EXHIBIT 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 6th day of April 1999, by and among SECURITY CAPITAL CORPORATION, a
Delaware corporation ("SCC"), PRIMROSE HOLDINGS, INC., a Delaware corporation
("Purchaser"); XXXX X. XXXXX, a resident of the State of Georgia ("Xxxxx"); and
THE XXXX X. XXXXX GRANTOR RETAINED ANNUITY TRUST (the "Trust") (Xxxxx and the
Trust are referred to collectively as the "Shareholders").
WITNESSETH:
WHEREAS, Xxxxx owns all of the issued and outstanding shares of capital
stock of The Jewel I, Inc. d/b/a Primrose Country Day School ("Country Day") and
Metrocorp Properties, Inc. ("Metrocorp") and Xxxxx and Trust collectively own
all of the issued and outstanding shares of capital stock of Primrose School
Franchising Company ("Primrose") (Primrose, Country Day and Metrocorp are
referred to individually as a "Company" and collectively as the "Companies")
(the shares of all of the Companies are referred to collectively as the
"Shares"); and
WHEREAS, the Shareholders and Purchaser desire that Purchaser purchase the
Shares from the Shareholders, upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the promises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1.
DEFINITIONS
1.1 CERTAIN DEFINITIONS. The following terms shall, when used in this
Agreement, have the following meanings:
"ADVERSE CONSEQUENCES" mean all actions, suits, proceedings, claims,
injunctions, judgments, orders, damages, costs, losses, amounts paid in
settlement, liabilities, expenses and fees (including court costs and legal
fees, costs and expenses).
"ADVERTISING AND DEVELOPMENT FUND" means those funds collected from
Primrose Franchisees in accordance with the terms of the franchise agreement
between Primrose and each of the Primrose Franchisees for advertising and
development, and maintained on the books of Primrose for payment of expenses in
accordance with the terms of the franchise agreement between Primrose and each
of the Primrose Franchisees.
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"APPLICABLE RATE" means the rate of interest publicly announced by
Canadian Imperial Bank of Commerce ("CIBC") in New York, New York from time to
time as its base rate.
"ASSETS" mean all properties, assets, rights, interests and claims of
every type and description that are owned, leased, held or used in the Business
and in which the Companies have any right, title or interest or in which the
Companies acquire the right, title or interest on or before the Closing Date,
wherever located, and whether or not now or on the Closing Date on the Books and
Records of the Companies, including, without limitation, Books and Records,
Contracts, Intangibles, Intellectual Property and Equipment.
"BEST OF KNOWLEDGE OF THE SHAREHOLDERS" or any similar phrase shall mean
the actual knowledge of Xxxx X. Xxxxx and Xx Xxxxxxxx, it being understood that
such actual knowledge be established (i) by producing documentation existing
prior to the Closing Date (including in e-mail, computer files and the like)
with respect to the disclosure or omission in question and proof that Xxxxx or
Xxxxxxxx had personally received such documentation or been involved in
producing such documentation, (ii) by documentation created prior to the Closing
Date evidencing that Xxxxx or Xxxxxxxx was informed of the matter that was the
subject of the disclosure or omission prior to the Closing Date, or (iii) by an
admission of Xxxxx or Xxxxxxxx that he or she had actual knowledge of the matter
in question.
"BOOKS AND RECORDS" mean all of the Companies' books and records,
franchise agreements, manuals, invoices, sales materials and records, franchisee
lists, mailing lists, marketing information, personnel records and files,
technical data and records, all other financial records and all books and
records relating to the Companies' formation and capitalization, including
minute books and stock books.
"BUSINESS" means collectively the Primrose Business, the Metrocorp
Business and the Country Day Business.
"BUSINESS DAY" means any day other than Saturday, Sunday or a day on which
banking institutions in Atlanta, Georgia are required or authorized to be
closed.
"CHANGE IN CONTROL" shall be deemed to have taken place if:
(i) there shall be consummated any consolidation or merger of SCC in
which SCC is not the continuing or surviving corporation or pursuant to which
shares of SCC's capital stock are converted into cash, securities or other
property other than a consolidation or merger of SCC in which the holders of
SCC's voting stock immediately prior to the consolidation or merger shall, upon
consummation of the consolidation or merger, own at least 50% of the voting
stock of the surviving corporation, or any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of SCC; or
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(ii) any person (as such term is used in Sections 13(d) and 14
(d)(2) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
), shall after the date hereof become the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of securities
of SCC representing more than 50% of the voting power of all then outstanding
securities of SCC having the right under ordinary circumstances to vote in an
election of the Board of Directors of SCC (the "BOARD")(including, without
limitation, any securities of SCC that any such person has the right to acquire
pursuant to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, which shall be deemed beneficially owned by such person).
"CITIZENS FIRST INDEBTEDNESS" means the amount owed Citizens First Bank,
Rome, Georgia as of the Closing Date that has been borrowed by Metrocorp from
Citizens First Bank and utilized for the investigation and/or development of
Primrose Sites under contract or under consideration by Metrocorp as of the
Closing Date or for the payment of xxxxxxx money under any contract. Such
Citizens First Indebtedness is personally guaranteed by Xxxxx (the "Xxxxx
Guaranty") and Xxxxx has pledged property owned by him personally to secure such
guaranty (the "Xxxxx Collateral").
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES' ACCOUNTANT" means Xxxxx & Xxxxxx, P.C.
"COUNTRY DAY BUSINESS" means the operation of Country Day's child care
facility in Marietta, Georgia.
"EBITDA" means earnings before interest, taxes, depreciation, amortization
and any management fees paid by the Companies to SCC and/or Capital Partners,
Inc.
"ELECTION CORPORATION" means any Company that is subject to a Section
338(h)(10) Election (or a similar state or local election).
"EMPLOYEE BENEFIT PLAN" means any: (a) non-qualified deferred compensation
or retirement plan or arrangement that is an Employee Pension Benefit Plan; (b)
qualified defined contribution retirement plan or arrangement that is an
Employee Pension Benefit Plan; (c) qualified defined benefit retirement plan or
arrangement that is an Employee Pension Benefit Plan (including any
Multiemployer Plan); (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program; or (e) other employee benefit arrangement or payroll
practice.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Section
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Section
3(1).
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"ENCUMBRANCE" means any mortgage, pledge, lien, encumbrance, security
interest, security agreement, conditional sale or other title retention
agreement, but excluding encumbrances for current Taxes not delinquent or being
contested in good faith.
"ENVIRONMENTAL LAW" means any federal, state or local laws, regulations,
statutes, ordinances, orders, codes, common law, rules, judgments or decrees
relating to the protection of health and the environment, worker health and
safety, and/or governing the handling, use, generation, treatment, storage,
transportation, disposal, manufacture or distribution, exposure or release of
Hazardous Substances.
"EQUIPMENT" means the machinery, equipment, furniture, fixtures and
computer equipment owned or leased by the Companies.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"XXXXX EMPLOYMENT AGREEMENT" means an employment agreement for a term of
no more than 12 months for annual compensation of $150,000.00 requiring Xxxxx to
work for Purchaser and/or one or more of the Companies in a position and with
responsibilities comparable to those he has as of the Closing, and based in
Cartersville, Georgia on a part-time basis (50%), and providing Xxxxx and his
dependents with hospitalization insurance coverage comparable to that coverage
currently maintained by Primrose, all in the form of EXHIBIT 1 attached hereto.
"XXXXX STREET LEASE" means the lease for the Companies' principal offices
in Cartersville, Georgia between the Xxxxx Family Partnership, L.L.P., as
Landlord, and Primrose and/or Metrocorp, as Tenant.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"GOVERNMENTAL AUTHORITY" means: (i) the United States of America; (ii) any
state, commonwealth, territory or possession of the United States of America and
any political subdivision thereof (including counties, municipalities and the
like); (iii) any foreign (as to the United States of America) sovereign entity
and any political subdivision thereof; or (iv) any administrative agency,
regulatory authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
"HAZARDOUS SUBSTANCES" means petroleum, petroleum products, petroleum
by-products, asbestos or asbestos-containing materials and polychlorinated
biphenyls, together with and any other chemicals, materials, substances or
wastes in any amount or concentration which are regulated under any
Environmental Law.
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"INTANGIBLES" mean all claims, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set-off and other
intangible assets owned, used or held for use in the Business.
"INTELLECTUAL PROPERTY" means all of the following that are owned or used
in the Business: (i) trademarks, service marks, trade dress, logos, trade names
and corporate names and all applications, registrations and renewals in
connection therewith; (ii) patents, patent applications; (iii) copyrightable
works and copyrights and all applications, registrations and renewals in
connection therewith; (iv) trade secrets and confidential business information
(including research and development, know-how, formulas, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans); (v) all computer software
(including programs, data, files and related documentation); (vi) all franchise
agreements, operating manuals, pre-owning manuals and other training manuals
utilized by the Companies; and (vii) all copies and tangible embodiments of any
of the foregoing (in whatever form or medium).
"LEGAL REQUIREMENT" means any statute, ordinance, law, rule, regulation,
code, injunction, judgment, order, decree, ruling or other requirement, standard
or procedure enacted, adopted or applied by any Governmental Authority,
including judicial decisions applying common law or interpreting any other Legal
Requirement.
"LIABILITY" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, and whether liquidated or unliquidated), including any liability
for Taxes.
"LONG TERM BENEFIT AGREEMENT" means the Long Term Benefit Agreement
between Primrose as Employer and Xx Xxxxxxxx as Employee dated January 5, 1998.
"MADSP" means the modified aggregate deemed sales price at which an
Election Corporation is deemed to have sold its assets for Tax purposes as a
result of a Section 338(h)(10) Election (or a similar state or local election).
"MATERIAL ADVERSE EFFECT" means an event, change or occurrence which
individually, or together with any other event, change or occurrence, has a
material adverse effect on the financial position, business or results of
operations of the Companies taken as a whole; provided, however, that the term
"Material Adverse Effect" shall be deemed not to include the effect of (i)
changes in laws of general applicability or interpretations thereof by courts or
other governmental authorities; (ii) changes in GAAP; (iii) actions or omissions
of any Company taken with the prior written consent of Purchaser; (iv) the
consummation of the Transaction on the operating performance of any Company; or
(v) the loss of the services of any employee of any of the Companies other than
Xx Xxxxxxxx and/or Xxxx Xxxxx.
"METROCORP BUSINESS" means the operation of a real estate development
business.
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"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"ORDINARY COURSE" means the ordinary course of business consistent with
past practice.
"PARTIES" means, collectively, the Shareholders, SCC and Purchaser.
"PERMIT" means any license, permit, consent, approval, registration,
authorization, qualification or similar right granted by a Governmental
Authority.
"PERMITTED ENCUMBRANCES" means any lien granted to Citizens First Bank or
any other lending institution by Metrocorp in regard to any Primrose Site or
Primrose Facility as of the date of Closing and shown on SCHEDULE 3.6 hereto.
"PERSON" means any natural Person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
"POST-CLOSING PERIOD" means any taxable period or portion thereof
beginning after the Closing Date or, as the context may require, all such
periods. If a taxable period begins on or before the Closing Date and ends after
the Closing Date, then the portion of the taxable period that begins on the day
following the Closing Date shall constitute a Post-Closing Period.
"PRE-CLOSING PERIOD" means any taxable period or portion thereof ending on
or before the Closing Date or, as the context may require, all such periods. If
a taxable period begins on or before the Closing Date and ends after the Closing
Date, then the portion of the taxable period to the end of the Closing Date
shall constitute a Pre-Closing Period.
