may constitute or result in (with or
without notice or lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which any Acquired Company, or any of the
assets owned, leased or used by any Acquired Company, is subject; and
(iii) no Acquired Company has received at any time any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or potential violation of,
or failure to comply with, any term or requirement of any Order to which any
Acquired Company, or any of the assets owned, leased or used by any Acquired
Company, is or has been subject.
2.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in Part
2.17 of the Disclosure Letter, since August 31, 2001 there has not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
any Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; or purchase, redemption, retirement, or
other acquisition by any Acquired Company of any shares of any such capital
stock;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) payment or increase by any Acquired Company of any bonuses,
salaries, or other compensation to any Seller, stockholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) discharge or satisfaction of any Encumbrance, or payment of any
obligation or liability (fixed or contingent) other than liabilities included in
the Balance Sheet and current liabilities incurred since the date of the Balance
Sheet in the Ordinary Course of Business as reflected on the Closing Balance
Sheet;
(e) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
(f) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
any of the Acquired Companies;
(g) entry into (i) any license, sales representative, joint venture,
credit, or similar agreement, or (ii) any Applicable Contract outside the
Ordinary Course of Business;
(h) termination of, or receipt of notice of termination of (i) any
license, sales representative, joint venture, credit, or similar agreement or
(ii) any Applicable Contract or
17
transaction involving a total remaining commitment by any Acquired Company of at
least $100,000.00;
(i) sale, lease, or other disposition of any asset of any Acquired
Company other than sales of inventory in the Ordinary Course of Business or
dispositions of minor items of personal property, the cumulative effect of which
is not material to any Acquired Company, or mortgage, pledge, or imposition of
any Encumbrance on any material asset of any Acquired Company;
(j) cancellation or waiver of any claims or rights with a value to
any Acquired Company in excess of $100,000.00, except for lien releases given in
the Ordinary Course of Business;
(k) material change in the accounting methods used by any Acquired
Company; or
(l) agreement, whether oral or written, by any Acquired Company to do
any of the foregoing.
2.18 CONTRACTS; NO DEFAULTS.
(a) Part 2.18(a) of the Disclosure Letter contains a complete and
accurate list, and Sellers have delivered to Buyers true and complete copies, of
all Applicable Contracts which have not been fully performed and for which
obligations are still outstanding, of:
(i) each Applicable Contract for which work is still to be
performed or services or goods are still to be provided that involves
performance of services or delivery of goods or materials by any Acquired
Company of an amount or value in excess of $50,000;
(ii) each Applicable Contract for which work is still to be
performed or services or goods are still to be provided that involves
performance of services from a subcontractor in excess of $50,000;
(iii) each Applicable Contract that involves capital expenditures
of any Acquired Company in excess of $50,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $1,000 per month);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
18
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees relating to wages, hours, and other conditions of employment;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that in any
way purport to restrict any Acquired Company's business activity or limit the
freedom of any Acquired Company to engage in any line of business or to compete
with any Person;
(ix) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments for
goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by any Acquired Company to be responsible for consequential damages;
(xii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any Acquired
Company other than in the Ordinary Course of Business; and
(xiii) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
Part 2.18(a) of the Disclosure Letter sets forth information regarding such
Applicable Contracts, including the parties to the Applicable Contracts, the
date of such Applicable Contracts and the Acquired Company's office where
details relating to the Applicable Contracts are located.
(b) Except as set forth in Part 2.18(b) of the Disclosure Letter:
(i) no Seller has or may acquire any rights under, and no
Seller or any shareholder of FCC has or may become subject to any obligation or
liability under, any Applicable Contract that relates to the business of, or any
of the assets owned, leased or used by, any Acquired Company; and
(ii) to the Knowledge of the Acquired Companies, no officer,
director, agent, employee, consultant, or contractor of any Acquired Company is
bound by any Contract that purports to limit the ability of such officer,
director, agent, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the business
19
of any Acquired Company, or (B) assign to any Acquired Company or to any other
Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 2.18(c) of the Disclosure Letter:
(i) each Contract identified or required to be identified in
Part 2.18(a) of the Disclosure Letter is in full force and effect; and
(ii) to the Knowledge of the Acquired Companies, no Contract
identified or required to be identified in Part 2.18(a) of the Disclosure Letter
contains any term or requirement that is not customary in the industries in
which the Acquired Companies operate.
(d) Except as set forth in Part 2.18(d) of the Disclosure Letter:
(i) each Acquired Company is in material compliance with all
applicable terms and requirements of each Applicable Contract under which such
Acquired Company has or had any obligation or liability or by which such
Acquired Company or any of the assets owned, leased or used by such Acquired
Company is or was bound;
(ii) to the Knowledge of the Acquired Companies, each other
Person that has or had any obligation or liability under any Contract under
which an Acquired Company has or had any rights is in material compliance with
all applicable terms and requirements of such Contract;
(iii) to the Knowledge of the Acquired Companies, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
is reasonably likely to contravene, conflict with, or result in a violation or
breach of, or give any Acquired Company or other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any other
Person any notice or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of, or default
under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to any
Acquired Company under current or completed contracts with any Person having the
contractual or statutory right to demand or require such renegotiation and, to
the Knowledge of each Acquired Company and Seller, no such Person has made
written demand for such renegotiation.
(f) To the Knowledge of the Acquired Companies, the Contracts
relating to the sale, design, manufacture, or provision of products or services
by the Acquired Companies have been entered into in the Ordinary Course of
Business and have been entered into without the commission of any act alone or
in concert with any other Person, or any consideration having been paid or
promised, that is or is reasonably likely to be in violation of any Legal
Requirement.
20
2.19 INSURANCE.
(a) The Acquired Companies have delivered or will deliver to
Buyers on or before the date hereof:
(i) true and complete copies of all policies of
insurance to which any Acquired Company is a party or under which any Acquired
Company, or any director of any Acquired Company, is or has been covered at any
time within the three (3) years preceding the date of this Agreement to the
extent in the possession of any Acquired Company or Seller or their insurance
agent. Except for part 2.19(a) of the Disclosure Letter, all such coverages for
Premier Agendas shall be in the form of occurrence and not claims;
(ii) true and complete copies of all pending applications
for policies of insurance; and
(iii) any statement by the auditor of any Acquired
Company's financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Part 2.19(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting any
Acquired Company, including any reserves established thereunder, which are
adequately recorded in the Balance Sheet and as updated through Closing, as
reflected on the Closing Balance Sheet, in accordance with GAAP;
(ii) any contract or arrangement, other than a policy of
insurance for the transfer or sharing of any risk by any Acquired Company; and
(iii) all obligations of the Acquired Companies to provide
coverage to third parties (for example, under leases or service agreements) and
identifies the policy under which such coverage is provided.
(c) Part 2.19(c) of the Disclosure Letter sets forth, by year,
for the current policy year and each of the 3 preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost of such
claims.
(d) Except as set forth on Part 2.19(d) of the Disclosure
Letter:
(i) All policies to which PSA is a party or that provide
coverage to PSA or any director or officer thereof:
(A) are valid and outstanding;
21
(B) are issued by an insurer that to the
knowledge of the Acquired Companies is financially sound and reputable;
(C) taken together, provide adequate insurance
coverage for the assets and the operations of Acquired Companies for all risks
normally experienced by the Acquired Companies according to their historical
experience; and
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the any Acquired Company is a party or by
which any of them is bound;
(E) will not, by virtue of the Closing of this
transaction, fail to continue in full force and effect following the
consummation of the Contemplated Transactions.
(ii) No Seller or Acquired Company has received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or that the
issuer of any policy is not willing or able to perform its obligations
thereunder.
(iii) The Sellers and/or Acquired Companies have paid all
premiums due, and have otherwise performed all of their respective obligations,
under each policy to which any Acquired Company is a party or that provides
coverage to any Acquired Company or director thereof.
(iv) The Acquired Companies have given notice to the
insurer of all claims that may be insured thereby.
(e) The insurance covering the Acquired Companies is part of
FCC's group insurance coverage and such insurance will not be available to the
Buyer or the Acquired Companies following the Closing.
2.20 ENVIRONMENTAL AND OCCUPATIONAL SAFETY AND HEALTH MATTERS. Except
as set forth in Part 2.20 of the Disclosure Letter:
(a) Each Acquired Company is, and at all times prior to the
date hereof has been, in material compliance with, and has not been and is not
currently in violation of any Environmental Law or any Occupational Safety and
Health Law. No acquired Company has any reason to expect, nor have any of them
received, any actual or threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law or any
Occupational Safety and Health Law, or of any actual or threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which any Acquired Company has had an interest, or
with respect to any property or Facility at or to which Hazardous Materials were
generated,
22
manufactured, refined, transferred, imported, used, or processed by any Acquired
Company, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(b) No Acquired Company has any reason to expect, nor has any
of them, received, any Order, notice, communication, inquiry, warning, citation,
summons or directive that relates to Hazardous Activity, Hazardous Materials, or
any alleged, actual, or potential violation or failure to comply with any
Environmental Law or any Occupational Safety and Health Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities the operations of the Acquired Companies, or any other properties or
assets (whether real, personal, or mixed) in which any Acquired Company had an
interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by any Acquired Company have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(c) No Acquired Company has any material Environmental, Health,
and Safety Liabilities with respect to the Facilities, the operations of the
Acquired Companies or, with respect to any other properties and assets (whether
real, personal, or mixed) in which any Acquired Company (or any predecessor),
has or had an interest, or, to the Knowledge of the Acquired Companies, at any
property geologically or hydrologically adjoining the Facilities or any such
other property or assets.
