Exhibit 10.1
- -------------------------------------------------------------------------------
SHARE EXCHANGE AGREEMENT
DATED AS OF JULY 27, 1998
AMONG
VSI ACQUISITION II CORPORATION, as Buyer,
THE STOCKHOLDERS OF BUYER,
AND
THE SELLERS SPECIFIED HEREIN
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
1. DEFINITIONS..............................................................................................1
2. SALE, EXCHANGE AND TRANSFER OF SHARES; CLOSING..........................................................12
2.1 Sale of Shares.................................................................................12
2.2 Consideration..................................................................................12
2.3 Repurchase of Shares...........................................................................13
2.4 Closing........................................................................................14
2.5 Closing Obligations............................................................................14
3. CONDITIONS TO OBLIGATIONS OF BUYER AND THE
VSI STOCKHOLDERS........................................................................................15
3.1 Accuracy of Representations....................................................................15
3.2 Sellers' Performance...........................................................................16
3.3 Governmental Approvals.........................................................................16
3.4 Material Adverse Effect........................................................................16
3.5 No Proceedings.................................................................................17
3.6 No Prohibition.................................................................................17
3.7 Stockholders' Agreement........................................................................17
3.8 Additional Documents...........................................................................17
3.9 Consent of GE Capital..........................................................................18
3.10 Bank Consent...................................................................................18
3.11 GE Capital.....................................................................................18
3.12 Non-Foreign Tax Status.........................................................................18
3.13 Proceedings Satisfactory.......................................................................18
4. CONDITIONS TO OBLIGATIONS OF SELLERS....................................................................18
4.1 Accuracy of Representations....................................................................18
4.2 Buyer's and the VSI Stockholders' Performance..................................................19
4.3 Governmental Approvals.........................................................................19
4.4 Material Adverse Effect........................................................................19
4.5 No Proceedings.................................................................................20
4.6 No Prohibition.................................................................................20
4.7 Stockholders' Agreement........................................................................20
4.8 Additional Documents...........................................................................21
4.9 Lien in Favor of GE Capital....................................................................21
4.10 Bank Consent...................................................................................21
4.11 Proceedings Satisfactory.......................................................................21
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND THE VSI
STOCKHOLDERS............................................................................................21
5.1 Organization and Good Standing.................................................................21
5.2 Capital Structure..............................................................................22
i
Page
----
5.3 Authority Relative to Contemplated Transactions................................................23
5.4 Absence of Conflict............................................................................23
5.5 Governmental Approvals and Consents............................................................23
5.6 Financial Statements...........................................................................23
5.7 Books and Records..............................................................................24
5.8 Inventory......................................................................................24
5.9 Accounts Receivable............................................................................24
5.10 Title to Property; Encumbrances................................................................24
5.11 Marks, Software and Similar Rights.............................................................25
5.12 Litigation.....................................................................................25
5.13 Absence of Undisclosed Liabilities.............................................................26
5.14 Tax Matters....................................................................................26
5.15 Absence of Certain Changes or Events...........................................................26
5.16 Employee and Labor Matters.....................................................................28
5.17 Employee Benefit Matters.......................................................................28
5.18 Insurance......................................................................................29
5.19 Environmental Matters..........................................................................29
5.20 Material Agreements............................................................................31
5.21 Compliance with Law............................................................................32
5.22 No Brokers or Finders..........................................................................33
5.23 Investment Intent..............................................................................34
5.24 Absence of Certain Business Practices..........................................................34
5.25 Disclosure.....................................................................................34
5.26 Affiliate Transactions.........................................................................35
5.27 Securities and Other Matters...................................................................35
6. REPRESENTATIONS AND WARRANTIES OF SELLERS...............................................................35
6.1 Organization and Good Standing.................................................................35
6.2 Capital Structure..............................................................................36
6.3 Authority Relative to Contemplated Transactions................................................37
6.4 Absence of Conflict............................................................................37
6.5 Governmental Approvals and Consents............................................................37
6.6 Financial Statements...........................................................................37
6.7 Books and Records..............................................................................38
6.8 Inventory......................................................................................38
6.9 Accounts Receivable............................................................................38
6.10 Title to Property; Encumbrances................................................................38
6.11 Marks, Software................................................................................39
6.12 Litigation.....................................................................................39
6.13 Absence of Undisclosed Liabilities.............................................................40
6.14 Tax Matters....................................................................................40
6.15 Absence of Certain Changes or Events...........................................................40
6.16 Employee and Labor Matters.....................................................................42
ii
Page
----
6.17 Employee Benefit Matters.......................................................................43
6.18 Insurance......................................................................................43
6.19 Environmental Matters..........................................................................44
6.20 Material Agreements............................................................................46
6.21 Compliance with Law............................................................................47
6.22 No Brokers or Finders..........................................................................48
6.23 Investment Intent..............................................................................48
6.24 Absence of Certain Business Practices..........................................................48
6.25 Disclosure.....................................................................................49
6.26 Affiliate Transactions.........................................................................49
6.27 Securities and Other Matters...................................................................49
7. FURTHER AGREEMENTS OF THE PARTIES.......................................................................50
7.1 Operation of the Businesses of the Buyer Companies and
Service America Companies......................................................................50
7.2 Negative Covenant..............................................................................50
7.3 Notification...................................................................................50
7.4 No Negotiation.................................................................................51
7.5 Access Prior to the Closing....................................................................51
7.6 Director and Officer Liability and Indemnification.............................................51
7.7 Third Party Consents; Further Assurances.......................................................52
7.8 Offering Memorandum............................................................................52
7.9 Consent of GE Capital..........................................................................52
7.10 Execution of Document..........................................................................53
7.11 Buyer Obligation to Obtain Appraisal...........................................................53
7.12 Service America Preferred Stock Matters........................................................53
7.13 Other Preferred Stock Matters..................................................................53
7.14 GE Capital Lien. .............................................................................54
8. TERMINATION.............................................................................................54
8.1 Termination Events.............................................................................54
8.2 Effect of Termination..........................................................................54
9. INDEMNIFICATION AND RELATED MATTERS.....................................................................55
9.1 Indemnity......................................................................................55
9.2 Indemnification Procedure......................................................................55
9.3 Limits on Indemnification......................................................................56
9.4 Calculation of Damages.........................................................................58
10. MINORITY STOCKHOLDERS...................................................................................58
iii
Page
----
11. GENERAL PROVISIONS......................................................................................58
11.1 Expenses.......................................................................................58
11.2 Public Disclosure or Communications............................................................59
11.3 Confidentiality................................................................................59
11.4 Notices........................................................................................59
11.5 Further Assurances.............................................................................61
11.6 Arbitration; Exclusive Remedy..................................................................61
11.7 Amendment and Waiver...........................................................................61
11.8 Entire Agreement...............................................................................62
11.9 Schedules......................................................................................62
11.10 Governing Law..................................................................................62
11.11 Assignments, Successors, and No Third-Party Rights.............................................62
11.12 Paoletti.......................................................................................63
11.13 Severability...................................................................................63
11.14 Section Headings, Construction.................................................................63
11.15 Counterparts...................................................................................63
Exhibits
2.5(b)(ii) Promissory Note
3.7 Stockholders' Agreement
3.8(a)(i) Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP
3.9 Waiver and Amendment Agreement
3.11 Assignment and Assumption Amendment
4.8(a)(i) Opinion of Simpson, Thacher & Bartlett
7.7(b) Joint Request
iv
Schedules
Schedule 2.2 Methodology to Determine Consideration
Schedule 2.3(a) Methodology to Determine Repurchase of Shares
Schedule 3.4(a) Aggregate value for Service America Customer Contracts
terminated or to which no consents obtained
Schedule 4.4 Aggregate value for Buyer Company Customers Contracts
terminated
Schedule 5.1(a) List of Subsidiaries of Buyer and the capitalization thereof;
Encumbrances on Subsidiary shares
Schedule 5.1(b) Jurisdiction in which Buyer and each of its Subsidiaries are
incorporated and qualified to do business
Schedule 5.2(a) Ownership of Buyer Common Stock
Schedule 5.2(c) Outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements pertaining to
capital stock of Buyer or any of its Subsidiaries
Schedule 5.4 Exceptions to absence of conflict representation pertaining to
any material contract identified on Section 5.20
Schedule 5.5 Governmental approvals and consents required by VSI
Stockholders or any Buyer Companies
Schedule 5.6 Buyer Financial Statement items not in conformance with
GAAP
Schedule 5.9 List of exceptions to Buyer Companies accounts receivable
representation
Schedule 5.10(a) List of Buyer real property leases; exceptions to
representation
Schedule 5.10(b) List of Buyer Assets
Schedule 5.10(c) Unsuitable and inappropriate uses of tangible personal
property of any Buyer Company
Schedule 5.11 List of Buyer Company Software and Marks
Schedule 5.12 List of Proceedings against any Buyer Company
Schedule 5.13 List of undisclosed liabilities of Buyer Companies
Schedule 5.14 Exceptions to tax matter representation
v
Schedule 5.15 Non-Ordinary Course Activities of each Buyer Company
Schedule 5.16 List of collective bargaining agreements and strikes and
similar activities affecting Buyer Companies and other
employee and labor related matters
Schedule 5.18 List of insurance policies of Buyer Companies; other
insurance arrangements and obligations of Buyer Companies
Schedule 5.19 Exceptions to environmental matters representation
pertaining to Buyer
Schedule 5.20(a) List of material agreements of Buyer Companies
Schedule 5.20(b) Exceptions to contract representation of Buyer Companies
Schedule 5.21(c) List of Governmental Authorizations of Buyer Companies
Schedule 5.22 Brokers or finders retained by VSI Stockholders or Buyer
Companies
Schedule 5.26 Affiliate transactions
Schedule 6.1(a) List of Subsidiaries of Service America and the
capitalization thereof; Encumbrances on Subsidiary shares
Schedule 6.1(b) Jurisdiction in which Service America and each of its
Subsidiaries are incorporated and qualified to do Business
Schedule 6.2(a) Ownership of Service America Capital
Schedule 6.2(c) Outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements pertaining to
capital stock of Service America or any of its Subsidiaries
Schedule 6.4 Exceptions to absence of conflict representation pertaining to
any material contract identified on Schedule 6.20
Schedule 6.5 Governmental approvals and Consents required by Sellers or
any Service America Seller
Schedule 6.6 Service America Financial Statements items not in
conformance with GAAP
Schedule 6.7 Exceptions to books and records representation
Schedule 6.9 List of exceptions to Service America Companies accounts
receivable representations
Schedule 6.10(a) List of Service America real property leases; exceptions to
representations
vi
Schedule 6.10(b) List of Service America Assets
Schedule 6.10(c) Unsuitable or inappropriate uses of tangible personal
property of any Service America Company
Schedule 6.11 List of Service America Company Software and Marks
Schedule 6.12 List of Proceedings against any Service America Company
Schedule 6.13 List of undisclosed liabilities of Service America Companies
Schedule 6.15 Non-Ordinary Course Activities of each Service America
Company
Schedule 6.16 List of collective bargaining agreements and strikes and
similar activities affecting Service America and its
Subsidiaries and other employee and labor related matters
Schedule 6.18(a) List of insurance policies of Service America Companies
Schedule 6.18(b) Other insurance arrangements and obligations of Service
America Companies
Schedule 6.19 Exceptions to environmental matters representation
pertaining to Service America Companies
Schedule 6.20(a) List of material agreements of Service America Companies
Schedule 6.20(b) Exceptions to contract representation pertaining to Service
America Companies
Schedule 6.21(c) List of Governmental Authorizations of Service America
Companies
Schedule 6.22 Brokers or Finders retained by Service America Sellers or
Service America Companies
Schedule 6.26 Affiliate transactions
vii
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement (this "Agreement") is made as of July 27,
1998 by (i) VSI Acquisition II Corporation, a Delaware corporation ("Buyer"),
(ii) BCP Volume L.P., a Delaware limited partnership ("BCP Volume"), BCP
Offshore Volume L.P., a Cayman Island exempt limited partnership ("BCP
Offshore"), and VSI Management Direct L.P., a Delaware limited partnership ("VSI
Management Direct" and, collectively with BCP Volume and BCP Offshore, the "VSI
Stockholders"), and (iii) General Electric Capital Corporation, a New York
corporation ("GE Capital"), the Dee Family Limited Partnership, a Virginia
limited partnership (the "Dee Partnership"), John T. Dee ("Dee"), Michael J.
Higgins ("Higgins") and Robert Paoletti ("Paoletti" and, collectively with GE
Capital, the Dee Partnership, Dee and Higgins, "Sellers").
Recitals:
A. Sellers own substantially all of the issued and outstanding Service
America Common Stock (as hereinafter defined) and the Service America Preferred
Stock (as hereinafter defined) (collectively, the "Service America Shares") and
a warrant to purchase Service America Common Stock (the "Service America
Warrant" and, together with the Service America Shares, the "Service America
Capital") of Service America Corporation, a Delaware corporation ("Service
America"), each Seller owning the number and class of Service America Capital
set forth opposite such Seller's name on Schedule 6.2(a); and
B. Sellers desire to sell, and Buyer desires to buy, all of the Service
America Capital for the consideration and on the terms set forth in this
Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1 (terms defined in the singular to
have the correlative meaning in the plural and vice versa):
"AAA" -- as defined in Section 11.6.
"Affiliate" -- with respect to any Person, any entity that, directly or
indirectly, controls or is controlled by that Person, or is under common control
with that Person. For the purposes of this definition, "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
"Agreement" -- as defined in the preamble to this Agreement.
"Assignment and Assumption Amendment" -- as defined in Section 3.11.
"Basket Amount" -- as defined in Section 9.3(c).
"BCP Offshore" -- as defined in the preamble to this Agreement.
"BCP Volume" -- as defined in the preamble to this Agreement.
"Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
"Best Knowledge of Buyer and the VSI Stockholders" -- the actual
knowledge of Lawrence Hatch, Ronald Skadow, Kenneth Frick and/or any general
partner of Blackstone.
"Best Knowledge of Sellers" -- the actual knowledge of any executive
officer of GE Capital involved in the business of, or decisions affecting,
Service America, Dee, Higgins and/or Paoletti.
"Blackstone" -- BCP Offshore and BCP Volume.
"Business Day" -- any day that is not a Saturday or Sunday or a day on
which banks located in New York are authorized or required to be closed.
"Buyer" -- as defined in the preamble to this Agreement.
"Buyer and the VSI Stockholders Disclosure Schedule" -- as defined in
Section 5.
"Buyer Assets" -- as defined in Section 5.10(b).
"Buyer Audited Financial Statements" -- as defined in Section 5.6.
"Buyer Common Stock" -- the common stock, par value $.01 per share, of
Buyer.
"Buyer Companies" -- Buyer or any of its Subsidiaries.
"Buyer Financial Statements" -- as defined in Section 5.6.
"Buyer 401(K) Plan" -- as defined in Section 5.17.
"Buyer Interim Financial Statements" -- as defined in Section 5.6.
"Buyer Personal Property Leases" -- as defined in Section 5.20(a).
2
"Buyer Real Property Leases" -- as defined in Section 5.10(a).
"Capital Expenditure Amount" -- with respect to Service America
Companies or Buyer Companies, the amount of capital expenditures recorded as
such in accordance with GAAP on its financial statements during the six month
period ending June 27, 1998 (for the Service America Companies) or June 30, 1998
(for the Buyer Companies).
"Claim Statement" -- as defined in Section 9.2(a).
"Closing" -- as defined in Section 2.4.
"Closing Date" -- the date and time as of which the Closing actually
takes place.
"Confidentiality Agreements" -- (i) the two letter agreements between
Service America and Volume Services, Inc. dated May 21, 1998 and (ii) the letter
agreement between Service America and BCP Volume dated February 18, 1998.
"Consent" -- any approval, consent, ratification, waiver or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Service America Capital by Sellers to Buyer and
the delivery by Buyer to Sellers of the consideration contemplated in Section 2;
and
(b) the performance by Buyer, the VSI Stockholders and Sellers of
their respective covenants and obligations under this Agreement.
"Contract" -- any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Customer" -- the customer party to each Customer Contract.
"Customer Contract" -- each Contract pursuant to which an entity
provides food, beverage and other services to any Person.
"Dee" -- as defined in the preamble to this Agreement.
"Dee Partnership" -- as defined in the preamble to this Agreement.
"Encumbrance" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
3
"Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life and any other
environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities" -- any cost, damages,
expense, liability, obligation or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial" and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended.
"Environmental Law" -- any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged and used
so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
4
(e) protecting resources, species or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Excess Financing Proceeds" -- the balance of the proceeds derived from
the Financing after the payment of the amounts identified in Section 6.1(a)(i)
through and including (v) of the Stockholders' Agreement.
"Facilities" -- any real property, leaseholds orother interests
currently or formerly owned or operated by any Person and any buildings, plants
or structures currently or formerly owned or operated by any Person.
"Fifth Tranche" -- the next amount of Excess Financing Proceeds after
full utilization of the Fourth Tranche.
"Final Adjustment" -- with respect to Service America Companies or
Buyer Companies, the sum of its (a) Capital Expenditure Amount (which will be
expressed as a positive number), (b) Indebtedness Amount (which will be
expressed as a negative number) and (c) Working Capital Difference (which will
be expressed as either a positive or a negative number), in each case based on
the procedures for finally determining such amount in accordance with Section
2.2(b).
"Financial Representative" -- Dominick & Dominick Incorporated.
"Financing" -- a financing consummated by Buyer on or prior to the
first anniversary of the Closing Date, the proceeds of which shall be used to
pay or redeem certain expenses, indebtedness and capital stock of Buyer in the
manner described herein and in the Stockholders' Agreement.
"First Tranche" -- the first $1,250,000 of Excess Financing Proceeds.
"Fourth Tranche" -- the next amount of Excess Financing Proceeds after
full utilization of the Third Tranche which, upon being applied to repurchase
shares of Buyer Common Stock held by the VSI Stockholders in accordance with
Section 2.3, would result in their holding 60% of the issued
5
and outstanding shares of Buyer Common Stock, without taking into account
issuances of Buyer Common Stock after the Closing Date (other than pursuant to
Section 2.2).
"GAAP" -- generally accepted United States accounting principles.
"GE Capital" -- as defined in the preamble to this Agreement.
"GE Capital Objection" -- as defined in Section 2.2(b).
