EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
DATED AS OF JUNE 28, 2002
AMONG
TT ACQUISITION LLC
AND
TUTOR TIME LEARNING SYSTEMS, INC. AND
THE OTHER SELLERS NAMED HEREIN
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION...................................................................1
1.1 Definitions.....................................................................................1
1.2 Rules of Construction...........................................................................9
ARTICLE II PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES..................................................10
2.1 Purchase and Sale of Assets....................................................................12
2.2 Assignment and Assumption of Liabilities.......................................................12
2.3 Excluded Assets................................................................................13
2.4 No Other Liabilities Assumed...................................................................14
2.5 Deemed Consents and Cures......................................................................16
2.6 Obligations in Respect of Required Consents....................................................16
ARTICLE III BASIC TRANSACTION....................................................................................17
3.1 Purchase Price.................................................................................17
3.2 Further Assurances.............................................................................17
3.3 Deposit........................................................................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS.............................................................18
4.1 Sellers' Representations and Warranties........................................................18
4.2 Validity of Agreement..........................................................................18
4.3 Organization, Standing and Power...............................................................18
4.4 No Conflicts or Violations.....................................................................19
4.5 Financial Statements and Related Matters.......................................................19
4.6 Title to Assets; Assets Necessary to Business..................................................19
4.7 Employee Benefit Plans.........................................................................20
4.8 Labor Matters..................................................................................21
4.9 Personnel Matters..............................................................................22
4.10 Litigation, Orders.............................................................................22
4.11 Government Contracts...........................................................................23
4.12 Ownership; No Subsidiaries.....................................................................23
4.13 Real Property Assets...........................................................................23
4.14 Taxes..........................................................................................25
4.15 Compliance with Law............................................................................26
4.16 Approvals and Consents.........................................................................26
4.17 Cure Amounts...................................................................................26
4.18 Environmental Matters..........................................................................26
4.19 Absence of Undisclosed Liabilities.............................................................27
4.20 Affiliated Transactions........................................................................27
4.21 Intellectual Property..........................................................................28
4.22 Insurance......................................................................................29
4.23 Accounts Receivable............................................................................29
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4.24 Contracts......................................................................................30
4.25 Relationships with Suppliers...................................................................31
4.26 Franchising....................................................................................32
4.27 Accounts Payable and Other Accrued Expenses....................................................33
4.28 Brokers........................................................................................33
4.29 Absence of Certain Developments................................................................33
4.30 Officers, Directors and Bank Accounts Schedule.................................................34
4.31 No Failure to Disclose.........................................................................35
4.32 Closing Date...................................................................................35
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER............................................................35
5.1 Organization...................................................................................35
5.2 Authority......................................................................................35
5.3 Consents.......................................................................................35
5.4 Brokers........................................................................................35
ARTICLE VI COVENANTS OF SELLERS; OTHER AGREEMENTS................................................................36
6.1 Consents and Approvals.........................................................................36
6.2 Access to Information and Facilities...........................................................36
6.3 Conduct of the Business Pending the Closing....................................................37
6.4 Notification of Certain Matters; Schedules.....................................................38
6.5 Best Efforts; Further Assurances...............................................................39
6.6 Bankruptcy Actions.............................................................................39
6.7 Exclusivity; No Solicitation of Transactions...................................................40
6.8 [Intentionally Omitted]........................................................................40
6.9 Employees and Business Relations...............................................................40
6.10 Non-Seller Subsidiaries........................................................................40
6.11 Taxes..........................................................................................40
ARTICLE VII COVENANTS OF PURCHASER...............................................................................41
7.1 Assumed Obligations............................................................................41
7.2 Further Assurances.............................................................................41
7.3 Hiring of Headquarters Employees...............................................................41
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER....................................................41
8.1 Warranties True as of Both Present Date and Closing Date; Covenants............................41
8.2 Bankruptcy Condition...........................................................................42
8.3 Approvals......................................................................................42
8.4 Real Estate Matters............................................................................42
8.5 Additional Matters.............................................................................43
8.6 Material Adverse Change........................................................................43
8.7 [Intentionally Omitted]........................................................................43
8.8 Litigation.....................................................................................43
8.9 Cure Costs.....................................................................................44
8.10 Instruments of Conveyance and Transfer; Title..................................................44
8.11 FIRPTA Affidavit...............................................................................44
8.12 Financial Statements...........................................................................44
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8.13 Closing Deliveries.............................................................................44
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS........................................................44
9.1 Warranties True as of Both Present Date and Closing Date.......................................44
9.2 Approvals......................................................................................45
9.3 Bankruptcy Court Approval......................................................................45
9.4 Litigation.....................................................................................45
9.5 Consideration..................................................................................45
9.6 Cure Costs.....................................................................................45
9.7 Closing Deliveries.............................................................................45
ARTICLE X CLOSING................................................................................................45
10.1 Closing........................................................................................45
10.2 Deliveries by Sellers..........................................................................46
10.3 Deliveries by Purchaser........................................................................46
10.4 Form of Instruments............................................................................47
10.5 Payment of Breakup Fee.........................................................................47
ARTICLE XI TERMINATION...........................................................................................47
11.1 Termination....................................................................................47
11.2 [Intentionally Omitted]........................................................................48
11.3 Effect of Termination or Breach................................................................48
ARTICLE XII ADDITIONAL POST-CLOSING COVENANTS....................................................................48
12.1 Employees......................................................................................48
12.2 Employee Benefit Plans.........................................................................49
12.3 Rights of Third Parties........................................................................49
12.4 Sellers' Cooperation in Hiring of Employees....................................................49
12.5 WARN Act.......................................................................................49
12.6 Joint Post-Closing Covenant of Purchaser and Sellers...........................................50
12.7 Certain Consents...............................................................................50
12.8 Name Changes...................................................................................50
12.9 Accounts Receivable/Collections................................................................50
12.10 Access to Information..........................................................................51
ARTICLE XIII MISCELLANEOUS.......................................................................................51
13.1 Expenses.......................................................................................51
13.2 Amendment......................................................................................52
13.3 Notices........................................................................................52
13.4 Waivers........................................................................................53
13.5 Counterparts and Execution.....................................................................53
13.6 Headings.......................................................................................53
13.7 SUBMISSION TO JURISDICTION.....................................................................53
13.8 Governing Law..................................................................................53
13.9 Binding Nature; Assignment.....................................................................53
13.10 No Third Party Beneficiaries...................................................................54
13.11 Tax Matters....................................................................................54
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13.12 Construction...................................................................................54
13.13 Public Announcements...........................................................................54
13.14 Entire Understanding...........................................................................55
13.15 No Survival....................................................................................55
EXHIBITS
Exhibit A - Bidding Procedures Order
Exhibit B - Form of Sale Order
Exhibit C - [Intentionally Omitted]
Exhibit D - Form of Xxxx of Sale
Exhibit E - Form of Assignment and Assumption
Exhibit F - Forms of Intellectual Property Assignments
Exhibit G - Retention Plan
SCHEDULES
Schedule 2.1(a)(vi) - Assumed Contracts
Schedule 2.1(a)(vii) - Assumed Facility Leases
Schedule 2.2 - Certain Assumed Obligations
Schedule 2.3(c) - Excluded Assets
Schedule 4.3 - Organization, Standing and Power
Schedule 4.4 - No Conflicts or Violations
Schedule 4.5 - Financial Statements and Related Matters
Schedule 4.6(a) - Title to Assets
Schedule 4.6(b) - Acquired Assets
Schedule 4.7(a) - Sellers' Benefit Plans
Schedule 4.7(d) - Employee Benefit Plans
Schedule 4.8 - Labor Matters
Schedule 4.9 - Personnel Matters
Schedule 4.10 - Litigation, Orders
Schedule 4.11 - Government Contracts
Schedule 4.12 - Ownership; No Subsidiaries
Schedule 4.13(d) - Real Property Orders
Schedule 4.13(g) - Leased Facilities
Schedule 4.14 - Taxes
Schedule 4.15 - Compliance with Laws
Schedule 4.16 - Approval and Consents
Schedule 4.17 - Cure Amounts
Schedule 4.18 - Environmental Permits, Licenses, Compliance, Etc.
Schedule 4.19 - Absence of Undisclosed Liabilities
Schedule 4.20 - Affiliated Transactions
Schedule 4.21 - Intellectual Property
Schedule 4.22 - Insurance
Schedule 4.23 - Accounts Receivable
Schedule 4.24 - Contracts
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Schedule 4.26 - Franchising
Schedule 4.27 - Accounts Payable and Accrued Expenses
Schedule 4.28 - Brokers
Schedule 4.29 - Absence of Certain Developments
Schedule 4.30 - Officers, Directors and Bank Accounts
Schedule 6.3 - Conduct of the Business Pending the Closing
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EXHIBIT 4.2
ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT is made and entered into as of
this 28th day of June, 2002, by and between (i) TT Acquisition LLC, a Michigan
limited liability company ("Purchaser"), and (ii) Tutor Time Learning Systems,
Inc., a Florida corporation ("Tutor Time"), and each of its subsidiaries listed
on the signature page of this Agreement (each a "Seller" and collectively,
"Sellers").
In consideration of the mutual covenants, agreements and
warranties herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Definitions. Unless otherwise defined herein, terms used herein shall have the
meanings set forth below:
"Acquired Assets" shall have the meaning set forth in Section
2.1(a) hereof.
"Acquisition Proposal" means a proposal (other than by
Purchaser or its Affiliates) relating to any merger, consolidation, business
combination, sale or other disposition of 20% or more of the Acquired Assets
pursuant to one or more transactions, the sale of 20% or more of the outstanding
shares of capital stock of any Seller (including, without limitation, by way of
a tender offer, foreclosure or plan of reorganization or liquidation) or a
similar transaction or business combination involving one or more Third Parties
and any Seller.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities or otherwise.
"Agreement" means this
Asset Purchase Agreement, including all
Exhibits and Schedules hereto, as the same may be amended from time to time in
accordance with its terms.
"Allocation" shall have the meaning set forth in Section
13.11(b) hereof.
"Applicable Rate" means the prime rate of interest reported
from time to time in The Wall Street Journal.
"Assignment and Assumption" shall have the meaning set forth
in Section 10.2(c) hereof.
"Assumed Contracts" means all Contracts identified in Schedule
2.1(a)(vi) attached hereto under the heading "Assumed Contracts," other than
those excluded by Purchaser from the Acquired Assets pursuant to Section 2.3(c).
"Assumed Equipment Leases" means all equipment leases
identified in Schedule 2.1(a)(vi) attached hereto under the heading "Assumed
Equipment Leases," other than those excluded by Purchaser from the Acquired
Assets pursuant to Section 2.3(c) hereof.
"Assumed Executory Contracts" means the Assumed Contracts and
the Assumed Leases.
"Assumed Facilities" means the Facilities identified in the
Assumed Facility Leases.
"Assumed Facility Leases" means all real property leases of
Sellers applicable to the Leased Facilities identified in Schedule 2.1(a)(vii)
attached hereto, other than those excluded by Purchaser from the Acquired Assets
pursuant to Section 2.3(c) hereof.
"Assumed Leases" means the Assumed Equipment Leases and the
Assumed Facility Leases.
"Assumed Obligations" shall have the meaning set forth in
Section 2.2(a) hereof.
"Avoidance Action" or "Avoidance Actions" shall have the
meaning set forth in Section 2.3(a) hereof.
"Bankruptcy Code" means title 11 of the United States Code.
"Bankruptcy Court" means the United States Bankruptcy Court
for the Southern District of Florida.
"Baseline Senior Facility Amount" means $15,500,000.
"Benefit Plan" means any "employee benefit plan" (including,
without limitations, "plans" as defined in ERISA Section 3(3)), profit sharing,
deferred compensation, bonus, stock option, stock purchase, vacation pay,
holiday pay, pension, retirement plans, medical and any other form of
compensation or benefit plan, program or arrangement of any kind regardless of
whether any such plan is written or oral or provided under an employment,
collective bargaining or other similar arrangement.
"Bidding Procedures Order" means the order of the Bankruptcy
Court, dated May 30, 2002, a copy of which is attached hereto as Exhibit A.
"Books and Records" means (a) all records and lists of any
Seller pertaining to the Acquired Assets, (b) all records and lists pertaining
to the Business (including, without limitation, merchandise and analysis
reports, marketing analysis reports and creative material) or customers,
suppliers or personnel of any Seller (including, without limitation, customer
lists, mailing lists, e-mail address lists, recipient lists, sales records,
correspondence with customers, customer files and account histories, supply
lists and records of purchases from and correspondence with suppliers), (c) all
product, business and marketing plans of any Seller related to or used in
connection with the Business and (d) all books, ledgers, files, reports,
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plans, drawings and operating records of every kind maintained by any Seller
related to or used in connection with the Business, but excluding the originals
of the minute books, stock books and all Tax Returns of any Seller.
"Breakup Fee" means $750,000.
"Business" means the activities carried on by Sellers and any
of their Affiliates relating to the provision of education-based childcare
services (directly and as a franchisor).
"Cash" shall have the meaning set forth in Section 2.1(a)(i)
hereof.
"Cash Portion" shall have the meaning set forth in Section
3.1(a) hereof.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et
seq.).
"Chapter 11 Cases" means the cases commenced by Sellers under
Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court.
"Claim" shall have the meaning set forth in section 101(5) of
the Bankruptcy Code.
"Closing Date" shall have the meaning set forth in Section
10.1 hereof.
"Closing" shall have the meaning set forth in Section 10.1
hereof.
"COBRA" shall have the meaning set forth in Section 4.7(e)
hereof.
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Company Intellectual Property" shall have the meaning set
forth in Section 4.21(b) hereof.
"Contract" means any agreement, contract, commitment or other
binding arrangement or understanding related to the Business, whether written or
oral, to which any Seller is a party and which any Seller is capable of assuming
and assigning.
"Deposit" shall have the meaning set forth in Section 3.3
hereof.
"Disclosure Schedule" shall have the meaning set forth in
Section 4.1 hereof.
"Dollars" or "$" means dollars of the United States of
America.
"Employee Benefit Plan" shall have the meaning set forth in
Section 4.7 hereof.
"Environmental Laws" means all federal, state, local and
foreign statutes, Regulations, ordinances and other provisions having the force
or effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law, in
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each case concerning public health and safety, worker health and safety,
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, Release, threatened Release, control, or cleanup of any
Hazardous Substances (including without limitation CERCLA and analogous state
laws), each as amended or in effect prior to or as of Closing.
"ERISA Affiliate" means each entity which is treated as a
single employer with any Seller or its Subsidiaries for purposes of Code Section
414.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all regulations issued thereunder.
"Escrow Agent" means Xxxxxxxxx Traurig, P.A., counsel to the
Sellers.
"Escrow Amount" means $250,000.
"Escrow Closing Amount" means all amounts in the Escrow
Account on the Closing Date (including interest accrued on the Deposit).
"Excluded Assets" shall have the meaning set forth in Section
2.3 hereof.
"Excluded Contracts" shall have the meaning set forth in
Section 2.3(b) hereof.
"Excluded Environmental Liabilities" means any Liability or
investigatory, corrective or remedial obligation, whenever arising or occurring,
arising under Environmental Laws with respect to Sellers or any of their
predecessor(s) or Affiliate(s), the Business, the Acquired Assets or the Leased
Facilities (including without limitation any arising from the on-site or
off-site Release, threatened Release, treatment, storage, disposal, or
arrangement for disposal of Hazardous Substances) whether or not constituting a
breach of any representation or warranty herein and whether or not set forth on
any disclosure schedule attached hereto, except to the extent that the facts or
circumstances underlying any such Liability or obligation are caused or occur
after the Closing Date.
"Excluded Leases" shall have the meaning set forth in Section
2.3(b) hereof.
"Executive Officer" of a Person means its chairman, chief
executive officer, president, any vice president, director or head of any
business function, general counsel, or any other Person exercising similar
policy-making functions on behalf of such Person.
"Exhibits" means the exhibits hereto.
"Facilities" means the premises at which Sellers conduct the
Business.
"Final Order" means an Order as to which the time to file an
appeal, a motion for rehearing or reconsideration (excluding any motion under
F.R.C.P. 60(b)) or a petition for writ of certiorari has expired and no such
appeal, motion or petition is pending.
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"Financial Statements" shall have the meaning set forth in
Section 4.5(a) hereof.
"GAAP" means, at a given time, United States generally
accepted accounting principles, consistently applied.
"Hazardous Substances" means any pollutants, contaminants or
chemicals, and any industrial, toxic or otherwise hazardous materials,
substances or wastes with respect to which liability or standards of conduct are
imposed under any Environmental Laws, including, without limitation, petroleum
and petroleum-related substances, products, by-products and wastes, asbestos,
urea formaldehyde and lead-based paint.
"Indebtedness" with respect to any Person means any obligation
of such Person for borrowed money, and in any event shall include (a) any
obligation incurred for all or any part of the purchase price of property or
other assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the Ordinary Course
of Business, (b) the face amount of all letters of credit issued for the account
of such Person, (c) obligations (whether or not such Person has assumed or
become liable for the payment of such obligation) secured by Liens, (d)
capitalized lease obligations, (e) all guarantees and similar obligations of
such Person, (f) all accrued interest, fees and charges in respect of any
Indebtedness and (g) all prepayment premiums and penalties, and any other fees,
expenses, indemnities and other amounts payable as a result of the prepayment or
discharge of any Indebtedness.
