EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
dated as of September 30, 1997
by and among
MARRIOTT INTERNATIONAL, INC.
(To Be Renamed "Sodexho Marriott Services, Inc."),
MARRIOTT-ICC MERGER CORP.,
NEW MARRIOTT MI, INC.
(To Be Renamed "Marriott International, Inc."),
SODEXHO ALLIANCE, S.A.
and
INTERNATIONAL CATERING CORPORATION
ARTICLE I
THE DISTRIBUTION; SELLER CONTRIBUTION
Section 1.1. The Distribution........................................... 2
Section 1.2. The Seller Contribution and Canadian Transfer.............. 2
ARTICLE II
THE MERGER
Section 2.1. The Merger................................................. 3
Section 2.2. Effective Time............................................. 3
Section 2.3. Effects of the Merger...................................... 3
Section 2.4. Certificate of Incorporation............................... 3
Section 2.5. By-Laws.................................................... 3
Section 2.6. Directors of Surviving Corporation......................... 3
Section 2.7. Officers................................................... 3
Section 2.8. Conversion of Company Shares and Company Options........... 4
Section 2.9. Conversion of Acquisition Shares........................... 5
Section 2.10. Closing.................................................... 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY
Section 3.1. Organization............................................... 6
Section 3.2. Capitalization............................................. 7
Section 3.3. Authority Relative to this Agreement....................... 8
Section 3.4. Consents and Approvals; No Violations...................... 9
Section 3.5. Absence of Certain Changes................................. 10
Section 3.6. No Undisclosed Liabilities................................. 10
Section 3.7. [Reserved]................................................. 10
Section 3.8. Financial Statements; Changes; Contingencies;
Distributions............................................ 10
Section 3.9. Proxy Statement and Form 10................................ 12
Section 3.10. No Default................................................. 12
Section 3.11. Litigation; Compliance with Law............................ 12
Section 3.12. Employee Benefit Plans; ERISA.............................. 13
Section 3.13. Assets; Intellectual Property.............................. 15
Section 3.14. Contracts.................................................. 15
Section 3.15. Taxes...................................................... 17
Section 3.16. Labor Matters.............................................. 18
Section 3.17. Accounting Records; Internal Controls...................... 18
Section 3.18. Insurance.................................................. 19
Section 3.19. Permits.................................................... 19
Section 3.20. Business Relationships..................................... 19
Section 3.21. Environmental Compliance................................... 20
Section 3.22. Accounts Receivable........................................ 21
Section 3.23. Transactions with Certain Persons.......................... 21
Section 3.24. Certain Fees............................................... 21
Section 3.25. Certain Operations......................................... 21
Section 3.26. Investment Representation.................................. 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Section 4.1. Organization............................................... 22
Section 4.2. Capitalization............................................. 23
Section 4.3. Authority Relative to this Agreement....................... 24
Section 4.4. Consents and Approvals; No Violations...................... 25
Section 4.5. Absence of Certain Changes................................. 26
Section 4.6. No Undisclosed Liabilities................................. 26
Section 4.7. Reports.................................................... 27
Section 4.8. Financial Statements; Changes; Contingencies;
Distributions............................................ 27
Section 4.9. Proxy Statement and Form 10................................ 29
Section 4.10. No Default................................................. 29
Section 4.11. Litigation; Compliance with Law............................ 29
Section 4.12. Employee Benefit Plans; ERISA.............................. 30
Section 4.13. Assets; Intellectual Property.............................. 32
Section 4.14. Contracts.................................................. 33
Section 4.15. Taxes...................................................... 34
Section 4.16. Labor Matters.............................................. 35
Section 4.17. Accounting Records; Internal Controls...................... 35
Section 4.18. Insurance.................................................. 36
Section 4.19. Permits.................................................... 36
Section 4.20. Business Relationships..................................... 36
Section 4.21. Environmental Compliance................................... 37
Section 4.22. Accounts Receivable........................................ 37
Section 4.23. Transactions with Certain Persons.......................... 37
Section 4.24. Certain Fees............................................... 38
Section 4.25. Parent Rights Plan......................................... 38
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SPINCO
Section 5.1. Organization............................................... 38
Section 5.2. Authority Relative to this Agreement....................... 38
Section 5.3. Consents and Approvals; No Violations...................... 39
ARTICLE VI
COVENANTS
Section 6.1. Conduct of Business of Company............................. 40
Section 6.2. Conduct of Retained Business............................... 42
Section 6.3. Acquisition Proposals...................................... 44
Section 6.4. Access to Information...................................... 46
Section 6.5. Reasonable Efforts......................................... 47
Section 6.6. Consents................................................... 47
Section 6.7. Antitrust Filings.......................................... 47
Section 6.8. Public Announcements....................................... 48
Section 6.9. Financial Statements....................................... 49
Section 6.10. Registration of Spinco Shares.............................. 49
Section 6.11. Stockholders' Approval..................................... 50
Section 6.12. Tax Ruling................................................. 50
Section 6.13. Tax Sharing Agreement...................................... 51
Section 6.14. Notices of Certain Events.................................. 51
Section 6.15. Transaction Documents...................................... 51
Section 6.16. Retention of Auditors...................................... 52
Section 6.17. Termination or Redemption of Parent Rights Plan............ 52
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1. Conditions to Each Party's Obligation to Effect the
Merger................................................... 52
Section 7.2. Conditions to the Obligation of Seller and Company to
Effect the Merger........................................ 53
Section 7.3. Conditions to Obligations of Parent, Spinco and
Acquisition to Effect the Merger......................... 55
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1. Termination................................................ 56
Section 8.2. Effect of Termination...................................... 58
Section 8.3. Amendment.................................................. 58
Section 8.4. Extension; Waiver.......................................... 58
ARTICLE IX
MISCELLANEOUS
Section 9.1. Survival................................................... 58
Section 9.2. Entire Agreement........................................... 58
Section 9.3. Governing Law.............................................. 59
Section 9.4. Notices.................................................... 59
Section 9.5. Successors and Assigns; No Third Party Beneficiaries....... 60
Section 9.6. Counterparts............................................... 60
Section 9.7. Interpretation............................................. 60
Section 9.8. Schedules.................................................. 61
Section 9.9. Legal Enforceability....................................... 61
Section 9.10. Specific Performance....................................... 61
Section 9.11. Consent to Jurisdiction; Waiver of Jury Trial.............. 61
Section 9.12. Certain Expenses........................................... 62
TABLE OF DEFINED TERMS
Term Section No.
---- -----------
Acquired Companies....................................................Recitals
Acquired Company Material Contract.....................................3.14(a)
Acquired Company Financial Statements......................................3.6
Acquisition...........................................................Recitals
Acquisition Proposal....................................................6.3(c)
Acquisition Share.........................................................2.10
Affiliate...............................................................3.2(b)
Agreement.............................................................Recitals
Antitrust Authorities...................................................6.7(a)
Antitrust Law...........................................................6.7(a)
Audit..................................................................3.15(i)
Benefits Allocation Agreement...........................Distribution Agreement
Business Day...............................................................9.4
Canadian GAAP..........................................................3.12(f)
Certificate of Merger......................................................2.2
Closing...................................................................2.10
Closing Date...........................................................2.10(c)
Code.......................................................................2.8
Combined Business Material Adverse Effect...............................7.2(a)
Commission..............................................................3.4(a)
Company...............................................................Recitals
Company Auditors........................................................3.8(a)
Company Business..........................................................3.13
Company Canadian Plans.................................................3.12(f)
Company Material Adverse Effect........................................ 3.1(a)
Company Options.........................................................2.8(c)
Company Plans..........................................................3.12(a)
Company Share...........................................................2.9(a)
Confidentiality Agreement...............................................6.4(c)
Contract................................................................3.4(b)
Corporate Governance Arrangements.........................................6.13
DGCL....................................................................2.1(b)
Distribution..........................................................Recitals
Distribution Agreement................................................Recitals
Effective Time.............................................................2.2
Encumbrance.............................................................3.2(a)
ERISA..................................................................3.12(a)
ERISA Affiliate........................................................3.12(a)
Exchange Act............................................................3.4(a)
Form 10.................................................Distribution Agreement
GAAP....................................................................3.8(a)
Governmental Entity.....................................................3.4(a)
HSR Act.................................................................3.4(a)
Intellectual Property.....................................................3.13
IRS....................................................................3.12(a)
Law.....................................................................3.4(b)
▇▇▇▇▇...................................................Distribution Agreement
Merger.....................................................................2.1
MMS...................................................................Recitals
MMS Canada..............................................Distribution Agreement
MMS UK................................................................Recitals
Multiemployer Plan.....................................................3.12(b)
OFT.....................................................................3.4(a)
Omnibus Agreement.......................................................3.1(a)
Parent................................................................Recitals
Parent Auditors.........................................................4.8(a)
Parent Canadian Plans..................................................4.12(h)
Parent Common Stock.....................................................2.8(a)
Parent Material Adverse Effect.............................................4.1
Parent Plans...........................................................4.12(a)
Parent Rights Plan........................................................4.25
Parent SEC Documents....................................................4.7(a)
Parent Share............................................................2.9(a)
Parent Stock Options.......................................................4.2
Parent Stockholder Approval................................................4.3
PBGC...................................................................4.12(a)
Permit....................................................................3.19
Person..................................................................2.8(a)
Potential Acquiror.........................................................6.3
Proxy Statement.........................................Distribution Agreement
Required Regulatory Approvals...........................................3.4(a)
Retained Business..........................................................4.1
Retained Business Financial Statements.....................................4.6
Retained Employees......................................Distribution Agreement
Retained Subsidiaries......................................................4.1
SEC.....................................................................4.7(a)
Securities Act..........................................................3.4(a)
Seller................................................................Recitals
Seller Contribution.................................................. Recitals
Seller Material Adverse Effect......................................... 3.1(a)
Sodexho Canada........................................................Recitals
Spinco................................................................Recitals
Spinco Assets...........................................Distribution Agreement
Spinco Material Adverse Effect.............................................5.1
Spinco Subsidiaries.....................................Distribution Agreement
Subsidiary..............................................................2.8(a)
Surviving Corporation......................................................2.1
Surviving Corporation Shares..............................................2.10
Taxes..................................................................3.15(i)
Tax Returns............................................................3.15(i)
Tax Sharing Agreement.....................................................6.13
Transaction Documents...................................................3.1(a)
UK Stock Purchase Agreement...........................................Recitals
EXHIBITS
Exhibit A ..............................Net Tangible Assets Adjustment Formula
Exhibit B ...............................................Certificate of Merger
Exhibit C........................................Form of Tax Sharing Agreement
Exhibit D......................................Corporate Governance Term Sheet
Exhibit E-1.......................................Form of Assistance Agreement
Exhibit E-2.......................................Royalty Agreement Term Sheet
SCHEDULES
Schedule 2.6 Directors of Surviving Corporation
Schedule 2.7 Officers of Surviving Corporation
Seller's Disclosure Schedule
Parent's Disclosure Schedule
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 30,
1997 (this "Agreement"), is among MARRIOTT INTERNATIONAL, INC., a Delaware
corporation to be renamed "Sodexho Marriott Services, Inc." ("Parent"),
MARRIOTT-ICC MERGER CORP., a Delaware corporation and a direct wholly-owned
subsidiary of Parent ("Acquisition"), NEW MARRIOTT MI, INC., a Delaware
corporation and a wholly-owned subsidiary of Parent to be renamed "Marriott
International, Inc." ("Spinco"), SODEXHO ALLIANCE, S.A., a societe anonyme
organized under the laws of France ("Seller"), and INTERNATIONAL CATERING
CORPORATION, a Delaware corporation and a wholly-owned subsidiary of Seller
("Company").
RECITALS
WHEREAS, the Boards of Directors of Parent, Acquisition,
Seller and Company deem it advisable and in the best interests of their
respective stockholders to combine the businesses of Parent's management
services division and Company on the terms and conditions hereinafter set forth;
WHEREAS, pursuant to the terms of the Distribution Agreement
dated as of the date hereof (the "Distribution Agreement") between Parent and
Spinco, Parent will contribute the assets and certain of the liabilities of all
of its businesses other than Parent's management services division to Spinco;
WHEREAS, as provided in the Distribution Agreement, Parent
will make a distribution (the "Distribution") to its stockholders as of the
Distribution Record Date (as hereinafter defined), on a pro rata basis, of 100%
of the shares of capital stock of Spinco issued and outstanding immediately
prior to such distribution;
WHEREAS, as soon as reasonably possible following the date
hereof Parent will cause its wholly-owned subsidiary, Marriott Management
Services Corp., a New York corporation ("MMS"), to sell to Seller or its
designee the businesses of Parent's management services division conducted in
the United Kingdom through Marriott Management Services (U.K.) Ltd., a limited
company registered in England ("MMS UK"), pursuant to a stock purchase agreement
dated as of the date hereof (the "UK Stock Purchase Agreement");
WHEREAS, as provided herein, Seller will make a cash
contribution to Company prior to the Merger (as defined herein) in an amount
determined in accordance with the terms hereof (the "Seller Contribution"); and
WHEREAS, immediately following the Distribution and the Seller
Contribution, (i) Acquisition will merge with and into Company and Seller will
transfer to Parent all of the outstanding capital stock of Sodexho Financiere du
Canada Inc. ("Sodexho Canada" and, together with Company, "Acquired Companies"),
in each case pursuant to the terms hereof, (ii) all of the issued and
outstanding shares of Company common stock will be converted into common stock
of Parent in such amounts as are determined herein, and (iii) all issued and
outstanding shares of Acquisition will be converted into all the outstanding
capital stock of the Surviving Corporation, as a result of which Company (as the
Surviving Corporation in the merger) will become a wholly-owned subsidiary of
Parent.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Acquisition, Spinco, Seller and
Company hereby agree as follows:
ARTICLE I
THE DISTRIBUTION; SELLER CONTRIBUTION
Section 1.1. The Distribution. Upon the terms and subject to
the conditions of the Distribution Agreement, prior to the Effective Time, the
parties thereto shall effect the transactions contemplated by the Distribution
Agreement including, immediately prior to the Effective Time, the Distribution.
Section 1.2. The Seller Contribution and Canadian Transfer.
(a) Immediately prior to the Effective Time, Seller will make
the Seller Contribution to Company in an amount equal to $304,000,000 in
immediately available funds. Following the Effective Time, Seller will pay
Parent, or Parent will pay Seller, as the case may be, any amounts determined in
accordance with Exhibit A based on target Adjusted Net Tangible Assets for the
Acquired Companies, on a combined basis, of $269,000,000.
(b) Seller shall transfer to Parent all of the outstanding
capital stock of Sodexho Canada, which contribution shall be made (and
effective) at the Effective Time, by delivering to Parent the certificates
evidencing such stock, properly endorsed for transfer to or accompanied by a
duly executed stock power in favor of Parent or its nominee and otherwise in a
form acceptable for transfer on the books of Sodexho Canada.
ARTICLE II
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the
conditions hereof, at the Effective Time in accordance with the Delaware General
Corporation Law (the "DGCL"), Acquisition shall be merged (the "Merger") with
and into Company. From and after the Effective Time, Company shall continue as
the surviving corporation (the "Surviving Corporation") and the separate
corporate existence of Acquisition shall cease.
Section 2.2. Effective Time. The Merger shall become effective
at such time (the "Effective Time") as a certificate of merger in the form set
forth as Exhibit B hereto (the "Certificate of Merger") is filed with the
Delaware Secretary of State. Such filing shall be made simultaneously with or as
soon as practicable after the closing of the transactions contemplated by this
Agreement in accordance with Section 2.10.
Section 2.3. Effects of the Merger. The Merger shall have the
effects set forth in the DGCL. As of the Effective Time, Company shall be a
wholly-owned subsidiary of Parent.
Section 2.4. Certificate of Incorporation. The certificate of
incorporation of Company in effect immediately prior to the Effective Time will
be the certificate of incorporation of the Surviving Corporation after the
Effective Time, and thereafter may be amended in accordance with its terms and
as provided by the DGCL.
Section 2.5. By-Laws. The by-laws of Company as in effect
immediately prior to the Effective Time shall be the by-laws of the Surviving
Corporation after the Effective Time, and thereafter may be amended in
accordance with their terms and as provided by the certificate of incorporation
of the Surviving Corporation and the DGCL.
Section 2.6. Directors of Surviving Corporation. The
individuals identified on Schedule 2.6 hereto shall be the initial directors of
the Surviving Corporation and will hold office from the Effective Time until
their respective successors are duly elected or appointed and qualify in the
manner provided in the certificate of incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by the DGCL.
Section 2.7. Officers. The individuals identified on Schedule
2.7 hereto shall be the initial officers of the Surviving Corporation and will
hold office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the certificate of
incorporation and by-laws of the Surviving Corporation, or as otherwise provided
by the DGCL.
Section 2.8. Conversion of Company Shares and Company Options.
At the Effective Time:
(a) By virtue of the Merger and without any action on the part
of Seller other than the transfer of the stock of Sodexho Canada to Parent, all
shares of common stock, par value $0.001 per share, of Company (each, a "Company
Share") issued and outstanding immediately prior to the Effective Time (all of
which are held by Seller) shall be converted into the right to receive, and
become exchangeable for, a number of shares of validly issued, fully paid and
nonassessable common stock of Parent, par value $1.00 per share (the "Parent
Common Stock") (each such share, a "Parent Share"), upon the surrender of the
certificate(s) formerly representing such Company Shares, such that Seller
shall, in the aggregate, have the right to receive a number of Parent Shares
which, when added to Parent Shares issuable upon exercise of options issued
pursuant to Section 2.8(c), equal 49% of the Parent Shares (other than Parent
Shares held in the treasury of Parent or held by any wholly owned Subsidiary of
Parent) issued and outstanding immediately after the Effective Time. As used in
this Agreement, (x) the term "Subsidiary" means with respect to any Person, (a)
any corporation of which at least a majority in interest of the outstanding
voting stock (having by the terms thereof voting power under ordinary
circumstances to elect a majority of the directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned or
controlled by such Person, by one or more Subsidiaries of such Person, or by
such Person and one or more of its Subsidiaries, or (b) any non-corporate entity
in which such Person, one or more subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof, has at least majority ownership interest; and (y) the
term "Person" means any individual, corporation, partnership, association,
trust, estate or other entity or organization, including any governmental entity
or authority.
The Parent Shares issuable under this Agreement (including
upon exercise of options issued pursuant to Section 2.8(c), unless Parent Shares
issuable thereunder are covered by an effective registration statement on Form
S-8 or other appropriate form) shall not be registered or qualified under the
Securities Act or any state securities law, and shall bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. NO TRANSFER OR SALE OF THESE SECURITIES OR ANY INTEREST
THEREIN MAY BE MADE WITHOUT SUCH REGISTRATION AND QUALIFICATION UNLESS
THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE ISSUER STATING THAT SUCH
TRANSFER OR SALE DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER
APPLICABLE LAW.
(b) Each Company Share held in the treasury of Company or held
by any Subsidiary of Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be cancelled and retired and cease to exist.
(c) Pursuant to Company's 1996 Stock Option Plan, Company has
granted, and there are currently outstanding, 381,300 options, each of which
accords the holder thereof the right to purchase a Company Share (each, a
"Company Option"). Each holder of Company Options outstanding immediately prior
to the Effective Time shall have their Company Options treated as follows: (i)
42% of the Company Options held by such holder shall be settled in cash for
$36.21 each; and (ii) 58% of the Company Options held by such holder shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive, and become exchangeable for, options to
purchase Parent Shares on terms determined by the Surviving Corporation's Board
of Directors within two days after the Closing Date (as defined in Section
2.10), the number and exercise price of such options to be determined in
accordance with the methodology set forth in Section 424 of the Internal Revenue
Code of 1986, as amended (the "Code").
Section 2.9. Conversion of Acquisition Shares. Each share of
common stock of Acquisition (each such share, an "Acquisition Share") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and exchangeable for one share of common stock of the Surviving
Corporation. From and after the Effective Time, Acquisition shall be entitled to
treat outstanding certificates which immediately prior to the Effective Time
represented Acquisition Shares as evidencing ownership of the number of shares
of common stock of the Surviving Corporation (the "Surviving Corporation
Shares") which the holder of the Acquisition Shares represented by such
certificates is entitled to receive pursuant to this Section 2.9, and the holder
of such certificates shall not be required to surrender such certificates for
exchange. Surviving Corporation Shares which the holder of Acquisition Shares is
entitled to receive in the Merger shall be deemed to have been issued at the
Effective Time.