"GE Capital Loan Agreement" -- as defined in Section 3.9.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver or other authorization issued, granted, given or otherwise made available
by, or under the authority of, any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body" -- any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities of a Person or
such Person or its Subsidiaries.
"Hazardous Materials" -- any waste or other substance that is listed,
defined, designated or classified as, or otherwise determined to be, hazardous,
radioactive or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Higgins" -- as defined in the preamble to this Agreement.
6
"HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, or any successor law and regulations and rules issued pursuant to
that Act or any successor law.
"Indebtedness Amount" -- with respect to Service America Companies or
Buyer Companies, the amount of indebtedness reflected as such in accordance with
GAAP on its balance sheet as of June 27, 1998 (for the Service America
Companies) or June 30, 1998 (for the Buyer Companies).
"Indemnified Party" -- as defined in Section 9.2(a).
"Indemnifying Party" -- as defined in Section 9.2(a).
"Individual Service America Stockholders" -- Dee, Higgins and Paoletti.
"IRC" -- the Internal Revenue Code of 1986, as amended, or any
successor law and regulations issued by the IRS pursuant to the Code or any
successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency and, to the extent relevant, the United States Department of the
Treasury.
"Joint Request" -- as defined in Section 7.7(b).
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute or treaty.
"LLC" -- as defined in Section 11.11.
"Losses" -- any loss, cost, expense, liability, claim or damage,
including, without limitation, reasonable fees and disbursements of counsel and
accountants and other costs and expenses incidental to any claim, suit or
Proceeding.
"Marks" -- all patents, trademarks, servicemarks, trade names and
copyrights of a Person.
"Material Adverse Effect" -- any effect that is materially adverse to
the business, operations, prospects, results of operations or financial
condition of a Person.
"Minority Stockholders" -- as defined in Section 10.
"Neutral Accounting Firm" -- as defined in Section 2.2(b).
"1998 Buyer Balance Sheet" -- as defined in Section 5.6.
"1998 Service America Balance Sheet" -- as defined in Section 6.6.
7
"Normalized Working Capital Amount" -- the amount as reflected as such
for each of Buyer and Service America on Schedule 2.2.
"Occupational Safety and Health Law" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Offering Memorandum" -- an offering memorandum to be delivered to the
Minority Stockholders in connection with the exchange of their Service America
Common Stock for Buyer Common Stock.
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Personwill be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation, (b) the partnership agreement and
any statement of partnership of a general partnership, (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership, (d) any charter or similar document adopted or filed in connection
with the creation, formation or organization of a Person and (e) any amendment
to any of the foregoing.
"Panel"-- as defined in Section 11.6.
"Paoletti" -- as defined in the preamble to this Agreement.
"Permitted Encumbrances" -- (a) those liens disclosed on a Person's
latest fiscal year end balance sheet or the notes thereto, (b) any liens
existing on the date of this Agreement under any loan for borrowed money or
guarantee or security in respect thereof identified in Schedule 5.20 (with
respect to the Buyer Companies) or Schedule 6.20 (with respect to the Service
America Companies), (c) statutory liens for current taxes or assessments not yet
due or delinquent or the validity of which
8
are being contested in good faith by appropriate proceedings, (d) mechanics',
carriers', workers', repairmen's and other similar liens arising or incurred in
the Ordinary Course of Business with respect to charges not yet due and payable
or the validity of which are being contested in good faith by appropriate
proceedings, (e) such other Encumbrances, if any, that are provided for under
the Customer Contracts or which do not materially detract from the value of, or
interfere with the present use of, or with any use presently anticipated by a
Person of, the property subject thereto or affected thereby, (f) Encumbrances
created by the other party to this Agreement and (g) with respect to real
property, (i) minor imperfections of title, if any, none of which is substantial
in amount, materially detracts from the value or impairs the use of the property
or subject thereto or impairs the operation of the owner of the property and
(ii) zoning laws and other land use restrictions that do not impair the present
or anticipated use of the property subject thereto.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or Governmental Body.
"Proceeding" -- any legal motion, action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted, or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"Promissory Note" -- as defined in Section 2.5(b)(ii).
"Release" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping or other releasing into the Environment, whether
intentional or unintentional.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor or other representative of such
Person, including legal counsel, accountants and financial advisors.
"SAC Holders" -- as defined in Section 2.3.
"Second Tranche" -- the next $24 million of Excess Financing Proceeds
after full utilization of the First Tranche.
"Securities Act" -- the Securities Act of 1933, as amended, or any
successor law and regulations and rules issued pursuant to that Act or any
successor law.
"Sellers" -- as defined in the preamble to this Agreement.
"Sellers Disclosure Schedule" -- as defined in Section 6.
"Senior Subordinated Promissory Note" -- as defined in Section 2.3.
"Service America" -- as defined in the Recitals of this Agreement.
9
"Service America Assets" -- as defined in Section 6.10(b).
"Service America Audited Financial Statements" -- as defined in
Section 6.6.
"Service America Capital" -- as defined in the Recitals of this
Agreement.
"Service America Common Stock" -- the common stock, par value $.01 per
share, of Service America.
"Service America Companies" -- Service America or any of its
Subsidiaries.
"Service America Financial Statements" -- as defined in Section 6.6.
"Service America 401(k) Plan" -- as defined in Section 6.17.
"Service America Indemnified Parties" -- as defined in Section 9.1(b).
"Service America Preferred Stock" -- the 10% Class A Senior Preferred
Stock - Series A and the 10% Class A Senior Preferred Stock - Series B of
Service America.
"Service America Personal Property Leases" -- as defined in Section
6.20(a).
"Service America Real Property Leases" -- as defined in Section
6.10(a).
"Service America Shares" -- as defined in the Recitals of this
Agreement.
"Service America Warrant" -- as defined in the Recitals of this
Agreement.
"Software" -- all computer programs and software owned or licensed by a
Person and used by such Person in connection with its business.
"Statement" -- as defined in Section 2.2(b).
"Stockholders' Agreement" -- as defined in Section 3.7.
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax" -- any tax (whether federal, state, local or foreign,including,
but not limited to, any income tax, capital gains tax, value-added tax, sales
tax, property tax, transfer tax, employment tax, excise tax, gift tax, or estate
tax), levy, assessment, tariff, duty (including any customs duty),
10
deficiency, or other fee, and any related charge or amount (including any fine,
penalty, interest, or addition to tax), imposed, assessed or collected by or
under the authority of any Governmental Body or payable pursuant to any
tax-sharing agreement or any other Contract relating to the sharing or payment
of any such tax, levy, assessment, tariff, duty, deficiency or fee.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation or enforcement
of, or compliance with, any Legal Requirement relating to any Tax.
"Third Tranche" means the next $18.75 million of Excess Financing
Proceeds after full utilization of the Second Tranche.
"Threat of Release" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute or
other matter is likely to be asserted, commenced, taken or otherwise pursued in
the future.
"VSI Indemnified Parties" -- as defined in Section 9.1(a).
"VSI Parties" -- as defined in Section 8.1(a).
"VSI Stockholders" -- as defined in the preamble to this Agreement.
"Working Capital Difference" -- with respect to Service America
Companies or Buyer Companies, (a) the amount of working capital calculated on a
basis consistent with the manner in which working capital was calculated for
purposes of Schedule 2.2 reflected as such in accordance with GAAP on its
balance sheet as of June 27, 1998 (for the Service America Companies) or June
30, 1998 (for the Buyer Companies), minus (b) its Normalized Working Capital
Amount. If (a) is greater than (b), the Working Capital Difference will be
expressed as a positive number; if not, it will be expressed as a negative
number.
2. SALE, EXCHANGE AND TRANSFER OF SHARES; CLOSING.
2.1 Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing each Seller shall sell and transfer to Buyer, and
Buyer shall purchase from each Seller the Service America Capital set forth
opposite each Seller's name on Schedule 6.2(a).
11
2.2 Consideration. (a) In consideration of the sale and transfer to
Buyer by Sellers of the Service America Capital to be sold by each Seller, at
the Closing, Buyer shall: (i) pay to Sellers that are holders of the Service
America Common Stock by certified check or wire transfer the sum of One Thousand
Dollars ($1,000, pro rata according to such common stock held by such Sellers);
(ii) issue to GE Capital the Promissory Note; and (iii) issue to such Sellers
shares of Buyer Common Stock, on the basis described on Schedule 2.2.
(b) As soon as practicable, but in no event later than 60 days
following the Closing Date, Buyer shall prepare, or cause to be prepared, and
deliver to GE Capital a statement of the Final Adjustments with respect to both
Service America and Buyer (the "Statement") together with the workpapers used in
the preparation thereof. The Statement shall be prepared in accordance with GAAP
applied on a basis consistent with the audited financial statements referred to
in Section 5.6 or 6.6, as applicable. GE Capital shall within 30 days after the
delivery by Buyer of the Statement complete its review of the Statement. In such
period, GE Capital shall have access to all documentation and principal
personnel involved in preparation of such statements. In the event that GE
Capital objects to the Statement, GE Capital shall inform Buyer in writing (the
"GE Capital Objection"), setting forth a description in reasonable detail of the
basis of its objection and the adjustments to the Statement that it believes
should be made, on or before the last day of such 30 day period. Buyer shall
have 20 days to review and notify GE Capital in writing of any response to the
GE Capital Objection. During such 20 day review period and the subsequent 10 day
period the parties shall seek in good faith to resolve any differences that they
may have with respect to the matters specified in the GE Capital Objection. If
the Buyer and GE Capital are unable to resolve all of their disagreements with
respect to the GE Capital Objection within the 10 day period following
completion of Buyer's review of the GE Capital Objection, they shall refer their
remaining differences to the dispute resolution department of Arthur Andersen
LLP's New York City office or other nationally recognized firm of independent
public accountants as to which GE Capital and Buyer mutually agree (the "Neutral
Accounting Firm"), who shall determine only with respect to the remaining
differences so submitted, whether and to what extent, if any, the Statement
requires adjustment. The parties shall instruct the Neutral Accounting Firm to
deliver its written determination to Buyer and GE Capital no later than the 20th
day after the remaining differences underlying the GE Capital Objection are
referred to the Neutral Accounting Firm. The Neutral Accounting Firm's
determination shall be conclusive and binding upon the parties hereto, and shall
be based solely on presentations by Buyer and GE Capital and not by independent
review. The Neutral Accounting Firm shall address only those issues in dispute,
and may not assign a value to any item greater than the greatest value for such
item claimed by either party. The fees and expenses of the Neutral Accounting
Firm shall be borne by Buyer. The "Final Adjustment" shall be (i) as set forth
on the Statement in the event that (x) no GE Capital Objection is delivered to
the Buyer during the 30 day period specified above, or (y) as GE Capital and the
Buyer so agree, (ii) as set forth on the Statement, adjusted in accordance with
the GE Capital Objection in the event that the Buyer does not respond to the GE
Capital Objection within the 20 day period following receipt by the Buyer of the
GE Capital Objection or agrees with the GE Capital Objection or (iii) as set
forth on the Statement, as adjusted by either (x) the Agreement of the Buyer and
GE Capital or (y) the Neutral Accounting Firm.
12
(c) Promptly after the determination pursuant to Section 2.2(a) of the
Final Adjustments for both Service America and Buyer, Buyer shall either issue
and deliver to Sellers additional shares of Buyer Common Stock, or Sellers shall
return to Buyer a portion of the shares of Buyer Common Stock previously
delivered to Sellers pursuant to clause Section 2.2(a) above, such that, in
either case, the number of shares of Buyer Common Stock held by Sellers is the
number called for by Schedule 2.2 (with the calculations therein made with the
Final Adjustment numbers determined under Section 2.2(b)).
2.3 Repurchase of Shares. As promptly as practicable after the
consummation of the Financing and after the application of the net proceeds
thereof pursuant to Section 6.1(a)(i) through and including (v) of the
Stockholders' Agreement, Buyer, subject to the terms and conditions of this
Agreement, shall repurchase shares of Buyer Common Stock held by the VSI
Stockholders and Sellers (and other former Service America capital stock holders
who receive Buyer Common Stock) (collectively, "SAC Holders") and repay the
Promissory Note on the following basis:
(a) with the First Tranche of Excess Financing Proceeds, Buyer
shall utilize, on a pro rata basis, 60% of such proceeds to repurchase
from the VSI Stockholders, pro rata based on their relative holdings,
the number of shares of Buyer Common Stock calculated pursuant to
Schedule 2.3, and 40% of such proceeds to repay the Promissory Note;
(b) with the Second Tranche of Excess Financing Proceeds, Buyer
shall repurchase from the VSI Stockholders, pro rata based on their
relative holdings, shares of Buyer Common Stock at a purchase price per
share calculated pursuant to Schedule 2.3;
(c) with the Third Tranche of Excess Financing Proceeds, Buyer
shall utilize, on a pro rata basis, 60% of such proceeds to repurchase
from the VSI Stockholders, pro rata based on their relative holdings,
and 40% of such proceeds to repurchase from the SAC Holders, pro rata
based on their relative holdings, shares of Buyer Common Stock at a
purchase price per share calculated pursuant to Schedule 2.3;
(d) with the Fourth Tranche of Excess Financing Proceeds, Buyer
shall repurchase from the VSI Stockholders, pro rata based on their
relative holdings, shares of Buyer Common Stock at a purchase price per
share calculated pursuant to Schedule 2.3;
(e) with the Fifth Tranche of Excess Financing Proceeds, Buyer
shall utilize, on a pro rata basis, 60% of such proceeds to repurchase
from the VSI Stockholders, pro rata based on their relative holdings,
and 40% of such proceeds to repurchase from the SAC Holders, pro rata
based on their relative holdings, shares of Buyer Common Stock at a
purchase price per share calculated pursuant to Schedule 2.3; and
(f) in the event the Financing does not occur or the amount
applied from the First Tranche is less than $1,250,000, Buyer shall
repurchase from the VSI Stockholders, pro rata based on their relative
holdings, the number of shares of Buyer Common Stock calculated
pursuant to Schedule 2.3, in an aggregate amount equal to the
difference between $750,000 and the amount received by the VSI
Stockholders in applying proceeds of the First Tranche,
13
provided that the repurchase price shall be paid not in cash but in the
form of a senior subordinated promissory note (the "Senior Subordinated
Promissory Note") dated the date of such repurchase with the equivalent
terms of the Promissory Note issued to GE Capital by the Company.
Notwithstanding the foregoing but subject to Section 7.11, the
obligations of Buyer to make the repurchases of shares of Buyer Common Stock
called for by this Section 2.3 shall be subject to the satisfaction of the
following condition: The Board of Directors of Buyer shall not have determined
reasonably and in good faith, in accordance with applicable provisions of
corporation law, that the capital of Buyer is impaired by such repurchase or
would otherwise be impaired as a result of such repurchase on the date of such
repurchase within the meaning of Section 160(a)(1) of the Delaware General
Corporation Law.
2.4 Closing. The purchase, exchange and sale (the "Closing") provided
for in this Agreement will take place at the offices of Buyer's counsel, Simpson
Thacher & Bartlett, at 425 Lexington Avenue, New York, New York, at 10:00 a.m.
(local time), on the later of (a) August 20, 1998 or (b) the date that is two
Business Days following the satisfaction or waiver of all of the conditions set
forth in Article 3 and 4, or at such other time and place as the parties may
agree. Subject to the provisions of Section 8, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.4 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
2.5 Closing Obligations. At the Closing:
(a) Sellers will deliver or will cause Service America to deliver
to Buyer:
(i) the Service America Warrant and stock certificates
representing the Service America Shares set forth opposite each
Seller's name on Schedule 6.2(a), in each case duly endorsed for
transfer to Buyer or accompanied by stock or other appropriate
powers duly endorsed in blank;
(ii) duly executed resignations dated the Closing Date of
the members of the board of directors of each Service America
Company that are designated on Schedule 2.5(a)(ii); and
(iii) the documents contemplated in Section 3.
(b) Buyer will deliver to Sellers:
(i) certificates representing the shares of Buyer Common
Stock as set forth in Section 2.2;
14
(ii) a duly executed promissory note payable to GE Capital
in the principal amount of $500,000 in the form of Exhibit
2.5(b)(ii) (the "Promissory Note"); and
(iii) a certified check or a wire transfer in the amount of
$1,000 payable to GE Capital.
(c) Buyer and the VSI Stockholders will deliver to Sellers the
documents contemplated in Section 4.
3. CONDITIONS TO OBLIGATIONS OF BUYER AND THE VSI STOCKHOLDERS.
Buyer's obligation to purchase the Service America Capital and Buyer's
and the VSI Stockholders' obligations to take the other actions required to be
taken by Buyer and the VSI Stockholders at the Closing are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer or the VSI Stockholders in whole or in
part):
3.1 Accuracy of Representations.
(a) The representations and warranties of Sellers in this Agreement
that are not qualified by materiality must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date. The
representations and warranties of Sellers in this Agreement that are qualified
by materiality must have been accurate in all respects as of the date of this
Agreement and must be accurate in all respects at the Closing Date as if made on
the Closing Date. No supplement to the Sellers Disclosure Schedule made
subsequent to the signing hereof shall serve to correct or make true and correct
any representation or warranty made herein, except as provided in Section
11.9(a).
(b) Buyer and the VSI Stockholders shall have received a certificate
to the foregoing signed by Sellers.
3.2 Sellers' Performance.
(a) The covenants and obligations that are not qualified by
materiality that Sellers are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing must have been duly performed or
complied with in all material respects. The covenants and obligations that are
qualified by materiality that Sellers are required to perform or comply with
pursuant to this Agreement at or prior to the Closing must have been duly
performed or complied with in all respects.
(b) Buyer and the VSI Stockholders shall have received a certificate
to the foregoing signed by Sellers.
(c) Sellers must have delivered each of the documents required to be
delivered by Sellers pursuant to Section 2.5.
15
3.3 Governmental Approvals. All necessary and appropriate Consents,
notices and filings under any Legal Requirement relating to alcoholic beverage
licenses of any Service America Company shall have been obtained or made.