(d) Other than materials used by the Acquired Companies in the
Ordinary Course of Business and in compliance with all applicable Environmental
Laws,, there are no Hazardous Materials present on or in the environment at the
Facilities or, to the Knowledge of the Acquired Companies, at any geologically
or hydrologically adjoining property, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills (authorized
or unauthorized), land deposits, dumps, equipment (whether moveable or fixed) or
other containers, either temporary or permanent, and deposited or located in
land, water, swamps, or any other part of the Facilities or such adjoining
property, or incorporated into any structure therein or thereon. No Acquired
Company has permitted or conducted, and is not aware of, any activity conducted
with Hazardous Materials with respect to the Facilities or, to the Knowledge of
the Acquired Companies, any other properties or assets (whether real, personal,
or mixed) in which the Acquired Companies have or had an interest except in
material compliance with all applicable Environmental Laws and Occupational
Safety and Health Laws.
(e) There has been no Release or threat of Release by any
Acquired Company, or any other Person, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which any Acquired Company has or
had an interest, or, to the Knowledge of the Acquired Companies, from or by any
geologically or hydrologically adjoining property except in material compliance
with Environmental Laws.
23
(f) Each Acquired Company has obtained all necessary permits,
licenses, certificates and approvals for the operation of the Acquired Company's
business and the use of the Facilities as required by Environmental Laws and
Occupational Safety and Health Laws.
(g) The Sellers and the Acquired Companies have delivered to Buyers
true and complete copies and results of any reports, studies, analyses, tests,
or monitoring possessed or initiated by Sellers or any Acquired Company
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by any Acquired Company with Environmental
Laws.
2.21 EMPLOYEES.
(a) Part 2.21 of the Disclosure Letter contains a complete and
accurate list of the following information as of the last day of the payroll
period immediately preceding the Closing Date for each salaried employee or
director of the Acquired Companies, including each salaried employee on leave of
absence or layoff status: employer; name; job title; current compensation paid
or payable and any change in compensation since August 31, 2001; vacation
accrued; and service credited for purposes of vesting and eligibility to
participate under any Acquired Company's pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock option, cash bonus,
employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or vacation plan, or any
other Employee Benefit Plan. Except as set forth on Part 2.21, no Acquired
Company is a party to any written contracts of employment with any of its
employees (other than union employees governed by a collective bargaining
agreement) or any oral contracts of employment which are not terminable on the
giving of reasonable notice, and no inducements to accept employment with such
Acquired Company were offered to any such employees which have the effect of
increasing the period of notice of termination to which any such employee is
entitled.
(b) To the Knowledge of the Acquired Companies and Sellers, no current
employee or current director of any Acquired Company is a party to, or is
otherwise bound by, any agreement or arrangement that in any way adversely
affected, affects, or will affect (i) the performance of his duties as an
employee or director of the Acquired Companies, or (ii) the ability of any
Acquired Company to conduct its business. To the Knowledge of the Acquired
Companies and Sellers and based upon due inquiry, no director, officer, or other
key employee of an Acquired Company intends to terminate his/her employment with
such Acquired Company.
(c) Part 2.21 of the Disclosure Letter contains a complete and
accurate list of the following information for each retired employee or director
of the Acquired Companies, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
other benefits, and the duration for which such benefits were promised.
(d) Each Acquired Company has deducted and remitted to the relevant
Governmental Body or entity all income taxes, unemployment insurance
contributions, Canada Pension Plan contributions, employer health tax
remittances and any taxes or deductions or other
24
amounts which it is required by statute or contract to collect and remit to any
Governmental Body or other entities entitled to receive payment of such
deduction. Each Acquired Company has paid to the date of this Agreement all
amounts payable on account of salary, bonus payments and commission to or on
behalf of any and all employees.
(e) All levies under the Workers' Compensation Act (British
Columbia), or under the workers' compensation legislation of any other
jurisdiction where any Acquired Company carries on the business, have been paid
by such Acquired Company.
(f) Part 2.21 of the Disclosure Letter contains a complete and
accurate list of employees in receipt of or who have claimed benefits under any
weekly indemnity, long term disability or workers' compensation plan or
arrangement or any other form of disability benefit program.
2.22 LABOR DISPUTES; COMPLIANCE. Other than as set forth in Part 2.22 of
the Disclosure Letter,
(a) no Acquired Company has been or is a party to any collective
bargaining or other labor Contract;
(b) there is no presently pending or existing, and to the Acquired
Companies' Knowledge there is not threatened any strike, slowdown, picketing,
work stoppage, labor arbitration, unfair labor practice complaint or proceeding
in respect of the grievance of any employee, application or complaint filed by
an employee or union with the National Labor Relations Board or any comparable
Governmental Body, organizational activity, or other labor dispute against or
affecting any of the Acquired Companies or their Facilities, and no application
for certification of a collective bargaining agent is pending or to Affiliates'
and the Acquired Companies' Knowledge is threatened;
(c) except as specified on Part 2.22 of the Disclosure Letter, there
are no pending, threatened or anticipated (a) employment discrimination charges
or complaints against or involving any Acquired Company before any federal,
state, provincial, or local board, department, commission or agency, or (b)
unfair labor practice charges or complaints, under any labor relations
legislation, disputes or grievances affecting any Acquired Company.
(d) to the Acquired Companies' Knowledge no event has occurred or
circumstance exists that is reasonably likely to provide the basis for any work
stoppage or other labor dispute;
(e) there is no lockout of any employees by any Acquired Company, and
no such action is contemplated by any Acquired Company;
(f) the Acquired Companies have complied in all material respects with
all Legal Requirements relating to employment, equal employment opportunity,
non-discrimination, employee leave, immigration, wages, hours, benefits,
collective bargaining, the
25
payment of social security and similar taxes, occupational safety and health,
and plant closing; and
(g) no Acquired Company is liable for the payment of any taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
(h) all Acquired Companies have implemented and published a policy
against unlawful harassment which complies with guidance issued by the Equal
Employment Opportunity Commission and, to their Knowledge, have enforced such
policies.
2.23 CERTAIN PAYMENTS. Neither an Acquired Company nor any director,
officer, agent, or employee of an Acquired Company, or any other Person acting
for or on behalf of an Acquired Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services in violation of any Legal Requirement (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of an Acquired Company, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of an Acquired
Company.
2.24 DISCLOSURE. No notice given pursuant to Section 6.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
2.25 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in Part 2.25
of the Disclosure Letter, no Seller or any Related Person of Sellers has any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Acquired Companies' businesses.
Except as set forth in Part 2.25 of the Disclosure Letter, no Seller or any
Related Person of Sellers or of the Acquired Companies' owns of record or as a
beneficial owner, an equity interest or any other financial or profit interest
in any Person that has (i) had business dealings or a material financial
interest in any transaction with an Acquired Company other than business
dealings or transactions conducted in the Ordinary Course of Business with an
Acquired Company at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with an Acquired Company
with respect to any line of the products or services of an Acquired Company (a
"Competing Business") in any market presently served by any Acquired Company
except for less than one percent of the outstanding capital stock of any
Competing Business that is publicly traded on any recognized exchange or in the
over-the-counter market. Except as set forth in Part 2.25 of the Disclosure
Letter, no Seller or any Related Person of Sellers is a party to any Contract
with, or has any claim or right against, an Acquired Company.
2.26 BROKERS OR FINDERS. The Acquired Companies have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
26
2.27 CANADIAN SECURITIES LAWS. PSA is a private company within the meaning
of the Securities Act (British Columbia) and the sale of the Shares by the
Sellers to the Purchasers will be made in compliance with all applicable
securities legislation.
Each Seller represents and warrants to Buyers, individually as to such
Seller and not with respect to any other Seller, that the following statements
are, as of the date hereof and will be as of the Closing Date, true and correct:
2.28 OWNERSHIP OF STOCK. Each Seller owns of record and beneficially the
number of Shares of the Acquired Companies indicated opposite such Seller's name
in Schedule 2.28 hereto, with full right and authority to sell such Shares
hereunder, and upon delivery of such Shares hereunder, the Buyers will receive
good title thereto, free and clear of all liens, mortgages, pledges or security
interests or the rights of any third person and not subject to any agreements or
understandings among any Persons with respect to the voting or transfer of such
Shares other than those arising under agreements to which either Buyer is a
party.
2.29 EXECUTION, DELIVERY AND ENFORCEABILITY OF AGREEMENT; NO VIOLATION.
This Agreement has been duly executed and delivered by or on behalf of the
Seller, and at the Closing any other documents required hereunder to be executed
and delivered by or on behalf of the Seller will have been duly executed and
delivered. This Agreement constitutes the legal, valid and binding obligation of
the Seller, enforceable against such Seller in accordance with its terms, except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting
creditor's rights generally. Any other agreements required hereunder to be
executed and delivered by the Seller at Closing will constitute the legal, valid
and binding agreements of the Seller executing the same, enforceable against
such Seller in accordance with their respective terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditor's rights generally.
Neither the execution of this Agreement nor the consummation of the transactions
provided for herein by the Seller will violate, or constitute a default under,
or permit the acceleration of maturity of, except to the extent waived, the
Seller's organizational Documents or any indentures, mortgages, promissory
notes, contracts or agreements to which such Seller is a party or by which such
Seller or such Seller's properties are bound. Upon the execution and delivery by
the Seller of this Agreement, and the Sellers Releases (collectively, the
"Seller's Closing Documents") the Seller's Closing Documents will constitute the
legal, valid, and binding obligations of such Seller, enforceable against such
Seller in accordance with their respective terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditor's rights generally.
