Stock Purchase Agreement - Knowledge Schools Inc., Children's Discovery Centers of America Inc. and ARAMARK Corp.
STOCK PURCHASE AGREEMENT
AMONG
KNOWLEDGE SCHOOLS, INC.,
CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC.
AND
ARAMARK CORPORATION,
ARAMARK ORGANIZATIONAL SERVICES, INC., AND
ARAMARK EDUCATIONAL RESOURCES, INC.
MARCH 3, 2003
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TABLE OF CONTENTS
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1. Definitions. ................................................................ 1
2. Purchase and Sale of Company Shares. ........................................ 7
(a) Basic Transaction ..................................................... 7
(b) Purchase Price ........................................................ 7
(c) The Closing ........................................................... 8
(d) Closing Obligations. .................................................. 8
(e) Purchase Price Adjustment. ............................................ 8
3. Representations and Warranties Concerning the Transaction. .................. 10
(a) Representations and Warranties of the Parent and the Seller ........... 10
(b) Representations and Warranties of Holdings and the Buyer .............. 11
4. Representations and Warranties Concerning the Company and its Subsidiaries .. 13
(a) Organization, Qualification, and Corporate Power ...................... 13
(b) Capitalization ........................................................ 13
(c) Noncontravention ...................................................... 14
(d) Title to Assets ....................................................... 14
(e) Subsidiaries .......................................................... 14
(f) Financial Statements .................................................. 15
(g) Events Subsequent to Most Recent Fiscal Year End ...................... 15
(h) Undisclosed Liabilities ............................................... 17
(i) Legal Compliance ...................................................... 17
(j) Tax Matters. .......................................................... 18
(k) Real Property. ........................................................ 19
(l) Intellectual Property. ................................................ 21
(m) Tangible Assets ....................................................... 23
(n) Capital Expenditures .................................................. 23
(o) Contracts ............................................................. 23
(p) Notes and Accounts Receivable ......................................... 24
(q) Powers of Attorney .................................................... 24
(r) Insurance ............................................................. 24
(s) Litigation ............................................................ 25
(t) Licenses, Permits, Grants and Authorizations. ......................... 25
(u) Employees. ............................................................ 26
(v) Employee Benefits. .................................................... 28
(w) Guaranties ............................................................ 30
(x) Environment, Health, and Safety. ...................................... 30
(y) Certain Business Relationships with the Company and its Subsidiaries .. 32
(z) Identification of Depositories and Authorities ........................ 32
(aa) Certain Agreements .................................................... 32
(bb) No Other Representations .............................................. 32
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5. Pre-Closing Covenants ....................................................... 33
(a) General ............................................................... 33
(b) Notices and Consents. ................................................. 33
(c) Operation of Business ................................................. 34
(d) Preservation of Business .............................................. 34
(e) Access ................................................................ 34
(f) Confidentiality ....................................................... 34
(g) Notice of Developments ................................................ 34
(h) Exclusivity ........................................................... 35
(i) Release of Guaranties ................................................. 35
(j) Insurance ............................................................. 35
(k) Best Efforts to Obtain Financing ...................................... 36
(l) Warren Walker 401(k) Plan. ............................................ 36
6. Post-Closing Covenants ...................................................... 36
(a) General ............................................................... 36
(b) Litigation Support .................................................... 36
(c) Transition ............................................................ 37
(d) Confidentiality ....................................................... 37
(e) Covenant Not to Compete ............................................... 38
(f) Use of Names; Removal ................................................. 38
(g) Employee Benefits. .................................................... 38
(h) Continuity of Employment. ............................................. 43
(i) Insurance Matters. .................................................... 43
(j) Accrued Vacation/Sick Pay Reconciliation .............................. 45
(k) Buyer Financial Statements ............................................ 45
7. Conditions to Obligation to Close. .......................................... 46
(a) Conditions to Obligation of the Buyer ................................. 46
(b) Conditions to Obligation of the Parent and the Seller ................. 47
8. Remedies for Breaches of this Agreement. .................................... 48
(a) Survival of Representations and Warranties ............................ 48
(b) Indemnification Provisions for Benefit of the Buyer. .................. 49
(c) Indemnification Provisions for Benefit of the Parent and the Seller. .. 50
(d) Matters Involving Third Parties. ...................................... 51
(e) Matters Involving Environmental Claims ................................ 52
(f) Determination of Adverse Consequences ................................. 54
(g) Other Indemnification Provisions ...................................... 54
9. Tax Matters ................................................................. 55
(a) Tax Indemnities. ...................................................... 55
(b) Refunds and Tax Benefits. ............................................. 56
(c) Contests. ............................................................. 58
(d) Preparation of Tax Returns. ........................................... 59
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(e) Cooperation and Exchange of Information ............................... 59
(f) Tax Sharing Arrangements .............................................. 60
(g) Indemnity Payments to be Treated as Purchase Price Adjustment ......... 60
(h) Certain Taxes ......................................................... 60
10. Termination. ................................................................ 60
(a) Termination of Agreement .............................................. 60
(b) Effect of Termination ................................................. 61
11. Miscellaneous. .............................................................. 61
(a) Nature of Certain Obligations ......................................... 61
(b) Press Releases and Public Announcements ............................... 61
(c) No Third-Party Beneficiaries .......................................... 61
(d) Entire Agreement ...................................................... 61
(e) Succession and Assignment ............................................. 61
(f) Counterparts .......................................................... 62
(g) Headings .............................................................. 62
(h) Notices ............................................................... 62
(i) Governing Law ......................................................... 63
(j) Amendments and Waivers ................................................ 63
(k) Severability .......................................................... 63
(l) Expenses .............................................................. 63
(m) Construction .......................................................... 64
(n) Incorporation of Exhibits and Schedules ............................... 64
(o) Specific Performance .................................................. 64
(p) Jurisdiction; Attorneys' Fees; Waiver of Jury Trial. .................. 64
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Exhibit A - Working Capital
Exhibit B - Form of Holdings Note
Exhibit C - Form of Warrant
Exhibit D - Historical Financial Statements
Exhibit E - Side Agreements
E-1 - Regarding Repurchase of the Note
E-2 - Regarding Letter of Credit
Disclosure Schedule - Exceptions to Representations and Warranties
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STOCK PURCHASE AGREEMENT
Agreement entered into on March 3, 2003, by and among Knowledge Schools,
Inc., a Delaware corporation ("Holdings"), Children's Discovery Centers of
America, Inc., a Delaware corporation, to be renamed Knowledge Learning
Corporation (the "Buyer"), and ARAMARK Corporation, a Delaware corporation (the
"Parent"), ARAMARK Organizational Services, Inc., a Delaware corporation (the
"Seller"), and ARAMARK Educational Resources, Inc., a Delaware corporation (the
"Company"). The Buyer, the Parent, the Seller and the Company are sometimes
referred to herein collectively as the "Parties" or individually as a "Party."
RECITALS
A. The Seller is the sole record and beneficial owner of 1,000 shares
(the "Company Shares") of the common stock, par value $0.01 per share, of the
Company, which Company Shares constitute all of the issued and outstanding
shares of the capital stock of the Company;
B. The Seller is a direct wholly owned subsidiary of the Parent;
C. The Buyer is a direct wholly owned subsidiary of Holdings; and
D. Upon the terms and subject to the conditions set forth herein, the
Parent and the Seller desire to sell to the Buyer, and the Buyer desires to
purchase from the Seller, the Company Shares.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D promulgated
under the Securities Act.
"Accounting Arbitrator" has the meaning set forth in (S)2(e)(iii) below.
"Adverse Consequences" means any and all losses, costs, settlement
payments, awards, judgments, fines, penalties, damages, expenses (including
reasonable out-of-pocket attorneys' fees), deficiencies or other charges;
provided, however, that Adverse Consequences shall not include punitive, special
or consequential or opportunity cost damages of any kind or the loss of
anticipated or future business or profits, except that this exclusion shall not
apply with respect to (i) amounts paid or payable to third parties pursuant to
any third-party claim arising out of any incident involving the physical, sexual
and/or emotional abuse of children to the extent occurring prior to the Closing
Date and/or (ii) the net present value of lost profits from any center that is
shut down for longer than six consecutive months (including the lost profits for
such six consecutive months) calculated on the basis of the remaining lease life
or the period during which the center is shut down, whichever is shorter;
provided that (A) the center was shut down
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solely due to the Company's failure to have a valid license, to have not been in
compliance with applicable zoning laws (including variances) or to have not been
in compliance with the requirements of any applicable Governmental Authority in
each case prior to the Closing Date, and (B) the center was shut down
notwithstanding Buyer's having used its best efforts to correct the failure or
non-compliance, including making all necessary filings, registrations, payment
of money or taking other action that would permit the center to remain in
operation.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
(S)1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Applicable Rate" means 5% per annum.
"Base Price" has the meaning set forth in (S)2(b) below.
"Base Working Capital" has the meaning set forth in (S)2(e) below.
"Books and Records" shall have the meaning set forth in (S)6(b) below.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which banks are required or authorized by law to be closed in New York, New
York.
"Buyer" has the meaning set forth in the preface above.
"Buyer Financial Statements" has the meaning set froth in (S)3(b)(vi)
below.
"Buyer Indemnified Party" has the meaning set forth in (S)8(b)(i) below.
"Buyer Indemnified Parties" has the meaning set forth in (S)8(b)(i) below.
"Buyer Returns" has the meaning set forth in (S)9(d)(i) below.
"Child Care Laws" means any federal, state or local statute, law,
ordinance, executive order, regulation, rule, code, order, other requirement or
rule of law applicable to the child care industry.
"Closing" has the meaning set forth in (S)2(c) below.
"Closing Balance Sheet" has the meaning set forth in (S)2(e)(ii) below.
"Closing Date" has the meaning set forth in (S)2(c) below.
"Closing Working Capital" has the meaning set forth in (S)2(e)(ii) below.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Commitment Letter" means the letter agreement dated February 14, 2003, as
supplemented by a letter dated March 2, 2003, between Holdings and BNP Paribas
and BNP Paribas Securities Corporation relating to the commitment of BNP Paribas
to provide $260 million under senior secured credit facilities, which letters
have been provided to the Parent and the Seller.
"Company" has the meaning set forth in the preface above.
"Company Employees" has the meaning set forth in (S)6(g) below.
"Company Shares" has the meaning set forth in the recitals above.
"Competitive Business" has the meaning set forth in (S)6(e) below.
"Confidential Information" means any information concerning the
businesses and affairs of the Company and its Subsidiaries that is not already
generally available to the public.
"Consent" has the meaning set forth in (S)3(a)(ii) below.
"Deductible Amount" has the meaning set forth in (S)8(b)(i) below.
"Deficit Amount" has the meaning set forth in (S)2(e)(iv) below.
"Determination Date" has the meaning set forth in (S)2(e)(iii) below.
"Disclosure Schedule" means the disclosure schedule delivered by the
Parent, the Seller and the Company to the Buyer.
"EBITDA" means, for any Person for any period, the sum, without
duplication, of the amounts for such period of (i) net income, (ii) interest
expense, (iii) provisions for taxes based on income, (iv) depreciation expense,
and (v) amortization expense, but only, in the case of clauses (ii) - (v), to
the extent deducted in the calculation of net income, all of the foregoing
determined on a consolidated basis in conformity with GAAP.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
ERISA (S)3(3), including, without limitation, any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program, or (e) stock purchase, stock option,
severance pay, employment, change-in-control, vacation pay, company awards,
salary continuation, sick leave, excess benefit, bonus or other incentive
compensation, life insurance, or other employee benefit plan, contract, program,
policy or other arrangement, whether or not subject to ERISA, under which any
present or former employee of the Company or any of its Subsidiaries has any
present or future right to benefits sponsored or maintained by the Parent, the
Seller, the Company or any ERISA Affiliate or with respect to which the Company
or any of its Subsidiaries otherwise has any present or future Liability.
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"Employee Pension Benefit Plan" has the meaning set forth in ERISA (S)3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)3(1).
"Environmental Claim" has the meaning set forth in (S)4(y)(i)(A) below.
"Environmental Laws" has the meaning set forth in (S)4(y)(i)(B) below.
"Environmental Permits" has the meaning set forth in (S)4(y)(ii)(A) below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is a member of a "controlled group
of corporations" with, under "common control" with or a member of an "affiliated
services group" with, the Company or any of its Subsidiaries, as defined in
Section 414(b), (c), (m) or (o) of the Code.
"Estimated Closing Working Capital" has the meaning set forth in (S)2(e)(i)
below.
"Filing" has the meaning set forth in (S)3(a)(ii) below.
"Financial Statements" has the meaning set forth in (S)4(f) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Authority" means any federal, state, municipal or local
government, governmental authority, regulatory or administrative agency,
governmental commission, department, board, bureau, court, tribunal, arbitrator
or arbitral body.
"Governmental Permits" has the meaning specified in (S)4(u)(i).
"Guaranties" has the meaning set forth in (S)5(i) below.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Materials" has the meaning set forth in (S)4(y)(i)(C) below.
"Holdings" has the meaning set forth in the preface above.
"Income Tax" means any Tax based upon, measured by, or calculated with
respect to income or profits (including any capital gains Tax, minimum Tax and
any Tax on items of Tax preference, but not including sales, use, real or
personal property, gross receipts, transfer Taxes or similar Taxes).
"Increase Amount" has the meaning set forth in (S)2(e)(iv) below.
"Indemnified Party" has the meaning set forth in (S)8(d)(i) below.
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"Indemnifying Party" has the meaning set forth in (S)8(d)(i) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all curriculum, (h) all other proprietary rights,
and (i) all copies and tangible embodiments thereof (in whatever form or
medium).
"Interim Adjustment" has the meaning set forth in (S)2(e)(i) below.
"Knowledge of the Parent, the Seller and the Company" means the actual
knowledge of any of the following persons: Jeff Wheatley, Peter Van Veen, John
Rosen, Karen Gard, Paul Tosetti, Garner Pruitt, Matt Mitchell, Beverly
O'Connell, Annette Heng, Deborah Dumont and Marcy Suntken.
"Liability" means any liability (whether known or unknown, whether asserted
0or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Leased Real Property" has the meaning set forth in (S)4(l)(ii) below.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in (S)4(f)
below.
"Most Recent Fiscal Month End" has the meaning set forth in (S)4(f) below.
"Most Recent Fiscal Year End" has the meaning set forth in (S)4(f) below.
"Multiemployer Plan" has the meaning set forth in ERISA (S)3(37).
"Note" has the meaning set forth in (S)2(b) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past practice.
"Owned Real Property" has the meaning set forth in (S)4(l)(i) below.
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"Parent" has the meaning set forth in the preface above.
"Parent Returns" has the meaning set forth in (S)9(d)(i) below.
"Parties" has the meaning set forth in the preface above.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Prohibited Names and Marks" has the meaning set forth in (S)6(f) below.
"Purchase Price" has the meaning set forth in (S)2(b) below.
"Real Property" has the meaning set forth in (S)4(l)(ii) below.
"Records" has the meaning set forth in (S)6(a) below.
"Release" has the meaning set forth in (S)4(y)(i)(D) below.
"Reportable Event" has the meaning set forth in ERISA (S)4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes and installments of special assessments not
yet due and payable or being contested in good faith subject to reserves for
contested Taxes or assessments in accordance with GAAP, (c) purchase money liens
and liens securing rental payments under capital lease arrangements, and (d)
other liens and encumbrances arising in the Ordinary Course of Business and not
incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Seller Indemnified Party" has the meaning set forth in (S)8(c)(i) below.
"Seller Indemnified Parties" has the meaning set forth in (S)8(c)(i) below.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
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"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code (S)59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, business, occupancy or other tax of any kind whatsoever, including
any interest, penalty, or addition thereto, whether disputed or not.
"Tax Authority" shall mean any domestic, foreign, federal, national, state,
provincial, county or municipal or other local government, and subdivision,
agency, commission or authority thereof, or any quasi-governmental body
exercising any taxing authority or any other authority exercising Tax regulatory
authority.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in (S)8(d)(i) below.
"Transaction Claims" has the meaning set forth in (S)11(p)(i) below.
"WARN Act" has the meaning set forth in (S)4(v)(ix) below.
"Warrant" has the meaning set forth in (S)2(d)(ii) below.
"Working Capital" means current assets minus current liabilities determined
in accordance with GAAP (except that Income Tax assets (including deferred tax
assets) and Income Tax liabilities (including deferred tax liabilities) will be
excluded) consistent with the Company's past practice, as set forth on Exhibit A
hereto.
"Working Capital Adjustment Amount" has the meaning as set forth in
(S)2(e)(iv) below.
2. Purchase and Sale of Company Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of the Company Shares for the consideration
specified below in this (S)2. On and subject to the terms and conditions of this
Agreement, Parent agrees to take all actions necessary to cause Seller to sell
the Company Shares to the Buyer. On and subject to the terms and conditions of
this Agreement, Holdings agrees to take all actions necessary to cause the Buyer
to purchase the Company Shares from the Seller.
(b) Purchase Price. The aggregate purchase price for the Company
Shares shall be (i) Two Hundred Sixty-Five Million Dollars ($265,000,000) (the
"Base Price"), payable at the Closing by delivery (A) by Holdings of its
promissory note (the "Note") in the aggregate principal amount of $40,000,000
substantially in the form attached as Exhibit B hereto and (B) by the Buyer of
$225,000,000 in cash, plus (ii) the Working Capital Adjustment Amount (which may
be positive or negative) determined in accordance with Section 2(e) (the
"Purchase Price").
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(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Maron & Sandler in
Los Angeles, California, commencing at 9:00 a.m. local time on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties shall take
at the Closing itself) or such other date as the Buyer and the Parent and the
Seller may mutually determine (the "Closing Date").
(d) Closing Obligations.
(i) At the Closing, the Parent and the Seller shall deliver to
the Buyer (A) stock certificates representing all of the Company
Shares, endorsed in blank or accompanied by duly executed assignment
documents, and (B) the various certificates, instruments, and
documents referred to in (S)7(a) below.