3.4 Material Adverse Effect.
(a) The Service America Companies shall have received written consents
to the Contemplated Transactions under the Customer Contracts of any Service
America Company identified in Schedule 6.5, such that the aggregate value for
such Customer Contracts (as such values are listed on Schedule 3.4(a)) as to
which a consent was not obtained is not greater than $8 million. In the event
the aggregate value for such Customer Contracts (as such values are listed on
Schedule 3.4(a)) as to which consent is not obtained is greater than $8 million
and Sellers are willing to adjust the consideration to be received pursuant to
Section 2.2 by an amount that will reflect the value of the loss of such
Customer Contracts in their entirety, as computed according to the methodology
set forth in Section 2.2, this condition shall be deemed satisfied. In computing
the value of any Customer Contract as to which consent was not obtained for
purposes of this Section 3.4(a), there shall be credited any amount to which the
party is entitled upon termination of such Customer Contract and only the net
amount (i.e., the value of the Customer Contract less the amount to which the
party is entitled on termination of the Contract) shall be used.
(b) Service America Companies shall not have received written notice
of termination of Customer Contracts of any Service America Company (other than
those described in Section 3.4(a)) such that the aggregate value for such
terminated Customer Contracts (as such values are listed on Schedule 3.4(a)) is
greater than $8 million. In the event the aggregate value of such Customer
Contracts which are so terminated (as such values are listed on Schedule 3.4(a))
is greater than $8 million and Sellers are willing to adjust the consideration
to be received pursuant to Section 2.2 by an amount which will reflect the value
of the loss of such Customer Contracts in their entirety, as computed according
to the methodology set forth in Section 2.2, this condition shall be deemed
satisfied. In computing the value of any Customer Contract so terminated for
purposes of this Section 3.4(b), there shall be credited any amount to which the
party is entitled upon termination and only the net amount (i.e., the value of
the Customer Contract less the amount to which the party is entitled on
termination) shall be used.
(c) No Service America Company shall have received a written notice of
a breach or default under any Contract (other than a Customer Contract) arising
as a result of the Contemplated Transactions such that the estimated damages
from any such breach or default individually or in the aggregate can reasonably
be expected to exceed $8 million. The amount of estimated damages from any such
breach or default shall be determined by Buyer, on the one hand, and Sellers, on
the other hand. In the event such parties cannot agree within five Business Days
of the date such issue arises that the estimated amount of damages cannot
reasonably be expected to exceed $8 million, either Buyer or Sellers may submit
the matter to a single arbitrator in the manner described in Section 11.6 for
determination on an expedited basis, with the determination made by the
arbitrator being final and binding on all parties.
16
(d) Buyer and the VSI Stockholders shall receive a certificate signed
by Sellers as of the Closing Date certifying as to the Customers that have given
written termination notices or refused to consent to the Contemplated
Transactions under the Customer Contracts as of the Closing Date.
3.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer or the VSI Stockholders, or
against any Affiliate of Buyer or any VSI Stockholder, any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions or (b) that reasonably may be
expected to have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Contemplated Transactions.
3.6 No Prohibition. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order or (b) any Legal Requirement or Order that has been
published, introduced or otherwise formally proposed by or before any
Governmental Body.
3.7 Stockholders' Agreement. Sellers shall have executed the Amended
and Restated Stockholders' Agreement in the form of Exhibit 3.7 (the
"Stockholders' Agreement").
3.8 Additional Documents. Each of the following documents must have
been delivered to Buyer and the VSI Stockholders:
(a) an opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP, dated
the Closing Date, in the form of Exhibit 3.8(a); and
(b) such other documents as Buyer and the VSI Stockholders may
reasonably request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 4.8(a), (ii) evidencing the accuracy of any
representation or warranty of Sellers, (iii) evidencing the performance by
Sellers of, or the compliance by Sellers with, any covenant or obligation
required to be performed or complied with by Sellers, (iv) evidencing the
satisfaction of any condition referred to in this Section 3 or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
3.9 Consent of GE Capital. GE Capital shall have granted the requisite
consent to the Contemplated Transactions under the Loan Agreement with the
Service America Companies dated January 17, 1997 (the "GE Capital Loan
Agreement"), in the form of Exhibit 3.9 (the "Waiver and Amendment Agreement").
3.10 Bank Consent. The VSI Companies shall have received the requisite
consent of its lenders to the Contemplated Transactions under the Credit
Agreement dated as of December 21, 1995 among certain of the Buyer Companies,
the lenders named therein and The Chase Manhattan Bank.
17
3.11 GE Capital. On the Closing Date, GE Capital and Service America
shall enter into amendments to the Assignment and Assumption Agreement, dated as
of October 1, 1996 (the "Assignment and Assumption Amendment"), in the form of
Exhibit 3.11.
3.12 Non-Foreign Tax Status. Sellers shall have delivered to Buyer a
certificate pursuant to Section 1445 of the Code in form and substance
reasonably satisfactory to Buyer certifying their non-foreign status.
3.13 Proceedings Satisfactory. All certificates and other documents to
be delivered by Sellers and all other matters to be accomplished by Sellers
prior to or at the Closing shall be satisfactory in the reasonable judgment of
Buyer and its counsel.
4. CONDITIONS TO OBLIGATIONS OF SELLERS.
Sellers' obligation to sell the Service America Capital and to take the
other actions required to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Sellers in whole or in part):
4.1 Accuracy of Representations.
(a) The representations and warranties of Buyer and the VSI
Stockholders in this Agreement that are not qualified by materiality must have
been accurate in all material respects as of the date of this Agreement and must
be accurate in all material respects as of the Closing Date as if made on the
Closing Date. The representations and warranties of Buyer and the VSI
Stockholders in this Agreement that are qualified by materiality must have been
accurate in all respects as of the date of this Agreement and must be accurate
in all respects at the Closing Date as if made on the Closing Date. No
supplement to the Buyer and VSI Stockholders Disclosure Schedule made subsequent
to the signing hereof shall serve to correct or make true and correct any
representation or warranty made herein, except as provided in Section 11.9(a).
(b) Sellers shall have received certificates as to the foregoing
signed by Buyer and the VSI Stockholders.
4.2 Buyer's and the VSI Stockholders' Performance.
(a) The covenants and obligations that are not qualified by
materiality that each of Buyer and the VSI Stockholders is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing must
have been performed or complied with in all material respects. The covenants and
obligations that are qualified by materiality that each of Buyer and the VSI
Stockholders, respectively, is required to perform or comply with pursuant to
this Agreement at or prior to the Closing must have been performed or complied
with in all respects.
(b) Sellers shall have received certificates as to the foregoing
signed by Buyer and the VSI Stockholders.
18
(c) Buyer and the VSI Stockholders must have delivered each of the
documents required to be delivered by Buyer and the VSI Stockholders pursuant to
Section 2.5.
4.3 Governmental Approvals. All necessary and appropriate Consents,
notices and filings under any Legal Requirement relating to alcoholic beverage
licenses of any Buyer Company shall have been obtained or made.
4.4 Material Adverse Effect.
(a) The Buyer Companies shall have received written consents to the
Contemplated Transactions under the Customer Contracts of any Buyer Company
identified in Schedule 5.5 such that the aggregate value for such Customer
Contracts (as such values are listed on Schedule 4.4(a)) as to which a consent
was not obtained is not greater than $8 million. In the event the aggregate
value for such Customer Contracts (as such values are listed on Schedule 4.4(a))
as to which consent is not obtained is greater than $8 million and the VSI
Stockholders are willing to adjust the consideration to be received pursuant to
Section 2.2 by an amount that will reflect the value of the loss of such
Customer Contracts in their entirety, as computed according to the methodology
set forth in Section 2.2, this condition shall be deemed satisfied. In computing
the value of any Customer Contract as to which consent was not obtained for
purposes of this Section 4.4(a), there shall be credited any amount to which the
party is entitled upon termination of such Customer Contract and only the net
amount (i.e., the value of the Customer Contract less the amount to which the
party is entitled on termination of the Contract) shall be used.
(b) The Buyer Companies shall not have received written notice of
termination of Customer Contracts of any Buyer Company (other than those
described in Section 4.4(a)) such that the aggregate value for such terminated
Customer Contracts (as such values are listed on Schedule 4.4) is greater than
$8 million. In the event the aggregate value of such Customer Contracts which
are so terminated (as such values are listed on Schedule 4.4(a)) is greater than
$8 million and the VSI Stockholders are willing to adjust the consideration to
be received pursuant to Section 2.2 by an amount that will reflect the value of
the loss of such Customer Contracts in their entirety, as computed according to
the methodology set forth in Section 2.2, this condition shall be deemed
satisfied. In computing the value of any Customer Contract as to which notice of
termination was received for purposes of this Section 4.4(b), there shall be
credited to any amount to which a party is entitled upon termination of such
Customer Contract and only the net amount (i.e., the value of the Customer
Contract less the amount to which the party is entitled on termination of the
Contract) shall be used.
(c) No Buyer Company shall have received a written notice of a breach
or default under any Contract (other than a Customer Contract) arising as a
result of the Contemplated Transactions such that the estimated damages from any
such breach or default individually or in the aggregate can reasonably be
expected to exceed $8 million. The amount of estimated damages from any such
breach or default shall be determined by Buyer, on the one hand, and Sellers, on
the other hand. In the event such parties cannot agree within five Business Days
of the date such issue arose, that the estimated amount of damages cannot
reasonably be expected to exceed $8 million, either Buyer or Sellers may submit
the matter to a single arbitrator in the manner described in Section 11.6 for
19
determination on an expedited basis, with the determination made by the
arbitrator being final and binding on all parties.
(d) Sellers shall receive a certificate signed by Buyer and the VSI
Stockholders as of the Closing Date certifying as to the Customers that have
given written termination notices or refusal to consent to the Contemplated
Transactions under the Customer Contracts as of the Closing Date.
4.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Services America or Sellers, or
against any Affiliate of any Sellers or Service America, any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions or (b) that reasonably may be
expected to have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Contemplated Transactions.
4.6 No Prohibition. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Sellers or any Person affiliated
with Sellers to suffer any material adverse consequence under, (a) any
applicable Legal Requirement or Order or (b) any Legal Requirement or Order that
has been published, introduced or otherwise formally proposed by or before any
Governmental Body.
4.7 Stockholders' Agreement. Buyer and the VSI Stockholders shall have
executed the Stockholders' Agreement.
4.8 Additional Documents. Each of the following documents must have
been delivered to Sellers:
(a) an opinion of Simpson Thacher & Bartlett, dated the Closing Date,
in the form of Exhibit 4.8(a); and
(b) such other documents as Sellers may reasonably request for the
purpose of (i) enabling their counsel to provide the opinion referred to in
Section 3.8(a), (ii) evidencing the accuracy of any representation or warranty
of each of Buyer and the VSI Stockholders, (iii) evidencing the performance by
Buyer or the VSI Stockholders of, or the compliance by Buyer or the VSI
Stockholders with, any covenant or obligation required to be performed or
complied with by Buyer or the VSI Stockholders, (iv) evidencing the satisfaction
of any condition referred to in this Section 4 or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
4.9 Lien in Favor of GE Capital. Buyer shall have granted to GE
Capital a valid lien satisfactory to GE Capital to secure all amounts owing
under the GE Capital Loan Agreement on all Service America Capital and all other
Service America Common Stock being purchased by Buyer hereunder.
20
4.10 Bank Consent. The Buyer Companies shall have received the
requisite consent of its lenders to the Contemplated Transactions under the
Credit Agreement dated as of December 21, 1995 among certain of the Buyer
Companies, the lenders named therein and The Chase Manhattan Bank.
4.11 Proceedings Satisfactory. All certificates and other documents to
be delivered by Buyer and the VSI Stockholders and all other matters to be
accomplished by Buyer or the VSI Stockholders prior to or at the Closing shall
be satisfactory in the reasonable judgment of Sellers and their counsel.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND THE VSI STOCKHOLDERS.
Buyer and the VSI Stockholders jointly and severally represent and
warrant to Sellers, except as set forth in the Schedules comprising Schedule 5
hereto and incorporated herein by reference (the "Buyer and the VSI Stockholders
Disclosure Schedule"), as follows:
5.1 Organization and Good Standing.
(a) Each Subsidiary of Buyer and the capitalization of each such
Subsidiary is set forth on Schedule 5.1(a). Except as set forth in Schedule
5.1(a), Buyer or a Subsidiary of Buyer owns all of the assets that are utilized
to carry on its business and the VSI Stockholders neither own nor control any
other entity necessary to carry on such business. All of the shares of each
Subsidiary of Buyer are owned by Buyer or a wholly owned Subsidiary of Buyer
free and clear of all Encumbrances, except as set forth in Schedule 5.1(a), and
all such shares owned by Buyer or a wholly owned Subsidiary of Buyer will be
owned as of the Closing Date, free and clear of all Encumbrances, other than
Permitted Encumbrances. All of the issued and outstanding shares of the
Subsidiaries of Buyer have been duly authorized and are validly issued, fully
paid and nonassessable. None of the outstanding equity securities or other
securities of any Buyer Company was issued in violation of the Securities Act or
any other Legal Requirement.
(b) Each of the Buyer Companies is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation set forth next to its name on Schedule 5.1(b), has all requisite
corporate power to own and lease its properties and carry on its business as the
same is now being conducted and is qualified or licensed to do business as a
foreign corporation in each jurisdiction set forth next to its name in Schedule
5.1(b). Complete and correct copies of the Organizational Documents of each
Buyer Company have been delivered or made available by Buyer to Sellers, and are
complete and correct as of the date hereof.
5.2 Capital Structure.
(a) The authorized capital stock of Buyer consists of 1,000 shares of
common stock, par value $.01 per share, of which 376.0733 shares are issued and
outstanding. All of the outstanding shares of Buyer have been duly authorized
and validly issued and are fully paid and nonassessable and were issued without
violation of any preemptive rights. As of the date hereof, the Buyer
21
Common Stock is owned as shown on Schedule 5.2(a). No additional Buyer Common
Stock or any security convertible into, or exchangeable for, Buyer Common Stock,
shall be issued to any VSI Stockholder prior to the Closing and no modification
or amendment shall be made in the terms of any Buyer Common Stock held by the
VSI Stockholders. On the Closing Date, the authorized capital stock of Buyer
will consist of 1,000 shares of Buyer Common Stock, of which the issued and
outstanding shares will be duly authorized and validly issued, fully paid and
nonassessable and issued without violation of any preemptive rights.
(b) Blackstone represents and warrants and each other VSI Stockholder
represents and warrants as to itself that such VSI Stockholder has good and
valid title to the Buyer Shares that are set forth on Schedule 5.2(a) opposite
the name of such VSI Stockholder and owns such Buyer Common Stock free and clear
of all Encumbrances, other than Permitted Encumbrances.
(c) Except as set forth on Schedule 5.2(c), there are no outstanding
subscriptions, options, rights, warrants, convertible securities or other
agreements (other than this Agreement) or calls, demands, preemptive rights or
commitments of any kind relating to the issuance, sale or transfer of any
capital stock of any Buyer Company.
(d) The delivery to Sellers of the certificates representing the Buyer
Common Stock in accordance with Section 2 will transfer to each Seller of record
and beneficial ownership of the Buyer Common Stock free and clear of all
Encumbrances (other than Encumbrances created by Sellers).
5.3 Authority Relative to Contemplated Transactions. Blackstone
represents and warrants and each of the other VSI Stockholders represents and
warrants as to itself and as to its limited partners that (i) the execution,
delivery and performance by Buyer and the VSI Stockholders of this Agreement and
the consummation of the Contemplated Transactions by Buyer and the VSI
Stockholders has been duly authorized by all necessary corporate, or partnership
action, as the case may be, and (ii) this Agreement constitutes, and upon
execution and delivery by Sellers, will constitute, a valid and binding
obligation of Buyer and the VSI Sellers, enforceable against Buyer and the VSI
Stockholders in accordance with its terms.
5.4 Absence of Conflict. Blackstone represents and warrants and Buyer
and each of the VSI Stockholders represents and warrants as to itself that
neither the execution and delivery of this Agreement by the VSI Stockholders or
Buyer nor the consummation of the Contemplated Transactions by the VSI
Stockholders or Buyer will (a) conflict with or violate any provisions of the
Organizational Documents of any Buyer Company or the VSI Stockholders, (b)
except to the extent Consents may be required as indicated on Schedule 5.5,
violate, or be in conflict with or constitute a default under (or an event
which, with notice or lapse of time or both, would constitute a default under),
(i) any judgment, Order or ruling issued with respect to Buyer or any VSI
Stockholders, (ii) any applicable law, rule or regulation or (iii) except as set
forth on Schedule 5.4, any Contract to which any Buyer Company or any VSI
Stockholder is a party, (c) cause any Buyer Company or Service America Company
to become subject to, or to become liable for the payment of, any Tax, (d) cause
any assets of any Buyer Company to be reassessed or revalued by any taxing
authority or
22
other Governmental Body or (e) result in the imposition or creation of any
Encumbrance upon or with respect to any assets owned or used by any Buyer
Company.
5.5 Governmental Approvals and Consents. Except as set forth in
Schedule 5.5, no Consents of, or filings and registrations with, any
Governmental Body or any third party are required by or on behalf of the VSI
Stockholders or any Buyer Company in connection with the execution, delivery and
performance of this Agreement or the transfer of the Buyer Common Stock by Buyer
to Sellers.
5.6 Financial Statements. Buyer has delivered or made available to
Sellers (i) the audited consolidated balance sheets of Buyer and its
Subsidiaries as at December 30, 1997 and December 30, 1996 and the related
audited consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 30, 1997 and December 30, 1996, together with
the notes thereto and the report thereon of Buyer's independent accountants
(collectively, the "Buyer Audited Financial Statements") and (ii) the unaudited
condensed consolidated balance sheet of Buyer and its Subsidiaries as at June
30, 1998 (the "1998 Buyer Balance Sheet") and together with the Buyer Audited
Financial Statements (the "Buyer Financial Statements"). Except as provided in
this Section 5.6 or Schedule 5.6, the Buyer Financial Statements have been
prepared in accordance with GAAP consistently applied throughout the periods
indicated and fairly present the financial position, results of operations and
changes in financial position of Buyer and its Subsidiaries as at the respective
dates thereof and for the periods referred to therein. The 1998 Buyer Balance
Sheet does not include or reflect normal year-end adjustments or include the
type of notes that would customarily be included in a financial statement
prepared in accordance with GAAP. No financial statements of any Person other
than Buyer and its Subsidiaries are required by GAAP to be included in the
consolidated financial statements of Buyer.
