EXHIBIT 10.3
PURCHASE AGREEMENT
This Purchase Agreement is made and entered into as of this 1st day of
December, 1995, by and between THE SERVICEMASTER COMPANY, a Delaware limited
partnership with its principal place of business in Downers Grove, Illinois
("ServiceMaster"), and BRIGHT HORIZONS CHILDREN'S CENTERS, INC., a Delaware
corporation with its principal place of business in Cambridge, Massachusetts
("Bright Horizons").
RECITALS:
A. ServiceMaster Child Care Services, Inc., a Delaware corporation
with its principal place of business in Downers Grove, Illinois
("GreenTree"), is engaged in the business of providing child care services
under the name "GreenTree Child Care";
B. ServiceMaster owns all of the issued and outstanding shares of
capital stock of GreenTree;
C. ServiceMaster is the lessee under certain real property leases for
facilities used by GreenTree in its Child Care Business (the "ServiceMaster
Leases");
D. ServiceMaster is a party to certain management agreements pursuant
to which GreenTree provides child care management services (the
"ServiceMaster Service Agreements");
E. The ServiceMaster Leases and the ServiceMaster Service Agreement
are collectively referred to herein as the "ServiceMaster Contracts"; and
F. ServiceMaster desires to sell to Bright Horizons, and Bright
Horizons desires to purchase from ServiceMaster, subject to the terms and
conditions set forth herein, all of the ServiceMaster Contracts and all of
such shares.
NOW, THEREFORE, in consideration of the terms and conditions set forth
herein and in the Exhibits and the Schedules hereto, the parties agree as
follows:
2. DEFINITIONS
In this Agreement (as hereinafter defined), the following terms and
expressions shall have the indicated meanings (such meanings to be equally
applicable to the singular and plural forms of such words and expressions):
"Accounting Principles" shall mean the accounting principles that have been
previously consistently applied by GreenTree, such principles being in
accordance with United States generally accepted accounting principles except as
otherwise stated in Schedule 2-1.
"Agreement" means this Purchase Agreement, including all schedules and
exhibits hereto.
"Child Care Business" means the business of providing child care services.
"Closing" means the closing of the sale and the purchase of the Shares in
accordance with Section 4 hereof.
"Closing Balance Sheet" shall have the meaning set forth in Section 7.7(c).
"Closing Date" means December 6, 1995 or such other date to which the
parties may agree in writing.
"Confidential Information" means any and all information of any kind or
nature whatsoever, whether written or oral, including, without limitation,
financial information, trade secrets, client, customer or supplier lists and
other proprietary business information regarding Bright Horizons, ServiceMaster
or GreenTree, which information is not known to the general public or to persons
unaffiliated with Bright Horizons, ServiceMaster or GreenTree, as the case may
be.
"Employment and Pension Agreements" shall have the meaning set forth in
Section 7.24.
"Financial Statements for 1994" means, collectively, the balance sheet and
profit and loss account of GreenTree as of December 31, 1994, prepared in
accordance with the Accounting Principles consistently applied and audited by
the external auditors of ServiceMaster as part of their audit of the financial
statements of ServiceMaster Limited Partnership for the year ended December 31,
1994.
"Indemnifiable Losses" shall have the meaning set forth in Section 12.4(a).
"Intellectual Property" shall have the meaning set forth in Section
7.16(b).
"Key Employees" means the persons listed in Schedule 2-2.
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"Liens" means any lien, security interest, charge, mortgage or other
similar claims or rights of third parties.
"Losses" shall have the meaning set forth in Section 12.4(a).
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"Material Adverse Effect" means a material adverse effect on the business,
prospects, operations, financial or other condition of GreenTree, taken as a
whole.
"Most Recent Interim Financial Statements" means, collectively, the
unaudited balance sheet and profit and loss account of GreenTree (together with
the notes thereto), as of October 31, 1995 prepared in accordance with the
Accounting Principles, and certified by ServiceMaster's chief financial officer
(whose certification may include the next sentence of this paragraph). The Most
Recent Interim Financial Statements are subject to normal year-end adjustments
(which will not be material individually or in the aggregate).
"Nominal Losses" shall have the meaning set forth in Section 13.4(a).
"Note" shall have the meaning set forth in Section 3.2
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Personal Property" means all items of property, assets and equipment owned
or used by GreenTree, including, without limitation, inventory, office equipment
and all other types of equipment used in the conduct of the business of
GreenTree.
"Purchase Price" shall have the meaning set forth in Section 3.2.
"Purchase Price Allocation" means the allocation of the Purchase Price as
set forth in Exhibit A-1.
"Shares" means the 1,000 shares of common stock, par value $0.01 per share,
of GreenTree.
"Tax" and "Taxes" mean any federal, state or local: income tax; gross
receipts tax; license fee or tax; payroll tax; employment tax; excise tax;
value added tax; severance tax; stamp tax; occupation tax; capital stock tax;
franchise tax; profits tax; withholding tax; social security tax; unemployment
tax; disability tax; real or personal property tax; sales or use tax; transfer
registration fee or tax; alternative or add-on minimum tax; or any other tax of
any kind whatsoever. The term includes any interest, penalty or addition to a
base amount.
"Warrant" shall have the meaning set forth in Section 3.3.
"Working Capital Adjustment" shall have the meaning set forth in Section
3.6(d).
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3. PURCHASE AND SALE OF THE SERVICEMASTER CONTRACTS AND THE SHARES; PURCHASE
PRICE; PURCHASE PRICE ADJUSTMENTS
3.1 Basic Transaction. On and subject to the terms and conditions of this
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Agreement, ServiceMaster hereby agrees to sell to Bright Horizons at the
Closing, and Bright Horizons agrees to purchase from ServiceMaster at the
Closing, for the consideration specified in Sections 3.2 and 3.3, --
(i) all of the ServiceMaster Contracts listed on Schedule 5.2(a) hereto;
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and
(ii) all of the Shares.
3.2 Purchase Price.
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(a) Bright Horizons agrees that at the Closing it will pay to
ServiceMaster the sum of Six Million Dollars ($6,000,000) (the "Purchase Price")
by delivery of (x) a promissory note in the form of Exhibit A in the principal
amount of $3,000,000 (the "Note") and (y) cash for the balance of the Purchase
Price by wire transfer or delivery of otherwise immediately available funds. The
Purchase Price shall be adjusted as provided in Sections 3.4 - 3.6.
(b) The Purchase Price shall be allocated among the ServiceMaster
Contracts, the Shares and the agreement not to compete which is set forth in
Section 10 of this Agreement in accordance with the Purchase Price Allocation.
3.3 Warrant. In addition to the payment of the Purchase Price at the
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Closing, Bright Horizons will deliver to ServiceMaster a common stock purchase
warrant which shall entitle the holder to purchase 200,000 shares of common
stock of Bright Horizons at $3.50 per share and which shall otherwise be in the
form of Exhibit B (the "Warrant").
3.4 [This Section intentionally left blank.]
3.5 Purchase Price Adjustment: Start-Up Equipment and Start-Up Costs.
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(a) Bright Horizons agrees to reimburse ServiceMaster for the
ServiceMaster's expenditures in excess of $20,000 for start-up services, startup
supplies, furniture and fixtures and startup equipment in connection with the
seven centers listed on Schedule 3.5(a) hereto. The amount of such reimbursement
shall be the amount shown in Schedule 3.5(a) increased for any amounts paid by
ServiceMaster in November 1995 except for items in those categories which are
shown as frozen in Schedule 3.5(a).
(b) In no event shall any reimbursement made under this Section 3.5 exceed
$800,000.
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(c) Any reimbursement due from Bright Horizons under this Section 3.5
shall be made by way of an addition to the cash portion of the Purchase Price.
3.6 Purchase Price Adjustment: Unopened Centers. In the event that less
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than four of the seven proposed child care centers listed on Schedule 3.6 have
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not become fully operational prior to December 31, 1996 there shall be a
purchase price reduction in an amount equal to (x) $100,000 multiplied by (y)
the number by which the number of opened centers is less than four; provided
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however, that any such center which does not become fully operational as a
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result of a change in the economic substance of the proposal pursuant to which
such center is currently proposed to be opened (where such change has been
requested or adopted by Bright Horizons and has the effect of making such
proposal less favorable economically to the person to whom such proposal has
been presented) shall be deemed to have become fully operational for the
purposes of this Section 3.6.
3.7 Purchase Price Adjustments: Closing Balance Sheet; Statement of
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Working Capital.