(ii) At the Closing, Holdings shall deliver to the Seller (A)
the Note and (B) a warrant to purchase shares of Holdings common stock
substantially in the form attached as Exhibit C hereto (the
"Warrant"), and the Buyer shall deliver to the Seller (A) Two Hundred
Twenty-Five Million Dollars ($225,000,000) by wire transfer of
immediately available funds to accounts specified by the Seller, and
(B) the various certificates, instruments, and documents referred to
in (S)7(b) below.
(e) Purchase Price Adjustment.
(i) Interim Working Capital Adjustment. Not later than ten (10)
days after the Closing Date, the Parent and the Seller shall deliver
to Buyer their good faith estimate of the Working Capital of the
Company as of the Closing Date (the "Estimated Closing Working
Capital"), together with a reasonably detailed explanation of the
calculation thereof. If Estimated Closing Working Capital is greater
than negative $28,600,000 (e.g., negative $27,000,000), then within
five (5) days after such delivery, the Buyer shall pay to the Seller
the amount of such difference in cash. If Estimated Closing Working
Capital is less than negative $30,600,000 (e.g., negative
$31,000,000), then within five (5) days after such delivery, the
Seller shall pay to the Buyer the amount of such difference in cash.
Any payment made pursuant to this(S)2(e)(i) is referred to as the
"Interim Adjustment." As examples of the operation of this (S)
2(e)(i): (i) if Estimated Closing Working Capital is negative
$25,600,000, the Buyer would be required to pay the Seller $3,000,000
as an Interim Adjustment; and (ii) if Estimated Closing Working
Capital is negative $33,600,000, the Seller would be required to pay
the Buyer $3,000,000 as an Interim Adjustment.
(ii) Closing Balance Sheet. As soon as reasonably practicable
following the Closing Date, and in any event within sixty (60) days
thereafter, the Buyer shall prepare and deliver to the Parent and the
Seller (i) a consolidated balance sheet of the Company and its
Subsidiaries as of the Closing Date (the "Closing Balance Sheet") and
(ii) a calculation of the Working Capital as
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reflected on the Closing Balance Sheet (the "Closing Working
Capital"). The Closing Balance Sheet shall be prepared in accordance
with GAAP and on a basis consistent with the preparation of the Most
Recent Balance Sheet.
(iii) Disputes. Upon delivery of the Closing Balance Sheet, the
Company and the Buyer shall provide to the Parent and the Seller and
the Parent's and the Seller's accountants full access to the Books and
Records of the Company and its Subsidiaries, to the extent reasonably
related to a review of the Closing Balance Sheet and the calculation
of the Closing Working Capital. If the Parent and the Seller disagree
with the calculation of the Closing Working Capital or any element of
the Closing Balance Sheet relevant thereto, they shall notify Buyer of
such disagreement in writing within forty-five (45) days after receipt
of the Closing Balance Sheet, which notice shall set forth in detail
the particulars of such disagreement. In the event that the Parent or
the Seller does not provide such a notice of disagreement within such
forty-five (45) day period, the Parent and the Seller shall be deemed
to have accepted the Closing Balance Sheet and the calculation of the
Closing Working Capital delivered by the Buyer, which shall be final,
binding and conclusive for all purposes hereunder. In the event any
such notice of disagreement is timely provided by the Parent or the
Seller, the Buyer and the Parent and the Seller shall use their
commercially reasonable efforts for a period of forty-five (45) days
(or such longer period as they may mutually agree) to resolve any
disagreements with respect to the calculation of the Closing Working
Capital. If, at the end of such period, they are unable to resolve
such disagreements, then PricewaterhouseCoopers LLP (or such other
independent accounting firm of recognized national or regional
standing as may be mutually selected by the Buyer and the Parent and
the Seller) (the "Accounting Arbitrator") shall resolve any remaining
disagreements. The Accounting Arbitrator shall determine as promptly
as practicable, but in any event within forty-five (45) days of the
date on which such dispute is referred to the Accounting Arbitrator,
based solely on written submissions forwarded by the Buyer and the
Parent and the Seller to the Accounting Arbitrator within ten (10)
days following the Accounting Arbitrator's selection, whether or not
the calculation of the Closing Working Capital was prepared in
accordance with the standards set forth in this(S)2(e) and (only with
respect to the remaining disagreements submitted to the Accounting
Arbitrator) whether and to what extent (if any) the Closing Working
Capital determination requires adjustment. The Accounting Arbitrator
shall allocate its costs and expenses between the Buyer and the Seller
based upon the percentage which the portion of the contested amount
not awarded to each party bears to the amount actually contested by
such party. In acting hereunder, the Accounting Arbitrator shall be
entitled to the privileges and immunities of arbitrators. The
determination of the Accounting Arbitrator shall be final, conclusive
and binding on the parties. The date on which the Closing Working
Capital is finally determined in accordance with this(S)2(e) is
referred to as the "Determination Date."
(iv) Payment. The "Working Capital Adjustment Amount," which may
be positive or negative, shall mean, as applicable (i) if no Interim
Adjustment was
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made pursuant to(S)2(e)(i), the difference between the Closing Working
Capital and the Base Working Capital, (ii) if the Buyer paid the
Seller an Interim Adjustment pursuant to(S)2(e)(i), the difference
between (A) the Closing Working Capital less the Interim Adjustment
and (B) the Base Working Capital, or (iii) if the Seller paid the
Buyer an Interim Adjustment pursuant to(S)2(e)(i), the difference
between (A) the Closing Working Capital plus the Interim Adjustment,
and (B) the Base Working Capital. The "Base Working Capital" shall be
negative $29,600,000. If the Closing Working Capital (as adjusted for
an Interim Adjustment, as applicable, as provided above) is greater
than the Base Working Capital (such difference, the "Increase
Amount"), then within five (5) days after the Determination Date, the
Buyer shall pay to the Seller an amount equal to the Increase Amount,
together with interest thereon calculated from the Closing Date to the
date of payment at the Applicable Rate. If the Base Working Capital is
greater than the Closing Working Capital (as adjusted for an Interim
Adjustment, as applicable, as provided above) (such difference, the
"Deficit Amount"), then within five (5) days after the Determination
Date the Parent and Seller shall pay to the Buyer an amount equal to
the Deficit Amount, together with interest thereon calculated from the
Closing Date to the date of payment at the Applicable Rate. As
examples of the operation of this(S) 2(e)(i): (i) if no Interim
Adjustment was made and if Closing Working Capital is negative
$27,600,000, then the Buyer shall pay the Seller $2,000,000 as the
Increase Amount; (ii) if no Interim Adjustment was made and if Closing
Working Capital is negative $31,600,000, then the Seller shall pay the
Buyer $2,000,000 as the Deficit Amount; (iii) if the Buyer paid the
Seller an Interim Adjustment of $1,000,000 pursuant to(S)2(e)(i) and
if Closing Working Capital is negative $27,600,000, then the Buyer
shall pay the Seller $1,000,000 as the Increase Amount; (iv) if the
Buyer paid the Seller an Interim Adjustment of $2,000,000 pursuant
to(S)2(e)(i) and if Closing Working Capital is negative $29,600,000,
then the Seller shall pay the Buyer $2,000,000 as the Deficit Amount;
(v) if the Seller paid the Buyer an Interim Adjustment of $2,000,000
pursuant to(S)2(e)(i) and if Closing Working Capital is negative
$32,600,000, then the Seller shall pay the Buyer $1,000,000 as the
Deficit Amount; and (vi) if the Seller paid the Buyer an Interim
Adjustment of $1,000,000 pursuant to(S)2(e)(i) and if Closing Working
Capital is negative $28,600,000, then Buyer shall pay the Seller
$2,000,000 as the Increase Amount.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Parent and the Seller. The
Parent and the Seller represent and warrant to the Buyer, except as set forth in
the Disclosure Schedule, as follows:
(i) Organization of the Parent and the Seller. Each of the
Parent and the Seller is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. Each of the Parent, the
Seller and the Company has full corporate power and authority to
execute and deliver this
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Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of each of the
Parent, the Seller and the Company, enforceable in accordance with its
terms and conditions, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, and general equitable principles (whether considered in a
proceeding in equity or at law). Each of the Parent, the Seller and
the Company need not give any notice to, make any filing with (each, a
"Filing"), or obtain any authorization, consent, or approval (each, a
"Consent") of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement, other than
non-material Consents and Filings the failure of which to obtain or
make would not reasonably be expected to materially impair or
materially delay the ability of the Parent or Seller to effect the
Closing.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will, subject to obtaining or making the Consents or Filings,
as the case may be, as set forth on the Disclosure Schedule, (A)
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Parent or the
Seller is subject or any provision of its charter or bylaws or (B)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which the Parent or the Seller is a party or by which
it is bound or to which any of its assets is subject, except to the
extent that any such events would not reasonably be expected to
materially impair or materially delay the ability of the Parent or the
Seller to effect the Closing.
(iv) Company Shares. The Seller holds of record and owns
beneficially all of the Company Shares, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Security Interests (without
regard to any exclusions in such defined term), options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. Each of the Parent and the Seller is not a party to any
option, warrant, purchase right, or other contract or commitment that
could require the Parent or the Seller to sell, transfer, or otherwise
dispose of any capital stock of the Company (other than this
Agreement). Each of the Parent and the Seller is not a party to any
voting trust, proxy, or other agreement or understanding with respect
to the voting of any capital stock of the Company.
(b) Representations and Warranties of Holdings and the Buyer.
Holdings and the Buyer represent and warrant to the Parent and the Seller,
except as set forth in the Disclosure Schedule, as follows:
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(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of the Buyer, enforceable in
accordance with its terms and conditions. The Buyer need not give any
notice to, make any Filing with, or obtain any Consent of any
government or governmental agency in order to consummate the
transactions contemplated by this Agreement, other than non-material
Consents and Filings the failure of which to obtain or make would not
reasonably be expected to materially impair or materially delay the
ability of the Buyer to effect the Closing.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, shall, subject to obtaining or making of any consents or
filings, as the case may be, as set forth on the Disclosure Schedule,
(A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is
subject or any provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which the Buyer is a party or by which it is bound or to which any
of its assets is subject, except to the extent that any such events
would not reasonably be expected to materially impair or materially
delay the ability of the Buyer to effect the Closing.
(iv) Investment. The Buyer is not acquiring the Company Shares
with a view to or for sale in connection with any distribution thereof
in violation of the Securities Act.
(v) Sufficient Funds. The Commitment Letter has been executed \
and delivered by BNP Paribas, is in full force and effect and has not
been cancelled or revoked. Pursuant to the Commitment Letter, all
commitment fees and other amounts required to be paid prior to the
date hereof pursuant to the Commitment Letter have been paid. To the
knowledge of Holdings and the Buyer, none of the conditions to the
Lender's obligations to fund cannot be met on or before the Closing
Date. Subject to receipt of the financing under the senior secured
credit facilities contemplated by the Commitment Letter, the Buyer
will have available on the Closing Date sufficient funds to consummate
the purchase of the Company Shares from the Seller under this
Agreement.
(vi) Financial Statements. The Buyer has delivered to the Seller
copies of the audited divisional combined balance sheets of the
Children's Discovery Centers division of the Buyer (the "Division") as
of December 31, 2000 and 2001,
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together with the related audited divisional combined statements of
income, retained earnings and cash flows for the years then ended,
reported on without qualification by the Buyer's independent certified
public accountants (the "Buyer Financial Statements"). The Buyer
Financial Statements have been prepared in accordance with GAAP
(except as otherwise provided in the Buyer Financial Statements and
the notes thereto) applied on a consistent basis throughout the
periods covered thereby and present fairly, in all material respects,
the financial position of the Division as of such dates and the
results of operations of the Division for such periods.
(vii) No Other Representations. Notwithstanding anything
contained in this (S)3 or any other provision of this Agreement, it is
the explicit intent of all the Parties hereto that neither Holdings
nor the Buyer is making any representation or warranty whatsoever,
express or implied, except those of Holdings and the Buyer, as the
case may be, set forth in (S)3 hereof. Without limiting the generality
of the foregoing, the Parent and the Seller acknowledge and agree that
neither Holdings nor the Buyer makes any representation or warranty to
the Parent or the Seller with respect to any projections, estimates or
budgets heretofore delivered to or made available to the Parent or the
Seller of future revenues, expenses or expenditures or future results
of operations.
4. Representations and Warranties Concerning the Company and its
Subsidiaries. Each of the Parent, the Seller and the Company represents and
warrants as follows, except as set forth in the Disclosure Schedule:
(a) Organization, Qualification, and Corporate Power. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
Each of the Company and its Subsidiaries is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required. (S)4(a) of the Disclosure Schedule lists each such
jurisdiction in which each of the Company and its Subsidiaries is duly
authorized to conduct business. Each of the Company and its Subsidiaries has
full corporate power and authority and all material licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it. (S)4(a) of the Disclosure
Schedule lists the directors and officers of each of the Company and its
Subsidiaries. The Parent, the Seller and the Company have delivered to the Buyer
correct and complete copies of the charter and bylaws of each of the Company and
its Subsidiaries (as amended to date). The minute books (containing the records
of meetings of the stockholders, the board of directors, and any committees of
the board of directors), the stock certificate books, and the stock record books
of each of the Company and its Subsidiaries are correct and complete in all
material respects. None of the Company and its Subsidiaries is in default under
or in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the
Company consists of 1,000 Company Shares, of which 1,000 Company Shares are
issued and outstanding and no Company Shares are held in treasury. All of the
issued and outstanding Company Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of
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record by the Seller as set forth in (S)4(b) of the Disclosure Schedule. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Company. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the capital
stock of the Company.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will,
subject to making or obtaining the Consents and Filings, as the case may be, as
set forth in (S)4(c) of the Disclosure Schedule, (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
any of the Company and its Subsidiaries is subject or any provision of the
charter or bylaws of any of the Company and its Subsidiaries or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any real property lease or any material
agreement, contract, lease (other than a real property lease), license,
instrument, or other arrangement to which any of the Company and its
Subsidiaries is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). None of the Company and its Subsidiaries needs to make any Filing or
obtain any Consent of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(d) Title to Assets. Except as provided in (S)4(k) below with respect
to Real Property, each of the Company and its Subsidiaries has good and valid
title to, or a valid leasehold interest in, the properties and assets used by
them, located on their premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet.
(e) Subsidiaries. (S)4(e) of the Disclosure Schedule sets forth for
each Subsidiary of the Company (i) its name and jurisdiction of organization,
(ii) the number of shares of authorized capital stock of each class of its
capital stock, (iii) the number of issued and outstanding shares of each class
of its capital stock or other equity interests, as the case may be, the names of
the holders thereof, and the number of shares or other equity interests, as the
case may be, held by each such holder, and (iv) the number of shares of its
capital stock held in treasury. All of the issued and outstanding shares of
capital stock of each Subsidiary of the Company have been duly authorized and
are validly issued, fully paid, and nonassessable. One of the Company and its
Subsidiaries holds of record and owns beneficially all of the outstanding shares
or other equity interests of each Subsidiary of the Company, free and clear of
any restrictions on transfer (other than restrictions under the Securities Act
and state securities laws), Security Interests (without regard to any exclusions
in such defined term), options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
any of the Company and its Subsidiaries to sell, transfer, or otherwise dispose
of any capital stock or other
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<PAGE>
equity interests of any of its Subsidiaries or that could require any Subsidiary
of the Company to issue, sell, or otherwise cause to become outstanding any of
its own capital stock or other equity interests. There are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with
respect to any Subsidiary of the Company. There are no voting trusts, proxies,
or other agreements or understandings with respect to the voting of any capital
stock or other equity interests of any Subsidiary of the Company. None of the
Company and its Subsidiaries controls directly or indirectly or has any direct
or indirect equity participation in any corporation, partnership, trust, or
other business association, which is not a Subsidiary of the Company.
(f) Financial Statements. Attached hereto as Exhibit A are the
following financial statements (collectively the "Financial Statements"): (i)
audited consolidated balance sheets as of September 27, 2002 and September 28,
2001, and related statements of income, changes in stockholders' equity, and
cash flows for the fiscal years ended September 29, 2000, September 28, 2001,
and September 27, 2002 (the "Most Recent Fiscal Year End") for the Company and
its Subsidiaries; and (ii) an unaudited consolidated balance sheet and related
statements of income, changes in stockholders' equity, and cash flows (the "Most
Recent Financial Statements") as of and for the three months ended December 27,
2002 (the "Most Recent Fiscal Month End") for the Company and its Subsidiaries.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP (except as otherwise provided in the Financial Statements
and the notes thereto, and in the case of the unaudited financial statements,
except for the absence of footnotes and subject to normal year-end adjustments)
applied on a consistent basis throughout the periods covered thereby (unless
otherwise disclosed in the notes to the Financial Statements), present fairly in
all material respects the financial position of the Company and its Subsidiaries
as of such dates and the results of operations of the Company and its
Subsidiaries for such periods and have been prepared from the accounting books
and records of the Company and its Subsidiaries.
(g) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End to the date of this Agreement, there has not been any
material adverse change in the business, financial condition, operations or
results of operations of the Company and its Subsidiaries, taken as a whole.