Section 2.10. Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement and the Transaction Documents (as
defined in Section 3.1(a)) shall take place at the offices of O'Melveny & ▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇., on the last day of Parent's
accounting period immediately following (a) the vote of stockholders of Parent
approving and adopting the Merger, the Distribution and the transactions
contemplated thereby (assuming each of the other conditions set forth in Article
VII has been satisfied or waived), or (b) such later date on which the last of
the conditions set forth in Article VII hereof is satisfied or waived, or at
such other time and place as Parent, Acquisition, Spinco, Seller and Company
shall agree (the date on which the Closing occurs being the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY
Except as otherwise indicated on Seller's Disclosure Schedule
dated September 30, 1997 previously delivered to Parent and Acquisition
("Seller's Disclosure Schedule"), Seller and Company each represent and warrant
to Parent and Acquisition as follows:
Section 3.1. Organization.
(a) Each of Seller and each Acquired Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each Acquired Company is duly qualified or licensed and
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not, when taken together with all other such failures, have or reasonably be
expected to have a material adverse effect on (x) the business, operations,
properties, assets, conditions (financial or other) or results of operations of
Seller and its Subsidiaries taken as a whole, or the ability of Seller to
perform its obligations under or to consummate the transactions contemplated by
this Agreement and the Transaction Documents (as defined below) (a "Seller
Material Adverse Effect"), or (y) the business, operations, properties, assets,
conditions (financial or other) or results of operations of the Acquired
Companies and their Subsidiaries taken as a whole, or the ability of either
Acquired Company to perform its obligations under or consummate the transactions
contemplated by this Agreement and the Transaction Documents (a "Company
Material Adverse Effect"). True, accurate and complete copies of the certificate
of incorporation and by-laws (or other organizational documents) of each
Acquired Company, as in effect on the date hereof, including all amendments
thereto, have heretofore been delivered to Parent. For purposes of this
Agreement, "Transaction Documents" means the Omnibus Restructuring Agreement
dated as of the date hereof among the parties hereto (the "Omnibus Agreement"),
the Distribution Agreement, the UK Stock Purchase Agreement, the Certificate of
Merger, the Tax Sharing Agreement (as defined in Section 6.13), the documents to
be entered into consistent with the Corporate Governance Term Sheet attached
hereto as Exhibit D, the Assistance Agreement in the form attached hereto as
Exhibit E-1, the Royalty Agreement to be entered into consistent with the
Royalty Agreement Term Sheet attached hereto as Exhibit E-2 and, to the extent
not included in any of the foregoing, each Related Agreement (as defined in the
Distribution Agreement).
(b) Neither Acquired Company has any Subsidiaries except those
listed in Section 3.1(b) of Seller's Disclosure Schedule. Neither Acquired
Company has any interest, direct or indirect, or any commitment to purchase any
interest, direct or indirect, in any other Person. The business of each Acquired
Company and its Subsidiaries reflected in the Acquired Company Financial
Statements (as defined in Section 3.6) has not been conducted through any other
Subsidiaries or Affiliates (as defined below) of Seller. Except as disclosed in
Section 3.1(b) of Seller's Disclosure Schedule, each direct and indirect
Subsidiary of each Acquired Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Each Subsidiary of each Acquired Company is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not,
when taken together with all other such failures, have or reasonably be expected
to have a Company Material Adverse Effect. Neither Acquired Company nor their
respective Subsidiaries derive any revenue from business outside of the United
States of America and Canada. As used in this Agreement, "Affiliate" means, with
respect to any specified Person, any other Person directly or indirectly
controlling or controlled by, or under direct or indirect common control with,
such specified Person. For purposes of this definition, "control," when used
with respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
Section 3.2. Capitalization.
(a) The authorized capital stock of Company consists of
10,820,000 Company Shares, of which 10,417,000 Company Shares are issued and
outstanding, all of which are owned beneficially and of record by Seller. The
authorized capital stock of Sodexho Canada consists of 90,238 shares of common
stock, all of which are issued, outstanding and owned beneficially and of record
by Seller. All of the issued and outstanding Company Shares and shares of
capital stock of Sodexho Canada are validly issued, fully paid and
non-assessable and free of preemptive rights and are free and clear of any
liens, claims, encumbrances, security interests, equities, charges and options
of any nature whatsoever (collectively, "Encumbrances"). Except as set forth in
Section 3.2(a) of Seller's Disclosure Schedule, there are not now, and at the
Effective Time there will not be, any shares of capital stock of either Acquired
Company issued or outstanding or any outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement obligating either Acquired Company or
any Subsidiary of either Acquired Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of the capital stock of either
Acquired Company or obligating either Acquired Company or any of their
Subsidiaries to grant, extend or enter into any such agreement or commitment.
Following the Merger, neither Acquired Company will have any obligation to
issue, transfer or sell any shares of its capital stock pursuant to any employee
benefit plan or otherwise.
(b) There are not now, and at the Effective Time there will
not be, any voting trusts, proxies or other agreements or understandings to
which Seller or any Subsidiary of Seller is a party or is bound with respect to
the voting of any shares of capital stock of either Acquired Company or any of
their Subsidiaries.
(c) All of the issued and outstanding shares of capital
stock (or other equity interests) of each Subsidiary of each Acquired
Company are validly issued, fully paid and non-assessable and free of
preemptive rights, and those owned directly or indirectly by each Acquired
Company are owned free and clear of any Encumbrances. Each Acquired
Company owns directly or indirectly all of the issued and outstanding
shares of the capital stock (and other equity interests) of its
Subsidiaries. Except as set forth in Section 3.2(c) of Seller's Disclosure
Schedule, there are not now, and at the Effective Time there will not be,
any shares of capital stock (or other equity interests) of any Subsidiary
of either Acquired Company issued or outstanding or any outstanding
subscriptions, options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement obligating either Acquired Company or any Subsidiary of either
Acquired Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock (or other equity
interests) of any Subsidiary of such Acquired Company or obligating such
Acquired Company or any of its Subsidiaries to grant, extend or enter into
any such agreement or commitment.
Section 3.3. Authority Relative to this Agreement. Each
of Seller and Company has full corporate power and authority to execute and
deliver this Agreement and each Transaction Document to which it is a
party, as the case may be, and, subject to the Required Regulatory
Approvals (as defined below), to consummate the transactions contemplated
hereby and thereby. The execution and delivery by each of Seller and
Company of this Agreement and each Transaction Document to which it is a
party and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Boards of Directors of
Seller and Company, and Seller, as holder of all the outstanding Company
Shares, has approved and adopted this Agreement and the Merger. No other
corporate proceedings on the part of Seller or Company, including any
approval by the stockholders of Seller, are or will be necessary to
authorize this Agreement or any Transaction Document or to consummate the
transactions contemplated hereby or thereby. This Agreement has been duly
and validly executed and delivered by each of Seller and Company and
constitutes a valid and binding agreement of each of Seller and Company,
and each Transaction Document to which Seller or Company will be a party,
when executed and delivered by such party, will be a valid and binding
agreement of each of Seller and Company, enforceable against each of Seller
and Company in accordance with its terms except to the extent that
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws,
now or hereafter in effect, relating to the creditors' rights generally and
(b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 3.4. Consents and Approvals; No Violations.
(a) Except for any approvals required under the Securities
Exchange Act of 1934, as amended, and all rules and regulations thereunder (the
"Exchange Act"), and the Securities Act of 1933, as amended, and all rules and
regulations thereunder (the "Securities Act"), the expiration of any applicable
waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), the confirmation by the Office of Fair Trading of
the United Kingdom (the "OFT") that it is not the intention of the Secretary of
State to refer the transactions contemplated hereby to the Monopolies and
Mergers Commission, the filing and recordation of the Certificate of Merger as
required by the DGCL (such filings and approvals are collectively referred to as
the "Required Regulatory Approvals"), such filings and approvals as may be
required under the "takeover" or "blue sky" laws of various states, and as
disclosed in Section 3.4(a) of Seller's Disclosure Schedule or as contemplated
by this Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any Governmental Entity or any other
Person is necessary for the execution and delivery of this Agreement and the
Transaction Documents by Seller or Company or the consummation by Seller or
Company of the transactions contemplated hereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals which, if
not made or obtained, as the case may be, would not, in the aggregate, have or
reasonably be expected to have a Seller Material Adverse Effect or a Company
Material Adverse Effect. For purposes of this Agreement, "Governmental Entity"
means any court, agency, authority, board, bureau, commission, department,
regulatory or administrative body, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit (including the New
York Stock Exchange or any other national stock exchange), whether federal,
state, parish, county, district, municipality, city, political subdivision or
otherwise, domestic or foreign, or any other entity exercising executive,
legislative, judicial regulatory or administrative functions of or pertaining to
government, whether now or hereafter in effect.
(b) Except as set forth in Section 3.4(b) of Seller's
Disclosure Schedule, the execution and delivery by each of Seller and Company of
this Agreement and each Transaction Document to which it is a party do not, and
the consummation by Seller and Company of the transactions contemplated hereby
and thereby will not, in any material respect, violate, conflict with or result
in a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Encumbrance upon any of the properties or assets of Seller or
any of its Subsidiaries under any of the terms, conditions or provisions of (i)
the respective charters or by-laws (or other organizational documents) of Seller
or any of its Subsidiaries, (ii) subject to obtaining the Required Regulatory
Approvals, any material Law (as defined below) applicable to Seller or any of
its Subsidiaries or any of their respective properties or assets, (iii) any
Acquired Company Material Contract (as defined in Section 3.14) or (iv) any
material Contract (as defined below) to which Seller or any of its Subsidiaries
is now a party or by which Seller or any of its Subsidiaries or any of their
respective properties or assets may be bound or affected. For purposes of this
Agreement, "Law" means any statute, law, constitutional provision, code,
regulation, ordinance, rule, judgment, order, decree, permit, concession, grant,
franchise, license, agreement, directive, binding guideline or policy or rule of
common law, requirement of, or other governmental restriction of or
determination by, or any interpretation of any of the foregoing by, in each case
whether now or hereafter in existence, any Governmental Entity; and "Contract"
means any agreement, arrangement, note, bond, mortgage, indenture, or other
evidence of indebtedness, commitment, franchise, concession, contract,
indemnity, indenture, instrument, lease (including any real estate lease),
license or understanding, whether or not in writing.
Section 3.5. Absence of Certain Changes. Except (a) as set
forth in Section 3.5 of Seller's Disclosure Schedule or (b) as contemplated by
this Agreement, from August 31, 1996 until the date hereof, neither Acquired
Company nor any of their respective Subsidiaries has (i) taken any actions that,
if taken by an Acquired Company or any of its Subsidiaries during the period
from the date hereof through the Effective Time, would constitute a material
breach of Section 6.1 hereof, (ii) suffered any changes, events or circumstances
that, in the aggregate, would result or reasonably be expected to result in a
Company Material Adverse Effect, or (iii) conducted its business or operations
in any material respect other than in the ordinary and usual course of business,
consistent with past practices.
Section 3.6. No Undisclosed Liabilities. Except in connection
with the Merger and the Distribution or as expressly disclosed and described in
Section 3.6 of Seller's Disclosure Schedule, neither Acquired Company or any of
their respective Subsidiaries had at August 31, 1996, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature except (a) liabilities, obligations or contingencies
(i) which are accrued or reserved against in the financial statements of the
Acquired Companies provided pursuant to Section 3.8 hereof (the "Acquired
Company Financial Statements") or reflected in the notes thereto or (ii) which
were incurred after August 31, 1996 in the ordinary course of business and
consistent with past practices and (b) liabilities, obligations or contingencies
which (x) have not and would not reasonably be expected to have a Seller
Material Adverse Effect or Company Material Adverse Effect or (y) have been
discharged or paid in full prior to the date hereof.
Section 3.7. [Reserved]
Section 3.8. Financial Statements; Changes; Contingencies;
Distributions.
(a) Seller and Company have delivered to Parent (x)
consolidated balance sheets for Company and its Subsidiaries at August 31, 1996
and 1995 and the related consolidated statements of operations, cash flow, and
changes in stockholder's equity for the twelve month periods ended August 31,
1996 and 1995 and (y) consolidated balance sheets for Sodexho Canada and its
Subsidiaries at August 31, 1996 and 1995 and the related consolidated statements
of operations, cash flow and changes in stockholder's equity for the twelve
month periods ended August 31, 1996 and 1995. All such financial statements have
been audited by Price Waterhouse LLP (the "Company Auditors") whose reports
thereon are included with such financial statements. The financial statements
referred to in item (x) above have been prepared in conformity with U.S.
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except for changes, if any, required by GAAP and disclosed therein) and the
financial statements referred to in item (y) above have been prepared in
conformity with Canadian generally accepted accounting principles applied on a
consistent basis (except for changes, if any, required by Canadian generally
accepted accounting principles and disclosed therein). The statements of
operations and cash flow present fairly in all material respects the results of
operations and cash flows of each Acquired Company and its respective
Subsidiaries for the respective periods covered, and the balance sheets present
fairly in all material respects the financial condition of each Acquired Company
and its respective Subsidiaries as of their respective dates. Seller and Company
have made available to Parent and Acquisition copies of each management letter
or other letter delivered to either of them by the Company Auditors (or
management points relating thereto) in connection with such financial statements
or relating to any review by the Company Auditors of the internal controls of
each Acquired Company during the two-year period ended August 31, 1996, and have
made available to the Parent Auditors and/or Parent's management for inspection
all reports and working papers produced or developed by the Company Auditors or
management in connection with their examination of such financial statements,
other than those such reports and working papers prepared by the Company
Auditors relating to (i) assessment of risk of the engagement, (ii) planning for
the engagement, and (iii) other such reports and working papers not customarily
provided by independent auditors to third party purchasers in transactions of
this size and kind. Since August 31, 1994, there has been no change in any of
the significant accounting policies, practices or procedures of either Acquired
Company and/or its Subsidiaries.
(b) Seller and Company have delivered to Parent an unaudited
combined balance sheet for the Acquired Companies and their Subsidiaries at
August 31, 1997, and the related unaudited combined statement of operations for
the year then ended. Such unaudited financial statements have been prepared in
conformity with GAAP applied on a consistent basis except for changes, if any,
required by GAAP and disclosed therein. The statement of operations presents
fairly the results of operations of the Acquired Companies and their
Subsidiaries for such period, and the balance sheet presents fairly in all
material respects the financial condition of the Acquired Companies as of such
date. All such financial statements reflect all adjustments (which, except as
otherwise indicated on such financial statements, consist only of normal
recurring adjustments not material in amount and include estimated provisions
for year-end adjustments) necessary for a fair presentation. At the date of such
balance sheet, neither the Acquired Companies nor any of their Subsidiaries had
any material liability (actual, contingent or accrued) that, in accordance with
GAAP applied on a consistent basis, should have been shown or reflected therein
but was not except for the omission of notes with respect to contingent
liabilities that in the aggregate did not materially exceed those so reported in
the most recent of the audited statements delivered and that were of
substantially the same type as so reported.
(c) Except as set forth in Section 3.8(c) of Seller's
Disclosure Schedule, there has been no dividend or other distribution of assets
or securities whether consisting of money, property or any other thing of value,
declared, issued or paid since the date of the most recent financial statements
described in Section 3.8(a) by either Acquired Company or any of their
Subsidiaries, except for cash dividends paid out in the ordinary course.
Section 3.9. Proxy Statement and Form 10. None of the
information to be provided by Seller or either Acquired Company to Parent or
Acquisition for inclusion in the Proxy Statement or the Form 10 (each as defined
in the Distribution Agreement) (or any registration statement contemplated
pursuant to Article III of the Distribution Agreement) will be false or
misleading with respect to any material fact or will omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
Section 3.10. No Default. Except as set forth in Section 3.10
of Seller's Disclosure Schedule, neither Seller nor any of its Subsidiaries (i)
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of its charter or by-laws (or other organizational
documents) or (ii) is in default or violation (and no event has occurred which
with notice or lapse of time or both would constitute a default or violation) in
any material respect of any term, condition or provision of (a) any Acquired
Company Material Contract, or (b) any material order, writ, injunction, decree,
statute, rule or regulation applicable to either Acquired Company or any of
their respective Subsidiaries.
Section 3.11. Litigation; Compliance with Law.
(a) Except as set forth at Section 3.11(a) of Seller's
Disclosure Schedule, as of the date hereof, there are no actions, suits, claims,
proceedings or investigations pending or, to the best knowledge of Seller and
Company, threatened, involving either Acquired Company or any of their
respective Subsidiaries or any of their respective properties or assets (or any
Person whose liability therefrom may have been retained or assumed by either
Acquired Company or any of their respective Subsidiaries either contractually or
by operation of law), by or before any Governmental Entity or by any Person
which have had or would reasonably be expected to result in damages in excess of
$100,000 or have a Company Material Adverse Effect. Neither Acquired Company,
any of their Subsidiaries or any of their respective properties or assets is
subject to any outstanding order, writ, injunction or decree which would
reasonably be expected to have a Seller Material Adverse Effect or a Company
Material Adverse Effect or materially impair or interfere with the operation of
either Acquired Company's business as currently conducted.
(b) Except as set forth in Section 3.11(b) of Seller's
Disclosure Schedule, each Acquired Company and its Subsidiaries are now being
and in the past have been operated in compliance in all material respects with
all Laws.
Section 3.12. Employee Benefit Plans; ERISA.
(a) Except for those matters set forth in Section 3.12(a) of
Seller's Disclosure Schedule, (i) each "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all other employee benefit, bonus, incentive, stock option (or
other equity-based), severance, change in control, welfare (including
post-retirement medical and life insurance) and fringe benefit plans (whether or
not subject to ERISA) maintained or sponsored by Company or its Subsidiaries or
any trade or business, whether or not incorporated, that would be deemed under
Section 414 of the Code to be a "single employer" (each, an "ERISA Affiliate")
with Company, for the benefit of any U.S. employee or former U.S. employee of
Company or any of its ERISA Affiliates (the "Company Plans") is, and has been,
operated in all material respects in accordance with its terms and in
substantial compliance (including with respect to the making of governmental
filings) with all applicable Laws, including ERISA and the applicable provisions
of the Code, (ii) each of the Company Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service (the "IRS") to be so qualified and (iii) there are no material
pending or, to the knowledge of Company, threatened claims (other than routine
claims for benefits) by, on behalf of or against any of the Company Plans or any
trusts related thereto other than routine benefit claim matters. All Company
Plans are listed in Section 3.12(a) of Seller's Disclosure Schedule.
(b) (i) No Company Plan, other than a "multiemployer plan"
(within the meaning of Section 3(37) of ERISA (a "Multiemployer Plan") is
subject to Title IV of ERISA or Section 412 of the Code, (ii) neither Company
nor any of its ERISA Affiliates has incurred any material withdrawal liability
(including any contingent or secondary withdrawal liability) within the meaning
of Sections 4201 and 4204 of ERISA to any Multiemployer Plan which has not been
satisfied in full, and (iii) other than with respect to any Multiemployer Plan,
there has been no act or omission resulting in liability under Chapter 43 of the
Code or Sections 409, 502(c), 502(i), 502(l) or 4071 of ERISA with respect to
any Company Plan.
(c) Neither Company nor any of its ERISA Affiliates has failed
to make any contribution or payment to any Company Plan or Multiemployer Plan
which, in either case has resulted or could result in the imposition of a
material Encumbrance or the posting of a material bond or other material
security under ERISA or the Code.
(d) Except as otherwise set forth on Section 3.12(d) of
Seller's Disclosure Schedule or as expressly provided for in this Agreement, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or officer of either Acquired Company or
any ERISA Affiliate of Company to severance pay, unemployment compensation or
any other payment, or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or officer.
(e) Except as set forth on Section 3.12(e) of Seller's
Disclosure Schedule, neither Acquired Company nor any of their respective
Subsidiaries have any employment or consulting agreements, written or oral, with
any employees that provide for annual base compensation in excess of $150,000.