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(a) Closing Balance Sheet; Post-Closing Adjustments. (a) As soon as
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practicable but in any event no later than December 31, 1995, Bright Horizons
shall prepare and deliver to ServiceMaster a balance sheet for GreenTree as of
November 30, 1995 (the "Closing Balance Sheet") which shall be certified as true
and correct by the chief financial officer of Bright Horizons. Except as set
forth below, the Closing Balance Sheet shall be prepared in accordance with the
United States general accounting principles and shall include the following
provisions and no others:
Current Assets:
(1) a provision for the actual amount of assets relating to cash
which, amount shall be zero;
(2) a provision for the actual amount of assets relating to
accounts receivable (net of an allowance for doubtful
accounts);
(3) a provision for the actual amount of assets relating to
accounts receivable consulting (net of an allowance for
doubtful accounts) and not including any consulting receivable
relating to periods after November 1, 1995;
(4) a provision for the actual amount of assets relating to draw-
open;
(5) a provision for the actual amount of assets relating to pre-
paid insurance general liability;
(6) a provision for the actual amount of assets relating to pre-
paid expense miscellaneous (which provision shall not include
any assets relating to
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bonuses or other employee compensation and shall not include
any prepaid expenses relating to equipment, supplies or start-
up expenses);
(7) a provision for the actual amount of assets relating to pre-
paid rent;
Current Liabilities:
(8) a provision for the actual amount of liabilities for accounts
payable, which amount shall be zero;
(8)(a) a provision for a liability of not more than $134,000 for
renovations of the Cigna center and for start-up costs at the
Motorola, Xxxxxxxxxx and Cigna centers;
(9) a provision for the actual amount of liabilities for accrued
payroll, taxes and benefits;
(10) a provision for the actual amount of liabilities for accrued
real estate tax;
(11) a provision for the actual amount of liabilities for accrued
bonuses, which amount shall be zero, it being understood that
ServiceMaster will pay for bonuses or that portion of bonuses
due to any GreenTree employees for services rendered prior to
the Closing Date;
(12) a provision for the actual amount of liabilities for accrued
miscellaneous expenses;
(13) a provision for the actual amount of liabilities for deferred
revenue;
(14) a provision for liabilities for parent deposits in the amount
of $285,348, a breakdown of which appears in Schedule
3.7(a)(14), as adjusted through November 30, 1995 with respect
to the first ten centers listed in such schedule;
(15) a provision for the actual amount of liabilities for consulting
services, which amount shall be zero;
(16) a provision for the actual amount of liabilities for slot
reservations, which amount shall be zero;
(17) a provision for liabilities for accrued employee vacation time
in the amount of $213,409;
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(18) a provision for liabilities for parent vacation time in the
amount of $117,208;
(19) a provision for the actual amount of liabilities for the
current portion of any capitalized leases, which amount shall
be zero;
(20) a provision for the actual amount of current liabilities for
Taxes, which amount shall be zero; and
(21) a provision for liabilities for free rent calculated in
accordance with FASB 13 in the amount of $220,593.
(b) If ServiceMaster has no objections to the Closing Balance Sheet
prepared and delivered by Bright Horizons pursuant to Section 3.7(a), it shall
so notify Bright Horizons and the Closing Balance Sheet shall become final on
the date ServiceMaster provides such notice. If ServiceMaster has any objections
to the Closing Balance Sheet delivered by Bright Horizons, it shall deliver to
Bright Horizons a detailed statement describing its objections within 10 days
after receiving the Closing Balance Sheet. The Closing Balance Sheet shall also
become final if ServiceMaster fails to provide such notice. During such 10 day
period ServiceMaster shall be permitted to have access to, examine and make
copies of all books and records of GreenTree and shall have such access to the
personnel of GreenTree and Bright Horizons as may be reasonably necessary to
permit ServiceMaster to review the manner in which the Closing Balance Sheet was
prepared. If ServiceMaster's objections to the Closing Balance Sheet cannot be
resolved within 10 days following ServiceMaster's delivery of its notice of
objection, an independent auditor (the "independent auditor"), mutually
acceptable by the parties hereto, shall be retained to resolve all remaining
objections. Any determination shall be made by the independent auditor on the
basis of such procedures as it, in its sole discretion, deems appropriate and
expeditious, taking into account the procedures set forth in Section 3.7(a), the
nature of the issues, the amounts in dispute and the positions asserted by the
parties. The parties may submit to the independent auditor any fact or
materials which they deem relevant to the determination. The determination of
the independent auditor will be set forth in writing and will be conclusive,
nonappealable and binding upon the parties hereto for all purposes.
(c) In the event the parties submit any unresolved objections to the
independent auditor for resolution as provided in Section 3.7(b) above,
ServiceMaster and Bright Horizons shall each bear equal responsibility for the
fees and expenses of the independent auditor.
(d) Once the Closing Balance Sheet has been agreed to by the parties or
has been finally determined by the independent auditor, the following
adjustments to the Purchase Price shall be made. The "Working Capital
Adjustment" shall be calculated and shall equal the sum of the current assets
minus the sum of the current liabilities of Green Tree as of the Closing, as
reflected on the Closing Balance Sheet. If the Working Capital Adjustment is
positive, the Purchase Price shall be increased by such amount. If the Working
Capital Adjustment is negative, the Purchase Price shall be reduced
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by such amount. The amount of any such Purchase Price increase or Purchase Price
decrease shall be payable by the party owing such amount within 10 days after
the final determination of the Closing Balance Sheet by wire transfer or
delivery of otherwise immediately available funds, provided, however, that in
the event Bright Horizons is entitled to a purchase price reduction as a result
of the determination of the Closing Balance Sheet, Bright Horizons, at its
election, shall be entitled to offset an amount equal to the amount of such
Purchase Price reduction from any payment due to ServiceMaster pursuant to the
Note.
3.8 Payment of Purchase Price Reduction(s). Any Purchase Price reduction
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shall be payable by ServiceMaster in cash, bank check or wire transfer of
immediately available funds within 10 days after the determination that such
Purchase Price Reduction is payable to Bright Horizons, provided, however, that
Bright Horizons, at its elections, shall be entitled to offset the amount of any
Purchase Price Reduction from the next payment due to ServiceMaster under the
Note.
3.9 Changes in Purchase Price Allocation as a Result of Purchase Price
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Adjustments. In the event of any Purchase Price increase or any Purchase Price
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decrease, the Purchase Price Allocation shall be adjusted as determined by
Bright Horizons to reflect such changes by increasing or decreasing, as the case
may be, the amount of the Purchase Price allocated to items other than the non-
competition agreement.
4. CLOSING
4.1 Time and Place of Closing; Effective Date of the Transaction. The
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Closing shall take place on the Closing Date at the executive offices of
ServiceMaster at Xxx XxxxxxxXxxxxx Xxx, Xxxxxxx Xxxxx, Xxxxxxxx at 1:00 p.m.
Central Standard Time. However, the effective time of the closing of the
transactions contemplated by this Agreement shall be the close of business on
November 30, 1995.
4.2 Closing Deliveries. At the Closing, subject to the satisfaction or
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waiver of the obligations set forth in Section 11 hereof, the parties will make
the following deliveries --
(a) ServiceMaster shall deliver to Bright Horizons the various
certificates, instruments and documents referred to in Section
11.1;
(b) Bright Horizons shall deliver to ServiceMaster the various
certificates, instruments and documents referred to in Section
11.2;
(c) Subject to Section 11A, ServiceMaster shall deliver to Bright
Horizons duly executed assignments of all of the ServiceMaster
Contracts (which, in the case of the assignments of the
ServiceMaster Leases, shall be in recordable
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form) together with any required consents in respect thereof or
as require under any lease or agreement to which GreenTree is a
party;
(d) ServiceMaster shall deliver to Bright Horizons the stock
certificate(s) for the Shares, duly assigned to Bright Horizons;
and
(e) Bright Horizons shall pay and deliver to ServiceMaster the
consideration specified in Sections 3.2 and 3.3.
4.3 Documents and Procedures Regarding Change in Name. As part of the
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Closing, Bright Horizons shall deliver to ServiceMaster the following documents:
(a) A consent instrument executed by all of the new directors of
GreenTree which shall provide for a change in the corporate name
of GreenTree to a name which does not contain the name
"ServiceMaster" or any derivative thereof. Such consent
instrument shall be substantially in the form of Exhibit B-1.
(b) A duly executed amendment of the Certificate of Incorporation of
GreenTree in a form ready for filing with the Secretary of State
of Delaware which provides for the change in name referred to in
paragraph (a) above. Such amendment shall be in substantially the
form attached hereto as Exhibit B-2.
(c) Duly executed certificates suitable for filing in each state in
which GreenTree is presently qualified to do business which will
give effect to GreenTree's change in name as soon as such change
in name has been effected in Delaware.
As promptly as practicable after the Closing, ServiceMaster shall, at its
expense and as agent for GreenTree, file and record the documents referred to in
paragraphs (b) and (c) above.
5. REPRESENTATIONS AND WARRANTIES OF
SERVICEMASTER CONCERNING THE TRANSACTION
ServiceMaster represents and warrants to Bright Horizons that the
statements made in this Section 5 are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date as though
then made:
5.1 Organization; Power; Authorization.
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(a) ServiceMaster is duly organized, validly existing and in good standing
as a limited partnership under the laws of the State of Delaware.
(b) ServiceMaster has all requisite partnership and other power and
authority to execute and deliver this Agreement and to execute and deliver each
other agreement or document to be delivered in connection herewith and to
consummate the transactions contemplated by this Agreement (including, but not
limited to, the assignment of the Shares and the assignments of the
ServiceMaster Contracts).
(c) This Agreement and each other document delivered in connection
herewith by ServiceMaster has been duly and validly authorized, executed and
delivered by ServiceMaster and constitutes a valid, legal and binding obligation
of ServiceMaster, enforceable against ServiceMaster in accordance with its
terms.
(d) ServiceMaster need not give notice to, make any filing with, or obtain
any authorization, consent or approval of, any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
5.2 ServiceMaster Leases.
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(a) The ServiceMaster Leases are listed and described in reasonable detail
in Schedule 5.2(a).
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(b) ServiceMaster has delivered to Bright Horizons correct and complete
copies of the signed ServiceMaster Leases including all amendments, side letters
and estoppel letters relating thereto, if any.
(c) ServiceMaster had, and continues to have, all partnership power and
authority to enter into each of the ServiceMaster Leases.