Without limiting the generality of the foregoing, since the Most Recent Fiscal
Year End to the date of this Agreement (with respect to the representation made
upon execution of this Agreement) and to the Closing Date (with respect to the
representation made at the Closing):
(i) none of the Company and its Subsidiaries has sold, leased,
transferred, or assigned any of its assets other than in the Ordinary
Course of Business;
(ii) none of the Company and its Subsidiaries has entered into
any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more
than $100,000 or outside the Ordinary Course of Business;
(iii) None of the Company and its Subsidiaries has, and to the
Knowledge of the Parent, the Seller and the Company no other party
has,
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<PAGE>
accelerated, terminated, modified or cancelled in writing any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more
than $100,000 or outside the Ordinary Course of Business, to which any
of the Company and its Subsidiaries is a party or by which any of them
is bound;
(iv) none of the Company and its Subsidiaries has imposed any
Security Interest upon any of its assets;
(v) none of the Company and its Subsidiaries has made any
capital expenditure (or series of related capital expenditures) either
involving more than $100,000 or outside the Ordinary Course of
Business;
(vi) none of the Company and its Subsidiaries has made any
capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related
capital investments, loans, and acquisitions) either involving more
than $100,000 or outside the Ordinary Course of Business;
(vii) none of the Company and its Subsidiaries has issued any
note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease
obligation involving more than $100,000;
(viii) none of the Company and its Subsidiaries has materially
delayed or postponed the payment of accounts payable and other
liabilities outside the Ordinary Course of Business;
(ix) none of the Company and its Subsidiaries has cancelled,
compromised, waived, or released any right or claim (or series of
related rights and claims) either involving more than $100,000 or
outside the Ordinary Course of Business;
(x) none of the Company and its Subsidiaries has granted any
license or sublicense of any rights under or with respect to any
material Intellectual Property;
(xi) there has been no change made or authorized in the charter
or bylaws of any of the Company and its Subsidiaries;
(xii) none of the Company and its Subsidiaries has issued, sold,
or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital stock;
(xiii) none of the Company and its Subsidiaries has declared, set
aside, or paid any dividend or made any distribution with respect to
its capital stock (whether in cash or in kind) or redeemed, purchased,
or otherwise acquired any of its capital stock;
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<PAGE>
(xiv) none of the Company and its Subsidiaries has experienced
any damage, destruction, or loss to its property in excess of $100,000
that is not covered by insurance;
(xv) none of the Company and its Subsidiaries has made any
loan to, or entered into any other transaction with, any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(xvi) none of the Company and its Subsidiaries has entered into
any collective bargaining agreement or material employment contract or
modified the terms of any existing such contract or agreement;
(xvii) none of the Company and its Subsidiaries has granted any
increase in the base compensation of any of its directors, officers,
and employees outside the Ordinary Course of Business;
(xviii) none of the Company and its Subsidiaries has adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other similar plan, contract, or commitment for the
benefit of any of its directors, officers, and employees (or taken any
such action with respect to any other Employee Benefit Plan) outside
of the Ordinary Course of Business;
(xix) none of the Company and its Subsidiaries has made any
other material change in employment terms for any of its directors,
officers, and employees outside the Ordinary Course of Business;
(xx) none of the Company and its Subsidiaries has made or
pledged to make any charitable or other capital contribution outside
the Ordinary Course of Business; and
(xxi) none of the Company and its Subsidiaries has committed to
any of the foregoing.
(h) Undisclosed Liabilities. None of the Company and its Subsidiaries
has any Liability, except for (i) liabilities reflected or reserved against in
the Most Recent Balance Sheet (or described in any notes thereto or in the notes
to the balance sheet for the Most Recent Fiscal Year End), and (ii) Liabilities
which have arisen after the Most Recent Fiscal Month End in the Ordinary Course
of Business.
(i) Legal Compliance. Each of the Company and its Subsidiaries has
complied in all material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state and local governments (and all agencies
thereof), and none of the Company or its Subsidiaries has received written
notice that any material action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
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<PAGE>
(j) Tax Matters.
(i) Each of the Company and its Subsidiaries has filed all Tax
Returns that it was required to file. All such Tax Returns were
correct and complete in all material respects. All Taxes with respect
to items or periods covered by such Tax Returns and shown to be owing
by any of the Company and its Subsidiaries on any such Tax Returns
have been paid other than those being contested in good faith through
appropriate proceedings and for which appropriate reserves have been
established. There are no liens on any of the assets of any of the
Company and its Subsidiaries that arose in connection with any failure
(or alleged failure) to pay any Tax other than liens for Taxes not yet
due or payable or for Taxes that the Company or its Subsidiaries are
contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established.
(ii) Each of the Company and its Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(iii) There is no dispute or claim concerning any material Tax
liability of any of the Company and its Subsidiaries claimed or raised
by any authority in writing. The Parent, the Seller and the Company
have delivered to the Buyer correct and complete copies of all the
examination reports and statements of deficiencies assessed against or
agreed to by any of the Company and its Subsidiaries since January 1,
1999.
(iv) None of the Company and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
(v) None of the Company and its Subsidiaries has filed a
consent under Code(S)341(f) concerning collapsible corporations. None
of the Company and its Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments
that will not be deductible under Code(S)280G. None of the Company and
its Subsidiaries is a party to any Tax allocation or sharing
agreement. None of the Company and its Subsidiaries (A) has been a
member of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Parent)
or (B) has any liability for the Taxes of any Person (other than any
of the Company and its Subsidiaries and the affiliated group the
common parent of which is the Parent) under Reg.(S)1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) (S)4(j) of the Disclosure Schedule sets forth the following
information with respect to each of the Company and its Subsidiaries
(or, in the case of clause (B) below, with respect to each of the
Subsidiaries) as of the most
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recent practicable date: (A) the basis of the Company or Subsidiary in
its assets; (B) the basis of the stockholder(s) of the Subsidiary in
its stock; (C) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company or Subsidiary; and
(D) the amount of earnings and profits of the Company and its
Subsidiaries.
(vii) The unpaid Income Taxes of the Company and its Subsidiaries
(A) did not, as of the Most Recent Fiscal Month End, exceed the
reserve for Income Tax Liability (rather than any reserve for deferred
Income Taxes established to reflect timing differences between book
and Income Tax income) set forth on the face of the Most Recent
Balance Sheet (or in any notes thereto) and (B) do not exceed that
reserve as adjusted for the passage of time through the Closing Date
in accordance with the past practice of the Company and its
Subsidiaries in filing their Income Tax Returns.
(k) Real Property.
(i) (S)4(k)(i) of the Disclosure Schedule lists all real
property that any of the Company and its Subsidiaries owns
(collectively, the "Owned Real Property"). With respect to each such
parcel of Owned Real Property:
(A) the identified owner has good and valid title to the
parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for (I) such as
are disclosed in the Financial Statements (or the notes thereto)
or securing debt reflected as a liability on the Most Recent
Balance Sheet (or the notes thereto), and (II) (a) mechanics',
carriers', workmen's, repairmen's or other like liens arising or
incurred in the Ordinary Course of Business for amounts not yet
due or which are being contested in good faith by appropriate
proceedings, (b) liens for Taxes and other government charges
which are not due and payable or which may thereafter be paid
without penalty or which are being contested in good faith by
appropriate proceedings (subject to an appropriate reserve
therefor), and (c) imperfections of title, recorded easements,
covenants, and other restrictions or encumbrances, if any,
including those reflected in title reports or title commitments
delivered to the Buyer, and in any case which do not,
individually or in the aggregate, materially impair the value or
continued use and operation of the specific assets to which they
relate;
(B) there are no pending or, to the Knowledge of the
Parent, the Seller and the Company, threatened condemnation
proceedings or material lawsuits, or administrative actions
relating to the Owned Real Property;
(C) all facilities located on the Owned Real Property have
received all material approvals of any Governmental Authority
(including licenses and permits) required in connection with the
ownership or
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operation thereof, are in good condition and repair (subject to
normal wear and tear given the use and age of the facility) and
have been operated and maintained in all material respects in
accordance with applicable laws, rules and regulations;
(D) there are no leases, subleases, licenses, concessions,
or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the Owned
Real Property, except for any entered into in the Ordinary Course
of Business that do not materially interfere with the operation
of the Company's business at such facility;
(E) there are no outstanding options or rights of first
refusal to purchase any parcel of Owned Real Property, or any
portion thereof or interest therein; and
(F) there are no parties (other than the Company and its
Subsidiaries) in possession of the parcel of real property, other
than tenants under any leases disclosed in (S)4(k)(i) of the
Disclosure Schedule who are in possession of space to which they
are entitled and others who have been granted possession in the
Ordinary Course of Business and who do not materially interfere
with the operation of the Company's business at such facility;
and
(G) all facilities located on the Owned Real Property are
supplied with utilities and other services sufficient for the
operation of such facilities in the Ordinary Course of Business,
including gas, electricity, water, telephone and sanitary sewer,
where applicable.
(ii) (S)4(k)(ii) of the Disclosure Schedule lists all real
property leased or subleased to any of the Company and its
Subsidiaries (the "Leased Real Property"; together with the Owned Real
Property, collectively, the "Real Property"). The Parent, the Seller
and the Company have delivered to the Buyer correct and complete
copies of the leases and subleases listed in (S)4(k)(ii) of the
Disclosure Schedule (as amended to date). With respect to each lease
and sublease listed in (S)4(k)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding and
enforceable against the Company and to the Knowledge of the
Parent, the Seller and the Company against each other party
thereto, and in full force and effect;
(B) none of the Company and its Subsidiaries is in breach
or default in any material respect under any such lease or
sublease, and no event has occurred under any such lease or
sublease which, with notice or lapse of time, would constitute a
breach or default in any material respect, thereunder, or permit
termination, modification, or acceleration thereof;
(C) none of the Company and its Subsidiaries has (i)
repudiated any provision of the lease or sublease or (ii)
received written notice from
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any other party to the lease or sublease of repudiation of any
provision thereof;
(D) there are no material disputes, oral agreements, or
forbearance agreements in effect as to the lease or sublease;
(E) none of the Company and its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in the leasehold or subleasehold estate created by
any such lease or sublease;
(F) all facilities leased or subleased thereunder have
received all material approvals of governmental authorities
(including licenses and permits) required in connection with the
operation thereof, are in good condition and repair (subject to
normal wear and tear given the use and age of the facility) and
have been operated and maintained in all material respects in
accordance with applicable laws, rules and regulations; and
(G) all facilities leased or subleased thereunder are
supplied with utilities and other services sufficient for the
operation of said facilities in the Ordinary Course of Business.
(l) Intellectual Property.
(i) Other than the name "ARAMARK" and derivations thereof, the
Company and its Subsidiaries own or have the right to use all material
Intellectual Property necessary for the operation of the businesses of
the Company and its Subsidiaries as presently conducted. Each of the
Company and its Subsidiaries has taken reasonably appropriate measures
to maintain and protect the Intellectual Property that it owns or
uses. None of the Company or any of its Subsidiaries use any
Prohibited Names and Marks in the operation of its business as
presently conducted.
(ii) None of the Company and its Subsidiaries has received
written notice that it is infringing upon, misappropriating, or
otherwise violating the Intellectual Property rights of third parties,
and none of the Parent, the Seller, the Company and its Subsidiaries
has received any written charge, complaint, claim, demand, or notice
alleging that any of the Company or its Subsidiaries is infringing,
misappropriating, or violating (including any claim that any of the
Company and its Subsidiaries must license or refrain from using any
Intellectual Property rights of any third party) any Intellectual
Property rights of third parties. To the Knowledge of the Parent, the
Seller and the Company, no third party is infringing upon,
misappropriating, or otherwise violating any Intellectual Property
rights of any of the Company and its Subsidiaries.
(iii) No patents or registrations have been issued to any of the
Company and its Subsidiaries with respect to any of its Intellectual
Property. (S)4(l) of the Disclosure Schedule identifies each material
license, agreement, or
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other permission which any of the Company and its Subsidiaries has
granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). (S)4(l)(iii) of the
Disclosure Schedule also identifies each material trade name or
trademark (registered or unregistered) used by any of the Company and
its Subsidiaries in connection with any of its businesses. With
respect to each item of registered Intellectual Property identified in
(S)4(l)(iii) of the Disclosure Schedule:
(A) the Company and its Subsidiaries possess all right,
title, and interest in and to the item, free and clear of any
Security Interest;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge against the Company or
any of its Subsidiaries;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of the Parent, the Seller and the Company, is
threatened which challenges the legality, validity or
enforceability of the item or the use or ownership of the item by
the Company and its Subsidiaries.
(iv) (S)4(l)(iv) of the Disclosure Schedule identifies each
material license, sublicense or agreement to use Intellectual Property
granted by any third party and that any of the Company and its
Subsidiaries uses. With respect to each such license, sublicense or
agreement identified in (S)4(l)(iv) of the Disclosure Schedule:
(A) such license, sublicense or agreement is in full force
and effect and is legal, valid, binding, enforceable against the
Company or its Subsidiaries, as applicable, and, to the Knowledge
of the Parent, the Seller and the Company, is legal, valid and
binding against the other party thereto;
(B) none of the Company and its Subsidiaries is, and to
the Knowledge of the Parent, the Seller and the Company, no other
party is, in breach or default in any material respect under any
such license, sublicense or agreement, and no event has occurred
which with notice or lapse of time would constitute a breach or
default in any material respect;
(C) none of the Company and its Subsidiaries has (i)
repudiated any provision of the license, sublicense or agreement
or (ii) received written notice from any other party to such
license, sublicense or agreement of repudiation of any provision
thereof;
(D) to the Knowledge of the Parent, the Seller and the
Company, the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
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(E) to the Knowledge of the Parent, the Seller and the
Company, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(F) none of the Company and its Subsidiaries has granted
any sublicense or similar right (other than to the Company and
its Subsidiaries) with respect to the license, sublicense,
agreement, or permission.
(m) Tangible Assets. Each tangible asset owned, leased, licensed or
used by the Company and its Subsidiaries has been maintained in accordance with
normal industry practice and is in good operating condition and repair (subject
to normal wear and tear given the use and age of such asset).
(n) Capital Expenditures. (S)4(n) of the Disclosure Schedule lists
all of the capital expenditures in excess of $100,000 (either individually or as
part of a related project) of the Company and its Subsidiaries made during the
Most Recent Fiscal Year and the total capital expenditure budget for the Most
Recent Fiscal Year. All of the capital expenditures listed on (S)4(n) of the
Disclosure Schedule that were made in the Most Recent Fiscal Year have been paid
in full. (S)4(n) of the Disclosure Schedule also lists (i) all budgeted (by
category) capital expenditures in excess of $100,000 (either individually or as
part of a related project) of the Company and its Subsidiaries for the fiscal
year ending September 2003, (ii) the actual expenditures through December 2002
(which shall be updated at the Closing through the most recent practicable
fiscal month end) on such 2003 budgeted amounts, and (iii) a schedule of planned
expenditures on such 2003 budgeted items for the balance of the fiscal year.
(o) Contracts. (S)4(o) of the Disclosure Schedule lists the following
contracts and other agreements to which any of the Company and its Subsidiaries
is a party and which is in effect or by which any of the Company and its
Subsidiaries is otherwise bound;
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $50,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year (and which is not cancelable within one year) and involves
consideration in excess of $100,000 in any year;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, any capitalized lease obligation, or any agreement
under which it has imposed a Security Interest on any of its assets;
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(v) any agreement concerning noncompetition or material
agreement concerning confidentiality;
(vi) any agreement with any of the Parent and the Seller and
their Affiliates (other than the Company and its Subsidiaries);
(vii) any collective bargaining agreement or similar written
agreement with any labor organization, or written work rules or
practices agreed to with any labor organization or employee
association applicable to employees of the Company or its
Subsidiaries;
(viii) any consulting agreement providing annual compensation in
excess of $100,000 or providing severance benefits; and
(ix) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business.
The Parent, the Seller and the Company have delivered to the Buyer a
correct and complete copy of each written agreement listed in (S)4(o) of the
Disclosure Schedule (as amended to date) and a written summary setting forth the
terms and conditions of each oral agreement referred to in (S)4(o) of the
Disclosure Schedule. With respect to each such agreement: (A) the agreement is
legal, valid, binding and enforceable against the Company, and to the Knowledge
of the Parent, the Seller and the Company, the agreement is legal, valid and
binding against the other party thereto; (B) none of the Company and its
Subsidiaries, and to the Knowledge of the Parent, the Seller and the Company no
other party thereto, is in breach or default in any material respect, and no
event has occurred which with notice or lapse of time would constitute a breach
or default in any material respect, or permit termination, modification, or
acceleration, under the agreement; and (C) no party has given written notice
that it has repudiated any provision of the agreement.
(p) Notes and Accounts Receivable. All notes and accounts receivable
of the Company and its Subsidiaries have arisen from bona fide transactions by
the Company or the relevant Subsidiary in the Ordinary Course of Business, are
reflected properly on their books and records, and are valid receivables subject
to no valid setoffs or counterclaims.
(q) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of the Company and its Subsidiaries, other than
pursuant to leases for the Leased Real Property.
(r) Insurance. The Parent, the Seller or the Company and its
Subsidiaries currently maintain policies of fire and extended coverage and
casualty, liability and other forms of insurance in such amounts and against
such risks and losses, including such levels of self-insured retention, as are
in the judgment of the Company prudent and shall use commercially reasonable
efforts to keep such insurance or comparable insurance in full force and effect
through the Closing Date. Copies of all such policies have been made available
to the Buyer.
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(s) Litigation. (S)4(s) of the Disclosure Schedule sets forth each
instance in which any of the Company and its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the Knowledge of the Parent, the Seller and the Company, is
threatened to be made a party to any material action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. With respect to each legal proceeding and claims matter listed or
referred to on the Disclosure Schedule as being "Insured Litigation" or an
"insured matter," subject to applicable deductibles (i) for physical damage to
vehicles and (ii) relating to any employment practice matter that arose after
February 15, 2003, all claims that have been made, or could be made, in such
proceeding or matter against the Company or its Subsidiaries, employees or
agents are, and will continue to be, fully covered by applicable insurance
policies of the Parent or the Seller covering the Company and its Subsidiaries
that do not require payment by the Company of any deductible, premium or other
amount, and the Company and its Subsidiaries shall not suffer any Adverse
Consequences resulting from or arising out of any such legal proceeding or
claims matter.
(t) Licenses, Permits, Grants and Authorizations.
(i) The Company and its Subsidiaries hold all material
licenses, approvals, consents, franchises, authorizations, security
clearances, grants or subsidies, and other permits of, or with, any
Governmental Authority, including all material authorizations under
Child Care Laws ("Governmental Permits") required to operate their
respective businesses as presently conducted. Such Governmental
Permits are valid and in full force and effect and there are no
proceedings pending or, to the Knowledge of the Parent, the Seller and
the Company, threatened that seek the revocation, cancellation,
suspension or adverse modification thereof.