5.7 Books and Records. The books of accounts, minute books, stock
record books and other records of all Buyer Companies, all of which have been
delivered or made available to Sellers, are complete and correct and have been
maintained in accordance with sound business practice, including the maintenance
of an adequate system of internal controls. The minute books of the Buyer
Companies contain accurate and complete records of all meetings held of, and
corporate actions taken by, the stockholders, the board of directors and
committees of the board of directors of the Buyer Companies, and no meeting of
any such stockholders, board of directors or committees has been held for which
minutes have not been prepared and are not contained in such minute books.
5.8 Inventory. All food inventory and other supplies and materials
used in the business of the Buyer Companies and located at the location of the
Customers of the Buyer Companies, to the extent reflected on the 1998 Buyer
Balance Sheet net of reserves, are in good condition and usable in the Ordinary
Course of Business consistent with industry practice, subject to normal and
customary allowances for spoilage, damage and outdated items. The quantities of
each item of inventory are not excessive, but are reasonable in the present
circumstances of the Buyer Companies.
23
5.9 Accounts Receivable. Except as set forth in Schedule 5.9, all
accounts receivable of the Buyer Companies, unless paid prior to the Closing
Date, represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the accounts receivable are or will be current and collectible net
of reserves not exceeding customary levels (which reserves are adequate).
Subject to such reserves, each of the accounts receivable either has been or
will be collected in full, without any setoff, within 90 days after the day on
which it first became due and payable. There is no contest, claim or right of
setoff under any Customer Contract of any Buyer Company with any obligor of
accounts receivable relating to the amount or validity of such accounts
receivable.
5.10 Title to Property; Encumbrances.
(a) No Buyer Company holds title to any real property. Schedule
5.10(a) sets forth a complete and accurate list of each lease of real property
by the Buyer Companies and includes the name of each current lessor and lessee
and the dates and lease term (including renewal options) of each lease and any
amendment thereto (the "Buyer Real Property Leases"). Copies of each Buyer Real
Property Lease have heretofore been delivered or made available to Sellers.
Except as set forth in Schedule 5.10(a), (i) each Buyer Real Property Lease is
the legal, valid and binding obligation the Buyer Company party thereto,
enforceable against the Buyer Company party thereto in accordance with its
terms, (ii) the Buyer Company party thereto has not received any written notice
of any event or condition that constitutes, or with the passage of time would
constitute, a default by the Buyer Company party thereto under any of the Buyer
Real Property Leases or by any other party to any such Buyer Real Property
Leases and (iii) no Buyer Company party thereto has received from any lessor
thereunder any written notice or other advice of termination or cancellation.
(b) Schedule 5.10(b) contains a list of all material personal property
owned by the Buyer Companies as of the date hereof. Except for Permitted
Encumbrances, the Buyer Companies have, and will have on the Closing Date, good
title to all of its personal property set forth in Schedule 5.10(b) (except for
personal property sold or otherwise disposed of since June 30, 1998 in the
Ordinary Course of Business) (the "Buyer Assets"), free and clear of all
Encumbrances.
(c) All tangible personal property included in the Buyer Assets and
owned by or held by any Buyer Company pursuant to the Buyer Personal Property
Leases is in substantially good operating condition and repair, subject to
ordinary wear and tear and, except as set forth on Schedule 5.10(c) hereof, is
suitable and appropriate for use consistent with the manner in which such Buyer
Assets have been used by the Buyer Companies in their business immediately prior
to the date hereof.
5.11 Marks, Software and Similar Rights. Schedule 5.11 contains a true
and complete list of all Software and Marks owned by the Buyer Companies and
used in the business of the Buyer Companies, and all licenses of Software and
Marks used by the Buyer Companies in their business. One of the Buyer Companies
owns or otherwise has the right to use all Software and Marks in the manner
currently used in connection with the operation of its business and without
infringement of the intellectual property rights of third parties. There is no
Proceeding pending or, to the Best Knowledge of Buyer and the VSI Stockholders,
Threatened that challenges the rights of the Buyer
24
Companies in respect of any Buyer Company's Software or Marks, and except as
described in Schedule 5.11 hereto, there is no claim of infringement or other
complaint that any Buyer Company's use of its Software or Marks violates or
infringes the rights of any third party. No Person is infringing in any respect
the rights of any Buyer Company with respect to any Software or Mark of any
Buyer Company. No Buyer Company has licensed or otherwise granted to any third
party any rights in any Software or Mark of a Buyer Company.
5.12 Litigation.
(a) Except as disclosed in Schedule 5.12, there is no Proceeding
pending or, to the Best Knowledge of Buyer and the VSI Stockholders, Threatened
(i) against any Buyer Company or its business or assets, except for Proceedings
that are uninsured and seek only monetary relief in an amount not exceeding (A)
$100,000 in any individual Proceeding and (B) $500,000 for the aggregate of all
such Proceedings or (ii) that challenges, or that may have the effect of
preventing or making illegal any of the Contemplated Transactions.
(b) There are no existing Orders, writs or decrees of any court or
other Governmental Body against any Buyer Company or its business or assets. No
officer, director, agent or employee of any Buyer Company is subject to any
Order, writ or decree of any court or Governmental Body that prohibits such
officer, director, agent or employee from engaging in or continuing any conduct,
activity or practice relating to the business of the Buyer Companies.
5.13 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 5.13, the Buyer Companies have no liabilities or obligations of any
nature, except for (a) liabilities and obligations reflected as reserved against
in the balance sheet included in the Buyer Audited Financial Statements or (b)
current liabilities incurred in the Ordinary Course of Business since the date
thereof.
5.14 Tax Matters.
(a) Except as set forth on Schedule 5.14, (i) All Tax Returns required
to be filed on or before the date of this Agreement by, or with respect to, any
Buyer Company have been timely filed, (ii) all such Tax returns are true,
correct and complete, (iii) Buyer or a Subsidiary of Buyer has timely paid, or
made provision for the payment of, all Taxes attributable to taxable periods
ending on or before the Closing Date, except for Taxes that are being contested
in good faith by appropriate Proceedings and (iv) the charges, accruals and
reserves with respect to Taxes (excluding deferred taxes representing
differences between the book and tax basis in assets and liabilities) on the
books of the Buyer Companies are adequate for all periods up to and including
the Closing Date (determined in accordance with GAAP consistently applied).
(b) No Encumbrances for Taxes exist with respect to any asset or
properties of any Buyer Company, except for statutory Encumbrances for Taxes not
yet due.
(c) There is no tax sharing agreement that will require any payment by
any Buyer Company after the date of this Agreement.
25
(d) Neither Buyer nor any VSI Stockholder has a plan or intention to
liquidate Service America or merge Service America with or into Buyer following
consummation of the Contemplated Transactions.
5.15 Absence of Certain Changes or Events. Except as contemplated by
this Agreement or as set forth in Schedule 5.15, since December 30, 1997, each
Buyer Company has conducted its operations in the Ordinary Course of Business
consistent with past practice and has not:
(a) suffered any Material Adverse Effect (other than any that
may be the result of changes of laws generally), it being understood
that any matter relating to a cancellation or termination of, or
failure to obtain a consent disclosed in Section 5.5 with respect to,
any Customer Contract, or the breach of any other Contract of the
Buyer Companies due to the Contemplated Transactions subsequent to the
date hereof shall not be deemed a Material Adverse Effect on the Buyer
Companies but shall be dealt with as provided in Section 4.4;
(b) incurred any obligation or liability, except liabilities
incurred in the Ordinary Course of Business;
(c) other than in connection with the consummation of the
Contemplated Transactions, issued, sold or otherwise disposed of any
of its capital stock, or created or suffered to be created any
Encumbrance thereon, or reclassified, split up or otherwise changed
any of its capital stock, or granted or entered into any options,
covenants or calls or other rights to purchase or convert any
obligation into any of its capital stock, granted any registration
rights, or purchased, redeemed, retired or otherwise acquired any
shares of any such capital stock;
(d) made or granted any increases in salaries, bonuses or other
remuneration to any employee, except in the Ordinary Course of Business
consistent with past practice, or entered into any employment,
severance or other Contract with any director, officer or employee;
(e) adopted, or increased payments or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees of
any Buyer Company;
(f) sold, assigned, transferred, conveyed, leased, pledged,
encumbered or otherwise disposed of any material assets or any other
material right, except in the Ordinary Course of Business consistent
with past practice;
(g) canceled any debts or affirmatively waived any claims or
rights of substantial value;
(h) declared or paid any dividend or made any other payment or
distribution in respect of its capital stock;
26
(i) amended any Organizational Documents of any Buyer Company;
(j) made any change in accounting methods, principles or
practices, except as required by law;
(k) incurred, assumed or guaranteed any indebtedness for borrowed
money or other obligations, or created or assumed any Encumbrance on
any asset other than in the Ordinary Course of Business consistent
with past practice, but in no event with respect to assets with a
value of, or obligations in an amount of, more than $25,000 in the
aggregate;
(l) made any loan, advance or capital contribution to or
investment in any Person other than in the Ordinary Course of Business
consistent with past practice, but in no event in the amount of more
than $25,000 in the aggregate, and other than investments in cash
equivalents made in the Ordinary Course of Business consistent with
past practice;
(m) entered into any other commitment or transaction material to
the Buyer Companies taken as a whole, except in the Ordinary Course of
Business consistent with past practice;
(n) entered into any Contract requiring capital expenditures
over its term in excess of $500,000 or guarantee of any obligation or
incurrence of any contingent liability in excess of $100,000;
(o) made or changed any Tax election, changed any method of
accounting with respect to Taxes or settled or compromised any
liability for Taxes; or
(p) made any agreement, commitment, arrangement or undertaking to
perform any action described in the foregoing clauses (a) through (o).
5.16 Employee and Labor Matters. Except as set forth in Schedule 5.16:
(a) no Buyer Company is a party to any collective bargaining agreement
applicable to employees of any Buyer Company nor is any such contract or
agreement presently being negotiated; (b) no Buyer Company is a party to any
employment agreement or consulting agreement with any person or entity
obligating any Buyer Company to make payments in excess of $50,000 per year nor
is any such contract or agreement presently being negotiated; (c) there is no
unfair labor practice charge or complaint pending or, to the Best Knowledge of
Buyer and the VSI Stockholders, Threatened against or otherwise affecting any
Buyer Company which, if adversely determined, would reasonably be likely to
result in a liability having a Material Adverse Effect; (d) there is no labor
strike, slowdown, work stoppage or lockout in effect or, to the Best Knowledge
of Buyer and the VSI Stockholders, Threatened against or otherwise affecting any
Buyer Company and no Buyer Company has experienced any such labor controversy
within the past three years; (e) no Buyer Company is a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental Authority
relating to employees or employment practices; (f) no Buyer Company will have
any liability under any benefit or severance policy, practice, agreement, plan,
or program which exists or arises, or may be deemed to exist or arise, under any
applicable law or otherwise, as a result of the consummation
27
of the Contemplated Transactions; (g) the Buyer Companies are in compliance with
their obligations pursuant to the Worker Adjustment and Retraining Notification
Act of 1998 and all other notification and bargaining obligations arising under
any collective bargaining agreement, statute or otherwise; and (h) the Buyer
Companies are in compliance with all provisions of applicable law pertaining to
the employment of their employees, including, without limitation, laws relating
to labor relations, equal employment, fair employment practices, prohibited
discrimination or other similar employment practices acts. There is no breach or
event of default under, and each Buyer Company is in full compliance with, each
employment, severance and consulting Contract to which it and any director,
officer or employee is a party.
5.17 Employee Benefit Matters. The Buyer 401(k) Plan (the "Buyer 401(k)
Plan") is the only pension plan sponsored by Buyer on the date hereof relating
to the business of the Buyer Companies. Sellers have received or had made
available to them true and correct copies of all documents embodying the Buyer
401(k) Plan. The Buyer 401(k) Plan is in substantial compliance with the
provisions of ERISA and the qualification requirements of Section 401(a) of the
IRC. There are no Proceedings pending or, to the Best Knowledge of Buyer and the
VSI Stockholders, Threatened with respect to the Buyer 401(k) Plan that would
reasonably be expected to materially and adversely affect such qualification or
result in a materially adverse effect on Buyer. To the Best Knowledge of Buyer
and the VSI Stockholders, no "prohibited transaction," as described in Section
406 (and not exempt under Section 408) of ERISA, has occurred with respect to
the Buyer 401(k) Plan.
5.18 Insurance.
(a) Schedule 5.18(a) sets forth a list of all insurance policies
maintained as of the date of this Agreement by or on behalf of the Buyer
Companies and relating to their business or assets. Sellers have received or had
made available to them true and correct copies of such policies together with
all riders and amendments thereto. Such insurance policies are in full force and
effect, all premiums due thereon have been paid (except as described in Schedule
5.18(a)) and such policies are adequate to insure the Buyer Companies' business
in such amounts and against such risks as are customary for companies engaged in
businesses similar to that of the Buyer.
(b) Schedule 5.18(b) describes:
(i) any self-insurance arrangement by or affecting any Buyer
Company, including any reserves established thereunder;
(ii) any Contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by any Buyer
Company; and
(iii) all obligations of any Buyer Company to third parties with
respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such coverage
is provided, except for such obligations under the Customer Contracts
of any Buyer Company.
28
(c) Neither any Buyer Company nor any VSI Stockholder has received
with respect to any current insurance claim (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights or (B) any
notice of cancellation or any other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations thereunder.
(d) The Buyer Companies have paid all premiums due, and have otherwise
performed all of their respective obligations under, each policy to which any
Buyer Company is a party or that provides coverage to any Buyer Company or any
officer, director or employee thereof.
(e) The Buyer Companies have given notice to the insurer of all claims
that may be insured thereby.
5.19 Environmental Matters. Except as set forth in Schedule 5.19:
(a) Each Buyer Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or
liable under, any Environmental Law. Neither Buyer nor any VSI
Stockholder with respect to a Buyer Company has any basis to expect,
nor has any of them or any other Person for whose conduct they are or
may be held to be responsible received, any actual or Threatened Order,
notice or other communication from (i) any Governmental Body or
private citizen acting in the public interest or (ii) the current or
prior owner or operator of any Facilities of a Buyer Company, of any
actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities of a Buyer Company
or any other properties or assets (whether real, personal or mixed)
in which any Buyer Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used or processed by any
Buyer Company, or any other Person for whose conduct they are or may
be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed,
recycled or received.
(b) There are no pending or, to the Best Knowledge of Buyer and
the VSI Stockholders, Threatened claims, Encumbrances or other
restrictions of any nature resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities
of a Buyer Company or any other properties and assets (whether real,
personal or mixed) in which any Buyer Company has or had an interest.
(c) No Buyer Company has any basis to expect nor has any Buyer
Company or, to the Best Knowledge of Buyer and the VSI Stockholders,
any other Person for whose conduct they are or may be held responsible
received any citation, directive, inquiry, notice, Order, summons,
warning or other communication that relates to Hazardous Activity,
Hazardous Materials or any alleged, actual or potential violation or
failure to comply with any Environmental Law, or of any alleged,
actual or potential obligation to undertake or bear
29
the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities of a Buyer Company or any other of
their properties or assets (whether real, personal or mixed) in which
any Buyer Company had an interest, or with respect to any property or
Facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used or processed by any Buyer Company, or any
other Person for whose conduct it is or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed,
recycled or received.
(d) Neither any Buyer Company nor, to the Best Knowledge of
Buyer and the VSI Stockholders, any other Person for whose conduct
it is or may be held responsible has any Environmental, Health, and
Safety Liabilities with respect to the Facilities of the Buyer
Companies or with respect to any other properties and assets (whether
real, personal or mixed) in which any Buyer Company (or any
predecessor) has or had an interest or at any property geologically or
hydrologically adjoining such Facilities or any such other property
or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities of any Buyer Company or at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps or any other part of such
Facilities or such adjoining property, or incorporated into any
structure therein or thereon. Neither any Buyer Company nor, to the
Best Knowledge of Buyer and the VSI Stockholders any other Person for
whose conduct it is or may be held responsible or any other Person,
has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or
assets (whether real, personal or mixed) in which any Buyer Company
has or had an interest, except in full compliance with all applicable
Environmental Laws.
(f) There has been no Release or, to the Best Knowledge of Buyer
and the VSI Stockholders, Threat of Release of any Hazardous Materials
at or from the Facilities of a Buyer Company or at any other locations
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used or processed from or by such
Facilities, or from or by any other properties and assets (whether
real, personal or mixed) in which any Buyer Company has or had an
interest, or any geologically or hydrologically adjoining such
property, whether by any Buyer Company or any other Person.
(g) Buyer and the VSI Stockholders have delivered or made
available to Sellers true and complete copies and results of any
reports, studies, analyses, tests or monitoring possessed or initiated
by any Buyer Company pertaining to Hazardous Materials or Hazardous
Activities in, on or under the Facilities of a Buyer Company, or
concerning compliance by any Buyer Company, or any other Person for
whose conduct they are or may be held responsible, with Environmental
Laws.
30
5.20 Material Agreements.
(a) Schedule 5.20(a) contains a complete and accurate list, and
Buyer has delivered or made available to Sellers true and complete copies of,
(i) each Contract for the purchase of inventory in excess of $500,000 per
calendar year, (ii) each Customer Contract, (iii) each Contract pertaining to
employment, consulting or severance arrangements with any officer, director,
employee or independent contractor, (iv) each indenture, mortgage, note,
letter of credit or other instrument relating to the borrowing of money (or
the guarantee thereof), (v) each franchise Contract, (vi) each Contract that
was not entered into in the Ordinary Course of Business and that involves
expenditures or receipts of one or more Buyer Companies in excess of $200,000
over its term, (vii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $100,000 and with terms of less than one year)
(with respect to those agreements in this clause (vii) pertaining to personal
property, the "Buyer Personal Property Leases"), (viii) each collective
bargaining agreement and other Contract to or with any labor union or other
employee representative of a group of employees, (ix) each joint venture,
partnership and other Contract (however named) involving a sharing of profits,
losses, costs or liabilities by any Buyer Company with any other Person,
(x) each Contract containing covenants that in any way purport to restrict the
business activity of any Buyer Company or any Affiliate of a Buyer Company or
limit the freedom of any Buyer Company or any Affiliate of a Buyer Company to
engage in any line of business or to compete with any Person, (xi) each
Contract providing for payments to or by any Person based on sales, purchases
or profits, other than direct payments for goods, (xii) each power of attorney
that is currently effective and outstanding, (xiii) each Contract entered into
other than in the Ordinary Course of Business that contains or provides for an
express undertaking by any Buyer Company to be responsible for consequential
damages, (xiv) each Contract for capital expenditures in excess of $500,000
and (xv) each Contract between any Buyer Company and any VSI Stockholder (or
one of its Affiliates).