"PRIMROSE BUSINESS" means the operation of a child care franchising
company.
"PRIMROSE COUNTRY DAY LEASE" means the lease from Xxxxx as lessor to The
Jewel I, Inc. in regard to the premises in Marietta, Georgia utilized for the
operation of the Primrose Country Day School.
"PRIMROSE FRANCHISEE" means any franchisee of Primrose.
"PRIMROSE SITE" means any tract or parcel of real property under contract
by Metrocorp that is being investigated for use as a Primrose Facility, or that
is being considered as a site for a Primrose Facility though not under contract.
"REPRESENTATIVE" means any director, officer, employee, agent, consultant,
adviser or other representative of a Person, including legal counsel,
accountants and financial advisors.
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"SECTION 338 TAX" means a Tax that is attributable to, or arises or
results from, a Section 338(h)(10) Election (or any similar state or local
election), irrespective of whether such Tax arises in a Pre-Closing Period or a
Post-Closing Period.
1.2 OTHER DEFINITIONS. The following terms shall, when used in this
Agreement, have the meanings assigned to such terms in the Sections indicated.
TERM SECTION
---- -------
"CLOSING" 2.6
"CLOSING DATE" 2.6
"CONTRACTS 3.14
"ESCROW AGENT" 2.5
"FINANCIAL STATEMENTS" 3.8
"PREFERRED SHARES" 2.2
"PURCHASE PRICE" 2.2
"SECURITIES ACT" 3.19
"SURVIVAL PERIOD" 11.1
"TAXES" 3.12
"TAX RETURNS" 3.12
"TRANSFER" 5.2
ARTICLE 2.
PURCHASE OF SHARES
2.1 PURCHASE OF SHARES. Subject to the terms and conditions of this
Agreement, and for the consideration hereinafter provided, the Shareholders
hereby agree to sell, convey, assign and transfer the Shares to Purchaser, and
Purchaser hereby agrees to acquire and purchase the Shares from the
Shareholders, on and as of the Closing Date, free and clear of all Encumbrances.
2.2 PURCHASE PRICE. The aggregate Purchase Price for the Shares (the
"PURCHASE PRICE") consists of (i) U.S. $26,650,000, payable $24,650,000 in cash
and $2 million through the delivery to the Shareholders of 500,000 shares (the
"PREFERRED SHARES"), $10 liquidation value per share, of zero coupon Convertible
Preferred Stock of SCC, convertible into 500,000 shares of Class A Common Stock,
par value $.01 per share, of SCC, or redeemable at the greater of liquidation
value or the value specified in the Certificate of Designation in the form of
EXHIBIT 2 hereto at the Shareholders' option either (a) at the end of each of
the third and fourth anniversaries of the Closing Date if the most recently
completed fiscal year combined EBITDA of the Companies was $8.5 million or
higher, provided that none of the Companies is in default under its loan
agreements before and after such redemption or (b) at the end of the fifth
anniversary of the Closing Date at a ratio of actual combined EBITDA of the
Companies for the most recently completed fiscal year over $8.5 million
multiplied by $5 million, provided that none of the Companies is in default
under its loan
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agreements before and after such redemption or (c) at the end of the seventh
anniversary of the Closing Date or (d) upon a Change in Control or (e) in the
event of a public offering by SCC of its Class A Common Stock, provided that
none of the Companies is in default under its loan agreements before and after
such redemption and that the underwriters of such public offering do not object
to such redemption as a use of proceeds; and (ii) the payment by Purchaser
and/or the Companies of the Citizens First Indebtedness. The holders of the
Preferred Shares will be entitled to a preemptive right in certain instances, as
more fully described in the Certificate of Designation in the form of EXHIBIT 2
hereto. The Parties acknowledge and agree that the Preferred Shares will have a
present value of $2,000,000 as of the Closing Date. The Purchase Price shall be
allocated among the Shareholders of the Companies as set forth in SCHEDULE 2.3
hereto.
2.3 PAYMENT OF PURCHASE PRICE. On the Closing Date, Purchaser shall: (a)
pay to the Shareholders the cash portion of the Purchase Price (less the
escrowed amount set forth in Section 2.5), by wire transfer to a bank account
designated in writing by each Shareholder; and (b) deliver to the Shareholders
certificates evidencing the Preferred Shares.
2.4 NET INCOME DISTRIBUTION.
(a) RIGHT TO RECEIVE NET INCOME. The Shareholders shall be entitled
to receive the combined net income of the Companies for the period between
January 1, 1999 and the Closing Date (the "NET INCOME"). If the Closing Date
occurs on other than the final day of any month, the Net Income with respect to
that month will be prorated based on the number of days that elapsed in that
month prior to the Closing Date. The Shareholders may make distributions prior
to the Closing Date of up to a maximum of 85% of the Net Income. Notwithstanding
anything to the contrary contained in this Agreement, the Shareholders shall pay
100% of their expenses referred to in the first sentence of Section 14.11.
(b) ESTIMATED NET INCOME CLOSING STATEMENT. On the Closing Date, the
Shareholders shall deliver to Purchaser a statement (the "ESTIMATED NET INCOME
CLOSING STATEMENT") prepared in accordance with GAAP, consistent with prior
practice, setting forth a calculation of the Shareholders' good faith estimate
of the Net Income (the "ESTIMATED NET INCOME"). On the Closing Date, either the
Purchaser shall pay to the Shareholders an amount equal to 85% of the Estimated
Net Income (as shown on the Estimated Net Income Closing Statement), less all
distributions made to the Shareholders pursuant to this Section or, if the
distributions made to the Shareholders pursuant to this Section are greater than
85% of the Estimated Net Income, the Shareholders shall pay such excess to the
Purchaser on the Closing Date.
(c) NET INCOME CLOSING STATEMENT. Within forty-five days after the
Closing Date, the Shareholders will prepare and deliver to Purchaser an
unaudited income statement of each Company for the period from January 1, 1999
to the Closing Date prepared in accordance with GAAP, consistent with prior
practice, and reviewed by the Companies' Accountant, together with a statement
setting forth a calculation of the Net Income (the "NET INCOME CLOSING
STATEMENT"). The
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calculation of Net Income with respect to the month in which the Closing occurs
shall be made using royalties receivable as paid by the twentieth (20th) day of
the month following the Closing. All fees and expenses incurred and to be
incurred by the Shareholders and the Companies in connection with the
transactions contemplated by this Agreement shall be paid prior to the Closing
or accrued on the Estimated Net Income Closing Statement and on the Net Income
Closing Statement. To the extent the Net Income (as finally determined pursuant
to Section 2.4(d) below) is greater than 85% of the Estimated Net Income,
Purchaser shall promptly pay to the Shareholders the amount equal to the
difference. To the extent the Net Income (as finally determined pursuant to
Section 2.4(d) below) is less than 85% of the Estimated Net Income, the
Shareholders shall promptly pay to the Purchaser the amount equal to the
difference.
(d) NET INCOME CALCULATION.
(i) Purchaser shall be entitled to full access to the relevant
records and working papers prepared by or for the Shareholders
and full access to the employees of the Companies involved in
such preparation to aid in its review of the calculation of
the Net Income as set forth on the Net Income Closing
Statement. If Purchaser believes that the Net Income
calculation set forth therein (the "NET INCOME CALCULATION")
has not been properly calculated in accordance with the
calculation methodologies set forth in this Section 2.4, it
shall, within fifteen (15) days after receipt of the Net
Income Calculation, give written notice ("PURCHASER'S NET
INCOME OBJECTION") to the Shareholders, setting forth the
basis of Purchaser's Net Income Objection in reasonable detail
and, to the extent practicable, the adjustments to the Net
Income Calculation which Purchaser believes should be made.
Failure to so notify the Shareholders within such fifteen (15)
day period shall constitute acceptance and approval of the Net
Income Calculation. If the Shareholders agree that any change
proposed by Purchaser is appropriate, the change shall be made
to the Net Income Calculation, whereupon Purchaser shall be
deemed to have accepted and approved the Net Income
Calculation with respect to such change and any other
non-disputed item of the Net Income Calculation. If the
proposed change is disputed by the Shareholders, then the
Shareholders and Purchaser shall negotiate in good faith to
resolve such dispute as expeditiously as possible. If, after a
period of fifteen (15) days following the date on which
Purchaser gives the Shareholders notice of any such proposed
change, any such proposed change still remains disputed, then:
(ii) A neutral accounting firm (the "Neutral Accounting Firm")
shall be engaged by Purchaser and the Shareholders to resolve
any remaining disputes. The Neutral Accounting Firm shall act
as an arbitrator to determine, based solely on presentations
submitted by the Shareholders and Purchaser, and not by
independent review, only those issues still in dispute. Each
of Purchaser and
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the Shareholders shall have made its complete submission to
the Neutral Accounting Firm within ten (10) days following the
expiration of the fifteen (15) day negotiation period
described in Section 2.4(d)(i). The failure by either the
Shareholders or Purchaser to make a complete submission prior
to the expiration of such ten (10) day period shall be deemed
a waiver of such party's right to make a submission or a
further submission to the Neutral Accounting Firm. The Neutral
Accounting Firm's determination, based upon the calculation
methodologies set forth in this Section 2.4, shall be made
within thirty (30) days following the date on which the
dispute is submitted, shall be set forth in a written
statement delivered to the Shareholders and Purchaser and
shall be final, binding and conclusive. The fees and any
expenses of the Neutral Accounting Firm shall be paid by the
party whose Net Income Calculation was rejected by the Neutral
Accounting Firm. If the Neutral Accounting Firm disagrees with
both calculations, the fees and expenses will be shared
equally by the Shareholders and Purchaser. In the event a
party does not comply with the procedure and time requirements
contained herein, the Neutral Accounting Firm shall render a
decision based solely on the evidence it has which was timely
filed by either the Shareholders or Purchaser.
2.5 ESCROW. There shall be placed in escrow with Synovus Trust Company,
Atlanta, Georgia (the "ESCROW AGENT"), $1,500,000 of the $24,650,000 cash to be
paid by Purchaser to the Shareholders at the Closing as part of the
consideration for the Shares. Such $1,500,000 shall be delivered by Xxxxx to the
Escrow Agent at the Closing and shall be held and delivered by the Escrow Agent
in accordance with the terms and provisions of the Escrow Agreement in the form
of EXHIBIT 3 hereto (the "ESCROW AGREEMENT"), which Escrow Agreement Purchaser,
Xxxxx and the Escrow Agent shall execute and deliver at the Closing.
2.6 CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Xxxxxx, Xxxxx &
Xxxxxxx LLP, on April 6, 1999, provided that all conditions precedent to the
Closing set forth in Articles 7 and 8 have been satisfied or waived, or on such
other date that the Parties may agree, provided that all such conditions
precedent have been satisfied or waived. The date on which the Closing actually
occurs is referred to as the "CLOSING DATE."
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Xxxxx represents and warrants to Purchaser and SCC, and the Trust (solely
with respect to Sections 3.2, 3.16 and 3.19 and only to the best of the Trust's
knowledge with respect to the representations and warranties set forth in
Section 3.2) represents and warrants to Purchaser and SCC, as follows:
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3.1 ORGANIZATION. Each of the Companies is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia,
with all requisite power and authority to own, lease and use its assets as they
are currently owned, leased and used and to conduct its business as it is
currently conducted. Each of the Companies is duly qualified to conduct business
as a foreign corporation and is in good standing in each jurisdiction in which
the nature of its business or the ownership of its properties requires such
qualification, except where the failure to be so qualified and in good standing
would not have a Material Adverse Effect. The jurisdictions in which the
Companies are qualified to conduct business as foreign corporations are set
forth in SCHEDULE 3.1 hereto.