(ii) The Company and its Subsidiaries are, and have been during
the last two years, in material compliance with the terms and
requirements of each Governmental Permit;
(iii) No event has occurred or circumstance exists that may (with
or without notice or lapse of time) (A) constitute or result directly
or indirectly in a material violation of or a failure to comply with
any term or requirement of any Governmental Permit, or (B) result
directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any material modification to, any
Governmental Permit;
(iv) Neither the Company nor any of its Subsidiaries has
received, at any time during the past two years, any written notice or
other written communication from any Governmental Authority or any
other Person regarding (A) any actual, alleged, possible, or potential
material violation of or failure to comply with any term or
requirement of any Governmental Permit, or (B) any actual or proposed
revocation, withdrawal, suspension, cancellation or termination of any
Governmental Permit; and
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(v) All material applications required to have been filed for
the renewal of the Governmental Permits have been duly filed on a
timely basis with the appropriate Governmental Authority, and all
other material filings required to have been made with respect to such
Governmental Permit have been duly made on a timely basis with the
appropriate Governmental Authority.
(u) Employees.
(i) (S)4(u) of the Disclosure Schedule contains a complete and
accurate list as of the date of this Agreement (which shall be updated
at the Closing through the most recent reasonably practicable date) of
the following information for each independent contractor, consultant
or employee of the Company with annual compensation in excess of
$100,000, including each such employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or
payable and any change in compensation since September 27, 2002;
vacation accrued and date of hire.(S)4(u) of the Disclosure Schedule
also contains a complete and accurate list of the following
information for each retired employee or retired director of the
Company, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance
coverage and other benefits.
(ii) To the Knowledge of the Parent, the Seller and the Company,
no executive or group of employees acting together has notified the
Parent, the Seller or the Company in writing that he or she has any
plans to terminate employment with the Company or its Subsidiaries.
(iii) The Company and its Subsidiaries have paid in full to, or
in accordance with past practice accrued on behalf of, all Persons
performing services for the Company and its Subsidiaries, all
payments, wages, salaries, commissions, bonuses and other compensation
earned for all services performed by such Persons, all vacation,
profit-sharing and other benefits which have accrued through the date
hereof for such Persons, and all amounts required to be reimbursed to
such Persons for which appropriate reimbursement requests have been
submitted.
(iv) There is no labor strike, dispute, slowdown, work stoppage
or lockout actually pending or, to the Knowledge of the Parent, the
Seller and the Company, threatened against or affecting the Company or
its Subsidiaries and, during the past five years, there has not been
any such action.
(v) To the Knowledge of the Parent, the Seller and the Company,
there are no union claims to represent the employees of the Company or
its Subsidiaries.
(vi) None of the employees of the Company and its Subsidiaries
are represented by any labor organization and to the Knowledge of the
Parent, the
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Seller and the Company there are no current union organizing
activities among the employees of the Company or its Subsidiaries and
no question concerning representation of such employees exists.
(vii) There are no written personnel policies, rules or
procedures applicable to employees of the Company and its Subsidiaries
generally, other than those set forth in the Disclosure Schedule,
true, correct and complete copies of which have heretofore been
delivered to the Buyer.
(viii) There is no material unfair labor practice charge or
complaint against the Company or its Subsidiaries pending or, to the
Knowledge of the Parent, Seller and Company, threatened before the
National Labor Relations Board or any other Governmental Authority.
(ix) To the Knowledge of the Parent, Seller and Company, no
material charges of discrimination or other material violation of
equal employment laws with respect to or relating to the Company or
its Subsidiaries are pending before the Equal Employment Opportunity
Commission or any other Governmental Authority.
(x) No Governmental Authority responsible for the enforcement
of labor or employment Laws has informed the Parent, the Seller or the
Company that it intends to conduct an investigation or compliance
audit with respect to or relating to the Company or its Subsidiaries
and no such investigation or compliance audit by any Government
Authority is in progress.
(xi) There are no pending or, to the Knowledge of the Parent,
Seller and Company, threatened material wage and hour claims filed
against the Company or its Subsidiaries with the United States
Department of Labor or any other Governmental Authority.
(xii) There are no pending material citations relating to the
Company and its Subsidiaries filed by the Occupational Safety and
Health Administration nor any other Governmental Authority and, to the
Knowledge of the Parent, Seller and Company, there are no such
threatened citations relating to the Company or its Subsidiaries.
(xiii) There is no pending material investigation of, or material
complaint pending against, the Company or its Subsidiaries by the
Office of Federal Contract Compliance Programs or any other
Governmental Authority and, to the Knowledge of the Parent, Seller and
Company, there are no such threatened investigations or complaints;
and
(xiv) There are no material complaints, controversies, lawsuits
or other proceedings pending or, to the Knowledge of the Parent,
Seller and Company, overtly threatened that allege breach or violation
of any express or implied contract of employment, any law governing
employment or the termination thereof, or alleging any other
discriminatory, wrongful, unlawful or tortuous
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conduct in connection with the employment relationship asserted by or
on behalf of any employees of the Company or its Subsidiaries.
(xv) Subject to applicable law, all employees of the Company
and its Subsidiaries may be terminated by the Company or its
Subsidiaries at any time with or without cause and without any
severance or other obligation of or Liability to the Company or its
Subsidiaries. Since January 1, 2000 the Company and its Subsidiaries
have not compensated any workers performing services to the Company or
its Subsidiaries as independent contractors. The Company and its
Subsidiaries have properly characterized as independent contractors
the individuals listed on (S)4(u) of the Disclosure Schedule using the
applicable rules and regulations of the Internal Revenue Service.
(xvi) The Company and its Subsidiaries have not since January 1,
2000 effectuated (i) a "plant closing" (as defined in the Worker
Adjustment and Retraining Notification Act of 1988 ("WARN Act"))
affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the
Company or (ii) a "mass layoff" (as defined by the WARN Act) affecting
any site of employment or facility of the Company except in compliance
with the WARN Act. The Company and its Subsidiaries shall not take any
action prior to the Closing which could result in any obligation or
liability being imposed on the Company or its Subsidiaries under the
WARN Act except in compliance with the WARN Act.
(v) Employee Benefits.
(i) (S)4(v) of the Disclosure Schedule lists each Employee
Benefit Plan.
(ii) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) has been operated and maintained in all
material respects in accordance with its terms and the applicable
requirements of ERISA, the Code, and other applicable laws;
(iii) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions and Summaries of Material Modifications) have been filed
or distributed appropriately in all material respects with respect to
each such Employee Benefit Plan; the requirements of Part 6 of
Subtitle B of Title I of ERISA and of Code (S)4980B have been met in
all material respects with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan;
(iv) With respect to each Employee Benefit Plan which is an
Employee Welfare Benefit Plan, all material company premiums or
company payments which are due for all periods ending on or prior to
the Closing Date have been paid or accrued on the Closing Balance
Sheet. With respect to each Employee Benefit Plan which is an Employee
Pension Benefit Plan, all contributions (including employer
contributions and employee salary reduction contributions)
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which are a material liability of the Company or any Subsidiary due
with respect to any period ending on or prior to the Closing Date have
been paid or accrued on the Closing Balance Sheet.
(v) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan that is intended to meet the requirements of a
"qualified plan" under Code (S)401(a) is the subject of a favorable
determination letter from the Internal Revenue Service and all
amendments to any such Employee Benefit Plan for which the remedial
amendment period (as defined in Section 401(b) of the Code and
applicable regulations) has expired are covered by a favorable
determination letter from the Internal Revenue Service;
(vi) The Parent, the Seller or the Company has delivered or
made available to the Buyer correct and complete copies of the plan
documents and summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, the most recent actuarial reports or other
Financial Statements and all related trust agreements, insurance
contracts, and other funding agreements which implement each such
Employee Benefit Plan;
(vii) There have been no prohibited transactions (within the
meaning of Section 406 of ERISA or 4975 of the Code) with respect to
any Employee Benefit Plan that could reasonably be expected to result
in any material Liability to the Company or any of its Subsidiaries.
No action, suit, proceeding, hearing, or investigation with respect to
the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is
pending with the Department of Labor, the PBGC, the Internal Revenue
Service, any court or other governmental agency or, to the Knowledge
of the Parent, the Seller and the Company, threatened;
(viii) Neither the Company nor any of its Subsidiaries
contributes to or has any material obligation which remains
unsatisfied to contribute to (I) any Multiemployer Plan or (II) any
Employee Pension Benefit Plan that is subject to Title IV of ERISA,
and neither the Company nor any of its Subsidiaries has any other
material actual or contingent liability with respect to (x) any
Employee Pension Benefit Plan that is subject to Title IV of ERISA or
(y) to the Knowledge of the Parent, the Seller and the Company, any
Multiemployer Plan; and
(ix) Neither the Company nor any of its Subsidiaries maintains
or has any material Liability which remains unsatisfied to contribute
to any Employee Welfare Benefit Plan providing retiree welfare
benefits for current or future retired employees of the Company or any
of its Subsidiaries, their spouses, or their dependents (other than
any post-termination benefits provided in accordance with Code
(S)4980B or other similar applicable law). Neither the Company nor any
of its Subsidiaries is required to maintain or adopt any Employee
Benefit Plan that provides retiree welfare benefits to Company
Employees (other than any post-
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termination benefits provided in accordance with Code (S)4980B or
other similar applicable law).
(w) Guaranties. None of the Company and its Subsidiaries is a
guarantor or otherwise is bound by any contract or agreement under which it is
liable for any Liability or obligation (including indebtedness) of any other
Person.
(x) Environment, Health, and Safety.
(i) As used in this Agreement:
(A) "Environmental Claim" means any written claim, action,
cause of action, investigation or notice by any person or entity
alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on
or resulting from (I) the presence, or Release into the indoor or
outdoor environment, of any Hazardous Materials at any location,
whether or not owned or operated by the Company, or (II)
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
(B) "Environmental Laws" means all federal, state and
local laws and regulations, in effect on the date hereof or on
the Closing Date, relating to pollution or protection of human
health (as affected by exposure to Hazardous Materials) or the
environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation
and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970 (to the extent concerning exposure to Hazardous
Materials), each as amended, and all laws relating to protection
of endangered or threatened species of fish, wildlife and plants
and the conservation of natural resources.
(C) "Hazardous Materials" means any pollutant,
contaminant, hazardous substance, hazardous waste, toxic
substance, petroleum or petroleum fraction or product, waste,
asbestos, PCBs, radioactive material, or other compound, element,
material or substance to the extent regulated, restricted or
controlled by or under any Environmental Law, including all
substances defined as Hazardous Substances, Oils, Pollutants or
Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. (S)300.5, or defined as
such by, or regulated as such under, any applicable Environmental
Law.
(D) "Release" means any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal,
discharge, dispersal,
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leaching or migration into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater and surface or subsurface strata).
(ii) (A) The Company is in compliance in all material respects
with all applicable Environmental Laws (which compliance includes, but
is not limited to, the possession by the Company of all material
permits and other governmental authorizations required under
applicable Environmental Laws (collectively, "Environmental Permits"),
and compliance in all material respects with the terms and conditions
thereof); and (B) the Company has not received any written
communication alleging that the Company is not in such compliance that
has not been resolved in all material respects;
(iii) The Company has not received any material Environmental
Claim that has not been resolved in all respects; and to the Knowledge
of the Parent, the Seller and the Company, (A) no other material
Environmental Claim has been threatened, against the Company that has
not been resolved in all respects, and (B) there is no other material
Environmental Claim pending against any person or entity whose
liability for any Environmental Claim the Company has retained or
assumed either contractually or by operation of law;
(iv) To the Knowledge of the Parent, the Seller and the Company,
prior to the date that the Company acquired, leased or otherwise took
possession or control of any Real Property or improvements thereon, no
person had Released, placed, stored, buried, emitted, discharged or
dumped Hazardous Materials or any other wastes or products, the
presence of which could reasonably be expected to result in a material
Environmental Claim against the Company;
(v) On or after the date that the Company acquired, leased or
otherwise took possession or control of any Real Property or
improvements thereon, neither the Seller, the Parent or the Company,
nor any of their employees or representatives, and to the Knowledge of
the Parent, the Seller and the Company, no other person has, Released,
placed, stored, buried, emitted, discharged or dumped Hazardous
Materials or any other wastes or products, the presence of which could
reasonably be expected to result in a material Environmental Claim
against the Company;
(vi) To the Knowledge of the Parent, the Seller and the Company,
no Real Property contains any underground storage tanks, asbestos,
polychlorinated biphenyls, underground injection wells, radioactive
materials, or septic tanks or waste disposal pits in which process
wastewater or any Hazardous Materials have been discharged or disposed
that could reasonably be expected to result in a material
Environmental Claim against the Company;
(vii) The Company has delivered or otherwise made available for
inspection to the Buyer the written reports or written results of,
studies, analyses, tests or monitoring, identified on Schedule
4(x)(vii); and the Company possesses
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no material written reports or written results of studies, analyses,
tests or monitoring pertaining to Hazardous Materials in, on, beneath
or adjacent to any property currently or formerly owned, operated or
leased by the Company, or regarding the Company's compliance with
applicable Environmental Law, that is not identified on Schedule
4(x)(vii);
(viii) To the Knowledge of the Parent, the Seller and the
Company, no buildings or other improvements on the Real Property
contain mold of the type and in quantities which could reasonably be
expected to be hazardous to human health or safety; and
(ix) Except regarding Section 4(c) hereof with respect to
Environmental Permits, notwithstanding any other representations and
warranties in this Agreement, the representations and warranties in
this (S)4(x) shall be deemed the only representations and warranties
in this Agreement concerning Environmental Laws, Hazardous Materials
or mold.
(y) Certain Business Relationships with the Company and its
Subsidiaries. The Parent, the Seller and their Affiliates (other than the
Company and its Subsidiaries) have not been involved in any business arrangement
or business relationship with any of the Company and its Subsidiaries within the
past 12 months, and none of the Parent, the Seller and their Affiliates owns any
asset which is used in the business of any of the Company and its Subsidiaries.
(z) Identification of Depositories and Authorities. (S)4(z) of the
Disclosure Schedule sets forth a complete and accurate list of the names and
addresses of all banks, trust companies, savings and loan associations and other
financial institutions in which the Company has assets, deposits or safe deposit
boxes and the signatories thereunder.
(aa) Certain Agreements. The Master Lease and Security Agreement,
between the Company and Sumitomo Bank Leasing and Finance, Inc., dated July 11,
1997, has not been in effect since July 10, 2002 and there are no leases or any
other obligations outstanding pursuant to such Master Lease and Security
Agreement. The Revolving Credit Agreement, among the Company, the Lenders listed
therein and the Chase Manhattan Bank, dated as of August 23, 1996, has not been
in effect since September 6, 2001 and there are no advances, outstanding balance
or any other obligations outstanding pursuant to such Revolving Credit
Agreement.
(bb) No Other Representations. Notwithstanding anything contained in
this (S)4 or any other provision of this Agreement, it is the explicit intent of
all the Parties hereto that none of the Parent, the Seller and the Company is
making any representation or warranty whatsoever, express or implied, except
those of the Parent, the Seller and the Company, as the case may be, set forth
in (S)3 and (S)4 hereof. Without limiting the generality of the foregoing, Buyer
acknowledges and agrees that none of the Parent, the Seller or the Company makes
any representation or warranty to the Buyer with respect to any projections,
estimates or budgets heretofore delivered to or made available to the Buyer of
future revenues, expenses or expenditures or future results of operations.
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2. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties shall use its commercially
reasonable efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in (S)7 below).
(b) Notices and Consents.
(i) The Parent and the Seller (either directly or through the
Company) and the Buyer agree to use their commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary to consummate and make effective the
transactions contemplated by this Agreement, including all of the
following: (A) seeking to obtain prior to the Closing Date all
licenses, certificates, permits, approvals, consents, authorizations,
qualifications and orders of any Governmental Authority necessary for
the consummation of the transactions contemplated hereby, including
such clearances as may be required under the Hart-Scott-Rodino Act;
(B) seeking to obtain all necessary or appropriate consents of third
parties, other than consents of any Governmental Authority; (C)
seeking to effect all necessary registrations and other filings and
submissions of information requested by any Governmental Authority in
connection with this Agreement and the transactions contemplated
hereby; (D) seeking to take such actions and execute and deliver such
documents as may be necessary to effectuate the purposes of this
Agreement at the earliest practicable time; and (E) seeking to take
such actions as are necessary to satisfy the conditions to Closing.
(ii) As promptly as practicable, and in any event not more than
10 Business Days after the date hereof, the Buyer and the Seller shall
file with the Federal Trade Commission and the Antitrust Division of
the Department of Justice the notifications and other information
required to be filed under the Hart-Scott-Rodino Act with respect to
the transactions contemplated hereby. Each of the Buyer and the Seller
(with respect to the Company) agrees to make available to the other
such information relative to its business, assets and property as the
other may reasonably request in order to prepare filings or
submissions under the Hart-Scott-Rodino Act. Each of the Buyer and the
Seller agrees to keep the other apprised in a timely manner of the
status and substance of all meaningful actions or communications
between it (or its advisors) and any such agency relating to this
Agreement or any of the matters described in this(S)5(b).
Notwithstanding the foregoing, Buyer shall not be required to agree to
any divestiture by Buyer or any Subsidiary or Affiliate of Buyer
(including the Company) of (i) any business, assets or property of any
Affiliate of the Buyer (excluding any Subsidiary of the Buyer, the
Company and any Subsidiary of the Company), or the imposition of any
material limitations on the ability of any such Affiliate of the Buyer
to conduct their business or to own or exercise control of such
assets, properties or stock, or (ii) any business, assets or property
of the Buyer, any Subsidiary of the
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Buyer, the Company or any Subsidiary of the Company, or the
imposition of any material limitations on the ability of any of
them to conduct their business or to own or exercise control of
such assets, properties or stock, except to the extent that the
facilities of the Buyer, the Company and their respective
Subsidiaries which are not required to be divested and are not
subject to any such limitation, represent at least $69.4 million
of combined EBITDA for the twelve months ended December 31, 2002.
(c) Operation of Business. The Parent and the Seller shall cause
the Company and its Subsidiaries to operate its business in the Ordinary Course
of Business. Without limiting the generality of the foregoing, the Parent and
the Seller shall not cause or permit any of the Company and its Subsidiaries to
(i) without the consent of the Buyer, declare, set aside, or pay any dividend or
make any distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock, (ii) without the consent of the
Buyer, sell any interest in Owned Real Property in excess of $100,000, or (iii)
without the consent of the Buyer (which shall not be unreasonably withheld or
delayed), otherwise engage in any practice, take any action, or enter into any
transaction of the sort described in (S)4(g) above.