(b) Except as set forth in Schedule 5.20(b), (i) each Contract required
to be set forth in Schedule 5.20(a) is the legal, valid and binding obligation
of a Buyer Company identified in such Schedule and, to the Best Knowledge of
Buyer and VSI Stockholders, each other party thereto, enforceable against it
in accordance with its terms, (ii) no Buyer Company or any VSI Stockholder nor,
to the Best Knowledge of Buyer and the VSI Stockholders, any other party
thereto, is in default under any of the Contracts required to be identified in
Schedule 5.20(a) and (iii) neither any Buyer Company nor any VSI Stockholder
has received from any Customers of any Buyer Company any written notice or
other advice of termination or cancellation or failure to consent to the
Contemplated Transactions required to be identified in Schedule 5.20(a) of any
Customer Contract. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Buyer understands that Customer Contracts may
expire or terminate, or the party to a Customer Contract as to which consent
is required as identified in Schedule 5.5 may refuse consent to the
Contemplated Transactions or a Contract of Buyer Companies may be breached due
to the Contemplated Transactions, in each case, prior to, on or after the
Closing Date. Sellers agree that their exclusive right and remedy with respect
to any of the matters in the foregoing sentence is as provided in Section 4.4.
31
5.21 Compliance with Law.
(a) The operation of the business of the Buyer Companies has been
conducted in all respects in accordance with all applicable Legal Requirements
and other applicable requirements of all Governmental Bodies. No Buyer Company
has since the date of the 1998 Buyer Balance Sheet received any notification
from any Governmental Body of any asserted present or past failure by it to
comply with any such Legal Requirements.
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) may constitute or result in a violation
by any Buyer Company of, or a failure on the part of any Buyer Company to
comply with, any Legal Requirement or (ii) may give rise to any obligation on
the part of any Buyer Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
(c) Schedule 5.21(c) contains a complete and accurate list of each
Governmental Authorization that is held by the Buyer Companies or that
otherwise relates to the business of, or to any of the assets owned or used by,
the Buyer Companies. Each Governmental Authorization listed or required to be
listed in Schedule 5.21(c) is valid and in full force and effect. Except as
set forth in such Schedule:
(i) each Buyer Company is, and at all times since June 30, 1993
has been, in full compliance with all of the terms and requirements
of each Governmental Authorization identified or required to be
identified in Schedule 5.21(c);
(ii) the consummation of the Contemplated Transactions will not
and no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to
be listed in Schedule 5.21(c) or (B) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation or termination
of, or any modification to, any Governmental Authorization listed or
required to be listed in Schedule 5.21(c);
(iii) no Buyer Company has received, at any time since June 30,
1993, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible or potential violation of, or failure to
comply with, any term or requirement of any Governmental Authorization
or (B) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification
to, any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in
Schedule 5.21(c) have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to
have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental
Bodies, except for such
32
failures to timely file or make such required filings that would not
be reasonably expected to have a Material Adverse Effect.
The Governmental Authorizations listed in Schedule 5.21(c) collectively
constitute all of the Governmental Authorizations necessary to permit the Buyer
Companies to lawfully conduct and operate their businesses in the manner they
currently conduct and operate such businesses and to permit the Buyer Companies
to own and use their assets in the manner in which they currently own and use
such assets.
5.22 No Brokers or Finders. Except as set forth in Schedule 5.22,
neither any VSI Stockholder, any Buyer Company nor any of their respective
Representatives have not retained any broker or finder or incurred any liability
for any brokerage or finder's fee or commissions or similar payment in
connection with any of the Contemplated Transactions.
5.23 Investment Intent. Buyer is acquiring the Service America Capital
for its own account and not with a view to their distribution within the meaning
of Section 2(11) of the Securities Act. Buyer confirms that (i) it has such
knowledge, sophistication and experience in business and financial matters that
it is capable of evaluating the merits and risks of an investment in the Service
America Capital, (ii) it can bear the economic risk of an investment in the
Service America Capital and can afford a complete loss of such investment, (iii)
Sellers have made available to Buyer and its Representatives the opportunity to
ask questions of the officers and management employees of Service America and to
acquire such additional information about the business and financial condition
of Service America as Buyer has requested, and all such information has been
received and (iv) it understands that the Service America Capital has not been
registered under the Securities Act and cannot be sold or transferred unless so
registered or an exemption from registration is available and that such Service
America Capital is subject to the terms of a Stockholders Agreement dated
January 17, 1997 by and among Sellers.
5.24 Absence of Certain Business Practices. Since June 30, 1995,
neither any Buyer Company nor any officer, employee or agent of any Buyer
Company or any other Person acting on its behalf has, directly or indirectly,
given or agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other Person who is or may be in a position to help or
hinder the business of any Buyer Company (or assist any Buyer Company in
connection with any actual or proposed transaction relating to the business of
such Buyer Company) (i) which subjected or might have subjected any Buyer
Company to any damage or penalty in any civil, criminal or governmental
litigation or Proceeding, (ii) which if not given in the past, might have had a
Material Adverse Effect on any Buyer Company, (iii) which if not continued in
the future, might have a Material Adverse Effect on any Buyer Company or subject
any Buyer Company to suit or penalty in any private or governmental litigation,
(iv) which, in case of a payment made directly or indirectly to an official or
employee of any government or of an agency or instrumentality of any government,
constitutes an illegal bribe or kickback (or, if made to an official or employee
of a foreign government, is unlawful under the Foreign Corrupt Practices Act of
1977) or, in the case of a payment made directly or indirectly to a Person other
than an official or employee of a government or of an agency or instrumentality
of a government, constitutes an illegal bribe, illegal kickback or
33
other illegal payment under any law of the United States or under the law of
any State which subjects the payor to a criminal penalty or the loss
of license or privilege to engage in a trade or business.
5.25 Disclosure.
(a) No representation or warranty of any Buyer or any VSI
Stockholder in this Agreement and no statement in the Buyer and the
VSI Stockholders Disclosure Schedule omits to state any fact necessary
to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) There is no fact known to Buyer or any VSI Stockholder that
has specific application to any Buyer Company (other than general
economic or industry conditions) and that adversely affects the
assets, business, prospects, financial condition or results of
operations of the Buyer Companies (on a consolidated basis) that has
been set forth in this Agreement or the Buyer and the VSI Stockholders
Disclosure Schedule.
5.26 Affiliate Transactions. Except as disclosed in Schedule 5.26,
there are no Contracts between any Buyer Company and any VSI Stockholder (or
any of their respective Affiliates).
5.27 Securities and Other Matters. The Offering Memorandum will not
include any untrue statement of a material fact or fail to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that no
representation is made as to information that will be supplied or be required
to be supplied for inclusion therein by Sellers regarding Sellers and the
Service America Companies. Each of Sellers and the Minority Stockholders has
been or will be given, and has availed or will avail itself, if it so desires,
of the opportunity to obtain information or documents from, and to ask
questions and receive answers of, the officers and representatives of Buyer to
evaluate the risk related to an investment in Buyer to the extent Sellers or a
Minority Stockholder deemed reasonably necessary as constituted subsequent to
the consummation of the Contemplated Transactions. Assuming the truth and
accuracy of the representations and warranties set forth in Section 6.27,
(i) the sale of the Buyer Common Stock or change, if any, in the redemption,
repurchase or other terms of the Buyer Common Stock, and/or the capitalization
of Buyer is exempt from registration and prospectus delivery requirements of
the Securities Act and (ii) any acquisition by Buyer of any Buyer Common Stock
or change in the redemption, repurchase or other terms of the Buyer Common
Stock with respect to all VSI Stockholders, will not subject Buyer or any
other party hereto to a claim for damages by any VSI Stockholder (including
any Person included in any VSI Stockholder, directly or indirectly). No form
of general advertising or solicitation was or will be used by the Buyer in the
offer and sale of the Buyer Common Stock by Buyer in connection with this
Agreement. Any acquisition by Buyer of securities of Service America taking
place subsequent to the Closing will be made in good faith and for at least
the same value (whether offered in Buyer Common Stock or cash) offered to
Sellers hereunder and will comply in all respects with applicable law,
including federal and state securities laws.
34
6. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers jointly and severally represent and warrant to Buyer
and the VSI Stockholders, except as set forth in the Schedules
comprising Schedule 6 hereto and incorporated herein by reference (the
"Sellers Disclosure Schedule"), as follows:
6.1 Organization and Good Standing.
(a) Each Subsidiary of Service America and the capitalization
of each such Subsidiary is set forth on Schedule 6.1(a). Except as
set forth in Schedule 6.1(a), Service America or a Subsidiary of
Service America owns all of the assets that are utilized to carry on
its business and Sellers neither own nor control any other entity
necessary to carry on such business. All of the shares of each
Subsidiary of Service America are owned by Service America or a wholly
owned Subsidiary of Service America free and clear of all
Encumbrances, except as set forth in Schedule 6.1(a), and all such
shares owned by Service America or a wholly owned Subsidiary of
Service America will be owned as of the Closing Date, free and clear
of all Encumbrances, other than Permitted Encumbrances. All of the
issued and outstanding shares of the Subsidiaries of Service America
have been duly authorized and are validly issued, fully paid and
nonassessable. None of the outstanding equity securities or other
securities of any Service America Company was issued in violation of
the Securities Act or any other Legal Requirement.
(b) Each of the Service America Companies is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation set forth next to its name on
Schedule 6.1(b), has all requisite corporate power to own and lease
its properties and carry on its business as the same is now being
conducted and is qualified or licensed to do business as a foreign
corporation in each jurisdiction set forth next to its name in
Schedule 6.1(b). Complete and correct copies of the Organizational
Documents of each Service America Company have been delivered or made
available by Sellers to Buyer, and are complete and correct as of the
date hereof.
6.2 Capital Structure.
(a) The authorized capital stock of Service America consists of
(i) 1,200,000 shares of common stock, par value $.01 per share, of
which 291,100 shares are issued and outstanding, (ii) 40,000 shares of
10% Class A Senior Preferred Stock - Series A, par value $1.00 per
share, of which 30,000 shares are issued and outstanding, and (iii)
260,000 shares of 10% Class A Senior Preferred Stock - Series B, par
value $1.00 per share, of which 200,000 shares are issued and
outstanding. All of the outstanding shares of Service America have
been duly authorized and validly issued and are fully paid and
nonassessable and were issued without violation of any preemptive
rights. The Service America Shares are owned as shown on Schedule
6.2(a).
(b) GE Capital represents and warrants and each other Seller
represents and warrants as to himself or itself, as the case may be,
that each Seller has good and valid title to the Service America
Shares that are set forth on Schedule 6.2(a) opposite the name of such
Seller and owns such Service America Shares free and clear of all
Encumbrances other than the Encumbrances listed on Schedule 6.2(b).
The delivery to Buyer of the certificates representing the Service
America Shares in accordance with Section 2.1 and the receipt by
35
Sellers of the Buyer Common Stock in accordance with Section 2.2 will
transfer to Buyer record and beneficial ownership of the Service
America Shares free and clear of all Encumbrances (other than
Encumbrances placed thereon by Buyer or otherwise applicable solely
to Buyer or its assets).
(c) Except for the Service America Warrant and as set forth on
Schedule 6.2(c), there are no outstanding subscriptions, options,
rights, warrants, convertible securities or other agreements (other
than this Agreement) or calls, demands, preemptive rights or
commitments of any kind relating to the issuance, sale or transfer of
any capital stock of any Service America Company. The Service America
Warrant issued to GE Capital has been duly authorized and is
exercisable, subject to the terms and conditions thereof.
6.3 Authority Relative to Contemplated Transactions. GE Capital
represents and warrants and each other Seller represents and warrants as to
himself or itself, as the case may be, that (i) the execution, delivery and
performance by Sellers of this Agreement and the consummation of the
Contemplated Transactions by Sellers have been duly authorized by all necessary
corporate action (in the case of GE Capital), partnership action (in the case of
the Dee Partnership) or are within his or its full legal right, power and
authority (in the case of the Individual Service America Stockholders) and (ii)
this Agreement constitutes, and upon execution and delivery by Buyer and the VSI
Stockholders, will constitute, a valid and binding obligation of Sellers,
enforceable against Sellers in accordance with its terms.
6.4 Absence of Conflict. GE Capital represents and warrants and each
other Seller represents and warrants as to himself or itself, as the case may
be, that neither the execution and delivery of this Agreement by Sellers nor the
consummation of the Contemplated Transactions by Sellers will (a) conflict with
or violate any provisions of the Organizational Documents of any Service America
Company, GE Capital or the Dee Partnership, (b) except to the extent Consents
may be required as indicated on Schedule 6.5, violate, or be in conflict with or
constitute a default under (or an event which, with notice or lapse of time or
both, would constitute a default under), (i) any judgment, Order or ruling
issued with respect to Service America or any Seller, (ii) any applicable law,
rule or regulation or (iii) except as set forth on Schedule 6.4, any Contract to
which any Service America Company or any Seller is a party, (c) cause any Buyer
Company or Service America Company to become subject to, or to become liable for
the payment of, any Tax, (d) cause any assets of any Service America Company to
be reassessed or revalued by any taxing authority or other Governmental Body or
(e) result in the imposition or creation of any Encumbrance upon or with respect
to any assets owned or used by any Service America Company. Sellers each waive
the provisions of Section 3 of the Stockholders Agreement dated January 17, 1997
among Servam Acquisition Corp. and the stockholders thereto only in connection
with the Contemplated Transactions.
6.5 Governmental Approvals and Consents. Except as set forth in
Schedule 6.5, no Consents of, or filings and registrations with, any
Governmental Body or any third party are required by or on behalf of Sellers or
any Service America Company in connection with the execution, delivery and
performance of this Agreement or the sale of the Service America Capital by
Sellers to Buyer.
36
6.6 Financial Statements. Sellers have delivered or made available to
Buyer (i) the audited consolidated balance sheets of Service America and its
Subsidiaries as at December 28, 1996 and December 27, 1997 and the related
audited consolidated statements of operations, stockholders' equity and cash
flows for the 39 weeks ended December 28, 1996 and the 52 weeks ended December
27, 1997, together with the notes thereto and the report thereon of Service
America's independent accountants (collectively, the "Service America Audited
Financial Statements") and (ii) the unaudited condensed consolidated balance
sheet of Service America and its Subsidiaries as at June 27, 1998 (the "1998
Service America Balance Sheet" and, together with the Service America Audited
Financial Statements, the "Service America Financial Statements"). Except as
provided in this Section 6.6 or Schedule 6.6, the Service America Financial
Statements have been prepared in accordance with GAAP consistently applied
throughout the periods indicated, and fairly present the financial position,
results of operations and changes in financial position of Service America and
its Subsidiaries as at the respective dates thereof and for the periods referred
to therein. The 1998 Service America Balance Sheet does not include or reflect
normal year-end adjustments or include the type of notes that would customarily
be included in a financial statement prepared in accordance with GAAP. No
financial statements of any Person other than the Service America and its
Subsidiaries are required by GAAP to be included in the consolidated financial
statements of Service America.
6.7 Books and Records. Except for the books and records of Service
America of Texas, Inc., the books of accounts, minute books, stock record books
and other records of all Service America Companies, all of which have been
delivered or made available to Buyer, are complete and correct and have been
maintained in accordance with sound business practice, including the maintenance
of an adequate system of internal controls. Except as set forth in Schedule 6.7,
the minute books of the Service America Companies contain accurate and complete
records of all meetings held of, and corporate actions taken by, the
stockholders and the board of directors and committees of the board of directors
of the Service America Companies, and no meeting of any such stockholders, board
of directors or committees has been held for which minutes have not been
prepared and are not contained in such minute books.
6.8 Inventory. All food inventory and other supplies and materials used
in the business of the Service America Companies and located at the location of
the Customers of the Service America Companies, to the extent reflected on the
1998 Service America Balance Sheet net of reserves, are in good condition and
usable in the Ordinary Course of Business consistent with industry practice,
subject to normal and customary allowances for spoilage, damage and outdated
items. The quantities of each item of inventory are not excessive, but are
reasonable in the present circumstances of the Service America Companies.
6.9 Accounts Receivable. Except as set forth in Schedule 6.9, all
accounts receivable of the Service America Companies, unless paid prior to the
Closing Date, represent valid obligations arising from sales actually made or
services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the accounts receivable are or will be current and
collectible net of reserves not exceeding customary levels (which reserves are
adequate). Subject to such reserves, each of the accounts receivable either has
been or will be collected in full, without any
37
setoff, within 90 days after the day on which it first became due and payable.
There is no contest, claim or right of setoff under any Customer Contract of any
Service America Company with any obligor of accounts receivable relating to the
amount or validity of such accounts receivable.
6.10 Title to Property; Encumbrances.
(a) No Service America Company holds title to any real property.
Schedule 6.10(a) sets forth a complete and accurate list of each
lease of real property by the Service America Companies and includes
the name of each current lessor and lessee and the dates and lease
term (including renewal options) of each lease and any amendment
thereto (the "Service America Real Property Leases"). Copies of each
Service America Real Property Lease have heretofore been delivered or
made available to Buyer. Except as set forth in Schedule 6.10(a), (i)
each Service America Real Property Lease is the legal, valid and
binding obligation of the Service America Company party thereto,
enforceable against Service America party thereto in accordance with
its terms, (ii) the Service America Company party thereto has not
received any written notice of any event or condition that
constitutes, or with the passage of time would constitute, a default
by the Service America Company party thereto under any of the Service
America Real Property Leases or by any other party to any such
Service America Real Property Leases and (iii) no Service America
Company party thereto has received from any lessor thereunder any
written notice or other advice of termination or cancellation.
(b) Schedule 6.10(b) contains a list of all material personal
property owned by the Service America Companies as of the date hereof.