3.2 CAPITALIZATION. Each of the Companies' authorized, issued and
outstanding capital stock is fully and accurately described in SCHEDULE 3.2
hereto. The Shares represent all of the issued and outstanding shares of each of
the Companies and are owned, beneficially and of record, by the Shareholders, in
the amounts set forth in SCHEDULE 3.2 hereto, and no other Person has any right,
title or interest, whether legal, beneficial or equitable, in the Shares. No
Person has any preemptive or other rights with respect to any such capital stock
or securities, and there are no options, warrants, rights, agreements or
commitments of any kind (contingent or otherwise) relating to the issuance,
conversion, registration, sale or transfer of any equity interests or other
securities of the Companies or obligating the Companies or any other Person to
purchase or redeem any such equity interests or other securities. All of the
Shares have been duly authorized and are validly issued and outstanding, fully
paid and nonassessable, have been issued in compliance with applicable
securities laws and other Legal Requirements, and are not subject to any
Encumbrances. None of the Companies has any subsidiaries.
3.3 AUTHORITY AND VALIDITY. The Shareholders have all requisite power to
execute and deliver, to perform their respective obligations under and to
consummate the transactions contemplated by this Agreement. Upon the execution
and delivery of this Agreement by the Shareholders, this Agreement will be the
legal, valid and binding obligation of the Shareholders, enforceable against
each in accordance with its terms. This Agreement has been duly executed and
delivered by the Shareholders.
3.4 NO BREACH OR VIOLATION. Subject to obtaining the consents, approvals,
authorizations and orders of and making the registrations or filings with or
giving notices to Governmental Authorities and Persons set forth in SCHEDULE 3.4
hereto, if any, the execution, delivery and performance by the Shareholders of
this Agreement and the consummation of the transactions contemplated hereby in
accordance with the terms and conditions hereof do not and will not constitute a
violation or breach of, constitute a default (with or without the giving of
notice or right to cure) or give rise to any right of termination or
acceleration of any right or obligation of any Company or Shareholder under, or
result in the creation or imposition of any Encumbrance upon the Companies, the
Assets or the Business by reason of the terms of (i) the articles of
incorporation or by-laws of any Company, (ii) any material contract, agreement,
lease, indenture or other instrument to which any Shareholder or any Company is
a party or by or to which any Shareholder, any
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Company or the Assets may be bound or subject, (iii) any order, judgment,
injunction or decree of any Governmental Authority or any statute, law, rule or
regulation applicable to any Shareholder or any Company or (iv) any Permit of
any Company, which in the case of (ii), (iii) or (iv) above would have a
Material Adverse Effect.
3.5 CONSENTS AND APPROVALS. Except as set forth in SCHEDULE 3.5 hereto, no
consent, approval, authorization or order of, registration or filing with, or
notice to, any Governmental Authority or any other Person is necessary to be
obtained, made or given by any Shareholder or any Company in connection with the
execution, delivery and performance by them of this Agreement or for the
consummation by them of the transactions contemplated hereby.
3.6 TITLE TO ASSETS. None of the Companies owns any real property. Except
as set forth in SCHEDULE 3.6 hereto, the Companies have good and marketable
title to the Assets (or, in the case of leased Assets, a valid leasehold
interest in such Assets), free and clear of any and all Encumbrances except
Permitted Encumbrances. Except as provided by this Agreement, no Person has any
right to acquire, directly or indirectly, any interest in any Company or the
Assets, other than as set forth in SCHEDULE 3.6 hereto, and there is no
agreement to which any Company or Shareholder is a party or is otherwise bound
relating to the direct or indirect sale of the capital stock or Assets of any
Company, other than Primrose Sites and Primrose Facilities, the terms of which
are described in SCHEDULE 3.6 hereto.
3.7 INTELLECTUAL PROPERTY. The Companies own all right, title and interest
in the names "Primrose" and "Primrose School" in the locations where the
Companies do business, free and clear of any and all Encumbrances. To the Best
of Knowledge of the Shareholders, the Companies own all right, title and
interest in, or have valid and subsisting license rights sufficient to use and
to continue to use (as currently used by the Companies), all other Intellectual
Property used in their operation of the Business, free and clear of any and all
Encumbrances. To the Best of Knowledge of the Shareholders, (i) the Companies
have not, in their operation of the Business, infringed upon or misappropriated,
and (ii) the operation of the Business as currently conducted does not violate
or infringe upon, any Intellectual Property rights of third parties, where such
infringement, misappropriation or violation may result in a Material Adverse
Effect, and the Companies have not received any written complaint, claim, demand
or notice alleging any such infringement, misappropriation or violation. To the
Best of Knowledge of the Shareholders, no third party has infringed upon or
misappropriated any Intellectual Property rights of the Companies. To the Best
of Knowledge of the Shareholders, the Companies have no inventions or
discoveries that may be patentable. Except as set forth on SCHEDULE 3.7, all
information systems relating to the Business (including but not limited to,
information technology, embedded systems, or any other electro-mechanical or
processor-based system) licensed from suppliers, owned, sold, licensed or
otherwise made available by the Companies to customers or franchisees, or
otherwise used by the Companies with respect to the Business are free of any
"Year 2000 Problem" such that such information systems do not and will not,
without requiring any modifications, experience any malfunctions, premature
cancellation or expiration of contractual rights or deletion of data, or any
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other problems that would result in a Material Adverse Effect in connection with
(i) the year 2000 (and all subsequent years) as distinct from 1900's years, (ii)
the date February 29, 2000, and all subsequent leap years or (iii) the date
September 9, 1999.
3.8 FINANCIAL INFORMATION. The Companies have delivered to Purchaser the
following financial statements (collectively, the "FINANCIAL STATEMENTS"): (i)
Primrose Audited Financial Statements for the Fiscal Years ended December 31,
1994 through 1998, including Independent Auditor's Report; (ii) Metrocorp
Unaudited Financial Statements for the Fiscal Years ended December 31, 1994
through 1996, Unaudited Income Statement for the Fiscal Year ended December 31,
1997, Audited Balance Sheet as of December 31, 1997, including Independent
Auditor's Report, and Audited Financial Statements for the Fiscal Year ended
December 31, 1998, including Independent Auditor's Report; (iii) Country Day
Unaudited Financial Statements for the Fiscal Years ended December 31, 1994
through 1998, except that the Balance Sheet as of December 31, 1998 is audited
and includes an Independent Auditor's Report; and (iv) Combined Financial
Statements of the Companies for the Years ended December 31, 1994 through 1998,
as compiled by the Companies' Accountants (the "COMBINED FINANCIAL STATEMENTS").
The Financial Statements that are audited are in accordance with the Books and
Records of the Companies, and fairly present the financial position of the
Companies as of such respective dates and the results of their operations for
the respective periods then ended in accordance with GAAP. The Financial
Statements that are unaudited are in accordance with the Books and Records of
the Companies, and fairly present the financial position of the Companies as of
such respective dates and the results of their operations for the respective
periods then ended. Except for obligations and liabilities under the terms of
any contract set forth in SCHEDULE 3.14 hereto, the Companies had no material
(individually or in the aggregate) obligations or liabilities, absolute, accrued
or contingent, as of the date of the December 31, 1998 Combined Balance Sheet of
the Companies included in the Combined Financial Statements (the "DECEMBER 1998
BALANCE SHEET").
3.9 EVENTS SUBSEQUENT TO DECEMBER 31, 1998. Since January 1, 1999, except
as set forth in SCHEDULE 3.9 hereto, none of the Companies has (i) issued any
stock, bonds or other corporate securities; (ii) borrowed any amount or incurred
any liabilities (absolute or contingent) that would be required to be disclosed
on a balance sheet as of the date hereof prepared in accordance with GAAP,
except current liabilities incurred, and liabilities under contracts entered
into, in the Ordinary Course or liabilities for legal fees and accounting fees
incurred in connection with the transactions contemplated hereby and other
liabilities not material in amount; (iii) discharged or satisfied any lien or
paid any obligation or liability (absolute or contingent) other than current
liabilities shown on the December 1998 Balance Sheet, current liabilities
incurred since that date in the Ordinary Course and liabilities for legal fees
incurred in connection with the transactions contemplated hereby; (iv) declared
or made any payment or distribution to shareholders or purchased or redeemed any
shares of its capital stock or other securities; (v) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, other than liens of
current real property taxes not yet due and payable; (vi) sold, assigned or
transferred any of its tangible assets or canceled any debts or claims, except
in the Ordinary Course; (vii) sold, assigned or transferred any patents,
trademarks,
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trade names, copyrights, trade secrets or other intangible assets; (viii)
suffered any material losses or waived any rights of substantial value, whether
or not in the Ordinary Course; (ix) received notification of cancellation, or
canceled or waived, any rights which, individually or in the aggregate, are
material with respect to any currently existing agreement, contract, right or
understanding; (x) made any changes in officer compensation or paid any bonuses,
except in the Ordinary Course; (xi) entered into any transaction except in the
Ordinary Course; (xii) been the subject of any claims from the holders of any of
its securities; or (xiii) suffered a material adverse change in its business,
assets, properties, operations or condition (financial or other).
3.10 UNDISCLOSED LIABILITIES. Except as disclosed in this Agreement or in
SCHEDULE 3.10 hereto, each Company has no material Liability, other than (i)
Liabilities that are set forth on the December 1998 Balance Sheet; and (ii)
Liabilities incurred in the Ordinary Course since December 31, 1998.
3.11 LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 3.11 hereto, there
is no order, action, suit, proceeding, claim or arbitration, or any
investigation by or before any person or entity, including, but not limited to,
any Governmental Authority, (i) pending, issued or outstanding with respect to
any Company or the Business; (ii) challenging any Company's or any Shareholder's
right to execute, deliver, perform under or consummate the transactions
contemplated by this Agreement; or (iii) asserting any right with respect to any
of transactions contemplated by this Agreement and, in each such case, to the
Best of Knowledge of the Shareholders, there is no basis for or threat of any
such action, suit, proceeding, claim, arbitration or investigation. Except as
set forth in SCHEDULE 3.11 hereto, to the Best of Knowledge of the Shareholders,
there is no order, action, suit, proceeding, claim or arbitration, or any
investigation by or before any person or entity, including, but not limited to,
any Governmental Authority, pending, issued, outstanding or threatened against
or relating to any Primrose Franchisee or its business that might have a
Material Adverse Effect.
3.12 TAXES.
(a) Each Company has duly and timely filed all returns, reports or
statements (including information statements) ("TAX RETURNS") required to have
been filed with respect to all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, AD VALOREM, transfer, value
added, franchise, bank shares, withholding, payroll, employment, disability,
excise, property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto ("TAXES"). Each such
Tax Return correctly and completely reflects the income, franchise or other Tax
liability and all other information required to be reported thereon. All Taxes
due and payable by each Company, whether or not shown on any Tax Return, have
been paid. Each Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party.
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(b) Each Company, other than Metrocorp, at all times and for each
taxable year since its incorporation has been, and up to and including the
Closing Date will remain, an "S corporation" within the meaning of Section
1361(a) of the Code. Metrocorp has at all times since January 1, 1991 been, and
up to and including the Closing Date will remain, an "S Corporation" within the
meaning of Section 1361(a) of the Code.
