Exhibit 2c
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[***]"). The Omitted Material Has Been Filed Separately
With The United States Securities and Exchange Commission.
ASSET PURCHASE AGREEMENT
This agreement ("Agreement") dated as of October 19, 1999 is by and
between ORKIN EXTERMINATING COMPANY, INC., a Delaware corporation ("Orkin"),
XXXX PEST CONTROL COMPANY, INC., a Mississippi corporation ("Xxxx"), and XXXXXXX
X. XXXX, an individual resident of the state of Mississippi (hereinafter
sometimes referred to as "Xxxxxxx Xxxx" or the "Owner").
W I T N E S S E T H:
WHEREAS, Xxxx is engaged in the Pest Business (as defined in Section
2.01 below); and
WHEREAS, the Owner owns all of the issued and outstanding equity
interests of Xxxx; and
Whereas, [***], an individual resident of the state of [***], [***],
an individual resident of the state of [***], and [***], an individual resident
of the state of [***] are collectively the "Senior Management" of Xxxx,
and the obligations of Orkin to consummate the transactions contemplated
herein are conditioned, in part, on certain agreements to be entered into by
the Senior Management; and
WHEREAS, Orkin desires to purchase all of the assets owned and used by
Xxxx in connection with the Pest Business and assume certain liabilities of Xxxx
in connection therewith, all upon terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the promises
hereinafter contained, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
PURCHASE OF ASSETS AND RELATED AGREEMENTS
1.01 Purchase and Sale of Assets. At the Closing (as defined in Section
1.04 below) and subject to the terms hereof, Xxxx agrees to sell and deliver to
Orkin, and Orkin agrees to purchase, all of Xxxx'x right, title and interest in
the assets used by Xxxx in the conduct of the Pest Business other than the
Excluded Assets (as defined below) (collectively the "Assets"). The Assets shall
include, but not be limited to, the following:
(a) Customer Contracts and Customer Lists. All of Xxxx'x
rights pursuant to written or oral contracts existing as of the Closing Date to
provide Pest Services to customers ("Customer Contracts"), and Xxxx'x existing
lists of current customers ("Customer Lists").
(b) Accounts Receivable and Prepaid Expenses. All accounts
receivable of Xxxx as of the Closing Date ("Accounts Receivable"), prepaid
advertising as of the Closing Date, and all other prepaid expenses of Xxxx
(including leasehold security deposits and prepaid rent for those properties
covered by the Leases as defined in Section 1.01(d) below), other than Prepaid
Insurance (as defined herein) and other prepaid expenses included in the
Excluded Items (as defined herein), ("Prepaid Expenses").
(c) Fixed Assets. All fixtures, tools, items of furniture,
equipment, computers, vehicles, leasehold improvements and other tangible
personal property assets owned by Xxxx and used in the Pest Business, including
those listed on Schedule 1.01(c) (the "Fixed Assets").
(d) Leases. To the extent assignable (or, if not assignable,
to the extent that the respective lessor consents to such assignment or Orkin
waives receipt of such consent) all of Xxxx'x leasehold interest in those
operational field office locations and vehicles covered by the leases listed on
Schedule 1.01(d) (the "Leases").
(e) Inventory. All inventories (including inventories covered
by Xxxx purchase orders, warehoused inventories, owned inventories held by
suppliers, inventories covered by customer purchase orders and sample and
promotional goods) that are used in the conduct of the Pest Business as of the
Closing Date, including any inventories acquired after the date of this
Agreement but excluding any inventories sold or otherwise disposed of after the
date of this Agreement ("Inventory").
(f) Other Contracts and Purchase Orders. All of Xxxx'x rights,
to the extent assignable or transferable (or, if not assignable, to the extent
that each respective third party to such agreement consents to the assignment
thereof, or Orkin waives receipt of such consent), pursuant to: employment
agreements, covenants not to compete and confidentiality agreements with Xxxx
employees (to the extent Orkin can be a third-party beneficiary), covenants not
to compete and confidentiality agreements with all Xxxx employees; and those
non-disclosure agreements, confidentiality agreements, licenses, service
contracts and other contracts including those listed on Schedule 1.01(f) hereto
("Other Contracts"). All of Xxxx'x commitments and orders for the purchase and
sale of goods and equipment (including Inventory) and services (including
advertising, maintenance and other incidental services) ("Purchase Orders").
(g) Intellectual Property. All of Xxxx'x right, title and
interest in all logos, service marks and trademarks owned by Xxxx, including,
without limitation, those items listed on Schedule 1.01(g) hereto, and all of
Xxxx'x right, title, and interest in and to existing quality control procedures
and protocols, service procedures and protocols, field computer software (to the
extent assignable or transferable or if not assignable, to the extent the
licensor consents to the assignment thereof or Orkin waives receipt of such
consent), and technical know-how, and in and to computer data (collectively,
"Intellectual Property").
(h) Other Assets. All of Xxxx'x rights to its telephone
numbers for field office locations listed on Schedule 1.01(h); telephone
directory advertising; existing files and records (including correspondence) of
current and former customers, all licenses, consents, permits, variances,
certifications, and approvals of governmental agencies to the extent
transferable; existing books of account, financial, accounting, marketing, and
other records relating to the operation of the Pest Business (excluding the
corporate minute books and stock ledgers of Xxxx) and all current, existing
pricing, cost information and supplier lists relating to the Pest Business; and,
except as
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[***] - CONFIDENTIAL TREATMENT REQUESTED
otherwise provided in this Agreement, all deposits, refunds, causes of action,
rights of recovery, rights of set off and rights of recoupment.
1.02 Excluded Assets. The Assets shall not include the following
items (collectively, the "Excluded Assets"):
(a) Cash and Cash Equivalents. All cash and cash equivalents
(other than cash equivalents included in the Prepaid Expenses).
(b) Insurance Policies; Tax Refunds. All insurance policies
and claims thereunder of Xxxx, including prepayments of insurance premiums
("Prepaid Insurance"), claims for and rights to receive tax refunds, tax
deductions for losses, expenses and other tax benefits of Xxxx such as credits
and losses accrued or arising prior to the Closing Date, all tax returns of Xxxx
(whether relating to the Pest Business or otherwise), and any legal files or
other documents covered by an evidentiary privilege.
(c) Transaction Documentation. All books, documents, records
and files prepared in connection with or relating to the transactions
contemplated by this Agreement.
(d) Transaction Rights. All of Xxxx'x rights under or pursuant
to this Agreement and the other agreements between Xxxx and Orkin contemplated
hereby.
(e) Corporate Records. All minute books and stockholder and
stock transfer records and similar corporate records of Xxxx.
(f) Franchise Agreements. All of Xxxx'x contracts to provide
franchising services to the Franchisees specified on Schedule 1.02(f) attached
hereto (the "Xxxx Franchise Agreements").
(g) C.P.S. Insurance Company, Ltd. and Copesan Services stock.
All of the stock of C.P.S. Insurance Company, Ltd. Copesan Services.
(h) Excluded Items. Those items ("Excluded Items") set forth
on Schedule 1.02(h) attached hereto.
1.03 Assumption of Liabilities.
(a) Orkin shall assume on the Closing Date and shall pay,
perform and discharge when due all of Xxxx'x obligations and liabilities arising
from and after the Closing under the Customer Contracts (other than Termite
Guarantee Contracts, which shall be governed by the provisions of Section
1.03(c) hereof), the Other Contracts, the Leases and the Purchase Orders
("Executory Contractual Liabilities"). As a part of the Purchase Price, Orkin
shall also assume (i) the obligations of Xxxx under those certain deferred
compensation agreements specified on Schedule 1.03(a)(i) attached hereto (the
"Deferred Compensation Agreements"); (ii) those acquisition debt obligations
specified on Schedule 1.03(a)(ii) attached hereto (the "Acquisition
Obligations"); (iii) that certain outstanding loan from Deposit Guaranty
National Bank, in the principal amount of [***] (the "[***] Loan"); (iv) the
obligations of Xxxx for
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[***] - CONFIDENTIAL TREATMENT REQUESTED
[***] but [***], [***] with [***], [***], and/or [***] of Redd employees as of
the Closing Date (the "Days Off Accruals"); and (v) specified accounts payable
as identified and in the amount contained on the Assumed Payables List (as
hereinafter defined). Collectively, the liabilities referred to in this Section
1.03(a) are the "Assumed Liabilities".
(b) Except for the Assumed Liabilities, it is expressly
understood and agreed between the parties hereto that ORKIN SHALL NOT ASSUME AND
IS NOT ASSUMING, NOR SHALL ORKIN BECOME LIABLE, OBLIGATED OR RESPONSIBLE FOR THE
PAYMENT OF ANY DEBTS, LIABILITIES OR OBLIGATIONS OR THE PERFORMANCE OF ANY
DUTIES OF XXXX OF ANY KIND OR NATURE WHATSOEVER, KNOWN OR UNKNOWN, WHETHER
ARISING BEFORE, ON OR SUBSEQUENT TO THE CLOSING AND WHETHER CONTINGENT OR
LIQUIDATED IN AMOUNT (INCLUDING, WITHOUT LIMITATION, ANY DEBT, LIABILITIES,
OBLIGATIONS OR DUTIES ARISING OUT OF ACCOUNTS PAYABLE (OTHER THAN THOSE INCLUDED
IN THE ASSUMED PAYABLES LIST), TAX LIABILITIES, ENVIRONMENTAL, IMMIGRATION OR
PRODUCT LIABILITY MATTERS, EMPLOYEE BENEFITS, CUSTOMER CONTRACTS OR OTHER
CONTRACTS OR AGREEMENTS (OTHER THAN OBLIGATIONS ARISING UNDER THE EXECUTORY
CONTRACTUAL LIABILITIES FROM AND AFTER THE CLOSING DATE) OR OTHER LIABILITIES OF
XXXX).
(c) Notwithstanding anything in this Agreement to the
contrary, Orkin shall not assume any obligation under a [***] unless and
until (i) the [***] to such contract makes a [***] to [***], (ii) the [***]
for which such [***] was made has commenced, and (iii) Orkin inspects and is
satisfied with the condition of such [***].
1.04 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Barnes, Broom, Dallas and XxXxxx,
PLLC, in Jackson, Mississippi, on November 30, 1999. The Closing shall be
effective as of 12:01 am local time on December 1, 1999 (or, if the Closing does
not occur on November 30, 1999 on such other date as may be mutually acceptable
to the parties hereto), which shall be the "Closing Date".
ARTICLE II
DEFINITIONS; PURCHASE PRICE
2.01 Certain Definitions. As used herein, the following terms shall
have the meanings set forth below.
(a) "Assumed Payables List" shall be a list of payables of
Xxxx which shall be assumed by Orkin and which shall trigger a reduction to the
Purchase Price. A draft of the Assumed Payables List shall be provided by Xxxx
to Orkin on or before five (5) business days prior to the Closing Date. The
Assumed Payables List shall be updated as of the Closing Date, and shall be
finalized as a part of the Purchase Price Adjustments Calculation after the
Closing Date.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
(b) "Baseline Assets" shall mean [***], [***] (excluding
Prepaid Insurance, Excluded Items, and any deferred discounts), [***],
and [***].