Except for Permitted Encumbrances, the Service America Companies have
and will have on the Closing Date the good title to all of their
personal property set forth on Schedule 6.10(b) (except for personal
property sold or otherwise disposed of since June 28, 1998 in the
Ordinary Course of Business) (the "Service America Assets"), free and
clear of all Encumbrances.
(c) All tangible personal property included in the Service America
Assets and owned by or held by any Service America Company pursuant to
the Service America Personal Property Leases is in substantially good
operating condition and repair, subject to ordinary wear and tear and,
except as set forth on Schedule 6.10(c) hereof, is suitable and
appropriate for use consistent with the manner in which such Service
America Assets have been used by the Service America Companies in
their business immediately prior to the date hereof.
6.11 Marks, Software. Schedule 6.11 contains a true and complete list
of all Software and Marks owned by the Service America Companies and used in the
business of the Service America Companies, and all licenses of Software and
Marks used by the Service America Companies in their business. One of the
Service America Companies owns or otherwise has the right to use all Software
and Marks in the manner currently used in connection with the operation of its
business and without infringement of the intellectual property rights of third
parties. There is no Proceeding pending or, to the Best Knowledge of Sellers,
Threatened that challenges the rights of the Service America Companies in
respect of any Service America Company's Software or Marks, and except as
described in Schedule 6.11 hereto, there is no claim of infringement or other
complaint that any Service America Company's use of its Software or Marks
violates or infringes
38
the rights of any third party. No Person is infringing in any respect the rights
of any Service America Company with respect to any Software or Mark of the
Service America Companies. No Service America Company has licensed or otherwise
granted to any third party, any rights in any Software or Mark of a Service
America Company.
6.12 Litigation.
(a) Except as disclosed in Schedule 6.12, there is no Proceeding
pending or, to the Best Knowledge of Sellers, Threatened (i) against
any Service America Company or its business or assets, except for
Proceedings that are uninsured and seek only monetary relief in an
amount not exceeding (A) $100,000 in any individual Proceeding and (B)
$500,000 for the aggregate of all such Proceedings or (ii) that
challenges, or that may have the effect of preventing or making
illegal any of the Contemplated Transactions.
(b) There are no existing Orders, writs or decrees of any court or
other Governmental Body against any Service America Company or its
business or Assets. No officer, director, agent or employee of any
Service America Company is subject to any Order, writ or decree of any
court or Governmental Body that prohibits such officer, director,
agent or employee from engaging in or continuing any conduct, activity
or practice relating to the business of the Service America Companies.
6.13 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 6.13, the Service America Companies have no liabilities or obligations
of any nature, except for (a) liabilities and obligations reflected as reserved
against in the balance sheet included in the Service America Audited Financial
Statements or (b) current liabilities incurred in the Ordinary Course of
Business since the date thereof.
6.14 Tax Matters.
(a) (i) All Tax Returns required to be filed on or before the
date of this Agreement by, or with respect to, any Service America
Company have been timely filed, (ii) all such Tax Returns are true,
correct and complete, (iii) Service America or a Subsidiary of Service
America has timely paid, or made provision for the payment of, all
Taxes attributable to taxable periods ending on or before the Closing
Date except for Taxes that are being contested in good faith by
appropriate Proceedings and (iv) the charges, accruals and reserves
with respect to Taxes (excluding the deferred taxes representing
differences between the book and tax basis in assets and liabilities)
on the books of the Service America Companies are adequate for all
periods up to and including the Closing Date (determined in
accordance with GAAP consistently applied).
(b) No Encumbrances for Taxes exist with respect to any asset or
properties of any Service America Company, except for statutory
Encumbrances for Taxes not yet due.
(c) There is no tax sharing agreement that will require any
payment by any Service America Company after the date of this
Agreement.
39
(d) No Service America Company is a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the
IRC.
6.15 Absence of Certain Changes or Events. Except as contemplated by
this Agreement or as set forth in Schedule 6.15, since December 27, 1997, each
Service America Company has conducted its operations in the Ordinary Course of
Business consistent with past practice and has not:
(a) suffered any Material Adverse Effect (other than any that may
be the result of changes of laws generally), it being understood that
any matter relating to a cancellation or termination of, or the
failure to obtain a Consent disclosed in Section 6.5 with respect to,
any Customer Contract or the breach of any other Contract of the Buyer
Companies due to the Contemplated Transactions subsequent to the date
hereof shall not be deemed a Material Adverse Effect on the Service
America Companies but shall be dealt with as provided in Section 3.4;
(b) incurred any obligation or liability, except liabilities
incurred in the Ordinary Course of Business;
(c) other than in connection with the consummation of the
Contemplated Transactions, issued, sold or otherwise disposed of any
of its capital stock, or created or suffered to be created any
Encumbrance thereon, or reclassified, split up or otherwise changed
any of its capital stock, or granted or entered into any options,
covenants or calls or other rights to purchase or convert any
obligation into any of its capital stock, granted any registration
rights, or purchased, redeemed, retired or otherwise acquired any
shares of any such capital stock;
(d) made or granted any increases in salaries, bonuses or other
remuneration to any employee, except in the Ordinary Course of Business
consistent with past practice, or entered into any employment,
severance or other Contract with any director, officer or employee;
(e) adopted, or increased payments or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees of
any Service America Company;
(f) sold, assigned, transferred, conveyed, leased, pledged,
encumbered or otherwise disposed of any material assets or any other
material right, except in the Ordinary Course of Business consistent
with past practice;
(g) canceled any debts or affirmatively waived any claims or
rights of substantial value;
(h) declared or paid any dividend or made any other payment or
distribution in respect of its capital stock;
40
(i) amended any Organizational Documents of any Service America
Company;
(j) made any change in accounting methods, principles or
practices except as required by law;
(k) incurred, assumed or guaranteed any indebtedness for borrowed
money or other obligations, or created or assumed any Encumbrance on
any asset other than in the Ordinary Course of Business consistent
with past practice, but in no event with respect to assets with a
value of, or obligations in an amount of, more than $25,000 in the
aggregate;
(l) made any loan, advance or capital contribution to or
investment in any Person other than in the Ordinary Course of Business
consistent with past practice, but in no event in the amount of more
than $25,000 in the aggregate, and other than investments in cash
equivalents made in the Ordinary Course of Business consistent with
past practice;
(m) entered into any other commitment or transaction material to
the Service America Companies taken as a whole, except in the Ordinary
Course of Business consistent with past practice;
(n) entered into any Contract which provides for required capital
expenditures over its term in excess of $500,000 or guarantee of any
obligation or incurrence of any contingent liability in excess of
$100,000;
(o) made or changed any Tax election, changed any method of
accounting with respect to Taxes or settled or compromised any
liabilities for Taxes; or
(p) made any agreement, commitment, arrangement or undertaking to
perform any action described in the foregoing clauses.
6.16 Employee and Labor Matters. Except as set forth in Schedule 6.16:
(a) no Service America Company is a party to any collective bargaining agreement
applicable to employees of any Service America Company nor is any such contract
or agreement presently being negotiated; (b) no Service America Company is a
party to any employment agreement or consulting agreement with any person or
entity obligating any Service America Company to make payments in excess of
$50,000 per year nor is any such contract or agreement presently being
negotiated; (c) there is no unfair labor practice charge or complaint pending
or, to the Best Knowledge of Sellers, Threatened against or otherwise affecting
any Service America Company which, if adversely determined, would reasonably be
likely to result in a liability having a Material Adverse Effect; (d) there is
no labor strike, slowdown, work stoppage or lockout in effect or, to the Best
Knowledge of Sellers, Threatened against or otherwise affecting any Service
America Company, and no Service America Company has experienced any such labor
controversy within the past three years; (e) no Service America Company is a
party to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices; (f) no
Service America Company will have any liability under any benefit or severance
policy, practice, agreement, plan, or
41
program which exists or arises, or may be deemed to exist or arise, under any
applicable law or otherwise, as a result of the consummation of the Contemplated
Transactions; (g) the Service America Companies are in compliance with their
obligations pursuant to the Worker Adjustment and Retraining Notification Act of
1998 and all other notification and bargaining obligations arising under any
collective bargaining agreement, statute or otherwise; and (h) the Service
America Companies are in compliance with all provisions of applicable law
pertaining to the employment of their employees, including, without limitation,
laws relating to labor relations, equal employment, fair employment practices,
prohibited discrimination or other similar employment practices acts. There is
no breach or event of default under, and each Service America Company is in full
compliance with, each employment, severance and consulting Contract to which it
and any of its director, officer or employee is a party.
6.17 Employee Benefit Matters. The Service America Corporation
Retirement and Savings Plan (the "Service America 401(k) Plan") is the only
pension plan sponsored by the Service America Companies on the date hereof
relating to the business of the Service America Companies. Buyer has received or
had made available to it true and correct copies of all documents embodying the
Service America 401(k) Plan. The Service America 401(k) Plan is in substantial
compliance with the provisions of ERISA and the qualification requirements of
Section 401(a) of the IRC. There are no Proceedings pending or, to the Best
Knowledge of Sellers, Threatened with respect to the Service America 401(k) Plan
that would reasonably be expected to materially and adversely affect such
qualifications or result in a materially adverse effect on the Service America.
To the Best Knowledge of Sellers, no "prohibited transaction," as described in
Section 406 (and not exempt under Section 408) of ERISA, has occurred with
respect to the Service America 401(k) Plan.
6.18 Insurance.
(a) Schedule 6.18(a) sets forth a list of all insurance policies
maintained as of the date of this Agreement by or on behalf of the
Service America Companies and relating to their business or assets.
Buyer has received or had made available to them true and correct
copies of such policies together with all riders and amendments
thereto. Such insurance policies are in full force and effect, all
premiums due thereon have been paid (except as described in Schedule
6.18(a)) and such policies are adequate to insure the Service America
Companies' business in such amounts and against such risks as are
customary for companies engaged in businesses similar to that of
Service America.
(b) Schedule 6.18(b) describes:
(i) any self-insurance arrangement by or affecting any
Service America Company, including any reserves established
thereunder;
(ii) any Contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by any Service
America Company; and
(iii) all obligations of any Service America Company to third
parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy
42
under which such coverage is provided, except for such
obligations under Customer Contracts of any Service America
Company.
(c) Neither any Service America Company nor any Seller has
received with respect to any current insurance claim (A) any refusal
of coverage or any notice that a defense will be afforded with
reservation of rights or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder.
(d) The Service America Companies have paid all premiums due, and
have otherwise performed all of their respective obligations, under
each policy to which any Service America Company is a party or that
provides coverage to any Service America Company or any officer,
director or employee thereof.
(e) The Service America Companies have given notice to the
insurer of all claims that may be insured thereby.
6.19 Environmental Matters. Except as set forth in Schedule 6.19:
(a) Each Service America Company is, and at all times has been,
in full compliance with, and has not been and is not in violation of
or liable under, any Environmental Law. No Seller has with respect to
a Service America Company any basis to expect, nor has any of them or
any other Person for whose conduct they are or may be held to be
responsible received, any actual or Threatened Order, notice or other
communication from (i) any Governmental Body or private citizen
acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities of the Service America Companies, of any
actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities of the Service
America Companies or any other properties or assets (whether real,
personal or mixed) in which any Service America Company has had an
interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by any Service America Company or any
other Person for whose conduct it is or may be held responsible, or
from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled or received.
(b) There are no pending or, to the Best Knowledge of Sellers,
Threatened claims, Encumbrances or other restrictions of any nature
resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to
or affecting any of the Facilities of the Service America Companies or
any other properties and assets (whether real, personal or mixed) in
which any Service America Company has or had an interest.
(c) No Service America Company has any basis to expect nor has any
Service America Company or, to the Best Knowledge of Sellers, any
other Person for whose conduct they are or may be held responsible
43
received any citation, directive, inquiry, notice, Order, summons,
warning or other communication that relates to Hazardous Activity,
Hazardous Materials or any alleged, actual or potential violation or
failure to comply with any Environmental Law, or of any alleged,
actual or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of
the Facilities of the Service America Companies or any of their
properties or assets (whether real, personal or mixed) in which any
Service America Company had an interest, or with respect to any
property or Facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used or processed by
any Service America Company, or any other Person for whose conduct
it is or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(d) Neither any Service America Company nor to the Best
Knowledge of Sellers, any other Person for whose conduct they are or
may be held responsible has any Environmental, Health, and Safety
Liabilities with respect to the Facilities of the Service America
Companies or with respect to any other properties and assets (whether
real, personal or mixed) in which any Service America Company (or any
predecessor) has or had an interest or at any property geologically
or hydrologically adjoining such Facilities or any such other property
or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities of any Service America Company or at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps or any other part of
such Facilities or such adjoining property, or incorporated into any
structure therein or thereon. Neither any Service America Company nor,
to the Best Knowledge of any Seller, any other Person for whose
conduct they are or may be held responsible or any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or
assets (whether real, personal, or mixed) in any Service America
Company has or had an interest, except in full compliance with all
applicable Environmental Laws.
(f) There has been no Release or, to the Best Knowledge of
Sellers, Threat of Release of any Hazardous Materials at or from the
Facilities of the Service America Companies or at any other locations
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by such
Facilities, or from or by any other properties and assets (whether
real, personal or mixed) in which any Service America Company has or
had an interest, or any geographically or hydrologically adjoining
such property whether by any Service America Company or any other
Person.
(g) Sellers have delivered or made available to Buyer true and
complete copies and results of any reports, studies, analyses, tests
or monitoring possessed or initiated by any Service America Company
pertaining to Hazardous Materials or Hazardous Activities in, on
44
or under the Facilities of the Service America Companies or concerning
compliance by any Service America Company, or any other Person for
whose conduct they are or may be held responsible, with Environmental
Laws.
6.20 Material Agreements.
(a) Schedule 6.20(a) contains a complete and accurate list, and
Sellers have delivered or made available to Buyer, true and complete
copies of, (i) each Contract for the purchase of inventory in excess
of $500,000 per calendar year, (ii) each Customer Contract, (iii) each
Contract pertaining to employment, consulting or severance
arrangements with any officer, director, employee or independent
contractor, (iv) each indenture, mortgage, note, letter of credit or
other instrument relating to the borrowing of money (or the guarantee
thereof), (v) each franchise Contract, (vi) each Contract that was not
entered into in the Ordinary Course of Business and that involves
expenditures or receipts of one or more Service America Companies in
excess of $200,000 over its term, (vii) each lease, rental or
occupancy agreement, license, installment and conditional sale
agreement, and other Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $100,000 and with terms of less than one year)
(with respect to those agreements listed in this clause (vi)
pertaining to personal property, the "Service America Personal
Property Leases"), (viii) each collective bargaining agreement and
other Contract to or with any labor union or other employee
representative of a group of employees, (ix) each joint venture,
partnership and other Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by any Service America Company
with any other Person, (x) each Contract containing covenants that in
any way purport to restrict the business activity of any Service
America Company or any Affiliate of a Service America Company or
limit the freedom of any Service America Company or any Affiliate of
a Service America Company to engage in any line of business or to
compete with any Person, (xi) each Contract providing for payments to
or by any Person based on sales, purchases or profits, other than
direct payments for goods, (xii) each power of attorney that is
currently effective and outstanding, (xiii) each Contract entered
into other than in the Ordinary Course of Business that contains or
provides for an express undertaking by any Service America Company
to be responsible for consequential damages, (xiv) each Contract for
capital expenditures in excess of $500,000 and (xv) each Contract
between any Service America Company and any Seller (or one of its
Affiliates).
(b) Except as set forth in Schedule 6.20(b), (i) each Contract
required to be set forth in Schedule 6.20(a) hereof is the legal,
valid and binding obligation of the Service America Company
identified in such Schedule and, to the Best Knowledge of Sellers,
each other party thereto, enforceable against it in accordance with
its terms, (ii) no Service America Company nor, to the Best Knowledge
of Sellers, any other party thereto is in material default under any
of the Contracts required to be identified in Schedule 6.20(a), and
(iii) no Service America Company has received from any of its
Customers any written notice or other advice of termination or
cancellation or failure to consent to the Contemplated Transactions
of any of its Customer Contracts required to be identified in
Schedule 6.20(a). Notwithstanding the foregoing or any other provision
of this Agreement to the contrary, Buyer understands that Customer
Contracts may expire or terminate, or the party to a Customer Contract
as to which consent is required as identified in Schedule 6.5 may
45
refuse consent to the Contemplated Transactions or a Contract of
Service America Companies may be breached due to the Contemplated
Transactions, in each case, prior to, on or after the Closing Date.
Buyer and VSI Stockholders agree that their exclusive right and remedy
with respect to any of the matters in the foregoing sentence is as
provided in Section 3.4.
6.21 Compliance with Law.
(a) The operation of the business of the Service America
Companies has been conducted in all respects in accordance with all
applicable Legal Requirements and other applicable requirements of all
Governmental Bodies, and no Service America Company has, since the
date of the 1997 Service America Balance Sheet, received any
notification from any Governmental Body of any asserted present or
past failure by it to comply with any such Legal Requirements.
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) may constitute or result in a
violation by any Service America Company of, or a failure on the part
of any Service America Company to comply with, any Legal Requirement,
or (ii) may give rise to any obligation on the part of any Service
America Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature.
(c) Schedule 6.21(c) contains a complete and accurate list of
each Governmental Authorization that is held by the Service America
Companies or that otherwise relates to the business of, or to any of
the assets owned or used by the Service America Companies. Each
Governmental Authorization listed or required to be listed in Schedule
6.21(c) is valid and in full force and effect. Except as set forth in
such Schedule:
(i) each Service America Company is, and at all times since
June, 1993 has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or
required to be identified in Schedule 6.21(c);
(ii) the consummation of the Contemplated Transactions will
not and no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Schedule 6.21(c)
or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation or termination of, or any
modification to, any Governmental Authorization listed or
required to be listed in Schedule 6.21(c);
(iii) no Service America Company has received, at any time
since June 30, 1993, any notice or other communication (whether
oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible or potential
violation of, or failure to comply with, any term or requirement
of any Governmental Authorization or (B) any actual, proposed,
possible or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to, any
Governmental Authorization; and
46
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to
be listed in Schedule 6.21(c) have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis
with the appropriate Governmental Bodies, except for such
failures to timely file or make such required filings that would
not reasonably be expected to have a Material Adverse Effect.