Seller has provided to Parent copies of each such employment or consulting
agreement that provides for annual base compensation in excess of $150,000, and
has made all other such agreements available to Parent. Section 3.12(e) of
Seller's Disclosure Schedule sets forth a list of all employees or former
employees of the Acquired Companies or their Subsidiaries to whom any of them
owes severance pay in sums of $150,000 or more as of the date hereof.
(f) Section 3.12(f) of Seller's Disclosure Schedule lists each
employee benefit, bonus, incentive compensation, deferred compensation, pension,
retirement, stock option (or other equity based), severance, change in control,
welfare (including post-retirement medical and life insurance), fringe benefit
plan and any other employment arrangement maintained or sponsored by Sodexho
Canada or any of its Subsidiaries for the benefit of any Canadian employee or
former Canadian employee of Sodexho Canada (the "Company Canadian Plans").
Except as otherwise set forth in Section 3.12(f) of Seller's Disclosure
Schedule, each Company Canadian Plan has been operated in all material respects
in accordance with its terms and in substantial compliance with all applicable
Laws, and there are no material pending or, to the knowledge of either Acquired
Company, threatened claims (other than routine claims for benefits) by, on
behalf of or against any of the Company Canadian Plans or any trusts related
thereto other than routine benefit claim matters. Neither Sodexho Canada nor any
of its Subsidiaries has incurred any material withdrawal liability to any
Company Canadian Plan which would be the equivalent of a Multiemployer Plan, and
neither Sodexho Canada nor any of its Subsidiaries has failed to make any
contribution to any Company Canadian Plan which has resulted or could result in
the imposition of a material Encumbrance. With respect to any Company Canadian
Plan that is a defined benefit plan, (x) Seller has provided Parent with copies
of the most recent actuarial valuation report if an actuarial valuation report
is required by the relevant Canadian Governmental Entity, and (y) except as set
forth in Section 3.12(f) of Seller's Disclosure Schedule, as of the date hereof,
the fair market value of the assets of each such plan (excluding for these
purposes any accrued but unpaid contributions) exceeds the present value of all
benefits accrued under each such plan determined on a basis as required by law
and in accordance with Canadian generally accepted accounting principles applied
on a consistent basis (except for changes, if any, required by Canadian
generally accepted accounting principles and disclosed therein ("Canadian
GAAP")).
Section 3.13. Assets; Intellectual Property.
(a) Except as set forth in Section 3.13(a) of Seller's
Disclosure Schedule, the Acquired Companies and their Subsidiaries collectively
own or have rights to use all material properties and assets (including
Intellectual Property) necessary to permit them to conduct the business of the
Acquired Companies and their Subsidiaries as it is currently being conducted
(the "Company Business"). As used in this Agreement, "Intellectual Property"
means all registered and unregistered trademarks, service marks, service names,
trade styles and trade names (including trade dress and other names, marks and
slogans) and all associated goodwill, all registered and unregistered
copyrights, all patents, all applications for any of the foregoing together with
all rights to use all of the foregoing and all other rights in, to, and under
the foregoing, all know-how, inventions, discoveries, improvements, processes,
formulae (secret or otherwise), specifications, trade secrets, whether
patentable or not, licenses and other similar agreements, confidential
information, and all drawings, records, books or other indicia, however
evidenced, of the foregoing, in each such case, throughout the world.
(b) Neither Acquired Company nor any of their Subsidiaries now
or since January 1, 1995 has used Intellectual Property which conflicts with or
infringes upon any proprietary rights of others except where such conflict or
infringement would not have or reasonably be expected to have a Company Material
Adverse Effect.
(c) Section 3.13(c) of Seller's Disclosure Schedule lists any
and all Intellectual Property that is material to either Acquired Company or any
of their Subsidiaries and in which either Acquired Company or any of their
Subsidiaries has an interest and the nature of such interest therein. Such
assets include all licenses, permits, authorizations or other rights with
respect to any of the foregoing. Except as set forth in Section 3.13(c) of
Seller's Disclosure Schedule, no Acquired Company uses any such Intellectual
Property by consent of any other Person or is required to and does not make any
payments to others with respect thereto. Each Acquired Company and its
Subsidiaries has in all material respects performed all obligations required to
be performed by it and none of such entities is in default in any material
respect under any Material Contract relating to any of the foregoing. Each
Acquired Company and its Subsidiaries have taken reasonable actions necessary to
maintain and protect such Intellectual Property.
Section 3.14. Contracts.
(a) Section 3.14(a) of Seller's Disclosure Schedule lists each
Contract to which either Acquired Company or any of their Subsidiaries is a
party or to which they or any of their properties is subject or by which any
thereof are bound that is an Acquired Company Material Contract (as defined
below). "Acquired Company Material Contracts" are those that (i) after September
1, 1996 obligate either Acquired Company or any of their respective Subsidiaries
to pay an amount of $250,000 or more in any 12 month period, (ii) contain a
covenant not to compete or otherwise significantly restricts business activities
(other than such a covenant that applies only to a particular account covered by
a management agreement or franchise agreement related thereto), (iii) provide
for the extension of credit other than consistent with normal credit terms or in
an aggregate principal amount of more than $15,000,000, or provide for the
mortgage, pledge or grant of a security interest in assets of either Acquired
Company or any of their Subsidiaries or for a guarantee by either Acquired
Company or any of their Subsidiaries of the obligations of any other Person,
(iv) contain a right or obligation of or to any Affiliate of Seller other than
the Acquired Companies and their Subsidiaries, or to any officer or director of
either Acquired Company or any of their Subsidiaries, other than those Contracts
entered into in the ordinary course of business, (v) represent a Contract
contributing unit level profit equal to or exceeding 2% of aggregate unit level
profit measured for the most recently concluded fiscal year, (vi) require either
Acquired Company or any of their Subsidiaries to buy or sell goods or services
with respect to which there will be material losses or will be costs and
expenses materially in excess of expected receipts, (vii) are for the employment
of any officer or employee and provide for annual base compensation in excess of
$150,000, or are "golden parachute" or similar agreements with any officer or
employee, (viii) are with any labor union, (ix) are with any vendor,
manufacturer, or distributor or representative and have an unexpired term as of
August 31, 1997 of one year or more and contain any dollar or volume purchasing
requirements in excess of $250,000, (x) are with the federal government or a
governmental agency or department exceeding $250,000 in annual revenues, (xi)
are a lease to or from either Acquired Company or any of their Subsidiaries of
real or personal property with individual monthly rental amounts of at least
$10,000, (xii) were not made in the ordinary course of business, (xiii) create
any joint ventures, partnerships or other similar arrangements, or (xiv) contain
a "change of control" or similar provision relating to a change of control of
either Acquired Company or any of their Subsidiaries triggered by the
transactions contemplated by this Agreement or any Transaction Document. Unless
so noted in Section 3.14(a) of Seller's Disclosure Schedule, each such Acquired
Company Material Contract was entered into in the ordinary course of business.
True, correct and complete copies of the Acquired Company Material Contracts,
including all amendments and supplements, have been made available to Parent.
Each Acquired Company Material Contract is valid and subsisting; the Acquired
Company party thereto has duly performed in all material respects all its
obligations thereunder to the extent that such obligations to perform have
accrued; and no material breach or default, alleged material breach or default,
or event which would (with the passage of time, notice or both) constitute a
material breach or default thereunder by such Acquired Company, as the case may
be (or, to the best knowledge of Seller, any other party or obligor with respect
thereto), has occurred or as a result of this Agreement or its performance will
occur. Except as set forth in Section 3.14(a)(xv) of Seller's Disclosure
Schedule, consummation of the transactions contemplated by this Agreement will
not (and will not give any Person a right to) terminate or modify any rights of,
or accelerate or augment any obligation of, either Acquired Company under any
Acquired Company Material Contract.
(b) During the twelve months immediately prior to the date
hereof, no contract of either Acquired Company or its Subsidiaries with a
customer that, but for its cancellation or termination, would be deemed an
Acquired Company Material Contract pursuant to clause (v) of Section 3.14(a),
has been cancelled or otherwise terminated and during such time, to the
knowledge of Seller, no such cancellation or termination has been threatened.
(c) Seller has delivered to Parent, pursuant to a letter dated
September 30, 1997, (i) a complete list of client management accounts of the
Acquired Companies and their Subsidiaries, as of August 31, 1997, (ii) each
binding bid of either Acquired Company or their Subsidiaries providing for an
investment of $250,000 or more over the life of the proposed Contract and (iii)
an aging schedule of all accounts receivable of the Company and its Subsidiaries
as of August 31, 1997, and an aging schedule of all accounts receivable of
Sodexho Canada and its Subsidiaries as of August 15, 1997.
Section 3.15. Taxes. Except as otherwise disclosed in Section
3.15 of Seller's Disclosure Schedule:
(a) Each Acquired Company and its Subsidiaries have filed (or
have had filed on their behalf) or will file or cause to be filed, all Tax
Returns (as defined in Section 3.15(i) hereof) required by applicable Law to be
filed by any of them prior to the Effective Time, and all such Tax Returns and
amendments thereto are, or when filed will be, true, complete and correct in all
material respects.
(b) Each Acquired Company and its Subsidiaries have paid (or
have had paid on their behalf) all Taxes (as defined in Section 3.15(i) hereof)
due with respect to any period ending prior to or as of the Effective Time, or
where payment of Taxes is not yet due, have established (or have had established
on their behalf and for their sole benefit and recourse), or will establish or
cause to be established before the consummation of the Effective Time, an
adequate accrual for the payment of all such Taxes which have accrued prior to
the Effective Time. The accrual for Taxes set forth on the balance sheet of each
Acquired Company and its Subsidiaries at August 31, 1996 referenced in Section
3.8 hereof is adequate for the payment of all Taxes accrued as of such date.
(c) There are no Encumbrances for any Taxes upon the
properties or assets of either Acquired Company or any of their Subsidiaries,
other than statutory liens for Taxes not yet due and payable and Encumbrances
for real estate Taxes being contested in good faith.
(d) No Audit (as defined in Section 3.15(i) hereof) is pending
with respect to any Taxes due from either Acquired Company or any of their
Subsidiaries. There are no outstanding waivers extending the statutory period of
limitation relating to the payment of Taxes due from either Acquired Company or
any of their Subsidiaries for any taxable period ending on or prior to the
Effective Time.
(e) Neither Acquired Company nor any of their Subsidiaries is
a party to, is bound by, or has any obligation under, a tax sharing contract or
other agreement or arrangement for the allocation, apportionment, sharing,
indemnification, or payment of Taxes.
(f) Neither Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(g) The statute of limitations for all Tax Returns of each
Acquired Company and its Subsidiaries for all years through 1993 have expired
for all federal, state, local and foreign tax purposes, or such Tax Returns have
been subject to a final Audit.
(h) Neither Acquired Company nor any of their Subsidiaries has
received any written notice of any material deficiency, assessment or adjustment
from the IRS or any other domestic or foreign governmental taxing authority that
has not been fully paid or finally settled, and any such deficiency, adjustment
or assessment shown on such schedule is being contested in good faith through
appropriate proceedings and adequate reserves have been established under
Acquired Company's financial statements therefor. To the best knowledge of
Seller, there are no material deficiencies, assessments or adjustments
threatened, pending or assessed with respect to either Acquired Company or any
of their Subsidiaries, other than those referred to in the immediately preceding
sentence.
(i) For purposes of this Agreement: "Audit" means any audit,
assessment or other examination of Taxes or Tax Returns by the IRS or any other
domestic or foreign governmental authority responsible for the administration of
any Taxes, proceeding or appeal of such proceeding relating to Taxes; "Taxes"
means all federal, state, local and foreign taxes, and other assessments of a
similar nature (whether imposed directly or through withholding) including, but
not limited to income, excise, withholding, property, sales, use (or any similar
taxes), gains, transfer, franchise, payroll, value-added, Social Security,
business license fees, customs, duties and other taxes, assessments, charges, or
other fees imposed by a governmental authority, including any interest,
additions to tax, or penalties applicable thereto; and "Tax Returns" means all
federal, state, local and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any amended Tax Return
relating to Taxes.
Section 3.16. Labor Matters. Except as set forth in Section
3.16 of Seller's Disclosure Schedule, neither Acquired Company nor any of their
Subsidiaries has, since December 31, 1996, (i) been subject to, or, to the
knowledge of Seller, threatened with, any material strike, lockout or other
labor dispute or engaged in any material unfair labor practice, or (ii) received
written notice of any pending petition for certification before the National
Labor Relations Board with respect to any material group of employees of either
Acquired Company or any Subsidiary which is not currently organized.
Section 3.17. Accounting Records; Internal Controls. Each
Acquired Company and its Subsidiaries have records that accurately and validly
reflect its transactions, and accounting controls sufficient to insure that such
transactions are (i) executed in accordance with management's general or
specific authorization and (ii) recorded in conformity with GAAP or Canadian
generally accepted accounting principles, as the case may be, so as to maintain
accountability for assets.
Section 3.18. Insurance. Except as set forth in Section 3.18
of Seller's Disclosure Schedule, each Acquired Company and its Subsidiaries are,
and at all times since their organization have been, insured with reputable
insurers (or self-insured) against all risks normally insured against, and in
such amounts as are customary, by companies in similar lines of business, and
all of the insurance policies and bonds required to be maintained by each
Acquired Company and its Subsidiaries are in full force and effect. Section 3.18
of Seller's Disclosure Schedule lists all insurance policies and bonds that are
material to the Company Business. Amounts reserved for all risks covered by
self-insurance on the combined balance sheet for the Acquired Companies and
their Subsidiaries delivered pursuant to Section 3.8(b) are reasonable and
customary. Neither Acquired Company nor any of their Subsidiaries is in default
in any material respect under any such policy or bond. Each Acquired Company and
each of their Subsidiaries has timely filed claims with insurers with respect to
all material matters and occurrences for which it has coverage. All insurance
policies maintained by each Acquired Company and its Subsidiaries will remain in
full force and effect and may reasonably be expected to be renewed (or replaced
with comparable policies) on reasonably comparable terms in favor of Parent
following consummation of the Merger (subject to such entities' continuing
compliance with the applicable terms thereof and any right of insurers to
terminate without cause), and neither Acquired Company nor any of its
Subsidiaries has received notice or other indication from any insurer or agent
of any intent to cancel or not so renew any of such insurance policies.
Section 3.19. Permits. Each Acquired Company and its
Subsidiaries holds all material Permits (as defined below) that are required by
any Governmental Entity to permit it to conduct the Company Business as now
conducted, and all such Permits are valid and in full force and effect and will
remain in full force and effect upon consummation of the Merger, except for
those Permits identified on Section 3.19 of Seller's Disclosure Schedule. To the
knowledge of Seller and Company, no suspension, cancellation or termination of
any of such Permits is threatened or imminent as a result of the transactions
contemplated by this Agreement or otherwise. As used herein, "Permit" means any
license, permit, franchise, certificate of authority or order, or any extension,
modification or waiver of the foregoing, issued by any Governmental Entity.
Section 3.20. Business Relationships. Section 3.20 of Seller's
Disclosure Schedule lists the names of and describes all Contracts with the
three largest distributors of goods and the ten largest producers of goods
purchased by each Acquired Company and its Subsidiaries (by dollar volume for
the most recently ended fiscal year). To the knowledge of Seller and Company, no
material supplier or distributor is reasonably likely to cease supplying or
distributing, as the case may be, goods or services or substantially reduce its
supplies or distribution services in relation to the Company Business as a
result of the consummation of this Agreement and the transactions contemplated
hereby.
Section 3.21. Environmental Compliance. Except as set forth in
Section 3.21 of Seller's Disclosure Schedule:
(a) The Company Real Property (as defined below) and the
improvements thereon and the soil and groundwater thereunder (i) do not contain
and are not contaminated by any Hazardous Material (as defined below) in
violation of any Environmental Law (as defined below); (ii) do not contain
underground storage tanks in violation of any Environmental Law; (iii) are not
used in violation of any Environmental Law for the generation, treatment,
storage or disposal of any Hazardous Material, or for mining, land filling,
dumping or commercial petroleum product storage purposes, or as a gasoline
station or a dry cleaning establishment; (iv) have not had any release of any
Hazardous Material from, on, in or upon it that would reasonably be expected to
result in a material liability to either Acquired Company; and (v) have never
been the subject of any material remedial action or a lien or encumbrance for an
environmental problem.
(b) Each Acquired Company is in material compliance with all
Environmental Laws and has obtained and is in material compliance with all
permits required pursuant to Environmental Laws, and neither Acquired Company
nor Seller has received any notices, demands, requests for information,
complaints or orders, and no investigation, action, claim, suit or proceeding is
pending or threatened by any Governmental Entity, with respect to any matters
relating to either Acquired Company and relating to or arising out of any
Environmental Laws.
(c) There are no material liabilities of or relating to either
Acquired Company arising under or relating to any Environmental Law, and to the
best knowledge of Seller, there are no facts, conditions, circumstances or
situations which could reasonably be expected to result in or be the basis for
any such liability.
(d) Seller has delivered to Parent the true and complete
copies of all documents, notices, reports, studies, analyses, tests, permits and
other written materials identified in Section 3.21 of Seller's Disclosure
Schedule and any environmental reports or audits in the possession of Seller or
either Acquired Company relating to the Company Real Property.
(e) As used herein, "Company Real Property" means all assets
of either Acquired Company or any of their Subsidiaries consisting of real
property, appurtenances thereto, rights in connection therewith, and any
interest therein, whether owned or leased; "Environmental Laws" means any
applicable federal, state or local law, statute, ordinance, common law, rule,
regulation, permit, directive, license, guidance, order, or other legal
requirement, in each case as in effect on the date hereof, relating to the
protection of human health and safety or the environment, including any
requirement pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of hazardous or toxic materials.
Without limiting the foregoing, each of the following is an Environmental Law:
the Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. ss. 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C.
ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss.
6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et
seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. ss. 2601 et seq.), the Safe Drinking Water Act (42
U.S.C. ss. 300f et seq.), the Occupational Safety and Health Act (29 U.S.C.
ss. 651 et seq.), and the Atomic Energy Act (42 U.S.C. ss. 2011 et seq.),
as such laws have been amended or supplemented as of the date hereof, and
each similar applicable federal, state or local statute, and each rule and
regulation promulgated under such federal, state and local laws; "Hazardous
Material" means any substance or material meeting any one or more of the
following criteria: (i) it is or contains a substance designated as a
hazardous waste, hazardous substance, hazardous material, pollutant,
contaminant or toxic substance under any Environmental Law; (ii) it is
toxic, explosive, corrosive, reactive, ignitable, infectious, radioactive,
mutagenic or otherwise hazardous; (iii) its presence at some quantity
requires investigation, notification or remediation under any Environmental
Law or common law; or (iv) it is or contains, without limiting the
foregoing clauses (i)-(iii), asbestos, polychlorinated biphenyls, petroleum
hydrocarbons, petroleum derived substances or waste, crude oil or any
fraction thereof, nuclear fuel or waste, natural gas or synthetic gas.
Section 3.22. Accounts Receivable. The accounts receivable
of the Acquired Companies and their Subsidiaries were incurred in the ordinary
course of business and are not subject in the aggregate to material
counterclaim or set-off.
Section 3.23. Transactions with Certain Persons. Except as set
forth on Section 3.23 of Seller's Disclosure Schedule, during the past three
years neither Acquired Company nor any of their Subsidiaries have purchased or
leased any property or obtained any services from, or sold or leased any
property or furnished any services to (except with respect to remuneration for
services rendered as a director, officer or employee of either Acquired Company
or any of their Subsidiaries), in the ordinary course of business or otherwise,
Seller, any Affiliate of Seller or any of their respective officers, directors
or employees, holders, directly or indirectly, of 10 percent or more of their
outstanding capital stock, or, to the knowledge of Seller, any spouse, child or
parent of any of the foregoing.