"Insider" means, any Executive Officer, director, stockholder,
partner or Affiliate, as applicable, of any Seller or any of its Subsidiaries or
any individual related by marriage or adoption to any such individual or any
entity in which any such Person owns any beneficial interest.
"Intellectual Property" means all of the following in any
jurisdiction throughout the world: (a) patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof; (b)
trademarks, service marks, trade dress, logos, slogans, trade names, internet
domain names and corporate names, together with all goodwill associated
therewith, and applications, registrations and renewals in connection therewith;
(c) copyrights, mask works and copyrightable works, and applications,
registrations and renewals in connection therewith; (d) trade secrets and
confidential business information (including ideas, research and development,
know-how, inventions, formulas, compositions, manufacturing and production
processes and techniques, designs, drawings and specifications); (e) proprietary
computer software (including but not limited to source code, executable code
data, databases and documentation); (f) copies and tangible embodiments of any
of the foregoing in whatever form or medium; and (g) all other Intellectual
Property.
"Inventory" means all inventory held by any Seller for resale
in the ordinary course of the Business and all raw materials, work in process,
finished products, and similar items with respect to such inventory, in each
case wherever the same may be located.
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"Knowledge of Sellers" shall mean the actual knowledge of any
director or Executive Officer of Sellers.
"Latest Balance Sheet" shall have the meaning set forth in
Section 4.5(a) hereof.
"Leased Facilities" means all of Sellers' and their
Subsidiaries' right, title and interest in all leases, subleases, licenses,
concessions and other agreements (written or oral), pursuant to which a Seller
or a Subsidiary of a Seller holds a leasehold or subleasehold estate in, or is
granted the right to use or occupy, any land, buildings, structures,
improvements, fixtures or other interest in real property which is used or
intended to be used in, or otherwise related to, the Business.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due and regardless of when asserted), including, without limitation, any
liability for Taxes.
"Lien" or "Liens" shall have the meaning set forth in Section
2.1(b) hereof.
"Material Adverse Change" or "Material Adverse Effect" means,
any event, change, condition or matter that individually or in the aggregate
results in or could reasonably be expected to result in a material adverse
effect or change in the results of operations or condition (financial or
otherwise) or prospects of the Business or the Acquired Assets, except the
filing of the Chapter 11 Cases and reasonably anticipated effects thereof.
"Material Assumed Facility" shall have the meaning set forth
in Section 8.4(a) hereof.
"Material Contract" shall have the meaning set forth in
Section 4.24(c) hereof.
"Notice" means any summons, citation, directive, order, claim,
litigation, proceeding, judgment, letter or other communication, written or
oral, actual or threatened, from the United States Environmental Protection
Agency or any other federal, state, local or foreign agency or authority, or any
other entity or any individual and shall include the imposition of any lien on
property owned, leased, occupied or used by any Seller pursuant to any
Environmental Law.
"Order" means any decree, order, injunction, rule, judgment,
consent of or by any court or governmental authority.
"Ordinary Course of Business" means the operation of the
Business by Sellers in the usual and ordinary course in a manner substantially
similar to the manner in which Sellers operated prior to the commencement of the
Chapter 11 Cases.
"Owned Real Property" means all land and all buildings,
structures, fixtures and other improvements located thereon, and all easements,
rights of way, servitudes, tenements, hereditaments, appurtenances, privileges
and other rights with respect thereto owned by Sellers.
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"Permits" means all transferable licenses, permits, approvals,
certificates of occupancy, authorizations, operating permits, registrations,
plans and the like relating exclusively to the conduct of the Business for which
consent is obtained.
"Permitted Liens" means (i) statutory liens for current
property Taxes and assessments not yet due and payable, including, without
limitation, liens for ad valorem Taxes and statutory liens not yet due and
payable arising other than by reason of any default on the part of any Seller,
and liens for property Taxes being contested in good faith by any Seller by
appropriate proceedings and with respect to which adequate reserves have been
established by any Seller in accordance with GAAP and (ii) easements, covenants,
conditions, restrictions and other similar matters on real property, leasehold
estates or personalty that do not in any material respect detract from the value
thereof and do not individually or in the aggregate in any material respect
interfere with the present use of the property subject thereto in the operation
of the Business.
"Person" means any corporation, partnership, joint venture,
limited liability company, organization, entity, authority or natural person.
"Proceeding" shall have the meaning set forth in Section
2.4(i) hereof.
"Purchase Price" shall have the meaning set forth in Section
3.1(a) hereof.
"Purchaser" shall have the meaning set forth in the Preamble
hereto.
"Regulation" means any law, statute, regulation, ruling, rule
or Order of, administered or enforced by or on behalf of, any court or
governmental authority.
"Rehired Employees" shall have the meaning set forth in
Section 12.2(b) hereof.
"Release" shall have the meaning set forth in CERCLA.
"Retention Plan" means the retention plan in the form of
Exhibit G attached hereto adopted by Sellers prior to the date hereof, to the
extent approved by the Bankruptcy Court.
"Rule" or "Rules" means the Federal Rules of Bankruptcy
Procedure.
"Sale Hearing" means the hearing of the Bankruptcy Court to
approve the transactions contemplated by this Agreement.
"Sale Order" means the order of the Bankruptcy Court,
substantially in the form of Exhibit B attached hereto, to be entered by the
Bankruptcy Court pursuant to sections 363 and 365, and to the extent possible
section 1146(c), of the Bankruptcy Code (i) approving this Agreement and the
transactions contemplated hereby; (ii) approving the sale of the Acquired Assets
to Purchaser free and clear of all Liens, Claims, encumbrances and interests
(other than Permitted Liens) pursuant to section 363(f) of the Bankruptcy Code,
(iii) approving the assumption and assignment to Purchaser of the Assumed
Executory Contracts, without
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adequate assurance of future performance liability pursuant to section 365(f)(2)
of the Bankruptcy Code, except Purchaser's promise to perform following the
Closing obligations under the Assumed Executory Contracts; (iv) transferring and
assigning the Assumed Executory Contracts such that the Assumed Executory
Contracts will be in full force and effect from and after the Closing with
non-debtor parties being barred and precluded from asserting against Purchaser,
among other things, defaults, breaches or claims of pecuniary losses existing as
of the Closing or by reason of the Closing; (v) finding that Purchaser is a
good-faith purchaser entitled to the protections of section 363(m) of the
Bankruptcy Code; (vi) confirming that Purchaser is acquiring the Acquired Assets
free and clear of the Unassumed Liabilities and providing for a full release of
Purchaser with respect to the Unassumed Liabilities; (vii) that under section
1146(c) of the Bankruptcy Code there will be no transfer or similar tax to
either Sellers or Purchaser; (viii) providing that the provisions of Rules
6004(g) and 6006(d) of the Federal Rules of Bankruptcy Procedure are waived and
there will be no stay of execution of the Sale Order under Rule 62(a) of the
Federal Rules of Civil Procedure; (ix) retaining jurisdiction of the Bankruptcy
Court to interpret and enforce the terms and provisions of this Agreement; and
(x) authorizing the results of the Auction, as contemplated under the Bidding
Procedures Order.
"Schedules" means the schedules attached hereto.
"Seller" and "Sellers" shall have the meaning set forth in the
Preamble hereto.
"Senior Facility" means (i) that certain Financing Agreement
dated as of March 23, 2000, as amended from time to time prior to the date
hereof, by and among Sellers, certain affiliates of Sellers and Senior Lender,
and (ii) that certain Financing Agreement, dated as of May 14, 2002, as amended
from time to time on or prior to the Closing Date, by and among Sellers, as
debtors and debtors-in-possession, and Senior Lender.
"Senior Facility Amount" means all principal, interest, fees,
expenses and other amounts owed by Sellers to the Senior Lender pursuant to the
Senior Facility.
"Senior Lender" means Ableco Finance LLC, as a lender under
the Senior Facility and as agent for certain Affiliates which are lenders under
the Senior Facility.
"Subsidiary" means, with respect to any Person, any
corporation a majority of the total voting power of shares of stock of which is
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or any partnership,
limited liability company, association or other business entity a majority of
the partnership or other similar ownership interest of which is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes of this
definition, a Person is deemed to have a majority ownership interest in a
partnership, limited liability company, association or other business entity if
such Person is allocated a majority of the gains or losses of such partnership,
limited liability company, association or other business entity or is or
controls the managing director or general partner of such partnership, limited
liability company, association or other business entity.
8
"Surveys" shall have the meaning set forth in Section 8.4(b)
hereof.
"Tax" and, with correlative meaning, "Taxes" mean with respect
to any Person (a) all federal, state, local, county, foreign and other taxes,
assessments or other government charges, including, without limitation, any
income, alternative or add-on minimum tax, estimated gross income, gross
receipts, sales, use, ad valorem, value added, transfer, capital stock
franchise, profits, license, registration, recording, documentary, intangibles,
conveyancing, gains, withholding, payroll, employment, social security (or
similar), unemployment, disability, excise, severance, stamp, occupation,
premium, property (real and personal), environmental or windfall profit tax,
custom duty or other tax, governmental fee or other like assessment, charge, or
tax of any kind whatsoever, together with any interest, penalty, addition to tax
or additional amount imposed by any Taxing Authority responsible for the
imposition of any such tax (domestic or foreign) whether such Tax is disputed or
not, or (b) liability for the payment of any amounts of the type described in
clause (a) above relating to any other Person as a result of being party to any
agreement to indemnify such other Person, being a successor or transferee of
such other Person, or being a member of the same affiliated, consolidated,
combined, unitary or other group with such other Person.
"Tax Return" means any report, return, declaration, claim for
refund or other information or statement supplied or required to be supplied by
any Seller relating to Taxes, including any schedules or attachments thereto and
any amendments thereof.
"Taxing Authority" means any governmental authority.
"Third Party" means any Person other than Sellers, Purchaser
or any of their respective Affiliates.
"Title Commitments" shall have the meaning set forth in
Section 8.4(a) hereof.
"Title Insurer" shall have the meaning set forth in Section
8.4(a) hereof.
"Title Policies" shall have the meaning set forth in Section
8.4(a) hereof.
"Transaction Documents" means this Agreement, and all other
agreements, instruments, certificates and other documents to be entered into or
delivered by any party in connection with the transactions contemplated to be
consummated pursuant to this Agreement.
"Transition Period" shall have the meaning set forth in
Section 12.10 hereof.
"UFOC" shall have the meaning set forth in Section 4.26(b)
hereof.
"Unassumed Liabilities" shall have the meaning set forth in
Section 2.4 hereof.
"WARN Act" shall have the meaning set forth in Section 12.5
hereof.
1.2 Rules of Construction. Unless the context otherwise clearly
indicates, in this Agreement:
9
(a) the singular includes the plural;
(b) "includes" and "including" are not limiting;
(c) "may not" is prohibitive and not permissive; and
(d) "or" is not exclusive.
ARTICLE II
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES
2.1 Purchase and Sale of Assets.
(a) Subject to the terms and conditions set forth in this
Agreement, at the Closing, Sellers shall sell, contribute, convey, assign,
transfer and deliver to Purchaser, free and clear of all Liens (except for the
Assumed Obligations and Permitted Liens), and Purchaser shall purchase, acquire
and take assignment and delivery of, for the consideration specified in Section
3.1, all properties, assets, rights, titles and interests of every kind and
nature, owned or leased by Sellers (including indirect and other forms of
beneficial ownership) as of the Closing Date, which are used in, useful for or
otherwise associated with the Business (including, without limitation, all
assets located on the premises of the Assumed Facilities), whether tangible or
intangible, real or personal and wherever located and by whomever possessed,
including, without limitation, all of the following assets but excluding
Excluded Assets pursuant to Section 2.3 (all of the assets to be sold, assigned,
transferred and delivered to Purchaser hereunder herein called the "Acquired
Assets"):
(i) all cash (including, without limitation, checking
account balances, certificates of deposit and other time deposits and xxxxx
cash) and marketable and other securities net of overdrafts ("Cash"), less
$250,000 which shall be used to administer the estate of Sellers after the
Closing; provided, however, that to the extent that immediately prior to the
Closing, Sellers have less than $250,000 in Cash, Purchaser shall pay to Sellers
an amount equal to (i) $250,000 less (ii) the amount of Seller's Cash
immediately prior to Closing less (iii) the amount of any administrative
expenses paid by Sellers at or prior to Closing relating to the administration
of the estate of Sellers after the Closing;
(ii) all accounts and notes receivables (whether
current or noncurrent) and all causes of action specifically pertaining to the
collection of the foregoing;
(iii) all promotional allowances and vendor rebates
and similar items; all Tax refunds, rebates, credits and similar items relating
to any period, or portion of any period, on or prior to the Closing Date;
(iv) all Intellectual Property, along with all
income, royalties, damages and payments derived therefrom, which are due or
payable to Sellers as of the Closing or thereafter, including, without
limitation, damages and payments for past, present or future infringements or
misappropriations thereof, the right to xxx and recover for past infringements
or misappropriations thereof and any and all corresponding rights that, now or
hereafter, may
10
be secured throughout the world and all copies and tangible embodiments of any
such Intellectual Property in Sellers' possession or control;
(v) all of Sellers' rights existing under the Assumed
Executory Contracts;
(vii) all Assumed Facilities and all buildings and
other improvements located on such property, and all easements, licenses, rights
of way, Permits and all appurtenances to the Assumed Facility Leases including,
without limitation, all appurtenant rights in and to public streets, whether or
not vacated;
(viii) all leasehold improvements and all machinery,
equipment (including all transportation and office equipment), fixtures, trade
fixtures, computer equipment, telephone systems and furniture owned by Sellers
wherever located, including, without limitation, all such items which are
located in any building, warehouse, office or other space leased, owned or
occupied by Sellers or used in connection with the Business;
(ix) all inventories of work in process,
semi-finished and finished goods, stores, replacement and spare parts, packaging
materials, operating supplies, and fuels, owned by Sellers wherever located;
(x) all office supplies, production supplies, spare
parts, other miscellaneous supplies, and other tangible property of any kind
wherever located, including, without limitation, all property of any kind
located in any building, office or other space leased, owned or occupied by
Sellers or in any warehouse where any of Sellers' properties and assets may be
situated;
(xi) all deposits and advances and prepaid and other
current assets relating to the Business;
(xii) all claims, deposits, prepayments, warranties,
guarantees, refunds, causes of action, rights of recovery, rights of set-off and
rights of recoupment of every kind and nature (whether or not known or unknown
or contingent or non-contingent), other than those relating exclusively to
Excluded Assets and/or Excluded Contracts;
(xiii) the right to receive and retain mail, accounts
receivable payments and other communications relating to the Business;
(xiv) the right to xxxx and receive payment for
products shipped or delivered and services performed but unbilled or unpaid as
of the Closing;
(xv) all Books and Records;
(xvi) all advertising, marketing and promotional
materials and all other printed or written materials;
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(xvii) to the extent transferable, all Permits,
licenses, certifications and approvals from all permitting, licensing,
accrediting and certifying agencies, and the rights to all data and records held
by such permitting, licensing and certifying agencies;
(xviii) all goodwill as a going concern and all other
intangible properties;
(xix) all telephone numbers used by Sellers;
(xx) except for indemnities that relate solely to
Excluded Contracts or Excluded Assets, all indemnities relating to the Acquired
Assets or the Business prior to the Closing Date;
(xxi) all rights to proceeds under insurance policies
to the extent related to or payable in connection with any of the Acquired
Assets, the Assumed Obligation or the Business prior to the Closing Date; and
(xxii) all security deposits relating to Assumed
Contracts.
(b) All of the Acquired Assets shall be sold, assigned,
transferred, conveyed and delivered to Purchaser free and clear of all liens
(including liens for Taxes) (other than Permitted Liens), encumbrances (other
than the Assumed Obligations) (including, without limitation, any leasehold
interests, licenses or other rights, in favor of a Third Party or a Seller, to
use any portion of the Acquired Assets), Claims, security interests, of whatever
kind or nature, mortgages, pledges, restrictions, charges, instruments,
licenses, encroachments, options, rights of recovery, judgments, orders and
decrees of any court or foreign or domestic governmental authority, interest,
products and Taxes (including foreign, federal, state and local Taxes), in each
case of any kind or nature, whether secured or unsecured, xxxxxx or inchoate,
filed or unfiled, scheduled or unscheduled, noticed or unnoticed, recorded or
unrecorded, contingent or non-contingent, material or non-material, known or
unknown, and including all claims based on any theory that Purchaser is a
successor, transferee or continuation of Sellers or the Business, in each case,
other than the Assumed Obligations expressly assumed herein (each a "Lien" and
collectively the "Liens"), whether arising prior to or subsequent to the date of
the filing of the Chapter 11 petitions of Sellers, and in accordance with the
terms of the Sale Order and sections 363(f) and 365 of the Bankruptcy Code.