(d) With respect to each of the properties listed in Schedule 5.2(a),
(1) the lease is legal, valid, binding and enforceable in full force
and effect;
(2) subject to any required consents, the lease or sublease will
continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of
the transactions contemplated by this Agreement;
(3) subject to any required consents, no party to the lease is in
breach or default, and no event has occurred which, with notice
or lapse of time (or both), would constitute a breach or default
or permit termination, modification or acceleration thereunder;
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(4) no party to the lease has repudiated any provision thereof;
(5) there are no disputes, oral agreements or forbearance programs in
effect as to the lease;
(6) none of the ServiceMaster Leases is a sublease;
(7) no property listed in Schedule 5.2(a) is being used by GreenTree
in violation of any applicable zoning, building, or environmental
protection code after receipt of a notice of such violation which
was addressed to either ServiceMaster or GreenTree or otherwise
brought to the attention of either of them by the lessor or other
third party;
(8) no property listed in Schedule 7.13(a) is being used by GreenTree
in violation of any licensing law or regulation;
(9) ServiceMaster has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold
unless the fact that GreenTree is in possession of the leased
premises and uses the leased premises in connection with
GreenTree's Child Care Business effectively creates a sublease or
other form of property interest from ServiceMaster to GreenTree;
(10) there are no parties other than GreenTree in possession of any
parcel of real property listed in Schedule 5.2(a); and
(11) all facilities located on each parcel of real property listed in
Schedule 5.2(a) are supplied with the utilities and other
services necessary for the operation of such facilities.
5.3 ServiceMaster Service Agreements
--------------------------------
(a) The ServiceMaster Service Agreements are listed and described in
reasonable detail in Schedule 5.3(a).
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(b) ServiceMaster has delivered to Bright Horizons correct and complete
copies of the ServiceMaster Service Agreements.
(c) ServiceMaster had, and continues to have, all partnership power and
authority to enter into each of the ServiceMaster Service Agreements.
(d) With respect to each ServiceMaster Service Agreement listed in
Schedule 5.3(a),
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(1) the party actually rendering the services required by such
Service Agreement is GreenTree and such ServiceMaster Service
Agreement is the document under which GreenTree occupies and uses
the premises described in such ServiceMaster Service Agreement;
(2) such ServiceMaster Service Agreement is legal, valid, binding and
enforceable in full force and effect;
(3) subject to any required consents, such ServiceMaster Service
Agreement will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the
consummation of the transactions contemplated by this Agreement;
(4) subject to any required consents, no party to such ServiceMaster
Service Agreement is in breach or default, and no event has
occurred which, with notice or lapse of time (or both), would
constitute a breach or default or permit termination,
modification or acceleration thereunder;
(5) no party to such ServiceMaster Service Agreement has repudiated
any provision thereof;
(6) there are no disputes, oral agreements or forbearance programs in
effect as to such ServiceMaster Service Agreement;
(7) no property used by GreenTree under any ServiceMaster Service
Agreement listed in Schedule 5.3(a) is being used by GreenTree in
violation of any applicable zoning, building, or environmental
protection code after receipt of a notice of such violation which
was addressed to either ServiceMaster or GreenTree or otherwise
brought to the attention of either of them by the lessor or other
third party;
(8) no property used by GreenTree under any ServiceMaster Service
Agreement which is listed in Schedule 5.3(a) is being used by
GreenTree in violation of any licensing law or regulation;
(9) ServiceMaster has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the premises
described in any ServiceMaster Service Agreement unless the fact
that GreenTree is in possession of the premises and uses the
leased premises in connection with GreenTree's Child Care
Business effectively creates a lease or other form of property
interest from ServiceMaster to GreenTree;
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(10) there are no parties other than GreenTree in possession of any
parcel of real property listed in Schedule 5.3(a); and
(11) all facilities located on each parcel of real property listed in
Schedule 5.3(a) are supplied with the utilities and other
services necessary for the operation of such facilities.
5.4 ServiceMaster Contracts. Each of the ServiceMaster Contracts is
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legal, valid, binding, enforceable and in full force and effect on the date
hereof and, unless otherwise stated in Schedules 5.2(a) and 5.3(a), will
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continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the Closing.
5.5 ServiceMaster's Title to the Shares.
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(a) ServiceMaster holds of record, owns and has good and marketable title
to the Shares, free and clear of any restrictions on transfer and any Liens.
(b) There are no outstanding obligations, options, first refusal rights or
the like under contracts or agreements to which ServiceMaster, GreenTree or any
affiliate of either ServiceMaster or GreenTree is bound which affect
ServiceMaster's transfer of the Shares hereunder.
(c) Upon the delivery by ServiceMaster to Bright Horizons of the
certificates for the Shares and payment by Bright Horizons to ServiceMaster of
the consideration specified in Sections 3.2 and 3.3, Bright Horizons shall
acquire good and marketable title to the Shares, free and clear of any and all
Liens (other than Liens, if any, created by Bright Horizons).
5.5 No Conflicts. The execution, delivery and performance of this
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Agreement and the consummation of the transactions contemplated hereby will not
violate or result in a breach of any applicable laws or regulations, any
judgment, decree or order of any court or governmental body applicable to
ServiceMaster, GreenTree or any affiliate of either ServiceMaster or GreenTree
or the certificate of limited partnership or other organizational documents of
ServiceMaster, GreenTree or any affiliate of either ServiceMaster or GreenTree.
5.6 Brokers Fees. ServiceMaster has no liability or obligation to pay any
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fees or commissions to any broker, finder, employee or agent with respect to the
transactions contemplated by this Agreement for which Bright Horizons or
GreenTree could become liable or obligated.
6. REPRESENTATIONS AND WARRANTIES OF BRIGHT HORIZONS CONCERNING THE
TRANSACTION
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Bright Horizons represents and warrants to ServiceMaster that the
statements made in this Section 6 are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date as though
then made:
6.1 Organization; Power; Authorization
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(a) Bright Horizons is duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Bright Horizons has all requisite corporate and other power and
authority to execute and deliver this Agreement and to execute and deliver each
other agreement or document to be delivered in connection herewith and to
consummate the transactions contemplated by this Agreement.
(c) This Agreement and each other document delivered in connection
herewith by Bright Horizons has been duly and validly authorized, executed and
delivered by Bright Horizons and constitutes a valid, legal and binding
obligation of Bright Horizons, enforceable against Bright Horizons in accordance
with its terms.
(d) Bright Horizons need not give notice to, make any filing with, or
obtain any authorization, consent or approval of, any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
6.2 No Conflicts. The execution, delivery and performance of this
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Agreement and the consummation of the transactions contemplated hereby will not
violate or result in a breach of any applicable laws or regulations, any
judgment, decree or order of any court or governmental body applicable to Bright
Horizons or the articles of incorporation or other organizational documents of
Bright Horizons or violate any provision of Bright Horizons's bylaws or other
internal governance regulations.
6.3 Brokers Fees. Bright Horizons has no liability or obligation to pay
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any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which ServiceMaster could become
liable or obligated.
7. REPRESENTATIONS AND WARRANTIES OF SERVICEMASTER CONCERNING GREENTREE
ServiceMaster represents and warrants to Bright Horizons that the
statements made in this Section 7 are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date as though
then made:
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7.1 Organization, Qualification and Corporate Power of GreenTree.
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GreenTree is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. GreenTree is duly authorized to
conduct its business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a Material Adverse Effect. GreenTree has full
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it.
7.2 Certificate of Incorporation; Minutes Books; Directors and Officers.
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(a) ServiceMaster has delivered to Bright Horizons true, correct and
complete copies of the certificate of incorporation and bylaws of GreenTree,
each as amended to date.
(b) The minute books containing the records of meetings of the
stockholders, the board of directors and any committees of the board of
directors, the stock certificate books, and the stock record books of GreenTree
are true, correct and complete and have been made available to Bright Horizons.
(c) GreenTree is not in default under or in violation of any provision of
its certificate of incorporation or bylaws.
(d) A true and correct list of the directors and officers of GreenTree is
set forth in Schedule 7.2(d).
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7.3 Capitalization of GreenTree.
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(a) The entire authorized capital stock of GreenTree consists of 1,000
shares of common stock, par value $0.01 per share, of which the Shares
constitute all of authorized capital stock which is issued and outstanding.
(b) All of the Shares have been duly authorized, are validly issued, are
fully paid and non-assessable, and are held of record by ServiceMaster.
(c) There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights or other
contracts or commitments that could require GreenTree to issue, sell or
otherwise cause to become outstanding any of its capital stock. There are no
voting trusts, proxies or other agreements or understandings with respect to the
voting of the capital stock of GreenTree.
7.4 No Conflicts.
------------
(a) Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby will (i) violate or
result in a breach of any
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laws or regulations, any judgment, decree or order of any court or governmental
body or the certificate of incorporation or other organizational documents of
GreenTree or violate any provision of the bylaws of GreenTree or (ii) except as
set forth in Schedule 7.4, conflict with, result in a breach of, constitute a
------------
default under, result in the acceleration of, or create in any person the right
to accelerate, terminate, modify or cancel or require any notice under the
ServiceMaster Contracts or any agreement, contract, lease, license, instrument
or other arrangement to which GreenTree is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Lien upon
any of its assets).
(b) Except as set forth in Section 7.4(c), GreenTree does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the parties
hereto consummate the transactions contemplated by this Agreement.
(c) No license or permit under which GreenTree presently operates its
Child Care Business will be terminated, suspended or revoked as a result of the
Closing, however governmental child care licensing agencies may require child
care license renewals, amendments or reissuances for centers.
7.5 Subsidiaries. GreenTree has no subsidiaries.
------------
7.6 Title to and Sufficiency of Assets. Except as set forth in Schedule
---------------------------------- --------
7.6, GreenTree has good and marketable title to, or a valid leasehold interest
---
in, the properties and assets included in the Most Recent Interim Financial
Statements or acquired after the date thereof, or otherwise used by GreenTree,
free and clear of all Liens, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Interim Financial
Statements and except for the withdrawal of the Excess Cash pursuant to Section
3.4. Except as set forth in Schedule 7.6, such assets and property, together
with the ServiceMaster Contracts, constitute all of the assets and property
owned or leased by ServiceMaster or GreenTree which are used to conduct the
Child Care Business as presently operated by GreenTree and all of the assets and
property that will be required for Bright Horizons to conduct such business
following the consummation of the transaction contemplated hereby in the same
manner as such business was conducted by GreenTree immediately prior to the
Closing Date.