(c) "Baseline Liabilities" shall mean the [***] of
[***] received by Redd prior to Closing for [***] that have not yet been
[***] under [***].
(d) "Xxxxxxx Money Deposit" means the sum of [***]
Dollars [***], which was delivered by Orkin to Xxxx on [***].
(e) "Holdback" shall be equal to [***] of the total amount of
the Accounts Receivable as of the Closing.
(f) "Major Customers" shall mean those customers identified on
Schedule 3.05 attached hereto, constituting the 20 largest customers (other than
Copesan Services) based on the Revenue generated by such customers for the
twelve months ended September 30, 1999.
(g) "Net Worth" shall mean the difference between the Baseline
Assets and the Baseline Liabilities.
(h) "Permitted Encumbrances" shall mean (i) claims, security
interests, liens and other title encumbrances that are disclosed on Schedule
2.01(h) or the other Schedules hereto, and (ii) mechanics', carriers, workmen's,
repairmen's or other like liens arising or incurred in the ordinary course of
business, liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business and liens for taxes and other governmental charges which are
not yet due and payable or which may thereafter be paid without penalty.
(i) "Pest Business" shall mean the provision of Pest Services
by Xxxx to customers.
(j) "Pest Services" shall mean the provision of termite, pest
control and elimination services, and the sale or leasing of termite, pest
control and elimination products.
(k) "Revenues" shall mean the net revenues (gross revenues
determined after discounts and allowances other than the 5% prepayment discount
Xxxx has offered to its customers in the ordinary course of business) accrued
for the period designated, generated in connection with the performance by Xxxx
of Pest Services for its customers, exclusive of any revenues derived from the
provision of Pest Services under contract or subcontract with Copesan Services,
as determined under GAAP, consistently applied.
(l) "Termite Guarantee Contracts" shall mean contractual
obligations of Xxxx to perform corrective or treatment measures for the benefit
of a customer with respect to termite infestation or termite damage.
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[***] - CONFIDENTIAL TREATMENT REQUESTED
2.02 Purchase Price. The purchase price ("Purchase Price") for the
Assets, the Xxxx Noncompetition Agreement (as defined in Article IX), the
Xxxxxxx Xxxx Noncompetition Agreement (as defined in Article IX), and the Senior
Management Noncompetition Agreements (as defined in Article IX) shall be equal
to FIFTEEN MILLION SEVEN HUNDRED AND SEVENTY FIVE THOUSAND DOLLARS
($15,775,000), subject to the adjustments required to be made pursuant to
Sections 2.03 and 2.08.
2.03 Adjustments to Purchase Price. The Purchase Price shall be (i)
decreased by the face amount of the obligations under the [***], (ii) decreased
by the outstanding obligations (including principal and interest) under the
[***] on the Closing Date; (iii) decreased by the outstanding obligations
(including principal and interest) under the [***] on the Closing Date; (iv)
decreased by the [***]; (v) decreased by the [***] included on the [***]; and
(vi) increased or decreased, as the case may be, by the difference between the
Net Worth as of July 31, 1999 and the Net Worth on the Closing Date
(collectively, the "Purchase Price Adjustments"). On or before two business days
prior to the Closing Date, Orkin and Xxxx shall make a good faith estimate as of
the Closing Date of the Purchase Price Adjustments, which estimate shall be used
in determining the Closing Cash Payment (as defined below) (the "Estimated
Purchase Price Adjustments"). The Purchase Price Adjustments shall be finally
calculated and determined in the manner set forth in Section 2.05 below. The
Purchase Price shall also be subject to the adjustments for Accounts Receivable
set forth in Section 2.08 below.
2.04 Payments at Closing. At the Closing, Orkin shall deliver the
following:
(a) to Xxxx, by wire transfer of immediately available funds
to an account or accounts designated in writing by Xxxx, [***] DOLLARS
[***], minus the [***] (which shall be retained by Xxxx), minus the
Estimated Purchase Price Adjustments, and minus the Holdback (the
"Closing Cash Payment"); and
(b) to Xxxx, one or more promissory note(s) in the form
attached hereto as Exhibit A with a term of [***], an interest
rate of [***] and an aggregate face amount of [***] DOLLARS
[***] (collectively, the "Promissory Notes"); and
(c) to [***], an amount necessary to satisfy, in full, the
[***], as set forth in a payoff letter to be obtained by Xxxx from
[***] before the Closing.
In addition, Orkin shall (i) deliver to Xxxxxxx Xxxx the amounts due (if any) at
the Closing under the Xxxxxxx Xxxx Noncompetition Agreement; and (ii) deliver to
Senior Management the amounts due (if any) at the Closing under the Senior
Management Noncompete Agreements.
2.05 Calculation of Purchase Price Adjustments.
(a) In order to finally determine the amount of the Purchase
Price, Orkin shall perform a calculation of the Purchase Price Adjustments (the
"Purchase Price Adjustments Calculation") which shall be delivered to Xxxx
within 30 days following the Closing Date. Orkin (including its internal
auditors) and its certified public accountants shall have the opportunity during
the preparation of the Purchase Price Adjustments Calculation to consult with
Xxxxxxxxx & Company, certified public accountants (at the expense of Xxxx), and
the chief financial officer,
6
controller, or any other officer of Xxxx (to the extent not employed by Orkin),
and to review the books and records of Xxxx. Xxxx shall have a period of 30 days
after receipt of the Purchase Price Adjustments Calculation to present to Orkin
in writing any objections and the amounts related thereto (the "Section 2.05
Objections") which Xxxx may have with respect to the computation of the Purchase
Price Adjustments Calculation, which Section 2.05 Objections shall be presented
in reasonable detail. If no Section 2.05 Objections are raised by Xxxx within
such 30-day period, the Purchase Price Adjustments Calculation shall be deemed
accepted and approved by Xxxx and the adjustments to Purchase Price required by
Section 2.03 shall be made accordingly.
(b) Resolution by Parties. If, within such 30-day period, Xxxx
raises Section 2.05 Objections, Orkin and Xxxx shall attempt in good faith to
resolve the matter or matters in dispute and, if resolved, such resolution shall
be final, conclusive and binding upon the parties hereto and the adjustments to
Purchase Price required by Section 2.03 shall be made accordingly.
(c) Resolution by Independent Accounting Firm. If the dispute
referred to in Section 2.05(b) is not resolved by Orkin and Xxxx within 10 days
after delivery of the Section 2.05 Objections, then the specific matters in
dispute shall be submitted to Ernst & Young or such other nationally recognized
accounting firm as Orkin and Xxxx may mutually agree upon (the "Independent
Accounting Firm"), which firm shall be requested to make a determination as to
such matter or matters as are in dispute within 30 days after the such
submission of the dispute to the Independent Accounting Firm, which
determination shall be final, conclusive and binding upon the parties hereto and
the Purchase Price shall be revised to reflect such determination. The
Independent Accounting Firm shall simultaneously deliver its written
determination to Orkin and Xxxx. The fees and expenses of the Independent
Accounting Firm shall be shared equally by Xxxx and Orkin. Xxxx and Orkin agree
to cooperate in good faith with each other, with each other's authorized
representatives and with the Independent Accounting Firm, in order that any and
all matters in dispute may be resolved as soon as practicable.
2.06 Payment After Determination of Final Purchase Price Adjustments.
If the final Purchase Price Adjustments Calculation results in Purchase Price
Adjustments that are less than the Estimated Purchase Price Adjustments, then
Orkin shall pay the difference between the final Purchase Price Adjustments and
the Estimated Purchase Price Adjustments to Xxxx. If the final Purchase Price
Adjustments Calculation results in Purchase Price Adjustments that are greater
than the Estimated Purchase Price Adjustments, then Xxxx shall pay the
difference between the final Purchase Price Adjustments and the Estimated
Purchase Price Adjustments to Orkin. No interest shall be due or payable
respecting any payments to be made pursuant to this Section 2.06. Any and all
payments required to be made by Orkin or Xxxx as a result of adjustments made
pursuant to this Section 2.06 shall be made by wire transfer of immediately
available funds within five business
7
[***] - CONFIDENTIAL TREATMENT REQUESTED
days after the Purchase Price Adjustments Calculation is finalized. If Xxxx
fails to pay Orkin any amount due to Orkin under this Section 2.06, Orkin may
elect to set-off such amounts against the obligations due under the Promissory
Notes.
2.07 Allocation. The Purchase Price received by Xxxx shall be allocated
among each class of Assets of Xxxx, the Xxxxxxx Xxxx Noncompetition Agreement,
and the Senior Management Noncompetition Agreements, as mutually agreed by the
parties on or before the Closing. Xxxx agrees that it will prepare and file any
notice or other filings required pursuant to
Section 1060 of the Internal Revenue Code of 1986, as amended, and that any such
notices or filings will be prepared based on such tax allocation of the Purchase
Price. Xxxx agrees to send to Orkin a completed copy of its Form 8594 with
respect to this transaction prior to filing such form with the Internal Revenue
Service.
2.08 Accounts Receivable Adjustment. At the Closing, Xxxx shall deliver
to Orkin a detailed listing of the Accounts Receivable together with an aging
schedule therefor. On the [***] and [***] following the Closing Date, Orkin
shall present Xxxx with a detailed listing of the accounts and invoices which
were listed on the Accounts Receivable list delivered at Closing and which
remain outstanding on such date (the "Uncollected AR Calculation"). Xxxx shall
have a period of 30 days after receipt of the Uncollected AR Calculation to
present to Orkin in writing any objections and the amounts related thereto (the
"AR Objections") which Xxxx may have with respect to the Uncollected AR
Calculation, which AR Objections shall be presented in reasonable detail. At its
own expense, Xxxx and its certified public accountants shall have the
opportunity during and following the preparation of the Uncollected AR
Calculation to consult the chief financial officer, controller, or any other
employee of Orkin engaged in the calculation of the Uncollected AR Calculation,
to observe, review, and examine the work papers, schedules, and other documents
prepared or used in connection with the Uncollected AR Calculation, and to
review the books and records of Orkin related to such calculation. If no AR
Objections are raised by Xxxx within such 30-day period, the Uncollected AR
Calculation shall be deemed accepted and approved by Xxxx. If, within such
30-day period, Xxxx raises AR Objections, Orkin and Xxxx shall attempt in good
faith to resolve the matter or matters in dispute and, if resolved, such
resolution shall be final, conclusive and binding upon the parties hereto. If
the parties fail to reach such resolution within ten (10) days after delivery of
the AR objections, the dispute mechanism set forth in Section 2.05(c) of this
Agreement shall apply.
If the Uncollected AR Calculation includes Accounts Receivable
attributable to the sale of [***] to customers [***], Orkin shall, in good
faith, determine the collectibility of the [***] in accordance with the terms
thereof. That portion of the [***] that Orkin determines to be collectible in
accordance with the terms thereof shall be (i) deemed to be collected for
purposes of the Uncollected AR Calculation, and (ii) [***] of the face amount of
such Accounts Receivable shall be subtracted from the Uncollected AR
Calculation. There shall be no subtraction from the Uncollected AR Calculation
for [***] that Orkin does not determine to be collectible in accordance with the
terms thereof.