2.2 Assignment and Assumption of Liabilities.
(a) Subject to the terms and conditions set forth in this Agreement,
Purchaser shall assume from Sellers and thereafter pay, perform or discharge in
accordance with their terms, and shall indemnify and hold Sellers harmless from,
the following liabilities and obligations of Sellers (all such liabilities and
obligations herein called the "Assumed Obligations"): (i) obligations under the
Assumed Facility Leases first arising after the Closing; (ii) obligations under
the Assumed Equipment Leases first arising after the Closing; (iii) obligations
under the Assumed Contracts first arising after the Closing, (iv) any cure
obligations (up to but in no case exceeding $4,500,000 in the aggregate) set
forth on Schedule 4.17 with respect to the Assumed
12
Executory Contracts; (v) obligations with respect to any unused vacation or sick
leave earned and accrued (to the extent not paid) by all Persons employed by any
of Sellers as of the Closing Date; (vi) any obligation with respect to wages and
salary and commissions earned and accrued (to the extent not paid) by all
Persons employed by any of Sellers as of the Closing Date; (vii) obligations
under the Retention Plan; (viii) obligations with respect to payroll taxes; (ix)
obligations with respect to capitalized leases; (x) obligations with respect to
customer deposits; (xi) obligations with respect to deferred franchising fees;
(xii) obligations with respect to health insurance claims incurred but not
reported (to the extent not paid) by all Persons employed by any of Sellers as
of the Closing Date; (xiii) obligations with respect to any underfunding in
connection with the advertising fund contemplated under Sellers' franchise
agreements in an amount not to exceed $500,000 in the aggregate; (xiv)
obligations with respect to the funding of all of Sellers' July 2002 rent
obligations due on account of non-residential real property leases and equipment
leases; and (xv) obligations, in an amount not to exceed $1,100,000 in the
aggregate, with respect to payables coming due in the ordinary course of
business in July 2002 which were not paid by Sellers by borrowing under the
Senior Facility, including, but not limited to, those set forth on Schedule 2.2.
(b) The transactions contemplated by this Agreement shall in no
way expand the rights or remedies of any Third Party against Purchaser or
Sellers as compared to the rights and remedies which such Third Party would have
had against Sellers absent the Chapter 11 Cases, had Purchaser not assumed such
Assumed Obligations.
2.3 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, the following assets of Sellers shall be retained by Sellers and are
not being sold or assigned to Purchaser hereunder (all of the following are
referred to collectively as the "Excluded Assets"):
(a) any and all rights under this Agreement and avoidance
claims or causes of action arising under the Bankruptcy Code or applicable state
law, including, without limitation, (i) all rights and avoidance claims of
Sellers arising under sections 544 through 553, inclusive, of the Bankruptcy
Code, (ii) all claims against current directors and current officers of Sellers,
if any, and (iii) all claims against former directors and former officers for
breaches of fiduciary duty, if any (each an "Avoidance Action" and collectively
the "Avoidance Actions");
(b) all leases other than the Assumed Leases (the
"Excluded Leases") and all Contracts other than the Assumed Contracts (the
"Excluded Contracts");
(c) any asset set forth on Schedule 2.3(c) attached
hereto; provided that Purchaser may amend Schedule 2.3(c), Schedule 2.1(a)(vi),
and Schedule 2.1(a)(vii) at any time on or before one (1) day prior to the
Closing Date in order to exclude from the definition of Acquired Asset any other
asset, lease or Contract not otherwise excluded; provided further that such
exclusion shall not serve to reduce or otherwise affect the amount of the Cash
Portion of the Purchase Price;
(d) income Tax Returns and related materials;
(e) the equity securities of any Seller;
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(f) all retainers paid to attorneys and other professionals in
connection with their representation of Sellers; and
(g) Sellers' rights under this Agreement including all cash
and non-cash consideration payable or deliverable to Sellers pursuant to the
terms hereof.
2.4 No Other Liabilities Assumed. Each Seller acknowledges and agrees
that pursuant to the terms and provisions of this Agreement, Purchaser will not
assume any obligation of any Seller, other than the Assumed Obligations. In
furtherance and not in limitation of the foregoing, neither Purchaser nor any of
its Affiliates shall assume, and shall not be deemed to have assumed, any debt,
Claim, obligation or other Liability of any Seller or any of their respective
Affiliates whatsoever (other than the Assumed Obligations), including, but not
limited to the following (collectively, the "Unassumed Liabilities"):
(a) all obligations, claims, or Liabilities of Sellers or any
predecessor(s) or Affiliate(s) of Sellers that relate to any of the Excluded
Assets or Excluded Contracts;
(b) any cure obligations (pursuant to section 365 of the
Bankruptcy Code) with respect to any Assumed Executory Contract to the extent
the aggregate of all cure obligations with respect to the Assumed Executory
Contracts exceeds $4,500,000;
(c) Excluded Environmental Liabilities;
(d) all obligations, claims, or Liabilities of Sellers or any
predecessor(s) or Affiliate(s) of Sellers or for which Sellers or any
predecessor(s) or Affiliate(s) of Sellers could be liable relating to Taxes
(including with respect to the Acquired Assets or otherwise) including, without
limitation, any Taxes that will arise as a result of the sale of the Acquired
Assets or the assumption of the Assumed Obligations pursuant to this Agreement
and any deferred Taxes of any nature;
(e) all obligations, claims, or Liabilities for any legal,
accounting, investment banking, brokerage or similar fees or expenses incurred
by any Seller in connection with, resulting from or attributable to the
transactions contemplated by this Agreement or otherwise;
(f) all Indebtedness of any Seller or any predecessor(s) or
Affiliate(s) of any Seller;
(g) all obligations and Liabilities of Sellers related to the
right to or issuance of any capital stock or other equity interest of Sellers,
including, without limitation, any stock options or warrants;
(h) all obligations and Liabilities of Sellers or any
predecessor(s) or Affiliate(s) of Sellers resulting from, caused by or arising
out of, or which relate to, directly or indirectly, the conduct of the Business
or ownership or lease of any properties or assets or any properties or assets
previously used by Sellers, or other actions, omissions, including, without
limitation, any amounts due or which may become due or owing under the Assumed
Leases or
14
the Assumed Contracts with respect to the period prior to Closing (except for
cure payments payable by Purchaser as contemplated in Section 2.2 of this
Agreement), whether known or unknown on the date hereof;
(i) all obligations and Liabilities of Sellers or any
predecessor(s) or Affiliate(s) of Sellers resulting from, caused by or arising
out of, or which relate to, directly or indirectly, the conduct of the Business
anywhere or ownership or lease of any properties or assets or any properties or
assets previously used by Sellers at any time, or other actions, omissions or
events occurring prior to the Closing and which (i) constitute, may constitute
or are alleged to constitute a tort, breach of contract or violation of any law,
rule, regulation, treaty or other similar authority or (ii) relate to any and
all Claims, disputes, demands, actions, liabilities, damages, suits in equity or
at law, administrative, regulatory or quasi-judicial proceedings, accounts,
costs, expenses, setoffs, contributions, attorneys' fees and/or causes of action
of whatever kind or character ("Proceeding") against Sellers or any
predecessor(s) or Affiliate(s) of Sellers, whether past, present, future, known
or unknown, liquidated or unliquidated, accrued or unaccrued, pending or
threatened;
(j) any obligation or Liability arising out of any Proceeding
commenced after the Closing and arising out of, or relating to, any occurrence
or event happening prior to the Closing;
(k) all obligations, claims or Liabilities (whether known or
unknown) with respect to the employees or former employees, or both, of any
Seller arising from the operation of the Business prior to the Closing,
including, without limitation, payroll, vacation, sick leave, worker's
compensation, unemployment benefits, pension benefits, employee stock option or
profit sharing plans, heath care plans or benefits, or any other employee plans
or benefits or other compensation of any kind to any employee, and obligations
of any kind including, without limitation, any Liability pursuant to the WARN
Act for any action or inaction prior to the Closing;
(l) any obligation or Liability arising under any Employee
Benefit Plan or any other employee benefit plan, program or arrangement at any
time maintained, sponsored or contributed to by any Seller or any ERISA
Affiliate, or with respect to which Sellers or any ERISA Affiliate has any
liability;
(m) all accounts payable arising prior to the Closing;
(n) any obligation or Liability arising out of or relating to
services and/or products of Sellers to the extent provided, developed and/or
sold prior to the Closing;
(o) any obligation or Liability under any Assumed Executory
Contract which arises, or Purchaser receives notice of, after the Closing but
which arises out of or relates to any breach that occurred prior to the Closing;
(p) any obligation or Liability under any contract, agreement,
lease, mortgage, indenture or other instrument not assumed by Purchaser
hereunder;
15
(q) any obligation or Liability under any employment,
severance, retention or termination agreement with any employee, consultant or
contractor of Sellers;
(r) any obligation or Liability arising out of or relating to
any Seller employee grievance whether or not the affected employees are hired by
Purchaser;
(s) any obligation or Liability of Sellers to any shareholder
or Affiliate of any Seller;
(t) any obligation or Liability to indemnify, reimburse or
advance amounts to any officer, director, employee or agent of any Seller,
except for payments pursuant to the Retention Plan;
(u) any obligation or Liability to distribute to any Seller's
shareholders or otherwise apply all or any part of the consideration received
hereunder;
(v) any obligation or Liability arising out of or resulting
from any Seller's non-compliance with any law, ordinance, Regulation or treaty;
(w) any obligation or Liability of Sellers under this
Agreement or any other document executed in connection herewith; and
(x) any obligation or Liability of any Seller based upon such
Seller's acts or omissions occurring after the Closing.
The parties acknowledge and agree that disclosure of any obligation or Liability
on any Schedule to this Agreement shall not create an Assumed Obligation or
other Liability of Purchaser, except where such disclosed obligation has been
expressly assumed by Purchaser as an Assumed Obligation in accordance with the
provisions of Section 2.2 hereof.
2.5 Deemed Consents and Cures. For all purposes of this Agreement
(including all representations and warranties of Sellers contained herein),
Sellers shall be deemed to have obtained all required consents in respect of the
assignment of any Assumed Contract or Assumed Lease if, and to the extent that,
pursuant to the Sale Order or other Bankruptcy Court order, Sellers are
authorized to assume and assign Assumed Contracts and/or Assumed Leases to
Purchaser pursuant to section 365 of the Bankruptcy Code and any applicable cure
cost has been satisfied by Purchaser or Sellers, as provided herein.
2.6 Obligations in Respect of Required Consents. To the extent that any
Assumed Executory Contract is subject to a cure (pursuant to section 365 of the
Bankruptcy Code), immediately after the Closing, Purchaser shall directly pay or
otherwise provide for such cure; provided, however, if the aggregate of all cure
obligations with respect to the Assumed Executory Contracts exceeds $4,500,000,
Sellers shall pay all additional cure obligations in excess of $4,500,000 with
respect to the Assumed Executory Contracts. Sellers shall provide to Purchaser,
at least three business days prior to the Closing Date, a schedule setting forth
the name and address of each person to whom a cure payment is to be made, and
the amount of the cure payment owed to such person.
16
ARTICLE III
BASIC TRANSACTION
3.1 Purchase Price.
(a) The aggregate purchase price for the Acquired Assets
(the "Purchase Price") shall be (i) an amount in cash equal to $15,500,000,
minus (ii) the amount (if any) by which the Senior Facility Amount as of the
Closing Date is less than the Baseline Senior Facility Amount plus (iii) the
amount of any Cash (which in no case shall exceed $250,000) paid by Purchaser to
Sellers pursuant to Section 2.1(a)(i) plus (iv) $2,500,000 plus (v) the Breakup
Fee (the foregoing, the "Cash Portion") plus (vi) the dollar amount of any cure
payments to be made (pursuant to section 365 of the Bankruptcy Code) by
Purchaser on behalf of Sellers (which in no case shall exceed $4,500,000) plus
(vii) the dollar value of the Assumed Obligations.
(b) At the Closing, Purchaser shall assume the Assumed
Obligations and pay, by wire transfer of immediately available funds to an
account of Sellers' counsel, as designated by Sellers at least two business days
prior to the Closing Date, to Sellers an amount equal to (i) the Cash Portion
minus (ii) the Escrow Closing Amount minus $2,000 minus (iii) $750,000
(representing the Breakup Fee). The amount paid to Sellers' counsel pursuant to
this Section 3.1(b) shall be disbursed as reflected in the Final Order.
(c) At the Closing, the Escrow Agent shall deliver to
Sellers the Escrow Closing Amount.
(d) At the Closing, Purchaser shall pay to Sun T
Acquisition Corp (f/k/a Tutor Time Corporation) $750,000, representing the
Breakup Fee.
3.2 Further Assurances. From time to time after the Closing and
without further consideration, (i) Sellers, upon the request of Purchaser, shall
execute and deliver such documents and instruments of conveyance and transfer as
Purchaser may reasonably request in order to consummate more effectively the
purchase and sale of the Acquired Assets as contemplated hereby and to vest in
Purchaser title to the Acquired Assets transferred hereunder, and (ii)
Purchaser, upon the request of Sellers, shall execute and deliver such documents
and instruments of contract or lease assumption as Sellers may reasonably
request in order to confirm Purchaser's liability for the obligations
specifically assumed hereunder or otherwise more fully consummate the
transactions contemplated by this Agreement.
3.3 Deposit. Sellers acknowledge that Purchaser has previously
deposited with the Escrow Agent an amount equal to the Escrow Amount (the
"Deposit"). In the event this Agreement is terminated by Sellers pursuant to
Section 11.1(c), the receipt by Sellers of the Deposit shall be Sellers' sole
and exclusive remedy as liquidated damages and the Escrow Agent shall
immediately disburse the Deposit and all interest accrued thereon to Sellers to
be retained by Sellers for their own account. If this Agreement is terminated
for any reason other than the termination of this Agreement by Sellers pursuant
to Section 11.1(c), the Escrow Agent shall immediately upon such termination
return to Purchaser the Deposit (together with all interest thereon) and
Purchaser shall have no further obligation or Liability of any kind to
17
Sellers or any of their Affiliates. The fees and charges of the Escrow Agent, if
any, arising out of its duties with respect to the Deposit, shall be paid in
full by Sellers.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
4.1 Sellers' Representations and Warranties. Sellers represent and
warrant to Purchaser that the statements contained in this Article IV are
correct and complete as of the date of this Agreement, except as expressly set
forth in the disclosure schedules delivered by Sellers to Purchaser on the date
hereof (the "Disclosure Schedules").
4.2 Validity of Agreement. Subject to any necessary authorization
from the Bankruptcy Court, Sellers have full power and authority to execute and
deliver the Transaction Documents to which they are a party and to consummate
the transactions contemplated hereby and thereby. No corporate proceedings on
the part of any Seller are necessary to approve and authorize the execution and
delivery of the Transaction Documents to which such Seller is a party and the
consummation of the transactions contemplated thereby. All Transaction Documents
to which any Seller is a party have been duly executed and delivered by each
such Seller, except such Transaction Documents that are required by the terms
hereof to be executed and delivered by Sellers after the date hereof, in which
case such Transaction Documents will be duly executed and delivered by Sellers
at or prior to the Closing, and, subject to any necessary authorization from the
Bankruptcy Court, all Transaction Documents constitute, or will constitute, as
the case may be, the valid and binding agreements of Sellers, enforceable
against Sellers in accordance with their terms.
4.3 Organization, Standing and Power. Each Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation and, except where the failure to obtain such
qualification could not reasonably be expected to have a material adverse
effect, is qualified to do business in every jurisdiction in which it is
required to be qualified. All jurisdictions in which each Seller is qualified to
do business are set forth on Schedule 4.3 attached hereto. Each Seller has full
power and authority and all material licenses, Permits and authorizations
necessary to own and operate its properties and to carry on the Business as now
conducted. Correct and complete copies of each Seller's and each of their
Subsidiaries' articles of incorporation and by-laws have been made available to
Purchaser, which documents reflect all amendments made thereto at any time prior
to the date of this Agreement. Correct and complete copies of the minute books
containing the records of meetings of the stockholders and board of directors,
the stock certificate books and the stock record books of each Seller and each
of their Subsidiaries have been furnished to Purchaser. No Seller nor any of its
Subsidiaries is in default under or in violation of any provision of its
articles of incorporation or by-laws. Subject to any necessary authorization
from the Bankruptcy Court, each Seller has all requisite corporate power and
authority to own, lease and operate its properties, to carry on the Business as
now being conducted and to execute and deliver this Agreement and all writings
relating hereto and, subject to obtaining the Sale Order, to perform its
obligations hereunder and thereunder.
18
4.4 No Conflicts or Violations. Except as set forth on Schedule
4.4, attached hereto and subject to the entry of the Sale Order, the execution,
delivery and performance of the Transaction Documents and the consummation of
the transactions contemplated thereby by Sellers do not and shall not (a)
conflict with or result in any breach of any of the terms, conditions or
provisions of, (b) constitute a default under, (c) result in a violation of, (d)
give any Third Party the right to modify, terminate or accelerate any obligation
under, (e) result in the creation of any Lien upon the Acquired Assets or (f)
require any authorization, consent, approval, exemption or other action by or
notice or declaration to, or filing with, any court or administrative or other
governmental body or agency, under the provisions of the articles of
incorporation or by-laws of any Seller or any of its Subsidiaries or any
indenture, mortgage, lease, loan agreement or other material agreement or
instrument to which any Seller or any of its Subsidiaries is bound or affected,
or any law, statute, rule or Regulation to which any Seller or any of its
Subsidiaries is subject or any judgment, order or decree to which any Seller or
any of its Subsidiaries is subject.
4.5 Financial Statements and Related Matters.
(a) Set forth on Schedule 4.5 attached hereto are copies of
Sellers' and each of their Subsidiaries' (i) unaudited consolidated and
consolidating balance sheet as of March 31, 2002 (the "Latest Balance Sheet")
and the related statements of income and cash flows for the 3-month period then
ended, (ii) unaudited consolidated and consolidating balance sheets and
statements of income and cash flows for the fiscal years ended December 31,
2001, and (iii) audited consolidated and consolidating balance sheets and
statements of income and cash flows for the fiscal years ended December 31,
2000. Each of the foregoing financial statements (including in all cases the
notes thereto, if any) (the "Financial Statements") is accurate and complete in
all material respects, is consistent with Sellers' and each of their
Subsidiaries' Books and Records (which, in turn, are accurate and complete in
all material respects), presents fairly Sellers' and their Subsidiaries'
financial condition and results of operations as of the times and for the
periods referred to therein in all material respects, and has been prepared in
accordance with GAAP, subject in the case of unaudited financial statements to
changes resulting from normal year-end adjustments for recurring accruals (which
shall not be material individually or in the aggregate) and to the absence of
footnote disclosure.