Section 3.24. Certain Fees. Neither Acquired Company nor any
of their Subsidiaries has employed any financial advisor or finder or incurred
any liability for any financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
Section 3.25. Certain Operations. Except as set forth on
Section 3.25 of Seller's Disclosure Schedule, neither Acquired Company nor any
of their Subsidiaries is or will be engaged at the Effective Time in any
activity or business that either (x) comes within the definition of Host
Business (as defined in the Noncompetition Agreement dated as of October 8,
1993, as amended, among Parent, Host Marriott Corporation and Host Marriott
Services Corporation) or (y) would, if engaged in by Parent, breach the terms of
the Noncompetition Agreement dated as of December 15, 1989 among Parent (as
assignee of Host Marriott Corporation), Host International, Inc., Caterair
Holdings Corporation and Caterair International Corporation.
Section 3.26. Investment Representation. Seller is acquiring
the Parent Shares to be issued in the Merger for its own account, for investment
purposes only and not with a view to or for sale in connection with the
distribution thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Except as otherwise indicated on Parent's Disclosure Schedule
dated September 30, 1997 previously delivered to Seller and Company, Parent and
Acquisition represent and warrant to Seller and Company as follows:
Section 4.1. Organization.
(a) Each of Parent and its Subsidiaries that will be owned,
directly or indirectly, by Parent following the Distribution (the "Retained
Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of Parent and the
Retained Subsidiaries is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not, when taken together
with all other such failures, have or reasonably be expected to have a material
adverse effect ("Parent Material Adverse Effect") on (x) the business,
operations, properties, assets, conditions (financial or other) or results of
operations of the Retained Business (as defined below), as a whole or (y) the
ability of Parent or Acquisition to perform their respective obligations under
or consummate the transactions contemplated by this Agreement or, in the case of
Parent, the Distribution Agreement or any other Transaction Document. True,
accurate and complete copies of each of Parent's and Acquisition's certificates
of incorporation and by-laws, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Seller and
Company. For purposes of this Agreement, "Retained Business" has the meaning set
forth in the Distribution Agreement; provided that, for all purposes of this
Agreement (other than the net tangible assets adjustment contemplated by Section
2.8(f) of the Distribution Agreement), (i) the Retained Business will be deemed,
from the date hereof until the consummation of the transactions contemplated by
the UK Stock Purchase Agreement, to include the business and operations of MMS
UK, and (ii) thereafter, the Retained Business will be deemed not to include the
business and operations of MMS UK.
(b) After the Distribution, Parent will have no Subsidiaries
other than the Retained Subsidiaries, all of which are listed in Schedule
4.1(b). At such time, except as set forth in this Agreement or in Section
4.14(a)(xiii) of Parent's Disclosure Schedule, Parent will have no interest,
direct or indirect, and will have no commitment to purchase any interest, direct
or indirect, in any other Person. Except as set forth in Section 4.1(b) of
Parent's Disclosure Schedule, the business of Parent and the Retained
Subsidiaries reflected in the Retained Business Financial Statements (as defined
in Section 4.6) has not been conducted through any other Subsidiaries or
Affiliates of Parent. Each Retained Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Each Retained Subsidiary is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not, when taken together
with all other such failures, have or reasonably be expected to have a Parent
Material Adverse Effect.
Section 4.2. Capitalization.
(a) The authorized capital stock of Parent consists of
301,000,000 shares, consisting of 300,000,000 Parent Shares and 1,000,000 shares
of preferred stock of Parent. At September 26, 1997, 127,503,586 Parent Shares
were issued and outstanding and no shares of preferred stock of Parent were
outstanding. All of the issued and outstanding Parent Shares are validly issued,
fully paid and non-assessable and free of preemptive rights. As of September 26,
1997, 13,800,151 Parent Shares were issuable upon the exercise of outstanding
vested and non-vested options and as of September 12, 1997, 4,434,452 Parent
Shares were issuable upon the vesting of deferred bonus awards and deferred
stock agreements (together, "Parent Stock Options") granted under any stock
option plan, program or similar arrangement of Parent or any of its
Subsidiaries, each as amended (excluding cash balances in Parent's employee
stock purchase plan). Since September 12, 1997, Parent has not granted any
Parent Stock Options or issued any shares of its capital stock except as set
forth on Section 4.2(a) of Parent's Disclosure Schedule or except upon exercise
of Parent Stock Options or pursuant to any existing Parent Plan in accordance
with the current terms of such Parent Plan. Except (i) as set forth in Section
4.2(a) of Parent's Disclosure Schedule, (ii) pursuant to Plans listed on Section
4.12(a) of Parent's Disclosure Schedule, (iii) as provided in the Benefits
Allocation Agreement (as defined in the Distribution Agreement), (iv) pursuant
to the ▇▇▇▇▇ (as defined in the Distribution Agreement) and any amendments
thereto contemplated by the Distribution Agreement and (v) pursuant to the
Parent Rights Plan (as defined in Section 4.25), there are not now, and at the
Effective Time there will not be, any shares of capital stock of Parent issued
or outstanding or any outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating Parent or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
Parent Shares or obligating Parent or any of its Subsidiaries to grant, extend
or enter into any such agreement or commitment.
(b) The authorized capital stock of Acquisition consists of
100 Acquisition Shares, of which 100 Acquisition Shares were issued and
outstanding, all of which are owned beneficially and of record by Parent. All of
the issued and outstanding Acquisition Shares are validly issued, fully paid and
non-assessable and free of preemptive rights and are free and clear of any
Encumbrances. Except as set forth in Section 4.2(b) of Parent's Disclosure
Schedule, there are not now, and at the Effective Time there will not be, any
shares of capital stock of Acquisition issued or outstanding or any outstanding
subscriptions, options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement obligating Acquisition to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of Acquisition
or obligating Acquisition to grant, extend or enter into any such agreement or
commitment. Following the Merger, Acquisition will have no obligation to issue,
transfer or sell any shares of its capital stock pursuant to any employee
benefit plan or otherwise.
(c) There are not now, and at the Effective Time there will
not be, any voting trusts, proxies or other agreements or understandings to
which Parent or any Subsidiary of Parent is a party or is bound with respect to
the voting of any shares of capital stock of Parent or any Retained Subsidiary.
(d) All of the issued and outstanding shares of capital stock
(or other equity interests) of each Retained Subsidiary are validly issued,
fully paid and non-assessable and free of preemptive rights, and those owned
directly or indirectly by Parent are owned free and clear of any Encumbrances.
Parent owns directly or indirectly all of the issued and outstanding shares of
the capital stock (and other equity interests) of each Retained Subsidiary.
Except as set forth in Section 4.2(d) of Parent's Disclosure Schedule, there are
not now, and at the Effective Time there will not be, any shares of capital
stock (or other equity interests) of any Retained Subsidiary issued or
outstanding or any outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating Parent or any Retained Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock (or other equity interests) of any Retained
Subsidiary or obligating Parent or any Retained Subsidiary to grant, extend or
enter into any such agreement or commitment.
Section 4.3. Authority Relative to this Agreement. Each of
Parent and Acquisition has full corporate power and authority to execute and
deliver this Agreement, the Distribution Agreement and each other Transaction
Document to which it is a party, as the case may be, and, subject to the
Required Regulatory Approvals, to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement, the
Distribution Agreement and each other Transaction Document by Parent or
Acquisition, and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Boards of Directors of
Parent and Acquisition, and no other corporate proceedings on the part of Parent
or Acquisition, are or will be necessary to authorize this Agreement, the
Distribution Agreement or any other Transaction Document or to consummate the
transactions contemplated hereby and thereby other than (x) the approval and
adoption of the Distribution and the Merger and related matters by the
stockholders of Parent (the "Parent Stockholder Approvals") and (y) the
establishment by the Board of Directors of Parent of the date for taking a
record of the holders of Parent's common stock entitled to participate in the
Distribution and the date on which the Distribution shall be effected. This
Agreement and the Distribution Agreement each has been duly and validly executed
and delivered by each of Parent and Acquisition, and constitutes a valid and
binding agreement of each of Parent and Acquisition, as the case may be, and
each other Transaction Document to which Parent or Acquisition will be a party,
when executed and delivered by the parties thereto, will be a valid and binding
agreement of each of Parent and Acquisition, as the case may be, enforceable
against each of Parent and Acquisition, as the case may be, in accordance with
their respective terms except to the extent that enforcement thereof may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws, now or hereafter in effect, relating to the
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
Section 4.4. Consents and Approvals; No Violations.
(a) Except for the Required Regulatory Approvals, Parent
Stockholder Approvals, such filings and approvals as may be required under the
"takeover" or "blue sky" laws of various states, and as disclosed in Section
4.4(a) of Parent's Disclosure Schedule or as contemplated by this Agreement, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any Governmental Entity or any other Person is necessary
for the execution and delivery of this Agreement, the Distribution Agreement and
each other Transaction Document by Parent or Acquisition as the case may be, or
the consummation by Parent or Acquisition, as the case may be, of the
transactions contemplated hereby and thereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals which, if
not made or obtained, as the case may be, would not, in the aggregate, have or
reasonably be expected to have a Parent Material Adverse Effect.
(b) Except as set forth in Section 4.4(b) of Parent's
Disclosure Schedule, the execution and delivery of this Agreement, the
Distribution Agreement and each other Transaction Document by each of Parent and
Acquisition, as the case may be, do not, and the consummation by Parent and
Acquisition, as the case may be, of the transactions contemplated hereby and
thereby will not, in any material respect, violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Encumbrance upon any of the properties or assets of Parent or any of its
Subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or by-laws of Parent or Acquisition, (ii) subject to
obtaining the Required Regulatory Approvals and the Parent Stockholder
Approvals, any material Law applicable to Parent or Acquisition or any of their
respective properties or assets, (iii) any Retained Business Material Contract
(as defined in Section 4.14) or (iv) any material Contract to which Parent or
Acquisition is now a party or by which Parent or Acquisition or any of their
respective properties or assets may be bound or affected or (v) any material
Contract to which Parent or any Retained Subsidiary is a party that is intended
to be included in the Spinco Assets (as defined in the Distribution Agreement)
pursuant to the Distribution Agreement and that does not provide for the release
of Parent or such Retained Subsidiary from the obligations thereunder upon the
assignment thereof to Spinco or a Spinco Subsidiary.
Section 4.5. Absence of Certain Changes. Except (a) as set
forth in Section 4.5 of Parent's Disclosure Schedule, (b) as set forth in any
document filed prior to the date hereof pursuant to the Exchange Act, or (c) as
contemplated by this Agreement, the Distribution Agreement and the other
Transaction Documents, from January 3, 1997 until the date hereof, with respect
to the Retained Business, neither Parent nor any of its Subsidiaries has (i)
taken any actions that, if taken by Parent or any of its Subsidiaries during the
period from the date hereof through the Effective Time, would constitute a
breach of Section 6.2 hereof, (ii) has suffered any changes that, in each case,
in the aggregate, would reasonably be expected to result in a Parent Material
Adverse Effect or (iii) conducted its business or operations in any material
respect other than in the ordinary and usual course of business, consistent with
past practices.
Section 4.6. No Undisclosed Liabilities. Except as (x)
disclosed in any document filed prior to the date hereof pursuant to the
Exchange Act, (y) incurred in connection with the Merger and the Distribution or
(z) as expressly disclosed and described in Section 4.6 of Parent's Disclosure
Schedule, neither Parent, with respect to the Retained Business, nor any
Retained Subsidiary had at January 3, 1997, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature except (a) liabilities, obligations or contingencies (i) which are
accrued or reserved against in the financial statements of the Retained Business
delivered pursuant to Section 4.8 (the "Retained Business Financial Statements")
or reflected in the notes thereto or (ii) which were incurred after January 3,
1997, and were incurred in the ordinary course of business and consistent with
past practices and (b) liabilities, obligations or contingencies which (x) have
not and would not reasonably be expected to have a Parent Material Adverse
Effect or (y) have been discharged or paid in full prior to the date hereof.
Section 4.7. Reports.
(a) Since January 1, 1995, Parent and each of its Subsidiaries
required to make filings under the Securities Act or the Exchange Act have filed
with the Securities and Exchange Commission (the "SEC"), all material reports,
forms, statements and other documents (including all exhibits, amendments and
supplements thereto; collectively, including any financial statements or
schedules included or incorporated by reference therein, the "Parent SEC
Documents") required to be filed by them under the Securities Act, the Exchange
Act and the rules and regulations thereunder. Each of the Parent SEC Documents,
as of its filing date and at each time thereafter when the information included
therein was required to be updated pursuant to the rules and regulations of the
SEC, complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
None of the Parent SEC Documents, as of their respective filing dates or any
date thereafter when the information included therein was required to be updated
pursuant to the rules and regulations of the SEC, contained or will contain any
untrue statement of a material fact or omitted or will omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets (including the related
notes) included in the Parent SEC Documents filed prior to or after the date of
this Agreement fairly presents or will fairly present in all material respects
the consolidated financial position of Parent and its Subsidiaries as of the
respective dates thereof, and the other related statements (including the
related notes) included therein fairly present or will fairly present in all
material respects the results of operations and the cash flows of Parent and its
Subsidiaries for the respective periods or as of the respective dates set forth
therein. Each of the financial statements (including the related notes) included
in the Parent SEC Documents filed prior to or after the date of this Agreement
has been prepared or will be prepared in all material respects in accordance
with generally accepted accounting principles consistently applied during the
periods involved, except (i) as otherwise noted therein, (ii) to the extent
required by changes in generally accepted accounting principles or (iii) in the
case of unaudited financial statements, normal recurring year-end audit
adjustments.
(b) Parent has previously delivered to Seller and Company
copies of (i) Annual Reports on Form 10-K for the fiscal year ended January 3,
1997 and for each of the two immediately preceding fiscal years, as filed with
SEC, (ii) proxy and information statements relating to (x) all meetings of its
stockholders (whether annual or special) and (y) actions by written consent in
lieu of a stockholders' meeting from January 1, 1995 until the date hereof and
(iii) all other reports or registration statements filed by Parent with the SEC
since January 1, 1995 (other than Registration Statements on Form S-8).
Section 4.8. Financial Statements; Changes; Contingencies;
Distributions.
(a) Parent has delivered to Seller and Company consolidated
balance sheets for the Retained Business at January 3, 1997 and December 29,
1995 and the related consolidated statements of operations, cash flows and
changes in stockholder's equity for the 52 or 53 week periods ended January 3,
1997 and December 29, 1995. All such financial statements have been audited by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP (the "Parent Auditors"), whose reports thereon are included
with such financial statements. All such financial statements have been prepared
in conformity with GAAP applied on a consistent basis (except for changes, if
any, required by GAAP and disclosed therein). The statements of operations and
cash flow present fairly in all material respects the results of operations and
cash flows of the Retained Business for the respective periods covered, and the
balance sheets present fairly in all material respects the financial condition
of the Retained Business as of their respective dates. Parent and Acquisition
have made available to Seller and Company copies of each management letter or
other letter delivered to Parent by the Parent Auditors (or management points
relating thereto) in connection with such financial statements or relating to
any review by the Parent Auditors of the internal controls of Parent during the
two-year period ended January 3, 1997, and have made available to the Company
Auditors for inspection all reports and working papers produced or developed by
Parent Auditors or management in connection with their examination of such
financial statements, including such reports and working papers prepared by the
Parent Auditors relating to assessment of risk of the engagement and planning
for the engagement but excluding the billing analysis prepared by such auditors.
Except as set forth in the Retained Business Financial Statements or the Parent
SEC Documents since December 31, 1994, there has been no change in any of the
significant accounting policies, practices or procedures of Parent and/or its
Subsidiaries.
(b) Parent and Acquisition have delivered to Seller and
Company the unaudited consolidated balance sheet for the Retained Business at
June 20, 1997, and the related unaudited consolidated statements of operations
and cash flows for the period then ended. All such interim unaudited financial
statements have been prepared in conformity with GAAP applied on a consistent
basis except for changes, if any, required by GAAP and disclosed therein. The
statements of operations and cash flows present fairly the results of operations
and cash flows of the Retained Business for the respective periods covered, and
the balance sheets present fairly in all material respects the financial
condition of the Retained Business as of their respective dates. All such
interim financial statements reflect all adjustments (which, except as otherwise
indicated as such financial statements, consist only of normal recurring
adjustments not material in amount and include estimated provisions for year-end
adjustments) necessary for a fair presentation. At the dates of such balance
sheets, the Retained Business had no material liability (actual, contingent or
accrued) that, in accordance with GAAP applied on a consistent basis, should
have been shown or reflected therein but was not except for the omission of
notes with respect to contingent liabilities that in the aggregate did not
materially exceed those so reported in the most recent of the audited statements
delivered and that were of substantially the same type as so reported.
(c) Except as set forth at Section 4.8(c) of Parent's
Disclosure Schedule, there has been no dividend or other distribution of assets
or securities whether consisting of money, property or any other thing of value,
declared, issued or paid subsequent to the date of the most recent financial
statements described in Section 4.8(a) by Parent or any Retained Subsidiary,
except for cash dividends paid in the ordinary course.
Section 4.9. Proxy Statement and Form 10. None of the
information to be included in the Proxy Statement or the Form 10 (each as
defined in the Distribution Agreement) or any registration statement
contemplated pursuant to Article III of the Distribution Agreement will be
false or misleading with respect to any material fact or will omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. Except for information provided by Seller or
Company in writing for inclusion therein, the Proxy Statement and the Form
10 (or any registration statement contemplated pursuant to Article III of
the Distribution Agreement), including any amendments thereto, will comply
in all material respects with the Exchange Act and the Securities Act.
Section 4.10. No Default. Except as set forth in Section
4.10 of Parent's Disclosure Schedule, neither Parent nor any of the Retained
Subsidiaries (i) is in default or violation (and no event has occurred which
with notice or the lapse of time or both would constitute a default or
violation) of any term, condition or provision of its charter or its by-
laws, or (ii) is in default or violation (and no event has occurred which
with notice or lapse of time or both would constitute a default or
violation) in any material respect of any term, condition or provision of
(a) any Retained Business Material Contract, or (b) in each case only with
respect to the Retained Business, any material order, writ, injunction,
decree, statute, rule or regulation applicable to Parent or any of the
Retained Subsidiaries.
Section 4.11. Litigation; Compliance with Law.
(a) Except as set forth in Section 4.11(a) of Parent's
Disclosure Schedule, as of the date hereof and only with respect to the
Retained Business, there are no actions, suits, claims, proceedings or
investigations pending or, to the best knowledge of Parent or Acquisition,
threatened, involving Parent or any of the Retained Subsidiaries or any of
their respective properties or assets (or any Person whose liability
therefrom may have been retained or assumed by Parent or any of the
Retained Subsidiaries either contractually or by operation of law), by or
before any Governmental Entity or by any Person which have had or would
reasonably be expected to result in damages in excess of $100,000 or have a
Parent Material Adverse Effect. None of Parent, any of the Retained
Subsidiaries or any of their respective properties or assets is subject to
any outstanding order, writ, injunction or decree relating to the Retained
Business which would reasonably be expected to have a Parent Material
Adverse Effect or materially impair or interfere with the operation of the
Retained Business as currently conducted.
(b) Except as disclosed by Parent in the Parent SEC
Documents filed since January 3, 1997 or in Section 4.11(b) of Parent's
Disclosure Schedule, Parent (with respect to the Retained Business), the
Retained Subsidiaries and Acquisition are now being and in the past have
been operated in compliance in all material respects with all Laws.
Section 4.12. Employee Benefit Plans; ERISA.
(a) Except for those matters set forth in Section 4.12(a) of
Parent's Disclosure Schedule, (i) each "employee benefit plan" (as defined in
Section 3(3) of ERISA, and all other employee benefit, bonus, incentive, stock
option (or other equity-based), severance, change in control, welfare
(including post-retirement medical and life insurance) and fringe benefit
plans (whether or not subject to ERISA) maintained or sponsored by Parent
or its ERISA Affiliates, for the benefit of any U.S. employee or former
U.S. employee of Parent or any of its ERISA Affiliates employed in the
Retained Business (the "Parent Plans") is, and has been, operated in all
material respects in accordance with its terms and in substantial
compliance (including with respect to the making of governmental filings)
with all applicable Laws, including ERISA and the applicable provisions of
the Code, (ii) each of the Parent Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined by the IRS to
be so qualified, (iii) no "reportable event," as such term is defined in
Section 4043(c) of ERISA (for which the 30-day notice requirement to the
Pension Benefit Guaranty Corporation (the "PBGC") has not been waived), has
occurred with respect to any Parent Plan that is subject to Title IV of
ERISA, and (iv) there are no material pending or, to the knowledge of
Parent, threatened claims (other than routine claims for benefits) by, on
behalf of or against any of the Parent Plans or any trusts related thereto
other than routine benefit claim matters. All Parent Plans are listed in
Section 4.12(a) of Parent's Disclosure Schedule.