8
If the Uncollected AR Calculation (as finally determined) is greater
than or equal to the Holdback, the Orkin shall be entitled to retain the
Holdback, and Xxxx shall pay the difference between the Uncollected AR
Calculation and the Holdback to Orkin. If the Uncollected AR Calculation (as
finally determined) is less than the Holdback, the Orkin shall be entitled to
retain only that portion of the Holdback that is equal to the Uncollected AR
Calculation, and shall pay the remainder of the Holdback to Xxxx. No interest
shall be due or payable respecting any payments to be made pursuant to this
Section 2.08. Any and all payments required to be made by Orkin or Xxxx as a
result of adjustments made pursuant to this Section 2.08 shall be made by wire
transfer of immediately available funds within five business days after the
Uncollected AR
Calculation is finalized. If Xxxx fails to pay Orkin any amount due to Orkin
under this Section 2.08, Orkin may elect to set-off such amounts against the
obligations due under the Promissory Notes.
Between the Closing Date and the date of its presentation of the
Uncollected AR Calculation, (i) Orkin shall use its best efforts to collect the
Accounts Receivable; (ii) Orkin shall apply any payments received from any
customer listed on the Accounts Receivable list in the manner directed by such
customer, and, if the customer fails to designate an invoice for payment, then
the payment shall be applied against the oldest outstanding invoice for such
customer; (iii) Orkin shall have the sole right to collect and to endorse with
the name of Xxxx any checks received on account of any outstanding Accounts
Receivable; (iv) Xxxx shall promptly forward or cause to be forwarded to Orkin
any and all Accounts Receivable proceeds received by Xxxx; and (v) Xxxx shall
cause its chief financial officer, controller, or any other officer of Xxxx (to
the extent not employed by Orkin) to provide such reasonable assistance to Orkin
as may be necessary or appropriate to ensure that the Accounts Receivable are
collected in a manner consistent with past practice and experience.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF XXXX
Xxxx makes the following representations and warranties to Orkin, all
of which shall survive the Closing as herein provided and each of which is
acknowledged by Xxxx to be relied upon by Orkin.
3.01 Organization. Xxxx is a corporation duly organized, validly
existing and in good standing under the laws of the State of Mississippi and has
the corporate power and authority to own and use its properties and to conduct
its business as currently conducted in all places where it does business.
3.02 Authorization; Effect of Agreement; Consents.
(a) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate and shareholder action of Xxxx. This
Agreement constitutes a valid and binding obligation of Xxxx, enforceable in
accordance with its terms.
9
(b) Schedule 3.02(b) to this Agreement lists all approvals and
consents required under the Material Contracts (as defined in Section 3.05
below) in order that Xxxx'x rights thereunder may be assigned to Orkin as
contemplated hereby (the "Consents").
3.03 Title to Assets. Xxxx has good and marketable title to all
tangible Assets (and a valid and enforceable leasehold interest in all assets
subject to Leases which are Material Contracts) free and clear of all claims,
security interests, liens and other title encumbrances other than Permitted
Encumbrances.
3.04 Condition of Certain Assets. Schedule 1.01(c) includes a true,
correct and complete list as of the date hereof of the material tangible
personal property assets owned by Xxxx and used in the Pest Business. Except as
disclosed in Schedule 1.01(c), the Fixed Assets and the assets subject to Leases
which are Material Contracts are, in good operating condition, ordinary wear and
tear excepted.
3.05 Leases, Other Contracts, Customer Contracts and Customer Lists.
Schedule 1.01(d) sets forth a true, correct and complete list as of the date
hereof of all real property and vehicle leases used by Xxxx in the conduct of
the Pest Business ("Material Contracts"). Schedule 3.05 sets forth the Major
Customers who, as of September 30, 1999, are parties to Customer Contracts.
Schedule 3.05 sets forth the commencement and initial expiration dates of such
Customer Contracts of Major Customers, and the monthly rate and the addresses of
such Major Customers. Except as set forth on Schedule 3.05 hereto, there is no
condition or development which threatens to have a material adverse effect upon
the aggregate Revenues related to such Major Customers. Neither Xxxx nor any
other party to any Material Contract is in breach of, or in default under, such
Material Contract and no event has occurred which, but for the lapse of time or
the giving of notice, or both, would be such a default. Except as disclosed on
Schedule 3.05, as of the date hereof, all Major Customers are active customers
of the Pest Business.
3.06 Inventory. Except as noted on Schedule 3.06, the Inventory is not
obsolete, damaged or defective, has been stored and maintained in accordance
with normal industry practice and is generally suitable for the purposes for
which it is used.
3.07 Intellectual Property. Schedule 1.01(g) sets forth a true, correct
and complete list as of the date hereof of each patent, copyright (other than
copyrighted labels, advertising and promotional materials), logo, service xxxx
or trademark actively used by Xxxx. Xxxx has full right, title and interest to
each patent, copyright, trademark or trade name actively used in the Pest
Business and included in Schedule 1.01(g). There are no pending or threatened
claims against Xxxx alleging that the conduct of Xxxx infringes or conflicts
with the rights of others under patents, trademarks, copyrights and trade
secrets. Xxxx owns or possesses the right to use all the patents, copyrights,
trademarks, trade names, service marks, licenses and rights with respect to the
foregoing necessary for the operation of Xxxx as now conducted. Xxxx is not
aware of any violation by a third party of any of Xxxx'x patents, licenses,
trademarks, service marks, trade names, copyrights, trade secrets, or other
proprietary rights used by Xxxx.
3.08 Availability of Certain Assets. All of the Fixed Assets (other
than vehicles when in use and Fixed Assets leased to customers pursuant to
Customer Contracts or in the possession of
10
such customers at their locations, in vehicles covered by the Leases or at the
residences of sales managers and technicians) and Inventory (other than
Inventory when being used) are located at a Xxxx facility or storage site, or at
the residences of sales managers and technicians (and, on reasonable conditions,
Xxxx will make such items available for inspection by Orkin). Xxxx has generally
maintained such items in the ordinary course of its business.
3.09 All Assets. The Assets and all assets subject to Leases,
constitute all material properties of any nature with which Xxxx has conducted
the Pest Business for the 12-month period prior to the date hereof, subject to
the addition and deletion of assets in the ordinary course of its
business. All facilities currently used by Xxxx are supplied with utilities
reasonably necessary for the operation of such facilities.
3.10 Financial Statements; Books and Records. Xxxx has delivered to
Orkin: (a) the unaudited balance sheet of Xxxx as of December 31 in each of the
years 1997 and 1998, and the related statement of income and cash flow for each
of the fiscal years then ended, (b) an unaudited balance sheet of Xxxx as of
September 30, 1999 and the related unaudited statement of income and cash flow
for the nine (9) months then ended, including in each case the notes thereto.
Such financial statements and notes fairly present the financial condition and
the results of operations, and cash flow of Xxxx as of the respective dates of
and for the periods referred to in such financial statements, all in accordance
with the income tax method of accounting, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, have a material adverse
effect) and the absence of notes (that, if presented, would not differ
materially from those included in the 12/31/98 balance sheet), and reflect the
consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements. No
financial statements of any person other than Xxxx are required by Generally
Accepted Accounting Principles ("GAAP") to be included in the financial
statements of Xxxx. The books of account and other records of Xxxx, all of which
have been made available to Orkin, are complete and correct and have been
maintained in accordance with sound business practices.
3.11 Absence of Material Changes. Except as set forth in Schedule 3.11,
from July 31, 1999 through the date of this Agreement there has been, and
through the Closing Date there will be: (A) no material adverse change in the
assets constituting the Assets of Xxxx (including any acquisition or purchase,
sale, pledge or other transfer, exchange or disposition of any asset except in
the ordinary course of business), (B) no increases in the wages and salaries of
the officers or employees of Xxxx other than in the ordinary course of business;
and (C) no contracts for the purchase of goods and services by Xxxx providing
for payments in an amount in excess of $5,000 per month except (x) purchases of
inventory in the ordinary course of business, (y) as listed on Schedule 3.11 or
(z) as consented to by Orkin.
3.12 Accounts Receivable. Schedule 3.12 hereto sets forth a true,
correct and complete list of all Accounts Receivable, in the aggregate, in
30-day aging categories as of September 30, 1999. All Accounts Receivable
included in the Assets will have arisen in the ordinary course of the business.
11
3.13 No Conflict. The execution and delivery of this Agreement by Xxxx
and the Owner does not, and the performance of this Agreement by Xxxx and the
Owner will not, (i) conflict with or violate any law, regulation, court order,
judgment or decree applicable to Xxxx, the Owner, or by which any of the Assets
are bound or affected, (ii) violate or conflict with either the charter or
bylaws of Xxxx, or (iii) except as may result from the failure to obtain any
required third-party consent or approval, result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under any Material Contract, instrument, permit, license or franchise
of which Xxxx is a party.
3.14 Taxes and Assessments. Xxxx has filed or will file when and as due
all sales, use, payroll, excise, business and license tax returns required by
law to be filed by Xxxx; and Xxxx has paid or will pay when and as due all
federal, state, local or foreign taxes or other governmental charges including
interest or penalties imposed to the Closing Date.
3.15 Employees. Xxxx'x employees are not represented by a union or
subject to a collective bargaining agreement and Xxxx has no knowledge of any
attempts to organize Xxxx'x employees. There are no strikes, labor disputes,
union representation contests, state labor or National Labor Relations Board
proceedings or litigation pending, or to the knowledge of Xxxx, threatened
against or affecting the operation of the Pest Business or its relations with
its employees, except as set forth on Schedule 3.15. Except for such items which
in the aggregate are not materially adverse to Redd, Redd is, to Xxxx'x
knowledge, in substantial compliance with all federal, state and local laws,
rules and regulations with respect to employment, wages, hours and benefits.
Except as set forth on Schedule 3.15, Xxxx is not engaged in any unfair labor
practices nor are any unfair labor practices or other complaints pending against
Xxxx filed with or, to the knowledge of Xxxx, threatened to be filed with or by
the National Labor Relations Board, Equal Employment Opportunity Commission,
Department of Labor or any similar agency or instrumentality of any state or
local government; and Xxxx has experienced no strikes or collective work
stoppage over the past three years.
3.16 Benefit Plans.
(a) Schedule 3.16 sets forth a true and complete list of each "employee
benefit plan" (as defined by Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), and any other bonus, profit
sharing, pension, compensation, deferred compensation, stock option, stock
purchase, fringe benefit, severance, post-retirement, scholarship, disability,
sick leave, vacation, individual employment, commission, bonus, payroll
practice, retention, or other plan, agreement, policy, trust fund or arrangement
(each such plan, agreement, policy, trust fund or arrangement is referred to
herein as an "Employee Benefit Plan", and collectively, the "Employee Benefit
Plans") that is currently in effect, was maintained since December 31, 1975 or
which has been approved before the date hereof but is not yet effective, for the
benefit of (i) directors or employees of Xxxx or any other persons performing
services for Xxxx, (ii) former directors or employees of Xxxx or any other
persons formerly performing services for Xxxx, and/or (iii) beneficiaries of
anyone described in (i) or (ii) (collectively, "Business Employees") or with
respect to which Xxxx or any "ERISA Affiliate" (hereby defined to include any
trade or business, whether or not incorporated, other than Xxxx, which has
employees who are or have been at any date of
12
determination occurring within the preceding six (6) years, treated pursuant to
Section 4001(a)(14) of ERISA and/or Section 414 of the Code as employees of a
single employer which includes Xxxx) has or has had any obligation on behalf of
any Business Employee. Except as disclosed on Schedule 3.16 attached hereto,
there are no other benefits to which any Business Employee is entitled, and Xxxx
specifically represents and warrants that it has no severance pay policy.