2.30 BROKERS OR FINDERS. The Sellers have entered into an agreement with
ThinkEquity Partners, pursuant to which the Sellers will be obligated to pay a
fee from the proceeds received at Closing. The Sellers do hold the Buyers and
the Acquired Companies harmless with respect to the obligation to pay such fee
27
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYERS
Buyers represent and warrant to Sellers as follows:
3.1 ORGANIZATION AND GOOD STANDING. Each of the Buyers is a corporation
duly organized, validly existing, and in good standing under the laws of its
incorporation. SSI Canada is wholly owned subsidiary of SSI and SSI is not
Canadian entity.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyers, enforceable against Buyers in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting
creditor's rights generally. Buyers have the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement and to perform their
obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement by Buyers
nor the consummation or performance of any of the Contemplated Transactions by
Buyers will give any Person the right to prevent, delay, or otherwise interfere
with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyers' Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyers;
(iii) any Legal Requirement or Order to which Buyers may be
subject; or
(iv) any Contract to which Buyers are a party or by which Buyers
may be bound.
Except as set forth in Schedule 3.2, Buyers are not and will not be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
3.3 INVESTMENT INTENT. Buyers are acquiring the Shares for their own
account and not with a view to the resale of the Shares or their distribution
within the meaning of Section 2(11) of the Securities Act. Buyers understand
that none of the Shares has been registered under the Securities Act or state
securities laws by reason of a specific exemption from the registration
provisions of the Securities Act and applicable state laws which depends upon,
among other things, the bona fide nature of the investment intent and the
accuracy of Buyers' representations as expressed in this Section 3.3. Buyers are
sophisticated business entities whose officers and
28
directors with responsibility for determining whether to acquire the Shares have
knowledge and experience in business and financial matters, are experienced in
the business of the Acquired Companies and are able to evaluate the merits and
risks of acquiring the Shares. Buyers have had the opportunity to obtain
information regarding the Acquired Companies as desired to evaluate the merits
and the risks inherent in holding the Shares and have been given an opportunity
to discuss the acquisition of the Shares and the business and financial
condition of the Acquired Companies with officers, directors, and other
representatives of Sellers and the Acquired Companies.
3.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyers and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyers' Knowledge, no such Proceeding has been
threatened.
3.5 BROKERS OR FINDERS. Buyers and their officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
3.6 FINANCIAL CAPACITY TO CLOSE. The Buyers have adequate cash in the bank
or have arranged for the funds necessary to close the transactions contemplated
hereby and this transaction is not subject to any financing contingencies on the
part of the Buyers.
ARTICLE IV
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYERS
Buyers' obligation to purchase the Shares and to take the other actions
required to be taken by Buyers at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyers, in whole or in part):
4.1 [This section is intentionally deleted.]
4.2 SELLERS' AND THE ACQUIRED COMPANIES' PERFORMANCE.
(a) All of the covenants and obligations that Sellers and the
Acquired Companies are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
(b) Each Seller or the Acquired Companies, as the case may be, must
have delivered each of the documents required to be delivered by such Seller
pursuant to Section 1.4.
4.3 CONSENTS. Each of the Consents required to be obtained from any Person
or Governmental Body to consummate the transactions contemplated by this
Agreement, the failure of which to obtain would have a Material Adverse Effect,
must have been obtained and be in full force and effect. Notwithstanding the
foregoing, if any Consent has not been obtained which
29
would give the Buyer the right not to close such transactions because of such
failure to obtain a material Consent, the Seller may elect to indemnify and hold
harmless the Buyer under the terms of Article VIII without application to the
Indemnification Deductible, from the damages resulting from such failure and the
Buyer shall then be required to proceed with a closing of such transactions
notwithstanding that such Consent has not been obtained. The parties agree that
in such event, each will work reasonably and in good faith following the Closing
to obtain such Consent. All corporate and other action necessary to authorize
the execution, delivery and performance of this Agreement by Sellers and the
Acquired Companies and the consummation by Sellers and the Acquired Companies of
the transactions contemplated by this Agreement shall have been duly and validly
taken and Sellers shall have full right and power to sell the Shares and Sellers
shall have full right and power to perform their obligations upon the terms
provided in this Agreement.
4.4 [This Section is intentionally deleted.]
4.5 NO MATERIAL ADVERSE EFFECT. During the period from August 31, 2001
through the Closing Date, there shall not have been any Material Adverse Effect
on the value, assets, and/or business(s) of the Acquired Companies, and/or none
of the events described in Section 2.17 of this Agreement shall have occurred.
In the event that through the due diligence process, the Buyers determine prior
to Closing that a Material Adverse Effect exists which differs from Sellers
representations and warranties and the content of the Disclosure Letter, they
shall have the option not to consummate the Contemplated Transactions, unless
the Sellers are willing to indemnify the Buyers regarding all such matters which
compose the Material Adverse Effect(s) under the terms of Article VIII without
application of the Indemnification Deductible. The Buyers
4.6 ADDITIONAL DOCUMENTS. Sellers must have caused the following documents
to be delivered to Buyers:
(a) an opinion of counsel to the Sellers, dated the Closing Date, in
a form which shall be mutually acceptable to the Buyers and the Sellers;
(b) certified copy of a resolution of the board of directors of FCC
approving the transfer of the Premier Agendas Shares to the Buyers and the
Contemplated Transactions and a resolution of the board of directors of FC
Canada approving the transfer of the PSA Shares;
(c) certified copies of the Organizational Documents of each of the
Acquired Companies, FC Canada and FCC;
(d) statutory declaration of the FC Canada concerning Canadian
qualification of FC Canada or other reasonable and satisfactory evidence that FC
Canada is at the Closing Date a corporation in good standing under the laws of
Canada within the meaning of the Tax Act;
30
(e) certificate of the Sellers concerning the matters referred to in
Section 4.2 hereof and confirming that all conditions under this Agreement in
favor of the Sellers have been either fulfilled or waived;
(f) certificates of incumbency of FCC, FC Canada and each Acquired
Company;
(g) share certificates duly endorsed for transfer representing all
Shares;
(h) resignation letters from each of the directors of the Acquired
Companies, which resignations shall be effective as of the Closing;
(i) a license agreement in the form attached hereto as Exhibit 4.6(i)
shall have been entered into between FCC and the Acquired Companies;
(j) such other documents as Buyers may reasonably request for the
purpose of (i) evidencing the accuracy of any of Sellers' and the Acquired
Companies' representations and warranties, (ii) evidencing the performance by
either Sellers or the Acquired Companies of, or the compliance by each Seller
and Acquired Company with, any covenant or obligation required to be performed
or complied with by such Seller or Acquired Company, (iii) evidencing the
satisfaction of any condition referred to in this Article IV, or (iv) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions;
Sellers shall cause the following documents to be delivered to Buyers
within a reasonable time (not to exceed 60 days) following the Closing:
(k) certificates of good standing of FCC, FC Canada, and each Acquired
Company in each jurisdiction in which they are qualified to do business.
4.7 NO PROCEEDINGS. There shall not be in effect any Legal Requirement or
any injunction or other Order that prohibits the sale of the Shares by the
Sellers to the Buyers.
4.8 [This Section was intentionally deleted.]
4.9 NO PROHIBITION. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause either Buyer or any Person affiliated with
either Buyer to suffer any Material Adverse Effect under, (a) any applicable
Legal Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
4.10 COMPLIANCE WITH LAW. There shall have been obtained any and all
Governmental Authorizations which counsel for Buyers may reasonably deem
necessary or appropriate so that consummation of the transactions contemplated
by this Agreement and the Transaction Agreements will be in compliance with
Legal Requirements and the failure of which to obtain would have a Material
Adverse Effect on the Buyers or the Acquired Companies. There
31
shall have been obtained, from all appropriate Governmental Bodies, such
Consents as are required to permit the change of ownership and due registration
of the Shares contemplated by this Agreement, including, without limitation, the
following:
(a) Investment Canada - The Buyers shall have either received:
(i) a receipt issued under subsection 13(1) of the Investment
Canada Act certifying that a complete notice in prescribed form in respect of
the acquisition has been received and advising that such acquisition is not
reviewable or a notice from the Minister of Industry issued under sections 21,
22 or 23 of the Investment Canada Act, indicating that such Minister is, or is
deemed to be, satisfied that the acquisition is likely to be of net benefit to
Canada;
(ii) an opinion of the Minister of Industry issued under
subsection 37(2) of the Investment Canada Act indicating that such Minister is
of the opinion that the Investment Canada Act is not applicable to the
transactions contemplated herein; or
(iii) an opinion of a reputable Canadian law firm engaged by
Seller that the Investment Canada Act does not apply to the transaction.
4.11 NOTICES. Sellers will give any notices to third parties required by
agreements with such third parties where the failure to give or such notice
would have a Material Adverse Effect or pursuant to Legal Requirements where the
failure to give such notice would have Material Adverse Effect. The parties will
have filed with the Federal Trade Commission and the Antitrust Division of the
U. S. Department of Justice all filings required by the HSR Act and shall have
received a notice from the Federal Trade Commission and the United States
Department of Justice that such transaction may proceed.
4.12 [This Section was intentionally deleted.]
4.13 DISCLOSURE LETTER. The Sellers and the Acquired Companies shall have
provided the Buyers full and complete and final copies of the Disclosure Letter
including supplements thereto as limited under the terms of Section 6.8. Further
in the event that under the terms of Section 6.8 herein, the Sellers shall
submit supplements to the Disclosure Letter to the Buyers, which in the
aggregate describe matters which do in the aggregate indicate Material Adverse
Change(s) in the value, assets and/or business(s) of the Acquired Companies,
then, unless the Sellers are willing to indemnify the Buyers regarding such
Material Adverse Change(s) under the terms of Article VIII without application
to the Indemnification Deductible, the Buyers shall not be required to conclude
the Contemplated Transactions.