7.7 Financial Statements.
--------------------
(a) The Financial Statements for 1994 have been prepared in accordance
with the Accounting Principles and fairly present the financial condition of
GreenTree as at December 31, 1994 and the results of its operations during the
period commencing on January 1, 1994 and ending on December 31, 1994 and are
correct and complete and are consistent with the books and records of GreenTree.
The Financial Statements for 1994 are attached hereto as Exhibit C-1
-16-
(b) The Most Recent Interim Financial Statements have been prepared in
accordance with the Accounting Principles, except that notes and other
presentation items have been omitted and except that certain modifications have
been made in the balance sheet included in the Most Recent Interim Financial
Statements is consistent with Section 3.7(a) and the balance sheet as so
modified and the remaining portions of the Most Recent Interim Financial
Statements, fairly present the financial condition of GreenTree as at October
31, 1995 and the results of its operations during the period commencing on
January 1, 1995 and ending on October 31, 1995 and are correct and complete and
are consistent with the books and records of GreenTree. The Most Recent Interim
Financial Statements are attached hereto as Exhibit C-2.
7.8 Events Subsequent to October 31, 1995.
-------------------------------------
(a) Since October 31, 1995, GreenTree has managed and carried out its
business and affairs in the Ordinary Course of Business and there has not
occurred, arisen or been created, as the case may be, any change in the
business, financial condition, operations, or results of operations of GreenTree
which have had, or which could reasonably be expected to have, a Material
Adverse Effect.
(b) Except as set forth in Schedule 7.8(b), since October 31, 1995,
---------------
GreenTree has not declared any dividends, paid any management fees to
ServiceMaster, or made any other distribution of its profits or unrestricted
equity to its stockholder or any other payments to a related party.
(c) Without limiting the generality of Section 7.8(a), since October 31,
1995 GreenTree has not:
(1) sold, leased, transferred or assigned any of its assets (tangible or
intangible) other than for fair consideration in the Ordinary Course
of Business;
(2) entered into any agreement, contract, lease or license (or series of
related agreements, contracts, leases or licenses) involving an annual
payment of more than $25,000;
(3) accelerated, terminated, modified or canceled any material agreement,
contract, lease or license (or series of related agreements,
contracts, leases or licenses) or had any of such instruments
accelerated, terminated, modified or canceled by action of another
party;
(4) imposed or suffered the imposition of any Lien on any of its assets
(tangible or intangible);
(5) except as set forth in Schedule 3.5(a), made any capital expenditure
(or series of related capital expenditures) outside the Ordinary
Course of Business;
-17-
(6) issued any note, bond or other debt security, or created, incurred,
assumed or guaranteed any indebtedness for, borrowed money or
capitalized lease obligation;
(7) made any capital investment in, or made any loan to, or acquired the
securities of any other person;
(8) delayed or postponed the payments of accounts payable and other
liabilities outside the Ordinary Course of Business;
(9) canceled, compromised, waived or released any right or claim (or
series of related rights or claims) outside the Ordinary Course of
Business;
(10) granted any license or sublicense of any rights under or with respect
to any Intellectual Property;
(11) changed or authorized any change in its certificate of incorporation;
(12) issued, sold or otherwise disposed of any of its capital stock or
granted any options, warrants or other rights to purchase or obtain
any of its capital stock;
(13) experienced any damage, destruction or loss (whether or not covered by
insurance) to its property;
(14) made any loan to, or entered into any other transaction with, any of
its officers or Key Employees;
(15) entered into any employment contract which is materially different
from the form of employment agreement furnished by ServiceMaster to
Bright Horizons or entered into any collective bargaining agreement,
whether written or oral, or modified the terms of any existing such
contract or agreement;
(16) granted any increase in the base compensation of any of its officers
or Key Employees;
(17) made any other change in employment terms for any of its officers or
Key Employees; or
(18) suffered any occurrence, event, incident, action, failure to act or
transaction outside the Ordinary Course of Business.
7.9 No Undisclosed Liabilities. Except as set forth in Schedule 7.9,
-------------------------- ------------
GreenTree has no liability which will be subject to premature repayment as a
result of the transaction contemplated by this Agreement and GreenTree has no
liability other than liabilities set forth on or reflected in
-18-
the Most Recent Interim Financial Statements and liabilities which have arisen
after the date of the Most Recent Interim Financial Statements in the Ordinary
Course of Business (none of which results from, arises out of, relates to, is in
the nature of or was caused by any breach of contact, breach of warrant, tort,
infringement, or violation of law) nor to the knowledge of ServiceMaster is
there any basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against GreenTree giving rise
to any liability
7.10 Legal Compliance. GreenTree is in compliance with applicable laws,
----------------
rules, regulations, codes, judgment, orders, decrees and rulings in all material
respects; and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced against GreenTree
alleging any failure so to comply, provided, that this Section 7.10 does not
apply to matters not known to GreenTree which constitute technical noncompliance
with such regulations, codes, orders, decrees and rulings, but provided further
that the foregoing exception is limited to matters which do not have Material
Adverse Effect.
7.11 Tax Matters.
-----------
(a) GreenTree has filed with the appropriate authorities all Tax returns
and reports required to be filed prior to the Closing Date and GreenTree has
paid all Taxes owed by GreenTree with respect to such periods. All such Tax
returns were correct and complete in all respects.
(b) With respect to any and all Taxes for which GreenTree has become
liable but which are not yet due, adequate reserves therefor have been
established on the books of GreenTree.
(c) There are no Liens on any of the assets of GreenTree that arose in
connection with the failure to pay any Tax when due and payable.
(d) GreenTree (or ServiceMaster, on behalf of GreenTree) 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.
(e) There is not now pending, and to the best of ServiceMaster's knowledge
there is not now threatened, any suit, claim, investigation or audit by any
governmental or quasi-governmental authority against GreenTree with respect to
Taxes. ServiceMaster does not expect any authority to assess any additional
Taxes for any period for which Tax returns have been filed. There is no dispute
or claim concerning any Tax liability of GreenTree.
(f) GreenTree has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax deficiency or
assessment.
7.12 Real Estate - Owned. GreenTree does not own any real estate.
-------------------
-19-
7.13 Real Estate - Leased.
--------------------
(a) The real estate properties leased GreenTree as lessee are listed and
described in reasonable detail in Schedule 7.13(a).
----------------
(b) ServiceMaster has delivered to Bright Horizons correct and complete
copies of the leases listed in Schedule 7.13(a).
(c) With respect to each of the properties listed in Schedule 7.13(a),
----------------
(1) the lease is legal, valid, binding and enforceable in full force
and effect;
(2) subject to any required consents, the lease or sublease will
continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of
the transactions contemplated by this Agreement;
(3) subject to any required consents, no party to the lease is in
breach or default, and no event has occurred which, with notice
or lapse of time (or both), would constitute a breach or default
or permit termination, modification or acceleration thereunder;
(4) no party to the lease has repudiated any provision thereof;
(5) there are no disputes, oral agreements or forbearance programs in
effect as to the lease or sublease;
(6) with respect to each sublease, the representations and warranties
set forth in subsections (1) through (5) above are true and
correct with respect to the underlying lease;
(7) neither ServiceMaster nor GreenTree has received any notice to
the effect that a property listed in Schedule 7.13(a) is being
used by GreenTree in violation of any applicable zoning,
building, or environmental protection code and no such violation
has otherwise brought to the attention of either ServiceMaster or
GreenTree by the lessor or other third party having regulatory
authority with respect to such property;
(8) no property listed in Schedule 7.13(a) is being used by GreenTree
in violation of any licensing law or regulation;
(9) GreenTree has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold;
-20-
(10) there are no parties other than GreenTree in possession of any
parcel of real property listed in Schedule 7.13(a); and
(11) all facilities located on each parcel of real property listed in
Schedule 7.13(a) are supplied with the utilities and other
services necessary for the operation of such facilities.
7.14 Personal Property. Except as set forth in Schedule 7.6, GreenTree
----------------- ------------
owns and has good and marketable title to all items of Personal Property which
it purportedly owns (but not leases) which are reflected in the Most Recent
Interim Financial Statements other than items disposed of since the date of
those statements in the Ordinary Course of Business, and such items of Personal
Property are free and clear of any Liens other than Liens following from
retention of title set forth in contracts for the purchase of goods (or the
relevant invoices) created in the Ordinary Course of Business and for amounts
not yet due and payable and other than Liens reflected in the Most Recent
Interim Financial Statements or arising since the date thereof in the Ordinary
Course of Business. All of the Personal Property has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and is suitable for the purposes for
which it is used.
7.15 [This section left blank intentionally].
7.16 Intellectual Property.
---------------------
(a) Neither GreenTree nor ServiceMaster has registered the "GreenTree"
trade name and service xxxx at any federal or state registry, but ServiceMaster
has filed an application to register the GreenTree logo. ServiceMaster will
assign such application to GreenTree at the Closing. ServiceMaster has
registered the "GreenTree" trade name and service xxxx in Japan and has granted
an exclusive license to Fox River Japan, Inc., a Delaware corporation, to
conduct a Child Care Business in Japan under the "GreenTree" trade name and
service xxxx as registered in Japan. However, ServiceMaster will take all
action necessary to assure that the arrangements which Bright Horizons has made
regarding operations in Japan are not in conflict with the foregoing
arrangements made by ServiceMaster in Japan.
(b) Except as set forth in Schedule 7.16(b), GreenTree owns, or has valid
----------------
licenses or other rights to use, all of the patents, copyrights and trademarks,
service marks, trade dress, logos, trade names and corporate names, and all
goodwill associated therewith, used by GreenTree in the conduct of its business
("the Intellectual Property"). Such Intellectual Property is listed in Schedule
7.16(b).