(b) (i) No Parent Plan has incurred an "accumulated
funding deficiency" (as defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived, (ii) neither Parent nor any of its ERISA
Affiliates has incurred any liability under Title IV of ERISA except for
required premium payments to the PBGC, which payments have been made when
due, and no events have occurred which are reasonably likely to give rise
to any liability of Parent or any of its ERISA Affiliates under Title IV of
ERISA or which could reasonably be anticipated to result in any claims
being made against Seller or Company by the PBGC, (iii) neither Parent nor
any of its ERISA Affiliates has incurred any material withdrawal liability
(including any contingent or secondary withdrawal liability) within the
meaning of Sections 4201 and 4204 of ERISA to any Multiemployer Plan which
has not been satisfied in full, and (iv) other than with respect to any
Multiemployer Plan, there has been no act or omission resulting in
liability under Chapter 43 of the Code or Sections 409, 502(c), 502(i),
502(l) or 4071 of ERISA with respect to any Parent Plan.
(c) Except as set forth on Section 4.12(c) of Parent's
Disclosure Schedule, with respect to each Parent Plan that is subject to
Title IV of ERISA, (i) Parent has provided to Seller copies of the most
recent actuarial valuation report prepared for such Parent Plan prior to
the date hereof, (ii) the assets and liabilities in respect of the accrued
benefits as set forth in the most recent actuarial valuation report
prepared by the Parent Plan's actuary fairly present the funded status of
such Parent Plan in all material respects, and (iii) since the date of such
valuation report there has been no material adverse change in the funded
status of any such Parent Plan.
(d) Neither Parent nor any of its ERISA Affiliates has
failed to make any contribution or payment to any Parent Plan or
Multiemployer Plan which, in either case has resulted or could result in
the imposition of a material Encumbrance or the posting of a material bond
or other material security under ERISA or the Code.
(e) Except as otherwise set forth on Section 4.12(e) of
Parent's Disclosure Schedule or as expressly provided for in this Agreement
or in the Benefits Allocation Agreement, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any
current or former employee or officer of Parent or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
(f) Except as set forth on Section 4.12(f) of Parent's
Disclosure Schedule, Parent and its Subsidiaries do not have any employment
or consulting agreements, written or oral, with any employees of the
Retained Business that provide for annual base compensation in excess of
$150,000. Parent has provided to Seller copies of each such employment or
consulting agreement that provides for annual base compensation in excess
of $150,000, and has made all other such agreements available to Seller.
Section 4.12(f) of Parent's Disclosure Schedule sets forth a list of all
employees or former employees associated with the Retained Business to whom
Parent owes severance pay in sums of $150,000 or more as of the date
hereof.
(g) Parent has the right, and will have the right after
the Effective Time, to amend or terminate any Parent Plan and any Parent
Canadian Plan, and specifically to the extent any Parent Plan provides
post-retirement medical and life insurance benefits.
(h) Section 4.12(h) of Parent's Disclosure Schedule
lists each employee benefit, bonus, incentive compensation, deferred
compensation,pension, retirement, stock option (or other equity based),
severance, change in control, welfare (including post-retirement medical
and life insurance), fringe benefit plan and any other employment
arrangement maintained or sponsored by Parent or its Subsidiaries for the
benefit of any Canadian employee or former Canadian employee of Parent or
its Subsidiaries employed in the Retained Business (the "Parent Canadian
Plans"). Except as otherwise set forth in Section 4.12(h) of Parent's
Disclosure Schedule, each Parent Canadian Plan has been operated in all
material respects in accordance with its terms and in substantial
compliance with all applicable Laws, and there are no material pending or,
to the knowledge of Parent, threatened claims (other than routine claims
for benefits) by, on behalf of or against any of the Parent Canadian Plans
or any trusts related thereto other than routine benefit claim matters.
Neither Parent nor any of its Subsidiaries has incurred any material
withdrawal liability to any Company Canadian Plan which would be the
equivalent of a Multiemployer Plan, and neither Parent nor any of its
Subsidiaries has failed to make any contribution to any Parent Canadian
Plan which has resulted or could result in the imposition of a material
Encumbrance. With respect to any Parent Canadian Plan that is a defined
benefit plan, (x) Parent has provided Seller with copies of the most
recent actuarial valuation report if an actuarial valuation report is
required by the relevant Canadian Governmental Entity, and (y) except as
set forth in Section 4.12(h) of Parent's Disclosure Schedule, as of the
date hereof, the fair market value of the assets of each such plan
(excluding for these purposes any accrued but unpaid contributions) exceeds
the present value of all benefits accrued under each such plan determined
on a basis as required by law and in accordance with Canadian GAAP.
(i) Each employee's benefit, bonus, incentive
compensation, deferred compensation, pension, retirement, stock option (or
other equity based), severance, change in control, welfare (including post-
retirement medical and life insurance), fringe benefit plan and any other
employment arrangement maintained or sponsored by MMS UK or its
Subsidiaries for the benefit of their employees has been operated in all
material respects in accordance with its terms and in substantial
compliance with all applicable Laws, and there are no material pending or,
to the knowledge of Parent, threatened claims (other than routine claims
for benefits) by, on behalf of or against any of such plans. All material
plans maintained by MMS UK or its Subsidiaries for the provision of
retirement income to their employees are listed in Section 4.12(i) of
Parent's Disclosure Schedule and all such plans that are funded defined
benefit pension schemes are funded in accordance with the recommendations
of the relevant United Kingdom Government Entity.
Section 4.13. Assets; Intellectual Property.
(a) Except as set forth in Section 4.13(a) of Parent's
Disclosure Schedule, upon consummation of the Distribution, Parent and the
Retained Subsidiaries will own or have rights to use all material
properties and assets (including Intellectual Property) necessary to permit
Parent and the Retained Subsidiaries to conduct the Retained Business as it
is currently being conducted.
(b) Neither Parent nor any of the Retained Subsidiaries
now or since December 31, 1994 has used Intellectual Property which
conflicts with or infringes upon any proprietary rights of others except
where such conflict or infringement would not have or reasonably be
expected to have a Parent Material Adverse Effect.
(c) Section 4.13(c) of Parent's Disclosure Schedule
lists any and all Intellectual Property that is material to the Retained
Business and in which the Parent or any Retained Subsidiary has an interest
and the nature of such interest therein. Such assets include all licenses,
permits, authorizations or other rights with respect to any of the
foregoing. Except as set forth in Section 4.13(c) of Parent's Disclosure
Schedule, Parent does not use any such Intellectual Property by consent of
any other Person and is not required to and does not make any payments to
others with respect thereto. Parent has in all material respects performed
all obligations required to be performed by it, and none of such entities
is in default in any material respect under any material Contract relating
to any of the foregoing. Parent and the Retained Subsidiaries have taken
reasonable actions necessary to maintain and protect such Intellectual
Property.
Section 4.14. Contracts.
(a) Section 4.14(a) of Parent's Disclosure Schedule
lists each Contract in respect of the Retained Business to which Parent or
any Retained Subsidiary is a party or to which they or any of their
properties used primarily in the Retained Business is subject or by which
any thereof are bound that is a Retained Business Material Contract (as
defined below). "Retained Business Material Contracts" are those that (i)
after January 3, 1997 obligate Parent, in respect of the Retained Business,
or any Retained Subsidiary, to pay an amount of $250,000 or more in any 12
month period, (ii) contain a covenant not to compete or otherwise
significantly restrict business activities (other than such a covenant that
applies only to a particular account covered by a management agreement or
franchise agreement related thereto), (iii) provide for the extension of
credit other than consistent with normal credit terms or in an aggregate
principal amount of more than $15,000,000, or provide for the mortgage,
pledge or grant of a security interest in assets of the Retained Business
or for a guarantee by the Parent or any Retained Subsidiary of the
obligations of any other Person in connection with the Retained Business,
(iv) contain a right or obligation of or to any Affiliate of Parent other
than Parent and the Retained Subsidiaries, or to any officer or director of
Parent or any of the Retained Subsidiaries other than those contracts
entered into in the ordinary course of business, (v) represent a Contract
contributing unit level profit equal to or exceeding 2% of aggregate unit
level profit measured for the most recently concluded fiscal year, (vi)
require Parent (in respect of the Retained Business) or any Retained
Subsidiary to buy or sell goods or services with respect to which there
will be material losses or will be costs and expenses materially in excess
of expected receipts, (vii) are for the employment of any Retained Employee
and provide for annual base compensation in excess of $150,000, or are
"golden parachute" or similar agreements with any Retained Employee, (viii)
are with any labor union, (ix) are with any vendor, manufacturer, or
distributor or representative and have an unexpired term as of June 20,
1997 of one year or more and contain any dollar or volume purchasing
requirements in excess of $250,000, (x) are with the federal government or
a governmental agency or department exceeding $250,000 in annual revenues,
(xi) are leases to or from Parent (with respect to the Retained Business)
or one of the Retained Subsidiaries of real or personal property with
individual monthly rental amounts of at least $10,000, (xii) were not made
in the ordinary course of business, (xiii) create any joint ventures,
partnerships or other similar arrangements relating to the Retained
Business, or (xiv) contain a "change of control" or similar provision
relating to a change of control of the Parent or any of its Subsidiaries
triggered by the transactions contemplated by this Agreement or any
Transaction Document. Unless so noted in Section 4.14(a) of Parent's
Disclosure Schedule, each such Retained Business Material Contract was
entered into in the ordinary course of business. True, correct and
complete copies of the Retained Business Material Contracts, including all
amendments and supplements, have been made available to Seller. Each
Retained Business Material Contract is valid and subsisting; each of Parent
and any Retained Subsidiary has duly performed in all material respects all
its obligations thereunder to the extent that such obligations to perform
have accrued; and no material breach or default, alleged material breach or
default, or event which would (with the passage of time, notice or both)
constitute a material breach or default thereunder by Parent or a Retained
Subsidiary, as the case may be (or, to the best knowledge of Parent, any
other party or obligor with respect thereto), has occurred or as a result
of this Agreement or its performance will occur. Except as set forth in
Section 4.14(a) of Parent's Disclosure Schedule, consummation of the
transactions contemplated by this Agreement will not (and will not give any
Person a right to) terminate or modify any rights of, or accelerate or
augment any obligation of, Parent or any Retained Subsidiary under any
Retained Business Material Contract.
(b) During the twelve months immediately prior to the
date hereof, no contract of the Retained Business with a customer that, but
for its cancellation or termination, would be deemed a Retained Business
Material Contract pursuant to clause (v) of Section 4.14(a), has been
cancelled or otherwise terminated and during such time, to the knowledge of
Parent, no such cancellation or termination has been threatened.
(c) Parent has delivered to Seller, pursuant to a letter
dated September 30, 1997, (i) a complete list of client management accounts
of the Retained Business, as of August 22, 1997, (ii) each binding bid of
Parent, with respect to the Retained Business, or any Retained Subsidiary,
providing for an investment of $250,000 or more over the life of the
proposed Contract and (iii) an aging schedule of all accounts receivable of
the Retained Business as of August 15, 1997.
Section 4.15. Taxes. Except as otherwise disclosed in
Section 4.15 of Parent's Disclosure Schedule:
(a) Parent and each of its Subsidiaries have filed (or
have had filed on their behalf) or will file or cause to be filed, all Tax
Returns required by applicable Law to be filed by any of them prior to the
Effective Time, and all such Tax Returns and amendments thereto are, or
when filed will be, true, complete and correct in all material respects.
(b) Parent and each of its Subsidiaries have paid (or
have had paid on their behalf) all Taxes due with respect to any period
ending prior to or as of the Effective Time, or where payment of Taxes is
not yet due, have established (or have had established on their behalf and
for their sole benefit and recourse), or will establish or cause to be
established before the consummation of the Effective Time, an adequate
accrual for the payment of all such Taxes which have accrued prior to the
Effective Time other than Taxes directly attributable to the transactions
contemplated by the Distribution Agreement. The accrual for Taxes set
forth on the balance sheet of Parent at January 3, 1997 referenced in
Section 4.8 hereof is adequate for the payment of all Taxes accrued as of
such date.
(c) There are no Encumbrances for any Taxes upon the
properties or assets of Parent or any of its Subsidiaries which properties
or assets are used primarily in the Retained Business, other than statutory
liens for Taxes not yet due and payable and Encumbrances for real estate
Taxes being contested in good faith.
(d) No Audit is pending with respect to any Taxes due
from Parent or any of its Subsidiaries relating to the Retained Business or
the Retained Subsidiaries. There are no outstanding waivers extending the
statutory period of limitation relating to the payment of Taxes due from
Parent or any Subsidiary for any taxable period ending on or prior to the
Effective Time.
(e) Other than the Tax Sharing Agreement (as defined in
Section 6.13), neither Parent nor any Subsidiary is a party to, is bound
by, or has any obligation under, a tax sharing contract or other agreement
or arrangement for the allocation, apportionment, sharing, indemnification,
or payment of Taxes.
(f) Neither Parent nor any of its Subsidiaries has made
an election under Section 341(f) of the Code.
(g) The statute of limitations for all Tax Returns of
Parent and each of its Subsidiaries for all years through 1991 have expired
for all federal, state, local and foreign tax purposes, or such Tax Returns
have been subject to a final Audit.
(h) Neither Parent nor any of its Subsidiaries has
received any written notice of any material deficiency, assessment or
adjustment from the IRS or any other domestic or foreign governmental
taxing authority relating to the Retained Business or the Retained
Subsidiaries that has not been fully paid or finally settled, and any such
deficiency, adjustment or assessment shown on such schedule is being
contested in good faith through appropriate proceedings and adequate
reserves have been established on Parent's financial statements therefor.
To the best of Parent's knowledge, there are no material deficiencies,
assessments or adjustments threatened, pending or assessed with respect to
Parent or any of its Subsidiaries relating to the Retained Business or the
Retained Subsidiaries, other than those referred to in the immediately
preceding sentence.
Section 4.16. Labor Matters. Except as set forth in
Section 4.16 of Parent's Disclosure Schedule, neither Parent, Acquisition,
nor any Retained Subsidiary has, since December 31, 1996, in each case only
with respect to the Retained Business, (i) been subject to, or, to the
knowledge of Parent, threatened with, any material strike, lockout or other
labor dispute or engaged in any material unfair labor practice, or (ii)
received written notice of any pending petition for certification before
the National Labor Relations Board with respect to any material group of
Retained Employees (as defined in the Distribution Agreement) which is not
currently organized.
Section 4.17. Accounting Records; Internal Controls.
Each of Parent and the Retained Subsidiaries have records that accurately
and validly reflect its transactions in respect of the Retained Business,
and accounting controls sufficient to insure that such transactions are (i)
executed in accordance with management's general or specific authorization
and (ii) recorded in conformity with GAAP or with Canadian or English
generally accepted accounting principles, as the case may be, so as to
maintain accountability for assets.
Section 4.18. Insurance. Except as set forth in Section
4.18 of Parent's Disclosure Schedule, with respect to the Retained Business
only, Parent and each Retained Subsidiary is, and at all times since its
organization has been, insured with reputable insurers (or self-insured)
against all risks normally insured against, and in such amounts as are
customary, by companies in similar lines of business, and all of the
insurance policies and bonds required to be maintained by Parent and each
Retained Subsidiary are in full force and effect. Section 4.18 of Parent's
Disclosure Schedule lists all insurance policies and bonds that are
material to the Retained Business. Amounts reserved for all risks covered
by self-insurance on the Retained Business Balance Sheet as of June 20,
1997 are reasonable and customary. Neither Parent nor any Retained
Subsidiary is in default in any material respect under any such policy or
bond. Each of Parent and each Retained Subsidiary has timely filed claims
with insurers with respect to all material matters and occurrences relating
to the Retained Business for which it has coverage. All insurance policies
maintained by Parent and each Retained Subsidiary relating to the Retained
Business will remain in full force and effect and may reasonably be
expected to be renewed (or replaced with comparable policies) on reasonably
comparable terms in favor of Parent following consummation of the Merger
(subject to such entities' continuing compliance with the applicable terms
thereof and any right of insurers to terminate without cause), and neither
Parent nor any Retained Subsidiary has received notice or other indication
from any insurer or agent of any intent to cancel or not so renew any of
such insurance policies.
Section 4.19. Permits. Each of Parent and the Retained
Subsidiaries holds all material Permits that are required by any
Governmental Entity to permit it to conduct the Retained Business as now
conducted, and all such Permits are valid and in full force and effect and
will remain in full force and effect upon consummation of the Merger,
except for those Permits identified on Section 4.19 of Seller's Disclosure
Schedule. To the knowledge of Parent, no suspension, cancellation or
termination of any of such Permits is threatened or imminent as a result of
the transactions contemplated by this Agreement and the Distribution
Agreement or otherwise.
Section 4.20. Business Relationships. Section 4.20 of
Parent's Disclosure Schedule lists the names of and describes all Contracts
with the three largest distributors of goods and the ten largest producers
of goods purchased by Parent and the Retained Subsidiaries (by dollar
volume for the most recently ended fiscal year) with respect to the
Retained Business. To the knowledge of Parent, no material supplier or
distributor is reasonably likely to cease supplying or distributing, as the
case may be, goods or services or substantially reduce its supplies or
distribution services in relation to the Retained Business as a result of
the consummation of this Agreement and the transactions contemplated
hereby.
Section 4.21. Environmental Compliance. Except as set
forth in Section 4.21 of Parent's Disclosure Schedule:
(a) The Parent Real Property (as defined below) and the
improvements thereon and the soil and groundwater thereunder (i) do not
contain and are not contaminated by any Hazardous Material in violation of
any Environmental Law; (ii) do not contain any underground storage tanks
in violation of any Environmental Law; (iii) are not used in violation of
any Environmental Law for the generation, treatment, storage or disposal of
any Hazardous Material, or for mining, land filling, dumping or commercial
petroleum product storage purposes, or as a gasoline station or a dry
cleaning establishment; (iv) have not had any release of any Hazardous
Material from, on, in or upon it that would reasonably be expected to
result in a material liability to the Retained Business; and (v) have never
been the subject of a remedial action or a lien or encumbrance for an
environmental problem. As used herein, "Parent Real Property" means all
assets of Parent or any Retained Subsidiary used in connection with the
Retained Business consisting of real property, appurtenances thereto,
rights in connection therewith, and any interest therein, whether owned or
leased.
(b) With respect to the Retained Business, Parent is in
material compliance with all Environmental Laws and has obtained and is in
material compliance with all permits required pursuant to Environmental
Laws, and Parent has not received any notices, demands, requests for
information, complaints or orders, and no investigation, action, claim,
suit or proceeding is pending or threatened by any Governmental Entity,
with respect to any matters relating to Parent and relating to or arising
out of any Environmental Laws.
(c) There are no material liabilities of or relating to
Parent with respect to the Retained Business arising under or relating to
any Environmental Law, and to the best knowledge of Parent, there are no
facts, conditions, circumstances or situations which could reasonably be
expected to result in or be the basis for any such liability.
(d) Parent has delivered to the Seller true and complete
copies of all documents, notices, reports, studies, analyses, tests,
permits and other written materials identified in Section 4.21 of Parent's
Disclosure Schedule and any environmental reports or audits in the
possession of Parent relating to the Parent Real Property.
Section 4.22. Accounts Receivable. The accounts
receivable of the Retained Business were incurred in the ordinary course of
business and are not subject in the aggregate to material counterclaim or
set-off.