(b) Sellers' and their Subsidiaries' notes and accounts
receivable are valid receivables, current, and to the Knowledge of Sellers, are
subject to no valid counterclaims or setoffs, at the aggregate amount recorded
on Sellers' and their Subsidiaries' Books and Records as of the Closing, net of
an amount of allowances for doubtful accounts which relate to those receivables
computed in a manner consistent with GAAP and the accounting practices used in
the preparation of the Latest Balance Sheet.
4.6 Title to Assets; Assets Necessary to Business.
(a) Except as set forth on Schedule 4.6(a) attached
hereto, Sellers and each of their Subsidiaries have good and marketable title
to, or a valid leasehold interest in, the Acquired Assets. Since the date of the
Latest Balance Sheet, no Seller has purchased any material amount of assets
except in the Ordinary Course of Business and consistent with past practice.
19
(b) Except as described on Schedule 4.6(b) attached
hereto, the Acquired Assets are in good operating condition and repair (ordinary
wear and tear excepted) and are fit for use in the Ordinary Course of Business.
(c) Sellers and each of their Subsidiaries owns or leases all
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of the Business as presently conducted. The Acquired Assets constitute
all of the assets, agreements, licenses and properties owned by Sellers (other
than the Excluded Assets) and are all assets, agreements, licenses and
properties necessary in connection with the conduct of the Business.
(d) Subject to Bankruptcy Court approval, Sellers have the
power and the right to sell, assign and transfer and Sellers will sell and
deliver to Purchaser, and upon consummation of the transactions contemplated by
this Agreement, Purchaser will acquire good and marketable title to the Acquired
Assets, free and clear of all Liens other than Permitted Liens.
(e) This Agreement and the documents contemplated hereby, when
duly executed and delivered by Sellers to Purchaser at the Closing, will
effectively vest in Purchaser good and marketable title to the Acquired Assets,
subject to the Permitted Liens.
4.7 Employee Benefit Plans.
(a) Schedule 4.7(a) attached hereto, sets forth a complete and
accurate list of each Benefit Plan Sellers or their Subsidiaries maintain,
contribute to or have any liability or potential liability to any employee or
former employee ("Employee Benefit Plan"). Sellers have made available to
Purchaser true and correct copies, if applicable, of each Employee Benefit Plan.
The Employee Benefit Plans are in compliance in all material respects with all
applicable requirements of ERISA, the Code, and other applicable laws and have
been administered in all material respects in accordance with their terms and
such laws. Each Employee Benefit Plan which is intended to be qualified within
the meaning of Section 401 of the Code has received a favorable determination
letter as to its qualification, and nothing has occurred that would cause the
loss of such favorable determination.
(b) No Employee Benefit Plan is a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) and no Seller nor any ERISA Affiliate
has sponsored or contributed to or has any liability or potential liability to
any multiemployer plan. No Seller nor any ERISA Affiliate has any liability with
respect to any "employee benefit plan" (as such term is defined under Section
3(2) of ERISA) that is subject to Section 302 of ERISA or Section 412 of the
Code.
(c) To the Knowledge of Sellers, no event or condition has
occurred in connection with which any Seller or any of its ERISA Affiliates
could reasonably be subject to any material liability, encumbrance or Lien with
respect to any Employee Benefit Plan under ERISA, the Code or any other
applicable law or under any agreement or arrangement pursuant to or under which
any Seller or any of its ERISA Affiliates are required to indemnify any Person
against such liability. There are no pending or, to the Knowledge of Sellers,
threatened
20
claims, suits, audits or investigations related to any Benefit Plan (other than
routine claims for benefits).
(d) Except as set forth on Schedule 4.7(d) attached hereto,
the consummation of the transactions contemplated by this Agreement (alone or in
connection with any subsequent event, including a termination of employment)
will not (i) accelerate the vesting or payment of any economic benefit provided
or made available to any Seller's or its Subsidiaries' employees by such Seller
or its Subsidiaries, (ii) increase the amount of any economic benefit provided
or made available to any Seller's or its Subsidiaries' employees by such Seller
or Subsidiaries, or (iii) accelerate or increase the funding obligation of any
Seller or its Subsidiaries with respect to any Employee Benefit Plan.
(e) Sellers have complied with the health care continuation
requirements of Part 6 of Subtitle B of Title I of ERISA ("COBRA"); and neither
Sellers nor any Subsidiary has any obligations under any Employee Benefit Plan,
or otherwise, to provide health or life insurance benefits to former employees
of Sellers or their Subsidiaries, or any other person, except as specifically
required under COBRA.
(f) With respect to each Employee Benefit Plan, all required
or recommended (in accordance with past practices) payments, premiums,
contributions, distributions, reimbursements or accruals for all periods (or
partial periods) ending prior to or as of the Closing Date shall have been made
or properly accrued.
4.8 Labor Matters. Except as set forth in Schedule 4.8 attached hereto:
(a) With respect to the Business, each Seller and its
Subsidiaries is in compliance in all material respects with all applicable laws
relating to employment and employment practices, terms and conditions of
employment, and wages and hours, and is not engaged in any unfair labor practice
or unlawful employment practice. In addition, to the Knowledge of Sellers, there
are no pending material grievances or pending unfair labor practices or other
material employment-related claims against any Seller with respect to the
Business;
(b) No Seller or its Subsidiaries has received notice of any
representation proceeding or unfair labor practice, charge or complaint against
it before the National Labor Relations Board relating to the Business and no
Seller or its Subsidiaries has, to the Knowledge of Sellers, received notice of
any threatened unfair labor practice charge or complaint or representation
proceeding before the National Labor Relations Board or union representational
activity relating to the Business;
(c) There is no labor strike, slowdown or work stoppage
relating to the Business pending or, to Knowledge of Sellers, threatened against
any Seller or its Subsidiaries with respect to the Business;
(d) No Seller or its Subsidiaries has experienced any work
stoppages or been a party to any proceedings before the National Labor Relations
Board involving any issues for the three years prior to the date hereof or been
a party to any arbitration proceeding arising out
21
of or under collective bargaining agreements for the three years prior to the
date hereof, in either case, relating to the Business; and
(e) No Seller or its Subsidiaries has received notice of any
material employment-related charge or material complaint against any Seller or
its Subsidiaries before the Equal Employment Opportunity Commission or the
Department of Labor or any state or local agency of similar jurisdiction
relating to the Business, and no Seller or its Subsidiaries has received any
notice of any material threatened employment-related charge or complaint against
any Seller or its Subsidiaries before the Equal Employment Opportunity
Commission or the Department of Labor or any state or local agency of similar
jurisdiction relating to the Business.
(f) With respect to this transaction, any notice required
under any law or collective bargaining agreement has been given, and all
bargaining obligations with any employee representative have been, or prior to
the Closing will be, satisfied. Neither Seller nor any Subsidiary has
implemented any plant closing or mass layoff of employees that could implicate
the WARN Act.
4.9 Personnel Matters. Schedule 4.9 attached hereto, contains an
accurate and complete list of the wage rates, base compensation, and any
supplemental or bonus compensation (including, without limitation, any retention
or stay bonus arrangements) for all persons employed in the Business including:
(i) full information about each Seller's and its Subsidiaries' obligations to
make current wage or salary payments to employees who are terminable at will and
without notice, and (ii) all other employment-related commitments that exist,
whether oral or in writing, including all collective bargaining agreements,
employment agreements, consulting agreements, independent contractor agreements,
retainers and severance agreements, under which any Seller or any of its
Subsidiaries has any obligation to provide wages, salary, commissions, or other
compensation, remuneration or benefits to any employee, former employee,
consultant or contractor. No Seller is in default with respect to any material
obligation to any of such employees. To the Knowledge of Sellers, no key
executive employee and no group of employees or independent contractors of any
Seller or any of its Subsidiaries has any plans to terminate his, her or its
employment or relationship with any Seller or any of its Subsidiaries.
4.10 Litigation, Orders. Except as set forth on Schedule 4.10 attached
hereto, there are no actions, suits, complaints, charges, Proceedings, Orders,
investigations or claims pending or, to the Knowledge of any Seller, threatened
against or affecting any Seller or any of its Subsidiaries at law or in equity,
in the United States or elsewhere, or before or by any court, arbitrator,
governmental or regulatory official, office, department, commission, board,
bureau, agency or instrumentality (including, without limitation, any actions,
suits, complaints, charges, Proceedings or investigations with respect to the
transactions contemplated by this Agreement) in which the damages sought exceed
$25,000 individually or $100,000 in the aggregate or otherwise could have a
material adverse effect on the Business; and no Seller nor any of their
Subsidiaries is subject to any material grievance or arbitration Proceedings
under collective bargaining agreements or otherwise or, to the Knowledge of
Seller, any governmental investigations or material inquiries. No Seller nor any
of its Subsidiaries is subject to any
22
judgment, Order or decree of any court or other governmental agency (or
settlement enforceable therein), and no Seller nor any of its Subsidiaries has
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to the Business.
4.11 Government Contracts. Except as set forth on Schedule 4.11, no
Seller is a federal contractor or is governed by Executive Order 11246, the
Rehabilitation Act, or the Vietnam Era Veterans Readjustment Assistance Act.
4.12 Ownership; No Subsidiaries. Schedule 4.12 attached hereto
correctly sets forth the name of each Subsidiary of Sellers (other than a
Subsidiary which is a Seller), the jurisdiction of its incorporation and the
Persons owning the outstanding capital stock of such Subsidiary. No Subsidiary
of Sellers (other than a Subsidiary which is a Seller) has any property, assets,
rights, titles or interests of any kind and nature, owned or leased, tangible or
intangible, real or personal (including indirect and other forms of beneficial
ownership). Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, possesses all
requisite corporate power and authority and all material licenses, Permits, and
authorizations necessary to own its properties and to carry on its Business as
now being conducted and as presently proposed to be conducted and, except where
the failure to obtain such qualification could not reasonably be expected to
have a material adverse effect, is qualified to do business in every
jurisdiction in which its ownership of property or the conduct of Business
requires it to qualify. All of the outstanding shares of capital stock of each
Subsidiary are validly issued, fully paid and nonassessable, and all such shares
are owned by Sellers free and clear of all Liens and encumbrances (except Liens
that will be extinguished pursuant to the Sale Order). Except as set forth on
Schedule 4.12 attached hereto, no Seller nor any of its Subsidiaries owns or
holds the right to acquire any shares of stock or any other security or interest
in any other Person or has any obligation to make any investment in any Person.
Schedule 4.12 attached hereto sets forth a list of all of the officers and
directors of each Seller and of each Seller's Subsidiaries.
4.13 Real Property Assets.
(a) Sellers do not own any Owned Real Property.
(b) All utilities currently servicing the Assumed Facilities
are installed, connected and operating, with all charges paid in full.
(c) All permanent certificates of occupancy and all other
material licenses, Permits, authorizations, consents, certificates and approvals
required by all governmental authorities having jurisdiction and the requisite
certificates of the local board of fire underwriters (or other body exercising
similar functions) have been issued for the Assumed Facilities, have been paid
for, are in full force and effect, and, are assignable by Sellers or their
Subsidiaries.
(d) Except as set forth on Schedule 4.13(d) and with the
exception of the proposed Sale Order, to the Knowledge of Sellers, there are no
agreements, consent orders, decrees, judgments, licenses, Permits, conditions or
other directives, issued by a governmental
23
department or agency or court which relate to the future use or require any
change in the present use or operations of the Assumed Facilities.
(e) Neither Sellers nor any of their Subsidiaries have
received any notice from the holder of any mortgage presently encumbering the
Assumed Facilities, any insurance company which has issued a policy with respect
to the Assumed Facilities or, to the Knowledge of Sellers, from any board of
fire underwriters (or other body exercising similar functions) claiming any
defects or deficiencies in the Assumed Facilities or requiring the performance
of any repairs, alterations or other work to the Assumed Facilities.
(f) The operation and use of the buildings and other
improvements constituting the Assumed Facilities do not violate, in any material
respect, any zoning, subdivision, building or similar law, ordinance, Order,
Regulation or recorded plat or any certificate of occupancy issued with respect
to the Assumed Facilities, except for violations that would not have a material
adverse effect with respect to any individual Assumed Facility.
(g) (1) Except for the Assumed Facilities Leases identified on
Schedule 4.13(g) attached hereto, there are no occupancy rights, leases,
licenses or tenancies presently affecting the Assumed Facilities; (2) Sellers
have heretofore delivered to Purchaser true and complete copies of each of the
Assumed Facility Leases (or in the case of an oral lease, a written summary of
the material terms of such lease) and none of such leases has been amended,
modified or terminated; (3) except as set forth on Schedule 4.13(g) attached
hereto, the Assumed Facility Leases are at present and on the date of the
Closing shall be legal, valid, enforceable and in full force and effect unless
any such Assumed Facility Lease shall have expired in accordance with its terms
(and not because of any termination or other acceleration of the stated
expiration date thereof); (4) there is no option to purchase, right of first
offer, right of first refusal or other provision granting any Seller or, to the
Knowledge of Sellers any other Person any right to acquire the Assumed
Facilities; (5) except as set forth on Schedule 4.13(g) attached hereto, to the
Knowledge of Sellers, there are no disputes or forbearance programs in effect
with respect to such Assumed Facilities; (6) except as set forth on Schedule
4.13(g) attached hereto, neither Sellers nor, to the Knowledge of Sellers, any
other party to the Assumed Facilities is in breach or in default under such
Assumed Facility Leases, and no event has occurred or circumstance exists which,
with the delivery of notice, the passage of time or both, would constitute such
a material breach or default, or permit the termination, modification or
acceleration of rent under such Assumed Facilities; (7) except as set forth on
Schedule 4.13(g) attached hereto, no security deposit or portion thereof
deposited with respect such Assumed Facilities has been applied in respect of a
breach or default under such Assumed Facilities which has not been redeposited
in full; (8) neither Sellers nor any of their Subsidiaries owe, or will in the
future, owe any brokerage commissions or finder's fees with respect to such
Assumed Facilities; and (9) except for Liens which will be extinguished pursuant
to the Sale Order, neither Sellers nor any of their Subsidiaries have
collaterally assigned or granted any other security interest in such Assumed
Facilities nor subleased, licensed or otherwise granted any Person the right to
use or occupy such Assumed Facilities or any portion thereof.
24
(h) There are no defects in the buildings, improvements and
structures and fixtures located on or at the Assumed Facilities which would
materially impair the conduct of the Business by Purchaser immediately following
the Closing. The mechanical, electrical, plumbing, HVAC and other systems
servicing the Assumed Facilities are in good working order and repair, ordinary
wear and tear excepted, and there are no defects in such systems which could
reasonably be expected to materially impair the conduct of the Business by
Purchaser immediately following the Closing.
(i) The Leased Facilities comprise all of the real property
used in the Business.
4.14 Taxes. Except as set forth on Schedule 4.14:
(a) Each Seller and its Subsidiaries has filed all material
Tax Returns that it was required to file. All such Tax Returns were correct and
complete in all material respects. All material Taxes owed by any Seller or its
Subsidiaries (whether or not shown on any Tax Return) have been paid. No Seller
or its Subsidiaries is the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where any Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
(b) Each Seller and its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
Third Party, and all Forms W-2 and 1099 required with respect thereto have been
properly completed and timely filed.
(c) There is no dispute or claim concerning any Tax Liability
of any Seller claimed or raised by any authority in writing. Schedule 4.14(c)
attached hereto lists all federal, state, local, and foreign income Tax Returns
filed with respect to any Seller or its Subsidiaries for taxable periods ended
on or after December 31, 1997, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. Sellers have delivered to Purchaser correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any Seller or its Subsidiaries since December
31, 1997.
(d) None of Sellers or its Subsidiaries has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(e) None of the Assumed Liabilities is an obligation to make a
payment that will not be deductible under Section 280G of the Code. No Seller or
its Subsidiaries is a party to any Tax allocation or sharing agreement. No
Seller (A) has been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
Tutor Time) and (B) does not have any liability for the Taxes of any Person
(other than any Seller) under Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
25
4.15 Compliance with Law. Except as set forth on Schedule 4.15, each
Seller and each Subsidiary of a Seller, have, in all material respects, complied
with and are in material compliance with, and are not in default in any respect
with, all applicable laws, Regulations, Orders and ordinances of foreign,
federal, state and local governments and all agencies thereof which are
applicable to the Business, the Acquired Assets, or any owned or leased
properties of any Seller or any of its Subsidiaries and to which any Seller or
any of its Subsidiaries may be subject (including, without limitation, laws,
Regulations and Orders with respect to the operation of child care centers and
the sale of franchises), and no Claims have been filed against any Seller or any
of its Subsidiaries alleging a material violation of any such laws or
Regulations, and no Seller nor any of its Subsidiaries has received notice of
any such violations.