(c) Except as otherwise noted in Schedule 7.16(b), with respect to each
item listed in Schedule 7.16(b) --
-21-
(1) the license, sublicense, agreement or permission covering the
item is legal, valid, binding, enforceable and in full force and
effect;
(2) the license, sublicense, agreement or permission will continue to
be legal, valid, binding, enforceable and in full force and
effect on identical terms following the Closing, except that
after the Closing, GreenTree will not have any right to use the
name "ServiceMaster" or any derivation thereof;
(3) no party to the license, sublicense, agreement or permission is
in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit
termination, modification or acceleration thereunder;
(4) with respect to each sublicense, the representations and
warranties set forth in subsections (1) through (3) above are
true and correct with respect to the underlying license; and
(5) GreenTree has not granted any sublicense or similar right with
respect to the license, sublicense, agreement or permission.
(d) The business operations of GreenTree do not interfere with, infringe
upon, misappropriate or violate any intellectual property or related rights of
any third party. GreenTree has not received any notice alleging any such
interference, infringement, misappropriation or violation.
(e) Schedule 7.16(b) discloses that some of the information integrated
into the GreenTree Directors Guide is proprietary to ServiceMaster.
ServiceMaster hereby grants to GreenTree, without charge to GreenTree, a non-
transferable license to use such information and the ServiceMaster's management
training systems which are an integral part of GreenTree's training manuals for
the period commencing on the Closing Date and ending on December 31, 1998,
provided, that the foregoing license does not give GreenTree or Bright Horizons
any right to use the name "ServiceMaster" or any derivative thereof.
7.17 Contracts.
---------
(a) Subject to Section 7.17(d), Schedule 7.17 lists the following
-------------
contracts and agreements to which GreenTree is a party:
(1) any agreement (or group of related agreements) for the lease of
personal property to or from any person which provides for lease
payments in excess of $25,000 per annum and which can not be
terminated by GreenTree without penalty within a period of sixty days
after notice by GreenTree;
-22-
(2) any agreement (or group of related agreements) for the purchase of
materials, supplies or other personal property, or for the furnishing
or receipt of services the performance of which will extend over a
period of more than one year, which involves consideration in excess
of $25,000 and which can not be terminated by GreenTree without
penalty within a period of sixty days after notice by GreenTree;
(3) any agreement concerning a partnership or joint venture;
(4) any agreement (or group of related agreements) which create, assume or
guarantee any indebtedness for borrowed money or which creates or
extends a capitalized lease obligation and in which the principal
amount is in excess of $25,000 or which has imposed a Lien on any of
its assets, tangible or intangible;
(5) any agreement concerning confidentiality or non-competition;
(6) any agreement with ServiceMaster or any affiliate of ServiceMaster;
(7) any profit-sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance or other plan or arrangement for the
benefit of current or former Key Employees, directors, officers, or
other employees;
(8) any collective bargaining agreement;
(9) any agreement for the employment of any individual on a full-time,
part-time, consulting or other basis which provides for annual
compensation in excess of $75,000 or which provides severance
benefits;
(10) any agreement under which an advance or loan has been made to any
director, officer or Key Employee;
(11) any agreement under which the consequences of a default or termination
could have a Material Adverse Effect; or
(12) any other agreement (or group of related agreements) the performance
of which includes consideration in excess of $25,000.
ServiceMaster has delivered to Bright Horizons or has otherwise made available
to Bright Horizons a correct and complete copy of each written agreement listed
in Schedule 7.17 and a written summary setting forth the terms and conditions of
each oral agreement included in Schedule 7.17.
(b) With respect to each contract or agreement listed in Schedule 7.17,
-------------
the contract or agreement is legal, valid, binding, enforceable and in full
force and effect at the date hereof; the
-23-
contract or agreement will continue to be legal, valid, binding, enforceable and
in full force and effect on identical terms following the Closing; and no party
is in breach or default, and no event has occurred which with notice or lapse of
time, or both, would constitute a breach or default or permit termination,
modification or acceleration under the agreement and no party has repudiated any
provision of any such agreement.
(c) Neither ServiceMaster nor GreenTree has received any notification from
any governmental authority that any property used or occupied by GreenTree in
connection with any of the agreements or contracts listed in Schedule 7.17 is
being used or occupied by GreenTree in violation of any applicable zoning,
building, or environmental protection code or, to the knowledge of
ServiceMaster, is in violation of any such code as a result of the use,
occupation or ownership of such property by any other person.
(d) No property being used by GreenTree under any of the agreements or
contracts listed in Schedule 7.17 is being used by GreenTree in violation of any
licensing law or regulation.
(e) This Section 7.17 and Schedule 7.17 does not apply to real estate
leases under which GreenTree is lessee (which leases are covered by Section 7.13
and Schedule 7.13(a) or to the ServiceMaster Contracts (which contracts are
covered by Sections 5.2, 5.3 and 5.4).
7.18 Notes and Accounts Receivable. All notes and accounts receivable of
-----------------------------
GreenTree are reflected properly on its books and records, are valid receivables
which are not subject to any setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Interim Financial Statements as adjusted for the passage
of time through the Closing Date in accordance with the Accounting Principles.
7.19 Insurance.
---------
(a) Schedule 7.19(a) sets forth the following information with respect to
----------------
each insurance policy (including policies providing property, casualty,
liability and workers compensation coverage and bond and surety arrangements) to
which GreenTree has been a party, a named insured, or otherwise the beneficiary
of coverage at any time within the past five years:
(1) the name of the insurer, the name of the policyholder and the name of
the covered insured;
(2) the policy number and the period of coverage;
(3) the scope of the policy (including an indication whether the coverage
was on a claims made, occurrence or other basis) and the amount of
coverage (including a description of how deductibles and ceilings are
calculated and operate); and
-24-
(4) a description of any retroactive premium adjustments or other loss-
sharing arrangements.
(b) With respect to each insurance policy identified in Schedule 7.19(a)
which is in effect on the Closing Date:
(1) the policy is legal, valid, binding, enforceable and in full force and
effect;
(2) except as otherwise stated in Schedule 7.19(a), the policy will
----------------
continue to be legal, valid, binding, enforceable and in full force
and effect on identical terms immediately after the Closing;
(3) Neither GreenTree nor ServiceMaster nor, to ServiceMaster's knowledge,
any other party is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination, modification or
acceleration under the policy.
(c) GreenTree has been covered during the past five years by insurance in
scope and amount customary and reasonable for the businesses in which it has
been engaged during such five-year period.
7.20 Litigation. Except as set forth in Schedule 7.20, there is no suit,
---------- -------------
claim or action or legal, administrative, arbitration, or other proceeding or
investigation pending, or to the best of the ServiceMaster's knowledge,
threatened, in any court or before any governmental authority or other
governmental body or arbitral panel against GreenTree.
7.21 Service Contracts and Warranties.
--------------------------------
(a) GreenTree is in compliance with all applicable contractual service
commitments.
(b) Each service provided by GreenTree has been in conformity with all
express and implied warranties, and GreenTree has no liability for damages in
connection therewith, subject only to the reserve for claims set forth on the
face of the Most Recent Interim Financial Statements as adjusted for the passage
of time through the Closing Date in accordance with the Accounting Principles.
(c) No service sold by GreenTree is subject to any guaranty, warranty or
other indemnity beyond the applicable standard terms and conditions of sale.
7.22 Product Liability. GreenTree does not have any liability arising out
-----------------
of any injury to individuals or property as a result of the ownership,
possession or use of any product manufactured, sold, lease or delivered by
GreenTree.
-25-
7.22A Compliance with Policy Manuals. GreenTree has conducted its
------------------------------
Child Care Business in conformity with its policy manuals except for possible
deviations of a minor nature which do not have a Material Adverse Effect.
7.23 Employees.
---------
(a) No Key Employee has resigned his or her position or employment with
GreenTree since December 31, 1994. Neither ServiceMaster nor GreenTree is aware
of any Key Employee who intends to leave his or her position with GreenTree.
(b) There is no pending and, to the best of ServiceMaster's knowledge, no
threatened (i) claim by any current or former director, officer, employee or
agent of GreenTree against GreenTree, or (iii) strike by the employees of
GreenTree. GreenTree has not received notice of any claim that it has not
complied with any employment, labor or related laws.
7.24 Employment and Pension Agreements.
---------------------------------
(a) Except as (i) expressly provided in employment contracts between
GreenTree and its respective employees, (ii) expressly provided for in the
collective bargaining agreements applicable to GreenTree and its respective
employees, or (iii) established or required by law in the respective
jurisdictions in which GreenTree is organized to do business, there are no
deferred compensation agreements, Multi-Employer Plans (as defined in Section
3(37) of ERISA), bonus plans (other than discretionary payments of annual
bonuses), profit-sharing plans, pension plans, severance pay or retirement
plans, employee stock option or purchase plans, private life insurance plans or
hospitalization insurance plans (collectively referred to as the "Employment and
Pension Agreements") in effect with respect to any current or former director,
officer or other employee of GreenTree which involves a liability material to
the business or condition, financial or otherwise, of GreenTree taken as a
whole.
(b) To the extent required by the Accounting Principles, provisions have
been made in the Financial Statements for 1994 and the Most Recent Financial
Statements for the full amount of all present and future liabilities in respect
of the Employment and Pension Agreements to be paid to current or former
directors, officers or other employees of GreenTree.
(c) ServiceMaster will enter into an agreement effective on the Closing
Date under which ServiceMaster will lease to GreenTree the ServiceMaster
employees who comprised the GreenTree staff immediately prior to the Closing
Date. Such lease will be for the period December 1, 1995 to and including
December 31, 1995 and will be on such terms and conditions as are set forth in
the leasing agreement.