(b) Xxxx has delivered to Orkin, with respect to each Employee Benefit
Plan, true and complete copies of (i) the documents embodying and relating to
each Employee Benefit Plan, including, without limitation, the current plan
documents and documents creating any trust maintained pursuant thereto, all
amendments, investment management agreements, group annuity contracts,
administrative service contracts, insurance contracts, collective bargaining
agreements, the most recent summary plan description with each summary of
material modification, if any, and employee handbooks, (ii) annual reports
including but not limited to Forms 5500, 990 and 1041 for the last three (3)
years for the plan or any related trust, (iii) actuarial valuation reports and
financial statements for the last three (3) years, (iv) each communication
involving the plan or any related trust to or from the Internal Revenue Service
("IRS"), Department of Labor ("DOL"), Pension Benefit Guaranty Corporation
("PBGC") or any other governmental authority including, without limitation, the
most recent determination letter received from the IRS pertaining to any
Employee Benefit Plan intended to qualify under Sections 401(a) or 501(c)(9) of
the Code.
(c) Except as set forth in Schedule 3.16, each Employee Benefit Plan is
in compliance with the provisions of ERISA and the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable to it. Except as set
forth in Schedule 3.16, Xxxx has not maintained or contributed to any plan
subject to the minimum funding standards of Section 302 of ERISA or Section 412
of the Code during its last six (6) fiscal years, and each plan maintained by an
ERISA Affiliate which is subject to Title IV of ERISA or Section 412 of the Code
is fully accrued and funded in compliance with ERISA and the Code as of the
Closing Date, and if any such plan or plans were terminated as of the Closing
Date, the termination would satisfy the minimum funding requirements of ERISA
and the Code. All Employee Benefit Plans which are "pension plans" as defined in
Section 3(2) of ERISA have received favorable determination letters from the
Internal Revenue Service as to their tax-qualified status and the tax-exempt
status of any related trust under Sections 401(a) and 501 of the Code,
respectively, which determinations are currently in effect.
(d) Except as set forth in Schedule 3.16, neither Xxxx nor any ERISA
Affiliate maintains or contributes to, is required to maintain or contribute to,
or, since December 31, 1975, has maintained or contributed to, a "multiemployer
plan" (as defined by Section 4001(a)(3) of ERISA).
(e) Orkin shall not, as a result of the transactions contemplated by
this Agreement (or any employment by Orkin of Business Employees): (i) become
liable for any contribution, tax, lien, penalty, cost, interest, claim, loss,
action, suit, damage, cost assessment or other similar type of liability or
expense of Xxxx or any ERISA Affiliate (including predecessors thereof) with
regard to any Employee Benefit Plan or any Employee Benefit Plan sponsored,
maintained or contributed to by an ERISA Affiliate (including predecessors
thereof) (assuming a like definition of "Employee
13
Benefit Plan" were applicable to ERISA Affiliates as to those same types of
agreements, policies, trusts, funds and arrangements sponsored, maintained or
contributed to by them) (each such plan for an ERISA Affiliate, an "ERISA
Affiliate Employee Benefit Plan"), including, without limitation withdrawal
liability arising under Title IV, Subtitle E, Part 1 of ERISA, liabilities to
the PBGC, or liabilities under Section 412 of the Code or Section 302(a)(2) of
ERISA, or (ii) be or become a party to any Employee Benefit Plan or any ERISA
Affiliate Employee Benefit Plan.
(f) No ERISA Affiliate and none of the Assets is subject to any lien
arising under ERISA or the Code, including, but not limited to, a lien arising
pursuant to Title IV of ERISA or Section 412 of the Code or a lien arising as a
result of any tax imposed by Chapter 43 of Subtitle D of the Code. Neither Xxxx
nor any ERISA Affiliate has ceased operations at a facility so as to become
subject to the provisions of Section 4062(e) of ERISA.
(g) Xxxx, each ERISA Affiliate, each Employee Benefit Plan and each
Employee Benefit Plan "sponsor" or "administrator" (within the meaning of
Section 3(16) of ERISA) has complied in all respects with the applicable
requirements of Part 6 of Subtitle B of Title I of ERISA and Section 4980B of
the Code (such statutory provisions and predecessors thereof are referred to
herein collectively as "COBRA"). Schedule 3.16 attached hereto lists the name of
each Business Employee who has experienced a "Qualifying Event" (as defined in
COBRA) with respect to an Employee Benefit Plan who is eligible for
"Continuation Coverage" (as defined in COBRA) and whose maximum period for
Continuation Coverage has not expired. Included in such lists are the current
address for each such individual, the date and type of each Qualifying Event,
whether the individual has already elected Continuation Coverage and, for any
individual who has not yet elected Continuation Coverage, the date on which such
individual was notified of his or her rights to elect Continuation Coverage.
3.17 Compliance with Laws; Licenses and Permits. Except as set forth
on Schedule 3.17 hereto:
(a) Xxxx is in substantial compliance with the Federal Fair
Labor Standards Act, Title VII of the Civil Rights Act of 1964, the Equal Pay
Act, the Age Discrimination in Employment Act and Executive Order 11246, and all
other applicable laws, orders, rules and regulations enacted or promulgated by
the Environmental Protection Agency, the Occupational Health and Safety
Administration and by all other governmental bodies and agencies, including
state labor boards. Xxxx has not received notice of any noncompliance with the
foregoing.
(b) Xxxx has all material governmental licenses, permits and
approvals necessary for its operations and has not received since December 31,
1996, notice of any violations in respect of any such license, permits or
approvals. No proceeding is pending or, to the knowledge of Xxxx is threatened,
which seeks revocation or limitation of any such license, permits or approvals.
3.18 Customers. Xxxx has a Customer Contract with each of its customers
included on the Customer List. All services to such customers have been rendered
in material compliance with such Customer Contracts, and have been performed in
material compliance with the applicable laws, rules and regulations (including
business and professional codes, home solicitation acts, credit
14
sales acts, and the Federal Insecticide, Fungicide and Rodenticide Act) of all
federal, state and local governmental bodies, agencies and boards, including
departments of agriculture except as set forth in Schedule 3.18.
3.19 Litigation. Except as set forth in Schedule 3.19, there is no
suit, claim, action or proceeding which is pending or threatened against Xxxx.
3.20 Fulfillment of Guarantees. All requests or demands for treatment
or other service made by customers to fulfill warranties or guarantees made or
given by Xxxx to such customers have been handled in the ordinary course of
business.
3.21 Broker's Fees. Xxxx has incurred no obligation or liability,
contingent or otherwise, for any brokerage fee, finder's fee, agent's commission
or other like payment in connection with this Agreement or the transactions
contemplated hereby.
3.22 Environment, Health and Safety.
(a) Xxxx has obtained all material permits, licenses,
approvals and other authorizations which are required under all Environmental
Laws (as defined below) and is in compliance in all material respects with the
terms and conditions of all such licenses, approvals and authorizations, and in
compliance with all other limitations, restrictions and requirements, including
without limitation, the submission of all required reports, notices and other
filings, contained in any applicable Environmental Law.
(b) Except as identified on Schedule 3.22(b), there is no
pending, threatened, charge, complaint, action, suit, proceeding hearing,
investigation, claim, or demand against Xxxx under any Environmental Law as
amended or other laws, rules or regulations of any federal, state or municipal
government or agency thereof concerning environmental matters nor has Xxxx
received any notice of any of the foregoing.
(c) Except as identified on Schedule 3.22(c), Xxxx is not
subject to any pending (nor does Xxxx have knowledge of any threatened) claim,
complaint, action, suit, proceeding, hearing, investigation, or demand, from any
governmental or private agency, entity or person concerning any intentional or
unintentional act or omission by Xxxx, any predecessor to Xxxx, or by any other
person or entity, with respect to (1) the investigation, remediation, or other
activities related to the spillage, clean-up, management, manufacture or
processing, or other handling of Hazardous Materials on, under or at any
property now or previously owned, leased or operated by Xxxx, (2) any actual or
alleged violation with respect to any Environmental Law or (3) any actual or
alleged claim related to any damage to health, safety or the environment caused
by Hazardous Materials.
(d) Xxxx is not subject to any pending (nor does Xxxx have any
knowledge of any threatened) private, governmental or judicial claim, order,
decree, or investigation related to the clean-up, management, manufacture or
processing, or other handling of Hazardous Materials on, under or at any
property now or previously owned, leased or operated by Xxxx.
15
(e) Schedule 3.22(e) sets forth any material past or present
enforcement actions, orders, consent decrees or agreements, citations,
violations or notices of violation, or penalties against or paid by Xxxx in
connection with any Environmental Law since December 31, 1996.
(f) Except as disclosed on Schedule 3.22(e), there are no
active, inactive or abandoned underground storage tanks ("USTs") for Hazardous
Materials on any property leased or operated by Xxxx. To Xxxx'x knowledge, each
such UST identified in Schedule 3.22(e) is in material compliance with all
requirements of Environmental Laws.
(g) Except as disclosed on Schedule 3.22(g), there is no
presence of any material quantities of PCB or asbestos materials at any property
leased or operated by Xxxx.
(h) Except as disclosed on Schedule 3.22(h), no material
quantities of Hazardous Materials have been released, spilled, leaked, pumped,
poured, emitted, emptied, discharged, injected, escaped, leached, dumped or
disposed of into, on or from any property leased or operated by Xxxx.
(i) Except as disclosed on Schedule 3.22(i), there are no
environmental reports, investigations, studies, audits, tests, reviews or other
analyses conducted by, or which are in the possession of, Xxxx in relation to
any Facility (as defined in Section 3.24(a)) which have not been made available
to Orkin. Xxxx has no knowledge of any material omissions or misstatements in
any such reports, investigations, studies, audits, tests, reviews or other
analyses relating to environmental conditions on or at any Facility.
(j) For purposes hereof, the term "Environmental Laws" shall
mean any and all federal, state, local and foreign statutes, laws, regulations,
requirements, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions, including without limitation, the Comprehensive Environmental
Response Compensation and Liability Act, as amended ("CERCLA"), the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended, the Clean Water Act, as amended, the Federal Insecticide,
Fungicide and Rodenticide Act, as amended, the Toxic Substances Control Act, as
amended, and any other federal, state or local law, regulation, requirement,
ordinance, rule, judgment, order, decree, permit, concession, grant, franchise,
license, agreement, other governmental restriction or any common law based on
nuisance, tort or strict liability, relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes, hazardous
constituents, petroleum, petroleum products, radon gas, and radioactive matter
into the environment or otherwise related to the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, hazardous constituents, petroleum, petroleum
products, radon gas and radioactive matter to the extent enacted and in effect
on or prior to the Closing Date.