4.14 SPECIAL CIRCUMSTANCES. Notwithstanding any other provision of this
Article IV or Section 6.8 to the contrary, if prior to the Closing, Buyers shall
discover events, conditions, or circumstances, which (i) individually or in the
aggregate would have a direct financial consequences or affect the value of the
Acquired Companies to the Buyers or the Acquired Companies of $10,000,000 or
more and which constitute a change or breach of the representations of the
Sellers set forth in Article II or in the Disclosure Letter delivered at the
32
time of the execution of this Agreement and as supplemented in accordance with
Section 6.8, or (ii) reveal that the Acquired Companies have engaged in
practices that (A) violate public policy and such violation would have a
material damaging impact on the reputation or business of the Buyers or the
Acquired Companies; or (B) violate the felony criminal statutes of any
jurisdiction; or (C) the sale of products or services of any Acquired Company is
enjoined and such injunction shall have a Material Adverse Effect, then in the
event of the occurrence of any of the foregoing, Buyers shall have the option to
(x) require Seller, as a condition of Closing, to indemnify Buyers and the
Acquired Companies in a manner reasonably acceptable to the Buyers, against such
events or circumstances, or (y) in the alternative not to close the Contemplated
Transactions. Sellers shall not be obligated to indemnify Buyers or the Acquired
Companies against such events or circumstances, provided that if Sellers are
unwilling to indemnify Buyers, Buyers' sole options shall be to proceed with the
Closing or to terminate this Agreement and not close the Contemplated
Transactions. If Buyers elect to terminate this Agreement and not close the
Contemplated Transactions pursuant to the terms of this Section 4.14, then in
such event, Buyers shall have no liability to Sellers for not closing the
Contemplated Transactions.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by the Sellers, in whole or in part):
5.1 ACCURACY OF REPRESENTATIONS. All of Buyers' representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
5.2 BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyers are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyers must have delivered each of the documents required to be
delivered by Buyers pursuant to Section 1.4 and must have made the cash payments
required to be made by Buyers pursuant to Section 1.4.
5.3 ADDITIONAL DOCUMENTS. Buyers must have delivered to Sellers such other
documents as Sellers may reasonably request for the purpose of (i) enabling
their counsel to provide the opinion referred to in Section 4.6, (ii) evidencing
the accuracy of any representation or warranty of Buyers, (iii) evidencing the
performance by Buyers of, or the compliance by
33
Buyers with, any covenant or obligation required to be performed or complied
with by Buyers, (iv) evidencing the satisfaction of any condition referred to in
this Article 5, or (v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
5.4 NO INJUNCTION. There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits the sale of the Shares by Sellers
to Buyers.
5.5 BANK ONE APPROVAL. The Sellers shall receive the approval of Bank One,
National Association as the primary financial lender of the Sellers, to the
Contemplated Transactions.
5.6 JOINT MARKETING AGREEMENT. The Sellers and Buyers shall have entered
into and delivered a Joint Marketing Agreement as of the Closing Date in a form
that is mutually agreeable to the Buyers and the Sellers. The Sellers and the
Buyers shall act reasonably and in good faith in the negotiation of this Joint
Marketing Agreement.
ARTICLE VI
COVENANTS OF THE SELLERS
6.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Between the date of this
Agreement and the Closing Date, the Acquired Companies will, unless the Acquired
Companies obtain the written consent of Buyers (which shall not be unreasonably
withheld or delayed):
(a) conduct the business of the Acquired Companies only in the
Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current business
organization of the Acquired Companies, keep available the services of the
current officers, employees, and agents of the Acquired Companies, and maintain
the relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Acquired
Companies;
(c) confer with Buyers concerning operational matters of a material
nature;
(d) not make or commit to make any capital expenditure in excess of
$100,000.00;
(e) report regularly to Buyers concerning the status of the business,
operations, and finances of the Acquired Companies;
(f) continue in force and in good standing all existing insurance
maintained by it;
(g) comply with all applicable Legal Requirements; and
34
(h) comply with all restrictive covenants described in Article I of
this Agreement.
6.2 ACCESS FOR INVESTIGATION. Between the date of this Agreement and the
Closing Date, the Sellers, the Acquired Companies and their Representatives
will, (a) afford Buyers and their representatives free and full access to the
Acquired Companies' management to discuss the Acquired Companies' business
operations, assets, liabilities, actual or potential litigation and claims,
properties and prospects with the Acquired Companies' employees, agents,
accountants, attorneys, customers, suppliers, and other persons having business
dealings with the Acquired Companies or knowledge of the issues, (b) afford
Buyers and their representatives full and free access to the Acquired Companies
properties (including subsurface testing), contracts, books and records, and
other documents and data, (c) furnish Buyer and Buyers' advisors and
representatives with copies of all such contracts, books and records, and other
existing documents and data as Buyers may reasonably request, and (d) furnish
Buyers and Buyers' Advisors and representatives with such additional financial,
operating, and other data and information as Buyers may reasonably request in
the possession or control of any Acquired Company or Seller, or as to which any
of the Sellers or the Acquired Companies have Knowledge.
6.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, the Sellers
and the Acquired Companies will not, without the prior consent of Buyer, which
shall not be unreasonably withheld or delayed, take any affirmative action, or
fail to take any reasonable action within their or its control, as a result of
which any of the changes or events listed in Section 2.17 are likely to occur.
6.4 REQUIRED APPROVALS. As promptly as practicable after the date of this
Agreement, the Sellers and the Acquired Companies will make all filings required
by Legal Requirements to be made by it in order to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of this
Agreement and the Closing Date, the Sellers and the Acquired Companies will (a)
cooperate with Buyers with respect to all filings that Buyers elect to make (as
may not be detrimental to the Sellers) or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining all consents identified in Schedule 3.2 (including taking all
actions requested by Buyer to cause early termination or any applicable waiting
period under the HSR Act).
6.5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each of the Acquired Companies and each Seller will promptly notify Buyers
in writing if such Seller or the Acquired Companies becomes aware of any fact or
condition that causes or constitutes a Breach of any representations and
warranties of the Acquired Companies, and the Sellers as of the date of this
Agreement, or if such Seller or an Acquired Company becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of
35
occurrence or discovery of such fact or condition. During the same period, the
Acquired Companies will promptly notify Buyer of the occurrence of any Breach of
any covenant in this Article VI or of the occurrence of any event that may make
the satisfaction of the conditions in Article IV or V impossible or unlikely.
6.6 NO NEGOTIATION. Each of the Sellers and the Acquired Companies will,
and will cause each of their Representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyers)
relating to any transaction involving the sale of the business or assets (other
than in the Ordinary Course of Business) of the Acquired Companies, or any of
the capital stock of the Acquired Companies, or any merger, consolidation,
business combination, or similar transaction involving the Acquired Companies.
6.7 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Sellers and the Acquired Companies will use their Best Efforts to cause
the conditions in Articles IV and VI to be satisfied.
6.8 SUPPLEMENTS TO DISCLOSURE LETTER. Sellers and the Acquired Companies
shall have the right and obligation, from time to time, on or prior to the
Closing, to supplement the material set forth in the Disclosure Letter only if
such supplements are based upon events that have occurred subsequent to the
execution and delivery of this Agreement and up to and including the Closing
Date. In the event that such supplements in the aggregate describe matters which
do not in the aggregate indicate Material Adverse Change(s) in the value, assets
and/or business(s) of the Acquired Companies, then such supplements may be
submitted by the Sellers to the Buyers without the approval of the Buyers and
shall be effective amendments to the Disclosure Letter. In the event that such
supplements in the aggregate describe matters which do in the aggregate indicate
Material Adverse Change(s) in the value, assets and/or business(s) of the
Acquired Companies, then the Sellers acknowledge that they may, as provided in
Section 4.13 hereof, but shall not be obligated to, indemnify the Buyers from
the effects of such supplements. If Sellers are willing to make such an
indemnity, such supplements shall be informational only and without impact
regarding the level of liability of the Sellers under the terms of this
Agreement (including but not limited to Article VIII herein without the
application of the Indemnification Deductible). Further if Sellers are willing
to make such an indemnity, Buyers may not use such disclosures as a reason for
not closing the Contemplated Transactions. In the event that the Sellers are
unwilling to indemnify the Buyers with respect to the matters raised in such
supplements and Buyers then elect to consummate the Contemplated Transactions
such election shall be a waiver of the indemnification by the Sellers of such
matters under the terms of Article VIII of this Agreement.
6.9 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement or as approved by the Buyers, Sellers will cause all
indebtedness of any Seller or Related Person of a Seller to an Acquired Company
to be paid in full no later than ten (10) days after Closing.
36
6.10 PRIOR TAXATION PERIODS. The Sellers shall jointly and severally
indemnify and hold harmless each Acquired Company and the Buyers in respect of
liability of each Acquired Company for Taxes relating to all financing periods
of the Acquired Companies commencing prior to the Closing Date and ending on the
Closing Date. The Buyer shall be responsible for all Taxes of the Acquired
Companies attributable to periods on or after the Closing Date. If any of the
Acquired Companies receives an assessment or reassessment in respect of which
the indemnity of the Sellers may extend, the Buyers shall cause the Acquired
Company so assessed or reassessed, as soon as practicable after receipt thereof
to deliver to the Sellers a copy of such assessment or reassessment and the
Buyers shall notify the Sellers of its claim, if any, against the Sellers in
accordance with the provisions of Article VIII hereof. The provisions of Article
VIII and Section 7.6 shall apply with regard to the right of the Sellers to
contest any assessment or reassessment relating to the Acquired Companies prior
to the Closing Date.