(d) Preservation of Business. The Parent and the Seller shall
cause each of the Company and its Subsidiaries to use commercially reasonable
efforts to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers, and employees.
(e) Access. Each of the Parent and the Seller shall permit, and
the Parent and the Seller shall cause each of the Company and its Subsidiaries
to permit, representatives of the Buyer to have reasonable access during normal
business hours and upon reasonable prior notice, and in a manner so as not to
interfere with the normal business operations of the Company and its
Subsidiaries, to all premises, properties, personnel, books, records (including
Tax records), contracts, and documents of or pertaining to each of the Company
and its Subsidiaries. Notwithstanding the foregoing, the Parent and the Seller
shall not be required to cause the Company to provide to the Buyer's officers,
employees, counsel, accountants and other representatives access to any
confidential information relating to pricing, marketing plans or other matters
to the extent that disclosure of such information could be inconsistent with any
antitrust or competition law.
(f) Confidentiality. Each of the Buyer, the Parent and the
Seller shall, and shall cause their respective Affiliates, officers, directors,
employees, lenders, agents and representatives to, hold any Confidential
Information in confidence to the extent required by, and in accordance with, the
provisions of that certain Confidentiality Letter dated as of November 19, 2001,
as amended as of December 23, 2002 (as amended, the "Confidentiality Letter"),
among the Buyer, the Parent and the Seller.
(g) Notice of Developments. The Parent, the Seller and the
Company shall give prompt written notice to the Buyer of any material adverse
development causing a breach of any of the representations and warranties in
(S)4 above. Each Party shall give prompt written notice to the others of any
material adverse development causing a breach of any of its own representations
and warranties in (S)3 above. From time to time until the Closing Date, the
Parent,
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the Seller and the Company may supplement or amend the Disclosure Schedule with
respect to any matter that is necessary to correct any information in the
Disclosure Schedule that is inaccurate with respect to events occurring prior to
the date of this Agreement; provided, however, that no such supplement or
amendment shall be effective or limit or otherwise affect the rights or remedies
of the Buyer in the event that the Closing does not occur unless such supplement
or amendment has previously been approved by the Buyer in writing in its sole
discretion. From time to time until the Closing Date, the Parent, the Seller and
the Company, without being deemed to be in breach of its representations and
warranties under this Agreement, may supplement or amend the Disclosure Schedule
with respect to any matter first existing or occurring after the date hereof
which, if existing or occurring at or prior to such date, would have been
required to be set forth in the Disclosure Schedule. No supplement or amendment
to the Disclosure Schedule shall have any effect for purposes of determining
satisfaction of the conditions set forth in (S)7(a) of this Agreement unless
such supplement or amendment is accepted by the Buyer in writing in its sole
discretion, in which case, the Disclosure Schedule shall be deemed to have been
amended accordingly. If the Closing occurs, the Buyer waives any right or claim
it may otherwise have or have had on account of any matter so disclosed in any
such supplement or amendment.
(h) Exclusivity. Until the earlier of the Closing Date and the
date upon which this Agreement is terminated pursuant to (S)10 hereof, none of
the Parent and the Seller shall (and the Parent and the Seller shall not cause
or permit any of the Company and its Subsidiaries to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person (excluding the
Buyer and its Affiliates) relating to the acquisition of any capital stock or
other voting securities, or any substantial portion of the assets of, any of the
Company and its Subsidiaries (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Until the earlier of the Closing Date
and the date upon which this Agreement is terminated, none of the Parent and the
Seller shall vote the Company Shares in favor of any such acquisition structured
as a merger, consolidation, or share exchange. The Parent, the Seller and the
Company shall notify the Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
(i) Release of Guaranties. On or prior to the Closing Date, the
Buyer agrees to use commercially reasonable efforts to obtain a release from the
guarantees set forth on (S)5(i) of the Disclosure Schedule (the "Guaranties").
(j) Insurance. The Parent and the Seller shall use their
commercially reasonable efforts to cause the Buyer to be named as an additional
insured on all of the Parent's and the Seller's occurrence based insurance
policies with respect to the Company relating to occurrences on or prior to the
Closing Date. Subject to the foregoing, effective 11:59 p.m. on the Closing
Date, the Company, its Subsidiaries and the properties and assets thereof shall
cease to be insured under all of the Parent's or the Seller's insurance policies
and the Buyer shall have no rights with respect to any such policies. The Buyer
shall use its commercially reasonable efforts to cause the Parent and the Seller
to be named as an additional insured on all of the Buyer's and the Company's
occurrence based insurance policies with respect to the Company relating to
occurrences following the Closing Date.
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(k) Best Efforts to Obtain Financing. The Buyer shall use its
best efforts to negotiate and execute a definitive loan agreement with BNP
Paribas providing for financing for the Buyer in amounts and under terms and
conditions substantially the same as those contained in the Commitment Letter
or, in the event such financing is not available, to obtain alternative
financing from other lenders under terms and conditions reasonably satisfactory
to the Buyer and the Parent.
(l) Warren Walker 401(k) Plan. The Parent, the Seller and the
Company shall provide to the Buyer for review all documentation and other
information the Buyer reasonably requests regarding the Warren Walker 401(k)
plan. If after such review, the Buyer reasonably determines that the Warren
Walker 401(k) plan is not qualified under Section 401(a) of the Code, then the
Parent and the Seller shall either rectify such matter or agree to indemnify the
Buyer and the Company from any Adverse Consequences that they may suffer
resulting therefrom.
6. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties shall take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under (S)8
below). The Parent, the Seller and the Company acknowledge and agree that from
and after the Closing the Buyer shall be entitled to possession of all
documents, books, records, agreements, and financial data (collectively,
"Records") of any sort relating to the Company and its Subsidiaries; provided,
however, that the Parent and the Seller may retain (i) all Records prepared in
connection with the sale of the Company, including bids received from other
parties and analyses relating to the Company or its Subsidiaries and (ii) any
Tax Returns, reports or forms, and the Buyer shall be provided with copies of
such Tax Returns, reports or forms only to the extent that they relate to
separate Tax Returns or separate Tax liability of the Company or any Subsidiary.
(b) Litigation Support. The Buyer shall make available to the
Seller and the Parent (without charge to the Seller or the Parent other than
reimbursement to the Buyer or the Company of reasonable out-of-pocket expenses)
during normal business hours and upon reasonable notice (with the right to
examine and duplicate) all books, records, files, designs, specifications,
customer lists, supplier lists, information, reports, correspondence, literature
and other sales materials, computer software, magnetic media and other data and
similar materials relating to the business of the Company and the Subsidiaries
on the Closing Date (all such materials, the "Books and Records") to the extent
necessary to deal with Tax and insurance matters, the investigation,
preparation, conduct or settlement of or for any dispute, claim, suit,
litigation or other proceeding by or against the Seller (or any of its
Affiliates) or any other matter arising out of the business of the Company or
the Subsidiaries prior to the Closing. The Buyer shall permit the Seller and the
Parent and their respective accountants, counsel, consultants, employees and
agents reasonable access to such personnel of the Buyer during normal business
hours and upon reasonable notice as may be necessary to the Seller or the Parent
in their respective review of the Books and Records, and provide such testimony
as shall be reasonably
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requested by the Seller or the Parent, all without charge to the Seller or the
Parent other than reimbursement to the Buyer or the Company of reasonable
out-of-pocket expenses incurred in connection therewith. In the event and for so
long as Buyer or the Company or any Company Subsidiary actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand in connection with (i) any transaction contemplated
under this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date involving any of
the Company and its Subsidiaries, each of the Parent and the Seller will
reasonably cooperate with it and its counsel in the contest or defense, make
available their personnel during normal business hours upon reasonable advance
notice, and provide such testimony and access as shall be reasonably necessary
in connection with the contest or defense, all without charge to the Buyer, the
Company or the Company Subsidiary other than reimbursement to the Parent or the
Seller of reasonable out-of-pocket expenses incurred in connection therewith
(unless the Buyer, the Company or the Company Subsidiary is entitled to
indemnification therefor under (S)8 below). The Buyer shall not destroy or
otherwise dispose of the Books and Records without first offering to surrender
the Books and Records which are intended to be destroyed or disposed of to the
Seller.
(c) Transition. None of the Parent, the Seller and the Company
shall take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of any of the Company and its Subsidiaries from maintaining the same
business relationships with the Company and its Subsidiaries after the Closing
as it maintained with the Company and its Subsidiaries prior to the Closing.
Each of the Parent, the Seller and the Company shall refer all customer
inquiries relating to the businesses of the Company and its Subsidiaries to the
Buyer from and after the Closing.
(d) Confidentiality. From and after the Closing for a period of
four years, each of the Parent and the Seller shall treat and hold as such all
of the Confidential Information and refrain from using any of the Confidential
Information except in connection with this Agreement. In the event that any of
the Parent or the Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, the Parent or the Seller shall notify the Buyer promptly of the
request or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with the provisions of this (S)6(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, either the
Parent or the Seller is, on the advice of counsel, compelled to disclose any
Confidential Information, the Parent or the Seller may disclose the Confidential
Information; provided, however, that the disclosing party shall use its
commercially reasonable efforts to obtain, at the request and sole cost of the
Buyer, an order or other assurance that confidential treatment shall be accorded
to such portion of the Confidential Information required to be disclosed as the
Buyer shall designate. The foregoing provisions shall not apply to any
Confidential Information which (i) is generally available to the public
immediately prior to the time of disclosure, or (ii) is or becomes available to
the Parent, the Seller or the Company on a non-confidential basis from a third
party, provided that to the Knowledge of the Parent, the Seller and the Company,
such party was not prohibited from disclosing such information to the Parent,
the Seller or the Company, as the case may be. In addition, notwithstanding
anything to the contrary in this Agreement, the Parent and the Seller may use
the Confidential Information
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for Tax reporting and in connection with any government filing and financial
reporting without complying with this (S)6(d).
(e) Covenant Not to Compete. For a period of four (4) years from
and after the Closing Date, neither the Parent nor the Seller shall engage
directly or indirectly in any business that any of the Company and its
Subsidiaries conducts as of the Closing Date in any geographic area in which any
of the Company and its Subsidiaries conducts that business as of the Closing
Date (a "Competitive Business"); provided, however, that (i) the Parent and the
Seller may own no more than 5% of the outstanding stock of any publicly traded
corporation engaged in a Competitive Business, (ii) the Parent and the Seller
shall not be prohibited from acquiring another Person, so long as such Person's
revenue from a Competitive Business in the fiscal year immediately preceding
such acquisition is less than 15% of such Person's total annual revenue in such
fiscal year and Parent and Seller use commercially reasonable efforts to divest
such Competitive Business as promptly as practicable after such acquisition, and
(iii) the Parent and the Seller shall not be prohibited from acquiring as a
creditor in bankruptcy or otherwise than by a voluntary investment decision a
Person engaged in a Competitive Business so long as Parent and Seller use
commercially reasonable efforts to divest such Competitive Business as promptly
as practicable after such acquisition. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this (S)6(e) is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(f) Use of Names; Removal. The Buyer acknowledges that following
the Closing, subject to the transition provisions set forth in this (S)6(f),
neither it nor its affiliates, nor the Company or any of the Subsidiaries will
be entitled to use the name "Aramark" and any variations and derivations
thereof, including any logo, trademark or design containing such name (the
"Prohibited Names and Marks"). Accordingly, promptly following the Closing, the
Buyer shall (i) cause each of the Company and the Subsidiaries (as appropriate)
to change its legal name to remove therefrom the name "Aramark" or any
variations and derivations thereof and (ii) cause the destruction, disposal
and/or replacement of stationery, business cards, signage and similar assets of
the Company and the Subsidiaries so to avoid the use of the Prohibited Names and
Marks. In addition, as soon as reasonably practicable, but in any event within
six months following the Closing, the Buyer shall cause to be removed the
Prohibited Names and Marks from all of the assets of the Company and the
Subsidiaries, and will not thereafter make any use whatsoever of such names,
marks, and logos.
(g) Employee Benefits.
(i) In General. As of the Closing Date, the Company and its
Subsidiaries shall cease to be participating employers under the
Employee Benefit Plans that are sponsored or maintained by the
Parent or the Seller (the "Parent Plans") and as of the Closing
Date the Company Employees shall cease to be active participants
under such Parent Plans. Following the Closing Date, the
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Company or its Subsidiaries shall be solely responsible for all
obligations and liabilities under the Employee Benefits Plans
that are sponsored or maintained by the Company or its
Subsidiaries (and none of Parent, Seller or their respective
Affiliates shall have any obligations or liabilities with respect
thereto). From the Closing Date through December 31, 2003 (unless
the Buyer modifies employee benefits earlier as provided below),
the Buyer shall cause the Company to provide employees of the
Company and its Subsidiaries who are actively employed by the
Company or any of its Subsidiaries as of the Closing Date (or who
are not actively at work due to illness, disability or approved
leave of absence) (collectively, "Company Employees") with
employee benefits (excluding stock options, other equity based
benefits, any benefits provided under any Transaction Agreement
(as defined in (S)6(g)(iii)) and benefits provided with respect
to any non-qualified deferred compensation plan or any stock unit
or similar supplemental retirement plan) that are substantially
comparable in the aggregate to those provided to Company
Employees under the Employee Benefit Plans immediately prior to
the Closing Date. Company Employees shall be credited for their
length of service with the Company and its Affiliates for all
purposes (other than for purposes of benefit accrual under any
defined benefit pension plan) under any plan, policy or
arrangement made available to Company Employees by the Buyer or
its Affiliates after the Closing Date to the same extent such
service would have been credited under the applicable Employee
Benefit Plans immediately prior to the Closing Date.
Notwithstanding any other provision of this Agreement, neither
Buyer nor any of its Affiliates shall assume any Liability with
respect to the ARAMARK Stock Unit Retirement Plan or any other
deferred compensation, excess benefit, or other non-qualified
retirement plan or program maintained by the Seller or any of its
Affiliates under which any Company Employee may have accrued any
benefits with respect to any period ending on or prior to the
Closing Date. Any pre-existing condition clause in any Employee
Welfare Benefit Plan offered or made available to Company
Employees by Buyer or any of its Affiliates shall be waived for
Company Employees to the extent such pre-existing condition would
have been or was waived under the applicable Employee Benefit
Plan in which the Company Employee participated prior to the
Closing Date, and Buyer shall credit Company Employees with any
amounts paid under the Employee Welfare Benefit Plans in which
such Company Employees were participating immediately prior to
the Closing Date towards satisfaction of the applicable
deductible amounts and co-payment obligations under the Employee
Welfare Benefit Plans of Buyer and its Affiliates in which such
Company Employees participate for the plan year in which the
Closing Date occurs. The Buyer may, in its sole discretion and
without the consent of the Seller or Parent, modify employee
benefits provided to Company Employees, provided that employee
benefits provided generally to Company Employees and employees of
the Buyer are substantially comparable in the aggregate.
(ii) 401(k) Plans.
(A) Parent and the Seller shall take all actions
necessary or appropriate to cause the account balances of
all Company Employees
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under the ARAMARK Hourly 401(k) Plan (the "Hourly 401(k)
Plan") and the ARAMARK Retirement Savings Plan for Salaried
Employees (the "RSP", and together with the Hourly 401(k)
Plan, the "ARAMARK 401(k) Plans") to be fully vested as of
the Closing Date.
(B) Effective as of the Closing Date, Parent shall
cause the trustees of each of the ARAMARK 401(k) Plans to
segregate the assets of such ARAMARK 401(k) Plan
representing the full account balances (including loans) of
Company Employees as of the Closing Date. The manner in
which the account balances of Company Employees under the
ARAMARK 401(k) Plans are invested shall not be affected by
such segregation of assets.
(C) Not later than the Closing Date, Buyer shall
establish or designate a 401(k) Plan for the benefit of
Company Employees (the "Buyer 401(k) Plan"), that is
intended to be a qualified plan under Section 401(a) of the
Code, and that is subject to a current favorable
determination letter from the Internal Revenue Service
covering the plan and all amendments for which the remedial
amendment period (as defined in Section 401(b) of the Code
and applicable regulations) has expired. As soon as
administratively practicable following the earlier of (x)
the delivery to Parent of a favorable determination letter
from the Internal Revenue Service regarding the qualified
status of the Buyer 401(k) Plan as amended to the date of
transfer, or (y) the delivery to Parent of the current
favorable determination letter with respect to the Buyer
401(k) Plan and a representation of the Buyer that the Buyer
does not know of any reason that as of the Initial Transfer
Date (as defined in Section 6(g)(ii)(D)) such favorable
determination letter should be revoked or suspended (and
Buyer shall indemnify the Parent, Seller and their
respective Affiliates for any Adverse Consequences that they
may suffer in the event that the Buyer 401(k) Plan is not
qualified under Section 401(a) of the Code as of the Initial
Transfer Date), Parent shall cause the trustees of the
ARAMARK 401(k) Plans to transfer, in accordance with Code
Section 414(l), the full account balances (including
outstanding loans) of Company Employees under the ARAMARK
401(k) Plans (which account balances will have been credited
with appropriate earnings attributable to the period from
the Closing Date to the date immediately prior to the date
of transfer described herein), reduced by any benefit or
withdrawal payments in respect of Company Employees
occurring during the period from the Closing Date to the
date immediately prior to the date of transfer described
herein, to the appropriate trustee as designated by Buyer
under the trust agreement forming a part of the Buyer 401(k)
Plan (the "Initial Transfer"). Such assets shall be
transferred in cash (or such other form as may be agreed by
Buyer and Parent), except for shares of Parent's common
stock and any participant loans allocated to the accounts of
Company Employees on the date of transfer described herein,
each of which shall be transferred in
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kind. Shares of Parent common stock so transferred shall be
Class B shares.