16
3.23 Immigration Matters.
(a) With respect to all of Xxxx'x employees, copies of all
Forms I-9 (Employment Eligibility Verification Forms) completed pursuant to the
Immigration Reform and Control Act of 1986 and all regulations promulgated
thereunder ("IRCA") and any and all copies of documentation, records or other
papers retained with Forms I-9, have been or, at Orkin's request, will be made
available to Orkin prior to the Closing. Xxxx has complied in all material
respects with IRCA with respect to the completion of Forms I-9 for all such
employees and the reverification of the employment status of any and all such
employees whose employment authorization documents indicated a limited period of
employment authorization.
(b) With respect to all former employees of Xxxx who left
Xxxx'x employment within three years prior to the Closing, Xxxx has complied in
all material respects with IRCA with respect to the maintenance of Forms I-9 for
at least three years from the date of employment or for one year beyond the date
of termination, whichever is later. Copies of all Forms I-9 maintained for
such former employees pursuant to IRCA, and any and all copies of documentation,
records or other papers retained with Forms I-9, have been or, at Orkin's
request, will be made available to Orkin prior to the Closing.
(c) Except as disclosed on Schedule 3.23, Xxxx has had no
material immigration law violations and has only employed individuals authorized
to work in the United States. Since December 31, 1994, Xxxx has not been the
subject of any inspection or investigation relating to its compliance with or
violation of IRCA, nor has it been warned in writing, fined or otherwise
penalized by reason of any failure to comply with IRCA, nor is any such
proceeding pending or threatened.
3.24 Matters Relating to the Facilities.
(a) Other than as set forth on Schedule 3.24, there are no
encroachments, rights-of-way, easements, or conditions to the knowledge of Xxxx
which could adversely affect the present use of the field locations leased under
the Leases included in the Material Contracts (individually, a "Facility" or
collectively, the "Facilities").
(b) There are no condemnation, or eminent domain proceedings
pending or contemplated, against any Facility or any part thereof and Xxxx has
received no notice of the intent of any public authority or other entity to take
or use any Facility. There are no contemplated real property assessments
affecting any Facility or any portion thereof which will adversely affect such
Facility.
(c) Xxxx has received no written notice of any pending, and
there is no threatened, action or governmental proceeding relating to, zoning
changes which will adversely affect any Facility, nor is there any existing
event or condition which would reasonably constitute a basis for any such
proceeding. There is no present use of any real property adjacent to any
Facility which adversely affects the conduct of the Pest Business.
17
[***] - CONFIDENTIAL TREATMENT REQUESTED
(d) Except as set forth in Schedule 3.24 attached hereto,
usable public sanitary and storm sewers, public water facilities, and gas and
electrical facilities (collectively, the "Public Utilities") as currently used
at each Facility as provided in the applicable Lease are of capacity sufficient
for the current operation of such Facility.
(e) Each Facility currently has access to and from public
streets and roads and there are no facts or conditions that would result in the
termination or material impairment of the present access from any Facility to
such existing highways and roads.
3.25 Year 2000 Compliance. Xxxx is currently, or will be, Year 2000
Compliant on or before the Closing Date. As used herein, "Year 2000 Compliant"
shall mean that all software, embedded microchips and other processing
capabilities utilized by Xxxx on existing computer hardware resources which are
critical to the functioning of the business of Xxxx will correctly process,
sequence, and calculate, without interruption, all date and date related data
for all dates to, through and after January 1, 2000, including leap year
calculations, and shall recognize, store and transmit date data in a format
which clearly indicates the correct century. Provided, however, that
notwithstanding the foregoing, Xxxx makes no representation or warranty of Year
2000 Compliance with respect to its [***] system, its [***] system or its
[***] system.
3.26 Complete Copies. The copies of all leases, instruments,
agreements, licenses, permits, certificates or other documents which are listed
on disclosure schedules attached hereto which have been delivered or made
available to Orkin have been or will be complete and correct in all material
respects.
3.27 Xxxx-Xxxxx Xxxxxx Act. Immediately prior to the Closing the
"Person" (as defined in the Regulations issued by the Federal Trade Commission
under the Xxxx-Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as amended)
within which Xxxx is included will have total assets (as shown on its last
regularly prepared balance sheet or financial statement) of less than
$10,000,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ORKIN
Orkin hereby makes the following representations and warranties to Xxxx
and the Owner, all of which shall survive the Closing as herein provided and
each of which is acknowledged by Orkin to be relied upon by Xxxx and the Owner:
4.01 Organization. Orkin is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to own and use its properties and to conduct
its business as currently conducted in all places where it does business.
4.02 Authorization; Effect of Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been, or before the Closing will be, duly authorized by
all necessary corporate action of Orkin and Xxxxxxx, Inc. This Agreement
constitutes a valid and binding obligation of Orkin enforceable against Orkin
18
in accordance with its terms, and the guaranty is a valid and binding obligation
of Xxxxxxx, Inc., enforceable against Xxxxxxx, Inc. in accordance with its
terms.
4.03 No Conflict. The execution and delivery of this Agreement by Orkin
does not, and the performance of this Agreement by Orkin will not, (i) conflict
with or violate any law, regulation, court order, judgment or decree applicable
to Orkin, (ii) violate or conflict with either the charter or bylaws of Orkin or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under any material
contract, instrument, permit, license or franchise to which Orkin is a party.
4.04 Broker's Fees. Orkin has not incurred any obligation or liability,
contingent or otherwise, for any brokerage fee, finder's fee, agent's commission
or other like payment in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE V
COVENANTS OF XXXX AND ORKIN
5.01 Covenant of Further Assurances.
(a) Each party hereto shall use its best efforts to take all
actions and to do all things reasonably necessary in order to consummate and
effect the transactions contemplated by this Agreement (subject to the
limitations contained in this Agreement). Without further consideration, each
party hereto will, at any time and from time to time following the Closing,
execute and deliver such further instruments of conveyance and transfer, and
take such other action as the other party may reasonably request (subject to the
limitations set forth in this Agreement), to consummate the transactions
contemplated by this Agreement, including, without limitation, obtaining a
release of the personal guaranty of Xxxxxxx Xxxx with respect to the Deposit
Guaranty Loan and the Motor Vehicle Lease Agreement.
(b) Certain of the Assets may be in the possession of third
parties on the Closing Date. Prior to the Closing, except as otherwise provided
in this Agreement, Xxxx and Orkin shall agree on reasonable procedures to
transfer possession of the Assets to Orkin as soon as practicable after the
Closing Date, and Xxxx shall provide reasonable assistance to Orkin in
connection with the transfer thereof. Each of Xxxx and Orkin shall bear their
own respective out-of-pocket costs incurred in connection with transferring such
Assets.
5.02 Consents. Orkin acknowledges that certain consents to the
transactions contemplated by this Agreement may be required from parties to the
Customer Contracts, Leases and Other Contracts and that such consents have not
been obtained. Orkin and Xxxx agree that they will use their reasonable efforts
to jointly seek and obtain prior to Closing the consent of all Major Customers
to the transactions contemplated by this Agreement. Xxxx shall use its
reasonable efforts to obtain and deliver to Orkin prior to the Closing the
consent of each lessor of the Leases. If any Lessor requires the payment of any
fees in order to obtain such consent, the parties shall bear the cost of such
fees equally.
19
5.03 Employee and Related Matters.
(a) Offers of Employment to Seller's Employees. Prior to or
after the Closing, Orkin may offer employment to any Business Employees;
provided, however, that notwithstanding anything to the contrary set forth
herein, it is understood that there is no obligation on the part of Orkin to
make any such offers of employment. Any Business Employee who accepts an offer
and is hired by Orkin effective as of the Closing is a "Transferred Employee".
With respect to Transferred Employees, Orkin and Xxxx agree to cooperate fully
in the transition of any such persons. Nothing contained in this Section shall
be construed to affect or limit any right Orkin or its affiliates may have after
the Closing with respect to the terms and conditions of employment of any
Business Employees (including but not limited to provision of employee benefits
different from those provided through the Employee Benefit Plans) or to
terminate the employment of any Transferred Employee at any time.
(b) Limitation. Notwithstanding the provisions of clause (a)
of this Section, Orkin shall not be required to offer employment to a person and
such person shall not be an "Transferred Employee" if, as of the Closing Date,
(i) such person has been determined to be eligible for and actually receiving
disability benefits on the Closing Date pursuant to an occurrence prior to the
Closing Date, excepting any person who is able to perform the essential
functions, with or without reasonable accommodation, of the position which they
would have been offered if there had been no disability benefits paid or (ii)
such person fails to comply with those Orkin employment criteria described on
Schedule 5.03(b) ("Orkin Minimum Employment Criteria").
(c) Accrued Benefits.Xxxx shall be responsible for vacation
pay (resulting from earned vacation days not taken) and sick pay which accrued
on or before the Closing Date of all Business Employees who do not become
Transferred Employees. With respect to Business Employees who become Transferred
Employees, Orkin shall afford such employees the right to take paid vacation and
sick time earned prior to the Closing Date and which is included in the Days Off
Accruals; provided, however, that if Xxxx is required, by virtue of collective
bargaining agreements or otherwise, to pay such employees for any accrued but
unused vacation and sick time, Orkin need not afford such employees the right to
take such vacation and sick time.
(d) Actions by Xxxx. Xxxx shall be responsible for providing
all notices and other communications to employees which may be required under
the Worker Adjustment and Retraining Act (the "WARN" Act") other than those
required solely due to actions of Orkin. Xxxx shall offer, or cause to be
offered by one or more of its ERISA Affiliates, and shall be responsible for
providing all notices and other communications to, and shall be responsible for,
Continuation Coverage to individuals who would be eligible to elect such
coverage if the transactions contemplated by this Agreement were treated as a
Qualifying Event with respect to all Business Employees as a result of the
transactions contemplated by this Agreement. Xxxx shall provide, or cause to be
provided by an ERISA Affiliate, all applicable notifications of any conversion
rights or privileges available under any Employee Benefit Plan or ERISA
Affiliate Employee Benefit Plan which is an "employee welfare benefit plan" (as
that term is defined in Section 3(1) of ERISA)
20
[***] - CONFIDENTIAL TREATMENT REQUESTED
which arise as a result of the transactions contemplated by this Agreement.
Orkin shall neither assume nor have any obligations or liabilities whatsoever in
respect of severance, WARN Act, payroll and/or unemployment tax, pension,
profit-sharing, health insurance, COBRA or other employee benefit liabilities in
respect of any Business Employee whose employment with Xxxx terminates on or
before the Closing, whether or not employed by Orkin, and Xxxx shall be liable
for any penalties, excise taxes or interest resulting from failure to provide
such benefits.
(e) Severance. Xxxx shall be liable for any compensation (if
any) accrued and due for the period of time prior to the Closing, or owed as a
result of the transactions contemplated by this Agreement, to any Business
Employee of Xxxx, including any payment due under the WARN Act. Orkin agrees to
adopt, effective as of the Closing Date, a [***] for Transferred Employees,
which shall provide that any Transferred Employee (other than Transferred
Employees who are also Senior Management) who is terminated by Orkin within the
[***] period after the Closing for any reason other than for "cause" (as defined
in Orkin's employee benefits policy) will be provided [***] notice of
termination, or, in the alternative, [***] pay in lieu of notice of termination.