Section 4.23. Transactions with Certain Persons. Except
as set forth on Section 4.23 of Parent's Disclosure Schedule and the Parent
SEC Documents, during the past three years Parent and the Retained
Subsidiaries have not purchased or leased any property or obtained any
services from, or sold or leased any property or furnished any services to
(except with respect to remuneration for services rendered as a director,
officer or employee of Parent or the Retained Subsidiaries), in the
ordinary course of business or otherwise, any Affiliate of Parent other
than the Retained Subsidiaries, or any of such Affiliates' respective
officers, directors or employees, holders, directly or indirectly, of 10
percent or more of their outstanding capital stock, or, to the knowledge of
Parent, any spouse, child or parent of any of the foregoing.
Section 4.24. Certain Fees. Except as set forth on
Section 4.24 of Parent's Disclosure Schedule, neither Parent nor any of its
Subsidiaries has employed any financial advisor or finder or incurred any
liability for any financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
Section 4.25. Parent Rights Plan. The Board of
Directors of Parent has taken all action necessary to render the rights
issued pursuant to the Rights Agreement, dated as of October 8, 1993, as
amended, between Parent and The Bank of New York, as Rights Agent (the
"Parent Rights Plan"), inapplicable to the Merger, this Agreement and the
transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SPINCO
Spinco represents and warrants to Seller and Company as
follows:
Section 5.1. Organization. Spinco is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted. Spinco is duly qualified or licensed and
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by
it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in
good standing would not, when taken together with all other such failures,
have or reasonably be expected to have a material adverse effect ("Spinco
Material Adverse Effect") on the ability of Spinco to perform its
obligations under or consummate the transactions contemplated by this
Agreement, the Distribution Agreement or any other Transaction Document to
which it is a party.
Section 5.2. Authority Relative to this Agreement.
Spinco has full corporate power and authority to execute and deliver this
Agreement, the Distribution Agreement and the Transaction Documents to
which it is a party and, subject to the Required Regulatory Approvals, to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement, the Distribution Agreement and the other
Transaction Documents to which it is a party by Spinco, and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by the Board of Directors of Spinco and no
other corporate proceedings on the part of Spinco are or will be necessary
to authorize this Agreement, the Distribution Agreement and the other
Transaction Documents to which it is a party or to consummate the
transactions contemplated hereby and thereby. This Agreement and the
Distribution Agreement each has been duly and validly executed and
delivered by Spinco and each constitutes a valid and binding agreement of
Spinco, and each other Transaction Document, when executed and delivered by
the parties thereto, will be a valid and binding agreement of Spinco,
enforceable against Spinco in accordance with their respective terms,
except to the extent that enforcement thereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or other similar laws, now or hereafter in effect, relating to the
creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law
or in equity).
Section 5.3. Consents and Approvals; No Violations.
(a) Except for the Required Regulatory Approvals, such
filings and approvals as may be required under the "takeover" or "blue sky"
laws of various states, and as disclosed in Section 4.4(a) of Parent's
Disclosure Schedule or as contemplated by this Agreement, no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any Governmental Entity or any other Person is necessary for
the execution and delivery of this Agreement, the Distribution Agreement
and the other Transaction Documents to which it is a party by Spinco or the
consummation by Spinco of the transactions contemplated hereby and thereby,
other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as
the case may be, would not, in the aggregate, have or reasonably be
expected to have a Spinco Material Adverse Effect.
(b) Except as set forth in Section 4.4(b) of Parent's
Disclosure Schedule, the execution and delivery of this Agreement, the
Distribution Agreement and the other Transaction Documents to which Spinco
is a party by Spinco and the consummation by Spinco of the transactions
contemplated hereby and thereby will not, in any material respect, violate,
conflict with or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any
of the properties or assets of Spinco or any of its Subsidiaries under any
of the terms, conditions or provisions of (i) the charter or by-laws of
Spinco, (ii) subject to obtaining the Required Regulatory Approvals, any
material Law applicable to Spinco or any of its properties or assets or
(iii) any material Contract to which Parent or any Retained Subsidiary is a
party that is intended to be included in the Spinco Assets pursuant to the
Distribution Agreement and that does not provide for the release of Parent
or such Retained Subsidiary from the obligations thereunder upon the
assignment thereof to Spinco or a Spinco Subsidiary.
ARTICLE VI
COVENANTS
Section 6.1. Conduct of Business of Company. Except as
contemplated by this Agreement or as specifically set forth in Schedule 6.1
of Seller's Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time, Seller will cause each Acquired Company
and its Subsidiaries to conduct its operations according to its ordinary
course of business, consistent with past practice, will use its
commercially reasonable efforts to (i) preserve intact its business
organization, (ii) maintain its material rights and franchises, (iii) keep
available the services of its officers and key employees, and (iv) keep in
full force and effect insurance comparable in amount and scope of coverage
to that maintained as of the date hereof. Without limiting the generality
of and in addition to the foregoing, and except as otherwise contemplated
by this Agreement, neither Acquired Company nor any of their Subsidiaries
will, without the prior written consent of Parent;
(a) amend its charter or by-laws (or other organizational
documents);
(b) authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other securities or,
except as required by law, amend any of the terms of any such securities or
agreements outstanding on the date hereof, except for (i) the issuance by
Company of Company Shares upon exercise of Company Options outstanding on
the date hereof and (ii) the granting of options upon cancellation of
existing options, so long as the aggregate number of options outstanding at
any time prior to the Effective Time does not exceed the number of options
outstanding on the date hereof;
(c) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock or redeem or otherwise acquire any of its securities
or any securities of its Subsidiaries; provided, however, that each
Acquired Company (and its Subsidiaries) may, prior to the Effective Time,
declare and pay cash dividends in respect of their capital stock;
(d) (i) pledge or otherwise encumber shares of capital
stock of either Acquired Company or any of their Subsidiaries; or (ii)
except in the ordinary course of business consistent with past practices,
(A) incur, assume or prepay any long-term debt or incur, assume, or prepay
any obligations with respect to letters of credit or any material short-
term debt, unless after the incurrence or assumption thereof all such debt
for the Acquired Companies and their Subsidiaries does not in the aggregate
exceed $105 million; (B) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for any
material obligations of any other person except wholly owned Subsidiaries
of each Acquired Company; (C) make any material loans, advances or capital
contributions to, or investments in, any other Person; (D) change the
practices of either Acquired Company or its Subsidiaries with respect to
the timing of payments or collections; or (E) except as contemplated by
existing credit arrangements set forth on Seller's Disclosure Schedule,
mortgage or pledge any properties or assets of either Acquired Company or
any of its Subsidiaries or create or permit to exist any material
Encumbrance thereupon;
(e) except (i) for arrangements entered into in the
ordinary course of business consistent with past practices, (ii) as
contemplated by this Agreement with respect to the Company Options, or
(iii) as required by Law, enter into, adopt or materially amend or change
the funding or accrual practices of any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements of or for the benefit or welfare
of any employee of either Acquired Company or any of its Subsidiaries (or
any other person for whom either Acquired Company or any of its
Subsidiaries will have liability), or (except for normal increases in the
ordinary course of business that are consistent with past practices)
increase in any manner the compensation or fringe benefits of any employee
of either Acquired Company or any of its Subsidiaries (or any other person
for whom either Acquired Company or any of its Subsidiaries will have
liability) or pay any benefit not required by any existing plan and
arrangement (including the granting of stock options, stock appreciation
rights, shares of restricted stock or performance units) or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing;
(f) transfer, sell, lease, license or dispose of any
lines of business, Subsidiaries, divisions, operating units or facilities
(other than facilities currently closed or currently proposed to be closed)
outside the ordinary course of business or enter into any material
commitment or transaction outside the ordinary course of business;
(g) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a portion of the
properties or assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any properties
or assets of any other Person (other than the purchase of properties or
assets in the ordinary course of business and consistent with past
practice), in each case where such action would be material to the Acquired
Companies and their Subsidiaries;
(h) except as may be required by Law, take any action to
terminate or materially amend any of its pension plans or retiree medical
plans with respect to or for the benefit of any employee of either Acquired
Company or any of its Subsidiaries (or any other person for whom either
Acquired Company or any of its Subsidiaries will have liability);
(i) materially modify, amend or terminate any Acquired
Company Material Contract or waive any material rights or claims of either
Acquired Company or any of its Subsidiaries thereunder, except in the
ordinary course of business consistent with past practice; provided, that
the provisions of this Section 6.1(i) shall not apply to any arrangement,
agreement or contract proposal previously submitted by either Acquired
Company or a Subsidiary thereof which proposal, upon acceptance thereof,
cannot be revised or withdrawn;
(j) effect any material change in any of its methods of
accounting in effect as of August 31, 1996, except as may be required by
Law or GAAP;
(k) enter into any Acquired Company Material Contract
other than in the ordinary course of business; or
(l) enter into a legally binding commitment with respect
to, or any agreement to take, any of the foregoing actions.
Section 6.2. Conduct of Retained Business. Except as
contemplated by this Agreement, the Distribution Agreement, the UK Stock
Purchase Agreement or the Benefits Allocation Agreement or as specifically
set forth in Schedule 6.2 of Parent's Disclosure Schedule, during the
period from the date of this Agreement to the Effective Time, Parent and
the Retained Subsidiaries will each conduct the Retained Business according
to its ordinary course of business, consistent with past practice, will use
its commercially reasonable efforts to (i) preserve intact the Retained
Business organization, (ii) maintain its material rights and franchises
with respect to the Retained Business, (iii) keep available the services of
officers and key employees of the Retained Business, and (iv) keep in full
force and effect insurance comparable in amount and scope of coverage to
that maintained as of the date hereof. Without limiting the generality of
and in addition to the foregoing, and except as otherwise contemplated by
this Agreement, the Distribution Agreement, the UK Stock Purchase Agreement
or the Benefits Allocation Agreement, neither Parent nor any Retained
Subsidiary will, without the prior written consent of Seller:
(a) amend its charter or by-laws (or other organizational
documents);
(b) authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other securities or,
except as required by Law, amend any of the terms of any such securities or
agreements outstanding on the date hereof; except (i) as contemplated by
this Agreement, the Distribution Agreement and the other Transaction
Documents and (ii) pursuant to securities or agreements outstanding on the
date hereof;
(c) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock or redeem or otherwise acquire any of its securities
or any securities of any Retained Subsidiary; provided, however, that
Parent and the Retained Subsidiaries may declare cash dividends in respect
of their capital stock;
(d) (i) pledge or otherwise encumber shares of capital
stock of any Retained Subsidiary; or (ii) except in the ordinary course of
business consistent with past practices, permit any Retained Subsidiary to
(A) incur, assume or prepay any long-term debt or incur, assume, or prepay
any obligations with respect to letters of credit or any material short-
term debt; (B) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for any material
obligations of any other person except wholly owned Retained Subsidiaries;
(C) make any material loans, advances or capital contributions to, or
investments in, any other Person; (D) change the practices of the Retained
Business with respect to the timing of payments or collections; or (E)
mortgage or pledge any properties and assets of the Retained Business or
any Retained Subsidiary or create or permit to exist any material
Encumbrance thereupon;
(e) except (i) for arrangements entered into in the
ordinary course of business consistent with past practices, (ii) as
contemplated in the Benefits Allocation Agreement, or (iii) as required by
Law, enter into, adopt or materially amend or change the funding or accrual
practices of any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreements, trusts, plans, funds or
other arrangements of or for the benefit or welfare of any Retained
Employee (or any other person for whom the Retained Business will have
liability), or (except for normal increases in the ordinary course of
business that are consistent with past practices) increase in any manner
the compensation or fringe benefits of any Retained Employee (or any other
person for whom the Retained Business will have liability) or pay any
benefit not required by any existing plan and arrangement (including the
granting of stock options, stock appreciation rights, shares of restricted
stock or performance units) or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
(f) transfer, sell, lease, license or dispose of any
lines of business, Subsidiaries, divisions, operating units or facilities
(other than facilities currently closed or currently proposed to be closed)
relating to the Retained Business outside the ordinary course of business
or enter into any material commitment or transaction with respect to the
Retained Business outside the ordinary course of business;
(g) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a portion of the
properties and assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any properties
and assets of any other Person (other than the purchase of properties and
assets in the ordinary course of business and consistent with past
practice) that would become part of the Retained Business, in each case
where such action would be material to the Retained Business;
(h) except as may be required by Law, take any action to
terminate or materially amend any of its pension plans or retiree medical
plans with respect to or for the benefit of Retained Employees or any other
person for whom the Retained Business will have liability;
(i) materially modify, amend or terminate any Retained
Business Material Contract or waive any material rights or claims of the
Retained Business thereunder, except in the ordinary course of business
consistent with past practice; provided, that the provisions of this
Section 6.2(i) shall not apply to any arrangement, agreement or contract
proposal previously submitted by Parent or a Subsidiary thereof which
proposal, upon acceptance thereof, cannot be revised or withdrawn;
(j) effect any material change in any of its methods of
accounting in effect as of January 3, 1997, except as may be required by
Law or GAAP;
(k) enter into any Retained Business Material Contract
other than in the ordinary course of business; or
(l) enter into a legally binding commitment with respect
to, or any agreement to take, any of the foregoing actions.
Section 6.3. Acquisition Proposals.
(a) After the date hereof and prior to the Effective
Time or earlier termination of this Agreement, unless Seller shall
otherwise agree in writing, Parent shall not, and shall not authorize any
officer, director or employee or any investment banker, attorney,
accountant or other agent, advisor or representative of Parent or any of
its Subsidiaries or Affiliates over which it exercises control to, directly
or indirectly, (i) initiate, solicit, negotiate, encourage, or provide
confidential information to facilitate the making of any Acquisition
Proposal (as defined in Section 6.3(b) hereof), (ii) enter into any
agreement with respect to any Acquisition Proposal or give any approval of
the type referred to in Section 6.3(b) with respect to any Acquisition
Proposal or (iii) participate in any discussions regarding any Acquisition
Proposal; provided, however, that, in response to any unsolicited
Acquisition Proposal, Parent and its Subsidiaries may (at any time prior to
the Parent Stockholder Approvals) furnish information concerning its
business, properties or assets to the Person (a "Potential Acquiror")
making such Acquisition Proposal and participate in negotiations with the
Potential Acquiror if (x) Parent's Board of Directors is advised by one or
more of its independent financial advisors that such Potential Acquiror has
the financial wherewithal to consummate such a potential Acquisition
Proposal, (y) Parent's Board of Directors reasonably determines, after
receiving advice from Parent's financial advisor, that such Acquisition
Proposal would involve consideration to Parent's stockholders and other
terms that taken as a whole are superior to the Distribution and the
Merger, and (z) based upon advice of counsel to such effect, Parent's Board
of Directors determines in good faith that it is necessary to so furnish
information and negotiate in order to comply with its fiduciary duty to
stockholders of Parent; provided, further, that nothing herein shall
prevent Parent's Board of Directors from taking, and disclosing to Parent's
stockholders, a position contemplated by Rules 14D-9 and 14e-2 promulgated
under the Exchange Act with regard to any tender offer. In the event
Parent shall determine to provide any information as described above, or
shall receive any offer of the type referred to in this Section 6.3, it
shall promptly inform Seller orally or in writing as to the fact that
information is to be provided and shall furnish to Seller a description of
the material terms thereof. Parent will keep Seller informed of the status
and material details (including amendments or proposed amendments of any
such proposed Acquisition Proposal).
(b) For purposes of this Agreement, the term
"Acquisition Proposal" means any bona fide proposal, in writing, made by a
Person to acquire beneficial ownership (as defined under Rule 13(d) of the
Exchange Act), pursuant to a merger, consolidation or other business
combination, sale of shares of capital stock, sale of assets, tender offer
or exchange offer or similar transaction, involving Parent, the Retained
Subsidiaries or the Retained Business, including any single or multi-step
transaction or series of related transactions (other than the transactions
contemplated by this Agreement and the Distribution Agreement) which is
structured to permit such Person to acquire beneficial ownership of any
material portion of the assets of, or any material portion of the equity
interest in any of Parent, the Retained Subsidiaries or the Retained
Business; provided, however, that the term "Acquisition Proposal" shall not
include any transaction or series of transactions which relate solely to
the businesses to be owned by Spinco and the Spinco Subsidiaries following
the Distribution so long as the consummation of such transaction or
transactions (x) would not reasonably be anticipated to adversely affect or
delay the consummation of the Merger, the Distribution or the transactions
contemplated hereby and (y) could not cause Spinco to cease to be engaged
in the conduct of the active trade or businesses relied upon for the
purposes of satisfying the requirements of Section 355(b) for purposes of
the ruling request described in Section 6.12.
(c) After the date hereof and prior to the Effective
Time or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, Seller shall not, and shall not authorize any
officer, director or employee or any investment banker, attorney,
accountant or other agent, advisor or representative of Seller, either
Acquired Company or any of their respective Subsidiaries or Affiliates over
which they exercise control to, directly or indirectly, (i) initiate,
solicit, negotiate, encourage, or provide confidential information to
facilitate any Company Acquisition Proposal (as defined in Section 6.3(d)
hereof), (ii) enter into any agreement with respect to any Company
Acquisition Proposal or give any approval of the type referred to in
Section 6.3(d) with respect to any Company Acquisition Proposal or (iii)
participate in any discussions regarding any Company Acquisition Proposal.
(d) For purposes of this Agreement, the term "Company
Acquisition Proposal" means any bona fide proposal, in writing, made by a
Person to acquire beneficial ownership (as defined under Rule 13(d) of the
Exchange Act), pursuant to a merger, consolidation or other business
combination, sale of shares of capital stock, sale of assets, tender offer
or exchange offer or similar transaction, involving either Acquired Company
or any of their Subsidiaries, including any single or multi-step
transaction or series of related transactions (other than the transactions
contemplated by this Agreement and the Distribution Agreement) which is
structured to permit such Person to acquire beneficial ownership of any
material portion of the assets of, or any material portion of the equity
interest in either Acquired Company or any of their Subsidiaries.
Section 6.4. Access to Information.
(a) Between the date of this Agreement and the Effective
Time, upon reasonable notice and at reasonable times, and subject to any
access, disclosure, copying or other limitations imposed by applicable Law
or any Contract of either Acquired Company or their Subsidiaries, each
Acquired Company will give Parent and/or Acquisition and their authorized
representatives reasonable access to all offices and other facilities of
each Acquired Company and to all books and records of each Acquired Company
and its Subsidiaries, and will permit Parent and Acquisition to make such
inspections as they may reasonably require, and will cause its officers and
those of its Subsidiaries to furnish Parent and Acquisition with such
financial and operating data and other information with respect to such
Acquired Company and its Subsidiaries as Parent or Acquisition may from
time to time reasonably request. Parent, Acquisition and their authorized
representatives will conduct all such inspections in a manner which will
minimize any disruptions of the business and operations of each Acquired
Company and its Subsidiaries.
(b) Between the date of this Agreement and the Effective
Time, upon reasonable notice and at reasonable times, and subject to any
access, disclosure, copying or other limitations imposed by applicable Law
or any of Parent's or the Retained Subsidiaries' contracts, Parent will
give Seller, Company and their authorized representatives reasonable access
to all offices and other facilities of Parent and the Retained Subsidiaries
and to all books and records of Parent and the Retained Subsidiaries that
relate to the Retained Business, and will permit Seller and Company to make
such inspections as they may reasonably require, and will cause its
officers and those of the Retained Subsidiaries to furnish Seller and
Company with such financial and operating data and other information with
respect to Parent and the Retained Subsidiaries as Seller or Company may
from time to time reasonably request, so long as such information and
inspections relate solely to the Retained Business. Seller, Company and
their authorized representatives will conduct all such inspections in a
manner which will minimize any disruptions of the business and operations
of Parent and the Retained Subsidiaries. For purposes of this Section
6.4(b), information that relates to the Retained Business shall be deemed
to include portions of the Tax Returns filed by Parent and its Subsidiaries
relating to the Retained Business and books and records relating thereto
and such other information relating to Taxes and Tax Returns as would be
available to Parent under the terms of the Tax Sharing Agreement if it were
in effect on the date hereof in the form attached hereto as Exhibit C.