(d) ServiceMaster will provide all notices required under COBRA. After the
Closing, (i) all employees who elect COBRA cover will pay the premiums required
of employees as
-26-
pursuant to the provisions by COBRA, and Bright Horizons will pay the employer's
share of such premium; and (ii) ServiceMaster will pay the actual adjusted cost
of COBRA claims.
(e) ServiceMaster will be responsible for continuing the benefits (if any)
which were available to employees who, for whatever reason, were not actively
working at GreenTree at January 1, 1996 and there shall be no assignment of any
such employee's employment agreement from ServiceMaster to Bright Horizons or
GreenTree in connection with this transaction. Any of such employees who
desires to return to GreenTree at the expiration of the time allowed for such
leave will be employed by GreenTree or Bright Horizons. ServiceMaster's
responsibilities under the first sentence of this Section 7.24(e) will expire as
to each employee upon such re-employment (if it occurs).
7.25 Guarantees. GreenTree is not a guarantor or otherwise liable for any
----------
obligation (including indebtedness) of a person who is not GreenTree.
7.26 Environmental, Health and Safety.
--------------------------------
(a) GreenTree has complied with all environmental, health and safety laws,
and no action, suit, proceeding, investigation, charge, complaint, claim, demand
or notice has been filed or commenced against it alleging any failure so to
comply. Without limiting the generality of the preceding sentence, GreenTree
has obtained and been in compliance with all of the terms and conditions of all
permits, licenses and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables which are
contained in all applicable environmental, health and safety laws.
(b) GreenTree has not handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in any
manner that could form the basis for any present or future action, suit,
proceeding, hearing, investigation charge, complaint, claim or demand against
GreenTree for damage to any site, location or body of water (surface or
subsurface) for any illness of or personal injury to any employee or other
individual, for any reason under any environmental, health and safety law.
7.27 Business Records. All customer records or lists, accounts or
----------------
accounting records, tax returns, market information, marketing or business plans
or any other similar business records, documents or materials of GreenTree are
kept in a reasonably organized fashion by GreenTree.
7.28 Brokers Fees. GreenTree has no liability or obligation to pay any
------------
fees or commissions to any broker, finder, agent or employee with respect to the
transactions contemplated by this Agreement.
-27-
7.29 Disclosure. The representations contained in this Section 7 do not
----------
contain any untrue statement of any fact or omit to state any material fact
necessary in order to make the statements and information in this Section 7 not
misleading.
8. PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
8.1 General. Each of the parties will use its reasonable best efforts to
-------
take all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement.
8.2 Notices and Consents. ServiceMaster will cause GreenTree to give any
--------------------
notices to third parties, and will cause GreenTree to use its best efforts to
obtain any third-party consents, that Bright Horizons reasonably may request.
Each of the parties will (and ServiceMaster will cause GreenTree to) give any
notices to, make any filings with, and use its best efforts to obtain any
necessary authorizations, consents and approvals of governments and governmental
agencies. Such consents will be in a form acceptable to Bright Horizons.
8.3 Operation of Business. ServiceMaster will not cause or permit
---------------------
GreenTree to engage in any practice, take any action, or enter into any
transaction, outside the Ordinary Course of Business (except for taking the
actions described in Section 8.2).
8.4 Preservation of Business. ServiceMaster will cause GreenTree to keep
------------------------
its business and properties substantially intact, including its present
operations, physical facilities, working conditions and relationships with
lessors, licensors, suppliers, customers and employees.
8.5 Full Access. ServiceMaster will permit, and ServiceMaster will cause
-----------
GreenTree to permit, representatives of Bright Horizons to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of GreenTree, to all premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
GreenTree.
8.6 Notice of Developments.
----------------------
(a) ServiceMaster will give prompt written notice to Bright Horizons of
any material adverse development which results in a breach of any one or more of
the representationes or warranties made in Section 5 and 7 above.
(b) Bright Horizons will give prompt written notice to ServiceMaster of
any material adverse development which results in a breach of any one or more of
the representationes or warranties made in Section 6 above.
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9. POST CLOSING COVENANTS
The parties agree as follows with respect to the period following the
Closing:
9.1 [This Section left intentionally blank.]
9.2 Confidentiality.
---------------
(a) Bright Horizons and ServiceMaster shall not, and shall not permit any
affiliated person or entity to, disclose any Confidential Information unless (i)
required to do so by law, (ii) required to do so by any applicable stock
exchange regulations, (iii) such disclosure is made in connection with the
Ordinary Course of Business of GreenTree, or (iv) such disclosure has been
consented to by ServiceMaster in the case of a disclosure by Bright Horizons and
by Bright Horizons in the case of a disclosure by ServiceMaster, which consent
shall not be unreasonably withheld.
(b) ServiceMaster will treat and hold as such all of the Confidential
Information, refrain from using any of the Confidential Information except in
connection with this Agreement, and deliver promptly to Bright Horizons or
destroy, at the request and option of Bright Horizons, all tangible embodiments
(and all copies) of the Confidential Information which are in ServiceMaster's
possession. In the event that ServiceMaster is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, ServiceMaster will notify Bright Horizons
promptly of the request or requirement so that Bright Horizons may seek and
appropriate protective order or waive compliance with this Section 9.2(b). If,
in the absence of a protective order or the receipt of a waiver hereunder any
representative of ServiceMaster is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that representative of ServiceMaster may disclose the Confidential
Information to the tribunal; provided, however, that ServiceMaster shall use its
best efforts to obtain, at the request of Bright Horizons, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as Bright Horizons shall
designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure and the foregoing provisions are subject to paragraph (c)
below.
(c) Anything in the foregoing provisions of this Section 9.2 to the
contrary notwithstanding, ServiceMaster may retain all materials or copies of
material relating to GreenTree's Tax liability for all periods ending on the
Closing Date and all materials relating to any matter for which ServiceMaster is
committed to indemnify Bright Horizons pursuant to this Agreement.
9.3 Cooperation in Financial Audits. ServiceMaster agrees to cooperate,
-------------------------------
at its own expense, with Bright Horizons and any independent accounting firm
retained by Bright Horizons
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in any financial audit of GreenTree for periods prior to the Closing Date. The
parties agree to cooperate in the preparation of federal and state income tax
returns and ServiceMaster shall file short year tax returns where required, if
any.
9.4 Further Assurances. If at any time after the Closing any further
------------------
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action, including the execution and
delivery of such further instruments and documents, as the other party may
reasonably request, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Section 11). ServiceMaster acknowledges and agrees that from and after the
Closing, Bright Horizons will be entitled to possession of all documents, books,
records (including Tax records), agreements and financial data of any sort
relating to GreenTree.
9.5 Litigation Support. If, and for so long as, any party is actively
------------------
contesting or defending against any action, suit proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with, any
transaction contemplated under this Agreement or any matter which originated on
or prior to the Closing Date involving any of GreenTree or its affiliates, the
other party will cooperate with the contesting or defending party and its
counsel in the contest or defense, make available its personnel, and provide
such testimony and access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending party (unless the contesting or defending party is
entitled to indemnification therefor under Section 11).
9.6 Transition. ServiceMaster will not take any action that is designed
----------
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier or other person having a business relationship with GreenTree from
maintaining the same business relationships with GreenTree after the Closing as
it maintained with GreenTree prior to the Closing. ServiceMaster will refer all
customer inquires relating to the business of GreenTree to GreenTree from and
after the Closing. ServiceMaster acknowledges and agrees that from and after
the Closing, Bright Horizons will be entitled to possession of all documents,
books, records (including Tax records), agreements and financial date of any
sort relating to GreenTree but that such possession is subject to the right of
ServiceMaster to have access to such materials and to make copies thereof to
the extent provided in this Agreement.
9.7 Change of Name. ServiceMaster, as agent for GreenTree, will file such
--------------
documents as are necessary to cause the corporate name of GreenTree to be
changed as provided in Section 4.
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10. COVENANT NOT TO COMPETE
10.1 ServiceMaster Covenant.
----------------------
(a) ServiceMaster covenants and agrees that, for a period of three years
from and after the Closing Date, neither ServiceMaster nor any present or future
affiliate of ServiceMaster will engage directly or indirectly in the Child Care
Business in the United States or in any portion thereof where this covenant may
be enforced.
(b) If the final judgment of a court of competent jurisdiction declares
that any term or provision of Section 10.1(a) is invalid or unenforceable, the
parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
11. CONDITIONS TO THE OBLIGATIONS OF THE PARTIES TO CLOSE
11.1 Conditions to the Obligation of Bright Horizons to Close.
--------------------------------------------------------
(a) The obligation of Bright Horizons to consummate the transactions to be
performed by it in connection with the Closing is subject to the satisfaction of
the following conditions:
(1) The representations and warranties set forth in Section 5 and in
Section 7 shall be true and correct in all material respects at and as
of the Closing Date;
(2) ServiceMaster shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(3) Since October 31, 1995, there shall not have occurred, nor shall there
exist as of the Closing, any event or circumstance that constitutes or
has result in or will, with the passage of time, result in a Material
Adverse Effect;
(4) With respect to the ServiceMaster Leases, the ServiceMaster Service
Agreements and leases and service agreements under which GreenTree is
the lessee or service provider, the extent to which third party
consents must be in hand as a condition to Bright Horizons' obligation
to close is set forth in Section 11A;
(5) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency wherein an
unfavorable injunction,
-31-
judgment, order, decree or ruling would prevent consummation of any of
the transactions contemplated by this Agreement or to be rescinded
following consummation or adversely affect the right of Bright
Horizons to own the stock of GreenTree and to control GreenTree or
adversely affect the right of GreenTree to own its assets and to
operate its business and no such injunction, judgment, order, decree,
ruling or charge shall be in effect;
(6) Bright Horizons shall have received the resignation, effective as of
the Closing, of each officer of GreenTree other than those whom Bright
Horizons shall have specified in writing at least five business days
prior to the Closing;
(7) Bright Horizons shall have received the resignation, effective as of
the Closing, of each director of GreenTree;
(8) [This Section intentionally left blank.]