After the termination of each such "special severance pay plan", Orkin agrees
that Transferred Employees shall be eligible to participate in Orkin's then
existing severance pay plan and with respect to such severance pay plan, all
Transferred Employees shall be provided [***] for the period that the
Transferred Employees were employed by Xxxx.
(f) Benefit Plans. Effective as of the Closing Date,
Transferred Employees shall be eligible to participate in any ERISA qualified or
employee welfare programs and/or benefits and any incentive or other
compensation program (e.g., pension, retirement, profit sharing, stock option,
incentive, vacation, education reimbursement or assistance, deferred
compensation, hospitalization, medical, dental, life insurance, sick pay,
disability, severance or other plan, program, policy or arrangement) ("Employee
Benefits") offered by Orkin, to the same extent that Orkin's similarly-situated
employees are eligible to participate in such programs and/or plans. Other than
for purposes of calculating any qualified defined benefit retirement benefit or
for purposes of determining a Transferred Employee's vested interest in any
employer "match" contribution under Orkin's Code Section 401(k) qualified
savings plan, Orkin shall grant all Transferred Employees service credit for the
period that the Transferred Employees were employed by Xxxx. Such service credit
shall apply for all eligibility and vesting requirements set forth in any
Employee Benefits. Xxxx shall take such actions as may be necessary to allow all
Transferred Employees to "roll-over" any moneys held in Xxxx'x Code Section
401(k) qualified savings plan into Orkin's Code Section 401(k) qualified savings
plan effective as soon as practicable after the Closing. Xxxx agrees to fully
vest, effective as of the Closing Date, but contingent on the Closing, all
Transferred Employees who are participants in the Xxxx'x Code Section 401(K)
qualified savings plan.
5.04 Customers.
(a) From and after the date hereof and until the Closing Date,
Xxxx shall use its reasonable efforts to retain its customers, including using
its reasonable efforts, in all material respects, to:
21
(i) service all customers with the same service
personnel used by Xxxx to service such customers (to the extent reasonably
practicable) and with a level of service and quality consistent with Xxxx'x past
practices;
(ii) abide by the terms of all existing contracts
(including Customer Contracts) relating to the
customers and the operation of the Pest Business with respect to such customers;
(iii) abide by the terms of all guarantees associated
with Customer Contracts for such customers and
perform all necessary work and satisfy all obligations thereunder;
(iv) communicate with and call upon the customers in
a manner consistent with Xxxx'x past practices and with the same sales personnel
used by Xxxx to communicate and call upon such customers (to the extent
reasonably practicable); and
(v) take such other actions relating to the to
provision of Pest Services the customers consistent
with Xxxx'x past practices.
(b) From and after the date hereof and until the Closing Date,
Xxxx agrees to use its reasonable efforts to cooperate with Orkin in
consummating the transactions contemplated hereby and in effecting an orderly
transition all the customers, the Assets and the Assumed Liabilities to Orkin.
5.05 Access. Prior to the Closing, Xxxx shall xxxxx to Orkin or cause
to be granted to Orkin and its representatives, employees (including information
technology personnel), counsel and accountants reasonable access, during normal
business hours and upon reasonable notice, (i) to the personnel, properties,
systems, books and records of Xxxx relating to the Pest Business, (ii) to the
employees employed in the Pest Business for the purpose of facilitating hiring
by Orkin and integrating employees into Orkin's operations, (iii) to the books
and records of Xxxx for the purpose of providing Orkin with information
demonstrated by Orkin as required to be included in a required filing under Form
8-K promulgated under the Securities Exchange Act of 1934, as amended, and (iv)
subject to the consent of the relevant landlord or lessor, to the premises
covered by the Leases for the purpose of conducting a Phase I environmental
investigation of such premises (it being agreed by the parties hereto that in
the event that Orkin, in the process of such investigations, discovers an
Environmental Violation at any of such premises which materially and adversely
affects such premises, then Orkin must disclose to Xxxx the results of the Phase
I investigation and may refuse to assume, and Xxxx shall not assign and
transfer, the Lease(s); provided however, that all requests for access shall be
directed to such person as Xxxx shall designate from time to time.
5.06 Sales or Transfer Taxes and Other Charges.
(a) Except as otherwise specifically provided in this
Agreement, Orkin and Xxxx shall each be responsible for and shall pay fifty
percent (50%) of the cost of all sales, use, value-added, excise, business,
goods and services, transfer, stamp, recording, registration, conveyance, or
similar taxes or expenses that may be imposed as the result of the sale and
transfer
22
of the Assets (including without limitation, any duty or other tax chargeable in
respect of any instrument transferring property and all filing fees or expenses
payable in connection with the sale and transfer of the intellectual property
described in Section 1.01(g), but excluding any and all penalties, interest and
additions to any of such taxes which shall be paid by the party against whom
such penalty, interest or addition was levied), and the parties shall cooperate
in timely making all filings, returns, reports, and forms as may be required to
comply with the provisions of any applicable tax law. Xxxx shall be responsible
for the preparation and filing of any sales and use tax filings necessitated by
the consummation of the transactions contemplated in this Agreement, but shall
provide drafts of any such filings to Orkin within a reasonable period of time
prior to the due date for filing the same, and shall revise such filings, as
appropriate, to take into account any reasonable comments thereto as provided by
Orkin. Orkin shall be responsible for the preparation and filing of any transfer
tax filings necessitated by the consummation of the transactions contemplated in
this Agreement, but shall provide drafts of any such filings to Xxxx within a
reasonable period of time prior to the due date for filing the same, and shall
revise such filings, as appropriate, to take into account any reasonable
comments thereto as provided by Xxxx.
(b) The following expense items relating to the Pest Business
shall be apportioned at the Closing in an equitable manner (based on actual tax
or other relevant bills or, to the extent such bills are not available prior to
the Closing, based on the most recently ascertainable tax or other relevant
bills). To the extent necessary, the parties shall make appropriate adjustments
and payments one to the other after the Closing so that the income and expense
items with respect to the period up to the Closing Date shall be for Xxxx'x
account and the income and expense items with respect to the period on and after
the Closing Date shall be for Orkin's account:
(i) Real estate taxes and payments in lieu of tax
with respect to the properties covered by the Leases on the basis of the fiscal
year for which assessed.
(ii) Personal property taxes, if any, on the basis
of the fiscal year for which assessed.
(iii) Utilities, telephone charges and other
apportionments and adjustments on the basis of the fiscal
year for which assessed.
5.07 Tax Assistance. After the Closing and upon reasonable written
notice, the parties shall furnish or cause to be furnished to each other and
their respective representatives, employees, counsel, and accountants access
during normal business hours, such information and assistance relating to the
Pest Business as is reasonably necessary for financial reporting and accounting
matters, the preparation and filing of any tax returns, reports, or forms, or
the defense of any tax claim or assessment; provided, however, that this access
shall not unreasonably disrupt the normal operations of Orkin or Xxxx, and the
party requesting cooperation shall pay the reasonable out-of-pocket costs
incurred by the party furnishing cooperation. This cooperation will continue for
a reasonable period from the Closing Date plus any additional time during which
a party has been advised (a) that there is an ongoing tax audit with respect to
periods before the Closing Date or (b) that the period is open to assessment.
Xxxx shall be responsible for any tax returns and filings attributable to income
earned, or fiscal or filing periods ending, before the Closing Date, and Orkin
23
[***] - CONFIDENTIAL TREATMENT REQUESTED
shall be responsible for any tax returns and filings attributable to income
earned, or fiscal or filing periods ending, on or after the Closing Date.
5.08 Updated Schedules. Prior to the Closing, Xxxx shall have the right
to supplement, modify or update the Schedules hereto to reflect any changes in,
or facts, events or circumstances relating to, the Pest Business that occur in
the ordinary course of business prior to the Closing; provided, however, that
any such supplements, modifications or updates shall be subject to Orkin's
rights under Section 6.01 hereof.
5.09 Termite Guarantee Contracts. From and after the Closing, Orkin
shall provide services on behalf of Xxxx under the Termite Guarantee Contracts.
Until the earlier of (i) the expiration date of a Termite Guarantee Contract, or
(ii) the beginning of a renewal period for which Orkin has assumed such
contract, all costs and expenses attributable to services performed pursuant to
such contract shall be borne by Xxxx, and shall be reimbursed by Xxxx to Orkin
within thirty (30) days after the presentation of an invoice therefor. Such
costs and expenses shall be equal to direct labor and materials costs
attributable to such services, plus an overhead charge equal to [***] of such
direct costs. If Xxxx fails to pay Orkin any amount due to Orkin under this
Section 5.09, Orkin shall first treat such amount as an uncollected account
receivable and included in the Uncollected AR Calculation under Section 2.08
hereof, if due and payable within the one hundred and eighty (180) day period
following the Closing Date, and then with respect to any additional amount
set-off such amounts against the obligations due under the Promissory Notes.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF ORKIN
The obligation of Orkin to consummate the transactions contemplated by
this Agreement is subject to the satisfaction of each of the following
conditions unless waived in writing by Orkin:
6.01 Representations and Warranties;Covenants. The representations and
warranties of Xxxx made in this Agreement shall be true and correct in all
respects on and as of the Closing Date as though made on and as of the Closing
Date and Xxxx and the Owner, as the case may be, shall have performed or
complied with all obligations and covenants required by this Agreement to be
performed or complied with by them by the time of the Closing, except to the
extent of changes or developments caused or contemplated by the transactions
expressly contemplated by this Agreement, for representations and warranties
that speak as of a specific date or time (which need only be true and correct as
of such date or time) and for breaches of such representations and warranties
and covenants that, in the aggregate, together with all supplements,
modifications and updates to the Schedules made by Xxxx as permitted by Section
5.10 above, would not have a material adverse effect on the Pest Business; and
Xxxx and the Owner shall have delivered to Orkin a certificate dated the Closing
Date confirming the foregoing.
Notwithstanding the foregoing, the parties hereto acknowledge that all
or some portion of the Schedules contemplated by this Agreement may not be
attached hereto on the date hereof. Xxxx covenants and agrees to deliver such
Schedules to Orkin as soon as practicable after the date hereof, but in any
event no later than five (5) business days prior to the Closing, and further
24
[***] - CONFIDENTIAL TREATMENT REQUESTED
acknowledges that such Schedules shall be acceptable to Orkin in its sole
discretion in order for Orkin to be obligated to consummate the transactions
contemplated herein.
6.02 No Injunctions, etc. No injunction or order of any court or
administrative agency of competent jurisdiction shall be in effect as of the
Closing which restrains or prohibits the consummation of the transactions
contemplated herein.
6.03 Revenue Validation. Orkin shall be satisfied, in its sole
discretion, that the Revenues of Xxxx for the twelve (12) month period ending
August 31, 1999 are no less than $12,750,000.