(D) In consideration for the Initial Transfer of
assets described herein, Buyer shall, effective as of the
date of such Initial Transfer (the "Initial Transfer Date"),
assume all of the obligations of Parent and any of its
Affiliates in respect of the account balances (including
outstanding loans) of Company Employees under the ARAMARK
401(k) Plans (exclusive of any portion of such account
balances which are distributed or withdrawn prior to the
Initial Transfer Date) on or prior to the Closing Date.
Except as set forth in clause (G) below, neither Buyer nor
any of its Affiliates shall assume any other obligations
arising under or attributable to the ARAMARK 401(k) Plans.
(E) Parent shall take all actions necessary or
appropriate to cause to be made employer matching
contributions under the RSP in respect of the plan year in
which the Closing Date occurs (the "Current Plan Year") on
behalf of Company Employees who made elective pre-tax salary
deferrals under the RSP during the Current Plan Year and
whose accounts are transferred to the Buyer 401(k) Plan
pursuant to the Initial Transfer. Such employer matching
contributions shall be made (i) in respect of such portion
of the Current Plan Year that has elapsed through the
Closing Date, taking into account eligible elective pre-tax
salary deferrals made by Company Employees under the RSP
through the Closing Date (subject to applicable service
requirements, but notwithstanding any provision of the RSP
that requires participants to be employees of the Parent or
its applicable Affiliates eligible to make contributions
under the plan on the last day of the Current Plan Year in
order to be eligible to receive employer matching
contributions), (ii) at the time such employer matching
contributions are made, generally, to other participants'
accounts under the RSP, and (iii) at the rate generally
applicable to other participants who are eligible for
employer matching contributions under the RSP. Such employer
matching contributions shall be made, at Parent's election,
in cash (and invested in a short-term, interest bearing
account under the plan) or in shares of Parent common stock
(and held under the plan's Parent stock fund).
Parent shall take all actions necessary or appropriate
to cause to be made employer matching contributions under
the Hourly 401(k) Plan, in accordance with its terms, in
respect of the Current Plan Year on behalf of Company
Employees who made elective pre-tax salary deferrals during
the Current Plan Year and whose accounts are transferred to
the Buyer 401(k) Plan. Such employer matching contributions
shall only be made in respect of periods of service during
the Current Plan Year ending prior to the Closing Date, and
shall only be made on behalf of such Company Employees who
are eligible to receive such employer matching
contributions, in accordance with the terms of the Hourly
401(k) Plan.
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(F) To the extent any employer matching contributions
described in clause (E) above are made after the Initial
Transfer Date, as soon as administratively practicable
following the date such contributions are made, Parent shall
cause the trustee of the relevant plan to transfer, in
accordance with Code Section 414(l), the account balances of
Company Employees attributable to such employer matching
contributions (credited with appropriate earnings, if any,
attributable to the period from the date of contribution to
the date immediately prior to the date of transfer described
herein), reduced by any benefit payments in respect of
Company Employees occurring during the period from the date
of contribution to the date immediately prior to the date of
transfer described herein, to the appropriate trustee as
designated by Buyer under the trust agreement forming a part
of the Buyer 401(k) Plan. Such assets shall be transferred
in cash or in kind in the form of Class B shares of Parent
common stock, as applicable.
(G) In consideration for the subsequent transfer of
assets, if any, described in clause (F) above (the
"Subsequent Transfer"), Buyer shall, effective as of the
date of such subsequent transfer (the "Subsequent Transfer
Date"), assume all of the obligations of Parent and any of
its Affiliates in respect of such account balances of
Company Employees attributable to such employer matching
contributions under the relevant plan (exclusive of any
portion of such account balances which are distributed prior
to the Subsequent Transfer Date). Except as set forth in
clause (D) above, neither Buyer nor any of its Affiliates
shall assume any other obligations arising under or
attributable to the ARAMARK 401(k) Plans.
(H) For a period of at least 12 months following the
Initial Transfer Date, the shares of Parent common stock
transferred to the Buyer 401(k) Plan pursuant to the Initial
Transfer and any Subsequent Transfer shall be held as a
separate investment fund under the Buyer 401(k) Plan.
Affected Company Employees shall be permitted at any time to
direct the transfer of up to 100% of their Parent stock fund
accounts under the Buyer 401(k) Plan out of (but not into)
such Parent stock fund. Following such 12-month period, in
the event a determination is made to reduce or eliminate the
Parent stock fund under the Buyer 401(k) Plan, Buyer shall
take such actions as are necessary or appropriate to ensure
the orderly and periodic liquidation of such shares of
Parent common stock as remain in such fund. Notwithstanding
any other provision of this Agreement, in no event shall any
Company Employee be eligible to make any additional
contribution to the Parent stock fund with respect to any
period following the Closing Date.
(I) Buyer shall use its reasonable best efforts to
cause Company Employees to be eligible to participate in the
Buyer 401(k) Plan commencing as of the day immediately
following the Closing Date (or as
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soon as administratively practicable thereafter), to the
extent otherwise consistent with such plan's eligibility
requirements.
(iii) Transaction Agreements. Parent shall be responsible
for making all payments (including without limitation all
transition bonus and management incentive bonus payments) and
providing all benefits that may be due or payable under or with
respect to those certain letters agreements listed on (S)4(g)(xv)
of the Disclosure Schedule (the "Transaction Agreements");
provided, however, that notwithstanding the foregoing, the Buyer
and the Company shall be responsible for providing any severance
obligations that may become due or payable pursuant to any
Transaction Agreement following the Closing Date in the event
that the Company or the Buyer terminates a listed employee for
reasons other than for Cause (as defined in the Transaction
Agreements) or due to such employee's death or permanent
disability (and none of Parent, Seller or their respective
Affiliates shall have any liability with respect thereto).
(h) Continuity of Employment.
(i) The parties intend that there be continuity of
employment with respect to the employees of the Company
immediately following the Closing. The Buyer, the Parent and the
Company shall use commercially reasonable efforts to ensure that
all persons who were employed by the Company on the day
immediately preceding the Closing Date will be employed by the
Company on and immediately after the Closing.
(ii) It is agreed that nothing in this Agreement shall be
construed to confer upon any Company Employee any right to
continued employment with the Company or any of its Subsidiaries
following the Closing, nor shall anything herein be construed to
interfere with the right of Buyer, the Company or any of its
Subsidiaries to terminate the employment of any such Company
Employee at any time following the Closing, with or without
cause, or restrict any of the Buyer, the Company or any of its
Subsidiaries, in the exercise of its independent business
judgment in modifying any of the terms and conditions of the
employment of any such Company Employee following the Closing.
Nothing in this Agreement, express or implied, shall be construed
to confer upon any Company Employee (or any other current or
former employee of the Seller, the Company or any of its
Subsidiaries), any rights or remedies under or by reason of this
Agreement.
(iii) Neither the Buyer nor the Company shall, at any time
prior to 90 days after the Closing Date, effectuate a "plant
closing" or "mass layoff", as those terms are defined in the WARN
Act, affecting in whole or in part any site of employment,
facility, operating unit or employee, except in compliance with
the WARN Act. The Seller shall notify the Buyer prior to the
Closing of any layoffs that have occurred in the 90-day period
prior to the Closing Date.
(i) Insurance Matters.
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(i) On the Closing Date, the Buyer shall have in place
liability insurance in such amounts and for such coverages as are
in the reasonable business judgment of the Buyer prudent.
(ii) Each of the parties hereto acknowledges and agrees
that the Seller (or any of its Affiliates) and their agents shall
maintain exclusive control of all claim management and
settlements with Seller's insurance carriers relating to the
Company and the Subsidiaries for all periods prior to the Closing
Date for all insurable matters for which indemnification has been
sought pursuant to (S)8(b); provided that the Parties agree that
claims involving the student accident program (as described
below) are specifically excluded from indemnification
under (S)8(b). The Company operates a self-insured student
accident program that is administered by Arthur J. Gallagher and
supplements the Company's general liability insurance plan. The
Company's student accident plan provides compensation when
children are injured while in the Company's care regardless of
fault. If the medical costs are less than $200, the Company will
pay for the costs. If the costs exceed $200, the Company asks
that the claim be submitted to the parent's medical insurance
plan and the Company will pay any deductibles or co-pays so that
the parent is not out-of-pocket any money. The maximum benefit
available under the plan is $10,000 and the plan also has a
$5,000 death benefit.
(iii) Upon request by the Seller, the Buyer agrees to
cooperate reasonably with the Seller and to use commercially
reasonable efforts to provide Seller with prompt written notice
regarding any matter which could reasonably be expected to lead
to an insured claim of the Company or any Subsidiary under the
Seller's insurance programs for a period prior to the Closing.
(iv) In the event of any written notice from the Seller of
a pending insurance claim for a period prior to the Closing, the
Buyer shall provide reasonable cooperation to the Seller and
shall make available to the Seller during normal business hours
and upon reasonable notice (consistent with the terms of (S)6(b)
above), all Books and Records and personnel of the Buyer, the
Company and the Subsidiaries which are reasonably necessary for
the Seller to deal with the investigation, adjudication and
settlement of any such pending insurance claims.
(v) Upon request by the Seller, the Buyer agrees to (A)
designate and make available to the Seller an officer of the
Company who shall be responsible for making an employee of the
Company available to assist the Seller and the Parent in
responding to claims related inquiries related to, and (B)
cooperate with the Seller with respect to, insurance claims
procedures and policies (including claims management) existing
under the Seller's insurance programs which relate to the Company
or any Subsidiary with dates of occurrence prior to the Closing
Date.
(vi) From and after the Closing, the Seller may, in its
sole discretion and without the consent of the Company, make
changes to any of its insurance
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programs that relate to Parent and its Subsidiaries (including
without limitation changes relating to insurance coverage).
(vii) From and for ninety days after the Closing, the Buyer
shall cause the Company to continue to provide employees of the
Company and its Subsidiaries who are not actively at work as a
result of a work-related disability with a date of occurrence
prior to the Closing Date with compensation that is substantially
comparable to that provided immediately prior to the onset of
such work-related disability and consistent with the Company's
salary continuation program in effect immediately prior to the
Closing.
(viii) The Buyer shall promptly pay to the Parent the amount
of any proceeds or recovery received by the Company or any
Subsidiary which resulted from any settlement or subrogation of
any insurance claim relating to the Company or any Subsidiary
with dates of occurrence prior to the Closing Date concerning
matters for which the Parent and the Parent's insurance carriers
are responsible.
(ix) From and after the Closing, with respect to the
Company and its Subsidiaries, the Buyer shall cause the Company
to (A) continue to report, process and manage worker compensation
claims with dates of occurrence prior to the Closing Date in
accordance with the policies and procedures established by the
Parent and in effect immediately prior to Closing, and (B) retain
the third party administrator(s) and workers compensation
insurance provider(s) used by the Parent immediately prior to
Closing with respect to worker compensation claims with dates of
occurrence prior to the Closing Date.
(j) Accrued Vacation/Sick Pay Reconciliation. With respect to
salaried employees of the Company or one of its Subsidiaries who cease to be
employed by the Company or one of its Subsidiaries for any reason from the
Closing Date through September 30, 2003, the Seller agrees to reimburse the
Buyer for that portion of the accrued vacation/sick pay compensation paid to
such employees that is attributable to the period prior to the Closing Date
(based upon prorating vacation/sick pay compensation evenly over the course of
the fiscal year ending September 30, 2003). The Seller shall pay such
reimbursement to the Buyer within five (5) business days after receipt of
written notice from the Buyer of the amount owed, together with the computation
thereof in reasonable detail.
(k) Buyer Financial Statements. Promptly after becoming
available, the Buyer shall deliver to the Seller copies of the audited
divisional combined balance sheet of the Division as of December 31, 2002,
together with the related audited divisional combined statement of income,
retained earnings and cash flows for the year then ended, reported on without
qualification by the Buyer's independent certified public accountants (the "2002
Buyer Financial Statements"). The 2002 Buyer Financial Statements will be
prepared in accordance with GAAP (except as otherwise provided in the 2002 Buyer
Financial Statements and the notes thereto) applied on a consistent basis
throughout the period covered thereby and will present fairly, in all material
respects, the financial position of the Division as of such date and the results
of operations of the Division for such period.
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7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) each of the representations and warranties set forth
in (S)3(a) and (S)4 above that is qualified as to materiality
shall be true and correct, and each of the representations and
warranties set forth in (S)3(a) and (S)4 above is not so
qualified shall be true and correct in all material respects, in
each case at and as of the Closing Date, as if made at and as of
such date (except for those representations and warranties which
are made as of a specific date or only with respect to a specific
period of time which shall be true and correct in all material
respects only as of such date or with respect to such time
period) except for changes contemplated or permitted by this
Agreement;
(ii) each of the Parent, the Seller and the Company shall
have performed and complied with all of their covenants hereunder
in all material respects through the Closing;
(iii) the Parent, the Seller and the Company and its
Subsidiaries shall have procured the third party consents set
forth in the Disclosure Schedule, including, without limitation,
the consent from Gelco Corporation under that certain Master
Lease Agreement between the Parent and Gelco Corporation, dated
as of August 14, 1997, consents from the lessors under any Leased
Real Property (except to the extent that the facilities of the
Company for which consent was not required or was obtained prior
to the Closing, together with the facilities operated by the
Buyer, represent at least $69.4 million of combined EBITDA for
the Company and the Buyer for the twelve months ended December
31, 2002) and consents from any Governmental Authority under any
Governmental Permits (where required);
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state or local foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (C) affect
adversely the right of the Buyer to own the Company Shares and to
control the Company and its Subsidiaries, or (D) affect
materially and adversely the right of any of the Company and its
Subsidiaries to own its assets and to operate its businesses (and
no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(v) between the date hereof and the Closing Date, there
has not been any material adverse change in the business,
financial condition, operations, or results of operations of the
Company and its Subsidiaries, taken as a whole.
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(vi) the Parent, the Seller and the Company shall have
delivered to the Buyer a certificate to the effect that each of
the conditions specified above in (S)7(a)(i)-(v) is satisfied in
all respects;
(vii) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Parties, the Company, and its
Subsidiaries shall have received all other material
authorizations, consents, and approvals of governments and
governmental agencies referred to in (S)3(a), (S)3(b), and
(S)4(c) above;
(viii) the Buyer shall have received from counsel to the
Parent and the Seller an opinion in a form mutually agreed upon
by the Parties, addressed to the Buyer, and dated as of the
Closing Date;
(ix) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the
Company and its Subsidiaries other than those whom the Buyer
shall have specified in writing prior to the Closing;
(x) the Buyer shall have received the financing under the
senior secured credit facilities contemplated by the Commitment
Letter, or if such financing is not available, the Buyer shall
have received alternative financing from one or more lenders on
terms and conditions reasonably satisfactory to the Buyer and the
Parent; and
(xi) the relevant parties shall have entered into a side
agreement in form and substance as set forth in Exhibit E-1
attached hereto and the same shall be in full force and effect.
The Buyer may waive any condition specified in this (S)7(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Parent and the Seller. The
obligation of the Parent and the Seller to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(i) each of the representations and warranties set forth
in (S)3(b) above shall be true and correct in all material
respects at and as of the Closing Date, as if made at and as of
such date (except for those representations and warranties which
are made as of a specific date or only with respect to a specific
period of time shall be true and correct in all material
respects, only as of such date or with respect to such time
period) except for changes contemplated or permitted by this
Agreement;
(ii) each of Holdings and the Buyer shall have performed
and complied with all of its covenants hereunder in all material
respects through the Closing;
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(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no
such injunction, judgment, order, decree, ruling, or charge shall
be in effect);
(iv) the Buyer shall have delivered to the Parent and the
Seller a certificate to the effect that each of the conditions
specified above in (S)7(b)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Parties, the Company, and its
Subsidiaries shall have received all other material
authorizations, consents, and approvals of governments and
governmental agencies referred to in (S)3(a), (S)3(b), and
(S)4(c) above;
(vi) the Parent and the Seller shall have received from
counsel to the Buyer an opinion in a form mutually agreed upon by
the Parties, addressed to the Parent and the Seller, and dated as
of the Closing Date;
(vii) Holdings shall have executed and deliver to the
Parent the Note and the Warrant; and
(viii) the relevant parties shall have entered into a side
agreement in form and substance as set forth in Exhibit E-2
attached hereto and the same shall be in full force and effect.
The Parent and the Seller may waive any condition specified in this (S)7(b) if
they execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parent, the Seller and the Company
contained in (S)3 and (S)4 above shall survive the Closing hereunder and
continue in full force and effect for a period of twenty-one (21) months
thereafter; provided, however, that (i) the representations and warranties
contained in (S)3(a)(iv), above shall survive the Closing hereunder and continue
in full force and effect until the expiration of the applicable statute of
limitations (with extensions) with respect to the matters addressed in such
section, (ii) the representations and warranties contained in (S)4(j) above
shall survive the Closing hereunder and continue in full force and effect until
thirty (30) days following the expiration of the applicable statute of
limitations (with extensions) with respect to the matters addressed in such
section, (iii) the representations and warranties contained in (S)4(v) above
shall survive the Closing hereunder and continue in full force and effect until
three (3) years thereafter, and (iv) the representations and warranties
contained in (S)4(x) above
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shall survive the Closing hereunder and continue in full force and effect for a
period of five (5) years thereafter (except for matters relating to mold which
will be governed solely by (S)8(e)(iii)).