4.16 Approvals and Consents. Except for the approval of the Bankruptcy
Court and except as set forth on Schedule 4.16, no action, approval, consent or
authorization, including, but not limited to, any action, approval, consent or
authorization by any court, governmental agency or quasi-governmental agency,
commission, board, bureau, or instrumentality is necessary as to Sellers in
order to constitute this Agreement as a valid, binding and enforceable
obligation of each Seller in accordance with its terms.
4.17 Cure Amounts. Schedule 4.17 attached hereto sets forth all of the
costs of cure to be satisfied for purposes of Sellers' assumption and assignment
to Purchaser of the Assumed Executory Contracts under section 365 of the
Bankruptcy Code.
4.18 Environmental Matters.
(a) Except as set forth on Schedule 4.18(a) attached hereto,
Sellers and each of their Subsidiaries have all material Permits required under
Environmental Laws for them to conduct the Business as presently conducted and
to own and operate the Acquired Assets and Assumed Facilities as presently owned
and operated. All Permits are listed and described on Schedule 4.18(a) attached
hereto with the respective expiration dates, and they are in full force and
effect. No suspension or cancellation of any of such Permits is pending or to
the Knowledge of Sellers threatened. Except as set forth on Schedule 4.18(a)
attached hereto, Sellers and each of their Subsidiaries, the Business, the
Acquired Assets and the Assumed Facilities have, in all material respects,
complied with and are in material compliance with all such Permits and all
Environmental Laws.
(b) Except as described on Schedule 4.18(b) attached hereto,
to the Knowledge of Sellers, there are no facts, events or conditions with
respect to the Business or Sellers or any of their predecessor(s) or
Affiliate(s), the Business, the Acquired Assets or the Assumed Facilities that
have given or would give rise to any material Liability or investigatory,
corrective or remedial obligation under any Environmental Law.
(c) Except as set forth on Schedule 4.18(c) attached hereto,
Sellers and their Subsidiaries and Affiliates, with respect to the Business, the
Acquired Assets or the Assumed Facilities, have received no written or oral
Notice, report or other information regarding any actual or alleged material
violation of Environmental Laws, or any material Liabilities or
26
potential material Liabilities, including any material investigatory, remedial
or corrective obligations, relating to any of them or their facilities arising
under Environmental Laws.
(d) Except as set forth on Schedule 4.18(d) attached hereto,
neither any Seller nor to the Knowledge of Sellers, any of its predecessor(s) or
Affiliate(s) with respect to the Business, the Acquired Assets or the Assumed
Facilities, has treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or Released any Hazardous Substance, or owned
or operated any property or facility (and no such property or facility is
contaminated by any Hazardous Substance) in a manner that has given or would
give rise to material Liabilities, including any material liability for response
costs, corrective action costs, personal injury, property damage, natural
resources damages or attorney fees, or any material investigatory, corrective or
remedial obligations, pursuant to CERCLA or any other Environmental Laws.
(e) Sellers have provided to Purchaser all material
environmental audits, reports and other material environmental documents
relating to the Acquired Assets, Assumed Facilities and the current and former
operations and Facilities of the Business, which are in their possession,
custody or control.
(f) Except as otherwise disclosed on Schedule 4.18(f), to the
Knowledge of Sellers, none of the following exists at the Acquired Assets,
Leased Facilities or any other property or facility owned or operated by the
Business: (1) underground storage tanks, (2) asbestos-containing material in any
form or condition, (3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills, surface impoundments, or disposal areas.
4.19 Absence of Undisclosed Liabilities. Except as otherwise disclosed
on Schedule 4.19, no Seller nor any of its Subsidiaries has any obligations or
Liabilities arising out of transactions entered into at or prior to the Closing,
or any action or inaction at or prior to the Closing, except (i) obligations
under executory contracts or commitments described on Schedule 4.19 attached
hereto or under executory contracts and commitments which are not required to be
disclosed thereon (but not liabilities for breaches thereof), (ii) liabilities
reflected on the liabilities side of the Latest Balance Sheet, and (iii)
liabilities which have arisen after the date of the Latest Balance Sheet in the
Ordinary Course of Business or otherwise in accordance with the terms and
conditions of this Agreement (none of which is a material liability for breach
of contract, breach of warranty, tort or infringement or a claim or lawsuit or
an environmental liability).
4.20 Affiliated Transactions. Except as disclosed on Schedule 4.20
attached hereto, no Insider is a party to any agreement, contract, commitment or
transaction with any Seller or any of its Subsidiaries or which is pertaining to
the Business or has any interest in the Acquired Assets or any property, real or
personal or mixed, tangible or intangible, used in or pertaining to the business
of any Seller or any of its Subsidiaries.
27
4.21 Intellectual Property.
(a) Schedule 4.21 attached hereto sets forth a complete and
correct list of all of the following that are owned by any Seller or any of its
Subsidiaries or used by any Seller or any of its Subsidiaries in the conduct of
the Business:
(i) patented or registered Intellectual Property and
pending patent applications or other applications for registrations of
Intellectual Property;
(ii) unregistered trademarks, unregistered service
marks, trade names, corporate names, and Internet domain names;
(iii) material unregistered copyrights;
(iv) computer software (other than commercially
available off-the-shelf software purchased or licensed for less than a total
cost of $10,000 in the aggregate); and
(v) any other material Intellectual Property.
(b) Except as set forth on Schedule 4.21, Sellers and their
Subsidiaries own and possess all right, title and interest in and to all of the
Intellectual Property set forth on Schedule 4.21 attached hereto and owns and
possesses all, right, title and interest in and to, or have a valid and
enforceable license to use pursuant to a written license agreement set forth on
Schedule 4.21 attached hereto, all other Intellectual Property necessary for the
operation of the Business as presently conducted (collectively, the "Company
Intellectual Property"). The Company Intellectual Property is not subject to any
liens, security interests or other encumbrances (other than Liens that will be
extinguished pursuant to the Sale Order), and is not subject to any restrictions
or limitations regarding use or disclosure other than pursuant to a written
license agreement or franchise agreement set forth on Schedule 4.24 attached
hereto.
(c) Except as set forth on Schedule 4.21, no Seller or any of
its Subsidiaries has infringed, misappropriated or otherwise conflicted with,
and the operation of the Business as currently conducted and, prior to the
Closing, will not infringe, misappropriate or otherwise conflict with, any
Intellectual Property of any Third Party, to the Knowledge of Sellers, there are
no facts which indicate a likelihood of any of the foregoing and no Seller nor
any of its Subsidiaries has received any notices regarding any of the foregoing
(including, without limitation, any demands or offers to license any
Intellectual Property from any Third Party).
(d) Each Seller and each of its Subsidiaries has taken all
necessary action to maintain and protect all of the Company Intellectual
Property and will continue to maintain and protect all of the Company
Intellectual Property prior to the Closing so as not to adversely affect the
validity or enforceability thereof. To the Knowledge of Sellers, the owners of
any of the Intellectual Property licensed to Sellers or any of their
Subsidiaries have taken all necessary action to maintain and protect the
Intellectual Property covered by such licenses.
(e) To the Knowledge of Sellers, no Third Party has infringed,
misappropriated or otherwise conflicted with any of the Company Intellectual
Property.
28
(f) Immediately subsequent to the Closing, the Company
Intellectual Property will be owned by or available for use by Purchaser on
terms and conditions identical to those under which Sellers and their
Subsidiaries owned or used the Company Intellectual Property immediately prior
to the Closing.
(g) All of the Company Intellectual Property is valid and
enforceable and none of the Company Intellectual Property has been misused, no
claim by any Third Party contesting the validity, enforceability, use or
ownership of any of the Company Intellectual Property has been made, is
currently outstanding or to the Knowledge of Sellers is threatened, and to the
Knowledge of Sellers there are no grounds for the same.
(h) No loss or expiration of any of the Company Intellectual
Property is pending or, to the Knowledge of Sellers, threatened or reasonably
foreseeable, except for patents expiring at the end of their statutory terms
(and not as a result of any act or omission by any Seller or its Subsidiaries,
including, without limitation, a failure by any Seller or its Subsidiaries to
pay any required maintenance fees).
(i) No Seller or any of its Subsidiaries has agreed to
indemnify any Third Party for or against any interference, infringement,
misappropriation or other conflict with respect to any Intellectual Property.
(j) To the Knowledge of Sellers, there is no Intellectual
Property owned or used by any competitor or Third Party which reasonably could
be expected to supersede or make obsolete any product or process of Sellers or
any of their Subsidiaries or to limit its business as currently conducted.
4.22 Insurance. Schedule 4.22 attached hereto lists and briefly
describes all material policies of insurance owned, held, or maintained by
Sellers or any of their Subsidiaries or insuring the Acquired Assets, including
the type and amount of coverage and the expiration dates of the policies and the
claims history for the past two years; it being understood that with respect to
Sellers' health insurance programs, the claims history set forth on Schedule
4.22 shall be on an aggregate basis. Except as set forth on Schedule 4.22
attached hereto, (a) current premiums and any other obligations under such
insurance have been paid and all such policies are valid and enforceable and in
full force and effect on the date hereof and no Seller nor any of their
Subsidiaries is in default with respect to its obligations under any such
insurance policies, and (b) no Seller nor any of its Subsidiaries has received
any notice within the last 90 days threatening suspension, revocation,
modification or cancellation of any insurance policy or a material increase in
any premium in connection therewith or informing any Seller or any of its
Subsidiaries that any coverage listed on Schedule 4.22 attached hereto will or
may not be available in the future on substantially the same terms as now in
effect. No Seller or any of its Subsidiaries has been denied insurance coverage
within the past 3 years. Except as set forth on Schedule 4.22, no Seller nor any
of its Subsidiaries has any self-insurance or co-insurance programs, and the
reserves set forth on the Latest Balance Sheet are adequate to cover all
anticipated liabilities with respect to self-insurance or coinsurance programs.
4.23 Accounts Receivable. Except as set forth on Schedule 4.23 attached
hereto, each account receivable arising from services and/or sales by Sellers or
any of their
29
Subsidiaries, whether or not earned by Sellers on the date hereof or on the
Closing Date, constitutes a bona fide receivable resulting from a bona fide sale
to a customer in the Ordinary Course of Business on commercially reasonable
terms, the amount of which was actually due on the date thereof.
4.24 Contracts
(a) Except as specifically contemplated by this Agreement and
except as set forth on Schedule 0 attached hereto, no Seller nor any of its
Subsidiaries is a party to or bound by, whether written or oral, any:
(i) collective bargaining agreement or contract with
any labor union or any bonus, pension, profit sharing, retirement or any other
form of deferred compensation plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal or
informal;
(ii) any contract for the employment of any officer,
individual employee or other Person on a full-time basis on any severance
agreements;
(iii) agreement or indenture relating to the
borrowing of money or to mortgaging, pledging or otherwise placing a Lien on any
of its assets;
(iv) contract under which Sellers or any of their
Subsidiaries has advanced or loaned any other Person amounts in the aggregate
exceeding $25,000;
(v) agreements with respect to the lending or
investing of funds;
(vi) all agreements relating to any license (to or
from a third party), franchise, distributorship or other agreement, commitment,
arrangement or understanding which relates in whole or in part to any software,
patent, trademark, trade name, service xxxx or copyright or to any ideas,
technical assistance or other know-how or any other Intellectual Property of
Seller or used by any Seller;
(vii) guaranty or any obligation, other than
endorsements made for collection;
(viii) management, consulting, advertising,
marketing, promotion, technical services, advisory or other contract or other
similar arrangement relating to the design, marketing, promotion, management or
operation of the Business involving more than $25,000 annually;
(ix) outstanding powers of attorney executed on
behalf of Seller;
(x) lease or agreement under which it is lessee of,
or holds or operates, any personal property owned by any other party calling for
payments in excess of $25,000 annually.
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(xi) lease or agreement under which it is lessor of
or permits any Third Party to hold or operate any property, real or personal,
owned or controlled by it involving more than $25,000 annually;
(xii) contract or group of related contracts with the
same party continuing over a period of more than six months from the date or
dates thereof, not terminable by it on 60 days or less notice without penalties
or involving more than $25,000 annually;
(xiii) any confidentiality agreement or similar
arrangement;
(xiv) any settlement, conciliation, leniency or
similar agreement;
(xv) contract which prohibits it from freely engaging
in business anywhere in the world; or
(xvi) other agreement material to it whether or not
entered into in the Ordinary Course of Business.
(b) Except as disclosed on Schedule 4.24 attached hereto, (i)
to the Knowledge of Sellers, no Material Contract has been breached or canceled
by the other party, and there is no anticipated breach by any other party to any
contract set forth on Schedule 4.24, (ii) no customer or supplier has indicated
in writing or, to the Knowledge of Sellers, orally to any Seller or any of its
Subsidiaries that it shall stop or decrease the rate of business done with such
Seller or Subsidiary or that it desires to renegotiate its contract or current
arrangement with such Seller or Subsidiaries, (iii) except for defaults that
will be cured through the cure payments listed on Schedule 4.17 attached hereto
or arising solely as a consequence of the commencement of the Chapter 11 Cases,
neither any Seller nor any other party thereto is in default or breach in any
material respect under the terms of any Material Contract and, to the Knowledge
of Sellers, no event or circumstance has occurred that, with notice or lapse of
time or both, would constitute a default or breach thereunder, (iv) no Seller
nor any of its Subsidiaries has assigned, delegated or otherwise transferred to
any Person any of its rights, title or interest under any Material Contract, and
(v) each Material Contract is legal, valid, binding, enforceable and in full
force and effect and, subject to the terms of this Agreement, will continue as
such following the consummation of the transactions contemplated hereby.
(c) Purchaser has had access to a true and correct copy of all
written contracts which are required to be disclosed on Schedule 4.24 attached
hereto (each a "Material Contract"), in each case together with all amendments,
waivers or other changes thereto (all of which are disclosed on Schedule 4.24).
Schedule 4.24 contains an accurate and complete description of all material
terms of all oral contracts referred to therein.
4.25 Relationships with Suppliers. Except as set forth on Schedule
4.25, Sellers have provided Purchaser with a true and accurate list of the names
and addresses of the top twenty suppliers of Sellers and their Subsidiaries (on
a consolidated basis) (by dollar volume of purchases from such suppliers), for
the fiscal years ended December 31, 2000 and 2001 and the
31
three-month period ended March 31, 2002. No Seller nor any of its Subsidiaries
has received any indication from any material supplier to the Business or any of
its Subsidiaries to the effect that, and no Seller nor any of its Subsidiaries
has any reason to believe that, such supplier will stop, materially decrease the
rate of, or materially change the terms (whether related to payment, price or
otherwise) with respect to, supplying materials, products or services to such
Seller or any of its Subsidiaries (whether as a result of the consummation of
the transactions contemplated hereby or otherwise).
4.26 Franchising.
(a) Schedule 4.26(a) contains a list of all franchise
agreements and area development agreements to which any Seller or any Subsidiary
of a Seller is a party (whether or not as franchisor), showing the name and
address of the current area developer or franchisee, the expiration date of the
agreement, the applicable royalty rate and compete detail of any exclusive
territorial rights granted to the area developer or franchisee. Except as set
forth on Schedule 4.26(a), (i) all such franchise agreements and area
development agreements were entered into with the area developers or franchisees
in material accordance with the statutes, rules and regulations governing the
offering and sale of franchises in effect at the time of execution of such
franchise agreements and area development agreements; (ii) all such franchise
agreements and area development agreements are in full force and effect; and
(iii) to the Knowledge of Sellers, there are no existing defaults by any of such
area developers or franchisees thereunder that would have a Material Adverse
Effect on Sellers. To the Knowledge of Sellers, no area developer or franchisee
has alleged, within the past one (1) year period, any misrepresentation or
breach of contract on the part of any Seller or any Subsidiary of any Seller in
connection with the operation of the franchise system, and no Seller nor any
Subsidiary of any Seller has breached any representation or obligation under any
such contract, except as shown on Schedule 4.26(a).
(b) Schedule 4.26(b) contains a list of all franchises that
any Seller has entered into contracts to sell and a list of contracts obligating
any Seller to deliver franchise opportunities to third parties. Schedule 4.26(b)
contains a copy of the most recent Uniform Franchise Offering Circular ("UFOC")
used by the Sellers. Schedule 4.26(b) contains a list of all states in which any
Seller is registered to sell franchises and the expiration date of such
registrations. No Seller has offered any area development agreements or
franchise agreements in any state or other jurisdiction in which such Seller was
not then registered to sell franchises, unless such state or other jurisdiction
then had no registration requirements or business opportunity exemption
requirements. Each UFOC used by a Seller in marketing its franchises (i)
complied (and, with respect to any UFOC used after the date hereof, such UFOC
will comply as of the date of such use) in all material respects with applicable
laws and regulations in effect on the date of such use and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) Except as shown on Schedule 4.26(c), there are no
franchise associations or other similar organizations by, with, among or between
any of the Sellers' franchisees.
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(d) Within the two year period ending on the date of this
Agreement, except as otherwise shown on Schedule 4.26(d), no Seller has received
any written notice from any franchisee or area developer of an intent to
terminate any franchise agreement or area development agreement or of an intent
not to renew any franchise agreement or area development agreement.
4.27 Accounts Payable and Other Accrued Expenses. Set forth on Schedule
4.27 attached hereto is a list of all accounts payable and other accrued
expenses of Sellers and each of their Subsidiaries as of March 31, 2002 together
with the name of each payee, the relationship (if any) to Sellers, the date each
such payment is due and the nature of the transaction in which it was incurred
if other than a trade payable incurred in the Ordinary Course of Business.