6.11 CANCELLATION OF INTERCOMPANY ACCOUNTS. As of the Closing the Sellers
shall cancel all intercompany payables and receivables due by and among the
Sellers and the Acquired Companies. This cancellation shall include but not be
limited to the cancellation of the Notes Payable to FCC.
6.12 RETAINED CLAIMS. Notwithstanding the foregoing, both prior to and
after Closing, Sellers shall retain all liability with respect to, have sole
authority for, and responsibility to act in the defense, settlement, or other
resolution of Black et al. v. The Premier Company and Xxxxxxxx Xxxxx Company
(Civil Action No. 01-4317, pending in the Federal District Court of the Eastern
District of Pennsylvania), Xxxxxxxxx x. Premier Graphics (37 ECR-0037-01-2,
pending before the State of Washington Human Rights Commission and Equal
Employment Opportunity Commission) any successor or related claims and any
claims alleging unlawful discrimination in employment against any of the Sellers
and/or the Acquired Companies (collectively "Retained Claims"). The Sellers
shall have no obligation to consult with Buyers concerning, such defense,
settlement, or resolution of the Retained Claims. Following closing, Buyer shall
provide to the Sellers, following reasonable notice, but without the necessity
of service of legal process by Sellers, with access to such records, generated
prior to the Closing Date and access to its employees as may be reasonably
requested by Sellers in defense, settlement, or resolution of the Retained
Claims.
6.13 ADULT LEADERSHIP TRAINING PROGRAM. The Sellers shall as of the
Closing, retain the operations (including expenses) and assets of the Acquired
Companies related to the Adult Leadership Training Program.
ARTICLE VII
COVENANTS OF THE BUYERS
7.1 CONFIDENTIALITY. The Buyers shall keep confidential all confidential
technology and any other confidential information (unless readily available from
public or published information or sources or required to be disclosed by law)
obtained from either the
37
Sellers or any Acquired Company. If this Agreement is terminated without
completion of the transactions contemplated herein, then, promptly after such
termination, all documents, working papers and other written material obtained
by the Buyers from the Sellers or any Acquired Company in connection with this
Agreement shall be returned by the Buyer to the Party from whom such materials
were obtained. Notwithstanding any provision of this Agreement to the contrary,
this Agreement does not terminate or supercede the terms of that certain
Confidentiality Agreement dated October 12, 2001 between FCC and SSI, which
agreement shall remain in full force and effect, except as provided by law. Such
Confidentiality Agreement shall be considered null and void upon the
consummation of the Contemplated Transactions.
7.2 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after the
date of this Agreement, Buyer will, and will cause each of its Related Persons
to, make all filings required by Legal requirements to be made by them to
consummate the Contemplated Transactions (including all filings under the HSR
Act). Between the date of this Agreement and the Closing Date, Buyers will, and
will cause each Related Person to (a) cooperate with Sellers with respect to all
filings that Sellers are required by Legal Requirements to make in connection
with the Contemplated Transactions, and (b) cooperate with Sellers in obtaining
all consents identified in Part 3.2 of the Disclosure Letter.
7.3 BEST EFFORTS. Between the date of this Agreement and the Closing Date,
Buyers will use their Best Efforts to cause the conditions in Article IV and V
to be satisfied.
7.4 INVESTMENT CANADA NOTIFICATION. Before or immediately after the
execution and delivery of this Agreement, the Buyers shall provide the required
notification of the acquisition of control of PSA to SSI Canada, if any, under
the Investment Canada Act in accordance with the provisions thereof and the
regulations thereunder and shall thereafter promptly respond to all enquiries,
corrections or other matters which may from time to time be required or
requested from the Buyers by Investment Canada.
7.5 (S)338(h)(10) ELECTION. The Buyers do covenant to the Sellers that
they shall not elect under (S)338(h)(10) of the Code regarding the Acquired
Companies and the Contemplated Transactions.
7.6 TAX MATTERS
(a) Returns.
-------
(i) Tax Periods Ending Before the Closing Date. Buyers shall
------------------------------------------
prepare and file or cause the Acquired Companies to prepare and file all Tax
Returns (including, without limitation, all income Tax Returns relating to
income Taxes imposed by Canadian Governmental Bodies) for the Acquired Companies
for all periods ending on or before the Closing Date that are to be filed after
the Closing Date. Sellers shall prepare and file all income Tax Returns of the
Acquired Companies relating to income Taxes imposed by the United States of
America and each state therein (such United States federal and state income Tax
Returns being "US Returns") for such periods that are to be filed after the
Closing Date. Buyers shall allow Sellers to review
38
and comment on each such Tax Return prepared by Buyers and shall revise such Tax
Returns as Sellers reasonably request. The Sellers shall reimburse Buyers for
all Taxes of the Acquired Companies paid for any tax year, tax period or portion
thereof ending on or before the Closing Date, but only to the extent such Taxes
exceed the amount of Taxes in the reserve for Tax liability reflected in the
Balance Sheet and as updated through the Closing Date on the Closing Balance
Sheet. Buyers and the Acquired Companies shall reasonably cooperate with and
provide information relating the Acquired Companies to Sellers in connection
with the preparation of each US Return.
(ii) Tax Periods Beginning Before and Ending After the Closing Date.
--------------------------------------------------------------
Buyers shall prepare and file or cause to be prepared and filed all Tax Returns
of the Acquired Companies for Tax periods which begin before the Closing Date
and end after the Closing Date. Sellers shall pay to Buyers the amount equal to
the portion of such Taxes which relates to the portion of such Tax period ending
on the Closing Date to the extent such Taxes are not reflected in the reserve
for Tax liability shown in the Closing Balance Sheet. For purposes of this
Section, in the case of any Taxes that are imposed on a periodic basis and are
payable for a Tax period that includes (but does not end on) the Closing Date,
the portion of such Tax which relates to the portion of such Tax period ending
on the Closing Date shall be deemed equal to the amount which would be payable
if the relevant Tax period ended on the Closing Date. Any credits relating to a
Tax period that begins before and ends after the Closing Date shall be taken
into account as though the relevant Tax period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of the Acquired Companies.
(iii) Tax Periods Beginning After the Closing Date. The Buyer and the
--------------------------------------------
acquired Companies shall be liable for, and shall indemnify and hold the Sellers
harmless against any and all Taxes imposed on the Acquired Companies relating or
apportioned to any portion of any taxable year thereof ending after the Closing
Date.
(b) Refunds or Credits. The Buyers and the Acquired Companies shall
------------------
promptly pay to the Sellers any refunds or credits of Taxes for which the
Sellers may be liable under Section 7.6(a) hereof or that relate to Tax periods
or portions thereof ending on or prior to the Closing Date. For purposes of this
Section 7.6(b), the term "refund" shall include a reduction in Taxes and the use
of an overpayment of Taxes as an audit or other Tax offset and receipt of a
refund
39
shall occur upon the filing of a return or an adjustment thereto using such
reduction, overpayment or offset, or upon the receipt of cash. Upon the
reasonable request of either Seller, Buyers shall prepare and file, or cause to
be prepared and filed, all claims for refunds relating to such Taxes. Buyers
shall be entitled to all other refunds and credits of Taxes; provided, however,
they will not allow the amendment of any of the Acquired Companies' Tax Returns
relating to any Taxes for a period (or portion thereof) ending on or prior to
the Closing Date or the carryback of an item to a period ending prior to Closing
without the Sellers' consent (which will not be unreasonably withheld).
(c) Mutual Cooperation. As soon as practicable, but in any event within 20
------------------
days after either Sellers' or Buyers' request, as the case may be, Buyers shall
deliver to Sellers or Sellers shall deliver to Buyers, as the case may be, such
information and other data relating to the Tax Returns and Taxes of the Acquired
Companies and shall provide such other assistance as may reasonably be
requested, to cause the completion and filing of all Tax Returns or to respond
to audits by any taxing authorities with respect to any Tax Returns or taxable
periods or to otherwise enable Sellers, Buyers or the Acquired Companies to
satisfy their accounting or Tax requirements. For a period of five years from
and after the Closing, Buyers and Sellers shall, and shall cause their
affiliates to, maintain and make available to the other party, on such other
party's reasonable request, copies of any and all information, books and records
referred to in this Section 7.6(c). After such five-year period, Buyers or
Sellers may dispose of such information, books and records, provided that prior
to such disposition, Buyers or Sellers shall give the other party the
opportunity to take possession of such information, books and records.
(d) Contests. Whenever any Governmental Body asserts a claim, makes an
--------
assessment, or otherwise disputes the amount of Taxes for which either Seller is
or may be liable under this Agreement, Buyers shall, if informed of such an
assertion, promptly inform Sellers, and Sellers shall have the right to control
any resulting proceedings and to determine whether and when to settle any such
claim, assessment or dispute to the extent such proceedings or determinations
affect the amount of Taxes for which either Seller may be liable under the
Agreement. Whenever any Governmental Body asserts a claim, makes an assessment
or otherwise disputes
40
the amount of Taxes for which either Buyer is liable under this Agreement,
Buyers shall have the right to control any resulting proceedings and to
determine whether and when to settle any such claim, assessment or dispute,
except to the extent such proceedings affect the amount of Taxes for which
either Seller is liable under this Agreement.
7.7 TRANSFERS OF THE SHARES. The Buyers shall not effect any offer or sale
of the Shares, or any portion thereof or interest therein, except pursuant to an
effective registration statement under the Securities Act and in compliance with
other applicable federal, state and provincial securities laws or in reliance on
a valid exemption from the registration requirements of such laws.