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any of the Parent, Seller or Company
breaches any of their representations, warranties, or covenants
contained herein (in each case without regard to (A) any
limitation, qualification or exception based upon any use of the
word "material" or derivations thereof in any representation or
warranty herein and (B) with respect to the representation
in (S)4(x)(viii), without regard to the Knowledge qualifier
therein, which in each case under both (A) and (B) shall be
disregarded for purposes of determining whether a breach has
occurred and the amount of Adverse Consequences resulting
therefrom) and, if with respect to a breach of a representation
or warranty there is an applicable survival period pursuant
to (S)8(a) above, provided that the Buyer makes a written claim
for indemnification against any of the Parent or Seller pursuant
to (S)11(h) below within such survival period, then each of the
Parent and Seller agree, jointly and severally, to indemnify
Buyer, Affiliates of Buyer (including the Company), and each of
their respective officers, directors, agents or employees, and
their respective successors and assigns (each a "Buyer
Indemnified Party," or collectively the "Buyer Indemnified
Parties") from and against any Adverse Consequences a Buyer
Indemnified Party may suffer resulting from, arising out of, or
caused by the breach; provided, however, that (A) the Parent and
Seller shall not have any obligation to indemnify the Buyer
Indemnified Parties from and against any Adverse Consequences
resulting from, arising out of, or caused by the breach of any
representation or warranty of the Parent, Seller or Company
contained in this Agreement until the Buyer Indemnified Parties
have suffered Adverse Consequences by reason of all such
breaches, together with Adverse Consequences from the matters
covered by (S)8(b)(iv), in excess of $1,750,000 (the "Deductible
Amount"), after which, subject to the other provisions of
this (S)8, the Parent and the Seller shall be obligated to
indemnify the Buyer Indemnified Parties from and against the
amount of any excess Adverse Consequences above the Deductible
Amount and (B) there will be an aggregate ceiling equal to
$75,000,000 on the obligation of the Parent and the Seller to
indemnify the Buyer Indemnified Parties from and against Adverse
Consequences resulting from, arising out of, or caused by,
breaches of the representations and warranties of the Parent, the
Seller or the Company contained in this Agreement and Adverse
Consequences resulting from, arising out of, or caused by the
matter covered by (S)8(b)(iv) and (C) the Parent and the Seller
shall not be obligated to provide any indemnification under (S)8
for any Adverse Consequences arising out of any breach of a
representation or warranty or pre-Closing covenant of the Parent,
the Seller or the Company to the extent that such Adverse
Consequences have been taken into account in the Purchase Price
adjustment pursuant to (S)2(e) of this Agreement or that relate
to Taxes that are subject to indemnification under (S)9.
(ii) Each of the Parent and the Seller agrees to indemnify
the Buyer Indemnified Parties from and against any Adverse
Consequences the Buyer
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Indemnified Parties may suffer resulting from, arising out of, or
caused by any liability of the Company and its Subsidiaries
related to third party claims arising out of any incident
involving the physical, sexual and/or emotional abuse of children
to the extent occurring prior to the Closing Date.
(iii) Each of the Parent and the Seller agrees to indemnify
the Buyer Indemnified Parties from and against any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any of the
Buyer Indemnified Parties become liable or obligated as a result
of any agreement entered into by the Parent, the Seller or the
Company.
(iv) Each of the Parent and the Seller agrees to indemnify
the Buyer Indemnified Parties from and against any Adverse
Consequences the Buyer Indemnified Parties may suffer resulting
from, arising out of, or caused by the class action complaint,
Kathy Nelson v. Aramark Educational Resources, Inc., filed in the
Circuit Court of Oregon, County of Multnomah, with respect to the
periods prior to the Closing Date; provided, however, that (A)
the Parent and the Seller shall not have any obligation to
indemnify the Buyer Indemnified Parties from and against any
Adverse Consequences resulting from, arising out of, or caused by
the matters described in this (S)8(b)(iv) until the Buyer
Indemnified Parties have suffered Adverse Consequences, together
with Adverse Consequences resulting from, arising out of, or
caused by the breach of any representation or warranty as
provided in (S)8(b)(i), in excess of the Deductible Amount, after
which, subject to the other provisions of this (S)8, the Parent
and the Seller shall be obligated to indemnify the Buyer
Indemnified Parties from and against the amount of any excess
Adverse Consequences above the Deductible Amount and (B) there
will be an aggregate ceiling equal to $75,000,000 on the
obligation of the Parent and the Seller to indemnify the Buyer
Indemnified Parties from and against Adverse Consequences
resulting from, arising out of, or caused by the matter described
in this (S)8(b)(iv) and Adverse Consequences resulting from,
arising out of, or cause by the breach of any representation or
warranty as provided in (S)8(b)(i).
(c) Indemnification Provisions for Benefit of the Parent and the
Seller.
(i) In the event any of Holdings or the Buyer breaches any
of its representations, warranties, or covenants contained herein
(in each case without regard to any limitation, qualification or
exception based upon any use of the word "material" or other
derivations thereof in any representation or warranty herein,
which shall be disregarded for purposes of determining whether a
breach has occurred and the amount of Adverse Consequences
resulting therefrom), then each of Holdings and the Buyer agree,
jointly and severally, to indemnify the Parent, Seller,
Affiliates of Parent and Seller, their respective officers,
directors, agents or employees, and their respective successors
and assigns (each a "Seller Indemnified Party," or collectively
the "Seller Indemnified Parties") from and against any Adverse
Consequences a Seller Indemnified Party may suffer resulting
from, arising out of, or caused by the breach; provided, however,
that
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(A) the Buyer shall not have any obligation to indemnify the
Seller Indemnified Parties from and against any Adverse
Consequences resulting from, arising out of, or caused by the
breach of any representation or warranty of the Buyer contained
in this Agreement until the Seller Indemnified Parties have
suffered Adverse Consequences by reason of all such breaches in
excess of the Deductible Amount, after which, subject to the
other provisions of this (S)8, the Buyer will be obligated to
indemnify the Seller Indemnified Parties from and against the
amount of any excess Adverse Consequences above the Deductible
Amount, (B) there will be an aggregate ceiling equal to the
$75,000,000 on the obligation of the Buyer to indemnify the
Seller Indemnified Parties from and against Adverse Consequences
resulting from, arising out of, or caused by breaches of the
representations and warranties of the Buyer contained in this
Agreement and (C) the Buyer shall not be obligated to provide any
indemnification under (S)8 for any Adverse Consequences arising
out of any breach of a representation or warranty or pre-Closing
covenant of the Buyer to the extent that such Adverse
Consequences have been taken into account in the Purchase Price
adjustment pursuant to (S)2(e) of this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, none of the
limitations on indemnification contained in this (S)8 shall apply
to any of the Parent's or Sellers' rights under the Note or the
Warrant.
(ii) Each of Holdings and the Buyer agrees to indemnify
the Seller Indemnified Parties from and against any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any of the
Seller Indemnified Parties become liable or obligated as a result
of any agreement entered into by Holdings or the Buyer.
(iii) Each of Holdings and the Buyer agrees to indemnify
the Seller Indemnified Parties from and against any Adverse
Consequences the Seller Indemnified Parties may suffer under the
Guaranties to the extent releases have not been obtained by the
Closing Date and resulting from, arising out of, or caused by
events occurring on and after the Closing Date.
(iv) Each of Holdings and the Buyer agrees to indemnify
the Seller Indemnified Parties from and against any Adverse
Consequences the Seller Indemnified Parties may suffer resulting
from, arising out of, or caused by any liability of the Company
and its Subsidiaries related to third party claims arising out of
any incident involving the physical, sexual and/or emotional
abuse of children to the extent occurring after the Closing Date.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification
against any other Party (the "Indemnifying Party") under this
(S)8, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing describing the Third Party
Claim in reasonable detail; provided, however, that no delay on
the part of the Indemnified Party in notifying
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any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent)
the Indemnifying Party thereby is prejudiced (except the
Indemnifying Party shall not be liable for any expenses incurred
by the Indemnified Party in investigating or defending the Third
Party Claim during the period in which the Indemnified Party has
not given notice of such Third Party Claim to the Indemnifying
Party).
(ii) Any Indemnifying Party shall have the right to defend
the Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified Party so
long as (A) the Indemnifying Party notifies the Indemnified Party
in writing within fifteen days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party
will assume the defense of the Indemnified Party from and against
any Adverse Consequences of the Third Party Claim, (B) the Third
Party Claim involves only money damages that would not have a
material adverse effect on the business, financial condition or
operations of Buyer and its Subsidiaries (including the Company
and its Subsidiaries) taken as a whole and does not seek an
injunction or other equitable relief, and (C) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with (S)8(d)(ii)
above, (A) the Indemnified Party may retain separate co-counsel
at its sole cost and expense and participate in the defense of
the Third Party Claim, (B) the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written
consent of the Indemnifying Party, and (C) the Indemnifying Party
will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be
withheld unreasonably) unless the judgment or proposed settlement
involves only the payment of money damages by one or more of the
Indemnifying Parties and contains a full and complete release in
favor of all Indemnified Parties.
(iv) In the event any of the conditions in (S)8(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified
Party may defend the Third Party Claim in any manner it
reasonably may deem appropriate; provided that the Indemnified
Party's counsel is reasonably acceptable to the Indemnifying
Party and that the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement without the
prior written consent of the Indemnifying Party (not to be
unreasonably withheld) and (B) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, or caused by the
Third Party Claim to the fullest extent provided in this (S)8.
(e) Matters Involving Environmental Claims. In addition to any
other limitations under this Agreement that may apply, with respect to any claim
for indemnification
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asserted under (S)8(b) above regarding any breach of any representation or
warranty in (S)4(x) above, Parent and Seller shall have no obligation to
indemnify:
(i) Unless the Adverse Consequences arise out of (A) a
Third Party Claim that is not instigated or encouraged by any
Buyer Indemnified Party, or (B) a condition discovered in the
ordinary course of business; and
(ii) For any costs or expenses incurred by or on behalf of
the Buyer Indemnified Party to implement measures with respect to
the condition giving rise to such claim for indemnification, to
the extent such measures are not (A) reasonably cost-effective
for addressing such condition, (B) required by applicable
Environmental Law in effect as of the Closing Date or by any
environmental regulatory authority with jurisdiction over the
matter acting pursuant to such Environmental Law, and (C)
reasonably necessary for the continued use of the property at
issue as it was used immediately prior to the Closing Date; and
(iii) For any costs to investigate, remediate, or otherwise
address mold that is present or suspected at any Real Property,
unless such costs comply with the foregoing subparagraphs (i) and
(ii)(C) and are Qualified Mold Remediation Costs. For purposes of
this Agreement, Qualified Mold Remediation Costs shall mean:
costs to investigate (including the costs of the environmental
consultant referred to in this paragraph), remediate, or
otherwise address mold in or at a building or equipment at any
Real Property, which costs prior to being incurred have been
reviewed and approved by an independent environmental consultant
(which consultant has been mutually agreed upon by Buyer and
Seller and which under no circumstances shall perform, or have
any interest in any entity that performs, any investigation,
remediation, or other addressing of mold that it reviews or
approves) as reasonably necessary and cost-effective to attain
applicable legal standards (or, in the absence of such standards,
levels generally recognized by indoor air quality experts as
reasonably acceptable in light of the use of the Real Property at
issue), subject to the following: (A) Buyer shall in every case
be responsible for the first $12,000 of Qualified Mold
Remediation Costs for any Real Property; (B) Seller shall be
responsible for 100% of Qualified Mold Remediation Costs, if any,
in excess of the Qualified Mold Remediation Costs referred to in
the foregoing clause (A) to the extent they are incurred within
six months after the Closing Date or up to an aggregate of
$500,000, whichever comes first; and (C) Qualified Mold
Remediation Costs other than those referred to in the foregoing
clauses (A) and (B) which are incurred within twelve months of
the date Seller no longer is obligated to pay 100% of Qualified
Mold Remediation Costs pursuant to the foregoing clause (B) shall
be shared equally by Buyer and Seller. Seller shall have no
further obligation to Buyer with respect to Qualified Mold
Remediation Costs or any other costs to investigate, remediate,
or otherwise address mold that is present or suspected at any
Real Property except as provided in this subparagraph (iii).
Payments of Qualified Mold Remediation Costs shall not be subject
to, or included in calculating, any Deductible Amounts or
ceilings provided for in (S)8(b) and (c).
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Notwithstanding any provision of (S)8(e) above that may be construed to
the contrary, the Buyer Indemnified Parties (A) shall control any measures taken
to address conditions at or emanating from any Owned Real Property or Leased
Real Property that are the subject of a claim for indemnification asserted under
(S)8(b) above regarding any breach of any representation or warranty in (S)4(x)
above, using consultants, contractors and advisors reasonably acceptable to the
Parent and the Seller, and (B) without limiting clause (A) above, the Buyer
Indemnified Parties will reasonably consult with Seller regarding any proposed
remedy, and will use commercially reasonable efforts to allow Seller to evaluate
any proposed claim (such efforts to include providing the Seller with reasonable
access to any property in the possession or control of any Buyer Indemnified
Party and to any relevant data or environmental reports and correspondence with
government agencies, and allowing the Seller to have a reasonable opportunity to
provide input regarding the handling of such matter).
(f) Determination of Adverse Consequences. The amount of any
Adverse Consequences with respect to any claim for indemnification hereunder
shall be determined net of any insurance proceeds actually received by the
Indemnified Party with respect to such claims; provided, however, that the
Indemnified Party shall have no obligation to seek insurance coverage. The
amount of any Adverse Consequences with respect to any claim for indemnification
hereunder shall be determined net of any Tax benefit actually realized by the
Indemnified Party with respect to such claim; provided, however, that any Tax
benefit resulting from such a claim shall be determined only after applying all
other deductions and losses, including any net operating loss carryforwards,
available to the Indemnified Party, as if the Tax benefit arising from such
claim did not exist (for example, all existing net operating loss carryforwards
would have to be exhausted before a "Tax benefit" would be actually realized
from such a claim) and provided further that creating or increasing a net
operating loss carryforward shall be deemed not to create a Tax benefit. In
addition, the amount of Adverse Consequences for any claim for indemnification
hereunder shall include interest at the Applicable Rate from the date that is
five (5) days after the time the Indemnified Party paid such amount to a third
party through and including the date of payment of such claim by the
Indemnifying Party. All indemnification payments under this (S)8 shall be deemed
adjustments to the Purchase Price.
(g) Other Indemnification Provisions. The Parties agree that,
from and after the Closing, the remedies provided in this (S)8 and (S)11(o) are
the exclusive remedies for any breach of representation, warranty or covenant
under this Agreement, other than claims based upon fraud. Notwithstanding
anything herein to the contrary, to the extent that a party waives the
satisfaction of any of the conditions set forth in (S)7(a) or (b), as the case
may be, which conditions were not satisfied due to one or more matters that were
specifically disclosed in writing to such waiving party prior to the Closing,
then no other party shall have any liability hereunder as an Indemnifying Party
for such matter or matters to the extent so disclosed. The Parent and the Seller
each hereby waives, and acknowledges and agrees that it shall not have and shall
not exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against the Company or
its Subsidiaries in connection with any indemnification obligation or for any
other liability for which the Parent or the Seller shall be responsible in
connection with this Agreement.
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9. Tax Matters. The following provisions shall govern the allocation
of responsibility as between the Buyer and the Parent and the Seller for certain
Tax matters following the Closing Date:
(a) Tax Indemnities.
(i) From and after the Closing Date, without duplication
and subject to (S)8 hereof (but without regard to the limitations
in (S)8(b)(i)(A) and (B) hereof), the Parent and the Seller shall
indemnify the Buyer and the Company and their Affiliates against
all Taxes (including reasonable attorneys' and accountants' fees
and other reasonable out-of-pocket expenses incurred in
connection therewith, but reduced by any Tax benefit that the
Buyer, the Company or their Affiliates realize as a result of the
payment (or the adjustment giving rise to the payment) of any
such Taxes) imposed on or payable by the Company or any of its
Subsidiaries (A) with respect to any taxable period or portion
thereof that ends on or before the Closing Date (including any
Taxes allocated to such period under (S)9(a)(iv) hereof); (B)
under Treasury Regulation (S)1.1502-6 (or any similar provision
of state, local or foreign law) by reason of the Company or any
of its Subsidiaries being included in any consolidated,
affiliated, combined or unitary or other similar group of which
the Parent is the common parent at any time on or before the
Closing Date, (C) pursuant to any contract or agreement with any
third party for indemnification of Taxes or (D) without
duplication, any Taxes arising from a breach of representation
contained in (S)4(j); other than any Taxes included as a
liability in Closing Working Capital. No indemnity shall be
provided under this Agreement for any Taxes resulting from any
transaction of the Company or any of its Subsidiaries occurring
after the Closing Date or on the Closing Date after the Closing
that is not in the Ordinary Course of Business.
(ii) From and after the Closing Date, without duplication,
the Buyer shall, and shall cause the Company to, indemnify the
Parent and its Affiliates against all Taxes (including reasonable
attorneys' and accountants' fees and other reasonable
out-of-pocket expenses incurred in connection therewith) imposed
on the Company and its Subsidiaries, which Taxes are not subject
to indemnification pursuant to (S)9(a)(i), including Taxes (A)
resulting from any transaction of the Company and its
Subsidiaries occurring after the Closing Date or on the Closing
Date after the Closing that is not in the Ordinary Course of
Business, (B) with respect to any taxable period or portion
thereof that begins after the Closing Date (including any Taxes
allocated to such period under (S)9(a)(iv) hereof) or (C)
included as a liability in Closing Working Capital.
(iii) Payment by the indemnitor of any amount due under
this (S)9 shall be made within ten days following written notice
by the indemnitee that payment of such amounts to the appropriate
Tax Authority is due, provided that the indemnitor shall not be
required to make any payment earlier than two days before it is
due to the appropriate Tax Authority. If the Parent receives an
assessment or other notice of Taxes due with respect to the
Company or any of its Subsidiaries for any period for which the
Parent is not responsible, in whole or in
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part, pursuant to (S)9(a)(i), then the Buyer shall pay such Tax,
or if the Parent pays such Tax, then the Buyer or the Company
shall pay to the Parent, in accordance with the first sentence of
this (S)9(a)(iii), the amount of such Tax for which the Parent is
not responsible. In the case of a Tax that is contested in
accordance with the provisions of (S)9(c), payment of the Tax to
the appropriate Tax Authority will not be considered to be due
earlier than the date a final determination to such effect is
made by the appropriate Tax Authority or court. Final
determination shall have the meaning as set forth in (S)1313(a)
of the Code.