(9) Bright Horizons shall have received an opinion of Xxxxxx X. Xxxxxxx,
Xx. Vice President and General Counsel of ServiceMaster, in the form
of that attached hereto as Exhibit D-1;
(10) Each license or permit needed by GreenTree to operate the Child Care
Business as operated by GreenTree prior to the Closing shall be in
effect at the Closing and shall not be terminated, suspended or
revoked as a result of the consummation of the transactions
contemplated hereby. ServiceMaster has informed Bright Horizons that
GreenTree will be able to continue to conduct its Child Care Business
for a reasonable period of time after the Closing pursuant to such
licenses and that, if GreenTree's Child Care Business is conducted
after the Closing in substantially the same manner as the Child Care
Business was conducted immediately prior to the Closing, ServiceMaster
does not expect GreenTree or Bright Horizons to encounter any material
difficulty in having such licenses or permits renewed or reissued, but
Bright Horizons understands that: (i) some or all of such licenses may
have to be renewed or reissued after the Closing as a result of the
change in control of GreenTree and/or changes in GreenTree's board of
directors and officers and/or the change in GreenTree's corporate
name; (ii) Bright Horizons has the responsibility for obtaining all of
such license renewals or reissuances; and (iii) ServiceMaster will not
be responsible for any problems which may be encountered by Bright
Horizons in regard to such license renewals or reissuance if the
difficulty is attributable to actions of Bright Horizons after the
Closing;
(11) ServiceMaster shall have delivered to Bright Horizons a certificate
from an officer of ServiceMaster that each of the conditions specified
in this Section 11.1 has been satisfied in all respects; and
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(12) ServiceMaster shall have delivered to Bright Horizons a xxxx of sale
from ServiceMaster to GreenTree which transfers any interest which
ServiceMaster may have in the personal property described in Section
7.6, provided, that such xxxx of sale shall not assign the assets
listed in paragraph [2] of Schedule 7.6.
(b) Bright Horizons may waive any condition specified in this
Section 11.1.
11.2 Conditions to ServiceMaster's Obligation to Close.
-------------------------------------------------
(a) The obligation of ServiceMaster to consummate the transactions to be
performed by it in connection with the Closing is subject to the satisfaction of
the following conditions:
(1) the representations and warranties set forth in Section 6 shall be
true and correct in all material respects at and as of the Closing
Date;
(2) Bright Horizons shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(3) Bright Horizons shall have procured all necessary third party
consents;
(4) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency wherein an
unfavorable injunction, judgment, order, decree or ruling would
prevent consummation of any of the transactions contemplated by this
Agreement or to be rescinded following consummation;
(5) ServiceMaster shall have received the documents which will enable
ServiceMaster to make the filings after the Closing which will change
the corporate name of GreenTree;
(6) ServiceMaster shall have received an opinion of Ropes & Xxxx in the
form of that attached hereto as Exhibit E-1;
(7) Bright Horizons shall have delivered to ServiceMaster a certificate
from an officer of Bright Horizons that each of the conditions
specified in this Section 11.2 has been satisfied in all respects; and
(8) Bright Horizons shall have delivered to ServiceMaster an agreement
which shall be to the effect that, if and to the extent that
ServiceMaster remains liable for the performance after the Closing of
the lessee's post-closing obligations under any of the ServiceMaster
Contracts or any of the leases under which GreenTree is the lessee,
Bright Horizons will indemnify and hold ServiceMaster harmless from
any costs or expenses which arise out of such remaining liability
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(9) Bright Horizons shall have delivered to ServiceMaster a written
confirmation by a recognized investment banking firm that the value of
the common stock of Bright Horizons as of the date of this Agreement
is approximately $3.00 per share.
(b) ServiceMaster may waive any condition specified in this Section 11.2.
11A. THIRD PARTY CONSENTS RE SERVICEMASTER LEASES, ETC.
11A.1 19-Out-Of-24 Requirement. Bright Horizons shall have no obligation
------------------------
to close unless, with respect to the 24 GreenTree child care centers which are
operating under a ServiceMaster Lease, a ServiceMaster Services Agreement, a
lease to GreenTree or a service agreement with GreenTree (hereinafter referred
to in this Section 11A as an "Occupancy Agreement"), for at least 19 of such
child care centers either --
(i) ServiceMaster shall have in hand at the closing consents from the
landlord or GreenTree customer which consents to the assignment of the
ServiceMaster Lease and/or the change in control of GreenTree; or
(ii) landlord or customer consents are not required for such Occupancy
Agreements on account of the transaction contemplated by this Agreement,
11A.2 Commitment to Obtain Missing Consents. To the extent that as of the
-------------------------------------
Closing, ServiceMaster shall have obtained more than 18 but less than 24
consents with respect to the Occupancy Agreements, ServiceMaster covenants and
agrees that it will obtain the remaining consents on or prior to January 31,
1996.
11A.3 ServiceMaster's Obligation to Repurchase Centers. To the extent
------------------------------------------------
that on January 31, 1996 all 24 child care centers are not fully covered by
landlord or customer consents (or such consents are not required), then
ServiceMaster agrees to repurchase from GreenTree, at a price equal to 1/27 of
the Purchase Price (as adjusted) per center, each center for which a landlord or
customer consent was required but not obtained.
11A.4 ServiceMaster's Right to Dispose of Reacquired Centers. Any
------------------------------------------------------
GreenTree child care center which ServiceMaster is required to repurchase under
Section 11A.3 may be sold by ServiceMaster to a third party, any provisions of
Section 10 hereof to the contrary notwithstanding.
11A.5 Payment for Repurchased Centers. Any payment due to Bright Horizons
-------------------------------
pursuant to this Section 11A shall be a Purchase Price reduction and the
provisions of Section 3.8 shall apply to this Section 11A.
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12. REMEDIES FOR BREACHES OF AGREEMENT; INDEMNIFICATION
12.1 Survival of Bright Horizon's Representations and Warranties. The
-----------------------------------------------------------
representations and warranties of Bright Horizons as set forth in Section 6 of
this Agreement shall survive the Closing and shall continue in full force and
effect indefinitely (subject to any applicable statutes of limitation).
12.2 Survival of ServiceMaster's Representations and Warranties.
----------------------------------------------------------
(a) The representations and warranties of ServiceMaster as set forth in
Section 5 of this Agreement shall survive the Closing and shall continue in full
force and effect indefinitely (subject to any applicable statutes of
limitation).
(b) The representations and warranties of ServiceMaster as set forth in
this Agreement other than in Section 5 shall survive the Closing and shall
continue in full force and effect to December 31, 1997, except that the
representations and warranties contained in Section 7.10 shall continue in full
force and effect until the last of the applicable statutes of limitation has
expired or a taxable period has otherwise been closed by agreement with the
relevant tax authority or by a judicial determination which is final and not
subject to appeal.
12.3 Indemnification Provisions for the Benefit of ServiceMaster. Bright
-----------------------------------------------------------
Horizons agrees to indemnify and hold ServiceMaster harmless from and against
any and all losses, damages, claims, liabilities and/or expenses incurred by
ServiceMaster as a result of any untruth or a breach of any representation or
warranty of Bright Horizons herein, provided, that ServiceMaster makes a written
claim for indemnification by Bright Horizons.
12.4 Indemnification Provisions for the Benefit of Bright Horizons.
-------------------------------------------------------------
(a) As used in this Section 12.4, the following terms shall have the
indicated meanings:
"Losses" shall have the meaning set forth in Section 12.4(b).
"Indemnifiable Loss" means a Loss (or a series of Nominal Losses which are
so similar in nature or interrelated that they are, in effect, one Loss)
which is otherwise indemnifiable under this Section 12.4 and the amount of
which is $10,000 or more.
"Nominal Loss" means a Loss which is otherwise indemnifiable under this
Section 12.4 and the amount of which is less than $10,000.
(b) Subject to the limitations set forth in Section 12.4(c) and to the
other provisions of this Section 12.4 other than Section 12.4(d), ServiceMaster
agrees to indemnify and hold Bright Horizons and GreenTree harmless from and
against any and all losses, damages, claims, liabilities
-35-
and/or expenses incurred by Bright Horizons or GreenTree as a result of any
untruth or a breach of any representation or warranty of ServiceMaster herein
("Losses"), provided, that Bright Horizons makes a written claim for
--------
indemnification by ServiceMaster before the expiration of the survival period of
the representation or warranty which is alleged to have been breached.
(c) ServiceMaster shall not be obligated to indemnify Bright Horizons for
a Loss unless: (i) the Loss is an Indemnifiable Loss and (ii) the aggregate
amount of all Losses (both Indemnifiable Losses and Nominal Losses) has become
greater than $50,000, in which case ServiceMaster shall be obligated to
indemnify Bright Horizons for the aggregate amount of all Losses. In order to
determine the extent to which the foregoing "basket amount" has been used up,
Bright Horizons agrees to give ServiceMaster notice from time to time of the
existence of Losses which Bright Horizons considers to be applicable against the
basket amount. ServiceMaster shall have the right to contest such
determination. In the event of a disagreement between the parties regarding the
occurrence of a Loss, the parties shall confer and make a good faith effort to
resolve the matter by mutual agreement.