(c) Each Company, other than Metrocorp, at all times and for each
taxable year since its incorporation has been, and up to and including the
Closing Date will remain, an "S corporation" within the meaning of Subsection
(7)(B) of Section 48-7-21 of the Code of Georgia of 1981, as amended. Metrocorp
has at all times since January 1, 1991 been, and up to and including the Closing
Date will remain, an "S Corporation" within the meaning of Subsection (7)(B) of
Section 48-7-21 of the Code of Georgia of 1981, as amended.
(d) Primrose and Metrocorp have been "S corporations" under the tax
laws of Ohio, Florida, North Carolina, Colorado and Alabama since they have been
required to file income tax returns in those states, and they will remain "S
corporations" in those states up to and including the Closing Date.
(e) Each Company has properly and fully accrued on its financial
statements, referred to in Sections 2.4, 2.5 and 3.8 above, all Taxes for any
period from the date of the last reporting period covered by such Tax Returns to
the Closing Date.
(f) None of the Companies is a party to any agreement extending the
time within which to file any Tax Return; provided, however, that the 1998
federal and state Tax Return filing dates may be extended to April 15, 1999. No
claim has ever been made by a jurisdiction in which any of the Companies do not
file Tax Returns that any of the Companies is or may be subject to taxation by
that jurisdiction.
(g) Except as set forth in SCHEDULE 3.12 hereto, none of the Tax
Returns of any of the Companies has been examined by the Internal Revenue
Service or any other similar taxing authority having the responsibility for
auditing Tax Returns for the taxable periods ending on the Closing Date.
Further, no facts exist or have existed which would constitute grounds for the
assessment of any Tax liability for any of the Companies for the taxable periods
ending on the Closing Date which have not been audited by the Internal Revenue
Service. No issue has been raised by the Internal Revenue Service or such other
similar taxing authority having the responsibility for auditing any Tax Returns
for the jurisdictions in which such Tax Returns are filed in any such
examination which, by application of the same or similar principles, reasonably
could be expected to result in a material proposed deficiency for any other
period not so examined. Each Company has delivered to Purchaser complete and
correct copies of all federal, state, local and foreign income Tax Returns filed
by, and all Tax examination reports and statements of deficiencies assessed
against or agreed to by, any of the Companies since January 1, 1995.
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(h) None of the Companies has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(i) None of the Companies has received any written ruling related to
Taxes or entered into any written and legally binding agreement with a Tax
authority relating to Taxes.
(j) (i) None of the Companies has liability for the Taxes of any
other person (other than the Companies) under Section 1.1502-6 of the Treasury
Regulations, or any similar provision of state, local or foreign law, as a
transferee or successor, by contract or otherwise; (ii) none of the Companies is
a party to any tax sharing agreement or tax indemnity agreement which would
require it to make any payment to any person (other than the Companies) by
reason of any Taxes imposed upon such person; (iii) none of the Companies has
liability for the Taxes of any other person (other than the Companies) as a
"transferee" within the meaning of Section 6901 of the Code; (iv) none of the
Companies has ever had a "change in method of accounting" as defined in Section
1.446-1(e)(2)(ii) of the Treasury Regulations; (v) there is no predecessor
corporation which would be treated as one corporation with any of the Companies
for purposes of Section 1374(c)(1) of the Code; (vi) no asset of any of the
Companies the basis of which is determined in whole or in part by the basis of
such asset in the hands of a "C Corporation" (as such term is defined in Section
1361(a)(2) of the Code) was acquired from any C corporation; (vii) none of the
Companies has any "net unrealized built-in gain," as defined in Section
1374(d)(1) of the Code; and (viii) none of the Companies is a party to any
agreement which would require it to make any payment which would constitute a
"parachute payment" for purposes of Sections 280G and 4999 of the Code.
3.13 EMPLOYEE BENEFITS; EMPLOYEES.
(a) All Employee Benefit Plans maintained or contributed to by any
Company currently, or within the past six years, are set forth in SCHEDULE 3.13
hereto. All such plans have been operated in accordance with their terms and
applicable law, and all required governmental filings have been made with
respect thereto. No such plan is an Employee Pension Benefit Plan, nor does any
such plan provide for any benefits beyond the termination of an employee's
employment, except where required by law. Except with respect to each other, no
Company is, and at no time has been, a member of a controlled group (within the
meaning of Section 412(n)(6)(C) of the Code) with any other entity. No benefit
under any Employee Benefit Plan will become payable or accelerated by reason of
the consummation of the transactions contemplated by this Agreement.
(b) There are no collective bargaining agreements applicable to any
Persons employed by any Company, nor are any such Persons represented by a labor
union or organization. There are not pending any unfair labor practice charges
against any Company, nor is there any demand for recognition, or any other
request or demand from a labor organization for representative status with
respect to any Person employed by any Company. There are no existing or, to the
Best of Knowledge of the Shareholders, threatened labor strikes, disputes,
grievances or other labor controversies affecting any Company, and no such
activities have occurred in the prior 24 months.
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(c) There are not pending or, to the Best of Knowledge of the
Shareholders, threatened unfair labor practice charges, wage payment claims or
discrimination complaints relating to race, color, national origin, sex,
religion, age, marital status or disability against any of the Companies before
any Governmental Authority or court or other Person. None of the Companies is
bound by any court or administrative order, judgment or decree of any kind
affecting employment, compensation or benefits of any employee.
3.14 CONTRACTS. To the Best of Knowledge of the Shareholders, SCHEDULE
3.14 hereto contains a true, correct and complete list of each of the following
written contracts, agreements or commitments to which any Shareholder is a party
that relates to the Business, or to which any Company is a party or that relates
to the Business (collectively, the "CONTRACTS"):
(i) any agreement, note, guaranty or other instrument (or group of
related agreements) under which the Company has created,
incurred, assumed or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, or under which a
material amount of the Assets have been made subject to an
Encumbrance, including the Long Term Benefit Agreement, which
the Purchaser agrees to hold in confidence;
(ii) any agreement concerning confidentiality and non-competition;
(iii) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis;
(iv) any independent contractor agreement;
(v) any agreement concerning any obligation to pay wages,
severance, salaries, commissions or other compensation or
remuneration (other than obligations to make current wage or
salary payments terminable at will without notice) to or on
behalf of any employee, former employee, consultant or
contractor;
(vi) any lease of real property;
(vii) any agreement or commitment for material capital expenditures
or the acquisition of a material amount of fixed assets;
(viii) any agreement with any Primrose Franchisee; and
(ix) any other material agreement.
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The Company has delivered to Purchaser a correct and complete copy of each
written agreement listed in SCHEDULE 3.14 hereto.
3.15 INSURANCE. SCHEDULE 3.15 hereto sets forth the following information
with respect to each insurance policy relating to the Business (including
policies providing property, casualty, liability and workers' compensation
coverage and bond and surety arrangements) to which any Company is a party, a
named insured or otherwise the beneficiary of coverage:
(i) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(ii) the policy number and the period of coverage;
(iii) the scope and amount of coverage; and
(iv) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
3.16 BROKERS OR FINDERS. No broker or finder has acted directly or
indirectly for any Company or any of its Affiliates in connection with the
transactions contemplated by this Agreement, except for the Breckenridge Group,
Inc. and its Affiliate, Breckenridge Securities Corporation. The Shareholders
will pay the fees and expenses of Breckenridge Group, Inc. and such Affiliate.
3.17 COMPLIANCE WITH LAWS, ETC.
(a) Except as set forth on SCHEDULE 3.17, the business and
activities of the Companies and, to the Best of Knowledge of the Shareholders,
the business of the Primrose Franchisees have been and are being conducted in
compliance with all provisions of all applicable Federal, state and local
statutes, ordinances, rules and regulations, the failure to comply with which
would have a Material Adverse Effect. In particular, all of the franchises of
the Companies have been sold in compliance in all material respects with all
applicable federal, state and local franchise disclosure, registration and
relationship requirements. None of the Companies is in violation of or in
default under (i) any order, judgment or decree of any court, arbitration panel
or other tribunal; or (ii) any administrative order, rule making, procedure,
policy or other published declaration of (x) any Federal, state or local
governmental agency or other authority or (y) any professional society, board or
other similar organization, other than such violation or defaults referred to in
clause (ii) above which, in the aggregate, would not have a Material Adverse
Effect.
(b) Each Company holds all governmental licenses, permits,
franchises and other governmental authorizations necessary to the ownership of
its properties or the conduct of its properties or the conduct of its business
as currently conducted, and all such licenses, permits, franchises and other
governmental authorizations will remain in full force and effect immediately
18
following the Closing Date and will not in any way be affected by, or terminate
or lapse by reason of, the consummation of the transactions contemplated hereby.
3.18 ENVIRONMENTAL MATTERS. To the Best of Knowledge of the Shareholders,
none of the real property or any of the buildings, improvements, fixtures and
equipment forming a part of the real property owned or leased by the Companies
(the "FACILITIES") is in violation in any respect of or the subject of any
investigation or inquiry or enforcement action by any Governmental Authority
with respect to the presence or release of Hazardous Substances or for the
recovery of environmental response costs or for compliance with remedial
obligations under any applicable Environmental Law. To the Best of Knowledge of
the Shareholders, each of the Companies has obtained and is in compliance in all
respects with all environmental permits required by the applicable Environmental
Laws to construct, occupy, operate, and use the Facilities, no Hazardous
Substances have been disposed of or have otherwise been released on or from the
Facilities during the period of any Company's ownership or operation thereof,
and the uses each Company has made or makes of the Facilities has not resulted,
and will not result, in the generation, storage, disposal, or release of any
Hazardous Substances in violation of the Environmental Laws.
3.19 ACQUISITION FOR INVESTMENT. The Preferred Shares, and the shares of
Class A Common Stock of SCC issuable upon conversion of the Preferred Shares,
are being acquired by the Shareholders for their own accounts for the purpose of
investment and not with a view to the resale or distribution of all or any part
of such securities in violation of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), it being understood that the right to dispose of such
securities shall be entirely within the discretion of the Shareholders. Each of
the Shareholders represents and warrants that it is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act.
Each Shareholder understands that the securities to be issued to it have not
been registered under the Securities Act or any state securities laws by reason
of exemptions from the registration requirements of the Securities Act and such
state securities laws which depend upon, among other things, the accuracy of the
representations set forth in this Section 3.19. Such securities shall also be
subject to the transfer restrictions contained in this Agreement. Each
Shareholder understands that (i) the securities to be issued to it hereunder
must be held indefinitely, and such Shareholder must continue to bear the
economic risk of its investment in such securities, until and unless the offer
and sale of such securities are subsequently registered under the Securities Act
and all applicable state securities laws or an exemption from such registration
is available, (ii) there is no established market for the Preferred Shares and
it is not anticipated that there will be any such market for such securities in
the foreseeable future, and there is only a limited market for such shares of
Class A Common Stock and (iii) any offer or sale without registration will
require an exemption under the Securities Act.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SCC
19
Purchaser and SCC represent and warrant to the Shareholders as follows:
4.1 ORGANIZATION AND QUALIFICATION. Each of Purchaser and SCC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with all requisite power and authority to own, lease
and use its assets and to conduct its business as it is currently conducted.
Each of Purchaser and SCC is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or the ownership of its properties requires such qualification,
except where the failure to be so qualified and in good standing would have a
material adverse effect on Purchaser or SCC, as the case may be.