(i) The Parent and the Buyer shall, to the extent
permitted by applicable law and except as otherwise provided
herein, elect with the relevant Tax Authority to close the
taxable period of the Company and its Subsidiaries at the end of
the day on the Closing Date. For purposes of this Agreement, in
the case of any Tax that is imposed on a periodic basis and is
payable for a taxable period that begins before the Closing Date
and ends after the Closing Date, the portion of such Taxes which
is payable for the portion of such taxable period ending on the
Closing Date shall be (A) in the case of any Tax other than a Tax
based upon or measured by income or receipts, the amount of such
Tax for the entire taxable period (or, in the case of such Taxes
determined on an arrears basis, the amount of such Tax for the
immediately preceding period) multiplied by a fraction, the
numerator of which is the number of days in the portion of such
taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period and (B)
in the case of a Tax based upon or measured by income or
receipts, the amount which would be payable if the relevant
taxable period ended on the Closing Date. Any credit or refund
resulting from an overpayment of Taxes shall be prorated based
upon the method employed in the immediately preceding sentence.
In the case of any Tax based upon or measured by capital
(including net worth or long-term debt) or intangibles, any
amount thereof required to be allocated under this (S)9(a)(iv)
shall be computed by reference to the level of such items on the
Closing Date. The taxable period of any partnership or other
pass-through entity in which the Company or any Subsidiary is a
partner or other beneficial interest holder shall be deemed to
terminate on the Closing Date. All determinations necessary to
effect the foregoing allocations shall be made in a manner
consistent with prior practice of the Company and its
Subsidiaries.
(b) Refunds and Tax Benefits.
(i) Subject to (S)9(b)(ii), the Buyer shall promptly pay
to the Parent the amount of any refund or credit or offset
(including any interest paid or credited or any offset allowed
with respect thereto but reduced by any Taxes that the Buyer, the
Company or any Subsidiary shall be required to pay with respect
thereto) received or used, in the case of a credit or offset, by
the Buyer, the Company or any subsidiary of Taxes (A) relating to
taxable periods or portions thereof ending on or before the
Closing Date (including any Taxes allocated to such period under
(S)9(a)(iv) hereof) or (B) attributable to an amount paid by the
Parent or the Seller under (S)9(a) hereof, other than any refund
of Taxes included as an asset in Closing
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Working Capital. The amount of any refunds or credits or offsets
(including any interest paid or credited with respect thereto)
received by Buyer, the Company or any Subsidiary shall be for the
account of the Buyer if the refund, credit or offset is of Taxes
relating to taxable periods or portions thereof that begin on or
after the Closing Date (including any Taxes allocated to such
period under (S)9(a)(iv) hereof). The Buyer shall, if the Parent
so requests and at the Parent's expense, cause the relevant
entity to file for and use its reasonable best efforts to obtain
and expedite the receipt of any refund to which the Parent is
entitled under this (S)9(b); provided, however, that the Buyer
must consent to any such refund claim, which consent may not be
unreasonably withheld; and provided further that neither Parent
nor any affiliate of the Parent shall, without the prior written
consent of the Buyer, which consent may not be unreasonably
withheld, file or cause to be filed any amended Tax Return or
claim for Tax refund solely with respect to the Company or any of
its Subsidiaries for any period ending on or before the Closing
Date, to the extent that any such filing may have a material
adverse effect on the Tax liability of the Buyer, the Company or
its Subsidiaries.
(ii) The Buyer shall, and the Buyer shall cause the
Company to, make any and all elections under (S)172(b)(3) of the
Code and under any comparable provision of any state, local and
foreign Tax law in any state, locality, or foreign jurisdiction
within which the Company or any of its Subsidiaries file a
combined, unitary or similar return with the Parent or any of its
Affiliates (other than a return including only the Company and
its Subsidiaries) to relinquish the entire carryback period with
respect to any net operating loss attributable to the Company or
any of its Subsidiaries in any taxable period beginning after the
Closing Date that could be carried back to a taxable year of the
Company or any such subsidiary ending on or before the Closing
Date. Neither the Parent nor any Affiliate thereof shall be
required to pay to the Buyer, the Company or any subsidiary any
refund or credit of Taxes that results from the carryback to any
taxable period ending on or before the Closing Date of any net
operating loss, capital loss or Tax credit attributable to the
Company or any of its Subsidiaries in any taxable period
beginning after the Closing Date, except that (i) the Company or
any of its Subsidiaries that have not filed combined, unitary or
similar returns with the Parent or any of its Affiliates (other
than the Company or any of its Subsidiaries) shall be entitled to
carry back losses or Tax credits from any taxable period
beginning on or after the Closing Date to any taxable period of
such Company ending on or prior to the Closing Date, but only if
such carryback would not impose a material Tax cost or otherwise
materially adversely affect the Parent or any of its Affiliates
and (ii) if, notwithstanding any election pursuant to
this (S)9(b)(ii), any credit, deduction or loss of the Buyer, the
Company or any Subsidiary arising in any period ending after the
Closing Date is required to be carried back and included in any
Tax Return of the Parent, or any affiliate of the Parent
(including the Company or any Subsidiary), for any period ending
on or before the Closing Date, then the Parent shall pay to the
Buyer an amount equal to the actual Tax savings produced by such
credit, deduction or loss; provided, however, that any credit,
deduction or loss of the Parent shall be used before any credit,
deduction or loss of the Buyer, the Company or any Subsidiary;
and
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provided further that the Parent must consent to any such refund
claim, which consent may not be unreasonably withheld (for this
purpose, withholding of consent shall be reasonable if such
refund claim could reasonably be expected to have a material Tax
cost or otherwise materially adversely affect Parent or any of
its affiliates).
(c) Contests.
(i) After the Closing Date, each of the Parent and the
Buyer shall promptly notify the other party in writing upon
receipt of written notice of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim
on the Parent, the Buyer or the Company or any Subsidiary which,
if determined adversely to the taxpayer or after the lapse of
time, would be grounds for indemnification by the other party
under (S)9(a). Such notice shall contain factual information (to
the extent known to the notifying party) describing the asserted
Tax liability in reasonable detail and shall include copies of
any notice or other document received from any Tax Authority in
respect of any such asserted Tax liability. If the indemnitee
under (S)9(a) fails to give the indemnitor under (S)9(a) prompt
notice of an asserted Tax liability as required by this (S)9(c),
then the indemnitor shall not have any obligation to indemnify
for any loss arising out of such asserted Tax liability, but only
to the extent that failure to give such notice results in a
detriment to the indemnitor.
(ii) In the case of an audit or administrative or judicial
proceeding that relates to a period ending on or before the
Closing Date, the Parent shall have the sole right, at its
expense, to control the conduct of such audit or proceeding;
provided, however, that the Parent shall consult with the Buyer
to the extent any proposed adjustment may have a material adverse
effect on the Taxes of the Buyer or the Company for taxable
periods beginning after the Closing Date. The Buyer shall control
the defense and settlement of any contest relating to taxable
periods or portions thereof that begin on or after the Closing
Date, provided, however, the Buyer shall consult with the Parent
to the extent any proposed adjustment may have a material adverse
effect on the Taxes of the Parent for taxable periods beginning
before the Closing Date.
(iii) With respect to periods beginning before the Closing
Date and ending after the Closing Date, (i) each party may
participate in an audit or proceeding which relates to any such
period and (ii) such audit or proceeding shall be controlled by
that party which would bear the burden of the greater portion of
the sum of the adjustment; provided that neither party shall
settle any such audit or proceeding without the consent of the
other, which consent shall not be unreasonably withheld. The
principle set forth in the preceding sentence shall govern also
for purposes of deciding any issue that must be decided jointly
(in particular, choice of judicial forum) in situations in which
separate issues are otherwise controlled hereunder by the Buyer
and the Parent.
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(d) Preparation of Tax Returns.
(i) The Parent shall timely prepare and file any income
Tax Returns relating to the Company and its Subsidiaries for any
taxable periods that end on or prior to the Closing Date (the
"Parent Returns") and timely pay when due all Taxes relating to
such Parent Returns. The Parent Returns shall be prepared in a
manner consistent with the prior practice of the Company and its
Subsidiaries (except to the extent the Parent determines that
there is no reasonable basis therefor). The Buyer shall timely
prepare and file all other Tax Returns for taxable periods that
end on or prior to the Closing Date (to the extent such Tax
Returns are due after the Closing Date) as well as all Tax
Returns for taxable periods that include, but do not end on, the
Closing Date (the "Buyer Returns"). The Buyer shall prepare or
cause the Company to prepare such Buyer Returns in a manner
consistent with the prior practice of the Company and its
Subsidiaries (except to the extent Buyer determines that there is
no reasonable basis therefor) and the Buyer shall deliver such
Buyer Returns to the Parent at least 14 days before such Buyer
Returns are due to be filed (taking into account any extensions
of time to file such Tax Return that have been properly obtained)
for the Parent's review and comment. The Parent shall reimburse
the Buyer for any Taxes on the Buyer Returns owed by the Parent
pursuant to (S)9(a)(i) and (S)9(a)(iv). The Buyer shall prepare
and file or cause the Company to prepare and file any Tax Return
relating to the Company or any of its Subsidiaries for any
taxable periods that begin on or after the Closing Date.
(ii) The Parent shall have the right to object to any
items set forth on the Buyer Returns within seven days of the
delivery of a particular Tax Return. In the event of such an
objection, the parties shall attempt in good faith to resolve the
dispute. If the parties cannot resolve any such dispute, the
items remaining in dispute shall be submitted to
PricewaterhouseCoopers LLP or such other independent accounting
firm of national or regional reputation selected by, and mutually
acceptable to, the Parent and the Buyer. The independent
accounting firm so selected shall determine the proper amounts
for the items remaining in dispute and the Buyer and the Parent
shall be bound by the determination by the independent accounting
firm absent manifest error. The independent accounting firm shall
make any such determination within seven days after submission of
the remaining disputed items. If a Tax Return is due before the
date a disputed item is resolved hereunder, it shall be filed as
prepared and resolved items shall be reflected on an amended Tax
Return.
(e) Cooperation and Exchange of Information. The Parent and the
Buyer shall provide each other with such cooperation and information as either
of them reasonably may request of the other in filing any Tax Return, amended
Tax Return or claim for refund, determining a liability for Taxes or a right to
a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Any information obtained under this (S)9(e)
shall be kept confidential, except as may be otherwise necessary in connection
with the filing of Tax Returns or claims for refund or in conducting an audit or
other proceeding.
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(f) Tax Sharing Arrangements. Any and all existing Tax sharing,
allocation, compensation or like agreements or arrangements, whether or not
written, that include the Company or any Subsidiary, including without
limitation any arrangement by which the Company or any Subsidiary makes
compensating payments to each other or any other member of any affiliated,
consolidated, combined, unitary or other similar Tax group for the use of
certain Tax attributes, shall be terminated as of the day before the Closing
Date (pursuant to a writing executed on or before the Closing Date by all
parties concerned) and shall have no further force or effect. All liabilities of
the Company or any Subsidiary or affiliate of the Parent (for Taxes or otherwise
pursuant to such agreements or arrangements) shall be canceled on or prior to
the Closing Date.
(g) Indemnity Payments to be Treated as Purchase Price
Adjustment. The Parent, the Seller and the Buyer agree that any payments
pursuant to (S)9(a)(i) and (S)9(a)(ii) hereof shall be treated as adjustments to
the Purchase Price.
(h) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
State Gains Tax, New York City Transfer Tax and any similar tax imposed in other
states or subdivisions), shall be paid one-half by the Parent and Seller and
one-half by the Buyer, and the Parent and Seller will file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation. Buyer will reimburse
the Parent and the Seller for one-half of all reasonable out-of-pocket costs
incurred in connection with filing any such Tax Returns and any such other
documentation.
10. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Parent and Seller may terminate
this Agreement by mutual written consent at any time prior to the
Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Parent and the Seller at any time prior to
the Closing (A) in the event any of the Parent, the Seller or the
Company has breached any representation, warranty, or covenant
contained in this Agreement in any material respect, the Buyer
has notified the Parent and the Seller of the breach, and the
breach has continued without cure for a period of thirty (30)
days after the notice of breach or (B) if the Closing shall not
have occurred on or before July 31, 2003, by reason of the
failure of any condition precedent under (S)7(a) hereof (unless
the failure results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this
Agreement); and
(iii) the Parent and the Seller may terminate this
Agreement by giving written notice to the Buyer at any time prior
to the Closing (A) in the event the
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Buyer has breached any representation, warranty, or covenant
contained in this Agreement in any material respect, the Parent
and the Seller have notified the Buyer of the breach, and the
breach has continued without cure for a period of thirty (30)
days after the notice of breach or (B) if the Closing shall not
have occurred on or before July 31, 2003, by reason of the
failure of any condition precedent under (S)7(b) hereof (unless
the failure results primarily from the Parent, the Seller or the
Company themselves breaching any representation, warranty, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to (S)10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach) except for (S)(S)11(a),
11(h), 11(i), 11(l) and 11(p).
11. Miscellaneous.
(a) Nature of Certain Obligations. The representations,
warranties, and covenants of the Parent and Seller in this Agreement are joint
and several obligations. This means that each of the Parent and Seller will be
responsible to the extent provided in (S)8 above for any Adverse Consequences
any Buyer Indemnified Party may suffer as a result of any breach thereof. The
representations, warranties and covenants of Holdings and the Buyer in this
Agreement are joint and several obligations. This means that each of Holdings
and the Buyer will be responsible to the extent provided in (S)8 above for any
Adverse Consequences any Seller Indemnified Party may suffer as a result of any
breach thereof.
(b) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the Buyer and the Parent and the Seller; provided, however, that any Party
may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party shall use its
commercially reasonable efforts to advise the other Parties prior to making the
disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. Prior to the Closing, no Party may assign
either this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Parent and the Seller;
provided, however, that the Buyer may (i) assign any or all of its rights and
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interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases the Buyer nonetheless shall remain responsible for the performance
of all of its obligations hereunder), and (iii) pledge or collaterally assign
any or all of its rights and interests hereunder to its lenders. Following the
Closing, none of the Parent, the Seller or the Buyer may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the Buyer.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Parent: ARAMARK Corporation
ARAMARK Tower
1101 Market Street
Philadelphia, PA 19107-2988
(215) 413-8733
Attention: General Counsel
Copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
(212) 455-2502
Attention: Mario A. Ponce, Esq.
If to the Seller: ARAMARK Organizational Services, Inc.
c/o ARAMARK Corporation
ARAMARK Tower
1101 Market Street
Philadelphia, PA 19107-2988
(215) 413-8733
Attention: General Counsel
Copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
(212) 455-2502
Attention: Mario A. Ponce, Esq.
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If to the Buyer: Knowledge Learning Corporation
1250 Fourth Street
Santa Monica, CA 90401
(310) 570-4555
Attention: President
Copy to: Maron & Sandler
1250 Fourth Street, Suite 550
Santa Monica, CA 90401
(310) 570-4901
Attention: David S. Kyman, Esq.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, facsimile, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(j) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Parent and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(l) Expenses. Each of the Buyer, the Parent and the Seller shall
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby;
provided, however, that the Buyer on the one hand and the Parent and the Seller
on the other hand shall each pay one-half of the cost of all filing fees under
the Hart-Scott-Rodino Act. The Parent and the Seller agree that none of the
Company and its Subsidiaries has borne or shall bear any out-of-pocket costs and
expenses (including any legal fees and expenses, but excluding telephone bills,
photocopying charges and other incidental expenses incurred by the Company) in
connection with this Agreement or any of the transactions contemplated hereby,
all of which shall be borne by the Parent or the Seller.
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(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof. The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs to which the information
relates. Disclosure of any fact or item pursuant to any paragraph of the
Disclosure Schedule shall be deemed to have been disclosed for the purpose of
other paragraphs of the Disclosure Schedule only where its relevance and
applicability is readily apparent. Matters reflected on the Disclosure Schedule
are not necessarily limited to matters required by this Agreement to be
reflected therein and the inclusion of such matters shall not be deemed an
admission that such matters were required to be reflected on the Disclosure
Schedule. Such additional matters are set forth for informational purposes only
and do not necessarily include other matters of a similar nature.
(o) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in (S)11(p), in addition (subject to (S)8(g)) to any other remedy to which
they may be entitled, at law or in equity.
(p) Jurisdiction; Attorneys' Fees; Waiver of Jury Trial.
(i) The Parties hereto agree that any and all claims,
grievances, demands, controversies, causes of action or disputes
of any nature whatsoever (including tort and contract claims, and
claims upon any law, statute, order or regulation) (hereinafter
"Transaction Claims") arising out of, in connection with or in
relation to (i) the interpretation, performance or breach of this
Agreement or (ii) any relationship before, at the time of
entering into, during the term of or upon or after expiration or
termination of this Agreement, between the parties hereto, shall
be brought in the United States District Court for the Southern
District of New York, or, if such court does not have
jurisdiction or shall not accept jurisdiction, in the Supreme
Court of the State of New York, New York County. The Parties
hereto unconditionally and irrevocably consent to the
jurisdiction of any such court over any Transaction Claims and
waive any objection which such Party may have to the laying of
venue of any Transaction Claims in any such court.
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(ii) The Parties hereto agree that the prevailing party in
any such Transaction Claims shall be entitled to recover its
costs and expenses, including reasonable attorneys' fees,
incurred in connection with such action, including any appeal of
such action.
(iii) THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH PARTIES, EITHER
VOLUNTARILY OR INVOLUNTARILY, DIRECTLY OR INDIRECTLY, RELATING TO
ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS AGREEMENT.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
KNOWLEDGE SCHOOLS, INC.
By: /s/ ADAM COHN
--------------------------------------------
Title: Adam Cohn, Vice President
--------------------------------------------
CHILDREN'S DISCOVERY CENTERS OF
AMERICA, INC. (to be renamed Knowledge Learning
Corporation)
By: /s/ ADAM COHN
--------------------------------------------
Title: Adam Cohn, Vice President
--------------------------------------------
ARAMARK CORPORATION
By: /s/ BARBARA A. AUSTELL
--------------------------------------------
Title: Senior Vice President, Finance and Treasurer
--------------------------------------------
ARAMARK ORGANIZATIONAL SERVICES, INC.
By: /s/ BARBARA A. AUSTELL
--------------------------------------------
Title: Vice President
--------------------------------------------
ARAMARK EDUCATIONAL RESOURCES, INC.
By: /s/ JOHN J. WHEATLEY
--------------------------------------------
Title: President
--------------------------------------------