The Governmental Authorizations listed in Schedule 6.21(c) collectively
constitute all of the Governmental Authorizations necessary to permit the
Service America Companies to lawfully conduct and operate their businesses in
the manner they currently conduct and operate such businesses and to permit the
Service America Companies to own and use their assets in the manner in which
they currently own and use such assets.
6.22 No Brokers or Finders. Except as set forth in Schedule 6.22,
neither any Seller, any Service America Company nor any of their respective
Representatives have not employed any broker or finder or incurred any liability
for any brokerage or finder's fee or commissions or similar payment in
connection with any of the Contemplated Transactions.
6.23 Investment Intent. Each Seller is acquiring the Buyer Common Stock
for its own account and not with a view to their distribution within the meaning
of Section 2(11) of the Securities Act. Each Seller confirms that (a) it has
such knowledge, sophistication and experience in business and financial matters
that it is capable of evaluating the merits and risks of an investment in the
Buyer Common Stock, (b) it can bear the economic risk of an investment in the
Buyer Common Stock and can afford a complete loss of such investment, (c) Buyer
has made available to such Seller and its Representatives the opportunity to ask
questions of the officers and management employees of Buyer and to acquire such
additional information about the business and financial condition of Buyer as
such Seller has requested, and all such information has been received and (iv)
it understands that the Buyer Common Stock have not been registered under the
Securities Act and cannot be sold or transferred unless so registered or an
exemption from registration is available.
6.24 Absence of Certain Business Practices. Since June 30, 1995,
neither any Service America Company nor any officer, employee or agent of any
Service America Company or any other Person acting on its behalf has, directly
or indirectly, given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other Person who is or may be in a
position to help or hinder the business of any Service America Company (or
assist the Service America Company in connection with any actual or proposed
transaction relating to the business of such Service America Company) (i) which
subjected or might have subjected any Service America Company to any damage or
penalty in any civil, criminal or governmental litigation or Proceeding, (ii)
which if not given in the past, might have had a Material Adverse Effect on any
Service America Company, (iii) which if not continued in the future, might have
a Material Adverse Effect on any Service America Company or subject any Service
America Company to suit or penalty in any private or governmental litigation,
(iv) which, in case of a payment made directly or indirectly to an official or
employee of any government or of an agency or instrumentality of any government,
constitutes an illegal bribe or kickback (or, if made to an official or employee
of a foreign government, is
47
unlawful under the Foreign Corrupt Practices Act of 1977) or, in the case of a
payment made directly or indirectly to a Person other than an official or
employee of a government or of an agency or instrumentality of a government,
constitutes an illegal bribe, illegal kickback or other illegal payment under
any law of the United States or under the law of any State which subjects the
payor to a criminal penalty or the loss of license or privilege to engage in a
trade or business.
6.25 Disclosure.
(a) No representation or warranty of any Seller in this Agreement
and no statement in the Sellers Disclosure Schedule omits to state any
fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) There is no fact known to any Seller that has specific
application to any Service America Company (other than general
economic or industry conditions) and that adversely affects the
assets, business, prospects, financial condition or results of
operations of the Service America Companies (on a consolidated basis)
that has not been set forth in this Agreement or the Sellers
Disclosure Schedule.
6.26 Affiliate Transactions. Except as disclosed in Schedule 6.26,
there are no Contracts between any Service America Company and any Seller (or
any of their respective Affiliates).
6.27 Securities and Other Matters. The Offering Memorandum will not
include any untrue statement of a material fact or fail to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that no
representation is made as to information that will be supplied or be required to
be supplied for inclusion therein by Buyer or by any VSI Stockholder regarding
the Buyer Companies and the VSI Stockholders and GE Capital jointly represents
with Buyer and VSI Stockholders as to the accuracy and material completeness of
the description of Contemplated Transaction. Each of Sellers, the Minority
Stockholders who exchange their capital stock in Service America for Buyer
Common Stock and their Financial Representative has been or will be given, and
has availed or will avail itself of, if it so desires, the opportunity to obtain
information or documents from, and to ask questions and receive answers of, the
officers and representatives of Service America to the extent Sellers or a
Minority Stockholder deemed reasonably necessary to evaluate the risk related to
an investment in Buyer as constituted subsequent to the consummation of the
Contemplated Transactions. Assuming the truth and accuracy of the
representations and warranties set forth in Section 5.27, any acquisition by
Buyer of Service America Shares and Service America securities taking place at
the Closing or within three months of the Closing of the Contemplated
Transactions, will not subject the Buyer or any other party hereto to a claim
for damages by any Seller or Minority Stockholder.
48
7. FURTHER AGREEMENTS OF THE PARTIES.
7.1 Operation of the Businesses of the Buyer Companies and Service
America Companies. Other than as contemplated by this Agreement, between the
date of this Agreement and the Closing Date, Buyer and the VSI Stockholders
(with respect to the Buyer Companies) and Sellers (with respect to the Service
America Companies) will:
(a) conduct the business of the Service America Companies and the
Buyer Companies only in the Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of the Service America Companies and the Buyer
Companies, keep available the services of the current officers,
employees and agents of the Service America Companies and the Buyer
Companies, and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents and others having
business relationships with the Service America Companies and the
Buyer Companies;
(c) confer with each other concerning operational matters of the
Service America Companies and the Buyer Companies of a material
nature; and
(d) otherwise report periodically to each other concerning the
status of the business, operations and finances of the Buyer Companies
and the Service America Companies.
7.2 Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, none of the
parties hereto shall take any affirmative action or fail to take any reasonable
action within their or its control as a result of which any of the changes or
events listed in Sections 5.15 and 6.15, as the case may be, is likely to occur.
7.3 Notification. Between the date of this Agreement and the Closing
Date, each of Buyer and the VSI Stockholders, on the one hand, and Sellers, on
the other hand, will promptly notify the other party in writing if such party
becomes aware of any fact or condition that causes or constitutes a breach of
any of their representations and warranties as of the date of this Agreement, or
if any party becomes aware of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in a party's Disclosure Schedule if such Disclosure Schedule were
dated the date of the occurrence or discovery of any such fact or condition, a
party will promptly deliver to the other party a supplement to its Disclosure
Schedule specifying such change (but in any event, no later than three Business
Days prior to the Closing Date). Any such supplement shall not be effective to
determine if the conditions to Closing of the party delivering the supplement
have been met but shall be effective for all purposes hereunder after the
Closing. During the same period, a party will promptly notify the other party of
the occurrence of any breach of any covenant of such party in this Agreement or
of the occurrence of any event that may make the satisfaction of the conditions
in this Agreement impossible or unlikely.
49
7.4 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 8, each party agrees it will not, and will cause
each of its Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person relating to any transaction involving
the sale of the business or assets (other than in the Ordinary Course of
Business) of any Service America Company or Buyer Company, or any of the capital
stock of any Service America Company or Buyer Company, or any merger,
consolidation, business combination or similar transaction involving any Service
America Company or Buyer Company.
7.5 Access Prior to the Closing. Between the date of this Agreement
and the Closing Date, Buyer and the VSI Stockholders shall with respect to the
Buyer Companies, on the one hand, and Sellers shall with respect to the Service
America Companies, on the other hand, (a) give the other party and its
authorized Representatives access to all properties, personnel, facilities and
offices and to the books and records of the Buyer Companies or the Service
America Companies (and permit such party to make copies thereof), as the case
may be, (b) permit the other party to make inspections thereof and (c) furnish
the other party with such financial information and operating data and other
information with respect to the business and properties of the Buyer Companies
or the Service America Companies, as the case may be, and discuss with the Buyer
Companies or the Service America Companies and its authorized Representatives
the affairs of the Buyer Companies or the Service America Companies, as the case
may be, all as such party may from time to time reasonably request for the
purposes of this Agreement during normal business hours, under reasonable
circumstances and with reasonable notice to the other party.
7.6 Director and Officer Liability and Indemnification. The parties
hereto agree that for a period of three years after the Closing, the Buyer
Companies or the Service America Companies shall maintain provisions of their
Organizational Documents relating to exculpation or indemnification of former
officers and directors thereof (unless required by law) such that the officers
and directors of each Buyer Company or Service America Company prior to the
Closing shall continue to be entitled to such exculpation and indemnification as
was in effect prior to the Closing (or any equally favorable arrangement) to the
fullest extent permitted under the laws of the applicable jurisdiction of
incorporation. Each Buyer Company and Service America Company also shall
maintain for a period of three years after the Closing Date directors and
officers liability insurance coverage for purposes of indemnifying and insuring
Persons covered by such insurance of the Buyer Companies or Service America
Companies, as the case may be, immediately prior to the Closing Date, which
coverage shall be on terms and in amounts at least as favorable to such Persons
as they were on the Closing Date; provided, that in satisfying its obligation
under this Section 7.6, neither any Buyer Company or Service America Company
shall be obligated to pay premiums in excess of 150% of the amount per annum
paid by such company in the last such fiscal year preceding the date of
execution of this Agreement, which amounts have been disclosed, and if any such
company is unable to obtain the insurance required by this Section 7.6 for such
premium, it shall use its Best Efforts to obtain as much comparable insurance as
possible for an annual premium equal to such maximum amount.
50
7.7 Third Party Consents; Further Assurances.
(a) Prior to the Closing Date, each party shall use its Best
Efforts to take, or cause to be taken, and to assist and cooperate
with the other party or parties hereto in doing, all actions
necessary, proper or advisable under applicable laws and regulations
to consummate and make effective, in the most expeditious manner
practicable, the Contemplated Transactions, including, without
limitation, (i) obtaining all necessary Consents, approvals or waivers
from third parties and (ii) defending any lawsuits or other legal
Proceedings, whether judicial or administrative and challenging this
Agreement or the consummation of the Contemplated Transactions.
(b) Promptly after the execution of this Agreement, the parties
each shall use their respective Best Efforts to jointly obtain such
Consents as may be required in connection with the Contemplated
Transactions. In connection therewith, no later than one Business Day
after the execution hereof, Buyer (or the applicable Subsidiary
thereof) and Service America (or the applicable Subsidiary thereof)
shall deliver to each third party from whom a Consent is required a
joint request (substantially in the form of Exhibit 7.7(b)) for such
Consent (each, a "Joint Request"). Within a reasonable time period
following the issuance of a Joint Request, the applicable Buyer
Company or Service America Company shall contact, either in person, by
telephone, telecopy or other means, those third parties from whom a
required Consent has not been obtained. Buyer and Sellers agree to
provide such financial or other information as may be requested by any
third party in connection with any consent sought hereunder.
Nothing in this Section 7.7(b) shall obligate any party to furnish any monetary
or other consideration to a third party to obtain such third party's consent to
the Contemplated Transactions. Promptly upon receipt thereof, each party shall
deliver to the other parties copies of any consents or written refusals to
provide consents received in connection with the Contemplated Transactions. To
the extent necessary to obtain or avoid the need to obtain the consent of a
party to a Contract, Buyer agrees to indicate to parties to such Contract that
such Contract will be performed by Buyer and its Subsidiaries after the Closing.
7.8 Offering Memorandum. Sellers shall prepare and distribute as soon
as reasonably practicable an Offering Memorandum with the cooperation and
assistance of Buyer, including, but not limited to, the provision by Buyer to
Sellers of information pertaining to the business and operations of Buyer and
jointly assisting Sellers in the preparation of a description of the
Contemplated Transactions.
7.9 Consent of GE Capital. GE Capital hereby grants the requisite
consent to the Contemplated Transactions under the GE Capital Loan Agreement. GE
Capital agrees that, if an Event of Default occurs under the GE Capital Loan
Agreement prior to the Closing, GE Capital may accelerate the Obligations
thereunder and exercise all rights and remedies against any Seller under the
Borrower Stockholder Pledge Agreement and Borrower Stockholders Guaranty;
provided that (x) for the period commencing on the occurrence of such Event of
Default and ending on the one year anniversary of the Closing GE Capital shall
not exercise any rights or remedies against the Collateral or any other rights
or remedies (including demanding the repayment of any principal of the loan
under the GE Capital Loan Agreement) for the period commencing on the occurrence
of such Event of Default and ending on the one year anniversary of the Closing
and (y) in the event GE Capital acquires the Service America Shares owned by any
Seller as a result of exercising its rights
51
under the Borrower Stockholder Pledge Agreement, GE Capital shall comply with
the agreements of such Seller under this Agreement (including consummating the
Contemplated Transactions with respect to such Seller's Service America Shares).
Subsequent to the one year anniversary of the Closing, GE Capital may exercise
all of its rights and remedies against the Collateral and all other rights and
remedies. Capitalized terms used in this Section 7.9 but not defined in this
Agreement shall have the meanings set forth in the GE Capital Loan Agreement.
7.10 Execution of Document. On or prior to the Closing, (a) each Seller
and VSI Stockholder and Buyer shall execute the Stockholders' Agreement and (b)
GE Capital shall enter into the Assignment and Assumption Amendment.
7.11 Buyer Obligation to Obtain Appraisal. As soon as practicable
after the execution of this Agreement, Buyer shall retain a nationally
recognized investment banking firm or appraisal firm that shall perform a
valuation of the assets of Buyer and its Subsidiaries (assuming consummation of
the Contemplated Transactions) and present such valuation to the Board of
Directors of Buyer for its approval. Such Board of Directors shall determine at
that time whether such valuation is sufficient to permit a revaluation of
Buyer's assets pursuant to the Delaware General Corporation Law to permit the
repurchase of Buyer Common Stock pursuant to Section 2.3.
7.12 Service America Preferred Stock Matters. Buyer agrees that it
shall not cancel, amend or modify in any respect or in any fashion alter the
terms of the Service America Preferred Stock prior to the acquisition by Buyer
of 100% of all outstanding Service America Preferred Stock. In addition, Buyer
shall execute on or prior to the Closing Date a written waiver pursuant to which
Buyer shall waive any entitlement to any liquidation redemption or other value
pertaining to or arising from its ownership of the Service America Preferred
Stock. In addition, Buyer further agrees that it shall not sell, exchange or
otherwise transfer any Service America Preferred Stock to any other Person
unless such Person agrees to be bound by the terms of this Section 7.12.
7.13 Other Preferred Stock Matters. The parties acknowledge that a
portion of the Buyer Common Stock allocated to Sellers on Schedule 2.2 will be
reserved for possible issuance to Lawrence Kilfoy.
(a) Buyer agrees, at the request of Sellers after the Closing, to
either issue such shares of Buyer Common Stock to Kilfoy or pay him the
liquidation value plus accrued and unpaid dividends thereon in
exchange for the Service America Preferred Stock held by him (to the
extent such transaction may be legally concluded). Buyer also agrees
after the Closing, to cause Service America to pay Kilfoy, as and when
due, the amount of severance due under his contract with Service
America dated June 9, 1994.
(b) Subject to the foregoing, and to the provisions of Section
9.3(c) hereof, Buyer after the Closing shall (i) permit Sellers to
control the negotiation of any issues outstanding with respect to
termination of Kilfoy's employment with Service America with counsel
of their choosing and (ii) enter into such agreement with Kilfoy as
may be so negotiated (provided it complies with applicable law); and
Sellers shall, after the Closing, indemnify Buyer on the terms and
subject to the basket amount for such claims set forth in Section 9
and Section 7.12 hereof for all amounts above those
52
described in Section 7.13(a) incurred by Buyer or its Subsidiaries as
a result of the termination of Kilfoy's employment with Service
America or the purchase, repurchase or redemption of the capital
stock of Service America held by Kilfoy.
7.14 GE Capital Lien. Buyer shall grant GE Capital a valid lien
satisfactory to GE Capital and on terms equivalent to those in effect on the
date hereof and equivalent to those referred to in Section 4.9 on any Service
America capital stock acquired after the date hereof as long as the Loan
Agreement is in effect.
8. TERMINATION.
8.1 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Buyer and the VSI Stockholders, on the one hand
(the "VSI Parties"), or Sellers, on the other hand, if a material
breach of any provision of this Agreement has been committed by the
other party and such breach has not been waived;
(b) (i) by the VSI Parties if any of the conditions in Section 3
has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of a VSI Party to comply with its obligations under this
Agreement) and the VSI Parties have not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions
in Section 4 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than
through the failure of Sellers to comply with their obligations under
this Agreement) and Sellers have not waived such condition on or
before the Closing Date;
(c) by mutual consent of the VSI Parties and Sellers; or
(d) by either the VSI Parties or Sellers if the Closing has not
occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before December 31, 1998 or such later date as
the parties may agree upon.
8.2 Effect of Termination. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1 and 11.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of this
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
53
9. INDEMNIFICATION AND RELATED MATTERS.
9.1 Indemnity.
(a) Subject to the provisions of Section 9.3, GE Capital shall
indemnify and save and hold harmless (but without duplication of
payment) Buyer and the VSI Stockholders and their respective officers,
directors, employees, shareholders, partners, Affiliates, agents,
heirs, successors and assigns (collectively, "VSI Indemnified
Parties") from and against any Losses suffered or incurred by any VSI
Indemnified Party relating to, arising out of or resulting from, (i)
any inaccuracy in, or breach of, any representation, warranty,
covenant or agreement made by any Seller in this Agreement, (ii) the
failure by Sellers to perform or observe any covenant, agreement or
provision to be performed or observed by them pursuant to this
Agreement and (iii) any claim by a Minority Stockholder involving a
breach in the representation contained in Section 6.27.
(b) Subject to the provisions of Section 9.3, the VSI
Stockholders, jointly and severally, shall indemnify and save and
hold harmless (but without duplication of payment) the Service
America Companies and Sellers and their respective officers,
directors, employees, shareholders, Affiliates, agents, successors
and assigns (collectively, the "Service America Indemnified Parties")
from and against any Losses suffered or incurred by any Service America
Indemnified Party relating to, arising out of or resulting from, (i)
any inaccuracy in, or breach of, any representation, warranty,
covenant or agreement made by Buyer or any VSI Stockholder in this
Agreement, (ii) the failure by Buyer or the VSI Stockholders to
perform or observe any covenant, agreement or provision to be
performed or observed by it or them pursuant to this Agreement, and
(iii) any claim by a VSI Stockholder involving a breach of the
representation contained in Section 5.27.