4.2 AUTHORITY AND VALIDITY. Each of Purchaser and SCC has all requisite
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by this Agreement. Upon the
execution and delivery of this Agreement by Purchaser and SCC, this Agreement
will be the legal, valid and binding obligation of each of Purchaser and SCC,
enforceable against it in accordance with its terms, regardless of whether such
enforceability is considered in a proceeding at law or in equity. The execution,
delivery, performance and consummation by each of Purchaser and SCC of the
transactions contemplated by this Agreement have been duly authorized by all
requisite corporate action of each of Purchaser and SCC, and this Agreement has
been duly executed and delivered by each of Purchaser and SCC.
4.3 NO BREACH OR VIOLATION. Subject to obtaining the consents, approvals,
authorizations, and orders of and making the registrations or filings with or
giving notices to Governmental Authorities and Persons set forth in SCHEDULE 4.3
hereto, if any, the execution, delivery and performance by Purchaser and SCC of
this Agreement and the consummation of the transactions contemplated hereby in
accordance with the terms and conditions hereof do not and will not conflict
with, constitute a violation or breach of, constitute a default (with or without
the giving of notice or right to cure) or give rise to any right of termination
or acceleration of any right or obligation of Purchaser or SCC under, or result
in the creation or imposition of any Encumbrance upon the property of Purchaser
or SCC by reason of the terms of (i) Purchaser's Certificate of Incorporation or
By-Laws or SCC's Amended and Restated Certificate of Incorporation or By-Laws;
(ii) any material contract, agreement, lease, indenture or other instrument to
which Purchaser or SCC is a party; (iii) any order, judgment, injunction, award
or decree of any Governmental Authority or any statute, law, rule or regulation
applicable to Purchaser or SCC; or (iv) any Permit of Purchaser or SCC, which in
the case of (ii), (iii) or (iv) above would have a material adverse effect on
the ability of Purchaser or SCC to perform its obligations under this Agreement.
4.4 CONSENTS AND APPROVALS. Except as set forth in SCHEDULE 4.4 hereto, no
consent, approval, authorization or order of, registration or filing with, or
notice to, any Governmental Authority or any other Person is necessary to be
obtained, made or given by Purchaser or SCC in connection with the execution,
delivery and performance by Purchaser or SCC of this Agreement or for the
consummation by Purchaser or SCC of the transactions contemplated hereby.
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4.5 LEGAL PROCEEDINGS. There is no action, suit or proceeding, judicial,
administrative or otherwise, that is pending or, to the best knowledge of
Purchaser or SCC, overtly threatened against Purchaser or SCC that challenges
the validity or propriety of, or may prevent or delay, any of the transactions
contemplated by this Agreement.
4.6 BROKERS OR FINDERS. No broker or finder has acted directly or
indirectly for Purchaser or SCC in connection with the transactions contemplated
by this Agreement, and Purchaser has incurred no obligation to pay any brokerage
or finder's fee or other commission in connection therewith.
ARTICLE 5.
PRE-CLOSING COVENANTS OF THE SHAREHOLDERS
Xxxxx covenants to Purchaser and SCC, and the Trust covenants (solely as
to Section 5.9) to Purchaser and SCC, as follows:
5.1 ADDITIONAL INFORMATION. The Shareholders shall cause the Companies to
provide to Purchaser and its Representatives (i) reasonable access to all of the
Assets, Liabilities and Books and Records of the Companies; and (ii) such
financial, operating and other documents, data and information relating to the
Companies, the Business, the Assets and the Liabilities of each Company as
Purchaser or its Representatives may reasonably request.
5.2 EXCLUSIVITY. Prior to the termination of this Agreement, the
Shareholders shall not and shall cause the Companies not to (i) solicit or
initiate the submission of any proposal or offer from any Person relating to the
direct or indirect sale or transfer of any of the Company's capital stock or the
Assets (a "SALE"); (ii) participate in any negotiations regarding, furnish any
information with respect to, assist or participate in any effort or attempt by
any Person to do or seek a Sale; (iii) enter into any agreement or understanding
relating to a Sale; or (iv) permit any Representative to engage in the foregoing
on behalf of the Companies or the Shareholders.
5.3 CONTINUITY AND MAINTENANCE OF OPERATIONS.
(a) The Shareholders shall cause each Company between the date
hereof and the Closing Date or termination of this Agreement to use reasonable
efforts to (i) comply with Legal Requirements applicable to each Company; (ii)
fulfill its obligations under the Contracts; (iii) use its reasonable business
judgment to promote, develop and preserve its relationships with its franchisees
and others having business relations with it; (iv) pay in the Ordinary Course
all accounts payable; and (v) not alter the rate of compensation of any of its
officers, directors or employees other than in the Ordinary Course. The
Shareholders shall cause each Company to maintain insurance relating to the
Business as in effect on the date of this Agreement, to continue in the Ordinary
Course
21
promotional and other activities with respect to the Business and to keep and
maintain all of the Books and Records in the Ordinary Course.
(b) The Shareholders shall not permit any Company to, without the
prior written consent of Purchaser: (i) sell, lease, transfer, convey or assign
any of the Assets (or enter into any contract to do any of the foregoing) other
than in the Ordinary Course, or in order to satisfy obligations under the Long
Term Benefit Agreement as required by Section 5.7 herein, or to comply with the
provisions of Sections 5.6 and 5.8 herein or to pay fees due as provided in
Section 3.16 herein, or permit the creation of any Encumbrance on any of the
Assets other than a Permitted Encumbrance; (ii) make any change in its
authorized or issued capital stock, grant any stock option or other right to
purchase shares of capital stock or other securities, issue or make any
commitment to issue any security, including any security exercisable for,
convertible into or exchangeable for capital stock; (iii) pay any dividend or
make any distribution on its capital stock or other securities (except as
permitted by Section 2.5); (iv) purchase, redeem, retire or make any other
acquisition of shares of its capital stock or other securities; (v) amend its
articles of incorporation or by-laws or any material agreement; (vi) assume,
create, incur or guarantee any indebtedness for borrowed money except in the
Ordinary Course; or (vii) waive any rights of material value; (viii) make any
changes in officer compensation or pay any bonuses, except in the Ordinary
Course; or (ix) enter into any transaction not in the Ordinary Course.
5.4 CONSENTS AND APPROVALS. As soon as practicable after execution of this
Agreement, the Shareholders shall use and cause each Company to use its
reasonable best efforts to obtain any necessary consent, approval, authorization
or order of, make any registration or filing with or give any notice to any
Governmental Authority or Person as is required to be obtained, made or given by
the Companies to consummate the transactions contemplated by this Agreement,
including, without limitation, any authorizations, consents, approvals, actions,
filings or notices set forth in SCHEDULE 3.5 hereto.
5.5 REMOVAL OF ENCUMBRANCES. Other than as to the Permitted Encumbrances,
the Shareholders shall take and cause the Companies to take all necessary
actions to cause the termination, release and removal, on or prior to the
Closing Date, of all Encumbrances relating to the Assets or the Business or
relating to the Companies which may reasonably be expected to affect the Assets
or the Business.
5.6 REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date, the Shareholders
shall cause the Companies to repay all indebtedness of the Companies, if any,
other than the Citizens First Indebtedness.
5.7 PAYOFF OBLIGATION UNDER LONG TERM BENEFIT AGREEMENT. Prior to the
Closing Date, the Shareholders shall cause the Companies to pay all obligations
and liabilities of the Companies under the Long Term Benefit Agreement, cause
such Long Term Benefit Agreement to
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be terminated and indemnify Purchaser and the Companies as to all claims
relating to the Long Term Benefit Agreement.
5.8 TRANSFERS OF RESTRICTED SECURITIES.
(a) RESTRICTIONS GENERALLY; SECURITIES ACT.
(i) Each Shareholder will not, directly or indirectly, sell, offer
for sale, assign, pledge, hypothecate, grant any option or
other right in respect of or otherwise transfer (collectively,
"TRANSFER") any of the Preferred Shares or the shares of Class
A Common Stock of SCC underlying the Preferred Shares
(collectively, "RESTRICTED SECURITIES"), except in accordance
with the terms of this Agreement. Any attempt by any
Shareholder to Transfer any Restricted Securities not in
accordance with the terms of this Agreement shall be null and
void, and neither the issuer of such securities nor any
transfer agent of such securities shall give any effect to
such attempted Transfer in its stock records.
(ii) Each Shareholder agrees that, in addition to the other
requirements imposed herein relating to Transfer, it will not
Transfer any Restricted Securities except pursuant to an
effective registration statement under the Securities Act, or
upon receipt by SCC of an opinion of counsel reasonably
satisfactory to SCC to the effect that registration is not
required because of the availability of an exemption from
registration under the Securities Act.
(b) LEGEND.
(i) Each certificate representing Restricted Securities held by
any Shareholder shall be endorsed with the following legends
and such other legends as may be required by applicable
securities laws or by SCC's Amended and Restated Certificate
of Incorporation:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF MAY NOT
SELL, OFFER FOR SALE, ASSIGN, PLEDGE, HYPOTHECATE, GRANT ANY
OPTION OR OTHER RIGHT IN RESPECT OF OR OTHERWISE TRANSFER
THESE SECURITIES WITHOUT THE CONSENT OF THE ISSUER HEREOF,
23
AND UNLESS IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE
SECURITIES LAWS."
(ii) Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new
certificate issued upon the completion of a Transfer pursuant
to a registered public offering under the Securities Act and
made in accordance with the Securities Act) shall also bear
such legend, unless in the opinion of counsel for SCC, the
Restricted Securities represented thereby are no longer
subject to the provisions of this Agreement or the
restrictions imposed under the Securities Act or state
securities laws, in which case the applicable legend (or
legends) may be removed.
5.9 FIRPTA CERTIFICATE. The Shareholders shall have executed a
certification of non-foreign status pursuant to Section 1.1445-2(b)(2) of the
Treasury Regulations.
5.10 TERMINATION OF TAX AGREEMENTS. The Shareholders shall have caused the
Companies to have terminated each Tax allocation or sharing agreement between
any of the Companies and any third party.
ARTICLE 6.
PRE-CLOSING COVENANTS OF PURCHASER AND SCC
Purchaser and SCC covenant to the Shareholders as follows:
6.1 CONSENTS AND APPROVALS. As soon as practicable after execution of this
Agreement, Purchaser and SCC shall use their best efforts to obtain any
necessary consent, approval, authorization or order of, make any registration or
filing with or give notice to any Governmental Authority or Person as is
required to be obtained, made or given by Purchaser or SCC to consummate the
transactions contemplated by this Agreement, including, without limitation, any
authorizations, consents, approvals, actions, filings or notices set forth in
SCHEDULE 4.4 hereto.
6.2 XXXXX GUARANTY AND XXXXX COLLATERAL. Purchaser will, on or prior to
the Closing Date, either (i) obtain a release of Xxxxx from the Xxxxx Guaranty
and obtain a release of the Xxxxx Collateral; or (ii) pay the Citizens First
Indebtedness. If such Citizens First Indebtedness is paid, such payment shall in
no way reduce the Purchase Price, but shall be a payment in addition to the
Purchase Price.
6.3 FINANCING. Purchaser and SCC will use all reasonable efforts to obtain
the necessary financing to consummate the transactions contemplated hereby.
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ARTICLE 7.