ARTICLE VIII
INDEMNIFICATION
8.1 GENERAL INDEMNIFICATION BY THE SELLERS. Each of the Sellers do jointly
and severally covenant and agree to indemnify, defend, protect and hold harmless
the Buyers and their officers, directors, employees, stockholders, assigns,
successors and affiliates (individually, an "Indemnified Party" and
collectively, "Indemnified Parties") from, against and in respect of all
liabilities, losses, claims, damages (excluding any incidental, special or
consequential damages, but including any diminution of value damages), punitive
damages, causes of action, lawsuits, administrative proceedings (including
informal proceedings), investigations, audits, demands, assessments,
adjustments, judgments, settlement payments, deficiencies, penalties, fines,
interest (including interest from the date of such damages), costs and expenses
(including without limitation reasonable attorneys' fees and disbursements), and
diminution in value, relating to the Acquired Companies, whether or not
involving a third party claim (collectively, "Damages") suffered, sustained,
incurred or paid by any Indemnified Party in connection with, resulting from, or
arising out of, directly or indirectly:
(a) any breach of any representation or warranty of the Sellers set
forth in this Agreement subject to content of the Disclosure Letter and its
supplements as limited by the terms of Section 6.8 of this Agreement or
certificate delivered pursuant to Section 1.4(a)(iii) delivered by or on behalf
of the Sellers in connection herewith; or
(b) any nonfulfillment of any covenant or agreement on the part of the
Sellers set forth in this Agreement; or
(c) any claim for fees or commissions of any broker or agent employed
or alleged to have been employed by the Sellers; or
(d) any claim regarding representations and warranties under Sections
2.16 (including Retained Claims) or 2.20 of this Agreement regardless of the
contents of the Disclosure Letter and/or any supplements thereto as same may
relate to these Sections.
41
Notwithstanding anything to the contrary herein, such information in the
Disclosure Letter regarding these Sections shall be informational only and shall
not effect the liability of the Sellers under the terms of this Agreement; or
(e) any insured claims based upon insurance as described under
Section 2.19 herein provided by the Sellers to the Acquired Companies subject to
the lesser of (i) the currently in effect deductible or (ii) $25,000 per
occurrence and/or their employees or Employee Benefits as described under
Section 2.14 herein provided by the Sellers to the Acquired Companies and/or
their employees which cease as of the Closing for events occurring prior to the
Closing Date whether known or unknown; or
(f) any and all Damages incident to any of the foregoing or to
the enforcement of this Article 8.
The right to indemnification, payment of Damages or other remedy based on
such representations, warranties, covenants, and obligations will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
8.2 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under
Section 8.1 unless, the aggregate amount of Damages exceeds $1,000,000.00 (the
"Indemnification Deductible"), whereupon Sellers shall only be liable under this
Article 8 for the total amount of Damages in excess of the Indemnification
Deductible; provided, however, that the Indemnification Deductible shall not
apply to (i) payments permitted under Section 1.5 of this Agreement; (ii) any
supplements to the Disclosure Letter which in the aggregate indicate a Material
Adverse Effect relating to the value, assets, and/or business of the Acquired
Companies and for which the Sellers have agreed to indemnify the Buyers; (iii)
compliance issues regarding the covenants listed in Section 6.10 of this
Agreement; (iv) claims under Section 8.1(d); and (v) the lesser of the policy
deductible or $25,000 for insurance claims as described under Section 8.1(e) of
this Agreement;
(b) the aggregate amount of the Sellers' liability under this\
Article 8 shall not exceed $100,000,000.00;
(c) the indemnification obligations under this Article 8, or
in any certificate or writing furnished in connection herewith, shall terminate
at the date that is the later of clause (i) or (ii) of this Section 8.2(c):
42
(i) (A) with respect to claims relating to or arising out of
breaches of the covenant relating to tax matters contained in Section 6.10 of
this Agreement or breaches of the warranties of Sections 2.12 and 2.15 of this
Agreement the date that is six (6) months after the expiration of the longest
applicable federal, state or provincial statute of limitation (including
mutually agreed-upon extensions thereof), or in cases in which no statute of
limitations applies, five (5) years from the Closing Date, or (B) with respect
to representations and warranties made in Section 2.20 seven (7) years after the
Closing Date, or (C) with respect to all claims other than those referred to in
clause (i)of this Section 8.2(c), twenty-four months (24) months after the
Closing Date (the "Twenty-Four Month Anniversary"); or
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 8.2(c) for which Buyer
has made a written indemnification claim against Sellers pursuant to the
provisions of Section 8.4 hereof (such claims referred to as "Pending Claims").
8.3 INDEMNIFICATION BY BUYERS. Buyers will, jointly and severally,
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyers in this Agreement or in
any certificate delivered by Buyers pursuant to this Agreement, (b) any Breach
by Buyers of any covenant or obligation of Buyers in this Agreement, (c) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such Person with Buyers (or any Person acting on its behalf) in connection with
any of the Contemplated Transactions, or the claim made against the Sellers
relating to any guaranty issued by the Sellers regarding an obligation of the
Acquired Companies which has accrued and occurred following the Closing Date.
8.4 INDEMNIFICATION PROCEDURES. All claims or demands for indemnification
under this Article 8 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 8.1 or Section
8.3 hereof (the "Indemnifying Party") which does not involve a Claim being
asserted against or sought to be collected by a third party against an
Indemnifying Party, the Indemnified Party shall, within thirty (30) days of
receipt of a written demand for a Claim, notify the Indemnifying Party of such
Claim, specifying the nature of such Claim and the amount or the estimated
amount thereof to the extent then feasible (the "Claim Notice"). If the
Indemnifying Party does not notify the Indemnified Party within thirty (30) days
after the date of delivery of the Claim Notice that the Indemnifying Party
disputes such Claim, with a detailed statement of the basis of such position,
the amount of such Claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder. In case an objection is made in writing in
accordance with this Section 8.4(a), the Indemnified Party shall respond in a
written statement to the objection within thirty (30) days and, for sixty (60)
days thereafter, attempt in good faith to agree upon the rights of the
respective parties with respect to each of such Claims (and, if the parties
should so agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties).
43
(b) (i) In the event that any Claim for which the Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice to the Indemnifying Party. The Indemnifying
Party shall have thirty (30) days from date of delivery of the Claim Notice to
notify the Indemnified Party (A) whether the Indemnifying Party disputes
liability to the Indemnified Party hereunder with respect to the Third Party
Claim, and, if so, the basis for such a dispute, and (B) if such party does not
dispute liability, whether or not the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend against the Third Party
Claim, provided that the Indemnified Party is hereby authorized (but not
obligated), prior to and during the Notice Period, to file any motion, answer or
other pleading and to take any other action which the Indemnified Party shall
deem necessary or appropriate to protect the Indemnified Party's interests.
(ii) In the event that the Indemnifying Party notifies the
Indemnified Party within the Notice Period that the Indemnifying Party does not
dispute the Indemnifying Party's obligation to indemnify with respect to the
Third Party Claim, the Indemnifying Party shall defend the Indemnified Party
against such Third Party Claim by appropriate proceedings, provided that, unless
the Indemnified Party otherwise agrees in writing, the Indemnifying Party may
not settle any Third Party Claim (in whole or in part) if such settlement does
not include a complete and unconditional release of the Indemnified Party. If
the Indemnified Party desires to participate in, but not control, any such
defense or settlement the Indemnified Party may do so at its sole cost and
expense. If the Indemnifying Party elects not to defend the Indemnified Party
against a Third Party Claim, whether by failure of such party to give the
Indemnified Party timely notice as provided herein or otherwise, then the
Indemnified Party, without waiving any rights against such party, may settle or
defend against such Third Party Claim in the Indemnified Party's discretion and
if the Indemnifying Party is obligated to indemnify the Indemnified Party
pursuant to the terms of this Agreement, the Indemnified Party shall be entitled
to indemnity as provided in this Agreement.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the Indemnifying
Party, any Third Party Claim seeks material prospective relief which could have
a material adverse effect on any Indemnified Party or any subsidiary, the
Indemnified Party shall have the right to control or assume (as the case may be)
the defense of any such Third Party Claim and the amount of any judgment or
settlement and the reasonable costs and expenses of defense shall be included as
part of the indemnification obligations of the Indemnifying Party hereunder if
the Indemnifying Party were liable for such amounts under the provisions of this
Agreement. If the Indemnified Party elects to exercise such right, the
Indemnifying Party shall have the right to participate in and control, the
defense of such Third Party Claim at the sole cost and expense of the
Indemnified Party.
(c) Nothing herein shall be deemed to prevent the Indemnified
Party from making a Claim under a Claim Notice, and an Indemnified Party may
make a Claim hereunder, for Damages, provided the Claim Notice sets forth the
specific basis for any such Claim or demand to the extent then feasible and the
Indemnified Party has reasonable grounds to believe that such Claim may be made.
44
(d) The Indemnified Party agrees to give the Indemnifying Party
written notice of any actual, threatened or possible claim or demand which may
give rise to a right of indemnification within fifteen (15) days of becoming
aware of the foregoing.
(e) The parties will make appropriate adjustments for any Tax
benefits and/or Tax detriments (excluding the tax effect of deductions for
amounts not paid by the Seller due to the Indemnification Deductible)
(calculated at a tax rate of 40%) or insurance proceeds in determining the
amount of any indemnification obligation under this Article 8, provided that no
Indemnified Party shall be obligated to continue pursuing any payment pursuant
to the terms of any insurance policy.
8.5 REMEDIES CUMULATIVE. The remedies set forth in this Article 8 are
the sole and exclusive remedy of the Buyers with respect to a breach of any
representation or warranty hereunder. The provisions of this Section 8 shall be
the exclusive basis for asserting claims against or the imposition of liability
on the Sellers in connection with this Agreement and/or the transactions
contemplated hereby whether based on contract, tort, statute or otherwise, with
the exception of issues of fraud and/or seeking injunctive relief.