4.28 Brokers. Except as set forth on Schedule 4.28 attached hereto,
neither Sellers nor any of their Subsidiaries have incurred any liability to any
broker, finder or agent with respect to the payment of any commission regarding
the consummation of the transactions contemplated hereby.
4.29 Absence of Certain Developments. Except as set forth on Schedule
4.29 attached hereto and except as expressly contemplated by this Agreement,
since December 31, 2001 no Seller nor any of its Subsidiaries has:
(a) suffered any change that has had or could reasonably be
expected to have a Material Adverse Effect or suffered any theft, damage,
destruction or casualty loss in excess of $50,000, to its assets, whether or not
covered by insurance or suffered any substantial destruction of its Books and
Records;
(b) redeemed or repurchased, directly or indirectly, any
shares of capital stock or other equity security or declared, set aside or paid
any dividends or made any other distributions (whether in cash or in kind) with
respect to any shares of its capital stock or other equity security;
(c) issued, sold or transferred any equity securities, any
securities convertible, exchangeable or exercisable into shares of its capital
stock or other equity securities, or warrants, options or other rights to
acquire shares of its capital stock or other of its equity securities;
(d) incurred or become subject to any liabilities, except
liabilities incurred in the Ordinary Course of Business;
(e) subjected any portion of its properties or assets to any
Lien (other than Permitted Liens);
(f) sold, leased, assigned or transferred (including, without
limitation, transfers to stockholders or any Insider) a portion of its tangible
assets, except for sales of Inventory in the Ordinary Course of Business, or
canceled without fair consideration any material debts or claims owing to or
held by it;
33
(g) sold, assigned, licensed or transferred (including,
without limitation, transfers to stockholders or any Insider) any Company
Intellectual Property owned by, issued to or licensed to it or disclosed any
confidential information (other than pursuant to agreements requiring the
disclosure to maintain the confidentiality of and preserving all its rights in
such confidential information) or received any confidential information of any
Third Party in violation of any obligation of confidentiality;
(h) suffered any extraordinary losses or waived any rights of
material value;
(i) entered into, amended or terminated any material lease,
contract, agreement or commitment, or taken any other action or entered into any
other transaction other than in the Ordinary Course of Business;
(j) entered into any other material transaction, or materially
changed any business practice;
(k) made or granted any bonus or any wage, salary or
compensation increase to any director, officer, employee or sales
representative, group of employees or consultant or made or granted any increase
in any employee benefit plan or arrangement, or amended or terminated any
existing employee benefit plan or arrangement or adopted any new employee
benefit plan or arrangement, or entered into, terminated or materially modified
any collective bargaining agreement;
(l) except for the adoption of the Retention Plan, made any
other change in employment terms for any of its directors, officers, and
employees;
(m) conducted its cash management customs and practices other
than in the Ordinary Course of Business (including, without limitation, with
respect to collection of accounts receivable, purchases of Inventory and
supplies, repairs and maintenance, payment of accounts payable and accrued
expenses, levels of capital expenditures and operation of cash management
practices generally);
(n) made any capital expenditures or commitments for capital
expenditures that aggregate in excess of $25,000;
(o) made any loans or advances to, or guarantees for the
benefit of, any Person;
(p) made charitable contributions, pledges, association fees
or dues in excess of $25,000; or
(q) committed to do any of the foregoing.
4.30 Officers, Directors and Bank Accounts Schedule. Schedule 4.30
attached hereto lists all officers and directors of Sellers and each of their
Subsidiaries, and all bank accounts, safety deposit boxes and lock boxes
(designating each authorized signatory with respect
34
thereto) for each Seller and each of its Subsidiaries. All of the bank accounts,
safety deposit boxes and lock boxes listed on Schedule 4.30 are owned and
controlled directly by Tutor Time.
4.31 No Failure to Disclose. To the Knowledge of Sellers, there is no
fact which has not been disclosed to Purchaser which has a Material Adverse
Effect on any Seller, its Subsidiaries, or the Business or could reasonably be
anticipated to have a Material Adverse Effect on any Seller, its Subsidiaries,
or the Business. Notwithstanding any right of Purchaser fully to investigate the
affairs of Sellers, and notwithstanding any knowledge of facts determined or
determinable by Purchaser pursuant to such investigation or right of
investigation, Purchaser has the right to rely fully upon the representations
and warranties of Sellers contained herein, in the exhibits or the Disclosure
Schedules attached hereto or in any other document delivered in connection with
the transactions contemplated hereby.
4.32 Closing Date All of the representations and warranties contained
in this Article IV and elsewhere in this Agreement and all information delivered
in any schedule, attachment or Exhibit hereto or in any writing delivered by
Sellers to Purchaser are true and correct on the date of this Agreement and
shall be true and correct on the Closing Date, except to the extent that Sellers
have advised Purchaser otherwise in writing prior to the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
5.1 Organization. Purchaser is a limited liability company validly
existing and in good standing under the laws of the State of Michigan and has
the full power and authority to execute, deliver and perform this Agreement and
to consummate all transactions contemplated hereby.
5.2 Authority. The execution, delivery and performance by Purchaser of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of Purchaser and do not
and will not violate any provisions of its organizational documents, any
applicable Regulation or any Contract or Order binding upon it. This Agreement
constitutes a valid and binding agreement of Purchaser, enforceable against
Purchaser in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally from time to time in effect, and to general equitable
principles.
5.3 Consents. No notice to, filing with, authorization of, exemption
by, or consent of any Person is required in order for Purchaser to consummate
the transactions contemplated hereby.
5.4 Brokers. Purchaser has incurred no liability to any broker, finder
or agent with respect to the payment of any commission regarding the
consummation of the transactions contemplated hereby, except to Xxxxxxxx
Partners, and any such payment owed to Xxxxxxxx Partners will be the sole
responsibility of Purchaser and its Affiliates.
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ARTICLE VI
COVENANTS OF SELLERS; OTHER AGREEMENTS
6.1 Consents and Approvals.
(a) Sellers shall use commercially reasonable efforts (i) to
obtain all necessary consents and approvals, as reasonably requested by
Purchaser, to consummate the purchase and sale of the Acquired Assets and the
assignment of the Assumed Obligations, together with any other necessary
consents and approvals to consummate the transactions contemplated hereby,
including, without limitation, obtaining the Sale Order, (ii) to make, as
reasonably requested by Purchaser, all filings, applications, statements and
reports to all authorities that are required to be made prior to the Closing
Date by or on behalf of Sellers or any of their Affiliates pursuant to any
applicable Regulation in connection with this Agreement and the transactions
contemplated hereby and (iii) to obtain, as requested by Purchaser, all required
consents and approvals (if any) necessary to assign and transfer the Permits to
Purchaser at Closing and, to the extent that one or more of the Permits are not
transferable, to assist Purchaser in obtaining replacements therefor. In the
event that certain Permits are not transferable or replacements therefor are not
obtainable on or before the Closing, but such Permits are transferable or
replacements therefor are obtainable after the Closing, Sellers shall continue
to use such commercially reasonable efforts in cooperation with Purchaser after
the Closing as may be required to obtain all required consents and approvals to
transfer, or obtain replacements for, such Permits after Closing and shall do
all things necessary to give Purchaser the benefits that would be obtained under
such Permits. Sellers and Purchaser shall each pay all of their own respective
fees, costs and expenses incurred in connection with this Section 6.1(a).
(b) Each of the parties shall give any other notices to, make
any other filings with, and use reasonable best efforts to obtain, any other
authorizations, consents and approvals of governments and governmental agencies
in connection with the matters contemplated by this Agreement.
6.2 Access to Information and Facilities.
(a) Sellers agree that, prior to the Closing Date, Purchaser,
Purchaser's lenders, and their respective representatives shall, upon reasonable
notice and so long as such access does not unreasonably interfere with the
business operations of any Seller, have reasonable access during normal business
hours to all Facilities and shall be entitled to make such reasonable
investigation of the properties, businesses and operations of Sellers relating
to the Business and such examination of the Books and Records and financial
condition of Sellers relating to the Business as it reasonably requests and to
make extracts and copies to the extent necessary of such Books and Records;
provided that no investigation pursuant to this Section 6.2 shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the transactions contemplated by this
Agreement.
(b) Sellers shall deliver to Purchaser copies of the
Business's interim monthly and year-to-date consolidated financial statements as
soon as reasonably practicable
36
(and in any event within 15 days) following the end of each monthly accounting
period during the period between the date of this Agreement and the Closing.
These financial statements shall include income statements, balance sheets,
profit and loss and other analyses and comparisons to the Sellers' budget for
the Business, as well as an explanation of the assumptions and the accounting
policies and practices used in preparation thereof and such other matters as
Purchaser may reasonably request and, if any, interim statements and operating
reports filed with the United States Trustee or the Bankruptcy Court.
6.3 Conduct of the Business Pending the Closing. Subject to any
obligations as a debtor in possession under the Bankruptcy Code and except as
(i) otherwise expressly contemplated by this Agreement or pursuant to the
written consent of Purchaser, (ii) described on Schedule 6.3 attached hereto, or
(iii) explicitly permitted pursuant to the debtor-in-possession credit facility
between the Senior Lender and Sellers, from the date hereof until the Closing
Date, Sellers shall (i) conduct the Business in the Ordinary Course of Business
(including with respect to the payment of accounts payable to the fullest extent
permissible under the Bankruptcy Code), (ii) use commercially reasonable efforts
to preserve intact the Business, to keep available the services of the present
employees of the Business and, (iii) not take any action inconsistent with this
Agreement or with the consummation of the Closing. Without limiting the
generality of the foregoing, subject to any obligations as a debtor in
possession under the Bankruptcy Code and except as otherwise expressly
contemplated by this Agreement or with the prior written consent of Purchaser or
except as described on Schedule 6.3 attached hereto, from the date hereof until
the Closing Date, each Seller shall:
(a) not sell, assign, transfer, convey, pledge, mortgage,
lease, license or otherwise dispose of or encumber any of the Acquired Assets,
or any interests therein, other than in the Ordinary Course of Business and
consistent with past practice;
(b) not make any material change in its methods of management,
marketing, accounting or operating (or practices relating to payments);
(c) report periodically to Purchaser concerning the status of
the Business, the Acquired Assets and its operations and finances;
(d) not take any action which is inconsistent with its
obligations under this Agreement;
(e) maintain the Acquired Assets in good operating condition
and repair, subject to ordinary wear and tear;
(f) continue all of its existing policies of insurance (or
comparable insurance) in full force and effect and at least at such levels as
are in effect on the date hereof, up to and including the Closing (and not
cancel any such insurance or take, or fail to take, any action that would enable
the insurers under such policies to avoid liability for claims arising out of
occurrences prior to the Closing);
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(g) not enter into any transaction or make or enter into any
contract or commitment or amend any material contract or commitment which is not
in the Ordinary Course of Business, consistent with past practice;
(h) not grant any increase in the compensation payable or
to become payable to any employee (including, without limitation, retention or
stay bonus arrangements), except such increases as are required by contract or
pursuant to the Retention Plan;
(i) not contribute or make any commitment to, or
representation that it shall, contribute any amounts to any Employee Benefit
Plan of Sellers, or otherwise alter any such Employee Benefit Plan of Sellers or
the funding thereof except as required by law or by the terms of any such plan
as in effect on the date of this Agreement;
(j) maintain the Books and Records in the usual, regular and
ordinary manner and consistent with past practice;
(k) maintain compliance with all laws, rules and Regulations
of all federal, state, local or foreign governmental or regulatory bodies that
relate to the Business and the Acquired Assets;
(l) not implement any employee layoffs that could implicate
the WARN Act;
(m) apply or continue prosecution of applications already
submitted for any Permits required under Environmental Laws, or under any other
Regulation, for the continued operation of the Business (as it is currently
being operated) up to and after Closing;
(n) not incur any Liability, whether absolute, fixed or
contingent, except in the Ordinary Course of Business and consistent with past
practice;
(o) not sell, transfer, license or otherwise dispose of, or
agree to sell, transfer, license or otherwise dispose of, or permit to lapse any
of the Intellectual Property; and
(p) not terminate, discontinue, close or dispose of any plant,
Leased Facility or business operation of Sellers.
Sellers will not (i) take or agree or commit to take any action that would make
any representation and warranty of Sellers hereunder inaccurate in any material
respect at, or as of any time prior to, the Closing Date or (ii) omit or agree
to omit to take any action necessary to prevent any such representation or
warranty from being inaccurate in any material respect at any such time.
6.4 Notification of Certain Matters; Schedules.
(a) Sellers shall give notice to Purchaser of (i) the
occurrence or nonoccurrence of any event that would be likely to cause either
(A) any representation or warranty of Sellers contained in this Agreement, or in
connection with the transactions
38
contemplated hereunder, to be untrue or inaccurate in any material respect at
any time from the date hereof to the Closing or (B) directly or indirectly, any
Material Adverse Effect on any of Sellers, or (ii) any material failure of
Sellers to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by them hereunder. Notwithstanding the foregoing and
except as set forth in Section 6.4(c), the delivery of any notice pursuant to
this Section 6.4(a) shall not (x) be deemed to amend or supplement any of the
Disclosure Schedules contemplated hereby, (y) be deemed to cure any breach of
any representation, warranty covenant or agreement or to satisfy any condition
or (y) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
(b) Sellers shall add Purchaser to Sellers' "special notice
list" and otherwise provide notice to Purchaser of all matters that are required
to be served on Sellers' creditors pursuant to the Bankruptcy Code and Rules.
(c) Purchaser and Sellers acknowledge that certain of the
representations and warranties of Sellers affirmatively require that Sellers
list certain factual information on the Schedules attached hereto. Sellers shall
be permitted to update such Disclosure Schedules on or prior to the Closing Date
but only with respect to events or circumstances arising between the date hereof
and the Closing Date.
6.5 Best Efforts; Further Assurances.
(a) Sellers will use best efforts timely obtain any consent
required for the consummation of the transactions contemplated by this Agreement
as soon as practicable.
(b) Sellers will use best efforts to ensure that the Sale
Order is entered on the Bankruptcy Court's docket as soon as practicable but no
later than one day after the date of the Sale Hearing.
(c) Sellers shall execute such documents and use their
reasonable best efforts to take or cause to be taken all action and do or cause
to be done all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including, without limitation, to
obtain all consents, approvals and authorizations of Third Parties, to make all
filings with and give all notices to Third Parties which may be necessary or
required in order to effectuate the transactions contemplated hereby, and to
obtain landlords' estoppels and landlords' lenders' waivers. Sellers'
obligations under this Section 6.5(c) shall be deemed to include Sellers'
commercially reasonably efforts to assist Purchaser in obtaining the Permits,
approvals and certifications Purchaser seeks with respect to the Acquired Assets
or the operations it contemplates at the Assumed Facilities. Sellers shall use
commercially reasonable efforts to fulfill or obtain the fulfillment of the
conditions set forth in Article VIII of this Agreement.
6.6 Bankruptcy Actions.
(a) The Assumed Executory Contracts (as set forth on
Schedule 2.1(a)(vi) attached hereto) shall be identified (by the date of the
Assumed Executory Contract (if available), the other party to the contract or
lease and the address of such party) on an exhibit
39
attached to a motion for order authorizing the assumption and assignment of
Executory Contracts (which may be included in the Sale Motion). Such exhibit
shall set forth the amounts necessary to cure defaults under each of such
Assumed Executory Contracts as determined by Sellers based on Sellers' Books and
Records. Sellers shall, at the written direction of Purchaser delivered any time
prior to one (1) day prior to the Closing Date, remove Assumed Executory
Contracts from the exhibit. In cases in which Sellers are unable to establish
that a default exists, the relevant cure amount shall be set at $0.00. The Sale
Motion shall reflect that Purchaser's promise to perform from and after the
Closing under the Assumed Executory Contracts shall be the only adequate
assurance of future performance necessary to satisfy the requirements of section
365 of the Bankruptcy Code in respect of the assignment to Purchaser of such
Assumed Executory Contracts.
(b) Sellers will provide Purchaser with a reasonable
opportunity to review and comment upon all motions, applications and supporting
papers prepared by Sellers relating to this Agreement (including forms of Orders
and notices to interested parties) prior to the filing thereof in the Chapter 11
Cases. All motions, applications and supporting papers prepared by Sellers and
relating to the approval of this Agreement (including forms of Orders and
notices to interested parties) to be filed on behalf of Sellers after the date
hereof must be acceptable in form and substance to Purchaser, in its reasonable
discretion.
6.7 Exclusivity; No Solicitation of Transactions. From the date of
the issuance of the Sale Order and until the Closing Date and provided that
Purchaser is proceeding in good faith to consummate the transactions
contemplated hereby in a timely manner, no Seller or any of its Affiliates shall
discuss, negotiate or consummate any transaction involving (i) the issuance,
redemption, sale or exchange or other disposition of any equity interest in any
Seller or (ii) the sale, exchange, liquidation, reorganization, or other
disposition of all or any part of the Acquired Assets.
6.8 [Intentionally Omitted]
6.9 Employees and Business Relations. Sellers shall use their
commercially reasonable best efforts to keep available the services of its
current employees and agents and to maintain its relations and goodwill with its
suppliers, customers, distributors and any others with whom or with which it has
business relations.
6.10 Non-Seller Subsidiaries. To the extent that any Subsidiary of any
Seller (other than a Subsidiary which is a Seller) owns any property, assets,
rights, titles or interests of any kind and nature, each Seller hereby covenants
that it will (and it will cause its Affiliates to), from time to time, without
further consideration, do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, all further acts, conveyances,
transfers, assignments and assurances as reasonably may be required to convey or
transfer to Purchaser any such property, assets, rights, titles or interests
free and clear of all Liens, Claims, encumbrances, interests and liabilities.