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND SCC
All obligations of Purchaser and SCC under this Agreement shall be subject
to the fulfillment at or prior to Closing of each of the following conditions,
it being understood that Purchaser may, in its sole discretion, to the extent
permitted by applicable Legal Requirements, waive any or all of such conditions
in whole or in part:
7.1 ACCURACY OF REPRESENTATIONS. All representations and warranties of the
Shareholders contained in this Agreement shall be, if specifically qualified by
materiality, true in all respects and, if not so qualified, shall be true in all
material respects, in each case on and as of the Closing Date with the same
effect as if made on and as of the Closing Date. The Shareholders shall have
delivered to Purchaser and SCC a certificate dated the Closing Date to the
foregoing effect.
7.2 COVENANTS. The Shareholders shall, in all material respects, have
performed and complied with each of the covenants, obligations and agreements
contained in this Agreement that are to be performed or complied with by them at
or prior to Closing. The Shareholders shall have delivered to Purchaser and SCC
a certificate dated the Closing Date to the foregoing effect.
7.3 CONSENTS. All consents, approvals, authorizations and orders required
to be obtained from, and all registrations, filings and notices required to be
made with or given to, any Governmental Authority or other Person as provided in
Sections 5.4 and 6.1 shall have been duly obtained, made or given, as the case
may be, and shall be in full force and effect, and any waiting period required
by applicable law or any Governmental Authority in connection with such
transactions shall have expired or have been earlier terminated.
7.4 DELIVERY OF DOCUMENTS. The Shareholders shall have delivered, or
caused to be delivered, to Purchaser and SCC the following documents:
(i) the original stock certificates of the Company evidencing the
Shares, endorsed in blank, with all required transfer stamps,
if any, affixed thereto;
(ii) an opinion of Brinson, Askew, Berry, Seigler, Xxxxxxxxxx &
Xxxxx, LLP, counsel to the Company, dated the Closing Date, in
the form attached hereto as EXHIBIT 4;
(iii) if requested by Purchaser, written resignations of the
officers and directors of each of the Companies, effective as
of the Closing;
(iv) the Xxxxx Employment Agreement, executed by Xxxxx;
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(v) evidence that the Long Term Benefit Agreement has been
terminated and that the Companies have paid all obligations
and liabilities of the Companies under the Long Term Benefit
Agreement; and
(vi) such other documents and instruments as Purchaser may
reasonably request to otherwise facilitate the consummation or
performance of any of the transactions contemplated by this
Agreement.
7.5 NO LITIGATION. No action, suit or proceeding shall be pending or
threatened before any Governmental Authority or other Person that would prohibit
or materially adversely affect Purchaser's ownership or operation of all or a
material portion of the Business or the Assets or the consummation of the
transactions contemplated hereby.
7.6 FINANCING. Purchaser shall have obtained the necessary financing to
consummate the transactions contemplated hereby.
7.7 OTHER EMPLOYMENT AGREEMENTS. Each of Xx Xxxxxxxx, Xxxxxxx Xxxxxx and
Xxxxxx Xxxxxxxx shall have entered into employment agreements with Purchaser
and/ or one or more of the Companies, substantially in the form attached hereto
as EXHIBIT 5.
ARTICLE 8.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS
All obligations of the Shareholders under this Agreement shall be subject
to the fulfillment at or prior to Closing of the following conditions, it being
understood that the Shareholders may, in their sole discretion, to the extent
permitted by applicable Legal Requirements, waive any or all of such conditions
in whole or in part:
8.1 ACCURACY OF REPRESENTATIONS. All representations and warranties of
Purchaser and SCC contained in this Agreement shall be, if specifically
qualified by materiality, true and correct in all respects and, if not so
qualified, shall be true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made on and as of the
Closing Date. Purchaser and SCC shall have delivered to the Shareholders a
certificate dated the Closing Date to the foregoing effect.
8.2 COVENANTS. Purchaser and SCC shall, in all material respects, have
performed and complied with each obligation, agreement, covenant and condition
contained in this Agreement and required by this Agreement to be performed or
compiled with by Purchaser and SCC at or prior to Closing. Purchaser and SCC
shall have delivered to the Shareholders a certificate dated the Closing Date to
the foregoing effect.
26
8.3 CONSENTS. All consents, approvals, authorizations and orders required
to be obtained from, and all registrations, filings and notices required to be
made with or given to, any Governmental Authority or other Person as provided in
Section 6.1 shall have been duly obtained, made or given, as the case may be,
and shall be in full force and effect, and any waiting period required by
applicable law or any Governmental Authority in connection with such
transactions shall have expired or have been earlier terminated.
8.4 DELIVERY OF DOCUMENTS. Purchaser, as applicable, shall have executed
and delivered, or caused to be executed and delivered, to the Shareholders the
following documents:
(i) evidence reasonably satisfactory to the Shareholders that each
of Purchaser and SCC has taken all action necessary to
authorize the execution of this Agreement and the consummation
of the transactions contemplated hereby;
(ii) opinion of Xxxxxx, Xxxxx & Bockius LLP, counsel to Purchaser,
dated the Closing Date, in the form attached hereto as EXHIBIT
6;
(iii) the Xxxxx Employment Agreement, as executed by Purchaser
and/or one or more of the Companies; and
(iv) such other documents and instruments as the Shareholders may
reasonably request to otherwise facilitate the consummation or
performance of any of the transactions contemplated by this
Agreement.
8.5 LITIGATION. No action, suit or proceeding shall be pending by or
before any Governmental Authority or other Person that would prevent the
consummation of any of the transactions contemplated by this Agreement.
8.6 LEASES. The Xxxxx Street Lease and the Primrose Country Day Lease
shall be ratified and affirmed by Purchaser. The term of the Xxxxx Street Lease
shall be for two (2) years from Closing and the term of the Country Day Lease
shall be for three (3) years from Closing. Each such Lease shall be a triple net
lease at the rent specified in EXHIBIT 7 (which Xxxxx believes to be a fair
market rent), provide for payments of taxes, insurance and maintenance by Tenant
and otherwise be substantially in the form attached hereto as EXHIBIT 7.
8.7 XXXXX GUARANTY AND COLLATERAL. The matters set forth in Section 6.2
shall be completed to the satisfaction of Xxxxx.
8.8 PURCHASE PRICE. The Purchase Price shall be delivered to the
Shareholders as provided in Section 2.2.
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ARTICLE 9.
POST-CLOSING COVENANTS
9.1 EMPLOYEE MATTERS. After the Closing, Purchaser will cause the
Companies to provide health insurance coverage to the employees of the Companies
under each Company's existing health insurance plan or a plan maintained by
Purchaser which provides comparable benefits for so long as such employees
remain employed by each Company.
9.2 TRANSFER TAXES, ETC. All sales, use, transfer, real property transfer,
gains, stamp, recording, stock transfer or other similar Taxes incurred in
connection with the transactions contemplated by this Agreement and due with
respect to the states in which the Companies conduct business, including any
interest, penalties, fines, assessments or additions to Tax, whether disputed or
not, imposed in respect of the foregoing, will be borne by the Shareholders. The
Shareholders will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer Taxes as required by
applicable law, and assume all responsibility for filing such Tax Returns and
documentation on an accurate, complete and timely basis. Purchaser, as
appropriate, will join in the execution of any such Tax Return or other
documentation.
9.3 REPORTING REQUIREMENTS, LEGENDS, ETC. SCC shall use its reasonable
efforts to (i) comply with the current public information requirements set forth
in Rule 144(c) under the Securities Act; and (ii) provide either of the
Shareholders or such Shareholder's prospective transferees with the information,
if any, required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. If any shares of Class A Common Stock of SCC held by either of
the Shareholders are or become eligible for sale pursuant to Rule 144(k) under
the Securities Act, then, upon the request of such Shareholder, SCC shall remove
any Securities Act legend from the certificates therefor.
9.4 401(K) PLAN. Within 90 days after the Closing, Purchaser shall
establish a non-contributory plan intended to be qualified under Section 401(k)
of the Code for the benefit of the employees of the Companies (the "Employees").
9.5 EMPLOYEE BENEFITS. Purchaser shall contribute a minimum of $15,000
(the "Minimum Benefit Amount") on an annual basis towards benefits for the
Employees. Purchaser shall (a) for the twelve months ended March 31, 2000,
allocate 20% of EBITDA for the twelve months ended March 31, 2000 in excess of
$4.3 million less the Minimum Benefit Amount toward benefits for the Employees;
and (b) for the twelve months ended March 31, 2001, Purchaser shall allocate
five to 10% of EBITDA for the twelve months ended March 31, 2001 in excess of
the actual EBITDA earned for the twelve months ended March 31, 2000. Purchaser
shall contribute the amounts set forth in (a) and (b) toward benefits for the
Employees to the extent such benefits are in line with the market as determined
by the Board of Directors of Purchaser.
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ARTICLE 10.
TERMINATION
10.1 EVENTS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to Closing as provided below:
(a) Purchaser and the Shareholders may terminate this Agreement by
mutual written consent at any time prior to Closing.
(b) Purchaser may terminate this Agreement by giving written notice
to the Shareholders at any time prior to Closing if the Shareholders have
breached any material representation, warranty or covenant contained in this
Agreement in any material respect, Purchaser has notified the Shareholders in
writing of the breach, and the breach has continued without cure for a period of
ten (10) days after receipt of the notice of breach.
(c) The Shareholders may terminate this Agreement by giving written
notice to Purchaser at any time prior to Closing if Purchaser has breached any
material representation, warranty or covenant contained in this Agreement in any
respect, the Shareholders have notified Purchaser in writing of the breach, and
the breach has continued without cure for a period of ten (10) days after
receipt of the notice of breach.
(d) Purchaser may terminate this Agreement if the Closing shall not
have occurred on or before April 6, 1999 by reason of the failure of any
condition precedent under Article 7 (unless the failure results primarily from
Purchaser breaching any representation, warranty or covenant contained in this
Agreement).
(e) The Shareholders may terminate this Agreement if the Closing
shall not have occurred on or before April 6, 1999 by reason of the failure of
any condition precedent under Article 8 hereof (unless the failure results
primarily from any of the Shareholders breaching any representation, warranty or
covenant contained in this Agreement).
10.2 LIABILITY IN EVENT OF BREACH. In the event the Closing does not take
place under this Agreement as a result of the breach of this Agreement by either
Purchaser and SCC, on the one hand, or the Shareholders, on the other hand,
after notice of such breach, and failure on the part of the other Party to cure
the same, the non-breaching Party shall be entitled to recover from the
breaching Party, as liquidated damages, the sum of $250,000.00, each Party
hereto acknowledging that such amount is a reasonable estimate of such damages
and that it is impossible to ascertain the exact amount of such damages. The
total liability of the Shareholders to Purchaser and SCC in the aggregate under
this paragraph shall be $250,000.00. The right to pursue liquidated damages as
set forth in this Section 10.2 shall be the sole and exclusive right of the
Parties, and none of the Parties shall have any other remedy at law or equity
under this Section 10.2.
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10.3 PROCEDURE UPON TERMINATION. If this Agreement is terminated by any
Party pursuant to this Article, notice of such termination shall promptly be
given by the terminating Party to the other Parties.
ARTICLE 11.