(c) Parent, Spinco, Acquisition, Seller and Company
agree that the provisions of the Confidentiality Agreement dated as of July
17, 1997 (the "Confidentiality Agreement") by and between Parent and Seller
shall remain binding and in full force and effect and that the terms of the
Confidentiality Agreement are incorporated herein by reference; provided
that (x) actions taken by Parent, Seller and their Subsidiaries that are
permitted by Section 2.01(a) of the Benefits Allocation Agreement shall be
deemed not to breach the Confidentiality Agreement and (y) the second full
paragraph on page 5 thereof is superseded by the terms hereof (and
therefore is of no further force or effect). Prior to the Effective Time,
Parent will assign its rights and obligations with respect to Spinco and
the Spinco Business under the Confidentiality Agreement to Spinco, which
assignment is hereby consented to by Seller.
Section 6.5. Reasonable Efforts. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees to use
all commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under applicable Laws to consummate and make effective
the transactions contemplated by this Agreement and the Distribution
Agreement (including (i) cooperating in the preparation and filing of the
Proxy Statement, the Form 10 (or any registration statement contemplated
pursuant to Article III of the Distribution Agreement), and any amendments
to any thereof; (ii) taking of all action reasonably necessary, proper or
advisable to secure any necessary consents or waivers from any Governmental
Entity or other Person; (iii) contesting any pending legal proceeding
relating to the Merger or the Distribution; and (iv) executing any
additional instruments necessary to consummate the transactions
contemplated hereby and thereby). In case at any time after the Effective
Time any further action is necessary to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall use
all reasonable efforts to take all such necessary action.
Section 6.6. Consents. Each of Parent, Spinco,
Acquisition, Seller and Company shall cooperate and use their respective
reasonable efforts to make all filings and obtain all consents and
approvals of governmental authorities and other third parties, including
collective bargaining representatives, necessary to consummate the
transactions contemplated by this Agreement and the Distribution Agreement.
Each of the parties hereto will furnish to the other party such necessary
information and reasonable assistance as such other persons may reasonably
request in connection with the foregoing.
Section 6.7. Antitrust Filings.
(a) In addition to and without limiting the agreements
contained in Section 6.6 and under the UK Stock Purchase Agreement, Parent,
Spinco, Acquisition, Seller and Company will (i) take promptly all actions
necessary to make the filings required of Parent, Seller or any of their
affiliates under the applicable Antitrust Laws (as defined below), (ii)
comply at the earliest practicable date with any request for additional
information or documentary material received by Parent, Seller or any of
their affiliates from the Federal Trade Commission or the Antitrust
Division of the Department of Justice pursuant to the HSR Act and from the
Commission or other foreign governmental or regulatory authority pursuant
to Antitrust Laws, and (iii) cooperate with the other parties hereto in
connection with any filing under applicable Antitrust Laws and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement or the Distribution Agreement
commenced by any of the Federal Trade Commission, the Antitrust Division of
the Department of Justice, the OFT, state attorneys general, the Commission
or other foreign governmental or regulatory authorities ("Antitrust
Authorities"). As used herein, "Antitrust Law" means the ▇▇▇▇▇▇▇ Act, as
amended, the ▇▇▇▇▇▇▇ Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, and all other federal, state and foreign
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other Laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization
or restraint of trade.
(b) In furtherance and not in limitation of the
covenants contained in Section 6.6 and Section 6.7(a) hereof and under the
UK Stock Purchase Agreement, Parent, Spinco, Acquisition, Seller and
Company shall each use all reasonable efforts to resolve such objections,
if any, as may be asserted with respect to the Distribution, the Merger or
any other transactions contemplated by this Agreement or the Distribution
Agreement under any Antitrust Law. If any administrative, judicial or
legislative action or proceeding is instituted (or threatened to be
instituted) challenging the Distribution, the Merger or any other
transactions contemplated by this Agreement or the Distribution Agreement
as violative of any Antitrust Law, Parent, Acquisition, Seller and Company
shall each take all reasonable action as may be required by the applicable
Antitrust Authority in order to resolve such objections as such Antitrust
Authority may have to such transactions under any Antitrust Law, so long as
such actions would not reasonably be expected to adversely affect in a
substantial way the benefits and opportunities that any party reasonably
expects to receive from the transactions contemplated by this Agreement and
the Distribution Agreement.
(c) Each of Parent, Spinco, Acquisition, Seller and
Company shall promptly (i) inform the other parties of any material
communication received by such party from any Antitrust Authority regarding
any of the transactions or filings contemplated hereby and (ii) advise the
other parties with respect to any understanding, undertaking or agreement
(whether oral or written) which such party proposes to make or enter into
with any of the foregoing parties with regard to any of the transactions
contemplated hereby.
Section 6.8. Public Announcements. Parent, Spinco,
Acquisition, Seller and Company will consult with each other before issuing
any press release or otherwise making any public statements with respect to
the Distribution or the Merger and shall not issue any such press release
or make any such public statement prior to such consultation, except as may
be required by Law or by obligations pursuant to any listing agreement with
any securities exchange. If any party issues a release or public
statement, it shall promptly provide a copy thereof to the other parties.
Section 6.9. Financial Statements.
(a) For the periods following the date hereof, Seller
and Company will make available to Parent and Acquisition as soon as
available unaudited combined balance sheets for the Acquired Companies and
their Subsidiaries for each fiscal quarter and the related unaudited
consolidated statements of operations and cash flows and changes in
stockholder's equity for the periods then ended. All such financial
statements shall be prepared in conformity with GAAP applied on a
consistent basis except for changes, if any, required by GAAP and disclosed
therein. The statements of operations and cash flows shall present fairly
the results of operations and cash flows of the Acquired Companies and
their Subsidiaries for the respective periods covered, and the balance
sheets shall present fairly in all material respects the financial
condition of the Acquired Companies and their Subsidiaries as of their
respective dates. All such interim financial statements shall reflect all
adjustments (which, except as otherwise indicated on such financial
statements, consist only of normal recurring adjustments not material in
amount and include estimated provisions for year-end adjustments) necessary
for a fair presentation.
(b) For the periods following the date hereof, Parent
and Acquisition will make available to Seller and Company as soon as
available unaudited consolidated balance sheets for the Retained Business
for each fiscal quarter and the related unaudited consolidated statements
of operations and cash flows and changes in stockholder's equity for the
periods then ended. All such financial statements shall be prepared in
conformity with GAAP applied on a consistent basis except for changes, if
any, required by GAAP and disclosed therein. The statements of operations
and cash flows shall present fairly the results of operations and cash
flows of the Retained Business for the respective periods covered, and the
balance sheets shall present fairly in all material respects the financial
condition of the Retained Business as of their respective dates. All such
interim financial statements shall reflect all adjustments (which, except
as otherwise indicated on such financial statements, consist only of normal
recurring adjustments not material in amount and include estimated
provisions for year-end adjustments) necessary for a fair presentation.
Section 6.10. Registration of Spinco Shares. If Parent
reasonably determines that the Distribution may not be effected without
registering the shares of common stock of Spinco to be distributed in the
Distribution pursuant to the Securities Act, Parent, as promptly as
practicable, shall use its efforts to cause the shares of Spinco to be
registered pursuant to the Securities Act and thereafter effect the
Distribution in accordance with the terms of the Distribution Agreement
including by preparing and filing on an appropriate form a registration
statement under the Securities Act covering the shares of Spinco and using
commercially reasonable efforts to cause such registration statement to be
declared effective and preparing and making such other filings as may be
required under applicable state securities laws.
Section 6.11. Stockholders' Approval. Parent shall, in
accordance with applicable Law, its Certificate of Incorporation and its
By-laws:
(a) duly call, give notice of, convene and hold a special
meeting of its stockholders for the purpose of considering and taking
action upon this Agreement;
(b) subject to its fiduciary duties under applicable Law,
include in the Proxy Statement prepared for distribution to stockholders of
Parent in advance of the stockholders' meeting in accordance with
Regulation 14C promulgated under the Exchange Act a recommendation of its
Board of Directors that the Merger and the Distribution are in the best
interests of the stockholders of Parent and recommending approval and
adoption of this Agreement and the Merger; and
(c) prepare and file with the SEC the Proxy Statement,
respond promptly to any comments made by the SEC with respect to the Proxy
Statement and any preliminary version thereof, cause the Proxy Statement to
be mailed to its stockholders and, subject to its fiduciary duties under
applicable Law, use its best efforts to obtain the necessary approvals of
this Agreement by its stockholders.
Seller and Company will provide Parent with the information concerning
Seller and each Acquired Company required to be included in the Proxy
Statement.
Section 6.12. Tax Ruling. Parent, Spinco, Acquisition,
Seller and Company shall promptly prepare and submit to the IRS a private
letter ruling request seeking confirmation that the transactions
contemplated by the Distribution Agreement and this Agreement qualify as a
tax-free transaction under Sections 355 and 368 of the Code. The receipt
of such a private letter ruling is a condition to the obligations of the
parties hereunder. Each party agrees and acknowledges that the receipt of
such a private letter ruling may be conditioned on the making of additional
representations to the IRS, on one or more party's acceptance of and
agreement to certain covenants which may restrict such party's future
activities, on changes to certain rights and obligations of the parties
hereunder, or on changes to certain aspects of the structure of the
transactions contemplated by the Distribution Agreement and this Agreement
(including the Corporate Governance Arrangements set forth in Exhibit D
hereto (the "Corporate Governance Arrangements")). Each party agrees to
consider any such proposed representations, covenants or changes in good
faith and to agree thereto unless so agreeing would be reasonably likely
(x) to deprive such party of benefits that are a material portion of the
benefits expected to be derived by such party and its Affiliates following
the Distribution from the transactions contemplated by the Distribution
Agreement and this Agreement or (y) to inflict upon such party burdens or
risks that are material in comparison to the benefits expected to be
derived by such party and its Affiliates following the Distribution from
such transactions; provided that the parties shall have agreed upon any
adjustments to the terms and conditions of the transactions contemplated
hereby that are reasonably necessary in order to reflect, to the extent
practicable, the economic effect of any such proposed representations,
covenants or changes that have a reasonably identifiable economic effect on
the transactions contemplated in this Agreement. The parties agree to
negotiate any such adjustments in good faith.
Section 6.13. Tax Sharing Agreement. Attached hereto as
Exhibit C is a form of Tax Sharing and Indemnification Agreement (the "Tax
Sharing Agreement") to which the parties have agreed and which, subject to
the next two sentences, the parties agree to execute on or prior to the
Closing Date. Such form of Tax Sharing Agreement may require modification
in light of the final representations and warranties made to the IRS in
support of such private letter ruling and of any changes to the transaction
made pursuant to Section 6.12. The parties agree to make such
modifications to the form of Tax Sharing Agreement as are necessary (x) to
reflect such representations and warranties and any such changes, (y) to
include covenants not to cause such representations and warranties to be
untrue and (z) to provide indemnification consistent with the existing form
of Tax Sharing Agreement for breaches of such representations, warranties
and covenants and for any failure of the same to be true or to be
performed.
Section 6.14. Notices of Certain Events. (a) Seller
and Company shall promptly notify Parent and Acquisition of (i) any notice
or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions
contemplated by this Agreement, (ii) any notice or other communication from
any Governmental Entity in connection with the transactions contemplated by
this Agreement and (iii) any actions, suits, claims, investigations or
proceedings commenced or, to the knowledge of Seller and Company,
threatened against, relating to or involving or otherwise affecting either
Acquired Company or any Subsidiary of either Acquired Company that, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 3.11 or that relate to the consummation
of the transactions contemplated by this Agreement, and (b) Parent and
Acquisition shall promptly notify Seller and Company of (i) any notice or
other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions
contemplated by this Agreement, (ii) any notice or other communication from
any Governmental Entity in connection with the transactions contemplated by
this Agreement and (iii) any actions, suits, claims, investigations or
proceedings commenced or, to the knowledge of Parent and Acquisition,
threatened against, relating to or involving or otherwise affecting Parent
or any Retained Subsidiary that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 4.11 or
that relate to the consummation of the transactions contemplated by this
Agreement.
Section 6.15. Transaction Documents. Simultaneously
with the execution hereof, Parent and certain of its Subsidiaries are
entering into the Distribution Agreement, the Omnibus Agreement and certain
other Transaction Documents. The parties acknowledge that other
Transaction Documents are not being entered into on the date hereof but
instead either (i) have been negotiated and are attached as exhibits or
schedules to either this Agreement or the Distribution Agreement or (ii)
have their principal terms set forth in term sheets attached as exhibits or
schedules to either this Agreement or the Distribution Agreement. The
execution and delivery of all such other Transaction Documents are
conditions to the consummation of the transactions contemplated hereby and
by the Transaction Documents. Therefore, the parties shall negotiate in
good faith to finalize definitive documentation for all Transaction
Documents as soon as reasonably practicable and either (x) execute such
Transaction Documents, which would become effective upon consummation of
the Merger, or (y) execute such Transaction Documents immediately prior to
the consummation of the Merger. It is the intent of the parties that all
such Transaction Documents be finalized by November 1, 1997. The failure
of any party to comply with the provisions of this Section 6.15 shall not
excuse such party from its obligations under this Agreement or the Omnibus
Agreement to consummate the transactions contemplated hereby or thereby.
Section 6.16. Retention of Auditors. Prior to the
Effective Time, Parent will cause Price Waterhouse LLP to be appointed as
its auditors, on customary and arms-length terms and conditions, so long as
Price Waterhouse LLP satisfies requirements of applicable law. For the
avoidance of doubt, the provisions of this Section 6.16 shall not impact
the procedures set forth in Exhibit A hereto or in Section 2.8(f) of the
Distribution Agreement.
Section 6.17. Termination or Redemption of Parent Rights
Plan. At Seller's request, Parent shall take all actions necessary to
enter into amendments to the Parent Rights Plan, the effect of which would
be to terminate the Parent Rights Plan or cause the rights issued under the
Parent Rights Plan to be extinguished, canceled, redeemed or otherwise made
inapplicable; provided that any costs incurred in redeeming any such rights
shall be borne by Seller.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1. Conditions to Each Party's Obligation to
Effect the Merger. The respective obligation of each party to effect the
Merger is subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) This Agreement and the Distribution Agreement shall
have been adopted by the affirmative vote of the stockholders of Parent by
the requisite vote in accordance with applicable Law;
(b) No statute, rule, regulation, order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits the consummation of the Distribution,
the Merger or the transactions contemplated hereby;
(c) Any waiting period applicable to the Merger under
the Antitrust Laws shall have terminated or expired and all other Required
Regulatory Approvals shall have been received;
(d) Parent shall have received a favorable IRS ruling on
qualification of the transactions contemplated by the Distribution
Agreement, in form and substance reasonably satisfactory to Parent and
Seller, subject to the provisions of Section 6.12; and
(e) The closing under the UK Stock Purchase Agreement
shall have occurred.
Section 7.2. Conditions to the Obligation of Seller and
Company to Effect the Merger. The obligation of Seller and Company to
effect the Merger is further subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) The representations and warranties of Parent,
Acquisition and Spinco contained in this Agreement (without giving effect
in any such representation or warranty to any materiality or Parent
Material Adverse Effect standard, qualification or exception contained
therein) shall be true at and as of the Effective Time with the same effect
as though made at and as of such time (except for representations and
warranties which speak as of a different date, which shall be true as of
such date); provided, however, that the representations and warranties of
Parent, Acquisition and Spinco need not be true, correct and complete at
and as of the Effective Time (or at such different date) so long as such
representations and warranties which are not true, correct or complete at
and as of the Effective Time (taken together but without giving effect to
any materiality or Parent Material Adverse Effect standard, qualification
or exception contained therein) would not, in the aggregate, have a
material adverse effect on the business, operations, properties, assets,
conditions (financial or otherwise) or results of operations of Company and
the Retained Business, taken as a whole (a "Combined Business Material
Adverse Effect"); and provided further that, if the transactions
contemplated by the UK Stock Purchase Agreement are consummated, the
representations and warranties of Parent, Acquisition and Spinco at and as
of the Effective Time will be deemed not to include representations and
warranties concerning MMS UK and its business and operations;
(b) Each of Parent, Spinco and Acquisition shall have
(x) performed in all material respects its obligations under this Agreement
(including Section 6.15 hereof) that are required to be performed by it at
or prior to the Effective Time pursuant to the terms hereof, (y) executed
and delivered any Transaction Document to which it is a party in the form
(or according to the terms) contemplated by this Agreement and the
Distribution Agreement (with only such changes as have been approved by
Seller in its reasonable discretion) and (z) performed in all material
respects its obligations under each such Transaction Document that are
required to be performed by it at or prior to the Effective Time pursuant
to the terms thereof;
(c) Each of Parent, Acquisition and Spinco will furnish
Seller and Company with such certificates and other documents to evidence
the fulfillment of the conditions set forth in this Section 7.2 as Seller
and Company may reasonably request;
(d) Each of Parent, Acquisition and Spinco shall deliver
to Seller and Company the following with respect to Parent, Acquisition or
Spinco, as the case may be, each, unless otherwise noted, dated as of the
Effective Time:
(i) Certified copies of the Certificate of
Incorporation of such Person, together with a good standing
certificate from the Secretary of State of its jurisdiction of
incorporation and each other state in which such Person is
qualified as a foreign corporation to do business and, to the
extent generally available, a certificate or other evidence of
good standing as to payment of any applicable franchise or similar
taxes from the appropriate taxing authority of each of such
jurisdictions, each dated a recent date prior to the Effective
Time;
(ii) Copies of the By-laws of such Person,
certified as of the Effective Time by such Person's corporate
secretary or an assistant secretary;
(iii) Resolutions of the Board of Directors of
such Person approving and authorizing the execution, delivery and
performance of this Agreement and, if applicable, the Transaction
Documents, certified as of the Effective Time by the corporate
secretary or an assistant secretary of such Person as being in
full force and effect without modification or amendment; and
(iv) Signature and incumbency certificates of
the officers of such Person executing the Agreement and the
Transaction Documents;
(e) Other than consents and approvals that relate solely
to the Retained Business, any third party consents and approvals required
to be set forth at Section 4.4(b) of Parent's Disclosure Schedule (whether
or not actually set forth at such Section) that are still required shall
have been received, unless Seller and Spinco shall have entered into
arrangements satisfactory to Seller with respect to any such third party
consents and approvals that have not been received;
(f) All of the capital stock of MMS Canada shall be held
directly by Parent;
(g) The Board of Directors of Parent will have taken all
action necessary to render the rights issued pursuant to the terms of the
Parent Rights Plan inapplicable to the Merger, this Agreement and the
transactions contemplated hereby; and
(h) The Distribution shall have been consummated in
accordance with the terms of the Distribution Agreement (which shall not
have been amended without the consent of Seller, such consent not to be
unreasonably withheld) and each supplemental indenture contemplated by
Section 2.8 of the Distribution Agreement that is required to be entered
into pursuant to such Section shall be in form and substance reasonably
satisfactory to Seller.