6.11 Taxes. On or prior to the Closing, Sellers shall pay all sales
taxes, use taxes, payroll taxes, and Taxes due in any foreign jurisdiction due
and owing by any Seller; provided
40
however Sellers shall not be obligated to pay any such Tax that is disputed in
good faith by any Seller.
Except for those covenants set forth in this Article VI and under
Article XII which by their terms will be fully performed and discharged prior to
the Closing, all covenants set forth in this Article VI and under Article XII
shall survive the Closing.
ARTICLE VII
COVENANTS OF PURCHASER
7.1 Assumed Obligations. Subsequent to the Closing, Purchaser
agrees to pay and perform the Assumed Obligations and shall indemnify and hold
Sellers harmless with respect to the Assumed Obligations.
7.2 Further Assurances. Purchaser shall execute such documents and
use its reasonable best efforts to take or cause to be taken all action and do
or cause to be done all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement. Purchaser shall use commercially
reasonable efforts to fulfill or obtain the fulfillment of the conditions set
forth in Article IX of this Agreement.
7.3 Hiring of Headquarters Employees. Subject to the approval of
the Bankruptcy Court, Purchaser agrees that it will make job offers on terms and
conditions of employment substantially similar to those provided by Tutor Time
on the date hereof to at least sixteen individuals employed by Tutor Time on the
date hereof and whose principal place of employment is Tutor Time's office
located at 0000 XX 00xx Xxxxxx, Xxxx Xxxxx, Xxxxxxx, 00000.
Except for those covenants set forth in this Article VI and under
Article XII which by their terms will be fully performed and discharged prior to
the Closing, all covenants set forth in this Article VI and under Article XII
shall survive the Closing.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are, at the
option of Purchaser, subject to satisfaction of the following conditions
precedent on or before the Closing Date.
8.1 Warranties True as of Both Present Date and Closing Date;
Covenants.
(a) Each of the representations and warranties of Sellers
contained herein shall be true and correct in all material respects (except for
such changes as are contemplated by the terms of this Agreement) on and as of
the Closing Date (except for representations and warranties made as of a
specified date, which shall be true and correct as of that date) with the same
force and effect as though made on and as of the Closing Date except that those
representations and warranties that are qualified by materiality, Material
Adverse Effect, or similar phrase shall be true and correct in all respects.
41
(b) Sellers shall have performed and complied in all
material respects with the obligations and covenants required by this Agreement
to be performed or complied with by Sellers on or prior to the Closing Date.
8.2 Bankruptcy Condition.
(a) The Sale Order shall have been entered on the docket by
the Clerk of the Bankruptcy Court.
(b) The Sale Order shall have become a Final Order.
(c) The Sale Order shall approve and authorize the assumption
and assignment of the Assumed Contracts and the Assumed Leases and the Assumed
Contracts and the Assumed Leases shall have been actually assumed and assigned
to Purchaser such that the Assumed Executory Contracts will be in full force and
effect from and after the Closing with non-debtor parties being barred and
precluded from asserting against Purchaser, among other things, defaults,
breaches or claims of pecuniary losses existing as of the Closing or by reason
of the Closing.
(d) [Intentionally Omitted]
(e) Notwithstanding Sections 8.2(a) and 10.1, nothing in this
Agreement shall preclude Purchaser or Sellers from consummating the transactions
contemplated herein if Purchaser, in its sole discretion, waives the requirement
that the Sale Order or any other Order shall have become Final Orders. No notice
of such waiver of this or any other condition to Closing need be given except to
Tutor Time and the Senior Lender, it being the intention of the parties hereto
that Purchaser shall be entitled to, and is not waiving, the protection of
section 363(m) of the Bankruptcy Code, the mootness doctrine and any similar
statute or body of law if the Closing occurs in the absence of Final Orders.
8.3 Approvals. All authorizations, consents, filings and approvals
necessary to permit Sellers to perform the transactions contemplated hereby
shall have been duly obtained, made or given, shall be in form and substance
reasonably satisfactory to Purchaser, shall not be subject to the satisfaction
of any condition that has not been satisfied or waived and shall be in full
force and effect. All terminations or expirations of waiting periods imposed by
any governmental authority necessary for the transactions contemplated under
this Agreement, if any, shall have occurred.
8.4 Real Estate Matters.
(a) Sellers shall have obtained, in preparation for the
Closing, at Sellers' own cost and expense, and shall have delivered to Purchaser
no later than fifteen (15) days prior to the Closing, a commitment for an ALTA
Leasehold Policy of Title Insurance for any specific Assumed Facilities
identified by Purchaser's lenders (the "Material Assumed Facilities") (the
"Title Commitments"), issued by a title insurer satisfactory to Purchaser (the
"Title Insurer"), insuring Purchaser's interest in such parcel as of the
Closing, subject only to the Permitted Liens. Sellers shall deliver at the time
of delivery of the Title Commitments, copies of all
42
documents of record referred to therein. Sellers will provide Purchaser with
title insurance policies ("Title Policies") on or before the Closing, from the
Title Insurer based upon the Title Commitments. Each such Title Policy will be
dated as of the date of closing and, unless not available in the any state where
Assumed Facility is located, contain such endorsements as Purchaser and
Purchaser's lender may reasonably request.
(b) Sellers have procured, at their own cost and expense, in
preparation for the Closing, and shall have delivered to Purchaser no later than
ten (10) days prior to the Closing, current surveys of each of the Material
Assumed Facilities ("Surveys"), prepared by a licensed surveyor, satisfactory to
Purchaser, and conforming to 1999 ALTA/ACSM Minimum Detail Requirements for
Urban Land Title Surveys, including Table A Items Nos. 1, 2, 3, 4, 6, 7, 8, 9,
10, 11, 13, 14, 15 and 16, and such standards as the Title Insurer may require
as a condition to the removal of any survey exceptions from the Title Policies,
and certified to Purchaser, Purchaser's lenders and the Title Insurer, in a form
satisfactory to such parties.
(c) With respect to the Assumed Facilities, Sellers shall have
obtained landlords' estoppels, landlords' lien waivers and landlords' consents
to leasehold mortgages or collateral assignment of leases if required by
Purchaser's lenders.
(d) No damage or destruction or other change shall have
occurred with respect to any Assumed Facility or any portion thereof that,
individually or in the aggregate, would have a material adverse effect on the
use or occupancy of the Assumed Facility or the operation of the Business as
currently conducted thereon;
8.5 Additional Matters. Purchaser shall have received such additional
documents, instruments or items of information reasonably requested by it from
Sellers in respect of any aspect or consequence of the transactions contemplated
hereby. All corporate and other proceedings, and all documents, instruments and
other legal matters in connection with the transactions contemplated by this
Agreement or by the other agreements referred to herein shall be reasonably
satisfactory in form and substance to Purchaser and its counsel. Purchaser shall
have such Permits and licenses as are necessary to operate the Business.
8.6 Material Adverse Change. Other than as disclosed on the Disclosure
Schedules on the date hereof and without regard to any supplement or update to
the Disclosure Schedules pursuant to Section 6.4(c), there shall not have
occurred a Material Adverse Change since December 31, 2001, other than as a
consequence of the filing of the Chapter 11 Cases.
8.7 [Intentionally Omitted]
8.8 Litigation. No action, suit or other proceedings shall be pending
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain damages in respect thereof, or involving a claim
that consummation thereof would result in the violation of any law, decree or
regulation of any governmental authority having appropriate jurisdiction.
43
8.9 Cure Costs. If the aggregate of all cure obligations (pursuant
to section 365 of the Bankruptcy Code) with respect to the Assumed Executory
Contracts exceeds $4,500,000, Sellers shall have paid all additional cure
obligations in excess of $4,500,000 with respect to the Assumed Executory
Contracts.
8.10 Instruments of Conveyance and Transfer; Title. Sellers shall have
delivered to Purchaser such bills of sale, deeds, endorsements, assignments, and
other good and sufficient instruments of conveyance and transfer, in form and
substance, reasonably satisfactory to Purchaser and its counsel, as are
necessary to vest in Purchaser good and marketable title to all of the interest
of Sellers in the Acquired Assets.
8.11 FIRPTA Affidavit. Each Seller shall deliver to Purchaser a
non-foreign affidavit dated as of the Closing Date and in form and substance
required under the Treasury Regulations issued pursuant to Section 1445 of the
Code so that Purchaser is exempt from withholding any portion of the Purchase
Price thereunder.
8.12 Financial Statements. Sellers shall have delivered to Purchaser
copies of the Business's interim monthly and year-to-date financial statements
pursuant to Section 6.2(b) above.
8.13 Closing Deliveries. Sellers shall have delivered to Purchaser (i)
a certificate signed by each Seller, dated the date of the Closing Date, (in
form and substance reasonably satisfactory to Purchaser) certifying that the
conditions specified in Sections 8.1 through 8.12 above have been satisfied as
of the Closing; (ii) copies of all third-party approvals and governmental
approvals required by Section 6.1; (iii) certified copies of the resolutions of
the each Seller's board of directors authorizing the execution, delivery and
performance of this Agreement and the other agreements contemplated hereby and
the consummation of the transactions contemplated hereby and thereby; (iv)
originals (or, to the extent originals are not available, copies) of all Assumed
Contracts (together with all amendments, supplements or modifications thereto);
(v) all of the closing deliveries set forth in Section 10.2; and (vi) such other
documents or instruments as are required to be delivered by any Seller at the
Closing pursuant to the terms hereof or that Purchaser reasonably requests prior
to the Closing Date to effect the transactions contemplated hereby.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligations of Sellers under this Agreement are, at the
option of Sellers, subject to the satisfaction of the following conditions
precedent on or before the Closing Date.
9.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Purchaser contained herein shall be true and
correct in all material respects (except for such changes as are contemplated by
the terms of this Agreement) on and as of the Closing Date (except for
representations and warranties made as of a specified date, which shall be true
and correct as of that date in all material respects) with the same force and
effect as though made by Purchaser on and as of the Closing Date, except those
qualified by
44
materiality shall be true and correct in all respects. Purchaser shall have
performed and complied in all material respects with the obligations and
covenants required by this Agreement to be performed or complied with by
Purchaser on or prior to the Closing Date.
9.2 Approvals. All authorizations, consents, filings and approvals
necessary to permit Purchaser to perform the transactions contemplated hereby
shall have been duly obtained, made or given, shall be in form and substance
reasonably satisfactory to Sellers, shall not be subject to the satisfaction of
any condition that has not been satisfied or waived and shall be in full force
and effect. All terminations or expirations of waiting periods imposed by any
governmental authority necessary for the transactions contemplated under this
Agreement, if any, shall have occurred.
9.3 Bankruptcy Court Approval. The Sale Order shall have been entered
on the docket by the Clerk of the Bankruptcy Court and shall approve and
authorize the assumption and assignment of the Assumed Contracts and the Assumed
Leases.
9.4 Litigation. No action, suit or other proceedings shall be pending
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain damages in respect thereof, or involving a claim
that consummation thereof would result in the violation of any law, decree or
regulation of any governmental authority having appropriate jurisdiction.
9.5 Consideration. Purchaser shall have delivered to Sellers the
Purchase Price and the Escrow Agent shall have delivered to the Sellers the
Escrow Closing Amount.
9.6 Cure Costs. Purchaser shall have paid all cure costs with respect
to the Assumed Executory Contracts up to $4,500,000.
9.7 Closing Deliveries. Purchaser shall have delivered to Sellers (i) a
certificate signed by Purchaser, dated the date of the Closing (in form and
substance reasonably satisfactory to Sellers) certifying that the conditions
specified in Sections 9.1 and 9.2 above have been satisfied as of the Closing;
(ii) certified copies of the resolutions of the Purchaser's board of directors
authorizing the execution, delivery and performance of this Agreement and the
other agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby; (iii) all of the closing deliveries set forth
in Section 10.3; and (iv) such other documents or instruments as are required to
be delivered by Purchaser at the Closing pursuant to the terms hereof or that
Sellers reasonably request prior to the Closing Date to effect the transactions
contemplated hereby.
ARTICLE X
CLOSING
10.1 Closing. Upon the terms and subject to the satisfaction of the
conditions contained in this Agreement, the closing of the transaction
contemplated by this Agreement (the "Closing") will take place at the offices of
Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx LLP, 0000 Xxxxx Xxxxxxxx Xxxxxxxx, Xxxxxxx, XX
00000, at 10:00 A.M. Eastern Daylight Time no later than the first business day
after the date on which the conditions set forth in Article VIII and
45
Article IX have been satisfied or waived; or on such other date as Purchaser and
Sellers may determine (the "Closing Date").
10.2 Deliveries by Sellers. At the Closing, Sellers shall deliver or
procure delivery to Purchaser of:
(a) physical possession of all of the Acquired Assets capable
of passing by delivery with the intent that title in such Acquired Assets shall
pass by and upon delivery;
(b) one or more bills of sale, in the form attached hereto as
Exhibit D, conveying in the aggregate all of the owned personal property of each
Seller included in the Acquired Assets, duly executed by each Seller;
(c) one or more assignments and assumptions of the Assumed
Obligations, in the form attached hereto as Exhibit E (collectively, the
"Assignment and Assumption"), duly executed by the relevant Seller or Sellers;
(d) a fully executed intellectual property assignments in the
forms attached hereto as Exhibits F-1, F-2 and F-3, each in recordable form to
the extent necessary to assign such rights;
(e) an affidavit from each Seller stating such Seller's
taxpayer identification number and that such Seller is not a foreign person
pursuant to section 1445(b)(2) of the Code;
(f) Sellers shall deliver the Title Policies to Purchaser;
(g) Sellers shall deliver the Surveys to Purchaser;
(h) with respect to the Assumed Facility Leases, any landlord
estoppel letters and landlord waivers from landlord's lenders, landlord lien
waivers and landlord consents to leasehold mortgages or collateral assignments
of leases, if required by Purchaser's lenders;
(i) certificates of title and title transfer documents to all
titled motor vehicles;
(j) an assignment and assumption agreement with respect to
Permits and warranties in form and substance reasonably acceptable to Purchaser,
whereby Sellers shall assign to Purchaser all of their respective rights in and
to any Permits and warranties relating to the Acquired Assets or the Business,
to the extent such Permits and warranties are assignable;
(k) all Books and Records; and
(l) such other instruments as shall be reasonably requested by
Purchaser to vest in Purchaser title in and to the Acquired Assets in accordance
with the provisions hereof.
10.3 Deliveries by Purchaser. At the Closing, Purchaser will deliver to
Sellers (i) the Assignment and Assumption duly executed by Purchaser, (ii) the
Cash Portion minus the
46
Escrow Closing Amount minus $2,000 minus $750,000 (representing the Breakup
Fee), by wire transfer of immediately available funds to an account of Sellers'
counsel, as designated by Sellers at least two business days prior to the
Closing Date.
10.4 Form of Instruments. To the extent that a form of any document to
be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to Purchaser and Sellers.
10.5 Payment of Breakup Fee. The Breakup Fee shall be paid in cash at
Closing by Purchaser to Sun T Acquisition Corp (f/k/a Tutor Time Corporation).
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated prior to the Closing
as follows:
(a) by mutual written agreement of Purchaser and Tutor Time;
(b) by either Purchaser or Tutor Time if there shall be in
effect a Final Order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby;
(c) by either Purchaser or Tutor Time (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein), if there shall have
been a material breach or misrepresentation of any of the representations or
warranties or a material breach of any of the covenants set forth in this
Agreement on the part of the other party, which breach is not cured within ten
days following written notice to the party committing such breach or which
breach, by its nature, cannot be cured prior to the Closing;
(d) by Purchaser (provided that Purchaser is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein) if it shall have reasonably determined that one or more
conditions set forth in Article VIII has not been or cannot be fulfilled or
satisfied prior to the date specified in such condition (if such condition
specifies a date other than the Closing Date by which such condition must be
satisfied);
(e) by Purchaser if any Seller seeks or supports
Bankruptcy Court approval of an Acquisition Proposal (other than in accordance
with the Bidding Procedures Order);
(f) by Purchaser if any Seller executes and delivers an
agreement or understanding of any kind with respect to an Acquisition Proposal;
(g) by Purchaser or Tutor Time if the Bankruptcy Court enters
an Order approving any Acquisition Proposal (other than the sale of the Business
and the Acquired Assets to Purchaser);
47
(h) by Purchaser on any day on or after the 45th day following
the date hereof if the Closing shall not have been consummated by such date (or
by such later date as shall be mutually agreed to by Purchaser and Tutor Time in
writing), unless the Closing has not occurred due to a material failure of
Purchaser to perform or observe its agreement as set forth in this Agreement
required to be performed or observed by it on or before the Closing Date; and
(i) by Tutor Time (provided that no Seller is then in material
breach of any representation, warranty, covenant or other agreement contained
herein) if Tutor Time shall have reasonably determined that one or more
conditions set forth in Article IX has not been or cannot be fulfilled or
satisfied prior to the date specified in such condition (if such condition
specifies a date other than the Closing Date by which such condition must be
satisfied).