ARTICLE IX
MISCELLANEOUS
9.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Buyers will be responsible
for payment of their own expenses and the Sellers will be responsible for
payment of their respective expenses. No expenses of this transaction shall be
charged to or be a liability of the Acquired Companies.
9.2 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified, terminated, rescinded or supplemented only by written agreement of the
parties hereto.
9.3 WAIVER; CONSENTS. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Any failure of a party to comply
with any obligation, covenant, agreement or condition herein may be waived by
each party affected thereby only by a written instrument signed by the party
granting such waiver. No waiver, or failure to insist upon strict compliance, by
any party of any condition or any breach of any obligation, term, covenant,
representation, warranty or agreement contained in this Agreement, in any one or
more instances, shall be construed to be a waiver of, or estoppel with respect
to, any other condition or any other breach of the same or any other obligation,
term, covenant, representation, warranty or agreement. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver.
45
9.4 FURTHER ASSURANCES. The parties hereto agree (i) to furnish upon
request to each other such further information, (ii) to execute and deliver to
each other such other documents, and (iii) to do such other acts and things, all
as another party hereto may at any time reasonably request, including before, at
and after the Closing, for the purpose of carrying out the intent of this
Agreement and the documents referred to herein.
9.5 DISCLOSURE LETTER.
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
9.6 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when (i) delivered
personally, (ii) sent by telecopier (with receipt confirmed), provided that a
copy is mailed by registered or certified mail, return receipt requested within
two business days after being sent by telecopier, (iii) received by the
addressee, if sent by Express Mail, Federal Express or other express delivery
service (receipt requested), or (iv) three business days after being sent by
registered or certified mail, return receipt requested, in each case to the
other party at the following addresses and telecopier numbers (or to such other
address or telecopier number for a party as shall be specified by like notice;
provided that notices of a change of address or telecopier number shall be
effective only upon receipt thereof):
If to SSI: School Specialty, Inc.
Attn: Xxxxxx X. Xxxxxxxx, CEO
X0000 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Facsimile: 000-000-0000
With a copy to: Xxxxxx X. Xxxxxxx XX
Xxxxxxx & Xxxxxxx, S.C.
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: 000-000-0000
If to FCC or
Franklin Canada: Xxxxxxxx Xxxxx Co.
0000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Val Xxxx Xxxxxxxxxxx
46
Facsimile: 000-000-0000
With a copy to: Xxxx Xxxxxxxx Xxxxx Xxx & Xxxxxxxx
Suite 1300
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Attn: Xxxxx X. Xxxxxxxx
Facsimile: 000-000-0000
9.7 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. This
Agreement is not intended to and shall not confer upon any person other than the
parties any rights or remedies hereunder or with respect hereto.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the state in which the
action is brought. Any disputes arising out of, in connection with or with
respect to this Agreement, the subject matter hereof, the performance or
non-performance of any obligation hereunder, or any of the transactions
contemplated hereby shall be adjudicated in a court of competent civil
jurisdiction sitting in the City of Salt Lake City, Utah should the action be
initially filed by the Buyers or be adjudicated in a court of competent civil
jurisdiction sitting in the City of Milwaukee, Wisconsin should the action be
initially filed by Sellers and nowhere else. Each of the parties hereto hereby
irrevocably submits to the jurisdiction of such court for the purposes of any
suit, civil action or other proceeding arising out of, in connection with or
with respect to this Agreement, the subject matter hereof, the performance or
non-performance of any obligation hereunder, or any of the transactions
contemplated hereby (collectively, "Suit"). Each of the parties hereto hereby
waives and agrees not to assert by way of motion, as a defense or otherwise in
any such Suit, any claim that it is not subject to the jurisdiction of the above
courts, that such Suit is brought in an inconvenient forum, or that the venue of
such Suit is improper. Nothing in this Agreement shall affect or diminish any
party's right to serve summonses and other legal process in any other manner
permitted by law in connection with any Suit in the jurisdictions and locations
described above.
9.9 JURISDICTION. Any process against Buyers, or any of the Sellers in, or
in connection with, any suit, action or proceeding arising out of or relating to
this Agreement or any of the transactions contemplated by this Agreement may be
served personally or by certified mail at the address of such party set forth in
Section 9.6 with the same effect as though served on it.
9.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. ANY SIGNATURE AFFIXED TO
THIS DOCUMENT AND RECEIVED IN TELECOPY FORM SHALL BE DEEMED AN ORIGINAL
SIGNATURE.
47
9.11 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. Unless otherwise provided, all references in this Agreement to
articles and sections refer to the corresponding articles and sections of this
Agreement. All words used herein shall be construed to be of such gender or
number as the circumstances require. Unless otherwise specifically noted, the
words "herein," "hereof," "hereby," "hereinabove," "hereinbelow," "hereunder,"
and words of similar import, refer to this Agreement as a whole and not to any
particular article, section, subsection, paragraph, clause or other subdivision
hereof. Whenever the term "including" or a similar term is used in this
Agreement, it shall be read as if it were written "including by way of example
only and without in any way limiting the generality of the clause or concept to
which reference is made."
9.12 ENTIRE AGREEMENT. This Agreement, including the Exhibits and the
documents, instruments and schedules referred to herein and in the Transaction
Agreements, embodies the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, representations, warranties, covenants, or undertakings
other than those expressly set forth or referred to herein and in the
Transaction Agreements. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
9.13 ATTORNEYS' FEES. In the event any party hereto institutes a Proceeding
against any other party hereto for a claim arising out of or to enforce this
Agreement, the losing party shall pay the reasonable attorneys' fees and court
costs incurred by the prevailing party in connection with such Proceeding.
9.14 TIME OF ESSENCE. With regard to all time periods set forth or referred
to in this Agreement, time is of the essence.
9.15 CONSTRUCTION. The parties have jointly participated in the negotiation
and drafting of this Agreement. In the event of an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumptions or burdens of proof shall arise
favoring any party by virtue of the authorship of any of the provisions of this
Agreement.
9.16 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of the court of
competent jurisdiction declares that a term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
48
9.17 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any persons other than the parties and their respective
successors or permitted assigns.
9.18 INCORPORATION OF EXHIBITS AND SCHEDULES. The exhibit and Disclosure
Schedules identified in this Agreement are incorporated herein by reference and
are a part hereof.
9.19 PUBLICITY. No party to this Agreement will make any press release or
announcement, public or otherwise, in connection with the transactions
contemplated hereby without the prior approval of the other party, except as may
be required by law.
9.20 SSI CANADA NAME. Following the execution and delivery of this
Agreement and up to and prior to the Closing SSI Canada shall have the right to
revise its corporate name.
ARTICLE X
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings specified or referred to below whether or not capitalized when used in
this Agreement. Any reference or citation to a law, statute or regulation shall
be deemed to include any amendments to that law, statute or regulation and
judicial and administrative interpretations of it.
"ACQUIRED COMPANIES"--Premier Agendas, PSA, and each of their respective
subsidiaries, collectively.
"ACQUIRED COMPANIES' ACCOUNTANTS"--Xxxxxx Xxxxxxxx LLP.
"ADULT LEADERSHIP TRAINING PROGRAM" - The Adult Leadership Training Program
shall mean all business activities of the Acquired Companies in selling and
providing training services in The 7 Habits of Highly Effective People, What
Matters Most, The 4 Roles of Leadership and any other Xxxxxxxx Xxxxx exclusively
owned training curriculum to Kindergarten through 12th grade school teachers and
administrators by, among other means, selling seats in public seminar programs
presented by Xxxxxxxx Xxxxx, delivering on-site training events at clients'
facilities, or licensing client-employed certified training facilitators to
present the foregoing curricula in-house.
"AFFILIATE"--with respect to a specified Person, (a) any entity of which
such Person is an executive officer, director, partner, trustee or other
fiduciary or is directly or indirectly the beneficial owner of 10% or more of
any class of equity security thereof or other financial or voting interest
therein; (b) any director, executive officer, partner, trustee or other
fiduciary or any direct or indirect beneficial owner of 10% or more of any class
of equity security of, or other financial or voting interest in, such entity; or
(c) any Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with the
49
Person specified. For purposes of this definition, "executive officer" means the
president, any vice president in charge of a principal business unit, division
or function such as sales, administration, research and development, or finance,
and any other officer, employee or other Person who performs a policy making
function or has the same duties as those of a president or vice president. For
purposes of this definition, "control" (including "controlling," "controlled by"
and "under common control with") means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. When used without reference to a particular Person, "Affiliate" means
an Affiliate of any of the Sellers. Without limiting the foregoing, for the
purpose of this Agreement, each of Sellers shall be deemed to be Affiliates of
each other.
"ALLOCATION SCHEDULE"--Schedule 1.2(a) describing the allocation of the
Purchase Price among Sellers.
"APPLICABLE CONTRACT"--any Contract (a) under which any Acquired Company
has any rights, (b) under which any Acquired Company has any obligation or
liability, or (c) by which any Acquired Company or any of the assets owned,
leased or used by any Acquired Company is bound.
"BALANCE SHEET"-- The combined balance sheets of the Acquired Companies as
of August 31, 2001 which have been included in the audited consolidated
financial statements of the Sellers.
"BEST EFFORTS"--the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to maximize to the extent reasonably
practicable the prospects that a result will occur.
"BREACH"--a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision and causes damage to such person, and the term "Breach" means any such
inaccuracy, breach, failure, claim, occurrence, or circumstance.
"BUYER'S AUDITORS"--Xxxxxx Xxxxxxxx LLP, or such other independent public
accounts as may be engaged by the Buyers from time to time.
"CLOSING"--as defined in Section 1.3.