(d) Subject to the provisions of this Section 12.4 other than Sections
12.4(b) and (c), ServiceMaster agrees to indemnify and hold Bright Horizons and
GreenTree and their officers and directors of GreenTree and Bright Horizons
harmless from and against --
(1) any and all losses, damages, claims and liabilities and/or expenses
incurred by Bright Horizons or GreenTree which have their origin in
tort or negligence claims asserted by third parties in respect of
actions or failures to take action by GreenTree personnel in the Child
Care Business as conducted by GreenTree prior to the Closing Date;
(2) any and all payments for taxes, and any interest and penalties
relating thereto, made by or for the account of GreenTree which are
attributable to any year ending prior to the year 1995 or to that
portion of the year 1995 which commenced on January 1, 1995 and ended
on the Closing Date;
(3) any and all payments for amounts due under any leases which are
attributable to a period or periods ending on or prior to the Closing
Date, provided that ServiceMaster's obligation under this item (3)
shall expire on June 30, 1996;
(4) any and all losses, damages, claims and liabilities and/or expenses
incurred by Bright Horizons or GreenTree which are in the nature of a
claim for which the EEOC or comparable state agency would have
jurisdiction;
(5) any and all workers compensation claims with respect to a period or
periods ending on or prior to the December 31, 1995; and
-36-
(6) any and all losses, damages, claims and liabilities and/or expenses
incurred by Bright Horizons or GreenTree as a result of the failure of
ServiceMaster to comply with the last sentence of 7.16(a).
(e) Subject to the provisions of this Section 12.4, other than Sections
12.4(b) and (c), the following special indemnity provisions shall apply with
respect to accounts payable of GreenTree:
(1) ServiceMaster agrees to reimburse Bright Horizons (or GreenTree, if
Bright Horizons directs) for the amount of all invoices received by
GreenTree which relate to the delivery of goods or services received
prior to November 1, 1995 (which have not been paid prior to the
November 30, 1995);
(2) ServiceMaster shall not be responsible for, and shall not reimburse
GreenTree or Bright Horizons for, the amount of invoices received by
GreenTree which relate to the delivery of goods or services received
by GreenTree after October 31, 1995 and prior to December 1, 1995
(which have not been paid prior to November 30, 1995) if and to the
extent that the cumulative amount of such invoices is less than or
equal to $125,000;
(3) ServiceMaster shall be responsible for, and shall reimburse GreenTree
or Bright Horizons for, the amount of invoices received by GreenTree
after November 30, 1995 which relate to the delivery of goods or
services received by GreenTree after October 31, 1995 and prior to
December 1, 1995 (which have not been paid prior to November 30, 1995)
if and to the extent that the cumulative amount of such invoices
exceeds $125,000.
(f) Any and all claims for indemnification under this Section 12.4 shall
be made in writing as soon as practicable after Bright Horizons becomes aware of
such claim, describing in detail the nature of and the grounds for the claim and
a good faith estimate of the amount claimed, provided, that a failure to provide
such notice shall not affect the indemnification provided hereunder except to
the extent that ServiceMaster has been actually prejudiced as a result of such
failure. ServiceMaster shall pay to Bright Horizons any amounts to which Bright
Horizons is entitled as indemnification hereunder as soon as practicable and in
no event later than thirty (30) days after the claim for such indemnification
has been submitted by Bright Horizons to ServiceMaster without objection by
ServiceMaster, or if such claim is disputed by ServiceMaster, as soon as
practicable after such dispute is resolved and in no event later than thirty
(30) days after the execution of a valid and binding settlement agreement
between the claimant and GreenTree or the entry of a valid and final award by a
court of competent jurisdiction. Notwithstanding the foregoing, Bright Horizons,
at its election, shall be entitled to offset an amount equal to the amount of
indemnification to which it is entitled from ServiceMaster pursuant to this
Section 11 from any payment due ServiceMaster pursuant to the Note.
-37-
(g) The amount of any Loss shall be calculated after taking into account
any tax benefits which may be realized under any applicable law by Bright
Horizons or GreenTree on account of the Loss.
(h) Any indemnification of Losses under this Agreement shall be considered
a reduction of the Purchase Price, and such reduction of the Purchase Price
shall be the sole and exclusive remedy for any claim by Bright Horizons in
connection with the transactions arising out of this Agreement and Bright
Horizons hereby waives all other rights it may have in respect thereof. If and
to the extent that Bright Horizons has offset any part of its obligations under
the Note and the means of collecting an amount due from ServiceMaster under this
Section 12, then the Purchase Price shall be considered to have been reduced to
that extent for purposes of this Section 12.(g). This Section 12.4(g) does not
apply to indemnification under Section 12.4(d)-(e) or to any matter involving
fraud or intentional misrepresentation.
(i) Except for the matters described in Section 12.4(d)-(e), any and all
obligations of ServiceMaster to indemnify Bright Horizons in respect of any
claims hereunder shall terminate at the end of the survival period for the
underlying representation or warranty, except for pending claims for
indemnification.
13. PROCEDURE REGARDING THIRD PARTY CLAIMS
13.1 Obligations of Bright Horizons. Whenever Bright Horizons becomes
------------------------------
aware of any claim, suit, action or proceeding by a third party against
GreenTree which may give rise to a Loss which is indemnifiable under Section 11,
Bright Horizons shall:
(a) Not make any admission of liability, agreement or compromise to or
with any person, entity or authority in relation thereto without the prior
written consent of ServiceMaster, which consent shall not be unreasonably
withheld;
(b) Permit ServiceMaster and its professional advisors to have access to
the personnel of GreenTree and to any relevant accounts, documents and records
within the possession or control of GreenTree to enable ServiceMaster and its
professional advisors to assess the merits and potential liability in respect of
such claim, suit, action or proceeding and to take copies or photographs of such
relevant accounts, documents and records at their own expense; provided,
--------
however, that notwithstanding the foregoing ServiceMaster shall have no rights
-------
under this Section 12 if Bright Horizons shall agree to discharge and release
ServiceMaster from its indemnification obligation hereunder in respect of the
Loss or portion thereof which arises out of such claim, suit action or
proceeding; and
(c) Upon the request of ServiceMaster, tender the defense of any such
claim, suit, action or proceeding to ServiceMaster, in which event ServiceMaster
shall assume the entire liability and obligation in respect of such claim, suit,
action or proceeding and shall be relieved
-38-
of its indemnification obligations under Section 11 for any and all Losses
resulting from such claim, suit, action or proceeding which are incurred after
ServiceMaster has assumed such defense.
14. MISCELLANEOUS
14.1 Entire Agreement. This Agreement, including all Exhibits and
----------------
Schedules, supersedes any and all other agreements, oral or written, between the
parties hereto with respect to the subject matter hereof, and contains the
entire agreement between such parties with respect to the transaction
contemplated hereby.
14.2 Amendments and Waivers.
----------------------
(a) No amendment of any provision of this Agreement shall be valid unless
the same is in writing and signed by Bright Horizons and by ServiceMaster.
(b) No waiver by either party of any default, misrepresentation or breach
of warranty or covenant shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant.
(c) This Agreement may be amended only pursuant to a written instrument
executed by both parties.
14.3 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure to the benefit of the parties and may not be assigned by any party hereto
without the prior written consent of the other parties.
14.4 Notices. Any and all notices, consents and other communications to be
-------
provided hereunder shall be provided in accordance with the following notice
information:
If to ServiceMaster, to:
The ServiceMaster Company
Xxx XxxxxxxXxxxxx Xxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
President, International and
New Business Development
Fax number: (000) 000-0000
-39-
If to Bright Horizons, to:
Bright Horizons Children's Centers, Inc.
Xxx Xxxxxxx Xxxxxx - Xxxxxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxx
Chief Executive Officer
With a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx, Esq.
14.5 Costs.
-----
(a) ServiceMaster and Bright Horizons will each bear their own fees and
expenses incurred in connection with the negotiation, preparation and execution
of this Agreement.
(b) ServiceMaster represents and warrants that GreenTree has not borne,
and GreenTree will not bear, any of ServiceMaster's costs and expenses
(including any of their legal or accounting fees and expenses) in connection
with this Agreement or any of the transactions contemplated hereunder.
14.6 Press Release. The parties agree that a special press release shall
-------------
be issued jointly by the parties on the Closing Date.
14.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
14.8 Incorporation of Exhibits and Schedule. The Exhibits and Schedules
--------------------------------------
identified in this Agreement are incorporated herein by reference and made a
part hereof.
14.9 Construction.
------------
(a) The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of
-40-
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
(b) The parties intend that each representation, warranty or covenant
contained herein shall have independent significance. If any party has breached
any representation, warranty or covenant contained herein in any respect, the
fact that there exists another representation, warranty or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which
the party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty or covenant.
-41-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP
By: ServiceMaster Management Corporation
(general partner)
By: ________________________________
Its
BRIGHT HORIZONS CHILDREN'S CENTERS, INC.
By: ________________________________
Its
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SCHEDULE 2-1
------------
Exceptions to Accounting Principles
-----------------------------------
The accounting principles utilized by GreenTree have deviated from United States
generally accepted accounting principles with respect to the following matters:
Accounting for leases in accordance with FASB 13
Cash flow statements
Footnotes and other presentation items
Parent vacations
Employee vacations
Accounts payable
The Most Recent Interim Financial Statements and the Closing Balance sheet have
been prepared as described in Section 7.7(b) and Section 7.7(c). These
statements are therefore not totally consistent with the Financial Statements
for 1994.
-43-
SCHEDULE 2-3
Purchase Price Allocation
-------------------------
The Purchase Price shall be allocated as follows:
Tangible assets: $3,000,000
Non-Competition Agreement: $2,000,000
ServiceMaster Contracts $1,000,000 *
(If the Purchase Price is adjusted so that it is not $6,000,000, then the amount
of the Purchase Price which is allocated to the ServiceMaster Contracts will be
the Purchase Price minus $5,000,000).
-44-