6.04 Deliveries. At the Closing, Xxxx or the Owner, as the case may be,
shall have delivered, or cause to be delivered, to Orkin each of the following
documents:
(a) a xxxx of sale and any other appropriate instruments of
transfer, assignment and conveyance in form and substance reasonably
satisfactory to Orkin, all dated as of the Closing Date, evidencing and
effecting the sale and transfer to Orkin of the Assets (it being understood that
none of the foregoing shall require Xxxx or any other person to make any
additional representations, warranties or covenants, express or implied, not
contained in this Agreement, and any additional statement contained therein
shall not constitute a representation or warranty), including assignments of the
Intellectual Property included in the Assets in form appropriate for recordation
with relevant governmental agencies or authorities responsible for intellectual
property.
(b) an opinion of counsel to Xxxx and the Owner in form
reasonably satisfactory to Orkin and its counsel.
(c) the Xxxx Noncompetition Agreement, the Xxxxxxx Xxxx
Noncompetition Agreement and the Senior Management Noncompetition Agreements,
duly executed by the Xxxx, Xxxxxxx Xxxx, and each of Senior Management, as
applicable.
(d) Waivers of Rights Agreement signed by the Senior
Management and Xxxxxxx Xxxx in the form attached hereto as Exhibit B.
(e) the Senior Management Employment Agreements with Orkin,
executed by each member of Senior Management, in the form attached hereto as
Exhibit C.
(f) the Copesan Commission and Termination of Deferred
Compensation Agreement between Xxxxxxx Xxxx and Orkin, duly executed by Xxxxxxx
Xxxx, in the form attached hereto as Exhibit D.
6.05 Closing of Related Transactions.
(a) That certain [***] by [***]Xxxx to [***] in the face
amount of [***] shall be paid in full or otherwise satisfied.
(b) All other amounts owed by Xxxx to Xxxxxxx Xxxx, or owed by
Xxxxxxx Xxxx to Xxxx, shall be paid in full or otherwise satisfied.
25
6.06 Board Approval. The transactions contemplated by this Agreement
shall have been approved by the Board of Directors of Orkin and Xxxxxxx, Inc.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXX AND THE OWNER
The obligation of Xxxx and the Owner to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of the following
conditions unless waived in writing by Xxxx and the Owner:
7.01 Representations and Warranties; Covenants. The representations and
warranties of Orkin made in this Agreement shall be true and correct in all
respects on and as of the Closing Date as though made on and as of the Closing
Date and Orkin shall have performed or complied with all obligations and
covenants required by this Agreement to be performed or complied with by Orkin
by the time of the Closing, except to the extent of changes or developments
caused or contemplated by the transactions expressly contemplated by this
Agreement and for representations and warranties that speak as of a specific
date or time (which need only be true and correct as of such date or time), and
for breaches of such representations and warranties and covenants that, in the
aggregate, would not have a material adverse effect on Orkin or its business
taken as a whole; and Orkin shall have delivered to Xxxx a certificate dated the
Closing Date confirming the foregoing.
7.02 No Injunctions, etc. No injunction or order of any court or
administrative agency of competent jurisdiction shall be in effect as of the
Closing which restrains or prohibits the consummation of the transactions
contemplated herein.
7.03 Deliveries. At Closing, Orkin shall have delivered:
(a) the Closing Cash Payment;
(b) the Promissory Notes;
(c) the Xxxx Noncompetition Agreement, the Xxxxxxx Xxxx
Noncompetition Agreement, and the Senior Managemen Noncompetition
Agreements, each duly executed by Orkin;
(d) the Senior Management Employment Agreements with Orkin,
executed by Orkin;
(e) the Copesan Commission and Termination of Deferred
Compensation Agreement between Xxxxxxx Xxxx and Orkin, duly executed
by Orkin;
(f) a License Agreement between Orkin and Xxxx in the form
attached hereto as Exhibit E, duly executed by Orkin, which License
Agreement shall xxxxx Xxxx a limited license to use the Intellectual
Property after the Closing with respect to Xxxx'x obligations as a
franchisor under the Xxxx Franchise Agreements;
26
(g) an assumption agreement in form and substance reasonably
satisfactory to Xxxx and the Owner, evidencing the assumption by Orkin
of the Assumed Liabilities, including, but not limited to, that certain
Motor Vehicle Lease Agreement between Automotive Rentals, Inc. ("ARI")
and Xxxx (the "Motor Vehicle Lease Agreement");
(h) a Guaranty executed by Xxxxxxx, Inc., Orkin's parent
company, in the form attached hereto as Exhibit F;
(i) an opinion of counsel to Orkin in form reasonably
satisfactory to Xxxx and its counsel; and
(j) evidence of payment of the Deposit Guaranty Loan.
7.04 Board Approval. The transactions contemplated by this Agreement
shall have been approved by the sole shareholder of Xxxx, and, to the extent
required, the Board of Directors of Xxxx.
ARTICLE VIII
INDEMNIFICATION
8.01 Indemnification by Xxxx. Subject to the provisions of Section 8.04
hereof, Xxxx shall indemnify and hold harmless Orkin, its officers, directors,
employees, affiliates, subsidiaries, agents and permitted assigns, from and
against any and all liabilities, obligations, claims, demands, losses, actions
and suits at law, administrative proceedings and investigations, or proceedings
in equity, damages, judgments, assessments, charges, fines, penalties, costs and
expenses, including reasonable attorneys' fees but excluding punitive damages
(collectively, "Losses"), arising out of or caused by (i) a breach of any
representation or warranty of Xxxx or the Owner contained in this Agreement,
(ii) a breach of any covenant of Xxxx or the Owner contained in this Agreement
and (iii) any liability or obligation of Xxxx that is not an Assumed Liability,
or (iv) any failure to perform before Closing under any Customer Contract,
Lease, Purchase Order or Other Contract.
8.02 Indemnification by Orkin. Orkin shall indemnify and hold harmless
Xxxx, its officers, directors, employees, affiliates, subsidiaries, agents and
permitted assigns, and the Owner, from and against any and all liabilities,
obligations, claims, demands, losses, actions and suits at law, administrative
proceedings and investigations, or proceedings in equity, damages, judgments,
assessments, charges, fines, penalties, costs and expenses, including reasonable
attorneys' fees but excluding punitive damages (collectively, "Losses") arising
out of or caused by (i) a breach of any representation or warranty of Orkin
contained in this Agreement, (ii) a breach of any covenant of Orkin contained in
this Agreement, (iii) any Assumed Liabilities, or (iv) any failure to perform
after Closing under any Customer Contract, Lease, Purchase Order or Other
Contract.
8.03 Procedures Relating to Indemnification.
(a) In order for a party (the "indemnified party") to be
entitled to any indemnification provided for under this Agreement with respect
to a claim or demand made by any third party against the indemnified party (a
"Third Party Claim"), such indemnified party must
27
[***] - CONFIDENTIAL TREATMENT REQUESTED
notify the party from whom indemnification is sought (the "indemnifying party")
in writing, and in reasonable detail, of the Third Party Claim as promptly as
reasonably possible after receipt by the indemnified party of written notice of
the Third Party Claim; provided, however, that failure to give such notification
will not affect the indemnification provided under this Agreement except to the
extent the indemnifying party has been actually prejudiced as a result of the
failure to provide prompt and reasonably detailed written notice. Thereafter,
the indemnified party shall deliver to the indemnifying party, within five
business days after the indemnified party's receipt of notice, copies of all
notices and documents (including court papers) received by the indemnified party
relating to the Third Party Claim.
(b) If a Third Party Claim is made against an indemnified
party, the indemnifying party will be entitled to participate in the defense of
such claim and, if it so chooses and acknowledges its obligation to indemnify
the indemnified party therefor, to assume the defense of such claim with counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party. Notwithstanding any acknowledgment made pursuant to the
immediately preceding sentence, the indemnifying party shall be entitled to
continue to assert any limitation on its indemnification responsibility
contained in Section 8.01 or in Section 8.02. Should the indemnifying party so
elect to assume the defense of a Third Party Claim, the indemnifying party will
not be liable to the indemnified party for legal expenses subsequently incurred
by the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the indemnifying party, with the
understanding that the indemnifying party shall control the defense thereof. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying party has
not assumed defense thereof. If the indemnifying party chooses to defend a Third
Party Claim, the parties shall cooperate in the defense or prosecution of the
claim. This cooperation will include the retention and (upon the indemnifying
party's request) the provision to the indemnifying party of records and
information that are reasonably relevant to such Third Party Claim, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Whether or not
the indemnifying party assumes defense of the Third Party Claim, the indemnified
party shall not admit any liability with respect to, or settle, compromise, or
discharge, such Third Party Claim without the indemnifying party's prior written
consent (which consent will not be unreasonably withheld). If the indemnifying
party shall have assumed the defense of the Third Party Claim, the indemnifying
party shall not settle such Third Party Claim without the indemnified party's
prior written consent (which consent will not be unreasonably withheld).
8.04 Year 2000 Compliance Representation by Xxxx; Right of Setoff.
------------------------------------------------------------
(a) Notwithstanding the provisions of Section 8.01(i) above,
the obligation of Xxxx to indemnify Orkin with respect to a breach of Xxxx'x
representations and warranties with respect to Year 2000 compliance (as set
forth in Section 3.25 hereof) shall apply only if the Losses attributable to a
breach of such Section exceed [***] dollars [***], and shall only
apply to the extent that such losses exceed [***] dollars [***].
28
(b) Without limiting other remedies available to Orkin, Orkin
shall have the right to set-off any amounts payable by Xxxx to Orkin pursuant to
the indemnification provisions of this Article VIII against the obligations due
under the Promissory Notes.
ARTICLE IX
COVENANTS NOT TO COMPETE
9.01 Xxxx. Xxxx shall execute and deliver at Closing a Noncompetition
Agreement in the form attached as Exhibit G (the "Xxxx Noncompetition
Agreement"). The shall acknowledge in the Noncompetition Agreement that the
geographic area and the period and nature of the agreed restrictions set forth
therein are necessary and reasonable for the protection of Orkin and shall
acknowledge that the restrictions contained therein relate exclusively to the
Pest Business.
9.02 Xxxxxxx Xxxx. Xxxxxxx Xxxx shall execute and deliver at Closing a
Noncompetition Agreement in the form attached as Exhibit H (the "Xxxxxxx Xxxx
Noncompetition Agreement"). Xxxxxxx Xxxx shall acknowledge in the Noncompetition
Agreement that the geographic area and the period and nature of the agreed
restrictions set forth therein are necessary and reasonable for the protection
of Orkin and shall acknowledge that the restrictions contained therein relate
exclusively to the Pest Business.
9.03 Senior Management. Each member of Senior Management shall execute
and deliver at Closing a Noncompetition Agreement in the form attached hereto as
Exhibit I (the "Senior Management Noncompetition Agreement"). Each member of
Senior Management shall acknowledge in the Noncompetition Agreement that the
geographic area and the period and nature of the agreed restrictions set forth
therein are necessary and reasonable for the protection of Orkin and shall
acknowledge that the restrictions contained therein relate exclusively to the
Pest Business
ARTICLE X
GENERAL
10.01 Notices. All notices, requests, demands, approvals, consents,
waivers or other communications hereunder shall be in writing and shall be
deemed to have been duly given if (a) delivered personally (including delivery
by an express courier service which guarantees next day delivery), (b) mailed by
registered or certified mail, return receipt requested, postage prepaid, or (c)
sent by telecopy, with written confirmation of receipt and a copy sent by the
methods described in (a) or (b), as follows (or to such other address as any
party shall specify by notice in writing to all other parties):
If to Xxxx: c/o Barnes, Broom, Dallas & XxXxxx, PLLC
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx X
Xxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxxxx X. XxXxxx
Telecopy number: 000-000-0000
29
If to Orkin: Orkin Exterminating Company, Inc.