REMEDIES FOR BREACH OF THIS AGREEMENT
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements contained
in any certificate or other instrument delivered pursuant to this Agreement
shall be deemed representations and warranties hereunder by the Party delivering
such certificate or instrument. All of the representations and warranties of
Purchaser, SCC and the Shareholders contained in this Agreement shall survive
the Closing and continue in full force and effect for five hundred and forty
(540) days from and after the Closing Date; provided, however, that (i) any
representation or warranty related to Tax matters shall survive until 30 days
from and after the expiration of the applicable Tax statute of limitations; (ii)
any representation or warranty related to environmental matters shall survive
for a period of five years from and after the Closing Date; (iii) the
representations and warranties set forth in Section 3.10 shall survive for a
period of two years from and after the Closing Date; (iv) the representations
and warranties set forth in Section 3.2 shall survive for a period of five years
from and after the Closing Date; and (v) the representations and warranties of
the Trust shall survive for only as long as Xxxxxx X. Xxxxxxx, Xx. is trustee of
the Trust; PROVIDED, HOWEVER, that the representations and warranties of Xxxxx
with respect to the Trust shall survive for the applicable periods set forth in
clauses (i), (ii), (iii) and (iv) of this Section 11.1. The period of survival
prescribed by this Section 11.1 is referred to as the "Survival Period." The
liabilities of Purchaser, SCC and the Shareholders under their respective
representations and warranties will expire as of the expiration of the Survival
Period for such representations and warranties; provided, however, that such
expiration will not include, extend or apply to any representation or warranty,
the breach of which has been asserted by (i) Purchaser or SCC in a written
notice to the Shareholders before such expiration, or (ii) the Shareholders in a
written notice to Purchaser or SCC before such expiration, in each case which
indicates the basis for such claim in reasonable detail.
11.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF PURCHASER.
(a) If either of the Shareholders breaches any representations and
warranties contained in this Agreement or in any certificate or other instrument
delivered hereto and if Purchaser or SCC makes a written claim for
indemnification against the breaching Party or Parties within the Survival
Period for such representations and warranties, then, subject to the limitations
of subsection (c), Xxxxx shall indemnify Purchaser, SCC and the shareholders,
directors, officers, employees, successors and assigns of each of Purchaser and
SCC from and against any Adverse Consequences that any such Person may suffer
through and after the date of the claim for indemnification resulting from,
arising out of, relating to or caused by the breach.
30
(b) Subject to the limitations of subsection (c), Xxxxx shall
indemnify Purchaser, SCC and the shareholders, directors, officers, employees,
agents, successors and assigns of each of Purchaser and SCC from and against any
Adverse Consequences that any such Person may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any of the following (i) any
breach of any covenant, agreement or obligation of the Shareholders contained in
this Agreement or in any certificate or other instrument delivered hereto; (ii)
any Liability for Taxes attributable to the use, ownership or operation of the
Assets by any Company or the Business or otherwise imposed on any Company
relating to a Pre-Closing Period and any Section 338 Tax; and (iii) the matters
described on Schedule 11.2(b). Such Persons' rights to indemnity under this
Section 11.2 shall expire after the applicable Survival Period; provided,
however, that such expiration will not include, extend or apply to rights for
indemnity with respect to any claim asserted in good faith in a written notice
to Xxxxx before such expiration.
(c) Notwithstanding any provision herein to the contrary, (i) no
Person otherwise entitled to indemnification under this Section 11.2 shall be so
entitled until the aggregate amount otherwise payable under this Section 11.2
exceeds $250,000, in which event such Person shall be entitled to
indemnification for the amount in excess of $250,000; and (ii) in no event shall
the liability of Xxxxx under this paragraph to all Persons in the aggregate
exceed $3,000,000.00, except that the limitations set forth in (i) and (ii) of
this Section 11.2(c) shall not apply to any indemnification relating to breach
of the representations and warranties under Section 3.12, Section 3.18 or
Section 3.2 (relating to stock ownership) or relating to a breach of the
covenants set forth in Section 5.7, Section 5.10, Section 5.11 or Section 9.2,
or any indemnification obligation described in Sections 11.2(b)(ii) and (iii) or
a breach of any obligation set forth in Article 12.
11.3 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE SHAREHOLDERS.
(a) If Purchaser breaches any of its representations and warranties
contained in this Agreement or in any certificate or other instrument delivered
hereto and if the Shareholders make a written claim for indemnification against
Purchaser and SCC within the Survival Period, then Purchaser and SCC shall
indemnify, defend and hold harmless the Shareholders, and the assigns of either
of the Shareholders, from and against any Adverse Consequences that any such
Person may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, or caused by the breach.
(b) Purchaser shall indemnify the Shareholders, and the assigns of
either of the Shareholders against any Adverse Consequences that any such Person
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by any of the following: (i) any breach of any covenant, agreement or
obligation of Purchaser contained in this Agreement or in any certificate or
other instrument delivered hereto; and (ii) any Liability for Taxes attributable
solely to the use, ownership or operation of the Assets or the transferred
Business by Purchaser relating to a Post-Closing Period, excluding any Section
338 Tax.
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(c) SCC shall indemnify the Shareholders, and the assigns of either
of the Shareholders, against any Adverse Consequences that any such Person may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by any breach of any covenant, agreement or obligation of SCC contained in this
Agreement or in any certificate or other instrument delivered hereto.
(d) Notwithstanding any provision herein to the contrary, (i) no
Person otherwise entitled to indemnification under this Section 11.3 shall be so
entitled until the aggregate amount otherwise payable under this Section 11.3
exceeds $250,000, in which event such Person shall be entitled to
indemnification for the amount in excess of $250,000; and in no event shall the
liability of the Purchaser and SCC under this paragraph to all Persons in the
aggregate exceed $3,000,000.00.
11.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify either Purchaser, SCC or the
Shareholders (the "INDEMNIFIED PARTY") with respect to any matter (a "THIRD
PARTY CLAIM") that may give rise to a claim for indemnification against the
other (the "INDEMNIFYING PARTY") under this Article, then the Indemnified Party
shall promptly notify the Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party is
prejudiced thereby.
(b) 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: (i) the
Indemnifying Party notifies the Indemnified Party in writing within fifteen (15)
days after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of or caused by the Third Party
Claim; (ii) the Indemnifying Party provides the Indemnified Party with evidence
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder; (iii) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnified Party;
and (iv) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with subsection (b): (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim; (ii) the Indemnified Party
shall 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 (iii) the Indemnifying Party shall not consent to the
entry of any judgment or enter into any
32
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party.
(d) If, however, any of the conditions set forth in Section 11.4(b)
above is not or no longer satisfied: (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith); (ii) the
Indemnifying Party shall reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses); and (iii) the Indemnifying Party shall remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of or caused by the
Third Party Claim to the fullest extent provided in this Article 11.
11.5 DETERMINATION OF ADVERSE CONSEQUENCES; SUBROGATION. Purchaser, SCC
and the Shareholders shall take into account the time cost of money (using the
Applicable Rate as the discount rate) in determining Adverse Consequences for
purposes of this Article 11. All indemnification payments under this Article
shall be net of any insurance proceeds received by the Indemnified Party in
respect of the event or circumstance giving rise to the claim for
indemnification and shall be deemed adjustments to the Purchase Price. Upon
payment in full of any indemnification claim, whether such payment is effected
by set-off or otherwise, or the payment of any judgment or settlement with
respect to a Third Party Claim, the Indemnifying Party shall be subrogated to
the extent of such payment to the rights of the Indemnified Party against any
Person with respect to the subject matter of such indemnification claim or Third
Party Claim.
ARTICLE 12.
SECTION 338(H)(10) ELECTIONS AND OTHER TAX MATTERS
12.1 SECTION 338(H)(10) ELECTIONS. At the election of Purchaser, Purchaser
and the Shareholders jointly will make one or more elections under Section
338(h)(10) of the Code (each, a "SECTION 338(H)(10) ELECTION") with respect to
the acquisition of the Companies. At the further election of Purchaser,
Purchaser and the Shareholders jointly will make one or more elections for state
or local Tax purposes similar to a Section 338(h)(10) Election with respect to
the acquisition of the Companies. As provided in Section 11.2(b)(ii), all
Section 338 Taxes will be borne and paid by the Shareholders. With respect to
each Section 338(h)(10) Election (or similar state or local election), the
Shareholders will (i) treat the Section 338(h)(10) Election as valid; (ii) not
take any action inconsistent with such treatment; and (iii) file, or cause to be
filed, all Tax Returns in a manner consistent with the Section 338(h)(10)
Election.
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12.2 ELECTION FORMS AND ALLOCATIONS.
(a) As requested from time to time by Purchaser (whether before, at
or after the Closing), the Shareholders shall assist Purchaser in, and shall
provide the necessary information to Purchaser in connection with, the
preparation of any form or document required to effect a valid and timely
Section 338(h)(10) Election (or similar state or local election), including
Internal Revenue Service Form 8023, any similar form under state or local law
and any schedules or attachments thereto (collectively, "SECTION 338 FORMS").
Upon delivery of any Section 338 Form by Purchaser to the Shareholders, the
Shareholders shall duly and promptly execute such Section 338 Form and shall
deliver such executed Section 338 Form to Purchaser. If Purchaser determines
that any change is to be made in a Section 338 Form previously executed by the
Shareholders and delivered by the Shareholders to Purchaser, then Purchaser may
prepare a new Section 338 Form and deliver such new Section 338 Form to the
Shareholders, and the Shareholders shall duly and promptly execute such Section
338 Form and shall deliver such executed Section 338 Form to Purchaser.
(b) The portion of the Purchase Price allocable to the stock of each
Election Corporation in accordance with SCHEDULE 12.1 attached hereto shall be
further allocated in the manner described in this Section 12.2(b). With respect
to each Section 338(h)(10) Election (or similar state or local election), as
soon as practicable after the Closing Date, Purchaser shall determine (i) MADSP
and (ii) the allocation of MADSP among the assets of the Election Corporation
(collectively, the "ELECTION ALLOCATIONS"), in accordance with Section 338 of
the Code and the applicable Treasury regulations thereunder. For purposes of any
purchase price allocation made under this Article 12, the Purchaser and the
Shareholders agree that the tax basis of the Section 1245 property, as defined
in Section 1245(a)(3) of the Code, of each of the Companies is equal to the fair
market value of such Section 1245 property, as of the date hereof. Except as may
be required by law, the Shareholders will (i) file, or cause to be filed, all
Tax Returns in a manner consistent with the Election Allocations; and (ii) not
take any action inconsistent therewith.
12.3 OTHER TAX MATTERS.
(a) In the case of Taxes arising in a taxable period of any Company
that includes but does not end on the Closing Date, except as provided in the
next sentence, the allocation of such Taxes between the Pre-Closing Period and
the Post-Closing Period shall be made on the basis of an interim closing of the
books as of the end of the Closing Date. In the case of (i) franchise Taxes
based on capitalization, debt or shares of stock authorized, issued or
outstanding; and (ii) AD VALOREM Taxes, in either case attributable to any
taxable period that includes but does not end on the Closing Date, the portion
of such Taxes attributable to the Pre-Closing Period shall be the amount of such
Taxes for the entire taxable period, multiplied by a fraction the numerator of
which is the number of calendar days in such taxable period ending on and
including the Closing Date and the denominator of which is the entire number of
calendar days in such taxable period; PROVIDED, HOWEVER, that if any property,
asset or other right of any Company is sold or otherwise transferred
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prior to the Closing Date, then AD VALOREM Taxes pertaining to such property,
asset or other right shall be attributed entirely to the Pre-Closing Period.
(b) The Shareholders shall file or cause to be filed all Tax Returns
of each Company for all taxable periods that end on or before the Closing Date.
The Shareholders will allow Purchaser an opportunity to review and comment upon
such Tax Returns (including any amended Tax Returns). The Shareholders shall pay
all Tax liabilities shown by such Tax Returns to be due.