Section 7.3. Conditions to Obligations of Parent, Spinco
and Acquisition to Effect the Merger. The obligations of Parent, Spinco
and Acquisition to effect the Merger are further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of Seller and
Company contained in this Agreement (without giving effect in any such
representation or warranty to any materiality or Company Material Adverse
Effect standard, qualification or exception contained therein) shall be
true at and as of the Effective Time with the same effect as though made at
and as of such time (except for representations and warranties which speak
as of a different date, which shall be true as of such date); provided
however, that the representations and warranties of Seller and Company need
not be true at and as of the Effective Time (or at such different date) so
long as such representations and warranties which are not true at and as of
the Effective Time (taken together but without giving effect to any
materiality or Company Material Adverse Effect standard, qualification or
exception contained therein) shall not constitute a Combined Business
Material Adverse Effect;
(b) Each of Seller and Company shall have (x) performed
in all material respects its obligations under this Agreement (including
Section 6.15 hereof) that are required to be performed by it at or prior to
the Effective Time pursuant to the terms hereof, (y) executed and delivered
any Transaction Document to which it is a party in the form (or according
to the terms ) contemplated by this Agreement and the Distribution
Agreement (with only such changes as have been approved by Parent in its
reasonable discretion) and (z) performed in all material respects its
obligations under each such Transaction Document that are required to be
performed by it at or prior to the Effective Time pursuant to the terms
thereof;
(c) Each of Seller and Company will furnish Parent and
Acquisition with such certificates and other documents to evidence the
fulfillment of the conditions set forth in this Section 7.3 as Parent or
Acquisition may reasonably request;
(d) Each of Seller and Company shall deliver to Parent,
Spinco and Acquisition the following with respect to Seller and Company, as
the case may be, each, unless otherwise noted, dated as of the Effective
Time:
(i) Certified copies of the Certificate of Incorporation
of each Acquired Company together with a good standing certificate
from the Secretary of State of its jurisdiction of incorporation
and each other state in which each Acquired Company is qualified
as a foreign corporation to do business and, to the extent
generally available, a certificate or other evidence of good
standing as to payment of any applicable franchise or similar
taxes from the appropriate taxing authority of each of such
jurisdictions, each dated a recent date prior to the Effective
Time;
(ii) Copies of the By-laws of each Acquired Company,
certified as of the Effective Time by such Acquired Company's
corporate secretary or an assistant secretary;
(iii) Resolutions of the Board of Directors of such
Person approving and authorizing the execution, delivery and
performance of the Agreement, and, if applicable, the Transaction
Documents, certified as of the Effective Time by the corporate
secretary or an assistant secretary of such Person as being in
full force and effect without modification or amendment; and
(iv) Signature and incumbency certificates of the
officers of such Person executing the Agreement;
(e) Other than consents and approvals that relate solely
to the Retained Business, any third party consents and approvals required
to be set forth at Section 3.4(b) of Seller's Disclosure Schedule (whether
or not actually set forth at such Section) that are still required shall
have been received;
(f) The Distribution shall have been consummated in
accordance with the terms of the Distribution Agreement; and
(g) Any Contracts between Seller or any of its
Affiliates and any Acquired Company or any of their Affiliates relating to
the matters covered by the Assistance Agreement attached hereto as Exhibit
E-1 and the Royalty Agreement Term Sheet attached hereto as Exhibit E-2
shall have been terminated.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1. Termination. This Agreement may be
terminated and the Merger may be abandoned at any time (notwithstanding
approval of the Merger by the stockholders of Parent, Acquisition or
Company) prior to the Effective Time:
(a) by mutual written consent of Parent, Acquisition,
Spinco, Seller and Company;
(b) by Parent, Acquisition, Spinco, Seller or Company if
any court of competent jurisdiction or other Governmental Entity shall have
issued a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the consummation of the
Distribution or the Merger and such order, decree, ruling or other action
is or shall have become nonappealable;
(c) by Seller or Company if there shall have been a
breach of any covenant in this Agreement or any Transaction Document on the
part of Parent, Spinco or Acquisition which (x) materially adversely
affects (or materially delays) the consummation of the Merger and the other
transactions contemplated hereby or thereby and (y) has not been cured
prior to 30 days following notice of such breach;
(d) by the Parent, Spinco or Acquisition if there shall
have been a breach of any covenant in this Agreement or any Transaction
Document on the part of Seller or Company which (x) materially adversely
affects (or materially delays) the consummation of the Merger and the other
transactions contemplated hereby or thereby and (y) has not been cured
prior to 30 days following notice of such breach;
(e) by Parent, Spinco, Acquisition, Seller or Company if
stockholders of Parent fail to approve and adopt the Distribution, the
Merger and the other transactions contemplated hereby at the meeting called
for such purpose (or any adjournment thereof);
(f) by Parent, if (i) the Board of Directors of Parent
shall have determined in good faith, based on the advice of outside
counsel, that it is necessary, in order to comply with its fiduciary duties
to Parent's stockholders under applicable law, to terminate this Agreement
to enter into an agreement with respect to or to consummate a transaction
constituting a Superior Proposal (as defined below), (ii) Parent shall
have given notice to Seller advising Seller that Parent has received a
Superior Proposal from a third party, specifying the material terms and
conditions (including the identity of the third party), and that Parent
intends to terminate this Agreement in accordance with this Section 8.1(f)
and (iii) either (A) Seller shall not have revised its Acquisition
Proposal within ten days from the time on which such notice is deemed to
have been given to Seller, or (B) if Seller within such period shall have
revised its Acquisition Proposal, the Board of Directors of Parent, after
receiving advice from Parent's financial advisor, shall have determined in
its good faith reasonable judgment that the third party's Acquisition
Proposal is superior to Seller's revised Acquisition Proposal;
(g) by Parent, Spinco, Acquisition, Seller or Company if
the consummation of the Merger has not occurred by June 30, 1998;
(h) by Parent, Spinco, or Acquisition if a condition to
closing set forth in Section 7.1 or Section 7.3 becomes incapable of being
satisfied; or
(i) by Seller or Company if a condition to closing set
forth in Section 7.1 or Section 7.2 becomes incapable of being satisfied.
As used herein, the term "Superior Proposal" means an
Acquisition Proposal by a Person which the Board of Directors of Parent
determines in its good faith reasonable judgment to be more favorable to
Parent's stockholders than the Distribution and the Merger (based on advice
of Parent's independent financial advisor that the value of the
consideration provided for in such proposal is superior to the value of the
consideration provided for in the Merger and the other transactions
contemplated hereby), for which financing, to the extent required, is then
committed and for which Parent's Board of Directors determines, in its good
faith reasonable judgment, that such proposed transaction is reasonably
likely to be consummated without undue delay.
Section 8.2. Effect of Termination. Except as specified
in Section 9.12, in the event of the termination and abandonment of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party
hereto or its affiliates, directors, officers or shareholders, other than
the provisions of this Section 8.2 and Article IX hereof. Nothing
contained in this Section 8.2 shall relieve any party from liability for
any breach of any agreement or covenant contained in this Agreement or any
Transaction Document.
Section 8.3. Amendment. This Agreement may be amended
by an instrument executed by Parent, Spinco, Acquisition, Seller and
Company at any time before or after adoption of the Merger by the
stockholders of Parent.
Section 8.4. Extension; Waiver. At any time prior to
the Effective Time, the parties may (a) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (b)
waive any inaccuracies in the representations and warranties of the other
parties contained herein or in any document, certificate or writing
delivered pursuant hereto or (c) waive compliance with any of the
agreements or conditions of the other parties hereto contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Survival. Except as otherwise expressly
set forth in the Distribution Agreement or another Transaction Document,
the representations, warranties, covenants and agreements made herein shall
not survive beyond the Effective Time; provided that the covenants and
agreements contained in Sections 6.5, 6.6 and 6.10 hereof shall survive
beyond the Effective Time without limitation.
Section 9.2. Entire Agreement. Except for the
provisions of the Confidentiality Agreement which shall continue in full
force and effect as modified hereby, this Agreement and the Transaction
Documents (including the schedules and exhibits referred to herein and
therein) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersedes all other prior negotiations,
commitments, agreements and understandings, both written and oral, between
the parties or any of them with respect to the subject matter hereof.
Section 9.3. Governing Law. This Agreement shall be
governed by and construed in accordance with the Laws of the State of New
York (regardless of the Laws that might otherwise govern under applicable
principles of conflicts Law) as to all matters, including matters of
validity, construction, effect, performance and remedies.
Section 9.4. Notices. All notices and other
communications hereunder shall be in writing and shall be deemed given upon
(a) confirmation of receipt of a facsimile transmission, (b) confirmed
delivery by a standard overnight carrier or when delivered by hand or (c)
the expiration of five Business Days (or seven Business Days if from the
United States to France or vice versa) after the day when mailed by
certified or registered mail, postage prepaid, addressed at the following
addresses (or at such other address for a party as shall be specified by
like notice):
(a) If to Parent, Spinco or Acquisition, to:
Marriott International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopy: 301/380-8150
with a copy to:
Marriott International, Inc.
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▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy: 301/380-6727
and a copy to:
O'Melveny & ▇▇▇▇▇ LLP
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▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: 202/383-5414
(b) If to Seller or Company, to:
Sodexho Alliance, S.A.
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇ - ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 011-331-3085-5088
with a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: 212/450-4800
As used in this Agreement, "Business Day" means any calendar day which is
not a Saturday, Sunday or a public holiday under the laws of New York or
Maryland.
Section 9.5. Successors and Assigns; No Third Party
Beneficiaries. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either
party (whether by operation of law or otherwise) without the prior written
consent of the other party. Notwithstanding the preceding sentence or
anything in any Transaction Document to the contrary, prior to consummation
of the transactions contemplated hereby, Spinco may assign its rights and
obligations hereunder and under the other Transaction Documents to any
wholly-owned U.S. subsidiary of Parent other than a Retained Subsidiary,
which wholly owned subsidiary shall, following the Distribution, own all of
the assets of Parent and its Subsidiaries (including shares of capital
stock of Subsidiaries and any other ownership interests in any Person)
other than the Retained Business. In the event of such an assignment and
assumption, the assignor shall be released from all of its obligations
under this Agreement and the assignee shall become Spinco for all purposes
under this Agreement and the Transaction Documents. This Agreement shall
be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 9.6. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same instrument.
Section 9.7. Interpretation. The descriptive headings
herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
For all purposes of this Agreement, except as otherwise expressly provided,
(i) the enumeration of one or more items following the term "including"
shall not be interpreted as excluding any items not so enumerated, (ii)
defined terms shall include the plural as well as the singular, (iii) all
references to "Articles," "Sections" or other subdivisions are to
designated Articles, Sections and other subdivisions of the body of this
Agreement, (iv) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and (v) the words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular Article, Section or other subdivision.
References to the "knowledge" or "best knowledge" of Parent, Acquisition or
any Subsidiary of Parent shall mean (and be limited) to the actual
knowledge of the individuals identified in Section 9.7 of Parent's
Disclosure Schedule. References to the "knowledge" or "best knowledge" of
Seller, Company, or any Subsidiary of Seller shall mean (and be limited) to
the actual knowledge of the individuals identified in Section 9.7 of
Seller's Disclosure Schedule.
Section 9.8. Schedules. The Schedules hereto shall be
construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
Section 9.9. Legal Enforceability. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without affecting the validity or
enforceability of the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. If any provision
of this Agreement is so broad as to be unenforceable, the provision shall
be interpreted to be only so broad as is enforceable.
Section 9.10. Specific Performance. Each of the parties
hereto acknowledges and agrees that in the event of any breach of this
Agreement, each non-breaching party would be irreparably and immediately
harmed and could not be made whole by monetary damages. It is accordingly
agreed that the parties hereto (a) will waive, in any action for specific
performance, the defense of adequacy of a remedy at law and (b) shall be
entitled, in addition to any other remedy to which they may be entitled at
law or in equity, to compel specific performance of this Agreement in any
action instituted in any state or federal court sitting in New York. The
parties hereto consent to personal jurisdiction in any such action brought
in any state or federal court sitting in New York and to service of process
upon it in the manner set forth in Section 9.4 hereof.
Section 9.11. Consent to Jurisdiction; Waiver of Jury
Trial. Each party irrevocably agrees that any legal action or proceeding
arising out of or relating to this Agreement shall be instituted in any
State or Federal court sitting in New York City, Borough of Manhattan (and
each party agrees not to commence any legal action or proceeding except in
such courts), and each party irrevocably submits to the jurisdiction of
such courts in any such action or proceeding. Seller hereby agrees that
service of process in any such action or proceeding may be made upon
Company, and the Seller irrevocably appoints Company as its true and lawful
agent to receive on behalf of itself and its properties, service of process
in any such action or proceeding, and Company irrevocably accepts such
appointment. Each party irrevocably consents to service of process in any
such action or proceeding upon it by mail at its address set forth in
Section 9.4 of this Agreement (or, in the case of Seller and Company, upon
Company at its principal U.S. offices, located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇). Any party serving process upon
Company as agent for Seller shall also provide a copy to Seller at its
notice address in accordance with Section 9.4. The foregoing provisions
shall not limit the right of any party to obtain execution on any judgment
rendered in any such action or proceeding in any other appropriate
jurisdiction or in any other manner. Seller agrees that a final judgment
against it in any legal action or proceeding arising out of or relating to
this Agreement shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified or exemplified copy of which judgment shall be conclusive
evidence thereof, or by any other means provided by law. EACH PARTY HEREBY
AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT.
Section 9.12. Certain Expenses. (a) If this Agreement
is terminated by Parent pursuant to Section 8.1(f) hereof, Parent shall pay
promptly to Seller an amount equal to the reasonable fees and expenses paid
or payable by or on behalf of Seller and Company to their attorneys,
accountants, consultants and advisors in connection with the negotiation,
execution and delivery of this Agreement; provided that such payment shall
in no event exceed $5,000,000. Such payment shall be made in same day
funds no later than five Business Days after receipt by Parent of a
statement (including invoices) describing in reasonable detail such fees
and expenses.
(b) If following a termination pursuant to Section
8.1(f) hereof, Parent shall, within twelve months following the date of
such termination, consummate an Acquisition Proposal with the Person that
made the Superior Proposal that resulted in this Agreement being
terminated, then Parent shall promptly pay to Seller a fee equal to
$75,000,000. Such payment shall be made in same day funds no later than
five Business Days after the consummation of such transaction.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement and Plan of Merger to be executed on its behalf by its officers
thereunto duly authorized, all as of the day and year first above written.
MARRIOTT INTERNATIONAL, INC. (to be
renamed "Sodexho Marriott Services,
Inc.")
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and Chief Operating
Officer
MARRIOTT-ICC MERGER CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
NEW MARRIOTT MI, INC. (to be renamed
"Marriott International, Inc.")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
SODEXHO ALLIANCE, S.A.
By: /s/ B. Carton
------------------------------------
Name: B. Carton
Title: Vice President, Finance
INTERNATIONAL CATERING CORPORATION
By: /s/ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇. ▇▇▇▇▇▇
Title: President
Schedule 2.6
Directors of Surviving Corporation
▇▇▇▇▇▇▇ O'Dell
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
Schedule 2.7
Officers of Surviving Corporation
▇▇▇▇▇▇ ▇▇▇▇▇▇ -- President and Chief Executive Officer
▇▇▇▇▇▇ ▇▇▇▇▇ -- Treasurer and Vice President, Finance
▇▇▇▇▇ ▇▇▇▇▇ -- Secretary
Exhibit A
NET TANGIBLE ASSETS ADJUSTMENT FORMULA
1. Definitions. Unless specified below, capitalized
terms have the meaning ascribed to them in the Agreement and Plan of Merger
(the "Agreement") to which this Exhibit A is attached. As used in this
Exhibit A, the following terms shall have the following meanings:
"Adjusted Net Tangible Assets" means, with respect to the
Acquired Companies and their Subsidiaries on a combined basis, the amount
by which "stockholders equity" exceeds "intangible assets" as reflected on
the combined balance sheet of the Acquired Companies prepared in accordance
with the Agreed Accounting Procedures as of immediately prior to and
without giving effect to the consummation of the transactions contemplated
by the Agreement and the Transaction Documents other than the making of the
Seller Contribution contemplated by Section 1.2(a) of the Agreement.
"Agreed Accounting Procedures" means the accounting
methodologies, policies, practices, assumptions and procedures used by
Seller in the preparation of the combined balance sheet for the Acquired
Companies at August 31, 1997, as articulated and/or modified if and to the
extent necessary (and only if and to the extent necessary) (I) to correct
any material discrepancy between such methodologies, policies, practices
and procedures and GAAP and (II) properly to reflect, consistent with GAAP
and with such Agreed Accounting Procedures, events, facts or circumstances
occurring subsequent to August 31, 1996 and not already reflected in such
consolidated balance sheet; provided that (i) any events, facts or
circumstances which occur more than 30 days after the Closing Date will not
be taken into account in connection with the preparation of the
Distribution Date Statement and (ii) no write-downs or write-ups of (or
valuation reserves for) deferred tax assets will be made (or provided)
because of any concern about whether Parent will have sufficient taxable
income to utilize such assets.
2. Adjustment Procedures. (a) Within 60 days after the
Distribution, Seller will prepare and deliver or cause to be delivered to
Parent and Spinco a statement (the "Closing Date Statement") that includes
a combined balance sheet for the Acquired Companies as of the moment
immediately prior to the consummation of the transactions contemplated by
this Agreement and the Transaction Documents (other than the making of the
Seller Contribution contemplated by Section 1.2(a) of the Agreement),
prepared in accordance with the Agreed Accounting Procedures, and a
calculation, set forth in reasonable detail, of the Adjusted Net Tangible
Assets for the Acquired Companies, on a combined basis, as of such time.
The Closing Date Statement shall be accompanied by a report of the Company
Auditors stating, without qualification, that such balance sheet and such
calculation have been prepared in accordance with this Exhibit A. Seller
will afford Parent's and Spinco's representatives reasonable access, upon
reasonable notice and during reasonable hours, to records and information
of the Acquired Companies during the preparation of the Closing Date
Statement and a reasonable opportunity to participate in the preparation
thereof.
(b) Spinco, Parent and Seller acknowledge and agree that
the purpose of the procedures and adjustments contemplated by this Exhibit
A is to ensure that the Adjusted Net Tangible Assets of the Acquired
Companies, on a combined basis, determined as provided herein and in
accordance with the Agreed Accounting Procedures, is equal to the sum of
$269,000,000. For the avoidance of doubt, it is expressly agreed that no
objection may be raised and no adjustment may be proposed to any entry or
item contained in the Closing Date Statement except on grounds that such
item or entry is not in accordance with the provisions of this Exhibit A or
the Agreed Accounting Procedures consistently applied; without prejudice,
however, to a party's right to challenge or propose adjustment to items or
entries on grounds that such items or entries are not so in accordance with
the provisions of this Exhibit A and the Agreed Accounting Procedures,
consistently applied.
(c) Following the delivery of the Closing Date Statement
to Parent and Spinco, Parent and Spinco will have the right to review the
Closing Date Statement to determine whether it was prepared in accordance
with this Exhibit A and the Agreed Accounting Procedures. Seller will
permit Parent and Spinco and their independent public accountants access at
all reasonable times to all of the working papers, analyses and schedules
of Seller and the Acquired Companies utilized or prepared in connection
with the preparation of the Closing Date Statement. Within the 30-day
period after receipt of the Closing Date Statement, Parent and Spinco will,
in a written notice to Seller, either accept the Closing Date Statement or
describe in reasonable detail any proposed adjustments to the Closing Date
Statement and the reasons therefor, in which case the notice from Parent
and Spinco will include a special report of the independent public
accountants of Spinco and Parent stating that such adjustments are required
in accordance with this Exhibit A. If Seller has not received such notice
of proposed adjustments within such 30-day period, Parent and Spinco will
be deemed irrevocably to have accepted the Closing Date Statement.
(d) Parent, Spinco and Seller will negotiate in good
faith to resolve any disputes over any proposed adjustments to the Closing
Date Statement. However, if any such dispute is not resolved within 30
days following the receipt by Seller of the proposed adjustments, Parent,
Spinco and Seller jointly will jointly engage KPMG Peat Marwick to resolve
such disputes in accordance with the standards set forth in this Exhibit A,
which resolution will be final and binding. Each party will bear a portion
of the fees and expenses of that accounting firm equal to the proportion of
the disputed amount determined in favor of the other party.
(e) Upon the acceptance of the Closing Date Statement by
Parent and Spinco or the resolution in writing of any disputes arising out
of any proposed adjustments, (A) if the Adjusted Net Tangible Assets of the
Acquired Companies, on a combined basis, as set forth on the Closing Date
Statement as so accepted or as modified to resolve such disputes is greater
than $269,000,000, Parent will promptly (but in no event more than five
days thereafter) pay to Seller the amount of such excess, together with
interest as computed below, or (B) if the Adjusted Net Tangible Assets of
the Acquired Companies, on a combined basis, as set forth on the Closing
Date Statement as so accepted or as modified to resolve such disputes is
less than $269,000,000, Seller will promptly (but in no event more than
five days thereafter) pay to Parent the amount of such difference, together
with interest as computed below. Interest will be payable on the amounts
set forth above from the Distribution Date through and including the date
of such payment at a rate per annum calculated as 6-month LIBOR (appearing
on the Dow ▇▇▇▇▇/Telerate Monitor on Telerate Access Service Page 3750
determined at 11:00 AM London time on the Closing Date and, if necessary,
each 6-month anniversary thereof) plus one percent (1.00%), computed based
on a 360-day year and the number of days elapsed. Any such payment under
this Exhibit A will be made by wire transfer of immediately available funds
in U.S. Dollars.