11.2 [Intentionally Omitted]
11.3 Effect of Termination or Breach. If this Agreement is terminated
in accordance with Section 11.1 hereof and the transactions contemplated hereby
are not consummated, this Agreement shall become null and void and of no further
force and effect, except (i) for this Section 11.3, (ii) for the provisions of
Sections 13.1 and 13.7 hereof, and (iii) that the termination of this Agreement
for any cause shall not relieve any party hereto from any liability which at the
time of termination had already accrued to any other party hereto or which
thereafter may accrue in respect of any act or omission of such party prior to
such termination, except the sole and exclusive remedy of Sellers shall be their
recovery of the amounts specified in the Deposit pursuant to Section 3.3 as
liquidated damages.
ARTICLE XII
ADDITIONAL POST-CLOSING COVENANTS
12.1 Employees.
(a) Immediately prior to the Closing, the employment of all of
the employees of the Business shall be terminated by Sellers, and all such
employees shall have the right to apply for employment with Purchaser. Sellers
recognize that Purchaser intends to make offers of employment to certain
employees of the Business, on terms and conditions of employment that may be
different from those provided by Sellers, and that it is uncertain how many
employees of Sellers will accept employment with Purchaser. Subject to Section
7.3 hereof, the number of offers of employment made by Purchaser, and the terms
and conditions of such offers, shall be determined by Purchaser in its sole
discretion and in accordance with applicable law. Except as set forth in Section
2.2(a), Sellers shall be responsible for any and all wages, bonuses,
commissions, employee benefits, retention or stay bonus arrangements, and other
compensation (including all obligations under any Employee Benefit Plans) due to
the employees of the Business arising out of their employment with Sellers prior
to and as of the Closing.
(b) Nothing contained in this Agreement shall confer upon any
Rehired Employee any right with respect to continuance of employment by
Purchaser, nor shall
48
anything herein interfere with the right of Purchaser to terminate the
employment of any Rehired Employees at any time, with or without notice, or
restrict Purchaser, in the exercise of its business judgment in modifying any of
the terms or conditions of employment of the Rehired Employees after the
Closing.
12.2 Employee Benefit Plans.
(a) To the extent responsible on the Closing Date, Sellers
shall be responsible for all Benefit Plans and all obligations and liabilities
thereunder. Except as set forth in Section 2.2(a) or as required under operation
of applicable Law, Purchaser shall not assume any Employee Benefit Plans or any
obligation or liability thereunder and Purchaser shall provide benefits to those
Rehired Employees as of or after the Closing as Purchaser, in its sole
discretion, shall determine. With respect to all claims by current and former
employees of Sellers who are or were employed in the Business arising prior to
or as of the Closing under any Employee Benefit Plans, whether insured or
otherwise (including, but not limited to, life insurance, medical and disability
programs), Sellers shall, at their own expense, honor or cause their respective
insurance carriers to honor such claims, whether made before or after the
Closing, in accordance with the terms and conditions of such Employee Benefit
Plans without regard to the employment by Purchaser of any such employees after
the Closing.
(b) As soon as reasonably possible after the Closing Date,
Purchaser shall cause each employee of Sellers hired by Purchaser ("Rehired
Employees") to be given credit for his or her service with Sellers (only to the
extent such service is taken into account under any Seller's vacation or sick
leave policy, program or arrangement) for the purpose of determining such
Rehired Employee's vacation and sick leave (on a going-forward basis) in any
vacation or sick leave plan, program or arrangement maintained for Purchaser's
employees' benefit on or after the Closing Date.
12.3 Rights of Third Parties. No provision of this Agreement shall be
construed to confer upon or give to any Person other than the parties to this
Agreement and their successors or permitted assigns any rights to remedies
hereunder.
12.4 Sellers' Cooperation in Hiring of Employees. Sellers shall
cooperate with Purchaser and shall, permit Purchaser a reasonable period prior
to the Closing Date (i) to meet with employees of Sellers (including managers
and supervisors) who are employed in the Business at such times as Purchaser
shall reasonably request, (ii) to speak with such employees' managers and
supervisors (in each case with appropriate authorizations and releases from such
employees) who are being considered for employment by Purchaser, (iii) to
distribute to such employees of Sellers such forms and other documents relating
to potential employment by Purchaser after the Closing as Purchaser may
reasonably request, and (iv) to permit Purchaser's counsel, upon request, to
review personnel files and other relevant employment information regarding
employees of Sellers.
12.5 WARN Act. In respect of notices and payments relating to events
occurring on or prior to the Closing, Sellers shall be jointly and severally
responsible for and assume all liability for any and all notices, payments,
fines or assessments due to any government authority, pursuant to any applicable
federal, state or local law, common law, statute, rule or
49
regulation with respect to the employment, discharge or layoff of employees by
Sellers as of or before the Closing, including but not limited to the Worker
Adjustment and Retraining Notification Act and any rules or regulations as have
been issued in connection with the foregoing (jointly, the "WARN Act").
Likewise, in respect of notices and payments relating to events occurring after
the Closing, Purchaser shall be responsible and assume all liability for any and
all notices, payments, fines or assessments due to any government authority,
pursuant to any applicable federal, state or local law, common law, statute,
rule or regulation, including but not limited to the WARN Act, with respect to
the employment, discharge or layoff of employees employed by Purchaser after the
Closing.
12.6 Joint Post-Closing Covenant of Purchaser and Sellers. Purchaser
and Sellers jointly covenant and agree that, from and after the Closing Date,
Purchaser and Sellers will each use commercially reasonable efforts to cooperate
with each other in connection with any action, suit, proceeding, investigation
or audit of the other relating to (a) the preparation of an audit of any Tax
Return of any Seller or Purchaser for all periods prior to or including the
Closing Date and (b) any audit of Purchaser and/or any audit of any Seller with
respect to the sales, transfer and similar Taxes imposed by the laws of any
state or political subdivision thereof, relating to the transactions
contemplated by this Agreement. In furtherance hereof, Purchaser and Sellers
further covenant and agree to promptly respond to all reasonable inquiries
related to such matters and to provide, to the extent reasonably possible,
substantiation of transactions and to make available and furnish appropriate
documents and personnel in connection therewith. All costs and expenses incurred
in connection with this Section 12.6 referred to herein shall be borne by the
party who is subject to such action.
12.7 Certain Consents. If a consent of a Third Party which is required
in order to assign any Acquired Asset (or Claim, right or benefit arising
thereunder or resulting therefrom) is not obtained prior to the Closing Date, or
if an attempted assignment would be ineffective or would adversely affect the
ability of any Seller to convey its interest in question to Purchaser, Sellers
will cooperate with Purchaser and use commercially reasonable efforts in any
lawful arrangement to provide that Purchaser shall receive the interests of any
Seller in the benefits of such Acquired Asset. If any consent or waiver is not
obtained before the Closing Date and the Closing is nevertheless consummated,
each Seller agrees to continue to use commercially reasonable efforts to obtain
all such consents as have not been obtained prior to such date.
12.8 Name Changes. Promptly after the Closing, each Seller shall take
all necessary action to change its name to a name bearing no resemblance to the
names set forth on the signature pages to this Agreement.
12.9 Accounts Receivable/Collections. After the Closing, Sellers shall
permit Purchaser to collect, in the name of Sellers, all accounts receivable
constituting part of the Acquired Assets and to endorse with the name of any
Seller for deposit in Purchaser's account any checks or drafts received in
payment thereof. Sellers shall promptly deliver to Purchaser any cash, checks or
other property that they may receive after the Closing in respect of any
accounts receivable or other asset constituting part of the Acquired Assets.
50
12.10 Access to Information. For a period of twenty-four (24) months
after the Closing Date (the "Transition Period"), each party and their
respective representatives and successors, and any official committee of
unsecured creditors of the Sellers or their designee, shall have reasonable
access to, and each shall have the right to photocopy, all of the Books and
Records relating to the Business or the Acquired Assets, including all employee
records or other personnel and medical records required by law, legal process or
subpoena, in the possession of the other party to the extent that such access
may reasonably be required by such party in connection with the Assumed
Obligations or the Unassumed Liabilities, or other matters relating to or
affected by the operation of the Business and the Acquired Assets. During the
Transition Period, and only to the extent that Purchaser's operation of the
Business is not interrupted in any material respect, Purchaser agrees to provide
Sellers, during ordinary business hours and upon reasonable notice and at any
Seller's request, with reasonable access to employees of Purchaser for purposes
of winding down the estates of Sellers. Such access shall be afforded by the
party in possession of such Books and Records upon receipt of reasonable advance
notice and during normal business hours; provided, however, that (A) any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the business of any party or its affiliates
(B) no party shall be required to take any action which would constitute a
waiver of the attorney-client privilege and (C) no party need supply the other
party with any information which such party is under a legal obligation not to
supply. The party exercising this right of access shall be solely responsible
for any costs or expenses incurred by it pursuant to this Section 12.10. If the
party in possession of such Books and Records shall desire to dispose of any
such Books and Records upon or prior to the expiration of such period, such
party shall, prior to such disposition, give the other party a reasonable
opportunity at such other party's expense, to segregate and remove such Books
and Records as such other party may select.
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses.
(a) Each party hereto shall bear its own costs and expenses,
including attorneys' fees, with respect to the transactions contemplated hereby.
Notwithstanding the foregoing, in the event of any action or proceeding to
interpret or enforce this Agreement, the prevailing party in such action or
proceeding (i.e., the party who, in light of the issues contested or determined
in the action or proceeding, was more successful) shall be entitled to have and
recover from the non-prevailing party such costs and expenses (including,
without limitation, all court costs and reasonable attorneys' fees) as the
prevailing party may incur in the pursuit or defense thereof.
(b) If any party to this Agreement seeks to enforce the terms
and provisions of this Agreement, then the prevailing party in such action shall
be entitled to recover from the non-prevailing party, all costs incurred in
connection with such action, including without limitation reasonable fees,
expenses and costs incurred at the trial court, all appellate courts and during
negotiations.
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13.2 Amendment. This Agreement may not be amended, modified or
supplemented except by a written instrument signed by Tutor Time (on behalf of
Sellers) and Purchaser.
13.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person, (b) on the date of
transmission if sent by telex, telecopy or other wire transmission (with answer
back confirmation of such transmission), (c) upon delivery, if delivered by a
nationally known commercial courier service providing next day delivery service
(such as Federal Express), or (d) upon delivery, or refusal of delivery, if
deposited in the U.S. mail, certified or registered mail, return receipt
requested, postage prepaid:
To Sellers: Tutor Time Learning Systems, Inc.
0000 XX 00xx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attn: General Counsel
Fax: (000) 000-0000
with copy to: Xxxxxxxxx Xxxxxxx, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx
Fax: (000) 000-0000
To Purchaser: TT Acquisition LLC
00000 Xxxx Xxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
with copy to: Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx LLP
0000 Xxxxx Xxxxxxxx Xxxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
and
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
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13.4 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing by Tutor Time, in the case of a
waiver by any Seller, or Purchaser, in the case of any waiver by Purchaser, and
no waiver in any one or more instances shall be deemed to be a further or
continuing waiver of any such condition or breach in other instances or a waiver
of any other condition or breach of any other term, covenant, representation or
warranty.
13.5 Counterparts and Execution. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. Any
counterpart may be executed by facsimile signature and such facsimile signature
shall be deemed an original.
13.6 Headings. The headings preceding the text of the Articles and
Sections of this Agreement and the schedules hereto are for convenience only and
shall not be deemed part of this Agreement.
13.7 SUBMISSION TO JURISDICTION. THE PARTIES HEREBY AGREE THAT ANY AND
ALL CLAIMS, ACTIONS, CAUSES OF ACTION, SUITS, AND PROCEEDINGS RELATING TO THIS
AGREEMENT OR THE OTHER AGREEMENTS CONTEMPLATED HEREIN SHALL BE FILED AND
MAINTAINED ONLY IN THE BANKRUPTCY COURT, AND THE PARTIES HEREBY CONSENT TO THE
JURISDICTION OF SUCH COURT.
13.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of
Delaware (regardless of the laws
that might otherwise govern under applicable
Delaware principles of conflicts of
law) as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.
13.9 Binding Nature; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without prior written consent of the other parties (which shall not be
unreasonably withheld or delayed); except (i) that Purchaser may assign any of
its rights and obligations hereunder to any Affiliate or Subsidiary of Purchaser
(whether wholly owned or otherwise), (ii) Purchaser may grant a security
interest in its rights and interests hereunder to its lenders, (iii) the terms
of this Agreement shall be binding upon any subsequent trustee appointed under
Chapter 11 or Chapter 7 of the Bankruptcy Code and the rights and interests of
Sellers hereunder may be assigned to a trustee appointed under Chapter 11 or
Chapter 7 of the Bankruptcy Code, (iv) this Agreement may be assigned to any
entity appointed as a successor to Sellers pursuant to a confirmed Chapter 11
plan and (v) as otherwise provided in this Agreement. Nothing contained herein,
express or implied, is intended to confer on any Person other than the parties
hereto or their successors and assigns, any rights, remedies, obligations,
claims, or liabilities under or by reason of this Agreement.
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13.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and no provision of this Agreement shall be deemed
to confer upon Third Parties any rights, remedies, Claims or causes of action.
Notwithstanding the prior sentence, subject to the approval of the Bankruptcy
Court, the individuals listed on Exhibit G attached hereto are intended third
party beneficiaries of the Retention Plan and have the express right to rely
upon and directly enforce the Retention Plan.
13.11 Tax Matters.
(a) Any sales, use, purchase, transfer, franchise, deed, fixed
asset, stamp, documentary stamp, use or other Taxes and recording charges which
may be payable by reason of the sale of the Acquired Assets or the assumption of
the Assumed Obligations under this Agreement or the transactions contemplated
herein shall be borne and timely paid by Sellers and Sellers shall jointly and
severally indemnify, defend (with counsel reasonably satisfactory to Purchaser),
protect, and save and hold Purchaser harmless from and against any and all
claims, charges, interest or penalties assessed, imposed or asserted in relation
to any such Taxes.
(b) Purchaser shall, within the later of (i) 120 days after
the Closing Date or (ii) 30 days prior to the date by which Sellers' federal
income Tax Returns must be filed, prepare and deliver to Sellers for their
consent (which consent shall not be unreasonably withheld, delayed or
conditioned) a schedule allocating the Purchase Price (and any other items that
are required for federal income tax to be treated as Purchase Price) among the
respective Sellers and the Acquired Assets, Assumed Contracts and Assumed Leases
(such schedule, the "Allocation"). If Sellers raise any objection to the
Allocation, Purchaser and Sellers will negotiate in good faith to resolve such
objection(s). Purchaser and Sellers shall report and file all Tax Returns
(including amended Tax Returns and claims for refund) consistent with the
Allocation as finally agreed upon, and shall take no position contrary thereto
or inconsistent therewith (including, without limitation, in any audits or
examinations by any Taxing Authority or any other proceeding). Purchaser and
Sellers shall cooperate in the filing of any forms (including Form 8594 under
section 1060 of the Code) with respect to such Allocation, including any
amendments to such forms required pursuant to this Agreement with respect to any
adjustment to the Purchase Price. If and to the extent the parties are unable to
agree on such Allocation, the parties shall retain PricewaterhouseCoopers LLC,
or such other mutually agreeable nationally-recognized firm of independent
accountants, to resolve such dispute. Notwithstanding any other provision of
this Agreement, the terms and provisions of this Section 13.11(b) shall survive
the Closing Date without limitation.
13.12 Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to this Agreement to express their
mutual intent, and no rule of strict construction shall be applied against any
party. 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.
13.13 Public Announcements. Except as required by law or in connection
with the Chapter 11 Cases, neither Sellers nor Purchaser shall issue any press
release or public
54
announcement concerning this Agreement or the transactions contemplated hereby
without obtaining the prior written approval of Tutor Time and Purchaser
relating to the contents and manner of presentation and publication thereof,
which approval will not be unreasonably withheld, delayed or conditioned. Prior
to making any public disclosure required by applicable law, the disclosing
parties shall give the other party a copy of the proposed disclosure and
reasonable opportunity to comment on the same.
13.14 Entire Understanding. This Agreement, the Exhibits and the
schedules attached hereto set forth the entire agreement and understanding of
the parties hereto in respect to the transactions contemplated hereby and the
Agreement, the Exhibits and the schedules attached hereto supersede all prior
agreements, arrangements and understandings relating to the subject matter
hereof and are not intended to confer upon any other Person any rights or
remedies hereunder.
13.15 No Survival. The representations and warranties of Sellers and
Purchaser contained in this Agreement or in any instrument delivered in
connection herewith shall not survive the Closing.
* * * * *
55
IN WITNESS WHEREOF, the parties hereto have caused this
Asset
Purchase Agreement to be executed and delivered on the date first above written.
PURCHASER:
TT ACQUISITION LLC
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxx
Its: Treasurer
SELLERS:
TUTOR TIME LEARNING SYSTEMS, INC.
CHILD CARE FRANCHISE GROUP, INC.
CHILD SITE CORP.
IN-SITE REALTY ASSOCIATES, INC.
LIFECARE ACQUISITION CORP.
OF NEW YORK, INC.
LIFECARE ACQUISITIONS OF WASHINGTON, INC.
LIFECARE INVESTMENTS, INC.
T.T. GP HOLDINGS, INC.
T.T. HOLDINGS, INC.
T.T. XXXXXX XXXX, INC.
TUTOR TIME CHILD CARE SYSTEMS, INC.
TUTOR TIME FRANCHISE LEARNING CENTERS, INC.
TUTOR TIME INTERNATIONAL, INC.
TUTOR TIME REALTY, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Xxxxxxx X. Xxxxx
President, Chief Executive Officer and
Acting Chief Financial Officer
56