(c) Purchaser shall file or cause to be filed all Tax Returns of any
Company that are not described in Section 12.3(b). With respect to any Tax
Return of any Company for a taxable period that begins on or before and ends
after the Closing Date, not later than five Business Days before the due date
(including any extension thereof) for payment of Taxes with respect to such Tax
Return, the Shareholders shall pay to such Company the portion of the Taxes set
forth on such Tax Return that are allocable to the Pre-Closing Period, net of
any payments made prior to the Closing Date in respect of such Taxes, whether as
estimated Taxes or otherwise.
(d) Each Party hereto shall provide to each of the other Parties
hereto such cooperation and information as any of them reasonably may request
relating to Taxes. Each Party will retain all Tax Returns, schedules and work
papers, and all material records and other documents relating to Tax matters of
the Companies for their Tax period first ending after the Closing Date and for
all prior Tax periods until the later of (i) the expiration of the statute of
limitations for the Tax periods to which the Tax Returns and other documents
relate; or (ii) eight years following the due date (without extension) for such
Tax Returns. Thereafter, the Party holding such Tax Returns or other documents
may dispose of them; PROVIDED, that such Party shall give to the other Party
ninety (90) calendar days' prior written notice prior to doing so. Each Party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
ARTICLE 13.
NON-COMPETITION
13.1 PROHIBITED ACTIVITIES. Xxxxx agrees that he will not, for a period
commencing on the Closing Date and ending on the date that is six (6) years
following the Closing Date, for any reason whatsoever, directly or indirectly,
for himself or on behalf of or in conjunction with any other person, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, in
any business related to child-care or child or adult education
or any reasonable extension thereof (other than instruction
solely in sports or recreational activities) or the
franchising of any operations related
35
thereto (the "BUSINESS") within the United States of America
(the "TERRITORY");
(ii) hire, solicit or otherwise encourage or help in any way to
terminate the employment of any employee of the Companies (or
any current or future subsidiary or affiliate thereof) or hire
or solicit any former management employee who was an employee
of the Companies (or of any current or future subsidiary or
affiliate thereof) within six months of the date on which the
Executive attempts to hire or solicit such former management
employee;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to the Closing Date,
a franchisee, proposed franchisee or customer of any of the
Companies (including any subsidiaries thereof), within the
Territory for the purpose of entering into franchise
agreements or otherwise soliciting or selling products or
services in direct competition with any of the Companies (or
any subsidiaries thereof) within the Territory;
(iv) call upon any prospective acquisition or franchise candidate,
on Xxxxx'x own behalf or on behalf of any competitor of the
Business, which candidate, to the Best of Knowledge of the
Shareholders, was called upon by any of the Companies
(including any subsidiaries thereof) or for which, to the Best
of Knowledge of the Shareholders, any of the Companies (or any
subsidiary thereof) made an acquisition analysis for the
purpose of acquiring such entity or contemplated entering into
a franchise agreement with; or
(v) disclose customers, whether in existence or proposed, of any
of the Companies to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever except to the
extent that any of the Companies (including any subsidiary
thereof) has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit Xxxxx from acquiring as an investment not more than one percent (1%) of
the capital stock of a competing business whose stock is traded on a national
securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
Purchaser, SCC or any of the Companies as a result of a breach of the foregoing
covenant, and because of the immediate and irreparable damage that could be
caused to any of the Companies for which it would have no other adequate remedy,
Xxxxx agrees that, in the event of any breach or threatened breach by him, the
foregoing covenant may be enforced by Purchaser, SCC or any of the Companies by
injunctions and restraining orders.
36
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on Xxxxx in
light of the activities and business of the Companies on the date of the
execution of this Agreement and the current plans of Purchaser with respect to
the Business, which include the expansion of the Business throughout the United
States of America.
13.4 SEVERABILITY; REFORMATION. The covenants in this Article 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the Parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and this Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Article 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of Xxxxx against
Purchaser or SCC, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Purchaser, SCC or any of the
Companies of such covenants. It is specifically agreed that the period of six
(6) years stated at the beginning of this Article 13, during which the
agreements and covenants of Xxxxx made in this Article 13 shall be effective,
shall be computed by excluding from such computation any time during which Xxxxx
is in violation of any provision of this Article 13. The covenants contained in
Article 13 shall not be affected by any breach of any other provision hereof by
Purchaser or SCC.
13.6 MATERIALITY. Xxxxx hereby agrees that this covenant is a material and
substantial part of this transaction.
ARTICLE 14.
MISCELLANEOUS
14.1 PARTIES OBLIGATED AND BENEFITED. This Agreement shall be binding upon
the Parties and their respective assigns and successors in interest and shall
inure solely to the benefit of the Parties and their respective assigns and
successors in interest, and no other Person shall be entitled to any of the
benefits conferred by this Agreement. Without the prior written consent of the
other Parties, no Party may assign this Agreement or any of its rights or
interests or delegate any of its duties under this Agreement; provided, however,
that Purchaser may assign this Agreement or any of its rights or interests or
delegate any of its duties hereunder to an Affiliate; provided, however, that
any such assignment or delegation shall not release Purchaser from any of its
obligations hereunder.
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14.2 NOTICES. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section as promptly as practicable thereafter).
Notices shall be addressed as follows:
(a) If to Purchaser or SCC:
c/o Capital Partners Inc.
Xxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxxxxx
Telecopier: 203-625-0423
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esq.
Telecopier: 000-000-0000
(b) If to the Shareholders:
Xx. Xxxx X. Xxxxx
0000 Xxxx Xxxxxx Xxxx, X. X.
Xxxx Xxxxxx, Xxxxxxx 00000
Telecopier: 706/295-4561
with a copy to:
Brinson, Askew, Berry, Seigler, Xxxxxxxxxx & Xxxxx, LLP
000 Xxxx Xxxxx Xxxxxx
Xxxx Xxxxxx Xxx 0000
Xxxx, Xxxxxxx 00000-0000
Attention: Xxx X. Xxxxxxx, Xx., Esq.
Telecopier: 706/234-3574
Any Party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section.
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14.3 HEADINGS. The Article and Section headings of this Agreement are for
convenience only and shall not constitute a part of this Agreement or in any way
affect the meaning or interpretation thereof.
14.4 CHOICE OF LAW. This Agreement and the rights of the Parties under it
shall be governed by and construed in all respects in accordance with the laws
of the State of Georgia.
14.5 FURTHER ACTIONS. The Parties shall execute and deliver to each other,
from time to time at or after Closing, for no additional consideration and at no
additional cost to the requesting party, such further assignments certificates,
instruments, records, or other documents, assurances or things as may be
reasonably necessary to give full effect to this Agreement and to allow each
Party fully to enjoy and exercise the rights accorded and acquired by it under
this Agreement.
14.6 TIME OF THE ESSENCE. Time is of the essence under this Agreement. If
the last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act shall be extended to the next succeeding Business Day.
14.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
14.8 ENTIRE AGREEMENT; SEVERABILITY. This Agreement, including the
schedules and exhibits hereto and the documents, certificates and instruments
referred to herein, embodies the entire agreement and understanding of the
parties hereto in respect of the transactions contemplated by this Agreement and
supersedes all prior agreements, representations, warranties, promises,
covenants, arrangements, communications and understandings, oral or written,
express or implied, between the parties with respect to such transactions.
Except for the Confidentiality Agreement, dated September 2, 1998, between
Capital Partners and The Breckenridge Group, Inc. there are no agreements,
representations, warranties, promises, covenants, arrangements or understandings
between the parties with respect to such transactions, other than those
expressly set forth or referred to herein. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the Parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
14.9 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
Parties. No waiver by any party of any default, misrepresentation or breach of
warranty or covenant hereunder shall be valid unless the same shall be in
writing, and signed by the Person against whom its enforcement is sought, and
39
no such waiver 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.
14.10 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If 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."
14.11 EXPENSES. Except as otherwise in this Agreement, each Party shall
bear its own costs and expenses (including legal fees and expenses and
accountants' fees and expenses) incurred in connection with the negotiation of
this Agreement, the performance of its obligations and the consummation of the
transactions contemplated hereby. To the extent such expenses are incurred by
the Shareholders and the Companies, it is acknowledged that the same may be
allocated to and among the Shareholders and the Companies in such manner as they
deem appropriate.
14.12 ARBITRATION.
(a) ARBITRATION. Except solely for actions for injunctive or other
equitable relief or to enforce a final judgment or arbitral award, the parties
agree that any and all disputes between them, and any claim by either party that
cannot be amicably settled, shall be determined solely and exclusively by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association or any successor thereof. Arbitration shall take place
at an appointed time and place in Atlanta, Georgia.
(b) SELECTION OF ARBITRATORS. Each party shall select one (1)
arbitrator (who shall not be counsel for the party), and the two (2) so
designated shall select a third arbitrator. If either party shall fail to
designate an arbitrator within seven (7) days after arbitration is requested, or
if the two (2) arbitrators shall fail to select a third arbitrator within
fourteen (14) days after arbitration is requested, then such arbitrator shall be
selected by the American Arbitration Association or any successor thereto upon
application of either party. Judgment upon any award of the majority of
arbitrators shall be binding and shall be entered in a court of competent
jurisdiction. The award of the arbitrators may grant any relief which might be
granted by a court of general jurisdiction, including, without limitation, by
reason of enumeration, award of damages and/or injunctive relief, and may, in
the discretion of the arbitrators, assess, in addition, the costs of the
arbitration, including the reasonable fees of the arbitrators and reasonable
attorneys' fees, against either or both parties, in such proportions as the
arbitrators shall determine.
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14.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Purchaser and each
of the Shareholders hereby irrevocably submit to the jurisdiction of the state
courts located in Xxxxxx County, Georgia and federal court located in Xxxxxx
County, Georgia in connection with any suit, action or other proceeding arising
out of or relating to this Agreement and the transactions contemplated hereby,
and hereby agree not to assert, by way of motion, as a defense, or otherwise in
any such suit, action or proceeding that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced by such courts.
14.14 PUBLIC ANNOUNCEMENT. At all times at or before the Closing, none of
the Parties hereto will issue or make any statements or releases to the public
with respect to this Agreement or the transactions contemplated hereby without
the consent of the other Parties hereto, except for such public disclosure as
may be necessary not to be in violation of or default under any applicable
federal or state securities law or any rule or regulation of any national
securities exchange. Copies of such statements or releases by a Party shall be
provided to the other Parties prior to distribution. The Shareholders also will
obtain SCC's prior approval of any press release the Shareholders and the
Companies desire to issue following the Closing announcing the consummation of
the transactions contemplated by this Agreement. SCC will provide a copy to the
Shareholders of any press release SCC desires to issue following the Closing
announcing the consummation of the transactions contemplated by this Agreement
and provide the Shareholders reasonable time to comment on such press release.
14.15 ACCESS TO RECORDS OF COMPANIES. Purchaser agrees after the Closing
and for such surviving period as specified under Section 11.1 herein, to make
available to the Shareholders for inspection and copying all Books and Records
upon reasonable notice by the Shareholders to Purchaser.
41
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement
as of the day and year first above written.
PURCHASER:
PRIMROSE HOLDINGS, INC.
By:/S/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx, President
SCC:
SECURITY CAPITAL CORPORATION
By: /S/ A. XXXXXX XXXXXXX
A. Xxxxxx Xxxxxxx, President
SHAREHOLDERS:
/S/ XXXX X. XXXXX
XXXX X. XXXXX
THE XXXX X. XXXXX GRANTOR
RETAINED ANNUITY TRUST
By: /S/ XXXXXX X. XXXXXXX, XX.
Xxx X. Xxxxxxx, Xx., Trustee
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