0000 Xxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: President
Telecopy number: 000-000-0000
With a copy to: General Counsel
Xxxxxxx, Inc.
X.X. Xxx 000
Xxxxxxx, Xxxxxxx 00000
Telecopy number: 000-000-0000
With a copy to: Xxxxxxxx Xxxxxx, Esq.
Arnall Golden & Xxxxxxx
2800 One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopy number: (000) 000-0000
Any such notice, request, demand, approval, consent, waiver or other
communication shall be deemed to have been received (i) if by personal delivery,
on the date of delivery if delivered by hand or on the next business day if sent
by express courier, (ii) if by mail, on the third business day following the
mailing thereof, or (iii) if by telecopy as described above, upon transmission.
10.02 Entire Agreement; Amendments; Waiver. This Agreement (including
the disclosure schedules and other documents to be delivered at or prior to
Closing) constitutes the entire agreement and understanding of the parties
hereto, and supersedes all prior agreements and understandings among the parties
hereto, in respect of the subject matter hereof and no amendment or modification
of the Agreement may be made except in writing signed by all parties hereto. At
any time prior to Closing, either party hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; or (iii) waive compliance
with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party to be bound thereby. The failure of either party to assert
any of its rights hereunder shall not constitute a waiver of any such rights.
10.03 Expenses. Each of Orkin, on the one hand, and Xxxx and the Owner,
on the other hand, shall pay its or their own expenses incidental to the
preparation and negotiation of this Agreement and the consummation of the
transactions contemplated hereby, except as otherwise expressly provided herein.
10.04 Bulk Sales Laws. Without implying that such laws apply to the
transactions contemplated hereby, the parties shall not comply with the
provisions of bulk sales or bulk transfer laws of any states relating to
creditors rights. Xxxx agrees, in addition to the provisions of Section 8.01, to
indemnify and hold Orkin harmless from any loss, cost, or expense which arises
out of any
30
noncompliance with any state bulk sales or bulk transfer law relating
to creditor's rights, and Orkin shall have the right to set-off any amounts
payable by Xxxx to Orkin pursuant to this Section 10.04 against the obligations
due under the Promissory Notes.
10.05 Confidentiality.
(a) Orkin shall use all reasonable efforts to cause its
directors, officers, employees, advisors, and affiliates to keep confidential
for a period of three years from the Closing Date all information concerning
Xxxx, other than information that relates solely to the Assets, the Pest
Business or the Assumed Liabilities, and other than any such information that is
available to the public on the Closing Date or thereafter becomes available to
the public, other than the result of a breach of this Section 10.05(a).
Nonetheless, Orkin may disclose any confidential information required by law or
legal or administrative process to be disclosed without violating this Section
10.05(a).
(b) Xxxx and the Owner agree to use all reasonable efforts
after the Closing Date to keep, and to cause Xxxx'x directors, officers,
employees, advisors and affiliates to keep the Information (as defined below)
confidential for a period of three years from the Closing Date, except that any
Information required by law or legal or administrative process to be disclosed
may be disclosed without violating the provisions of this Section 10.05(b). or
purposes hereof, the term "Information" means all information exclusively
concerning the Pest Business, the Assets and the Assumed Liabilities, other than
any such information that is available to the public on the Closing Date, or
that thereafter becomes available to the public other than as a result of a
breach of this Section 10.05(b), or that is developed independently by Xxxx or
its affiliates or is obtained from third parties.
10.06 Announcements. Except to the extent required by law, regulations
or judicial process or as may be necessary to obtain any Consents or for
financial reporting purposes, and except to the extent disclosed to the parties'
respective accountants and other representatives as necessary in connection with
the ordinary conduct of their respective businesses (so long as the recipients
of such information agree to keep the terms of this Agreement confidential),
each party agrees not to disclose the existence or terms of this Agreement to
any third party without the prior written consent of the other parties, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing, the
parties agree that each party shall have the right to announce publicly the
existence and the terms of this Agreement if such party reasonably believes that
such disclosure is required by the Securities Exchange Act of 1934 or
regulations promulgated thereunder or by the rules and regulations of the New
York Stock Exchange, provided that each party shall give reasonable notice to
the other before making any such announcement and shall allow the other party
reasonable time to comment on such release or announcement in advance of such
release or announcement.
10.07 Termination.
(a) This Agreement may be terminated at any time prior to
Closing:
31
(i) by the mutual written consent of Orkin, on
the one hand, and Xxxx and the Owner, on the other hand; or
(ii) by Orkin, on the one hand, and Xxxx and the
Owner, on the other hand, if the Closing has not occurred by January 1, 2000,
provided the terminating party has not, through breach of a representation,
warranty or covenant, prevented the Closing from occurring on or before such
date.
(b) In the event Orkin on the one hand, and Xxxx and the
Owner, on the other hand, seeks to terminate this Agreement as provided in
Section 10.07(a) above, such terminating party shall give the other parties
notice thereof, whereupon this Agreement (other than Sections 10.05 and 10.06
and this Section 10.07(b)) shall terminate without any liability of any party
hereto, other than (i) any liability for a pre-termination breach of warranty,
representation or covenant of any non-terminating party contained herein, and
(ii) in the case of Xxxx and the Owner, an obligation to return to Orkin the
Xxxxxxx Money Deposit.
10.08 Headings. The headings and captions in this Agreement and in any
Exhibit or Schedule hereto are solely for the convenience of the parties and
shall be of no force or effect in the construction of the Agreement.
10.09 Governing Law; Arbitration.
(a) This Agreement shall be construed in accordance with the
internal laws of the State of Mississippi applicable to agreements made and to
be performed entirely within such state, without regard to the conflicts of law
principles of such state.
(b) Any controversy, dispute or claim arising out of or
relating in any way to this Agreement or the other agreements contemplated
hereby shall, except with respect to seeking equitable remedies, be settled
exclusively by arbitration in the city of Birmingham, Alabama. Such arbitration
shall be administered by the American Arbitration Association ("AAA") in
accordance with its then prevailing rules (except as otherwise provided herein),
by one independent and impartial arbitrator. The fees and expenses of the AAA
and the arbitrator shall be shared equally by the parties and advanced by them
from time to time as required; provided that at the conclusion of the
arbitration, the arbitrator shall award costs and expenses (including the costs
of the arbitration previously advanced and the fees and expenses of attorneys,
accountants and other experts) and interest at the prime interest rate to the
prevailing party. Pre-arbitration discovery shall be permitted in accordance
with the rules of the AAA. The arbitrator shall render his award within 90 days
of the conclusion of the arbitration hearing. Notwithstanding anything to the
contrary provided in this Section 10.09(b) and without prejudice to the above
procedures, either party may apply to any court of competent jurisdiction for
temporary injunctive or other provisional judicial relief if such action is
necessary to avoid irreparable damage or to preserve the status quo until such
time as the arbitration panel is convened and available to hear such party's
request for temporary relief. The award rendered by the arbitrator shall be
final and not subject to judicial review and judgment thereon may be entered in
any court of competent jurisdiction.
32
10.10 Counterparts. This Agreement may be executed in two or more
counterparts (including by means of telecopied signature pages), each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement shall become effective when counterparts,
which together contain the signatures of all parties hereto, shall have been
delivered to Xxxx and Orkin.
10.11 Assignment. Except as set forth below, this Agreement and any
rights and obligations hereunder shall not be assignable or transferable by the
parties hereto without the prior written consent of the other parties and any
purported assignment without such consent shall be void and without effect;
provided that, without the consent of Xxxx or the Owner, Orkin may assign its
right to purchase any of the Assets hereunder to one or more wholly-owned
subsidiaries of Orkin upon written notice of such assignment to Xxxx and the
Owner. Provided, however, that no such assignment by Orkin shall limit or
otherwise affect Orkin's obligations hereunder, and that Orkin shall execute
such documentation as Xxxx and the Owner shall determine to be necessary or
appropriate to evidence its continued obligations to Xxxx or the Owner after the
Closing under any instruments contemplated herein (including, without
limitation, the Promissory Notes).
10.12 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto, and their permitted assigns and nothing herein
express or implied shall give or be construed to give to any person or entity,
other than the parties hereto and such permitted assigns, any legal or equitable
rights hereunder.
(Signatures On Next Page)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first hereinabove set forth, by their
representatives thereunto duly authorized.
"ORKIN":
ORKIN EXTERMINATING COMPANY, INC.
By:------------------------------
Title:---------------------------
"XXXX":
XXXX PEST CONTROL COMPANY, INC.
By:-------------------------------
Title:----------------------------
"XXXXXXX XXXX"
----------------------------------
Xxxxxxx X. Xxxx
34
SCHEDULES
Schedule Title
1.01(c) Fixed Assets
1.01(d) Leases
1.01(f) Other Contracts
1.01(g) Intellectual Property
1.01(h) Field Office locations; telephone numbers
1.02(f) Franchise Agreements
1.02(h) Excluded Items
1.03(a)(ii) Deferred Compensation Agreements
1.03(a)(ii) Acquisition Obligations
2.01(h) Permitted Encumbrances
3.02(b) Consents
3.05 Major Customers
3.06 Inventory
3.10 Financial Schedules
3.11 Absence of Material Changes
3.12 Receivables
3.15 Labor Disputes
3.16 Employee Benefit Plans
3.17 Notice of Violations of Governmental
Licenses, Permits or
Approvals
3.18 Customer Compliance
3.19 Litigation
3.22 Environmental Matters
3.23 Immigration Matters
3.24 Facilities
5.03(b) Orkin Minimum Employment Criteria
LIST OF EXHIBITS
Exhibit Title
A Form of Promissory Note (Section 2.04(b)
B Form of Waiver of Rights Agreement (Section 6.03(d)
C Form of Senior Management Employment Agreements (6.03(e))
D Form of Capesan Commission and Termination of Deferred
Compensation Agreement (Section 6.04(f))
E Form of License Agreement (Section 7.03(f))
F Form of Guaranty of Xxxxxxx, Inc. (Section 7.03(h))
G Form of Xxxx Noncompetition Agreement (Article IX)
H Form of Xxxxxxx Xxxx Noncompetition Agreement (Article IX)
I Form of Senior Management Noncompetition Agreement
(Article IX)
Schedule 1.03
Contractual Liabilities to be assumed by Orkin
(i) Deferred Compensation Agreements
1. Deferred Compensation Agreement, dated January 3, 1992, by and
between Xxxx and Xxxx Xxxxxx Xxxxxx.
2. Deferred Compensation Agreement, dated October 18, 1993, by and
between Xxxx and Xxxxxxx Xxxxx Xxxxxxx, Xx.
3. Deferred Compensation Agreement, dated January 3, 1992 by and
between Xxxx and Xxxxx Xxxxxx Case.
(ii)Acquisition Obligations
[insert].