9.2 Indemnification Procedure.
(a) Claims by Indemnified Parties. If any claim for Losses is
made by a VSI Indemnified Party against GE Capital or by a Service
America Indemnified Party against VSI Stockholders (VSI Indemnified
Party or Service America Indemnified Party, as the case may be, an
"Indemnified Party"; VSI Stockholders or GE Capital as the context
requires, the "Indemnifying Party") for which indemnity may be sought
under this Article 9, the Indemnified Party shall deliver to the
Indemnifying Party a detailed statement of such claim and all
requisite documents pertaining thereto (the "Claim Statement"). Such
Claim Statement shall include a good faith estimate of the amount of
such claim, which shall not be binding on the parties. The
Indemnified Party and the Indemnifying Party shall negotiate in good
faith for a period of 30 days a resolution to the claim. If the
Indemnified Party and the Indemnifying Party cannot resolve the claim
within 30 days of delivery of the Claim Statement to the Indemnifying
Party, then either party may submit the matter to arbitration pursuant
to the provisions of Section 11.6. Notwithstanding any provision of
Section 11.6, the fees and expenses of such arbitration shall be
borne by Buyer. The amount of any Loss determined pursuant to this
Section 9.2(a) or arbitration pursuant to Section 11.6 shall be
satisfied in the manner provided for in Section 9.3.
(b) Third Party Claims. If any Proceeding is brought or any claim
is made against an Indemnified Party in respect of which indemnity may
be sought under this Article 9 by a Person who
54
is not a party to this Agreement or an Indemnified Party, the
Indemnified Party shall promptly give notice of such Proceeding or
claim to the Indemnifying Party and Buyer, and Buyer shall assume the
defense of such Proceeding or claim (whether or not Buyer is the
Indemnified Party) employing counsel selected by the Indemnifying
Party and reasonably acceptable to the Buyer and the Indemnified
Party. Such counsel shall consult with both Buyer and the Indemnifying
Party but, in the event of a difference of opinion, shall follow the
instructions of the Indemnifying Party. The Indemnifying Party shall
review all fees and expenses of counsel. Buyer shall pay the full
expense of defending such Proceeding or claim and any other Losses
resulting therefrom. Notwithstanding the foregoing, if a claim is
asserted against an Indemnified Party and if, in the good faith
judgment of counsel selected by the Indemnifying Party in such matter,
there is a defense available to the Indemnified Party that cannot
effectively be asserted by common counsel, then Buyer shall, at its
option, pay or reimburse the Indemnified Party's costs and expenses
incurred in defending such claim by counsel reasonably satisfactory
to the Indemnifying Party. No settlement may be entered into without
the consent of the Indemnifying Party, but a Proceeding or claim may
be settled without the consent of the Indemnified Party if such
settlement fully discharges the Indemnified Party from liability to
any other party and is for money damages only. The Indemnifying
Party shall be subrogated to all rights of the Indemnified Party
against any third party with respect to any claim for which indemnity
was paid. The Indemnifying Party shall be liable for any Losses
resulting from such Proceeding or claim in the manner provided in
Section 9.3(d).
9.3 Limits on Indemnification.
(a) The representations and warranties made by Buyer and the VSI
Stockholders and Sellers in this Agreement shall survive until the
first anniversary of the Closing Date. Upon the expiration of such
period, such representations and warranties shall lapse and be of no
further force and effect.
(b) Notwithstanding any provision to the contrary in this
Agreement, neither Buyer nor any VSI Stockholder or Seller shall have
any right to indemnification for breach of a representation or
warranty by the other party if, as a result of the specific
disclosure in this Agreement or in a schedule to this Agreement
(including, without limitation, the Buyer and VSI Stockholders
Disclosure Schedule and Sellers Disclosure Schedule, in each case as
supplemented prior to Closing), of the facts underlying such breach,
the party seeking indemnification hereunder (whether Buyer, the VSI
Stockholders or Sellers) had actual knowledge as of the Closing Date
that such representation or warranty was false.
(c) Notwithstanding any other provision of this Agreement, GE
Capital and the VSI Stockholders shall not have any liability under
Section 9.1, except to the extent that aggregate Losses finally
determined to actually have been suffered or incurred by all VSI
Indemnified Parties (in the case of GE Capital) or Service America
Indemnified Parties (in the case of the VSI Stockholders) under this
Agreement (after reducing such Losses as set forth in Section 9.4),
exceed Two Million Dollars ($2,000,000) (the "Basket Amount") and, in
any case, only to the extent such Losses (as so reduced as set forth
in Section 9.4) exceed the Basket Amount; provided, that the Basket
Amount for purposes of any Losses (i) subject to Section 7.13(a),
arising from any claim made against any Buyer Company as a result of
the termination of the employment of Kilfoy with Service America
55
or the purchase, repurchase or redemption of the capital stock of
Service America held by Kilfoy (subject to the occurrence of the
Closing) shall be $200,000 (after reducing such Losses as set forth
in Section 9.4); or (ii) pursuant to Sections 5.27 or 6.27 or under
clause (iii) of Section 9.1(a) or clause (iii) of 9.1(b) shall be
$200,000 (in each case, after reducing such Losses as set forth in
Section 9.4) and, in the case of each of the clauses (i) and (ii) of
this Section 9.3(c), only to the extent such Losses (as so reduced
as set forth in Section 9.4) exceeds $200,000; and (iii) pursuant to
Sections 5.14 or 6.14 shall be $500,000 (after reducing such Losses
as set forth in Section 9.4) and to the extent such Losses (as so
reduced as set forth in Section 9.4) exceeds $500,000, only to the
extent such Losses (as so reduced as set forth in Section 9.4)
exceeds $500,000. In any event, the total liability of either GE
Capital or the VSI Stockholders, respectively, for Losses under
Section 9.1(a), calculated after the reductions set forth in Section
9.4, shall not exceed (whether the VSI Stockholders or GE Capital is
the Indemnifying Party) an amount of the Buyer Common Stock owned by
the VSI Stockholders or GE Capital equal to the amount of Buyer
Common Stock held by GE Capital or the same amount of Buyer Common
Stock held by VSI Stockholders at the completion of the Financing and,
if the Financing does not occur, at the Closing Date (after giving
effect to consummation of the Contemplated Transactions).
(d) Notwithstanding any other provision of this Agreement to the
contrary, in the event that an amount is due to be paid with respect to
indemnification of a Loss by either GE Capital or the VSI
Stockholders, such amount may, at the election of the Indemnifying
Party, be paid in Buyer Common Stock determined as set forth in the
following sentence upon resolution of a claim under Section 9.2(a) or
after a final judgement or an agreement or settlement under Section
9.2(b). The Indemnifying Party shall transfer to Buyer for
cancellation a number of shares of Buyer Common Stock equal to the
product of (i) the total number of shares of Buyer Common Stock held
by the Indemnifying Party at the Closing Date (after giving effect to
the adjustment in Section 2.2(b) and consummation of the Contemplated
Transactions) (as adjusted for any stock split, stock dividend,
combination or reclassification of Buyer Common Stock), times (2) a
fraction, the numerator of which is the amount of the Loss and the
denominator of which is Adjusted Contract Value (as referred to in
Schedule 2.2) of Service America (in the case GE Capital is the
Indemnifying Party) or Buyer (in the case VSI Stockholders are the
Indemnifying Party). In the event a claim under this Section 9
remains outstanding at the conclusion of the one-year period
described in Section 9.3(a), then the number of shares of Buyer
Common Stock sufficient to satisfy such claim (as determined by the
parties or the arbitrators) shall be placed into escrow pending
resolution of the claim or, alternatively, the Indemnifying Party may
agree in writing to extend the term during which no transfer of such
shares will be allowed pursuant to the Stockholders' Agreement. To the
extent that VSI Stockholders are the Indemnifying Party hereunder,
all VSI Stockholders agree that the Service America Indemnified
Parties may resolve any claim hereunder solely with Blackstone
regardless of which VSI Stockholders the claim is brought against.
9.4 Calculation of Damages. The amount of Losses payable by an
Indemnifying Party under this Article 9 shall be (a) reduced by any insurance
proceeds actually received by the Indemnified Party with respect to the claim
for which indemnification is sought, net of retrospective premium adjustments
and similar charges and (b) reduced by the net amount of any tax benefits
actually realized by the Indemnified Party to the extent the claim for which
indemnification is sought gives rise to a deductible loss or expense.
56
10. MINORITY STOCKHOLDERS.
Buyer acknowledges that an aggregate of 41,100 shares of Service
America Common Stock have been issued to the employees of Service America listed
on Schedule 6.2(a) (such employees and/or their transferees, other than Buyer,
and its Affiliates, the "Minority Stockholders") pursuant to the Service America
Corporation 1997 Stock Plan. As soon as practicable after execution of this
Agreement, Buyer and Service America shall engage Kaye, Scholer, Fierman, Hays
and Handler, LLP to prepare and distribute as soon as reasonably practicable an
Offering Memorandum with the cooperation and assistance of Buyer and the other
parties hereto, including, but not limited to, the provision by Buyer to Sellers
of information pertaining to the business and operations of the Buyer Companies
and a description of the Contemplated Transactions. Pursuant to such Offering
Memorandum Buyer shall offer to exchange the shares of Service America Common
Stock held by such Minority Stockholders for the same per share consideration to
be received by Sellers under Section 2. Buyer shall purchase from each Minority
Stockholder who elects to exchange such shares within 30 days from the date of
delivery of the Offering Memorandum and who also delivers within such time the
shares of Service America Common Stock owned by him or her. As and to the extent
any Minority Stockholder does not exchange his shares of Service America Common
Stock, Buyer shall have sole responsibility for providing the same consideration
in the exchange or payment of cash consideration to such Minority Stockholder.
Buyer covenants to reserve for issuance the shares allocated to Minority
Stockholders under Section 2.2 to fulfill its obligations hereunder. It shall be
a condition to the exchange that a Minority Stockholder execute the
Stockholders' Agreement (or, if an LLC (as hereinafter defined) is adopted under
Section 11.11, the governing document therefor).
11. GENERAL PROVISIONS.
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, all legal, accounting and other fees and expenses arising in
connection with this Agreement or the Contemplated Transactions that are (a)
incurred by Sellers or Service America shall be borne by Service America and (b)
incurred by VSI Stockholders or Buyer shall be borne by Buyer, in each case
regardless of whether the Contemplated Transactions are consummated. On the
Closing Date, Service America shall pay a mergers and acquisition fee of $1.6
million to Impala Partners and Buyer will pay an advisory fee of $2.4 million to
The Blackstone Group L.P. Service America shall pay one-half and Buyer will pay
one-half of the HSR Act filing fees.
11.2 Public Disclosure or Communications. Between the date of this
Agreement and the Closing Date, except to the extent provided in this Agreement,
(a) neither the Buyer Companies, and the VSI Stockholders, on the one hand, or
Sellers and the Service America Companies, on the other hand, shall issue any
press release or public announcement of any kind concerning the Contemplated
Transactions without the prior written consent of the other, (b) the Buyer
Companies and the VSI Stockholders, on the one hand, and Sellers and the Service
America Companies, on the other hand, shall not, and shall not permit their
respective Representatives to, communicate with Customers, suppliers or
employees of Buyer or employees of Service America, as the case may be, with
respect to the Contemplated Transactions or the business of the Service America
Companies or the Buyer Companies, as the case may be, without the prior written
consent of the other party, and
57
(c) Buyer and the VSI Stockholders shall not communicate with any Governmental
Body with respect to the Service America Companies or Sellers, and Sellers shall
not communicate with any Governmental Body with regard to the Buyer Companies or
the VSI Stockholders, or the Contemplated Transactions without the prior written
consent of the other.
11.3 Confidentiality. Between the date of this Agreement and the
Closing Date, or if the Closing shall not occur, each party shall hold, in
confidence, and not use to the detriment of the other party, all documents and
any written, oral or other information furnished to such party by the other
party or its respective Representatives in confidence in connection with this
Agreement and the Contemplated Transactions and will not release or disclose
such information to any other Person, unless (a) such information is already
known to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any Consent required for the consummation of the Contemplated
Transactions or (c) the furnishing or use of such information is required by
legal Proceedings. If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request. Notwithstanding anything to the contrary contained
herein, unless and until the Closing Date, the provisions of the Confidentiality
Agreements will remain in full force and effect, except as specifically amended
by the foregoing.
11.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), or (c) when received
by the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), or regular United States mail in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties)
VSI Stockholders:
c/o The Blackstone Group
345 Park Avenue
31st Floor
New York, New York 10154
Attention: Howard A. Lipson
Telecopier No.: (212) 754-8712
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely, Esq.
Telecopier No.: (212) 455-2502
58
Sellers:
Service America Corporation
300 First Stamford Place
Stamford, Connecticut 06904
Attention: John T. Dee and Janet L. Steinmayer, Esq.
Telecopier No.: (203) 975-5928
and
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Counsel - Commercial Finance
Telecopier No.: (203) 316-7895
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Joseph D. Hansen, Esq.
Telecopier No.: (212) 836-7149
Buyer:
VSI Acquisition II Corporation
201 East Broad Street
Spartanburg, South Carolina 29306
Attention: General Counsel
Telecopier No.: (864) 598-8694
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely, Esq.
Telecopier No.: (212) 455-2502
11.5 Further Assurances. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
59
11.6 Arbitration; Exclusive Remedy. Any and all disputes between the
parties that arise out of or relate to this Agreement or any other agreement
between the parties entered into in connection herewith or the Contemplated
Transactions, and which cannot be amicably settled shall be determined solely
and exclusively by arbitration administered by the American Arbitration
Association ("AAA") under its commercial arbitration rules for such disputes in
its office in New York, New York. The sole remedies available in such
arbitration shall be those provided in Section 9. The parties expressly,
unconditionally and irrevocably waive any right to rescission, repudiation or
similar remedy in any Proceeding hereunder. Within 60 days of receipt by one
party of a demand for arbitration, the arbitration panel (the "Panel") shall be
formed. Such Panel shall consist of three arbitrators, one to be appointed by GE
Capital, one to be appointed by Blackstone and the third to be appointed by the
first two or, in the event of the failure to agree within 30 days, by the
President of the AAA. A decision of the majority of the arbitrators shall be
final and binding on the parties and judgment rendered by the Panel may be
entered in any court having jurisdiction thereof. The fees and expenses of the
arbitrators selected by each party shall be borne by such party and the fees and
expenses of the third arbitrator shall be shared equally by Blackstone and GE
Capital.
11.7 Amendment and Waiver. This Agreement may be amended at any time
only by a written instrument executed by Buyer, VSI Stockholders and Sellers.
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party, (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 Entire Agreement. This Agreement, including all schedules and
exhibits hereto, contain, and are intended as, a complete statement of all of
the terms and the arrangements between the parties with respect to the matters
provided for herein, supersedes any previous agreements and understandings
between the parties with respect to those matters and cannot be changed or
terminated orally; provided, that the Confidentiality Agreements will remain in
full force and effect to the extent provided herein. Neither party makes, and
each party hereby expressly disclaims reliance upon, any representations or
warranties with respect to the Contemplated Transactions other than those set
forth herein. Buyer acknowledges and agrees that a Seller shall not be liable
for a breach or violation by another Seller of its obligations not to compete
with Buyer that are set forth in an Employment Agreement.
60
11.9 Schedules.
(a) Disclosures included on any Disclosure Schedules delivered pursuant
to this Agreement shall be considered to be made for all purposes under this
Agreement (provided that any updates to such Schedules made pursuant to Section
7.3 shall not be effective to satisfy Closing conditions but shall be fully
effective supplements for all purposes of this Agreement after the Closing).
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Schedules of the respective
parties (other than an exception expressly set forth as such in the respective
Disclosure Schedule with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement will control.
11.10 Governing Law. This Agreement shall be governed by, and construed
in accordance with the law of the State of New York applicable to agreements
made and to be performed therein without regard to conflicts of laws principles.
11.11 Assignments, Successors, and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Except as provided in Section
7.6, nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns. Notwithstanding the foregoing, each Seller shall have
the right to assign all of its rights and obligations hereunder to a limited
liability company of which GE Capital will be the sole managing member (the
"LLC") at or after the Closing and the other parties hereto consent to such
assignment. GE Capital shall (or shall cause the LLC to) advance the amount
necessary for the other Sellers hereunder to pay income tax on the Contemplated
Transaction to the extent that the Sellers do not obtain sufficient proceeds
(from the Financing or otherwise) from the sale of the Buyer Common Stock by the
time such taxes are due (and such advance shall be repaid with the first
proceeds due to such Sellers from any such Financing or otherwise).
11.12 Paoletti. The parties hereto understand that Paoletti must make
an informed investment decision prior to agreeing to exchange his Service
America Capital pursuant to the terms hereof. Accordingly, he may execute this
Agreement at a subsequent date after he has had the requisite time to evaluate
an investment in Buyer.
11.13 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
61
11.14 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
62
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
VSI ACQUISITION II CORPORATION
By: /s/ Lawrence A. Hatch
-------------------------------
Name: Lawrence A. Hatch
Title: Chairman and CEO
BCP VOLUME L.P.
By: Blackstone Capital Partners II
Merchant Banking Fund L.P.
By: Blackstone Management
Associates II L.L.C.,
as General Partner
By: /s/ David Blitzer
---------------------------------
Name: David Blitzer
Title: Attorney-in-Fact
BCP OFFSHORE VOLUME L.P.
By: Blackstone Offshore Capital
Partners II L.P.
By: Blackstone Management
Associates II L.L.C.,
as General Partner
By: /s/ David Blitzer
----------------------------------
Name: David Blitzer
Title: Attorney-in-Fact
By: Blackstone Service (Cayman) LDC
as Administrative General Partner
By: /s/ David Blitzer
-----------------------------------
Name: David Blitzer
Title: Attorney-in-Fact
VSI MANAGEMENT DIRECT L.P.
63
By: VSI Management I L.L.C.
By: /s/ Larry A. Hatch
--------------------------
Larry A. Hatch,
as Managing Member
By: Blackstone Management Associates II
L.L.C., as Managing Member
By: /s/ David Blitzer
--------------------------
David Blitzer
as Attorney-in-Fact
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Peter C. Keenoy
---------------------------------
Name: Peter C. Keenoy
Title: Duly Authorized Signatory
DEE FAMILY LIMITED PARTNERSHIP
By: /s/ John T. Dee
---------------------------------
Name: John Dee
Title: General Partner
/s/ John T. Dee
-------------------------------------
John T. Dee
/s/ Michael J. Higgins
-------------------------------------
Michael J. Higgins
/s/ Robert Paoletti
-------------------------------------
Robert Paoletti
64