"CLOSING DATE"--the date and time as of which the Closing actually takes
place.
"COMBINED WORKING CAPITAL"--total current assets minus total current
liabilities as determined on a combined basis, for the Acquired Companies in
accordance with GAAP.
50
Notwithstanding the foregoing, the amount of reserves included in Combined
Working Capital, as of the Closing Date shall be calculated in accordance with
GAAP but shall not be less than the amount as recorded in the Balance Sheets of
the Acquired Companies as of August 31, 2001. Further notwithstanding the
foregoing, current assets and current liabilities in accordance with GAAP for
the purpose of determining Combined Working Capital shall not be affected by
deferred Tax assets, deferred Tax liabilities, and income Taxes
payable/receivable.
"CODE"--the Internal Revenue Code of 1986, as amended, or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Sellers to Buyers;
(b) the execution, delivery, and performance of the Sellers' Releases;
(c) the performance by Buyers and Sellers of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and exercise of
control over any Acquired Companies.
"CONTRACT"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES"--as defined in Section 8.1.
"DISCLOSURE LETTER"--the disclosure letter attached hereto and delivered by
the Sellers and the Acquired Companies to Buyers upon the execution and delivery
of this Agreement, as the same may be supplemented from time to time, containing
the information required by Article II.
"EMPLOYEE BENEFIT PLAN"--with respect to Premier Agendas and Premier
Graphics any employee benefit plan within the meaning of Section 3.(3) of ERISA
or, with respect to PSA, any employee benefit program, scheme or plan
contributed to or funded by premiums paid by PSA or PSA employees, maintained or
contributed to by an employee or an Acquired Company or any ERISA Affiliate,
other than a Multiemployer Plan.
"EMPLOYMENT AGREEMENTS"--as defined in Section 1.4(a)(iv).
51
"ENCUMBRANCE"--any charge, claim, community property interest, condition,
equitable interest, lien, pledge, security interest, right of first refusal,
option or restriction of any kind, including any restriction on use, voting (in
the case of any security), transfer, receipt of income, or exercise of any other
attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), ground waters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life, and any other natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
the Breach of any Environmental Law, Occupational Safety and Health Law, or any
Order, and relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
remedial, or inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
Where United States jurisdiction is applicable, the terms "removal," "remedial,"
and "response action" will include the types of activities covered by the United
States Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. Section 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement designed:
(a) to advise appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous substances or
materials, violations or discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) to prevent or acceptably minimize the release of pollutants
or hazardous substances or materials into the Environment;
52
(c) to reduce the quantities, prevent the release, and minimize
the hazardous characteristics of wastes that are generated;
(d) to assure that products are designed, formulated, packaged,
or used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) to protect resources or species;
(f) to acceptably minimize the risks inherent in transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) to clean up pollutants that have been released, prevent the
threat of release, or pay the costs of such clean up or prevention; or
(h) to make responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or to permit
self-appointed representatives of the public interest to recover for injuries
done to public assets or the Environment.
"ERISA"--the Employee Retirement Income Security Act of 1974, any
successor statue and the rules and regulations thereunder, collectively, as from
time to time amended and in effect.
"ERISA AFFILIATE"--any Person which is treated as a single employer with
Premier Agendas under Section 414 of the Code.
"FACILITIES"--any real property or leaseholds currently owned or operated
by the Acquired Companies and any buildings, plants, structures, or equipment
currently owned, leased, or operated by any Acquired Company.
"FAMILY"--as defined in the definition of "Related Person."
"GAAP"-- with respect to accounting matters of PSA, generally accepted
accounting principles for Canada, consistently applied, with respect to Premier
Agendas, generally accepted accounting principles in the United States,
consistently applied and with respect to consolidated financial statements of
the Acquired Companies, United States GAAP shall apply. GAAP means those
accounting principles and practices (a) which are recognized as such by the
Financial Accounting Standards Board with respect to US GAAP or the Canadian
Institute of Chartered Accountants with respect to Canadian GAAP, (b) which are
applied for all periods in a manner consistent with the manner in which such
principles and practices were applied to the most recent audited or reviewed
financial statements of the Acquired Company in question furnished to Buyer, (c)
which are consistently applied for all periods so as to reflect properly the
financial condition, and results of operations and cash flows, of the Sellers,
and (d) notwithstanding the foregoing shall be without regard to materiality as
it relates to establishing adequate reserves and accruals as of the Closing
Date.
53
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, province, county, city, town, village,
district, or other governmental jurisdiction of any nature;
(b) federal, state, provincial, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature, whether in the United States, Canada or any
other jurisdiction.
"GUARANTEED PENSION PLAN"--any employee pension plan within the meaning
of Section 3(2) of ERISA, maintained or contributed to by an Acquired Company or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the Pension Benefit Guaranty Corporation pursuant to Title IV of
ERISA, other than a "Multiemployer Plan."
"HAZARDOUS ACT"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"HAZARDOUS MATERIALS"--any substance that is now listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos containing materials.
"HSR ACT"--the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
54
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact in carrying out such individual's duties for
any Acquired Company.
"KNOWLEDGE OF THE ACQUIRED COMPANIES"--shall mean Knowledge of the
following individuals about the affairs of the Company: Xxxxx X. Xxxxxxx,
Xxxxxxx X. Xxxxxxx, Xxxxx Xxxxx, and Xxxxx X. Xxxxxx.
"LEGAL REQUIREMENT"--any federal, state, provincial, local, municipal,
foreign, international, multinational, or other constitution, law, ordinance,
principle of common law, regulation, statute, or treaty.
"MATERIAL ADVERSE EFFECT" -- means an event, condition, circumstance,
act, omission or effect which, individually or in the aggregate with other
similar events, conditions, circumstances, acts, omissions or effects: (i) after
taking into consideration the relative amount, the absolute amount and the
nature of the item would cause a reasonably prudent buyer to conclude that such
effect adversely affects the value, financial condition, prospects, assets,
liabilities, obligations or operations of the Sellers or the businesses of the
Acquired Companies in a manner or amount which would be material, or (ii) has or
will have a direct financial consequence, including the diminution of value of
the Acquired Companies, of One Million Dollars ($1,000,000).
"MATERIAL INTEREST"--as defined in the definition of "Related Person."
"MULTIEMPLOYER PLAN"--a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
"NOTES PAYABLE TO FCC"--amounts due to FCC by the Acquired Companies due
to dividend declarations prior to August 31, 2001.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards.
"ORDER"--any award, decision, injunction, judgment, order, directive,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person and is not excessive
in amount or time with similar past actions. This
55
shall include but not be limited to not accelerating or extending the collection
or payment of assets or liabilities based upon the historic practices of the
Acquired Companies. Notwithstanding anything in this definition to the contrary,
withdrawal of cash by the Sellers from the Acquired Companies from August 31,
2001 through the Closing Date as described in Section 1.5 herein shall be
considered within the definition of ORDINARY COURSE OF BUSINESS.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles of incorporation, memorandum
and articles and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or other entity or
Governmental Body.
"PLAN"--as defined in Section 3.14.
"PREMIER AGENDAS SHARES"--as defined in the Recitals to this Agreement.
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PSA SHARES"--as defined in the Recitals to this Agreement.
"PURCHASE PRICE"--as defined in Section 1.2.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by any one or
more members of such individual's Family;
(c) any Person in which members of such individual's Family hold
(individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which one or more members of such
Individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
56
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest; and
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the first
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least ten percent (10%) of
the outstanding voting power of a Person or equity securities or other equity
interests representing at least ten percent (10%) of the outstanding equity
securities or equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment.
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SHARES"--as defined in the Recitals of this Agreement.
"SUBSIDIARIES"--with respect to any Person (the "Owner"), any corporations
or other Persons of which securities or other interests having the power to
elect a majority of that corporation's or other Person's board of directors or
similar governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of an Acquired Company.
"TAX"--any tax (including any income tax, capital gains tax, value-added
tax, sales tax, property tax, gift tax, employment and related taxes, or estate
tax, federal goods and services tax and social services tax and other federal,
provincial or state taxes), levy, assessment, tariff, duty (including any
customs duty), deficiency, or other amount (including any fine, penalty,
interest,
57
or addition to tax), imposed, assessed, or collected by or under the authority
of any Governmental Body.
"TAX ACT"--the Income Tax Act (Canada), as amended from time to time.
"TAX RETURNS"--returns or filings required for the Acquired Companies to
remain in full compliance with all Legal Requirements regarding Taxes including
but not limited those as described under Sections 2.12 and 2.14 of this
Agreement.
"TRANSACTION DATE"--the date on which an event occurs giving rise to an
obligation to pay money or the right to receive money in consideration for
services rendered or property exchanged or in accordance with the terms of this
Agreement.
[Remainder of Page Intentionally Blank]
58
IN WITNESS WHEREOF, each of the parties hereto has caused this agreement to
be executed on its behalf effective as of the date first above written.
Xxxxxxxx Xxxxx Co.
By: /s/ Xxxxxx Xxxxxxx
-------------------------------
Its: Chief Executive Officer
-------------------------------
Xxxxxxxx Xxxxx Canada Ltd.
By: /s/ Xxx Xxxxxxxxxxx
-------------------------------
Its: Executive Vice President
-------------------------------
School Specialty, Inc.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Its: Chief Executive Officer
-------------------------------
3956831 Canada Inc.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Its: President
-------------------------------
59
PURCHASE AGREEMENT ATTACHMENTS
By and Among Xxxxxxxx Xxxxx Co., Xxxxxxxx Quest Canada, Ltd.
And
School Specialty, Inc.
Dated November 13, 2001
Disclosure Letter (see separate list)
Exhibit 4.6(i) - License Agreement
60
